UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
______________________
SCHEDULE
14A
PROXY
STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Filed by
the Registrant x
Filed by
a party other than the Registrant ¨
Check the
appropriate box:
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¨
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Preliminary
proxy statement.
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Confidential,
for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
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x
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Definitive
proxy statement.
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¨
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Definitive
additional materials.
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¨
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Soliciting
material pursuant to §240.14a-12.
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ORTHOLOGIC
CORP.
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(Name
of Registrant as Specified in Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of filing fee (check the appropriate box):
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x
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No
fee required.
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¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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¨
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Fee
paid previously with preliminary
materials.
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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1275 West
Washington Street
Tempe,
Arizona 85281
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be
Held Friday, May 9, 2008
TO THE
STOCKHOLDERS:
The
Annual Meeting of Stockholders of OrthoLogic Corp., a Delaware corporation (the
“Company”), will be held on Friday, May 9, 2008 at 8:00 a.m., at
the Phoenix Hilton Airport located at 2435 South 47th Street, Phoenix, AZ 85034,
for the following purposes:
(1) To
elect two directors as Class II directors to serve until the Annual Meeting of
Stockholders to be held in the year 2011 or until a successor is
elected;
(2) To
ratify the appointment of Ernst & Young LLP, as the Company’s independent
registered public accounting firm for the fiscal year ending December 31, 2008;
and
(3) To
transact such other business as may properly come before the Annual Meeting or
any adjournment thereof.
The
foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
Stockholders
of record at the close of business on Monday, March 24, 2008 are entitled to
vote at the meeting and at any adjournment or postponement
thereof. Shares can be voted at the meeting only if the holder is
present or represented by proxy. A list of stockholders entitled to
vote at the meeting will be open for inspection at the Company’s corporate
headquarters for any purpose germane to the meeting during ordinary business
hours for 10 days prior to the meeting.
A copy of
the Company’s 2007 Annual Report to Stockholders, which includes certified
financial statements, is enclosed. All stockholders are cordially
invited to attend the Annual Meeting in person.
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By
order of the Board of Directors,
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/s/
John M. Holliman, III
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John
M. Holliman, III
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Executive
Chairman
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Tempe,
Arizona
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April
11, 2008
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IMPORTANT: It
is important that your stockholdings be represented at this
meeting. Whether or not you expect to attend the meeting,
please complete, date and sign the enclosed Proxy and mail it promptly in
the enclosed envelope to assure representation of your
shares. No postage need be affixed if mailed in the United
States.
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PROXY
STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD Friday, May 9, 2008
TABLE
OF CONTENTS
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1275 West
Washington Street
Tempe,
Arizona 85281
PROXY
STATEMENT
ANNUAL
MEETING OF STOCKHOLDERS
To
Be Held Friday, May 9, 2007
Proxies
in the accompanying form are solicited on behalf, and at the direction, of the
Board of Directors of OrthoLogic Corp. (the “Company”) for use at the Annual
Meeting of Stockholders to be held on Friday, May 9, 2008, at 8:00 a.m.,
local time, or any adjournment thereof (the “Annual Meeting”) at the Phoenix
Hilton Airport located at 2435 South 47th Street, Phoenix, AZ 85034.
All shares represented by properly executed proxies, unless such proxies have
previously been revoked, will be voted in accordance with the direction on the
proxies. If no direction is indicated, the shares will be voted in
favor of the proposals to be acted upon at the Annual Meeting. The
Board of Directors of the Company (the “Board”) is not aware of any other matter
which may come before the meeting. If any other matters are properly
presented at the meeting for action, including a question of adjourning the
meeting from time to time, the persons named in the proxies and acting
thereunder will have discretion to vote on such matters in accordance with their
best judgment.
When
stock is in the name of more than one person, the proxy is valid if signed by
any of such persons unless the Company receives written notice to the
contrary. If the stockholder is a corporation, the proxy should be
signed in the name of such corporation by an executive or other authorized
officer. If signed as attorney, executor, administrator, trustee,
guardian or in any other representative capacity, the signer’s full title should
be given and, if not previously furnished, a certificate or other evidence of
appointment should be furnished.
This
Proxy Statement and the form of proxy which is enclosed are being mailed to the
Company’s stockholders commencing on or about April 11, 2008. The
Proxy Statement and Form of Proxy, as well as the Company’s Annual Report on
Form 10-K are available on the Company’s website
www.orthologic.com.
A
stockholder executing and returning a proxy has the power to revoke it at any
time before it is voted. A stockholder who wishes to revoke a proxy can do so by
executing a later-dated proxy relating to the same shares and delivering it to
the Secretary of the Company prior to the vote at the Annual Meeting, by written
notice of revocation received by the Secretary prior to the vote at the Annual
Meeting or by appearing in person at the Annual Meeting, filing a written notice
of revocation and voting in person the shares to which the proxy
relates.
In
addition to the use of the mails, proxies may be solicited by personal
conversations or by telephone, telex, facsimile or telegram by the directors,
officers and regular employees of the Company. Such persons will
receive no additional compensation for such services. Arrangements
will also be made with certain brokerage firms and certain other custodians,
nominees and fiduciaries for the forwarding of solicitation materials to the
beneficial owners of Common Stock held of record by such persons, and such
brokers, custodians, nominees and fiduciaries will be reimbursed for their
reasonable out-of-pocket expenses incurred in connection
therewith. All expenses incurred in connection with this solicitation
will be borne by the Company.
The
mailing address of the principal executive offices of the Company is 1275 West
Washington Street, Tempe, Arizona 85281.
Only
stockholders of record at the close of business on March 24, 2008 (the “Record
Date”) will be entitled to vote at the Annual Meeting. On the Record
Date, there were issued and outstanding 41,814,438 shares of the Company’s
Common Stock. Each holder of Common Stock is entitled to one vote,
exercisable in person or by proxy, for each share of the Company’s Common Stock
held of record on the Record Date. The presence of a majority of the
shares of Common Stock entitled to vote, in person or by proxy, is required to
constitute a quorum for the conduct of business at the Annual
Meeting. Abstentions and broker non-votes are each included in the
determination of the number of shares present for quorum
purposes. The Inspector of Election appointed by the Chairman of the
Board of Directors shall determine the shares represented at the meeting and the
validity of proxies and ballots and shall count all proxies and
ballots. The nominee for director receiving the highest number of
affirmative votes (whether or not a majority) cast by the shares represented at
the Annual Meeting and entitled to vote thereon, a quorum being present, shall
be elected as a director. Abstentions and broker non-votes will not
be taken into account in determining the outcome of the election. The
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote is required with respect to the approval of the other proposals
set forth herein. Abstentions have the effect of negative
votes. Stockholders are not entitled to any dissenter’s or appraisal rights
under Delaware law or the Company’s Restated Certificate of Incorporation for
the proposals set forth in this Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of the
Company’s Common Stock at March 18, 2008 with respect to (i) each person known
to the Company to own beneficially more than five percent of the outstanding
shares of the Company’s Common Stock, (ii) each director of the Company, (iii)
each of the named executive officers and (iv) all directors and executive
officers of the Company as a group.
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Shares
Beneficially
Owned
(1)
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Identity
of Stockholder or Group
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Number
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Percent
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Fredric
J. Feldman (2)
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334,564
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*
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John
M. Holliman, III (3)
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573,076 |
1.4
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Elwood
D. Howse, Jr. (4)
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276,258 |
*
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William
M. Wardell (5)
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113,692 |
*
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Augustus
A. White, III (6)
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263,158 |
*
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Randolph
C. Steer (7)
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244,049 |
*
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Les
M. Taeger (8)
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273,312 |
*
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Dana
B. Shinbaum (9)
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239,010 |
*
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BVF
Group (10)
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3,858,808 |
9.2
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All
directors and executive officers as a group (11)
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2,316,019 |
5.5
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______________________________
* Less
than one percent
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(1)
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Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission (“SEC”) and generally includes voting or investment
power with respect to securities. In accordance with SEC rules,
shares, which may be acquired upon exercise of stock options which are
currently exercisable or which become exercisable within 60 days of the
date of the table, are deemed beneficially owned by the optionee. Except
as indicated by footnote, and subject to community property laws where
applicable, the persons or entities named in the table above have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by
them.
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(2)
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Includes
190,000 shares Dr. Feldman has a right to acquire upon exercise of stock
options. Voting and investment power shared with
spouse.
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(3)
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Includes
405,834 shares Mr. Holliman has a right to acquire upon exercise of stock
options, 3,000 shares indirectly owned as trustee, 1,658 shares indirectly
owned as trustee of Valley Ventures III,
LP.
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(4)
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Includes
180,000 shares Mr. Howse has a right to acquire upon exercise of stock
options.
