Document:

December 4, 2002

Mr. Angelo S. Morini
President
Galaxy Nutritional Foods, Inc.
2441 Viscount Row
Orlando, FL  32809

Re:  Special Services Agreement

Dear Angelo:

This letter agreement  supercedes the previous  agreement dated October 24, 2002
between  yourself  and  Galaxy  Nutritional  Foods (the  "Company").  This is to
confirm that you have agreed to author a book promoting the Company's  Veggie(R)
brand  products and the  "Veggiesizing(TM)"  stealth/health  diet. You have also
agreed to promote the book as needed while you are President  and  Vice-Chairman
of the  Board of  Directors  of the  Company  and,  in the  event of a change of
control  of  the  Company,   would   consider   promoting  book  for  additional
compensation.

For these special  services,  the Company agrees to issue you two  non-qualified
option agreements to purchase up to 310,060 shares of the Company's common stock
at an exercise price of $2.05 and 200,000  shares of the Company's  common stock
at an exercise price of $4.08. Both options will vest immediately.

This will also confirm that you are reserving  the right to negotiate  book sale
royalties,  depending on the book's potential profit to the Company, which is at
this time unknown.

Sincerely,                              Agreed to and Accepted by:

/s/ Salvatore J. Furnari                /s/ Angelo S. Morini
----------------------------            ---------------------------
Salvatore J. Furnari, CFO               Angelo S. Morini, President

<PAGE>Exhibit

10.1

 

STRAIGHT NOTE

 

	

  $850,000

  	

   

  	

  South El Monte,

  California

  	

   

  	

  October 7, 2002

  

 

For value received, Lee Pharmaceuticals promises to

pay Mark DiSalvo or order, at South El Monte, California the sum of EIGHT

HUNDRED FIFTY THOUSAND DOLLARS, with interest from October 7, 2002, on unpaid

principal at the rate of twenty (20) per cent per annum.  Accrued interest each month will be added to

the principal balance.  Thus, the principal

at the beginning of each month will include the original principal ($550,000)

plus accrued interest.  In May/June 2003

an additional $300,000 will be disbursed to complete the acquisition.  This will continue until June 30, 2003.  Commencing August 15, 2002, monthly payments

will be $30,000.  Interest shall be

calculated on the basis of the unpaid principal balance daily, based on a

365-day year, actual day month and payable monthly.  Principal and interest shall be payable in lawful money of the

United States.  If action were

instituted on this note, I promise to pay such sum as the Court may fix as

attorney’s fees.  This note is secured

by the trademark on the product brand Tronolane®.

 

 

	

  OCTOBER 7, 2002

  	

   

  	

  /s/ RONALD G. LEE

  	

   

  
	

  Date

  	

   

  	

  Lee Pharmaceuticals - Ronald G. Lee

  	

   

  

 

 

	

  OCTOBER 7, 2002

  	

   

  	

  /s/ MICHAEL L. AGRESTI

  	

   

  
	

  Date

  	

   

  	

  Lee Pharmaceuticals - Michael L. AgrestiExhibit

10.2

 

STRAIGHT NOTE

 

	

  $150,000

  	

   

  	

  South El Monte,

  California

  	

   

  	

  December 2, 2002

  

 

For value received, Lee Pharmaceuticals promises to

pay Mark DiSalvo or order, at South El Monte, California the sum of ONE HUNDRED

FIFTY THOUSAND DOLLARS, with interest from December 2, 2002, on unpaid

principal at the rate of twenty four (24) percent per annum.  This note is for a ninety day period from

December 2, 2002.    Interest will be accrued

each month and will be remitted along with the principal amount at maturity.  Interest shall be calculated on the basis of

the unpaid principal balance daily, based on a 365-day year, actual day

month.  Unpaid monthly interest will not

be added to the principal balance for subsequent monthly interest

calculations.  Principal and interest

shall be payable in lawful money of the United States.  If action were instituted on this note, I

promise to pay such sum as the Court may fix as attorney’s fees.  This note is personally guaranteed by Ronald

G. Lee.  This note is unsecured.

 

 

	

  DECEMBER 2, 2002

  	

