8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: April 5, 2006 (Date of earliest event reported)

ORTHOLOGIC CORP.

(Exact name of Company as specified in its charter)

Delaware	000-21214	86-0585310
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1275 West Washington Street, Tempe, Arizona	85281
(Address of principal executive offices)	(Zip Code)

Company’s telephone number, including area code:
(602) 286-5520

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Exhibit 10.1

Exhibit 99.1

Section 1 — Company’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement.

     On April 5, 2006, OrthoLogic Corp. (the “Company”) entered into a separation agreement and release with Dr. James M. Pusey, the Company’s Chief Executive Officer (the “Separation Agreement”) in connection with Dr. Pusey’s resignation. Under the terms of the Separation Agreement, the Employment Agreement dated March 3, 2005, by and between the Company and Dr. Pusey (the “Pusey Employment Agreement”) was terminated effective April 5, 2006 and Dr. Pusey will receive severance benefits of $100,000, to be paid in six equal monthly installments, and continued medical benefits for up to six months. The Separation Agreement is filed with this Form 8-K as Exhibit 10.1 and is incorporated herein by reference.

Item 1.02 Termination of a Material Definitive Agreement.

     On April 5, 2006, the Company entered into the Separation Agreement described in Item 1.01 of this Form 8-K, pursuant to which the Pusey Employment Agreement was terminated effective April 5, 2006 in connection with Dr. Pusey’s resignation. Dr. Pusey’s Employment Agreement was filed as Exhibit 10.1 to Form 8-K filed March 3, 2005.

Section 5 — Corporate Governance and Management

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

     (a)(b) On April 5, 2006, Dr. James M. Pusey resigned as Chief Executive Officer and as a director of the Company. Dr. Pusey was a Class I Director of the Company and his term was to expire at the 2007 Annual Meeting.

     (c) Effective April 5, 2006, the Company appointed John M. Holliman, III to serve as Executive Chairman and principal executive officer and Randolph C. Steer, MD, Ph.D. to serve as President of the Company.

     John M. Holliman, III, 52, 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 and Valley Ventures III, LP, all of which are venture capital funds, since February 1993. Valley Ventures invests primarily in life science companies and Mr. Holliman also is an active board member of several privately held life science companies. From 1985 to 1993, he was the Managing Director and Senior Managing Director of Valley Ventures’ predecessor, Valley National Investors, Inc., a venture capital subsidiary of The Valley National Bank of Arizona. Mr. Holliman has served as a director of the Company since 1987 and as Chairman of the Board since 1997.

     Randolph C. Steer, MD, Ph.D., 56, has been an independent pharmaceutical, biotechnology and medical devices consultant since 1989, and has provided consulting services to the Company since 2002. Dr. Steer 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 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.

     The compensation arrangements for Messrs. Holliman and Steer have not yet been established. Initially, Mr. Steer will be compensated at the rate provided in his consulting agreement with the Company, which is $250.00 per hour.

Section 7 — Regulation FD

Item 7.01 Regulation FD Disclosure

     On April 6, 2006, the Company issued a press release announcing the resignation of Dr. James M. Pusey as President and Chief Executive Officer and naming John M. Holliman, III as Executive Chairman and Randolph C. Steer, MD, Ph.D. as President of the Company. A copy of this press release is attached to this Form 8-K as Exhibit 99.1.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
10.1	Separation Agreement and Release dated April 5, 2006, by and between the Company and James M. Pusey
99.1	Press release dated April 6, 2006

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: April 11, 2006	ORTHOLOGIC CORP.
	/s/ Les M. Taeger
	Les M. Taeger
	Chief Financial Officer

EX-10.1

Exhibit 10.1

EXECUTION COPY

SEPARATION AGREEMENT AND RELEASE

     This Separation Agreement and Release (“Agreement and Release”) is made by and between James M. Pusey (“Executive”) and OrthoLogic Corp. (the “Corporation”). The Executive and the Corporation desire to amicably sever their employment relationship and, notwithstanding Section 6 of their Employment Agreement dated March 3, 2005 (the “Employment Agreement”), agree as follows:

     1. The Employment Agreement is terminated effective April 5, 2006 (“Termination Date”) and, except as expressly provided herein, Executive shall not have any further rights thereunder. Executive hereby resigns as Chief Executive Officer and each other office and employment position with the Corporation and his position as a director on the Corporation’s Board of Directors effective on the Termination Date.

