The ousted CEO of Indianapolis-based technology firm iSalus Healthcare is suing the company for breach of contract, claiming he was dismissed without cause and is entitled to severance pay and benefits.

Mark A. Day filed the lawsuit Oct. 19 in Marion Superior Court.

Day was iSalus’ president and CEO from June 23, 2006, until May 5, 2010, when the suit says he received a letter informing him that the company’s board had terminated his employment.

The letter said Day “seriously damaged” the company’s relationship with an important client by telling its owner that iSalus was in financial distress and that certain executives were not trustworthy, among other comments. Day also was accused of asking the customer for a job “if things did not work out” at iSalus.

“Your comments were false, inappropriate, unprofessional and in breach of your fiduciary duty and confidentiality obligations to the company,” the letter to Day said, and as a result he was terminated with cause, limiting his payout.

In his lawsuit, Day said iSalus “mischaracterized” the conversations in question. His attorney, DeLaney & DeLaney Managing Partner Kathleen A. DeLaney, declined to clarify how the discussions were misinterpreted.

“We cannot comment on the substance of conversations that will be at issue during trial,” she wrote in an e-mail response to questions. “Mr. Day looks forward to testifying about these and other matters at the appropriate time.”

iSalus founder Michael Hall declined to comment on the lawsuit, saying he had not yet seen it.

Founded in 2000, iSalus sells Web-based electronic medical record systems to health care providers and clinics. The 15-employee company has seen revenue jump as doctors rush to computerize their patient records and earn federal stimulus cash.

Day was paid $85,000 a year, according to his court filing, but was set to receive a salary increase to $125,000 when annualized sales reached the $2 million mark—a milestone he said has been reached.

The lawsuit says Day in late summer or early fall 2009 began investigating allegations that iSalus employees had stolen computer software, but Hall refused to aid in the inquiry. When he raised the issue with board Chairman Simon Abraham last spring, the suit said he was told to stop the investigation. He was fired a short time later.

Day said iSalus breached its contract with him by failing to provide severance pay and other benefits as spelled out in his employment agreement. In the event that he was terminated without cause—which Day’s lawsuit says is the case—he was to be entitled to a lump sum payment equal to two times his base salary.

iSalus paid Day $42,000 on June 3, the lawsuit says.

He has since secured other employment, DeLaney said.