   

  	

  /s/ RONALD G. LEE

  	

   

  
	

  Date

  	

   

  	

  Lee Pharmaceuticals - Ronald G. Lee

  	

   

  

 

 

	

  DECEMBER 2, 2002

  	

   

  	

  /s/ MICHAEL L. AGRESTI

  	

   

  
	

  Date

  	

   

  	

  Lee Pharmaceuticals - Michael L. AgrestiExhibit

10.3

 

MODIFICATION TO PROMISSORY NOTE

 

WHEREAS, on July 3, 1995, Lee Pharmaceuticals

(“maker”) and Sass DiSalvo (“Holder”) entered into an agreement (“Note”)

whereby Lee Pharmaceuticals was to pay to Sass DiSalvo the sum of Fifty

Thousand Dollars; and

 

WHEREAS, on July 6, 1996, the parties thereto modified

said Note to extend the maturity date from July 6, 1996, until December 8,

1997, ( a copy of said Modification to Promissory Note is attached for

reference as Exhibit A); and

 

WHEREAS, on December 8, 1997, the parties thereto

modified said Note to extend the maturity date from December 8, 1997, until

December 1, 1998, (a copy of said Modification to Promissory Note is attached

for reference as Exhibit B); and

 

WHEREAS, on December 1, 1998, the parties thereto

modified said Note to extend the maturity date from December 1, 1998, until

June 30, 1999, (a copy of said Modification to Promissory Note is attached for

reference as Exhibit C); and

 

WHEREAS, on June 30, 1999, the parties thereto

modified said Note to extend the maturity date from June 30, 1999, until June

30, 2000, (a copy of said Modification to Promissory Note is attached for

reference as Exhibit D); and

 

WHEREAS, on June 30, 2000, the parties thereto

modified said Note to extend the maturity date from June 30, 2000, until

December 1, 2001, (a copy of said Modification to Promissory Note is attached

for reference as Exhibit E); and

 

WHEREAS, on December 1, 2001, the parties hereto

modified said Note to extend the maturity date from December 1, 2001, until

December 1, 2002, (a copy of said Modification to Promissory Note is attached

for reference as Exhibit F); and

 

WHEREAS, the parties thereto now desire to further

modify said Note and Modification;

 

NOW, THEREFORE, the parties modify said Note and

Modification as follows:

 

1.             The

maturity date of the Note is extended from December 1, 2002, until December 1,

2003.

 

2.             All

other terms and conditions of the Note remain the same.

 

Date this 27th day of November, 2002

 

 

	

   

  	

  /s/ RONALD G. LEE

  
	

   

  	

  Lee Pharmaceuticals

  

 

 

	

   

  	

  By:  Ronald

  G. Lee, President

  
	

   

  	

   

  
	

   

  	

  /s/ SASS DI SALVO

  
	

   

  	

  Sass DiSalvo

  

 

2Exhibit 10.6

 

CEO EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made

between CompuMed, Inc., a California corporation (the “Company”), and John

G.  (“Jerry”) McLaughlin

(“McLaughlin”).  This Agreement is

effective as of the date on which it has been signed by both parties.  Certain background facts are as follows:

 

1.             The

Company is a medical informatics company which presently provides computer

interpretation of medical diagnostic tests, including electrocardiograms (ECGs)

and the OsteoGram bone mineral density test.

 

2.             The

Company wishes to employ McLaughlin as its Chief Executive Officer, and

McLaughlin wishes to be so employed.

 

ACCORDINGLY, on the basis

of the representations, warranties, and covenants contained in this Agreement,

the parties agree as follows:

 

ARTICLE 1

EMPLOYMENT AND TERM

 

1.1           Employment.  The Company hereby employs McLaughlin as its

Chief Executive Officer, and McLaughlin hereby accepts such employment, on the

terms and conditions set forth below.

 

1.2           Term.  Unless the parties renew this Agreement

under Section 1.4 or terminate this Agreement under Article 4, the term of

employment shall commence on May 20, 2002 and shall expire on September 30,

2004 (the “Term”).