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(5)
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Includes
55,000 shares Dr. Wardell has a right to acquire upon exercise of stock
options.
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(6)
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Includes
190,000 shares Dr. White has a right to acquire upon exercise of stock
options.
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(7)
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Includes
218,751 shares Dr. Steer has a right to acquire upon exercise of stock
options.
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(8)
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Includes
228,738 shares Mr. Taeger has a right to acquire upon exercise of stock
options.
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(9)
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Includes
195,199 shares Mr. Shinbaum has a right to acquire upon exercise of stock
options.
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(10)
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BVF
Group (Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P.
BVF Investments, L.L.C., Investment 10, L.L.C., BVF Partners, L.P., BVF
Inc.) is not a related party or otherwise affiliated with OrthoLogic
Corp., its directors or officers, and the principal business office of the
Reporting Persons comprising the Group is located at 900 North Michigan
Avenue, Suite 1100, Chicago, IL
60611.
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(11)
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Includes
1,663,522 shares directors and executive officers have a right to acquire
upon exercise of stock options.
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PROPOSAL 1: ELECTION OF DIRECTOR
Two
directors are to be elected at the Annual Meeting to serve as Class II directors
until the Annual Meeting of Stockholders to be held in the year 2011 or until
their respective successor is elected. Unless otherwise instructed,
the proxy holders will vote the Proxies received by them FOR the Company’s
nominees, John M. Holliman, III and Augustus A. White, III, MD,
Ph.D. Both, Mr. Holliman and Dr. White are currently directors of the
Company. The nominees for director receiving the highest number of
affirmative votes (whether or not a majority) cast by the shares represented at
the Annual Meeting and entitled to vote thereon, a quorum being present, shall
be elected as a director. Only affirmative votes are relevant in the
election of directors.
Pursuant
to the Company’s Restated Certificate of Incorporation, the Board of Directors
is classified into three classes, with each class holding office for a
three-year period. The Restated Certificate of Incorporation restricts the
removal of directors under certain circumstances. The number of
directors may be increased to a maximum of nine. Directors are
elected by a plurality of the votes present in person or represented by proxy
and entitled to vote at the Annual Meeting. Stockholders do not have
the right to cumulate their votes in the election of directors. If
any nominee of the Company is unable or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for any nominee who shall
be designated by the present Board of Directors to fill the
vacancy. It is not expected that any nominee will be unable or will
decline to serve as a director.
The names
of the nominees for director and of the directors, whose terms continue beyond
the Annual Meeting, and certain information about them, are set forth
below.
The
Board Recommends A Vote In Favor Of The Named Nominees
INFORMATION
CONCERNING DIRECTORS
Nominees
for Class II Directors Whose Terms Will Expire at the 2008 Annual
Meeting:
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John M. Holliman, III
(1)
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Director
since 1987
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John M.
Holliman III, 54, has served as Executive Chairman and Principal Executive
Officer of the Company since April 2006 and has served as a director of the
Company since September 1987 and as Chairman of the Board of Directors since
August 1997. Since February 1993 he has been a general partner of
entities, which are the general partners of Valley Ventures, LP (formerly known
as Arizona Growth Partners, LP), Valley Ventures II, LP, Valley Ventures III,
LP, Valley Ventures III Annex, LP, all of which are venture capital
funds that invest principally in life science companies.
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Augustus A. White, III, MD,
Ph.D. (2) (4)
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Director
since 1993
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Dr.
White, 71, became a director of the Company in July 1993. He is the former
Master of the Oliver Wendell Holmes Society and currently the Ellen and Melvin
Gordon Distinguished Professor of Medical Education and Professor of Orthopedic
Surgery at the Harvard Medical School and the Harvard-MIT Division of Health
Sciences and Technology (1978 – 2007). He is the Orthopedic
Surgeon-in-Chief, Emeritus, at the Beth Israel Deaconess Medical Center in
Boston since 1990. From 1992 to 1994, he served as the Chief of Spine Surgery at
Beth Israel and is a former Director of the Daniel E. Hogan Spine Fellowship
Program. He is a graduate of Brown University, the Stanford University Medical
School, holds a Ph.D. from the Karolinska Institute in Stockholm, and graduated
from the Advanced Management Program at the Harvard Business School. Dr. White
is a recipient of the Bronze Star, which he earned while stationed as a Captain
in the U.S. Army Medical Corps in Vietnam. Dr. White is currently a director of
Zimmer Holdings, Inc., a publicly held designer, marketer and manufacturer of
orthopedic products.
Class
III Directors Whose Terms Will Expire at the 2009 Annual Meeting:
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Elwood D. Howse, Jr. (1)
(2) (3)
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Director
since 1987
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Elwood D.
Howse, Jr., 68, has served as a director of the Company since September
1987. In 1982, Mr. Howse founded Cable, Howse and Ragen, investment
banking and stock brokerage firm, now owned by Wells Fargo and known as Ragen
MacKenzie. In 1977, Mr. Howse co-founded Cable & Howse Ventures,
an early stage venture capital firm focused on technology. In 1976,
he served as Vice President, Corporate Finance, for Foster & Marshall, a
northwest stock brokerage firm. In 1974 he was the Chief Financial
Officer of Seattle Stevedore Company and the Miller Produce
Company. Mr. Howse has served as a corporate director and advisor to
various public, private and non-profit enterprises. He served on the
board of the National Venture Capital Association and is past President of the
Stanford Business School Alumni Association. He currently serves on
the boards of directors of BSQUARE Corporation (BSQR), Formotus, Inc., Perlego
Systems Inc., The PowerTech Group, Inc., and not-for-profits, Junior Achievement
Worldwide, Junior Achievement of Washington and the MadreMonte
Foundation.
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William M. Wardell, MD,
Ph.D. (4)
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Director
since February 2006
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Dr.
Wardell, 69, was appointed by the OrthoLogic Board of Directors on February 11,
2006, to fill a vacancy (Class III) on the Board. He owns and operates the
consulting firm Wardell Associates International LLC in Princeton, NJ, where he
specializes in drug development, regulatory approval, and safety for a range of
pharmaceutical and biotechnology companies. Dr. Wardell has published
over one hundred scientific papers and four books, and has testified as an
expert in drug development during several Congressional hearings. Dr.
Wardell has 22 years of experience in the healthcare industry, holding
leadership positions as President, Protein Engineering Corporation (now DYAX);
Senior Vice President of Drug Development, Parke-Davis; Vice President and
Medical Director, Boehringer Ingelheim Pharmaceuticals; Senior Scientific
Officer, Covance; and Executive Director of the Covance Institute for Drug
Development Sciences. During his tenure at these companies, Dr.
Wardell was responsible for 11 approved New Drug Applications. He previously
served as an associate professor of Pharmacology, Toxicology and Medicine,
attending on the Clinical Pharmacology consultation service of Strong Memorial
Hospital at the University of Rochester Medical Center, where he co-founded and
directed the University’s Center for the Study of Drug Development. Dr. Wardell
earned his MA, PhD in pharmacology, and MD at the University of Oxford (UK), and
was a Merck International Fellow in Clinical Pharmacology and Medicine under Dr.
Louis Lasagna at the University of Rochester / Strong Memorial Hospital. He
currently serves on the Board of Directors of PhytoCeutica, Inc. and the
Scientific Advisory Board of Eleos, Inc.
Class
I Director Whose Term Will Expire at the 2010 Annual Meeting
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Fredric J. Feldman,
Ph.D. (1) (2) (3)
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Director
since 1991
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Fredric
J. Feldman, Ph.D., 67, has been the President of FJF Associates, a consultant to
health care venture capital and emerging companies, since February
1992. From September 1995 to June 1996, he was the Chief Executive
Officer of Biex, Inc., a women’s healthcare company. He served as
Chief Executive Officer of Oncogenetics, Inc., a cancer genetics reference
laboratory from 1992 to 1995. Between 1988 and 1992, Dr. Feldman was
the President and Chief Executive Officer of Microgenics Corporation, a medical
diagnostics company. He has been a director of a number of public and
private companies involved in the healthcare industry.
******
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(1)
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Member
of the Executive Committee.
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(2)
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Member
of the Audit Committee.
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(3)
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Member
of the Compensation Committee.
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(4)
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Member
of the Corporate Governance/Nominating
Committee
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******
BOARD MEETINGS AND COMMITTEES
The Board
of Directors is composed of four outside directors. On April 5, 2006,
Mr. Holliman became Executive Chairman and Principal Executive Officer of the
Company and is no longer an independent director under NASD Marketplace Rule
4200(a)(15). The Board has determined that each director other than Mr. Holliman
is independent for purposes of Marketplace Rule 4200(a)(15) of the National
Association of Securities Dealers, Inc. (“NASD”). The Board of
Directors held a total of eight meetings during the fiscal year ended December
31, 2007. No director attended fewer than 75% of the aggregate of all
meetings of the Board of Directors and any committee on which such director
served during the period of such service. Currently, the Board of
Directors does not have a policy regarding director attendance at the Company’s
annual meeting of stockholders. All of the directors attended last
year’s annual meeting of stockholders in person.
