**Exhibit 10.6**

 

**CEO EMPLOYMENT AGREEMENT**

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is madebetween CompuMed, Inc., a California corporation (the “Company”), and JohnG.  (“Jerry”) McLaughlin(“McLaughlin”).  This Agreement iseffective as of the date on which it has been signed by both parties.  Certain background facts are as follows:

 

1.             TheCompany is a medical informatics company which presently provides computerinterpretation of medical diagnostic tests, including electrocardiograms (ECGs)and the OsteoGram bone mineral density test.

 

2.             TheCompany wishes to employ McLaughlin as its Chief Executive Officer, andMcLaughlin wishes to be so employed.

 

ACCORDINGLY, on the basisof the representations, warranties, and covenants contained in this Agreement,the parties agree as follows:

 

# **ARTICLE 1EMPLOYMENT AND TERM**

 

1.1           Employment.  The Company hereby employs McLaughlin as itsChief Executive Officer, and McLaughlin hereby accepts such employment, on theterms and conditions set forth below.

 

1.2           Term.  Unless the parties renew this Agreementunder Section 1.4 or terminate this Agreement under Article 4, the term ofemployment shall commence on May 20, 2002 and shall expire on September 30,2004 (the “Term”).

 

1.3           RequiredIntroductory Period.  McLaughlin shallserve a four (4) month plus introductory period immediately following the dateof commencement of employment; provided, however, that theparties may, by mutual agreement, extend this introductory period for anadditional two (2) months.  During thisintroductory period, either the Company or McLaughlin may terminate thisAgreement for any reason, and the Company shall pay to McLaughlin only any basesalary due under Article 3 of this Agreement, prorated through the date oftermination.  McLaughlin shall have noright to receive any further compensation or benefits otherwise payable underany other provision of this Agreement.

 

1.4           Renewal.  The parties may renew McLaughlin’semployment under this Agreement (on the terms set forth in this Agreement or ondifferent terms, as mutually agreed) only through a writing, signed byboth McLaughlin and the Company, that states the terms of the renewedemployment and that states an expiration date for the renewed term.  Either party may decide, with or without Causeor reason, whether to agree to a renewed term, and there is no expectation onthe part of either McLaughlin or the Company as to whether the employment willor will not be renewed.

 

# **ARTICLE 2EMPLOYMENT DUTIES**

 

2.1           Duties.  McLaughlin agrees to undertake and performall duties as Chief Executive Officer. McLaughlin shall render such services and shall perform such duties andacts in connection with any aspect of the Company’s business as the Company’sBoard of Directors (the “Board of Directors” or the “Board”), as constitutedfrom time to time, reasonably may require. McLaughlin shall perform the services contemplated herein faithfully,diligently, to the best of his ability, and in the best interests of the Company.  McLaughlin shall devote his full and 

 

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exclusive business time and efforts to the rendition of suchservices.  McLaughlin shall at all timesperform such services in compliance with (and, to the extent of his authority,shall ensure that the Company is in compliance with) any and all laws, rules,regulations, and policies applicable to the Company of which he is aware.  McLaughlin shall, at all times during theTerm, adhere to and obey any and all written internal rules and regulations governingthe conduct of the Company’s employees, as established or modified from time totime; provided, however, that, in the event of any conflict between theprovisions of this Agreement and any such rules or regulations, the provisionsof this Agreement shall control.

 

2.2           ExclusiveServices.  During his employment bythe Company, McLaughlin shall not, without the express prior written consent ofthe Board of Directors, engage directly or indirectly in any outsideemployment, consulting of any kind whether or not McLaughlin receivesremuneration for such services, or other activity that relates to any line ofbusiness in which the Company is at that time engaged or plans to engage in, orthat would otherwise conflict with McLaughlin’s employment obligations,contractual duties, or fiduciary obligations to the Company; provided, however,that nothing in this Agreement shall prevent McLaughlin from owning, in theaggregate, five percent or less of the outstanding equity interests in anycompany whose products compete with the Company’s and whose equity interestsare registered pursuant to §12(b) or §12(g) of the Securities Exchange Act of1934.