 

1.3           Required

Introductory Period.  McLaughlin shall

serve a four (4) month plus introductory period immediately following the date

of commencement of employment; provided, however, that the

parties may, by mutual agreement, extend this introductory period for an

additional two (2) months.  During this

introductory period, either the Company or McLaughlin may terminate this

Agreement for any reason, and the Company shall pay to McLaughlin only any base

salary due under Article 3 of this Agreement, prorated through the date of

termination.  McLaughlin shall have no

right to receive any further compensation or benefits otherwise payable under

any other provision of this Agreement.

 

1.4           Renewal.  The parties may renew McLaughlin’s

employment under this Agreement (on the terms set forth in this Agreement or on

different terms, as mutually agreed) only through a writing, signed by

both McLaughlin and the Company, that states the terms of the renewed

employment and that states an expiration date for the renewed term.  Either party may decide, with or without Cause

or reason, whether to agree to a renewed term, and there is no expectation on

the part of either McLaughlin or the Company as to whether the employment will

or will not be renewed.

 

ARTICLE 2

EMPLOYMENT DUTIES

 

2.1           Duties.  McLaughlin agrees to undertake and perform

all duties as Chief Executive Officer. 

McLaughlin shall render such services and shall perform such duties and

acts in connection with any aspect of the Company’s business as the Company’s

Board of Directors (the “Board of Directors” or the “Board”), as constituted

from 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 

 

1

 

exclusive business time and efforts to the rendition of such

services.  McLaughlin shall at all times

perform 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 the

Term, adhere to and obey any and all written internal rules and regulations governing

the conduct of the Company’s employees, as established or modified from time to

time; provided, however, that, in the event of any conflict between the

provisions of this Agreement and any such rules or regulations, the provisions

of this Agreement shall control.

 

2.2           Exclusive

Services.  During his employment by

the Company, McLaughlin shall not, without the express prior written consent of

the Board of Directors, engage directly or indirectly in any outside

employment, consulting of any kind whether or not McLaughlin receives

remuneration for such services, or other activity that relates to any line of

business in which the Company is at that time engaged or plans to engage in, or

that 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 the

aggregate, five percent or less of the outstanding equity interests in any

company whose products compete with the Company’s and whose equity interests

are registered pursuant to §12(b) or §12(g) of the Securities Exchange Act of

1934.

 

2.3           Other

Obligations.  McLaughlin

acknowledges that the Company from time to time may have agreements with other

persons that impose obligations or restrictions on the Company regarding

inventions or creative works made during the course of the Company’s work under

such agreements, or that relate to the confidential nature of such work.  McLaughlin agrees to be bound by all such

obligations and restrictions of which he is informed by the Company and to take

all action necessary to discharge the obligations of the Company thereunder.

 

2.4             Planning.  McLaughlin shall develop a business plan and

budget for the Company, to be approved by the Board of Directors, starting with

fiscal year 2003 which begins on October 1, 2002. This plan shall include

monthly projections for the first fiscal year and quarterly for the next two

fiscal years. The plan shall be tracked with monthly reports of actuals vs.

plan. The plan shall be revised quarterly retaining a 12-month forward looking

window and preserving the original as well as revised projections for the

active fiscal year.

 

2.5             Reporting.  McLaughlin shall prepare and deliver to the

Board monthly status reports and financial performance reports. McLaughlin

shall participate with the Board in all Board meetings (expected approximately

quarterly) and with the Executive Committee meetings (expected approximately

monthly).

 

ARTICLE

3

COMPENSATION

 

As the total consideration for the services that

McLaughlin renders under this Agreement, McLaughlin shall be entitled to the

following:

 

3.1           Base

Salary.

 

3.1.1        Beginning

on 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 equal

installments, in accordance with the Company’s regular payroll practices.

 

 

3.2           Incentive

Bonuses.  Subject to the mutual

agreement of McLaughlin and the Board of Directors, McLaughlin shall receive an

annual performance bonus of a target value of $150,000.  The structure for this 

 

2

 

performance bonus will be based upon, among other things, stock

performance, revenue growth, earnings per share and funds raised for the

Company’s operations and will be agreed upon by McLaughlin and the Board of

Directors by September 30, 2002, and will be attached as an appendix to this

Agreement.