Independent
directors regularly meet in executive sessions without the Executive Chairman or
other members of management to review the criteria upon which the performance of
the Executive Chairman is based, the performance of the Executive Chairman
against that criteria, to ratify the compensation of the Executive Chairman as
approved by the Compensation Committee, and to discuss other relevant
matters.
The Board
presently has an Executive Committee, an Audit Committee, a Compensation
Committee and a Corporate Governance/Nominating Committee. The
Executive Committee, which acts on Board matters that arise between meetings of
the full Board of Directors, consists of Dr. Feldman, Mr. Holliman and Mr.
Howse. During 2007 the Executive Committee did not meet separately as
all matters were discussed and acted on by the full Board.
Audit
Committee
The Audit
Committee, which is a separately-designated standing committee established in
accordance with section 3(a)(58)(A) of the Exchange Act, consisted of Mr. Howse
(Chairman), Dr. White and Dr. Feldman and met five times in 2007. The
Audit Committee assists the Board of Directors in its oversight of financial
reporting practices, including the independent auditors’ qualifications and
independence, and the performance of the Company’s internal audit
function. The Audit Committee appoints the Company’s independent
auditors. The Audit Committee meets independently with
representatives of the Company’s independent auditors and with representatives
of senior management. The Committee reviews the general scope of the
Company’s annual audit, the fee charged by the independent auditors and other
matters relating to internal control systems. In addition, the Audit
Committee is responsible for approving, reviewing and monitoring the performance
of non-audit services by the Company’s auditors. The Audit Committee
operates under a written charter that has been adopted by the Board of
Directors.
The Board
of Directors has determined that the composition of the Audit Committee, the
attributes of its members and the responsibilities of the Audit Committee, as
reflected in its charter, are in accordance with applicable NASD Marketplace
Rules for audit committees. In particular, all audit Committee
members possess the required level of financial literacy, at least one member of
the Audit Committee meets the current standard of requisite financial management
expertise and the Board of Directors has determined that Elwood D. Howse, Jr.,
the Chairman of the Audit Committee, is an “audit committee financial expert” as
defined in Item 401(h) of Regulation S-K of the Securities and Exchange
Commission (the “SEC”). Additionally, Mr. Howse and each of the other
members of the Audit Committee is an “independent director” as defined in NASD
Marketplace Rule 4200(a)(15).
The Audit
Committee Charter is available on the Company’s website at
www.orthologic.com.
Compensation
Committee
The
Compensation Committee consisted of Mr. Casey and Mr. Howse until May 10,
2007. Dr. Feldman replaced Mr. Casey on May 10, 2007 upon Mr. Casey’s
decision to not seek re-election to the Board at the May 10, 2007 Annual
meeting. The Committee met two times during 2007. Each member of the
Compensation Committee is an “independent” director as defined in NASD
Marketplace Rule 4200(a)(15) and is an “outside director” as defined in Section
162(m) of the Internal Revenue Code. The Compensation Committee
reviews salaries and benefit programs designed for senior management, officers
and directors and administers certain grants under the Company’s stock option
plans with a view to ensure that the Company is attracting and retaining highly
qualified managers through competitive salary and benefit programs and
encouraging extraordinary effort through incentive rewards. The
Compensation Committee does not have a written charter.
Corporate
Governance/Nominating Committee
The
Corporate Governance/Nominating Committee examines and recommends nominations
for the Board of Directors and officers of the Company. The criteria
prepared by the Corporate Governance/Nominating Committee are used to determine
whether the selection of a particular nominee, either nominated by the Company
or by a stockholder, would be appropriate. The Corporate
Governance/Nominating Committee operates under a written charter, a copy of
which is posted on our website. Although the Corporate
Governance/Nominating Committee has not established minimum standards for Board
nominees, the Corporate Governance/Nominating Committee generally seeks
candidates with chief operating, executive or financial officer experience in
complex organizations; a commitment to give the time and attention to the duties
required of them; and evidence of an independent and inquiring mind willing to
question management’s assumptions. On an as needed basis, the
Corporate Governance/Nominating Committee uses the services of outside
consultants to assist the Corporate Governance/Nominating Committee to identify
capable director candidates.
The
Corporate Governance/Nominating Committee consists of Dr. Wardell and Dr.
White. Dr. Wardell and Dr. White are independent directors under NASD
Marketplace Rule 4200(a)(15). The Corporate Governance/Nominating
Committee met one time during 2007. The Corporate
Governance/Nominating Committee nominated Mr. Holliman and Dr. White for
election as Class II directors for this year’s annual meeting of
stockholders.
Stockholder
Nomination of Director Candidates
The
Corporate Governance/Nominating Committee will consider for nomination as a
director of the Company any director candidate recommended or nominated by
stockholders in accordance with the process outlined below.
Stockholders
wishing to recommend candidates for consideration by the Corporate
Governance/Nominating Committee may do so by providing the candidate’s name,
contact details, biographical data, and qualifications in writing to the
Corporate Governance/Nominating Committee, c/o Secretary, 1275 West Washington
Street, Tempe, Arizona 85281. The Board may change the process
for the means by which stockholders may recommend director candidates to the
Corporate Governance/Nominating Committee. Please refer to the Company’s
website at www.orthologic.com and the Company’s SEC filings for any changes to
this process. The Company has not received any stockholder
recommendations of director candidates with regard to the election of directors
covered by this Proxy Statement or otherwise.
Any
stockholder entitled to vote for the election of directors at a meeting may
nominate persons for election as directors only if written notice of such
stockholder’s intent to make such nomination is given, either by personal
delivery at 1275 West Washington Street, Tempe, Arizona or by United States
mail, postage prepaid to Secretary, OrthoLogic Corp., 1275 West Washington
Street, Tempe, Arizona 85281, not later than: (i) with respect to the election
to be held at an annual meeting of stockholders, 20 days in advance of such
meeting; and (ii) with respect to any election to be held at a special meeting
of stockholders for the election of directors, the close of business on the
fifteenth (15th) day following the date on which notice of such meeting is first
given to stockholders. Each such notice must set forth: (a) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that such stockholder is
a holder of record of stock of the corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all arrangements
or understandings between such stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the SEC
if such nominee had been nominated, or intended to be nominated, by the Board of
Directors; and (e) the consent of each nominee to serve as a director of the
Company if elected. The chairman of the stockholders’ meeting may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
Stockholder
Communications with Board
Stockholders
wishing to communicate with the Board of Directors or with a Board member should
address communications to the Board or to the particular Board member, c/o
Secretary, 1275 West Washington Street, Tempe, Arizona 85281. All
communications sent in this manner to the Board members will be forwarded
directly to the Board. From time to time, the Board may change the
process for the means by which stockholders may communicate with the Board or
its members. Please refer to the Company’s website at www.orthologic.com
for any changes to this process.
COMPENSATION OF DIRECTORS
|
Name
|
Fees
Earned or Paid in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
|
Fredric J. Feldman,
Ph.D.
Director
|
32,000
|
25,000
|
7,000
|
64,000
|
|||
|
Elwood
D. Howse, Jr.
Director
|
32,000
|
25,000
|
7,000
|
64,000
|
|||
|
William M. Wardell,
MD, Ph.D.
Director
|
32,000
|
25,000
|
7,000
|
64,000
|
|||
|
Augustus A. White,
III,
MD,
Ph.D.
Director
|
32,000
|
25,000
|
7,000
|
64,000
|
|||
|
Michael D. Casey
Former
Director
|
11,000
|
7,000
|
18,000
|
During
the year ended December 31, 2006, the Company paid directors an annual retainer
of $24,000 payable quarterly in advance and $1,000 for each board meeting
attendance. Effective June, 2007, the Company altered board meeting attendance
fees to be $2,500 for each board meeting attended in person and $1,000 for each
board meeting attended by telephone. All directors are eligible for
the grant of nonqualified stock options pursuant to the Company’s 2005 Equity
Incentive Plan. On June 10, 2005, the Board of Directors approved an
annual award to each director of a non-qualified stock option to purchase 10,000
shares of the Company’s common stock. The Company issued to each
director non-qualified options to acquire 10,000 shares at a price of $1.43 per
share on January 1, 2007 (fair value of $7,000). These options
vested immediately and were granted at the market price on the date of
grant. All options have been granted with ten-year
terms.