 

2.3           OtherObligations.  McLaughlinacknowledges that the Company from time to time may have agreements with otherpersons that impose obligations or restrictions on the Company regardinginventions or creative works made during the course of the Company’s work undersuch agreements, or that relate to the confidential nature of such work.  McLaughlin agrees to be bound by all suchobligations and restrictions of which he is informed by the Company and to takeall action necessary to discharge the obligations of the Company thereunder.

 

2.4             Planning.  McLaughlin shall develop a business plan andbudget for the Company, to be approved by the Board of Directors, starting withfiscal year 2003 which begins on October 1, 2002. This plan shall includemonthly projections for the first fiscal year and quarterly for the next twofiscal years. The plan shall be tracked with monthly reports of actuals vs.plan. The plan shall be revised quarterly retaining a 12-month forward lookingwindow and preserving the original as well as revised projections for theactive fiscal year.

 

2.5             Reporting.  McLaughlin shall prepare and deliver to theBoard monthly status reports and financial performance reports. McLaughlinshall participate with the Board in all Board meetings (expected approximatelyquarterly) and with the Executive Committee meetings (expected approximatelymonthly).

 

**ARTICLE3**

**COMPENSATION**

 

As the total consideration for the services thatMcLaughlin renders under this Agreement, McLaughlin shall be entitled to thefollowing:

 

3.1           BaseSalary.

 

3.1.1        Beginningon May 20, 2002, McLaughlin shall be paid a base salary of $150,000 per year,less income tax and other applicable withholdings, payable in bi-weekly equalinstallments, in accordance with the Company’s regular payroll practices.

 

 

3.2           IncentiveBonuses.  Subject to the mutualagreement of McLaughlin and the Board of Directors, McLaughlin shall receive anannual performance bonus of a target value of $150,000.  The structure for this 

 

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performance bonus will be based upon, among other things, stockperformance, revenue growth, earnings per share and funds raised for theCompany’s operations and will be agreed upon by McLaughlin and the Board ofDirectors by September 30, 2002, and will be attached as an appendix to thisAgreement.

 

3.3           CompanyBenefits.  McLaughlin shall be entitledto participate in the Company’s executive benefit plans, vacation, sick leave,medical, dental, vision, long-term disability, and short-term disabilitybenefits, life insurance or other insurance programs, if any, on the same basisas any of those benefits or insurance programs is available generally to othersenior executives under the Company’s personnel policies.

 

**ARTICLE4**

**TERMINATION**

 

4.1           Termination.  Either party shall have the right toterminate this Agreement with or without Cause before the expiration of itsterm.  If the expiration of the Term isreached, no severance or other additional compensation of any kind will bepaid.  Whatever the circumstances of thetermination may be, McLaughlin shall continue to be bound after termination by Articles5, 6 and 8 of this Agreement.

 

4.2           TerminationDuring Introductory Period.  Anytermination of McLaughlin’s employment during the Introductory Period(described in Section 1.3) shall be governed in accordance with Section 1.3.

 

4.3           Terminationfor Cause.  If the Companyterminates McLaughlin’s employment for Cause, the Company shall pay toMcLaughlin any compensation due under Article 3 of this Agreement, proratedthrough the date of termination. McLaughlin will not be eligible to receive any further compensation forany period after termination for cause. For the purposes of this Agreement, termination for “Cause” shall meantermination based on the Company’s good faith belief in the existence of:

 

4.3.1   McLaughlin’s failure or refusal (whether intentional,reckless, or negligent) to perform his duties under the Agreement, provided,however, that no termination shall occur on that basis unless the Company firstprovides McLaughlin with written notice to cure.  The notice to cure shall specify the acts or omissions thatallegedly constitute McLaughlin’s failure or refusal to perform his duties, andMcLaughlin shall have a reasonable opportunity (not to exceed 20 days after thedate of notice to cure) to correct his failure or refusal to perform his duties.  If McLaughlin does not correct his failureor refusal to perform his duties within that period, termination shall beeffective as of the date of written notice to cure;