 

3.3           Company

Benefits.  McLaughlin shall be entitled

to participate in the Company’s executive benefit plans, vacation, sick leave,

medical, dental, vision, long-term disability, and short-term disability

benefits, life insurance or other insurance programs, if any, on the same basis

as any of those benefits or insurance programs is available generally to other

senior executives under the Company’s personnel policies.

 

ARTICLE

4

TERMINATION

 

4.1           Termination.  Either party shall have the right to

terminate this Agreement with or without Cause before the expiration of its

term.  If the expiration of the Term is

reached, no severance or other additional compensation of any kind will be

paid.  Whatever the circumstances of the

termination may be, McLaughlin shall continue to be bound after termination by Articles

5, 6 and 8 of this Agreement.

 

4.2           Termination

During Introductory Period.  Any

termination of McLaughlin’s employment during the Introductory Period

(described in Section 1.3) shall be governed in accordance with Section 1.3.

 

4.3           Termination

for Cause.  If the Company

terminates McLaughlin’s employment for Cause, the Company shall 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 for

any period after termination for cause. 

For the purposes of this Agreement, termination for “Cause” shall mean

termination 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 first

provides McLaughlin with written notice to cure.  The notice to cure shall specify the acts or omissions that

allegedly constitute McLaughlin’s failure or refusal to perform his duties, and

McLaughlin shall have a reasonable opportunity (not to exceed 20 days after the

date of notice to cure) to correct his failure or refusal to perform his duties.  If McLaughlin does not correct his failure

or refusal to perform his duties within that period, termination shall be

effective as of the date of written notice to cure;

 

4.3.2        McLaughlin’s

breach of his fiduciary duties to the Company;

 

4.3.3        McLaughlin’s

commission of an act which, if prosecuted, would constitute a felony, or his

commission or conviction of any crime or act of dishonesty, moral turpitude, or

fraud;

 

4.3.4        McLaughlin’s

death or his disability, in accordance with applicable state and federal law;

 

4.3.5        McLaughlin’s

absence from his job for reasons other than illness (personal or immediate

family)or incapacity for a period in excess of any applicable vacation and

other personal time (as determined by the Company’s lawful policies and this

Agreement) without the consent of the Company;

 

4.3.6        McLaughlin’s

over 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        conduct

by McLaughlin that could harm the Company’s reputation or goodwill or that

otherwise could undermine the best interests of the Company or of its officers,

directors, Board, or related individuals or entities.

 

3

 

4.4           Termination

without Cause by the Company or Termination for Good Reason by McLaughlin.  If the Company terminates McLaughlin’s

employment without Cause or if McLaughlin terminates his employment for Good

Reason:

 

4.4.1        If

McLaughlin agrees to and signs a waiver and release of all claims (the form of

such waiver and release to be provided by the Company), the Company shall pay

to McLaughlin all compensation due under Article 3 for the remainder of the

Term, reduced by any amounts that McLaughlin earns from any other job he may

obtain during the remainder of the Term.

 

4.4.2        McLaughlin

must make his best efforts to mitigate his damages by diligently seeking and by

accepting other comparable employment during the remainder of the Term.  If McLaughlin accepts employment after his

termination date, he must notify the Company immediately, and the Company shall

be entitled to stop or reduce severance payments.

 

4.4.3        For

purposes of this Agreement, termination for “Good Reason” is defined as the

Company’s material breach of this Agreement which is not cured within two weeks

after written notice of such breach by McLaughlin to the Company

 

4.5           Termination

By McLaughlin Without Good Reason.  

If McLaughlin terminates his employment without Good Reason, the Company

shall 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           Termination

Date.  Any termination under this

Article shall be effected by written notice. 

The effective date of the termination (the “Termination Date”) shall be

as follows:

 

4.6.1        In

the event of a termination with or without Cause or with or without Good

Reason, the Termination Date shall be the date of receipt of notice of such

termination.

 

4.6.2        In

the event of termination through expiration of the Term, the Termination Date

shall be the date of expiration.