On June
10, 2005 the Board of Directors also approved an annual award to each director
of $25,000 of restricted stock. The shares granted vest one year from
the date of issuance. On January 1, 2007 the Board awarded 17,483
shares of restricted stock to each director, which represents a fair value of
$25,000, with the number of shares determined by the closing price of the
Company’s Common stock on the date of grant.
On April
4, 2006, John M. Holliman, III, became Executive Chairman of the Company and
subsequently entered into an agreement that provides for annual compensation of
$200,000 and eligibility for an additional payment (bonus) of up to 40% of his
annual compensation. Compensation earned in his role as Executive
Chairman is shown in the Summary Compensation Table in this Proxy
Report.
Michael
D. Casey’s term on the Board of Directors ended effective May 10, 2007, upon his
decision to not seek re-election to the Board of Directors at our Annual
Shareholder Meeting held May 10, 2007.
Director
Outstanding Equity Awards at Fiscal Year-End
|
Name
|
Option
Awards
|
||||
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
Options
Exercise Price ($)
|
Option
Expiration Date
|
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
|
John
M. Holliman, III
|
20,000
|
3.58
|
8/24/2011
|
||
|
*
|
158,333
|
41,667
|
1.75
|
5/12/2016
|
|
|
William
M. Wardell, MD, Ph.D.
|
10,000
|
5.33
|
2/11/2016
|
||
|
Augustus
A. White, III, MD, Ph.D.
|
10,000
|
3.25
|
8/21/2008
|
||
|
Various
directors:
|
|||||
|
(1)
(2) (3) (5)
|
5,000
|
5.53
|
1/1/2008
|
||
|
(1)
(2) (3) (5)
|
5,000
|
3.34
|
12/31/2008
|
||
|
(1)
(2)
|
5,000
|
2.53
|
12/29/2009
|
||
|
(1)
(2)
|
5,000
|
2.44
|
12/15/2010
|
||
|
(1)
(2) (3) (5)
|
30,000
|
3.19
|
1/19/2011
|
||
|
(1)
(2) (3) (5)
|
25,000
|
3.93
|
10/26/2011
|
||
|
(1)
(2) (3) (5)
|
5,000
|
4.89
|
12/31/2011
|
||
|
(1)
(2) (3) (5)
|
10,000
|
3.61
|
12/31/2012
|
||
|
(1)
(2) (3) (5)
|
10,000
|
6.13
|
12/31/2013
|
||
|
(1)
(2) (3) (5)
|
30,000
|
7.40
|
1/23/2014
|
||
|
(1)
(2) (3) (5)
|
10,000
|
6.25
|
12/31/2014
|
||
|
(1)
(2) (3) (5)
|
10,000
|
4.90
|
1/2/2016
|
||
|
(1)
(2) (3) (4) (5)
|
25,000
|
1.75
|
5/12/2016
|
||
|
(1)
(2) (3) (4) (5)
|
10,000
|
1.43
|
1/1/2017
|
||
| Feldman, Fred (1) | |||||
| Holliman, John (2) | |||||
| Howse, Elwood (3) | * Vest monthly over a two-year period ending 5/12/08 | ||||
| Wardell, William (4) | All other directors options were fully vested on 12/31/2007 | ||||
| White, Augustus (5) | |||||
The
following table sets forth information regarding our executive
officers:
|
Name
|
|
Title
|
|
Age
|
||
|
John
M. Holliman, III
|
54
|
Executive
Chairman and Principal Executive Officer
|
|
Randolph
C. Steer, MD, Ph.D.
|
58
|
President
|
|
Les
M. Taeger
|
57
|
Senior
Vice President and Chief Financial Officer
|
|
Dana
B. Shinbaum
|
45
|
Vice
President, Business Development
|
John M.
Holliman, III, became Executive Chairman and Principal Executive Officer of the
Company on April 5, 2006 and has served as a director of the Company since
September 1987 and as Chairman of the Board of Directors since August
1997. Since February 1993 he has been a general partner of entities,
which are the general partners of Valley Ventures, LP (formerly known as Arizona
Growth Partners, LP), Valley Ventures II, LP, Valley Ventures III Annex, LP, all
of which are venture capital funds that invest principally in life science
companies.
Randolph
C. Steer, MD, Ph.D. became President of the Company on April 5,
2006. Dr. Steer has been an independent pharmaceutical, biotechnology
and medical devices consultant since 1989, and has provided consulting services
to OrthoLogic since 2002. He has a broad scientific, medical and
business background, including extensive experience in pre-clinical, clinical
and regulatory affairs, having held key management positions in leading
corporations and having served as an advisor to many companies in the United
States and abroad. Dr. Steer has also advised numerous venture
capital firms, investment banks and independent investors on the commercial
development of drugs, biologics, diagnostics and medical devices. He
has served as Associate Director of Medical Affairs at Marion Laboratories;
Medical Director at Ciba Consumer Pharmaceuticals (Ciba-Geigy Corporation); Vice
President, Senior Vice President and Member of the Executive Committee at
Physicians World Communications Group; Chairman, President and Chief Executive
Officer of Advanced Therapeutics Communications International, a global drug
regulatory group, and Chairman and Chief Executive Officer of Vicus.com,
Inc. He is a member of the Board of Directors of Techne Corporation
and BioCryst Pharmaceuticals. Dr. Steer received his MD degree from
the Mayo Medical School and his Ph.D. from the University of Minnesota, where he
also completed a residency and subspecialty fellowship in clinical and chemical
pathology. He is a Fellow of the American College of Clinical
Pharmacology.
Les M.
Taeger joined OrthoLogic as Senior Vice President and Chief Financial Officer on
January 16, 2006. Mr. Taeger most recently served as Chief Financial Officer of
CardioTech International, Inc. (“CardioTech”). CardioTech is a
publicly-traded, medical device company that develops, manufactures and sells
advanced products for the treatment of cardiovascular disease. From
September, 2000 to February, 2004, when Mr. Taeger became Chief Financial
Officer of CardioTech, Mr. Taeger served as Chief Financial Officer of Gish
Biomedical, Inc. (“Gish”). Gish, which became a subsidiary of
CardioTech pursuant to a merger transaction involving the companies in April,
2003, specializes in the manufacture and sale of products used in open-heart
surgery, vascular access and orthopedic surgery. Prior to his
employment with CardioTech and Gish, Mr. Taeger was employed for over five years
as Chief Financial Officer of Cartwright Electronics, Inc., a division of
Meggitt, PLC. Mr. Taeger is a Certified Public Accountant, with a
Bachelor degree in accounting.
Dana B.
Shinbaum joined OrthoLogic as Vice President of Business Development in October
2005. Previously he served as Vice President, Product Planning and
Market Analytics at Savient Pharmaceuticals, Inc., and has over eighteen years
of experience in the pharmaceutical/biotechnology industry. While at
Savient his responsibilities included creating and developing new business
opportunities, leading global project teams and managing product
launches. He played key strategic planning roles in Savient’s
acquisition of Rosemont Pharmaceuticals Ltd. and the divestiture of
Bio-Technology General Ltd., Savient’s global biologics
business. Prior to joining Savient, Mr. Shinbaum was at Wyeth-Ayerst
Laboratories, where he held market planning and marketing roles of increasing
responsibility, including Product Manager for the PREMARIN® franchise. Mr.
Shinbaum received a Master of Business Administration, summa cum laude, from Drexel
University in Philadelphia and a Bachelor of Arts degree from Lafayette College
in Easton, Pennsylvania.
EXECUTIVE
COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Compensation
Philosophy
The
objectives of the Company’s executive compensation policies are to attract,
retain and reward executive officers who contribute to the Company’s success, to
align the financial interests of executive officers with the performance of the
Company, to strengthen the relationship between executive pay and shareholder
value, to motivate executive officers to achieve the Company’s business
objectives and to reward individual performance. The Company used
base salary, cash bonuses, stock awards and stock options to achieve these
objectives.