 

4.3.2        McLaughlin’sbreach of his fiduciary duties to the Company;

 

4.3.3        McLaughlin’scommission of an act which, if prosecuted, would constitute a felony, or hiscommission or conviction of any crime or act of dishonesty, moral turpitude, orfraud;

 

4.3.4        McLaughlin’sdeath or his disability, in accordance with applicable state and federal law;

 

4.3.5        McLaughlin’sabsence from his job for reasons other than illness (personal or immediatefamily)or incapacity for a period in excess of any applicable vacation andother personal time (as determined by the Company’s lawful policies and thisAgreement) without the consent of the Company;

 

4.3.6        McLaughlin’sover use of alcohol or possession/abuse of illegal drugs on Company premises,on work time, or at a work-related function; or

 

4.3.7        conductby McLaughlin that could harm the Company’s reputation or goodwill or thatotherwise could undermine the best interests of the Company or of its officers,directors, Board, or related individuals or entities.

 

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4.4           Terminationwithout Cause by the Company or Termination for Good Reason by McLaughlin.  If the Company terminates McLaughlin’semployment without Cause or if McLaughlin terminates his employment for GoodReason:

 

4.4.1        IfMcLaughlin agrees to and signs a waiver and release of all claims (the form ofsuch waiver and release to be provided by the Company), the Company shall payto McLaughlin all compensation due under Article 3 for the remainder of theTerm, reduced by any amounts that McLaughlin earns from any other job he mayobtain during the remainder of the Term.

 

4.4.2        McLaughlinmust make his best efforts to mitigate his damages by diligently seeking and byaccepting other comparable employment during the remainder of the Term.  If McLaughlin accepts employment after histermination date, he must notify the Company immediately, and the Company shallbe entitled to stop or reduce severance payments.

 

4.4.3        Forpurposes of this Agreement, termination for “Good Reason” is defined as theCompany’s material breach of this Agreement which is not cured within two weeksafter written notice of such breach by McLaughlin to the Company

 

4.5           TerminationBy McLaughlin Without Good Reason.  If McLaughlin terminates his employment without Good Reason, the Companyshall pay to McLaughlin any compensation due under Article 3 of this Agreement,prorated through the date of termination. McLaughlin will not be eligible to receive any further compensation.

 

4.6           TerminationDate.  Any termination under thisArticle shall be effected by written notice. The effective date of the termination (the “Termination Date”) shall beas follows:

 

4.6.1        Inthe event of a termination with or without Cause or with or without GoodReason, the Termination Date shall be the date of receipt of notice of suchtermination.

 

4.6.2        Inthe event of termination through expiration of the Term, the Termination Dateshall be the date of expiration.

 

**ARTICLE5**

**CONFIDENTIALITY AND NON-SOLICITATION**

 

5.1           Nondisclosure. McLaughlin acknowledges that in the course of employment with the Company,he will have access to Confidential Information.  “Confidential Information” includes, but is not limited to,information about either Company’s clients, the terms and conditions underwhich Company or its affiliates deals with clients, pricing information for thepurchase or sale of assets, customer lists, research materials, manuals,computer programs, formulas for analyzing asset portfolios, techniques, data,marketing plans and tactics, technical information, lists of asset sources, theprocesses and practices of Company, all information contained in electronic orcomputer files, all financial information, salary and wage information, and anyother information that is designated by Company or its affiliates asconfidential or that McLaughlin knows or should know is confidential,information provided by third parties that Company or its affiliates areobligated to keep confidential, and all other proprietary information ofCompany or its affiliates.  McLaughlinacknowledges that all Confidential Information is and shall continue to be theexclusive property of Company or its affiliates, whether or not prepared inwhole or in part by McLaughlin and whether or not disclosed to or entrusted toMcLaughlin in connection with employment by the Company.   McLaughlin agrees not to discloseConfidential Information, directly or indirectly, under any circumstances or byany means, to any third persons without the prior written consent of theCompany both during and after his employment by the Company.  McLaughlin agrees that he will not copy,transmit, reproduce, summarize, quote, or make any commercial or other usewhatsoever of Confidential Information, except as may be 

 

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necessary to perform work done by McLaughlin for the Company.  McLaughlin agrees to exercise the highestdegree of care in safeguarding Confidential Information against loss, theft orother inadvertent disclosure and agrees generally to take all steps necessaryor requested by the Company to ensure maintenance of the confidentiality of theConfidential Information.