 

ARTICLE

5

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 under

which Company or its affiliates deals with clients, pricing information for the

purchase 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, the

processes and practices of Company, all information contained in electronic or

computer files, all financial information, salary and wage information, and any

other information that is designated by Company or its affiliates as

confidential or that McLaughlin knows or should know is confidential,

information provided by third parties that Company or its affiliates are

obligated to keep confidential, and all other proprietary information of

Company or its affiliates.  McLaughlin

acknowledges that all Confidential Information is and shall continue to be the

exclusive property of Company or its affiliates, whether or not prepared in

whole or in part by McLaughlin and whether or not disclosed to or entrusted to

McLaughlin in connection with employment by the Company.   McLaughlin agrees not to disclose

Confidential Information, directly or indirectly, under any circumstances or by

any means, to any third persons without the prior written consent of the

Company 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 use

whatsoever of Confidential Information, except as may be 

 

4

 

necessary to perform work done by McLaughlin for the Company.  McLaughlin agrees to exercise the highest

degree of care in safeguarding Confidential Information against loss, theft or

other inadvertent disclosure and agrees generally to take all steps necessary

or requested by the Company to ensure maintenance of the confidentiality of the

Confidential Information.

 

5.2           Exclusions. 

Section 5.1 shall not apply to the following information:  (a) information now and hereafter

voluntarily disseminated by the Company to the public or which otherwise

becomes part of the public domain through lawful means; (b) information already

known to McLaughlin as documented by written records which predate McLaughlin’s

employment with the Company; (c) information subsequently and rightfully

received from third parties and not subject to any obligation of

confidentiality; and (d) information independently developed by McLaughlin

after termination of his employment.

 

5.3           Subpoenas;

Cooperation in Defense of the Company. 

If McLaughlin, during employment or thereafter, is served with any

subpoena or other compulsory judicial or administrative process calling for

production of Confidential Information or if McLaughlin is otherwise required

by law or regulation to disclose confidential information, McLaughlin will immediately,

before making any such production or disclosure, notify the Company and provide

it with such information as may be necessary for the Company to take such

action as the Company deems necessary to protect its interests.  McLaughlin agrees to cooperate reasonably

with the Company, whether during employment or thereafter, in the prosecution

or defense of all threatened claims or actual litigation in which the Company

is or may become a party, whether now pending or hereafter brought, in which

McLaughlin has knowledge of relevant facts or issues.

 

5.4           Confidential

Proprietary and Trade Secret Information of Others.  McLaughlin represents that he has disclosed

to the Company any agreement to which he is or has been a party regarding the

confidential information of others and he understands that his employment by

the Company will not require him to breach any such agreement.  McLaughlin will not disclose such

confidential information to the Company nor induce the Company to use any trade

secret or proprietary information received from another under an agreement or

understanding prohibiting such use or disclosure.

 

5.5           No

Unfair Competition.  McLaughlin

hereby acknowledges that the sale or unauthorized use or disclosure of any of

the Company’s Confidential Information obtained by him by any means whatsoever,

at any time before, during, or after the Term shall constitute unfair

competition.  McLaughlin shall not

engage in any unfair competition with the Company or its affiliates either

during the Term or at any time thereafter.

 

5.6           Non-Solicitation

of Employees.  McLaughlin shall not

during the period commencing on the date of this Agreement and continuing for a

period of two years after the termination of McLaughlin’s employment with the

Company, use Confidential Information to directly or indirectly, whether alone

or with any other person as a principal, agent, shareholder, participant,

partner, promoter, director, officer, manager, employee, consultant, sales

representative or otherwise, solicit or induce, or in any manner assist in the

solicitation or inducement of, any person employed by the Company in any

capacity (including, without limitation, as an officer, director, employee,

consultant, or independent contractor) to leave such employment, whether or not

such employment is pursuant to a contract with the Company, and whether or not

such employment is at will.  The hiring

of any such person within one year following the termination of such person’s

relationship with the Company shall be rebuttably presumed to be the result of

solicitation or inducement in violation of this covenant.