Review of
Current Compensation Components of Executive Chairman and other Executive
Officers
The
Compensation Committee reviews all components of the Executive Chairman’s and
other executive officers’ compensation, including salary, bonus, stock awards,
accumulated vested and unvested stock options, the dollar value to the executive
and cost to the company of all perquisites and other personal benefits, as well
as the actual projected payout obligations under several potential severance and
change-in-control scenarios and any limitations on the deductibility for federal
income tax purposes of all compensation. Documentation is provided to
the Compensation Committee consisting of the following:
|
|
1)
|
Each Executive has individual
performance goals for the fiscal year. The Compensation
Committee reviews the performance goals and expectations for individual
executive positions. Based on recommendations from the
Executive Chairman and the Compensation Committee’s evaluation of the
performance achievement of these goals, the Compensation Committee
determines the resulting bonus and/or changes to salary components for the
executive officers. The Executive Chairman also recommends
individual performance objectives for himself for each fiscal
year. The Compensation Committee approves the performance
objectives of the Executive Chairman and evaluates the Executive
Chairman’s performance measured against these objectives and evaluates and
formulates any potential changes in compensation
accordingly.
|
|
|
2)
|
The Company’s performance is
compared against the goals for the fiscal
year. Strategic, high level performance expectations are
identified each fiscal year for the Company. The Executive
Chairman provides documentation to the Compensation Committee regarding
the expectations and corresponding results of
operations.
|
|
|
3)
|
The level of compensation for
executives in similar positions for companies of similar size and
development structure is used as a benchmark. To enable
the Company to continue to attract and retain executives in the
competitive marketplace, executive compensation for similar companies is
reviewed annually. The Company typically obtains this data
through a review of publicly available executive compensation information
for comparable public companies.
|
The
Compensation Committee’s Conclusion
Based on
the review detailed above, the Compensation Committee, at its meeting held at
the beginning of the fiscal year, formulates its recommendations regarding what
areas of the compensation components will be adjusted for the upcoming year and
what the performance bonus for the prior year will be.
Board
Approval
At the
first Compensation Committee meeting of the year, the Compensation Committee
reviews the Executive Chairman and other executive officers’ compensation and
bonuses and presents its recommendations to the Board of
Directors. The final total compensation package decision regarding
the Executive Chairman is made by the Independent Directors in an Executive
Session without the Executive Chairman or other members of management present,
and the final decisions on other executives’ total compensation packages are
made by the full Board of Directors.
The
following discussion is provided to facilitate stockholder understanding of the
Named Executive Officer compensation information included with this proxy
statement. Overall our compensation decisions are framed by the nature of our
business as a development stage pharmaceutical company with the need for highly
specialized and talented individuals. Our compensation policies are designed to
take into account the fact that the competition for executives is with all sizes
of pharmaceutical firms and must factor in not just comparable compensation,
including health care, retirement or other traditional executive benefits, but
issues such as location and position stability. We operate in Tempe, Arizona, a
relatively small market for biotechnology, and in a field with substantial
product development risks, with no current revenue and limited
funds.
ANNUAL
BASE COMPENSATION AND CASH BONUS
As
previously mentioned, each executive officer receives a base salary and a cash
bonus which is based on performance against both Company and individual
performance goals. We have established base salaries which we feel are
comparable to other biotechnology firms and with the potential cash bonus,
provide for a reasonable level of cash-based compensation to the
executives. Base compensation in 2007 ranged from $325,000 for Dr.
Steer, to $200,000 for Mr. Holliman. In 2007 the bonus potential was
40% of base salary for Mr. Holliman, Dr. Steer, Mr. Taeger and Mr.
Shinbaum. The bonus plan placed 25-30% of the executive’s cash
compensation at risk, which we believe is a reasonable level of risk for
cash-based compensation. In 2007, performance for the bonus plan was
weighted 50% towards Company goals and 50% towards individual goals. Company and
individual goals included a combination of operating, such as timely completion
of clinical or pre-clinical tasks and performance against our strategic plan,
financial, such as performance to budget or generation of unbudgeted cost
savings, and administrative, such as maintaining compliance with Securities and
Exchange Commission rules, regulations and reporting requirements. We believe
that the cash compensation at risk and the performance goals of the 2007 bonus
plan serve to align our executive’s interests with our interests and focus their
efforts where we believe they have the potential to achieve performance we have
identified as important to accomplishing objectives necessary to advance our
development efforts.
Equity
Based Compensation
As
previously discussed, we provide a certain level of cash compensation to each
executive as both a short-term reward and to focus executive performance on
short-term goals that are part of our long-term strategies. Additionally, we use
a combination of stock option grants and stock awards, both during the
employment offer process and annually, to generate a commitment to and a
long-term investment in our company. Grants and awards connected with employment
offers were determined based on the position and competitive factors at the time
of the offers.
Stock
Option Grants
As part
of our long-term incentives we grant options to purchase shares of our common
stock to our executives. During 2007, we granted Dr. Steer an option
to purchase 50,000 shares. Grants are targeted such that an annual $1 increase
in market price, currently an annual $42,000,000 increase in shareholder value,
would provide approximately 10% of the executive’s compensation. We believe
grants at these levels serve to gradually increase our Executives’ commitment to
our company and align their interests with other stockholders of the
company.
Stock
Awards
We
believe stock awards are an important element in our compensation plan and in
2007 we awarded stock valued at $30,000 to Mr. Taeger and $25,000 to Mr.
Shinbaum Awards made are targeted to comprise approximately 10%
of total executive compensation and will be a fixed dollar amount award with the
number of shares determined by the closing market price on the date of grant.
Given the compensation levels of our executives we believe awards at these
levels serve to gradually increase our executive’s commitment to our company and
align their interests with other stockholders of the company.
Fringe
Benefits, Perquisites and Retirement Benefits.
Our
executives participate in group health, dental, life, and disability programs
and participate in our 401K plan on the same basis as other
employees. No perquisites are provided to executives that are not
provided to other employees or that in aggregate exceed $10,000 per
year.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
The
Compensation Committee of the Company’s Board of Directors (the “Compensation
Committee”) recommends the compensation of the Executive Chairman and President
to the Board and reviews and approves the design, administration and
effectiveness of compensation programs for other key executive officers,
including salary, cash bonus levels, other perquisites and stock awards or
option grants under the Company’s stock option plans. The Compensation Committee
has reviewed and discussed the Compensation Discussion and Analysis with
management, and based on this review and discussion, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this proxy statement.
Compensation
Committee during 2007:
|
Michael D. Casey
|
|
|
Elwood
D. Howse, Jr.
|
|
|
Fredric
J. Feldman, Ph.D. (replaced Mr. Casey on May 10,
2007)
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
During
2007, Fredric J. Feldman, Ph.D., Michael D. Casey and Elwood D. Howse, Jr., each
an independent director, served on the Compensation Committee of the Board of
Directors. Mr. Casey was replaced on the Compensation Committee by
Dr. Feldman on May 10, 2007.
SUMMARY COMPENSATION TABLE
The
following table sets forth, with respect to the years ended December 31, 2007
and 2006, compensation awarded to, earned by or paid to the Company’s named
executive officers.
|
Name
|
Year
|
Salary
($)
|
Bonus
($)
|
StockAwards
($)
|
OptionAwards
($)
|
Non-EquityIncentive Plan
Compensation
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
John M.
Holliman,
III
Executive
Chairman
|
2007
2006
|
200,000
133,000
|
73,000
57,000
|
25,000
20,000
|
66,000
174,000
|
32,000
(1)
28,000
(1)
|
396,000
412,000
|
||
|
Randolph
C.
Steer,
MD, Ph.D.
President
|
2007
2006
|
319,000
200,000
|
116,000
86,000
|
-
|
81,000
174,000
|
66,000
(2)
|
516,000
526,000
|
||
|
Les
M. Taeger
Chief
Financial
Officer
|
2007
2006
|
235,000
198,000
|
130,000(3)
86,000
|
-
|
138,000
351,000
|
5,000
|
508,000
635,000
|
||
|
Dana
B. Shinbaum
VP
Business
Development
|
2007
2006
|
235,000
227,000
|
112,000(3)
107,000
|
-
26,000
|
90,000
187,000
|
5,000
|
442,000
547,000
|
|
(1)
|
Mr.
Holliman is a member of the Board of Directors and received $32,000 and
$28,000 in Board fees in 2007 and 2006, respectively. Mr.
Holliman received total Director’s compensation (Board fees, stock awards
and option grants) of $64,000 and $94,000 in 2007 and 2006, respectively,
as more fully described in the Compensation of Directors section of this
Proxy Report.
|
|
(2)
|
Prior
to becoming an employee, Dr. Steer performed consulting services for the
Company for which he was paid $66,000 in
2006.
|
|
(3)
|
In
2007, Mr. Taeger and Mr. Shinbaum were awarded 19,868 and 16,556 shares,
respectively, with a fair value of the share awards on the date of grant
of $30,000 and $25,000, respectively. These amounts are
included in the “Bonus” column.
|
OPTION GRANTS / STOCK AWARDS
The
following table sets forth information about stock option grants and stock
awards during the last fiscal year to the executive officers named in the
Summary Compensation Table.
Grants
of Plan-based Awards
|
Name
|
Grant
Date
|
All
Other Stock
Awards:
Number
of Shares
of
Stock
or
Units
(#)
|
All
Other Option
Awards:
Number of Securities
Underlying
Options
(#)
|
Exercise
or Base Price of Option Awards
($/Share)
|
Grant
Date Fair Value of Stock and Option Awards (1)
($)
|
|
(a)
|
(b)
|
(i)
|
(j)
|
(k)
|
(l)
|
|
John M. Holliman,
III
Executive
Chairman
|
1/1/07
1/1/07
|
17,483
|
10,000
|
1.43
|
7,000
25,000
|
|
Randolph C. Steer,
MD, Ph.D.