 

5.2           Exclusions. Section 5.1 shall not apply to the following information:  (a) information now and hereaftervoluntarily disseminated by the Company to the public or which otherwisebecomes part of the public domain through lawful means; (b) information alreadyknown to McLaughlin as documented by written records which predate McLaughlin’semployment with the Company; (c) information subsequently and rightfullyreceived from third parties and not subject to any obligation ofconfidentiality; and (d) information independently developed by McLaughlinafter termination of his employment.

 

5.3           Subpoenas;Cooperation in Defense of the Company. If McLaughlin, during employment or thereafter, is served with anysubpoena or other compulsory judicial or administrative process calling forproduction of Confidential Information or if McLaughlin is otherwise requiredby law or regulation to disclose confidential information, McLaughlin will immediately,before making any such production or disclosure, notify the Company and provideit with such information as may be necessary for the Company to take suchaction as the Company deems necessary to protect its interests.  McLaughlin agrees to cooperate reasonablywith the Company, whether during employment or thereafter, in the prosecutionor defense of all threatened claims or actual litigation in which the Companyis or may become a party, whether now pending or hereafter brought, in whichMcLaughlin has knowledge of relevant facts or issues.

 

5.4           ConfidentialProprietary and Trade Secret Information of Others.  McLaughlin represents that he has disclosedto the Company any agreement to which he is or has been a party regarding theconfidential information of others and he understands that his employment bythe Company will not require him to breach any such agreement.  McLaughlin will not disclose suchconfidential information to the Company nor induce the Company to use any tradesecret or proprietary information received from another under an agreement orunderstanding prohibiting such use or disclosure.

 

5.5           NoUnfair Competition.  McLaughlinhereby acknowledges that the sale or unauthorized use or disclosure of any ofthe Company’s Confidential Information obtained by him by any means whatsoever,at any time before, during, or after the Term shall constitute unfaircompetition.  McLaughlin shall notengage in any unfair competition with the Company or its affiliates eitherduring the Term or at any time thereafter.

 

5.6           Non-Solicitationof Employees.  McLaughlin shall notduring the period commencing on the date of this Agreement and continuing for aperiod of two years after the termination of McLaughlin’s employment with theCompany, use Confidential Information to directly or indirectly, whether aloneor with any other person as a principal, agent, shareholder, participant,partner, promoter, director, officer, manager, employee, consultant, salesrepresentative or otherwise, solicit or induce, or in any manner assist in thesolicitation or inducement of, any person employed by the Company in anycapacity (including, without limitation, as an officer, director, employee,consultant, or independent contractor) to leave such employment, whether or notsuch employment is pursuant to a contract with the Company, and whether or notsuch employment is at will.  The hiringof any such person within one year following the termination of such person’srelationship with the Company shall be rebuttably presumed to be the result ofsolicitation or inducement in violation of this covenant.

 

5.7           Non-Solicitationof Customers.  McLaughlin shall notduring the period commencing on the date of this Agreement and continuing for aperiod of two years after the termination of McLaughlin’s employment with theCompany, use Confidential Information to directly or indirectly, whether aloneor with any other person as a principal, agent, shareholder, participant,partner, promoter, director, officer, manager, employee, consultant, salesrepresentative or otherwise: (a) solicit for business any customers of theCompany, (b) encourage any such customers to stop using the facilities orservices of the Company, or (c) encourage any such customers to use thefacilities or services of any competitor of the Company.