 

5.7           Non-Solicitation

of Customers.  McLaughlin shall not

during the period commencing on the date of this Agreement and continuing for a

period of two years after the termination of McLaughlin’s employment with the

Company, use Confidential Information to directly or indirectly, whether alone

or with any other person as a principal, agent, shareholder, participant,

partner, promoter, director, officer, manager, employee, consultant, sales

representative or otherwise: (a) solicit for business any customers of the

Company, (b) encourage any such customers to stop using the facilities or

services of the Company, or (c) encourage any such customers to use the

facilities or services of any competitor of the Company.

 

5

 

ARTICLE 6

COMPANY’S OWNERSHIP IN

EMPLOYEE’S WORK

 

6.1           Company’s

Ownership.  McLaughlin agrees that

all inventions, discoveries, improvements, trade secrets, formulae, techniques,

processes, and know-how, whether or not patentable, and whether or not reduced

to practice, that are conceived or developed during his employment with the

Company, either alone or jointly with others, if on the Company’s time, using

the Company’s equipment, supplies, facilities, or trade secret information or

relating to the Company shall be owned exclusively by the Company, and

McLaughlin hereby assigns to the Company all his rights, title, and interest in

all such intellectual property.  McLaughlin

agrees that the Company shall be the sole owner of all domestic and foreign

patents or other rights pertaining thereto, and further agrees to execute all

documents that the Company reasonably determines to be necessary or convenient

for use in applying for, prosecuting, perfecting, or enforcing patents or other

intellectual property rights, including the execution of any assignments,

patent applications, or other documents that the Company may reasonably

request.  This provision is intended to

apply only to the extent permitted by applicable law.  

 

6.2           Statutory

Limitation on Assignment. 

McLaughlin understands that the Company is hereby advising him that any

provision in this Agreement requiring him to assign rights in any invention

does not apply to an invention that qualifies fully under the provisions of

Section 2870 of the California Labor Code. 

That Section provides as follows:

 

“(a) Any provision in an

employment agreement which provides that an employee shall assign, or offer to

assign, any of his or her rights in an invention to his or her employer shall

not apply to an invention that the employee developed entirely on his or her

own time without using the employer’s equipment, supplies, facilities, or trade

secret information, except for those inventions that either:

 

(1) Relate at the time of conception or reduction to

practice of the invention to the employer’s business, or actual or demonstrably

anticipated research or development of the employer; or

 

(2) Result from any work performed by the employee for

the employer.

 

(b) To the extent a

provision in an employment agreement purports to require an employee to assign

an invention otherwise excluded from being required to be assigned under

subdivision (a), the provision is against the public policy of the state and is

unenforceable.”

 

By signing this Agreement, McLaughlin acknowledges

that this paragraph shall constitute written notice of the provisions of

Section 2870.

 

6.3           Ownership

of Copyrights.  McLaughlin agrees

that all original works of authorship not otherwise within the scope of Section

6.1 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’s

facilities, or relating to the Company shall be owned exclusively by the

Company, 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 be

the sole owner of all rights pertaining thereto, and further agrees to execute

all documents that the Company reasonably determines to be necessary or

convenient for establishing in Company’s name the copyright to any such

original works of authorship. 

McLaughlin shall claim no interest in any inventions, copyrighted

material, patents, or patent applications unless he demonstrates that any such

invention, copyrighted material, patent, or patent application was developed

before he began any employment with the Company.  This provision is intended to apply only to the extent permitted

by applicable law.

 

6.4           Ownership

of Records.  Any written record that

McLaughlin may maintain of inventions, discoveries, improvements, trade

secrets, formulae, processes, or know-how, whether or not patentable and

whether or not reduced to practice, and any such records relating to original

works of authorship made by him, alone or 

 

6

 

jointly with others, in the course of his employment with the Company

shall remain the property of the Company. 

McLaughlin shall furnish the Company any and all such records

immediately upon request.

 

6.5           Ventures.  If McLaughlin, during employment with the

Company, is engaged in or associated with the planning or implementation of any

project, program, or venture involving the Company and any third parties, all

rights in the project, program, or venture shall belong to the Company, and

McLaughlin shall not be entitled to any interest therein or to any commission,

finder’s fee, or other compensation in connection therewith other than the

salary to be paid to him as provided in this Agreement.