President
|
5/21/07
|
50,000 |
1.53
|
38,000
|
|
|
Les M. Taeger
Chief
Financial Officer
|
5/9/07
|
19,868
|
30,000
|
||
|
Dana B. Shinbaum
VP
Business Development
|
5/9/07
|
16,556
|
|
25,000
|
|
|
(1)
|
Fair
value of the grants at the date of the grants was determined using the
Black-Scholes model as described in Note 8 to our Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 5,
2008.
|
Outstanding Equity Awards at Fiscal Year-End
|
Name
|
Option
Awards
|
||||||||||||||
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
|||||||||||
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
||||||||||
|
John
M. Holliman, III
|
|||||||||||||||
| 5,000 | 5.53 |
1/1/2008
|
|||||||||||||
| 5,000 | 3.34 |
12/31/2008
|
|||||||||||||
| 5,000 | 2.53 |
12/29/2009
|
|||||||||||||
| 5,000 | 2.44 |
12/15/2010
|
|||||||||||||
| 30,000 | 3.19 |
1/19/2011
|
|||||||||||||
| 20,000 | 3.58 |
8/24/2011
|
|||||||||||||
| 25,000 | 3.93 |
10/26/2011
|
|||||||||||||
| 5,000 | 4.89 |
12/31/2011
|
|||||||||||||
| 10,000 | 3.61 |
12/31/2012
|
|||||||||||||
| 10,000 | 6.13 |
12/31/2013
|
|||||||||||||
| 30,000 | 7.40 |
1/23/2014
|
|||||||||||||
| 10,000 | 6.25 |
12/31/2014
|
|||||||||||||
| 10,000 | 4.90 |
1/2/2016
|
|||||||||||||
| 25,000 | 1.75 |
5/12/2016
|
|||||||||||||
| ** | 158,333 | 41,667 | 1.75 |
5/12/2016
|
|||||||||||
| 10,000 | 1.43 |
12/31/2017
|
|||||||||||||
|
Randolph
C. Steer, MD, Ph.D.
|
5,000 | 5.94 |
1/30/2008
|
||||||||||||
|
**
|
158,333 | 41,667 | 1.75 |
5/12/2016
|
|||||||||||
| 14,583 | 35,417 | 1.53 |
5/21/2017
|
||||||||||||
|
Les
M. Taeger ***
|
71,875 | 78,125 | 5.15 |
1/16/2016
|
|||||||||||
|
**
|
112,500 | 37,500 | 1.70 |
6/2/2016
|
|||||||||||
|
Dana
B. Shinbaum
|
27,083 | 22,917 | 3.27 |
10/29/2015
|
|||||||||||
|
*
|
16,771 | 18,229 | 5.39 |
1/30/2016
|
|||||||||||
|
**
|
112,500 | 37,500 | 1.70 |
6/2/2016
|
|||||||||||
* Vesting
four years - 25% year one and monthly thereafter
**
Vesting two years monthly
***
Vesting four years monthly
OPTION EXERCISES AND STOCK VESTED
|
Name
|
Option
Awards
|
Stock
Awards
|
||
|
Number
of Shares
Acquired
on Exercise
(#)
|
Value
Realized
on
Exercise
($)
|
Number
of Shares
Acquired
On Vesting
(#)
|
Value
Realized on
Vesting
($)
|
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|
John
M. Holliman, III
|
17,483
|
24,000
|
||
|
Les
M. Taeger
|
19,868
|
30,000
|
||
|
Dana
B. Shinbaum
|
16,556
|
25,000
|
||
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT,
AND
CHANGE-IN-CONTROL
ARRANGEMENTS
Effective
April 5, 2006, Mr. John M. Holliman, III, became Executive
Chairman and Principal Executive Officer. On May 12, 2006, the
Company entered into an agreement with VV III Management, LLC and John M.
Holliman, III, to compensate Mr. Holliman for his services as the Company’s
Executive Chairman and principal executive officer (the “Holliman
Agreement”).
Under the
Holliman Agreement, Mr. Holliman’s services to the Company may be terminated by
the Company at any time, with or without cause. In the event of
termination without cause in connection with or following a Change in Control,
payments under the Holliman Agreement will continue for six months after the
date of termination. It provides for annual base cash compensation of
$200,000, payable in accordance with the Company’s standard payroll practices
and a target bonus of 40% of base compensation upon the achievement of
individual and corporate performance objectives. In addition, the
Holliman Agreement includes other terms and conditions consistent with
agreements entered into with other Company executives.
In the
event of a change of control or liquidation of the Company, the vesting of the
options to purchase shares of the Company’s common stock held by Mr. Holliman,
will be accelerated so that the options will become fully
exercisable.
Effective
April 5, 2006, Randolph C. Steer, MD, Ph.D., became President of the
Company. Dr. Steer has performed consulting services for the Company
since 2002. On May
12, 2006, the Company also entered into an agreement with Randolph C. Steer, MD,
Ph.D., to compensate Dr. Steer for his services as the Company’s President and
Chief Operating Officer (the “Steer Agreement”). Under the Steer
Agreement, Dr. Steer’s services to the Company may be terminated by the Company
at any time, with or without cause. If the event of termination is
without cause, payments under the Steer Agreement will continue for three months
after the date of termination. In the event of termination without
cause in connection with or following a Change in Control, payments under the
Steer Agreement will continue for twelve months after the date of
termination. Effective April 1, 2007, Dr. Steer’s annual base
cash compensation was increased from $300,000 to $325,000, payable in accordance
with the Company’s standard payroll practices. Dr. Steer is also
eligible for a target bonus of 40% of base compensation upon the achievement of
individual and corporate performance objectives. In addition, the
Steer Agreement includes other terms and conditions consistent with agreements
entered into with other Company executives.
In the
event of a change of control or liquidation of the Company, the vesting of the
options to purchase shares of the Company’s common stock held by Dr. Steer, will
be accelerated so that the options will become fully exercisable.
On
January 10, 2006, the Company entered into an employment agreement with Les
M. Taeger, dated as of January 10, 2006, effective as of January 16,
2006 (the “Taeger Employment Agreement”), pursuant to which Mr. Taeger
serves as the Company’s Senior Vice President / Chief Financial
Officer. Under the Taeger Employment Agreement, Mr. Taeger may
be terminated at any time, with or without cause, at the option of either the
Company or Mr. Taeger. If the Company terminates Mr. Taeger
without cause, provided Mr. Taeger first executes a Severance Agreement in the
form then used by the Company, the Company shall continue to pay to Mr. Taeger
his minimum base salary in effect at the time of termination for a period of one
year following the date of termination, at the time and in the manner dictated
by the Company’s standard payroll policies. Should such termination
occur as a result of a Change in Control, the Company shall also pay
Mr. Taeger a pro-rata share of his bonus at the time of
termination. Effective January 1, 2008, Mr. Taeger’s annual base
salary was increased to $242,000. Mr. Taeger is eligible to
participate in the Company’s discretionary bonus program, which provides for a
bonus of up to 40% of his base salary, and Mr. Taeger will receive medical,
dental and other fringe benefits generally granted to the Company’s senior
management.
On
October 17, 2005, the Company entered into an employment agreement with
Dana B. Shinbaum (the “Shinbaum Employment Agreement”), pursuant to
which Mr. Shinbaum serves as the Company’s Vice President of Business
Development and Strategic Marketing. Under the Shinbaum Employment
Agreement, Mr. Shinbaum may be terminated at any time, with or without
cause, at the option of either the Company or Mr. Shinbaum. If
the Company terminates Mr. Shinbaum without cause, provided Mr. Shinbaum first
executes a Severance Agreement in the form then used by the Company, the Company
shall continue to pay to Mr. Shinbaum his minimum base salary in effect at the
time of termination for a period of one year following the date of termination,
at the time and in the manner dictated by the Company’s standard payroll
policies. Should such termination occur as a result of a Change in
Control, the Company shall also pay Mr. Shinbaum a pro-rata share of his bonus
at the time of termination. Effective January 1, 2008, Mr. Shinbaum’s
annual base salary was increased to $242,000. Mr. Shinbaum is
eligible to participate in the Company’s discretionary bonus program, which
provides for a bonus of up to 40% of his base salary, and Mr. Shinbaum will
receive medical, dental and other fringe benefits generally granted to the
Company’s senior management.