 

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# **ARTICLE 6**

# **COMPANY’S OWNERSHIP INEMPLOYEE’S WORK**

 

6.1           Company’sOwnership.  McLaughlin agrees thatall inventions, discoveries, improvements, trade secrets, formulae, techniques,processes, and know-how, whether or not patentable, and whether or not reducedto practice, that are conceived or developed during his employment with theCompany, either alone or jointly with others, if on the Company’s time, usingthe Company’s equipment, supplies, facilities, or trade secret information orrelating to the Company shall be owned exclusively by the Company, andMcLaughlin hereby assigns to the Company all his rights, title, and interest inall such intellectual property.  McLaughlinagrees that the Company shall be the sole owner of all domestic and foreignpatents or other rights pertaining thereto, and further agrees to execute alldocuments that the Company reasonably determines to be necessary or convenientfor use in applying for, prosecuting, perfecting, or enforcing patents or otherintellectual property rights, including the execution of any assignments,patent applications, or other documents that the Company may reasonablyrequest.  This provision is intended toapply only to the extent permitted by applicable law.  

 

6.2           StatutoryLimitation on Assignment. McLaughlin understands that the Company is hereby advising him that anyprovision in this Agreement requiring him to assign rights in any inventiondoes not apply to an invention that qualifies fully under the provisions ofSection 2870 of the California Labor Code. That Section provides as follows:

 

“(a) Any provision in anemployment agreement which provides that an employee shall assign, or offer toassign, any of his or her rights in an invention to his or her employer shallnot apply to an invention that the employee developed entirely on his or herown time without using the employer’s equipment, supplies, facilities, or tradesecret information, except for those inventions that either:

 

(1) Relate at the time of conception or reduction topractice of the invention to the employer’s business, or actual or demonstrablyanticipated research or development of the employer; or

 

(2) Result from any work performed by the employee forthe employer.

 

(b) To the extent aprovision in an employment agreement purports to require an employee to assignan invention otherwise excluded from being required to be assigned undersubdivision (a), the provision is against the public policy of the state and isunenforceable.”

 

By signing this Agreement, McLaughlin acknowledgesthat this paragraph shall constitute written notice of the provisions ofSection 2870.

 

6.3           Ownershipof Copyrights.  McLaughlin agreesthat all original works of authorship not otherwise within the scope of Section6.1 that are conceived or developed during his employment with the Company,either alone or jointly with others, if on the Company’s time, using Company’sfacilities, or relating to the Company shall be owned exclusively by theCompany, and McLaughlin hereby assigns to the Company all his rights, title,and interest in all such original works of authorship.  McLaughlin agrees that the Company shall bethe sole owner of all rights pertaining thereto, and further agrees to executeall documents that the Company reasonably determines to be necessary orconvenient for establishing in Company’s name the copyright to any suchoriginal works of authorship. McLaughlin shall claim no interest in any inventions, copyrightedmaterial, patents, or patent applications unless he demonstrates that any suchinvention, copyrighted material, patent, or patent application was developedbefore he began any employment with the Company.  This provision is intended to apply only to the extent permittedby applicable law.

 

6.4           Ownershipof Records.  Any written record thatMcLaughlin may maintain of inventions, discoveries, improvements, tradesecrets, formulae, processes, or know-how, whether or not patentable andwhether or not reduced to practice, and any such records relating to originalworks of authorship made by him, alone or 

 

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jointly with others, in the course of his employment with the Companyshall remain the property of the Company. McLaughlin shall furnish the Company any and all such recordsimmediately upon request.

 

6.5           Ventures.  If McLaughlin, during employment with theCompany, is engaged in or associated with the planning or implementation of anyproject, program, or venture involving the Company and any third parties, allrights in the project, program, or venture shall belong to the Company, andMcLaughlin shall not be entitled to any interest therein or to any commission,finder’s fee, or other compensation in connection therewith other than thesalary to be paid to him as provided in this Agreement.