     2. The Corporation shall pay to Executive:

          a. The sum of $100,000 in six equal installments, less applicable withholdings. The first payment shall be due within 10 days of full execution of this Agreement and the remaining five payments shall be due on the 15th day of each of the following five months.

          b. Within 30 days of the Termination Date, (i) Executive’s reasonable documented out-of-pocket business expenses properly incurred but not yet reimbursed prior to the Termination Date and (ii) Executive’s documented unreimbursed expenses incurred prior to the Termination Date for travel to and from Philadelphia, Pennsylvania which are reimbursable pursuant to paragraph 4(h)(iii) of the Employment Agreement, including without limitation such travel on or about March 23 and April 2, 2006.

          c. The excess of (i) the proceeds delivered to the Corporation from the sale of Executive’s restricted stock pursuant to his Rule 10b5-1 trading plan over (ii) the sum of $76,269 plus the applicable federal and state withholding and payroll tax obligations in respect of reimbursements under paragraph 4(h)(iii) of the Employment Agreement for expenses incurred during 2006 prior to the Termination Date. Executive agrees to instruct in writing the broker under his Rule 10b5-1 trading plan to pay the proceeds of the sale of shares thereunder directly to the Corporation in an amount equal to the amount set forth in clause (ii) of the immediately preceding sentence. Executive shall in any event pay or cause to be paid to the Corporation the amount set forth in clause (ii) of the first sentence of this paragraph. The net payment described in such clause (ii) takes into account the $62,500 the Corporation recently agreed to provide to Executive as additional relocation expense reimbursement and Executive shall have no further rights in respect of such amount.

     3. The Corporation shall continue to provide to the Executive medical insurance coverage, at the Corporation’s expense and in the same manner as now provided, through September 2006 or until Executive becomes eligible for medical benefits through another employment relationship, whichever comes sooner.

- 1 -

     4. Except as expressly provided herein, the Corporation hereby releases the Executive from any and all past and present causes of action, claims, rights and liabilities, known or unknown, statutory or at common law, arising out of Executive’s employment or resignation of employment with the Corporation or his service as an officer or director of the Corporation, including, without limitation, his performance or failure to perform any of his duties or responsibilities as an employee, officer or director of the Corporation or any action or failure to act in connection therewith; provided, that the foregoing release shall not apply to the Executive’s obligations under this Agreement.

     5. Executive hereby:

          a. (i) Except as expressly provided herein, releases the Corporation, its past and present parent, subsidiary and affiliated corporations or business entities and its and their past and present directors, officers, agents and employees, from any and all past and present causes of action, claims, rights and liabilities, known or unknown, statutory or at common law, arising out of Executive’s employment or termination of employment with the Corporation; provided, that the foregoing release shall not apply to the Corporation’s obligations under this Agreement or to the Corporation’s obligations to indemnify Executive in his capacity as a director or officer of the Corporation pursuant to the Certificate of Incorporation or Bylaws of the Corporation or that certain Indemnification Agreement between Executive and the Corporation dated April 15, 2005.

              (ii) By way of example only and without limiting the immediately preceding paragraph, this release is applicable to any cause of action, right, claim or liability under Title VII of the 1964 Civil Rights Act, Section 1981 of the 1866 Civil Rights Act, the Family and Medical Leave Act, the Equal Pay Act of 1963, the Americans with Disabilities Act, the Arizona Civil Rights Act, the Arizona Employment Protection Act, and any other employment law or statute, or of wrongful discharge, breach of implied or express contract, breach of the covenant of good faith and fair dealing, intentional or negligent infliction of emotional distress, defamation and any other claim in contract or tort, and for attorneys fees.

          b. Reaffirms his continuing obligation to abide by the terms of the Confidential Information and Assignment of Inventions Agreement dated March 3, 2005 between him and the Corporation.

          c. Agrees to immediately return any and all things in his possession or control belonging to the Corporation including, but not limited to, computers, cell phones, files and documents (whether stored electronically or hard copy), credit cards and access cards.

     6. Executive, in his capacity as a director of the Corporation, hereby waives notice of the meetings of the Corporation’s Board of Directors held on April 2, 3 and 4, 2006.

     7. The terms of this Agreement and Release supersede paragraph 6(a) through (d) of the Employment Agreement. The parties acknowledge that certain paragraphs of the Employment Agreement, by their nature, survive the termination of such agreement, including, but not limited to, paragraphs 6(e), 9 and 10. Each party expressly affirms its or his obligations under Section 10 of the Employment Agreement to, inter alia, not make disparaging remarks.

- 2 -

Notwithstanding the terms of the Employment Agreement, the parties agree that Section 7 of the Employment Agreement shall not survive and shall terminate upon termination of the Employment Agreement.

     8. The parties acknowledge and agree that for purposes of Executive’s two Letters of Stock Option Grant dated March 3, 2005, as of the Termination Date Executive has completed 13 full months of employment and Executive’s vested stock options are as follows:

          a. Under Letter of Stock Option Grant dated March 3, 2005 as to 200,000 shares: options to acquire 42,969 shares at $5.88 per share and options to acquire 25,782 shares at $5.31 per share (in each case subject to adjustment in accordance with such Letter of Grant);

          b. Under Letter of Stock Option Grant dated March 3, 2005 as to 300,000 shares: options to acquire 103,125 shares at $5.88 per share (subject to adjustment in accordance with such Letter of Grant).