Under the
Company’s stock option plans, upon the occurrence of a merger in which the
Company is not the surviving entity, a sale of substantially all of the assets
of the Company, an acquisition by a third party of 100% of the Company’s
outstanding equity securities or a similar reorganization of the Company, 75% of
all unvested options will vest, with the balance vesting equally over 12 months
or according to the individual’s vesting schedule, whichever is
earlier. If the option holder loses his position with the Company as
a result of the merger or sale, 100% of his options will immediately vest.
Additionally, the Company’s 1997 Stock Option Plan and 2005 Equity Incentive
Plan provide that, upon a merger, consolidation or reorganization with another
corporation in which the Company is not the surviving corporation, outstanding
options shall be substituted on an equitable basis for options for appropriate
shares of the surviving corporation, or optionees shall receive cash in exchange
for cancellation of outstanding options.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
The role
of the Audit Committee (the “Audit Committee”) is to assist the Board of
Directors in its oversight of the Company’s financial reporting
process. Management of the Company is responsible for the
preparation, presentation and integrity of the Company’s financial statements,
the Company’s accounting and financial reporting principles and internal
controls and procedures designed to assure compliance with accounting standards
and applicable laws and regulations. The independent registered public
accountant is responsible for auditing the Company’s financial statements
and expressing an opinion as to their conformity with generally accepted
accounting principles.
Among
other matters, the Audit Committee monitors and oversees the activities and
performance of the external independent registered public accountant, including
the audit scope, external audit fees, and auditor independence
matters. The Audit Committee also is responsible for approving
non-audit services proposed to be performed by the independent auditor. The
Audit Committee has responsibility to appoint and dismiss the Company’s
independent auditor. Management and independent auditor presentations
to and discussions with the Audit Committee also cover various topics and events
that may have significant financial impact or are the subject of discussions
between management and the independent auditor.
In the
performance of its oversight function, the Audit Committee reviewed and
discussed the audited financial statements with management and the independent
registered public accountant. The Audit Committee has also discussed with the
independent registered public accountant the matters required to be discussed by
Statement on Auditing Standards No. 61, as amended, Communication with Audit
Committees, and Rule 2-07 of Regulation S-X. Finally, the
Audit Committee has received the written disclosures and the letter from the
independent registered public accountant required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit
Committees, as currently in effect, and written confirmations from
management with respect to services provided by the independent registered
public accountant, has considered whether the provision of non-audit services by
the independent registered public accountant to the Company is compatible with
maintaining the auditor’s independence and has discussed with the independent
registered public accountant the independent registered public accountant’s
independence. The Audit Committee met five times in 2007, each time meeting
separately with the independent registered public accountant without the
presence of management.
Based
upon the reports and discussions described in this report, the Audit Committee
recommended to the Board that the audited financial statements be included in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2007
for filing with the Securities and Exchange Commission.
Audit
Committee during 2007:
|
Elwood
D. Howse, Jr.
|
|
|
Augustus A. White,
III, MD, Ph.D.
|
|
|
Fredric J. Feldman,
Ph.D.
|
The
foregoing report of the Audit Committee of the Company’s Board of Directors
shall not be deemed soliciting material or otherwise deemed filed and shall not
be subject to the liabilities of Section 18 of the Securities Exchange Act of
1934, or deemed to be incorporated by reference by any general statement
incorporating by reference this proxy statement into any other filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that we specifically incorporate the Report by reference
therein.
CODE OF CONDUCT AND CORPORATE GOVERNANCE
In March
2004, the Company adopted a code of conduct that applies to all of its employees
and has particular sections that apply only to its principal executive officer
and senior financial officers. The Company has posted the text of its
code of conduct on its website under the “Investors” section under the link for
the “Code of Conduct.” In addition, the Company will promptly
disclose on its website (1) the nature of any amendment to its code of conduct
that applies to its principal executive officer and senior financial officers,
and (2) the nature of any waiver, including an implicit waiver, from a provision
of its code of conduct that is granted to one of these specified officers, the
name of such officer who is granted the waiver and the date of the
waiver.
The full
Board of Directors addresses all matters regarding corporate governance (that
is, the relationships of the Board, the stockholders and management in
determining the direction and performance of the Company) and the procedural
rules regarding the operation of the Board itself. As such, the Board reviews
all proposals submitted by stockholders for action at the annual stockholders’
meeting with regards to each such proposal.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The Board
of Directors reviews transactions with related parties, but has no formal
policies in place with respect to such reviews or the approval of such
transactions. During 2007 there were no reported related party
transactions with directors, executive officers or other related parties, which
might have required disclosure under SEC rules or which were otherwise material
to the Company.
The
Company has entered into indemnity agreements with all of its directors and
officers for the indemnification of and advancing of expenses to such persons to
the fullest extent permitted by law.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Under the
securities laws of the United States, the Company’s directors, its executive
officers and any persons holding more than 10% of the Company’s Common Stock are
required to report their initial ownership of the Company’s Common Stock and any
subsequent changes in that ownership to the SEC. Specific due dates
for these reports have been established, and the Company is required to disclose
any failure to file by these dates. The company believes that all of
these filing requirements were satisfied during the year ended December 31,
2007.
In making
these disclosures, the Company has relied solely on written representations of
those persons it knows to be subject to the reporting requirements and copies of
the reports that they have filed with the SEC.
EQUITY COMPENSATION PLANS
The
following provides tabular disclosure of the number of securities to be issued
upon the exercise of outstanding options, the weighted average exercise price of
outstanding options, and the number of securities remaining available for future
issuance under equity compensation plans as of December 31, 2007, aggregated
into two categories – plans that have been approved by stockholders and plans
that have not.
|
Number
of Securities to
|
Weighted
Average
|
Number
of securities remaining
|
|
|
be
issued upon exercise
|
exercise
price of
|
available
for future issuances
|
|
|
of
outstanding options,
|
outstanding
options,
|
under
equity compensation plans
|
|
|
warrants
and rights
|
warrants
and rights
|
(excluding
securities reflected in
|
|
|
Plan
Category:
|
column
a)
|
||
|
Equity
Compensation Plans
|
|||
|
Approved
by Secutity Holders
|
3,200,125
|
$3.43
|
436,026
|
|
Equity
Compensation Plans Not
|
|||
|
Approved
by Security Holders (1)
|
103,125
|
$5.88
|
-
|
|
3,303,250
|
$3.51
|
436,026
|
|
|
(1)
|
Includes
options outstanding and exercisable by James M. Pusey, MD, former CEO, to
purchase 103,125 shares of the Company's common stock at a
weighted average exercise price of $5.88 with no additional options
available for future issuance.
|
PROPOSAL 2: RATIFICATION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTANT
On June
14, 2006 the Company dismissed Deloitte & Touche, LLP, (“Deloitte”) as its
independent registered public accounting firm. The decision to
dismiss Deloitte was initiated and approved by the Audit Committee of the
Company’s Board of Directors. On June 19, 2006, the Audit Committee
of the Board of Directors appointed Ernst & Young LLP (“E&Y) as our
independent registered public accounting firm. On May 10, 2007,
Shareholders of the Company approved the election of E&Y as our independent
registered public accounting firm for the year ended December 31,
2007.
The Board
of Directors is submitting the selection of the independent registered public
accountant firm for the year ending December 31, 2008, for shareholder
ratification at the 2008 Annual Meeting and recommends that stockholders vote
FOR ratification of such appointment.
In the
event the shareholders fail to ratify the appointment, the Audit Committee will
consider it a direction to consider other accounting firms for the subsequent
year. E&Y representatives are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate
questions.
Deloitte’s
reports on the Company’s financial statements for the fiscal years ended
December 31, 2005 and 2004, respectively, did not contain an adverse opinion or
a disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. Deloitte’s audit reports on
the Company’s financial statements for the fiscal years ended December 31, 2005
and 2004 did contain an explanatory paragraph regarding the fact that the
Company was in the Development Stage. The audit reports of Deloitte
on management’s assessment of the effectiveness of internal control over
financial reporting and the effectiveness of internal control over financial
reporting as of December 31, 2005 and 2004 did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. In connection with the audits
of the financial statements of the Company for the years ended December 31, 2005
and 2004 and through the interim period of January 1, 2006 through June 14,
2006, there were no disagreements between us and Deloitte on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to Deloitte’s
satisfaction, would have caused Deloitte to make a reference to the subject
matter of the disagreements in connection with its reports. During
the years ended December 31, 2005 and 2004, and during the subsequent interim
period of January 1, 2006 through June 14, 2006, there were no
reportable events, as defined in Item 304(a)(1)(v) of Regulation
S-K. During the Company’s fiscal years ended December 31, 2005 and
2004 and through the interim period of January 1, 2006 through June 14, 2006, we
did not consult with E&Y regarding any of the matters or events set forth in
Item 304(a)(2)(i) and (ii) of Regulations S-K.