 

6.6           Returnof Company’s Property and Materials. At the end of the Term, or at any time upon the Company’s request,McLaughlin shall promptly deliver to the Company (a) all ConfidentialInformation, including studies, test results, technical data, Company forms,financial data and reports and other documents or data (including data incomputer-readable form) supplied to or created by him in connection with his employmentwith the Company, including all copies of the foregoing, in his possession orcontrol, (b) all software, computers, modems, diskettes, instruments, tools,devices, equipment audio or video tapes, drawings, papers, notes and othermaterials, and any copies thereof (including those contained in magnetic mediaor other forms of computer storage), in McLaughlin’s possession or control thatrelate in any way to the Company’s business or McLaughlin’s employment with theCompany, and (c) all other property relating to the employment of McLaughlin,including, without limitation, company credit cards, telephone cards, cellulartelephone, office keys, desk keys, car keys and security passes.

 

# **ARTICLE 7**

**REVIEW AND UNDERSTANDING OF THISAGREEMENT**

 

MCLAUGHLIN HAS ENTERED INTO THIS AGREEMENT VOLUNTARILYAND DOES SO WITH THE UNDERSTANDING THAT IT SUPERSEDES ALL PREVIOUS EMPLOYMENT,INVENTION, CONFIDENTIALITY AND SIMILAR AGREEMENTS BETWEEN HIM AND THECOMPANY.  MCLAUGHLIN HAS CAREFULLY READAND CONSIDERED THE TERMS OF THIS AGREEMENT AND HAS HAD THE ASSISTANCE OF HISOWN LEGAL COUNSEL IN CONNECTION WITH THE NEGOTIATION, PREPARATION, TAXCONSEQUENCES AND EXECUTION HEREOF. MCLAUGHLIN HAS ASKED ANY QUESTIONS ABOUT THE PROVISIONS OF THISAGREEMENT WHICH HE MIGHT HAVE HAD AND UNDERSTANDS THEIR IMPLICATIONS.  MCLAUGHLIN UNDERSTANDS, MOREOVER, THAT ANYCHANGES TO THIS AGREEMENT MUST BE IN WRITING.

 

**ARTICLE8ARBITRATION**

 

# **8.1           Anycontroversy, dispute or claim (“Claim”) whatsoever between McLaughlin on theone hand, and the Company, or any of its employees, officers, and agents(collectively “Company Parties”) on the other hand, shall be settled by bindingarbitration at the request of either party. The claims covered by this Agreement include, but are not limited to,claims for wages and other compensation, claims for breach of contract (expressor implied), tort claims, claims for discrimination or harassment (including,but not limited to, race, sex, sexual orientation, religion, national origin,age, marital status, medical condition, and disability), and claims forviolation of any federal, state, or other law, statute, regulation, orordinance, except for claims for workers’ compensation or unemploymentinsurance benefits.  The Company and/orMcLaughlin may also seek temporary, preliminary or permanent injunctive reliefin a court of competent jurisdiction.**

# ** **

# **8.2           Theparties shall agree on an arbitrator and, if no agreement is reached, eitherparty may petition the Superior Court for the selection of an arbitrator.  The arbitrator shall apply Californiasubstantive law and the California Evidence Code to the proceeding unlessotherwise agreed.  The demand forarbitration must be in writing and must be made by the aggrieved party within theapplicable statute of limitations period. The arbitration shall**

# ** **

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# **take place in Los Angeles, California.  The parties shall be entitled to conductreasonable discovery, including, without limitation, conducting depositions,propounding interrogatories, and requesting documents.  The arbitrator shall prepare in writing andprovide to the parties a decision and award which includes factual findings andthe reasons upon which the decision is based.**

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# **8.3           Thedecision of the arbitrator shall be binding and conclusive on the parties.  Judgment upon the award rendered by thearbitrator may be entered in any court having proper jurisdiction.**

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# **8.4           Thefees for the arbitrator shall be paid equally by the Company andMcLaughlin.  Each party shall bear itsor his own fees and costs incurred in connection with the arbitration exceptfor any attorneys’ fees or costs which are awarded to a party by the Arbitratorpursuant to a statute or contract which provides for recovery of such feesand/or costs from the other party.**

# ** **

# **8.5           Boththe Company and McLaughlin understand and agree that by using arbitration toresolve any Claims between McLaughlin and the Company or any or all of theCompany Parties, they are giving up any right that they may have to a judge orjury trial with regard to those Claims. This agreement to arbitrate shall survive the termination ofMcLaughlin’s employment.**

 

**ARTICLE9**

**GENERAL PROVISIONS**

 

9.1           Notice.  All notices under this agreement may bemailed to the parties at the following respective addresses:

 

Company:              CompuMed, Inc.

