EXHIBIT 10.3




NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE COMPANY TO SUCH EFFECT. 

 

FORM OF COMMON STOCK PURCHASE WARRANT 

 

To Purchase 500,000 Shares of Common Stock of 

 

CompuMed, Inc. 

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Bathgate Capital Partners, LLC, a Colorado limited liability company, (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time prior to the close of business on March 12, 2012 (the “Termination Date”) to subscribe for and purchase from CompuMed, Inc., a Delaware corporation (the “Company”), up to 500,000 shares (the “Warrant Shares”) of Common Stock, par value $0.01 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price. 




Section 1.

Exercise. 

 

a)     Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time and from time to time on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto at the address set forth in Section 4i hereof (or at such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); provided, however, the Holder shall have surrendered this Warrant to the Company and the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. 

 

b)     Exercise Price. The exercise price of the Common Stock under this Warrant shall be $0.24 per share (the “Exercise Price”). The Company may, in its sole discretion, lower the exercise price temporarily or permanently. 

 

c)     Mechanics of Exercise. 

 

i.     Delivery of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by physical delivery to the address specified by the Holder in the Notice of Exercise within seven (7) Calendar Days from the receipt by the Company of the Notice of Exercise Form, surrender of this Warrant and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, prior to the issuance of such shares, have been paid. 

 








ii.     Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. 

  

iii.     No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall, in its sole discretion, either (i) pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price, or (ii) round up the fractional share to one whole share.

 

iv.     Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which reasonable and usual taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder. 

  

v.     Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof. 

 

d)     Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 

 

Section 2.

Transfer of Warrant. 

 

a)     Transferability. This warrant is transferable only to investment funds managed by Value Fund Advisors – it is not otherwise transferable.

 

b)     Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual written notice to the contrary. 

 

Section 3.

Certain Adjustments.

 

a)     Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) subdivides outstanding shares of Common Stock into a larger number of shares, (B) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (C) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted. The exercise price of the warrant shall also be adjusted to reflect any transaction described in this section. 











b)     In case of any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing entity, or in case of any sale or conveyance to another entity of all or substantially all of the property of the Company as an entirety, or in the case of any statutory exchange of securities with another corporation or entity (including any exchange effected in connection with a merger of a third corporation or entity with the Company), the Holder shall be obligated to convert this Warrant after paying the appropriate exercise price into the kind and amount of securities, cash or other property which he would have owned or have been entitled to receive immediately after such consolidation, merger, statutory exchange, sale or conveyance had such Warrant been converted immediately prior to effective date of such consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any Units or other securities or property thereafter deliverable on the conversion of this Warrant.  The above provisions of this subsection (c) shall similarly apply to successive consolidations, merger, statutory exchanges, sales or conveyance.  Notice of any such consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holder not less than 30 days prior to such event.  A sale of all or substantially all of the assets of the Company for a consolidation consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.







c)     Whenever the Per Unit Price is adjusted as provided in this Section 3 and upon modification of the rights of the Holder of this Warrant in accordance with this Section 3, the Company shall promptly prepare a certificate of an officer of the Company, setting forth the Per Unit Price and the number of Warrant Units after such adjustment or modification, a brief statement of the facts requiring such adjustment or modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause a copy of such certificate to be mailed to the Holder.




Section 4.

Cashless Exercise.

The Holder may also exercise this Warrant, in whole or in part, on a “cashless” or “net-issue” basis by delivering to the offices of the Company this Warrant, together with a Subscription Notice specifying the number of Warrant Shares to be delivered to the Holder and the number of Warrant Shares to be surrendered in payment of the aggregate Purchase Price according to the following formula:

			
	D =

	FMV – PP

	multiplied by SS


	 
	FMV

	 






Where




“D” means the number of Warrant Shares to be delivered on exercise of the Warrant,

“FMV” means the Fair Market Value, and

“SS” means the number of Warrant Shares to be delivered in payment of the Purchase Price

“PP” means Purchase Price




such that, without the exchange of any funds, the Holder will receive that number of Warrant Shares (and such other consideration otherwise issuable, or payable, upon exercise of this Warrant) less that number of Warrant Shares having an aggregate Fair Market Value on the date prior to the date of exercise (the “Exercise Date”) equal to the aggregate Purchase Price that would otherwise have been paid by the Holder as specified in the Subscription Notice.








The Fair Market Value shall be the average Current Market Price of a share of Common Stock for the five Trading Days immediately preceding the Exercise Date.  For the purpose of this calculation, the Current Market Price of a Share shall be deemed to be the last sale price of the security on the primary trading market for the security on the day for which the price is being calculated.




In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such Warrant Shares for which this Warrant is exercised, and the Company, at its expense, shall forthwith issue and deliver or upon the order of Holder a new Warrant of like tenor in the name of Holder or as Holder (upon payment by Holder of any applicable transfer taxes) may request, reflecting such adjusted Warrant Shares.

Section  5.

Miscellaneous. 

 

a)     Registration. The Holder acknowledges that it will receive unregistered shares of Common Stock upon exercise of the Warrant.   If, at any time prior to March 12, 2012, the Company proposes to file a registration statement under the Securities Act of 1933, as amended, with respect to an offering of any class of its equity securities, other than on Form S-8 or Form S-4, then the Company shall give written notice of such proposed filing to the Holder, as soon as practicable, but no later than 5 business days, before the anticipated filing date.  Such notice shall offer the Holder the opportunity to register such number of unregistered shares underlying the Warrant Shares as the Holder may request.  Should the Holder desire to have unregistered shares included in such registration statement, he shall so advise the Company in writing, setting forth the number of shares of Common Stock for which registration is requested.  If the Holder elects to include less than the full amount of Common Stock underlying the Warrant Shares then outstanding, then the registration rights will continue to apply to any remaining amounts of Common Stock. This grant of registration rights is conditioned upon Holder providing such information as is reasonably required in order to cause such registration statement to become effective. The Company has the right to defer the registration rights described in this Section 5 once if, upon the advice of the underwriter placing securities sold in the registration statement, including the Holder’s shares would adversely affect the offering of the Company’s securities described in the registration statement.  Additionally, if the Holder may sell the shares pursuant to Rule 144(k), the Holder may not require the Company to register the shares.




b)     No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment. 

  

c)     Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. 

 

d)     Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 

 








e)     Authorized Shares.  The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. 

 

f)     Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the laws of the State of California. 

 

g)     Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws. 

  

 

h)     Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any losses, damages, costs and expenses including, but not limited to, reasonable attorneys’ fees, expert fees, and litigation costs, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

i)     Notices. Any notice, request or other document required or permitted to be given or delivered to the Company shall be delivered to CompuMed, Inc., 5777 West Century Blvd., Suite 1285, Los Angeles, CA 90045, telecopier: (310) 645-5880, with a copy to: Amy Trombly, Esq., Trombly Business Law, 1320 Centre Street, Suite 202, Newton Center, MA 02459, Fax: (617) 243-0066.

 

j)     Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder. 

  

k)     Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant. 

 

l)     Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 

 

******************** 




IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. 




 Dated: March 12, 2007

				
	 

	 COMPUMED, INC.


	 

	 


	 

	By:

	/s/ John G. McLaughlin

	 


	 

	 

	Name: John G. McLaughlin

	 


	 

	 

	Title: Chief Executive Officer