The
Company provided Deloitte with a copy of this disclosure and requested that
Deloitte furnish it with a letter addressed to the Securities and Exchange
Commission stating whether or not Deloitte agrees with the above
statements. A copy of such letter dated June 19, 2006 from Deloitte
is filed as Exhibit 16.1 to our Form 8-K filed with the Securities and Exchange
Commission on June 20, 2006.
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTANT FOR THE 2008 FISCAL YEAR.
PRINCIPAL
ACCOUNTING FIRM FEES
The
following table sets forth the aggregate fees billed to the Company for the
years ended December 31, 2007 and December 31, 2006 by our principal accounting
firms Ernst & Young LLP and Deloitte & Touche LLP.
|
Type of
Fee
|
Amount
|
|||||||
|
2007
|
2006
|
|||||||
|
Audit-Fees
(1)
|
$ | 278,000 | $ | 332,000 | ||||
|
Audit-Related
Fees (2)
|
- | 59,000 | ||||||
|
Total
Audit and Audit-Related Fees
|
278,000 | 391,000 | ||||||
|
Tax
Fees (3)
|
- | 28,000 | ||||||
|
All
Other Fees (4)
|
- | - | ||||||
|
Total
Fees
|
$ | 278,000 | $ | 419,000 | ||||
|
(1)
|
Audit
fees include fees for services rendered in connection with the audits of
the Company’s financial statements for the fiscal years ended December 31,
2007 and 2006, audit of Internal Control over Financial Reporting as of
December 31, 2007 and 2006, and reviews of the financial statements
included in the Company’s quarterly reports on Form 10-Q during the
applicable fiscal year.
|
|
(2)
|
Audit-related
fees include fees for services rendered for matters such as the purchase
of substantially all of the assets of AzERx, Inc., sales of shares of the
Company’s common stock to PharmaBio Development, Inc., and responses to
accounting and reporting-related
matters.
|
|
(3)
|
Tax
fees include fees for services rendered for tax compliance, preparation of
original and amended tax returns, claims for refunds and other tax
services.
|
|
(4)
|
Our
principal accounting firms did not perform nor bill the Company for any
other services during the fiscal years ended December 31, 2007 and 2006
that are appropriately classified as “All Other
Fees.”
|
The Audit
Committee has concluded that the services provided by the principal accounting
firms that were not related to the audit of the Company’s financial statements
were at all times compatible with maintaining that firm’s
independence.
Consistent
with the rules of the Securities and Exchange Commission regarding auditor
independence, the Audit Committee has responsibility for appointing, setting
compensation for, and overseeing the work of, the independent auditor. In
recognition of this responsibility, the Audit Committee has included in its
charter the responsibility to pre-approve “all auditing services and permitted
non-auditing services proposed to be performed by the independent auditor,
subject to the de minimis exceptions for non-audit services that were not
recognized as non-audit services at the time of engagement and which are
subsequently approved by the committee prior to completion of the
audit.” No fees were paid to the independent auditor pursuant to the
“de minimis” exception to the foregoing pre-approval policy in
2007.
The
Company knows of no other matters to be submitted at the Annual
Meeting. If any other matter properly comes before the Annual
Meeting, it is the intention of the persons named in the enclosed proxy card to
vote the shares they represent as the Board of Directors may
recommend.
Proposals
of stockholders of the Company which are intended to be presented by such
stockholders at the Company’s Annual Meeting for the fiscal year ending December
31, 2008 must be received by the Company no later than December 13, 2008 in
order that they may be considered for inclusion in the proxy statement and form
of proxy relating to that meeting. Additionally, if a stockholder wishes to
present to the Company an item for consideration as an agenda item for a meeting
without inclusion in the proxy statement, he, she or it must timely give notice
to the Secretary and give a brief description of the business desired to be
discussed. To be timely for next year’s Annual Meeting, our bylaws
require that such notice must have been delivered to or mailed to and received
by the Company between 60 and 90 days prior to that Annual
Meeting. If we do not publicly announce our meeting date or give
notice of our meeting date at least 70 days before next year’s Annual Meeting,
stockholders may submit items for consideration as agenda items until 5:00 pm on
the 15th day
after the public disclosure or notice.
ANNUAL
REPORT
A copy of
the Company’s 2007 Annual Report to Stockholders is enclosed. The
Annual Report to Stockholders is not a part of the proxy soliciting material
enclosed herewith. The Proxy Statement and Form of Proxy, as well as
the Company’s Annual Report on Form 10-K, are available on the Company’s website
www.orthologic.com. Upon the written request of any stockholder
entitled to vote at the Annual Meeting, the Company will furnish, without
charge, a copy of the Company’s annual report on Form 10-K for the year ended
December 31, 2007, as filed with the Securities and Exchange
Commission. Copies of exhibits to the annual report on Form 10-K are
also available upon specific request and payment of 25 cents per page for
reproduction plus $3.00 for postage and handling. All requests should
be directed to the Secretary of the Company at 1275 West Washington Street,
Tempe, Arizona 85281.
HOUSEHOLDING
We have
adopted the “householding” procedure approved by the Securities and Exchange
Commission that allows the Company to deliver one proxy statement and annual
report to a household of stockholders instead of delivering a set of documents
to each stockholder in the household. This procedure is more cost
effective because it reduces the number of materials to be printed and mailed.
If they have elected, stockholders who share the same last name and address will
receive one proxy statement and annual report per address unless the Company
receives, or has previously received, contrary
instructions. Stockholders will continue to receive separate proxy
cards/voting instruction forms to vote their shares.
If you
would like to receive a separate copy of the proxy statement and annual report
for this year, please write or call the Company at the following address or
telephone number: OrthoLogic Corp., Corporate Secretary, 1275 West
Washington Street, Tempe, Arizona 85281; (800) 937-5520. Upon
receipt of your request, the Company will promptly deliver the requested
materials to you.
If you
and other OrthoLogic stockholders of record with whom you share and address
currently receive multiple sets of the proxy statement and annual report, and
you would like to receive only a single copy of each in the future, please
contact our distribution agent, ADP, by calling (800) 542-1061. If
you hold your shares in street name (that is, through a bank, brokerage account
or other record holder), please contact your bank, broker or the other record
holder to request information about householding. You may also revoke
your consent to householding by contacting ADP, Attention Householding
Department, 51 Mercedes Way, Edgewood, NY 11717, telephone (800)
542-1061.
|
April
11, 2008
|
THE
BOARD OF DIRECTORS
|
ORTHOLOGIC
CORP.
PROXY
2008
ANNUAL MEETING OF STOCKHOLDERS
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints John M. Holliman, III and Les M. Taeger, and each or
either of them, as Proxies, with full power of substitution, to represent and to
vote, as designated below, all shares of common stock which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of OrthoLogic Corp. to be
held on May 9, 2008, or any adjournment thereof, hereby revoking any proxy
previously given.
THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL NOS. 1 and 2.
|
(Continued
and to be dated and signed on the reverse side.)
|
|
|
ORTHOLOGIC
CORP.
|
|
|
P.O.
BOX 11365
|
|
|
NEW
YORK, N.Y. 10203-0365
|
|
1.
|
PROPOSAL
TO ELECT TWO CLASS II DIRECTORS FOR A TERM EXPIRING IN YEAR
2011
|
FOR the
nominee listed below (except as marked to the contrary below) [ ]
WITHHOLD
AUTHORITY to vote for the nominee listed below [ ]
|
|
Nominee:
|
John M. Holliman,
III
|
Augustus A. White,
III, MD, Ph.D.
(INSTRUCTIONS:
To withhold authority to vote for any individual nominee, mark the “For” box and
write the nominee’s name on the exceptions line below.)
|
Exceptions
|
|
2.
|
PROPOSAL
TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP, as the Company’s
Independent Registered Public Accounting Firm for fiscal year
2008
|
|
FOR
¨
|
AGAINST
¨
|
ABSTAIN
¨
|
|
3.
|
In
their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof as set forth in the Notice and Proxy Statement relating to this
meeting, receipt of which is hereby
acknowledged.
|
|
Change
of Address and/or
|
|
|
Comments
Mark Here ¨
|
Please
sign exactly as name appears to the left. Where shares are held by more than one
owner, all should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation,
partnership, limited liability entity, or any other entity, please sign in the
name of the entity by the president or other authorized officer.
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Dated:
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,
2008
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Signature
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Votes
must be indicated in Black or Blue ink.
Please
sign, date and return this proxy in the enclosed postage prepaid
envelope. The Proxy Statement and Form of Proxy, as well as the Company’s
Annual Report on Form 10-K are available on the Company’s website
www.orthologic.com.