5777 West CenturyBoulevard, Suite 1285

Los Angeles, California90045

Attn: Robert Stuckelman

 

McLaughlin:         John G. McLaughlin

5777 West CenturyBoulevard, Suite 1285

Los Angeles, California90045

 

Any notice required to beprovided under this Agreement shall be in writing and delivered personally ordeposited in the United States mail, certified with a return receipt requested,or registered mail, postage prepaid, addressed to the party to whom the noticeis to be given.  Any party may changehis or its mailing address by personally delivering or by serving writtennotice of such new address upon the other party in the same manner as providedfor in this paragraph.

 

9.2           Integration.  This Agreement supersedes any and all otheragreements, either oral or in writing between the parties hereto with respectto the employment of McLaughlin set forth herein and contains all of thecovenants and agreements between the parties with respect thereto in anymanner, whatsoever.  Each party to thisAgreement acknowledges that no representation, inducement, promise, oragreement, orally or otherwise, has been made by any party, or anyone acting onbehalf of any party, which is not embodied herein, and that no other agreement,statement, or promise not contained in this Agreement shall be valid or bindingon either party.

 

9.3           Modifications.  Any modification to this Agreement will beeffective only if it is in writing and signed by the party to be charged.

 

9.4           NoWaiver.  The failure of either partyto insist on strict compliance with any of the terms, covenants, or 

 

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conditions of this Agreement by the other party shall not be deemed awaiver of that term, covenant, or condition, nor shall any waiver orrelinquishment of any right or power at any one time be deemed a waiver orrelinquishment of that right or power for all or any other times.

 

9.5           Severability.  If any provision in this Agreement is heldby a court of competent jurisdiction to be invalid, void, or unenforceable, theremaining provisions shall, nevertheless, continue in full force and effectwithout being impaired or invalidated in any way.

 

9.6           Successorsand Assigns.  Because this Agreementhas been entered into due to, among other things, the special skills ofMcLaughlin, McLaughlin shall not assign or transfer, in whole or in part, hisrights or obligations under this Agreement without the prior written consent ofthe Company.

 

9.7           GoverningLaw.  This Agreement shall begoverned by and construed in accordance with the laws of the State ofCalifornia.

 

 

IN WITNESS WHEREOF, theparties hereto have caused this Agreement to be executed as of the later dateand year set forth below.

 

 
|          | CompuMed, Inc.      |                   |
|---------------|---------------------|------------------------|
|          |                |                   |   |
|          |                |                   |   |
| Date: 11/2/02 | By:                 | /s/Robert Stuckelman   |   |
|          |                | Robert  Stuckelman     |
|          |                | Chairman  of the Board |
|          |                |                   |
|          |                |                   |
| Date: 11/2/02 | By:                 | /s/John G. McLaughlin  |   |
|          | John G.  McLaughlin |

 

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# **ARTICLE 10 Appendix A toEmployment Agreement**

**Bonus Formula for paragraph 3.2**

 

 

Bonus will be awarded to the CEO based upon results for the fiscal yearas they are reported in the audited statement and 10K.  For FY 2003, ending September 30, 2003,results will be available by December 30, 2003, and bonus payment will be madeon January 1, 2004.

 

Bonus will be based upon revenue, profit, stock price appreciation andfund raising as shown in the attached spreadsheet.

 

The sum of all four bonus components have a target of $75,000 formeeting plan and a cap of $150,000 for exceeding plan by 25%. There is no bonusin any category for failing to reach 85% of plan. Calculation of bonus fornumbers between will be extrapolated using the right column of the spreadsheet.

 

Stock options provide a potential for an additional $100,000, or more,if the CEO is successful in moving the Company forward. The primary basis forbonus will be revenue and profit weighted 25% and 75%, respectively. The planis that prepared under the direction of the CEO. The top lines of the spreadsheetshow revenue and profit from this plan, and also show FY 2002 for comparison.