 

6.6           Return

of 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 Confidential

Information, including studies, test results, technical data, Company forms,

financial data and reports and other documents or data (including data in

computer-readable form) supplied to or created by him in connection with his employment

with the Company, including all copies of the foregoing, in his possession or

control, (b) all software, computers, modems, diskettes, instruments, tools,

devices, equipment audio or video tapes, drawings, papers, notes and other

materials, and any copies thereof (including those contained in magnetic media

or other forms of computer storage), in McLaughlin’s possession or control that

relate in any way to the Company’s business or McLaughlin’s employment with the

Company, and (c) all other property relating to the employment of McLaughlin,

including, without limitation, company credit cards, telephone cards, cellular

telephone, office keys, desk keys, car keys and security passes.

 

ARTICLE 7

REVIEW AND UNDERSTANDING OF THIS

AGREEMENT

 

MCLAUGHLIN HAS ENTERED INTO THIS AGREEMENT VOLUNTARILY

AND DOES SO WITH THE UNDERSTANDING THAT IT SUPERSEDES ALL PREVIOUS EMPLOYMENT,

INVENTION, CONFIDENTIALITY AND SIMILAR AGREEMENTS BETWEEN HIM AND THE

COMPANY.  MCLAUGHLIN HAS CAREFULLY READ

AND CONSIDERED THE TERMS OF THIS AGREEMENT AND HAS HAD THE ASSISTANCE OF HIS

OWN LEGAL COUNSEL IN CONNECTION WITH THE NEGOTIATION, PREPARATION, TAX

CONSEQUENCES AND EXECUTION HEREOF. 

MCLAUGHLIN HAS ASKED ANY QUESTIONS ABOUT THE PROVISIONS OF THIS

AGREEMENT WHICH HE MIGHT HAVE HAD AND UNDERSTANDS THEIR IMPLICATIONS.  MCLAUGHLIN UNDERSTANDS, MOREOVER, THAT ANY

CHANGES TO THIS AGREEMENT MUST BE IN WRITING.

 

ARTICLE

8

ARBITRATION

 

8.1           Any

controversy, dispute or claim (“Claim”) whatsoever between McLaughlin on the

one hand, and the Company, or any of its employees, officers, and agents

(collectively “Company Parties”) on the other hand, shall be settled by binding

arbitration 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 (express

or 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 for

violation of any federal, state, or other law, statute, regulation, or

ordinance, except for claims for workers’ compensation or unemployment

insurance benefits.  The Company and/or

McLaughlin may also seek temporary, preliminary or permanent injunctive relief

in a court of competent jurisdiction.

 

8.2           The

parties shall agree on an arbitrator and, if no agreement is reached, either

party may petition the Superior Court for the selection of an arbitrator.  The arbitrator shall apply California

substantive law and the California Evidence Code to the proceeding unless

otherwise agreed.  The demand for

arbitration must be in writing and must be made by the aggrieved party within the

applicable statute of limitations period. The arbitration shall 

 

7

 

take place in Los Angeles, California.  The parties shall be entitled to conduct

reasonable discovery, including, without limitation, conducting depositions,

propounding interrogatories, and requesting documents.  The arbitrator shall prepare in writing and

provide to the parties a decision and award which includes factual findings and

the reasons upon which the decision is based.

 

8.3           The

decision of the arbitrator shall be binding and conclusive on the parties.  Judgment upon the award rendered by the

arbitrator may be entered in any court having proper jurisdiction.

 

8.4           The

fees for the arbitrator shall be paid equally by the Company and

McLaughlin.  Each party shall bear its

or his own fees and costs incurred in connection with the arbitration except

for any attorneys’ fees or costs which are awarded to a party by the Arbitrator

pursuant to a statute or contract which provides for recovery of such fees

and/or costs from the other party.

 

8.5           Both

the Company and McLaughlin understand and agree that by using arbitration to

resolve any Claims between McLaughlin and the Company or any or all of the

Company Parties, they are giving up any right that they may have to a judge or

jury trial with regard to those Claims. 