     All other outstanding or conditionally granted options to acquire shares of OrthoLogic common stock shall lapse as of the Termination Date. In addition, the 100,000 shares of restricted stock issued under the Letter of Restricted Stock Grant dated March 3, 2005 and not yet vested shall be forfeited and returned to the Corporation for cancellation, and all conditional grants of restricted stock shall lapse as of the Termination Date.

     9. No provision contained herein shall be construed as an admission by Executive or the Corporation of improper conduct, omissions or liability.

     10. This Agreement and Release contains all the promises and understandings of the parties in respect of the subject matter hereof. There are no other agreements and understandings in respect of the subject matter hereof except as set forth herein and this Agreement and Release may be amended only by a written agreement of the parties.

- 3 -

     11. The parties each acknowledge that they have read this Agreement and Release and understand and voluntarily agree to its terms.

OrthoLogic Corp.:		Executive:
By:	/s/ John M. Holliman, III	/s/ James M. Pusey
Name: John M. Holliman, III		Name: James M. Pusey
Title: Chairman of the Board		Date: April 05, 2006
Date: April 05, 2006

- 4 -

EX-99.1

Exhibit 99.1

1275 W. Washington St.
Tempe, AZ 85281
(602) 286-5520
www.orthologic.com
Nasdaq: OLGC

FOR FURTHER INFORMATION:

Melanie Friedman (investors)
Stern Investor Relations, Inc.
(212) 362-1200
melanie@sternir.com

ORTHOLOGIC ANNOUNCES MANAGEMENT UPDATE

TEMPE, AZ, April 6, 2006 — OrthoLogic Corp. (NASDAQ: OLGC) today announced the resignation of James M. Pusey, MD as President and CEO. Dr. Pusey has decided to pursue other opportunities.

John M. Holliman, III, a director of OrthoLogic since September 1987 and Chairman of the Board of Directors since August 1997, will assume the title of Executive Chairman and will lead the Company’s business and corporate strategic activities.

Randolph C. Steer, MD, Ph.D. has been named President of OrthoLogic, directing the Company’s strategy and operations in all clinical development and regulatory areas.

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. In addition, he serves as an active member of the board of directors of public and private corporations. 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 several companies, including 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.

About OrthoLogic

OrthoLogic is a biotechnology company committed to developing a pipeline of novel peptides and other molecules aimed at helping patients with under-served conditions. The Company is focused on the development and commercialization of two product platforms: Chrysalin^® (TP508) and AZX100.

Chrysalin, the Company’s novel synthetic peptide, is being studied in two lead indications, both of which represent areas of significant unmet medical need — fracture repair and diabetic foot ulcer healing. Based on the Company’s pioneering scientific research of the natural healing cascade, OrthoLogic has become a leading company focused on tissue and bone repair. The Company owns exclusive worldwide rights to Chrysalin.

AZX100 is a novel pre-clinical 24-amino acid peptide, the first of a new class of compounds in the field of smooth muscle relaxation called Intracellular Actin Relaxing Molecules, or ICARMs™. AZX100 is currently being evaluated for medically and commercially significant applications, such as the treatment of vasospasm associated with subarachnoid hemorrhage, the prevention of keloid scarring and the treatment of asthma. OrthoLogic has an exclusive worldwide license to AZX100.

OrthoLogic’s corporate headquarters are in Tempe, Arizona. For more information, please visit the Company’s Web site: www.orthologic.com.

Statements in this press release or otherwise attributable to OrthoLogic regarding our business that are not historical facts are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which include the timing and acceptability of FDA filings and the efficacy and marketability of potential products, involve risks and uncertainties that could cause actual results to differ materially from predicted results. These risks include: delays in obtaining or inability to obtain FDA, institutional review board or other regulatory approvals of preclinical or clinical testing; unfavorable outcomes in our preclinical and clinical testing; the development by others of competing technologies and therapeutics that may have greater efficacy or lower cost; delays in obtaining or inability to obtain FDA or other necessary regulatory approval of our products; our inability to successfully and cost effectively develop or outsource manufacturing and marketing of any products we are able to bring to market; changes in FDA or other regulations that affect our ability to obtain regulatory approval of our products, increase our manufacturing costs or limit our ability to market our products; our possible need for additional capital in the future to fund the continued development of our product candidates; and other factors discussed in our Form 10-K for the fiscal year ended December 31, 2005, and other documents we file with the Securities and Exchange Commission.

###

Editors’ Note: This press release is also available under the Investors section of the Company’s Web site at: www.orthologic.com.