 

The company is short of cash, and cash erosion has continued during theCEO’s first four months. Therefore, in the interest of preserving cash, thetarget cash bonus is limited, but is enhanced with stock options. Employeeoptions for 100,000 shares of stock were awarded to the CEO on June 14,2002.  These are exercisable at $.25,the closing price that day. Employee options for an additional 50,000 shareswill be awarded on the day this appendix is signed by both parties. Theexercise price will be the closing price that day. The recent stock priceaverage has been $.125.

 

We mutually agree to this bonus plan as Appendix A to the EmploymentAgreement.

 

 
|               |                  |   | COMPUMED, INC.        |   |
|--------------------|-----------------------|--------|-----------------------|--------|
|               |                  |   |                  |   |
|               |                  |   |                  |   |
| By:                | /s/John G. McLaughlin |   | 11/2/02               |   | By: | /s/ Robert Stuckelman |   | 11/2/02 |   |   |
| John G. McLaughlin | date                  |   | Robert Stuckelman     | date   |
|               |                  |   | Chairman of the Board |   |
|                    |                       |        |                       |        |  |  |  |  |  |  |

 

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**RevenueBonus**

 
| **% of Plan** |   | **Revenue $** |            | **Bonus $** |   | **Bonus$/  Rev $K** |   |
|---------------|--------|---------------|-----------------|-------------|--------|---------------------|--------|
| 85%           |   | $             |  2,694,500 |        | 0      |                |   |   |
|          |   |          |            |        |   | 26                  |   |
| 100%          |   | $             |  3,170,000 |        | 12,500 |                |   |   |
|          |   |          |            |        |   | 16                  |   |
| 125%          |   | $             |  3,962,500 |        | 25,000 |                |   |   |

 

**ProfitBonus**

 
| **% of Plan** |   | **Profit $** |    | **Bonus $** |   | **Bonus$/  Profit $K** |   |
|---------------|--------|--------------|---------|-------------|--------|------------------------|--------|
| 85%           |   | $            | 277,100 |        | 0      |                   |   |   |
|          |   |         |    |        |   | 767                    |   |
| 100%          |   | $            | 326,000 |        | 37,500 |                   |   |   |
|          |   |         |    |        |   | 460                    |   |
| 125%          |   | $            | 407,500 |        | 75,000 |                   |   |   |

 

Stock Price Appreciation Avg for September 03

 
|          |   | **% Increase** |   | **Stock  Price** |   | **Bonus** |   | **Bonus$/  .01Stock Price** |   |
|---------------|--------|----------------|--------|------------------|--------|-----------|--------|-----------------------------|--------|
| Price 6/14/02 |   | 0              | %      | $                | 0.25   |      | 0      |                        |   |   |
|          |   |           |   |             |   |      |   | 400                         |   |
|          |   | 100            | %      | $                | 0.50   |      | 10,000 |                        |   |   |
|          |   |           |   |             |   |      |   | 200                         |   |
|          |   | 300            | %      | $                | 1.00   |      | 20,000 |                        |   |   |

 

**Fund Raising**

 
| **Money  Raised** |      | **Bonus $** |   | **Bonus$/ $K  Raised** |   |
|-------------------|-----------|-------------|--------|------------------------|--------|
| 0                 |      | 0           |   |                   |   |
|              |      |        |   | 5                      |   |
| $                 | 1,000,000 |        | 5,000  |                   |   |   |
|              |      |        |   | 5                      |   |
| $                 | 3,000,000 |        | 15,000 |                   |   |   |
|              |      |        |   | 5                      |   |
| $                 | 6,000,000 |        | 30,000 |                   |   |   |

 

**TotalBonus**

 
| **% of Plan** |   | **Bonus** |   |
|---------------|--------|-----------|--------|
| 85            | %      | 0         |   |
|          |   |      |   |
| 100           | %      | 75,000    |   |
|          |   |      |   |
| 150           | %      | 150,000   |   |

 

11

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