This agreement to arbitrate shall survive the termination of

McLaughlin’s employment.

 

ARTICLE

9

GENERAL PROVISIONS

 

9.1           Notice.  All notices under this agreement may be

mailed to the parties at the following respective addresses:

 

Company:              CompuMed, Inc.

5777 West Century

Boulevard, Suite 1285

Los Angeles, California

90045

Attn: Robert Stuckelman

 

McLaughlin:         John G. McLaughlin

5777 West Century

Boulevard, Suite 1285

Los Angeles, California

90045

 

Any notice required to be

provided under this Agreement shall be in writing and delivered personally or

deposited in the United States mail, certified with a return receipt requested,

or registered mail, postage prepaid, addressed to the party to whom the notice

is to be given.  Any party may change

his or its mailing address by personally delivering or by serving written

notice of such new address upon the other party in the same manner as provided

for in this paragraph.

 

9.2           Integration.  This Agreement supersedes any and all other

agreements, either oral or in writing between the parties hereto with respect

to the employment of McLaughlin set forth herein and contains all of the

covenants and agreements between the parties with respect thereto in any

manner, whatsoever.  Each party to this

Agreement acknowledges that no representation, inducement, promise, or

agreement, orally or otherwise, has been made by any party, or anyone acting on

behalf 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 binding

on either party.

 

9.3           Modifications.  Any modification to this Agreement will be

effective only if it is in writing and signed by the party to be charged.

 

9.4           No

Waiver.  The failure of either party

to insist on strict compliance with any of the terms, covenants, or 

 

8

 

conditions of this Agreement by the other party shall not be deemed a

waiver of that term, covenant, or condition, nor shall any waiver or

relinquishment of any right or power at any one time be deemed a waiver or

relinquishment of that right or power for all or any other times.

 

9.5           Severability.  If any provision in this Agreement is held

by a court of competent jurisdiction to be invalid, void, or unenforceable, the

remaining provisions shall, nevertheless, continue in full force and effect

without being impaired or invalidated in any way.

 

9.6           Successors

and Assigns.  Because this Agreement

has been entered into due to, among other things, the special skills of

McLaughlin, McLaughlin shall not assign or transfer, in whole or in part, his

rights or obligations under this Agreement without the prior written consent of

the Company.

 

9.7           Governing

Law.  This Agreement shall be

governed by and construed in accordance with the laws of the State of

California.

 

 

IN WITNESS WHEREOF, the

parties hereto have caused this Agreement to be executed as of the later date

and 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

  

 

9

 

ARTICLE 10 Appendix A to

Employment Agreement

Bonus Formula for paragraph 3.2

 

 

Bonus will be awarded to the CEO based upon results for the fiscal year

as 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 made

on January 1, 2004.

 

Bonus will be based upon revenue, profit, stock price appreciation and

fund raising as shown in the attached spreadsheet.

 

The sum of all four bonus components have a target of $75,000 for

meeting plan and a cap of $150,000 for exceeding plan by 25%. There is no bonus

in any category for failing to reach 85% of plan. Calculation of bonus for

numbers 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 for

bonus will be revenue and profit weighted 25% and 75%, respectively. The plan

is that prepared under the direction of the CEO. The top lines of the spreadsheet

show 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 the

CEO’s first four months. Therefore, in the interest of preserving cash, the

target cash bonus is limited, but is enhanced with stock options. Employee

options 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 shares

will be awarded on the day this appendix is signed by both parties. The

exercise price will be the closing price that day. The recent stock price

average has been $.125.

 

We mutually agree to this bonus plan as Appendix A to the Employment

Agreement.

 

 

	

   

  	

   

  	

   

  	

  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

  	

   

  
											

 

10

 

Revenue

Bonus

 

	

  % 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

  	

   

  	

   

  	

   

  

 

Profit

Bonus

 

	

  % 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

  	

   

  	

   

  	

   

  

 

Total

Bonus

 

	

  % of Plan

  	

   

  	

  Bonus

  	

   

  
	

  85

  	

  %

  	

  0

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  100

  	

  %

  	

  75,000

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  150

  	

  %

  	

  150,000

  	

   

  

 

11

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