Item 1.01 Entry into a Material Definitive Agreement.
New Revolving Line of Credit
On February 15, 2008, CompuMed, Inc., a Delaware corporation (the
Company
), entered into a revolving line of credit agreement (the
Credit Agreement
) between the Company, as Borrower, and Boston Avenue Capital, LLC, an Oklahoma limited liability company, as Lender (the
Lender
or
BAC
). The Credit Agreement provides for a new revolving line of credit facility in an aggregate principal amount of up to $4 million. The revolving line of credit matures on December 31, 2017. Advances under the revolving line of credit shall bear interest at the current three-month London Interbank Offered Rate (LIBOR), payable quarterly in arrears for the prior fiscal quarter on the fifth
business
day of each January, April, July and October, commencing on April 7, 2008. The Credit Agreement also provides that unused amounts up to the total commitment shall bear interest at a rate of one percent (1%) per annum, compounded annually on the first business day of each calendar year. The Credit Agreement also provides that the Lender shall provide the Company a letter of credit issued by JP Morgan Chase NA in an amount at all times equal to the amount of (i) $4,000,000
less
(ii) the aggregate amount of advances then outstanding under the revolving line of credit. Advances under the revolving line of credit will be unsecured senior obligations of the Company. The Company expects to use proceeds under the new revolving line of credit for general corporate purposes, including working capital and to fund potential acquisitions consistent with its business strategy.
The Credit Agreement contains customary representations and warranties of the Company. Availability under the new revolving line of credit is subject to certain conditions, including (i) that the existing board members of the Company (after giving effect to the director resignations and appointments described in this Current Report on Form 8-K) or other directors as approved by the Lender comprise all of the directors of the Company, (ii) that the members of the board of directors of the Company unanimously approve any advance, (iii) that there not be any undisclosed material liabilities at the time of an advance, and (iv) that the Lender shall have consented (in its sole discretion) in the event that an advance is requested and, at the time of the request for the advance, the Company or any of its officers, directors, employees, shareholders or affiliates is a party to any pending legal proceedings related to the Company or its affiliates.
The new revolving line of credit facility may be prepaid at any time in whole or in part without premium or penalty, other than payment of the 1% commitment interest on unused advances if the commitment is not terminated.
The Credit Agreement also includes certain customary events of default including, but not limited to: failure to pay principal or interest when due (subject to grace period); any representation or warranty proving to have been materially incorrect when made or confirmed; failure to perform or observe covenants set forth in the Credit Agreement; and bankruptcy and insolvency defaults.
The descriptions of the Credit Agreement provided under this Item 1.01 is qualified in its entirety by the terms of the Credit Agreement itself, which is filed as Exhibit 10.19 to this Current Report on Form 8-K.
Common Stock Purchase Warrant
On February 15, 2008, the Company issued a Common Stock Purchase Warrant (the
Warrant
) for the purchase of up to 16,000,000 shares of the Companys common stock to BAC for a purchase price of $5,000 (the
Warrant Purchase Price
) in connection with the Credit Agreement. Pursuant to the terms of the Warrant and subject to its conditions, BAC may purchase from time to time up to 16,000,000 shares of the Companys common stock at a price per share equal to the average of the daily volume weighted average price of the Companys common stock as reported by the OTC Bulletin Board on each trading day during the period commencing on the date of issuance of the Warrant and ending one hundred eighty (180) trading days immediately following but not including the date of issuance of the Warrant, calculated as of the close of trading on such one hundred eightieth trading day. The Warrant is exercisable if and only if the Companys stockholders approve an increase in the Companys authorized shares of common stock sufficient to permit that number of shares to be reserved for issuance and issued upon exercise of the Warrant. The Warrant terminates upon the earlier of (i) the twentieth (20
th
) anniversary of the date of issuance and (ii) the tenth (10
th
) anniversary of the date the Company shall have irrevocably reserved a sufficient number of duly authorized shares of common stock for issuance upon full exercise of the Warrant. If duly authorized and reserved shares of common stock are not available for issuance upon exercise of the Warrant by the fifth (5
th
) anniversary of the date of issuance, the holder of the Warrant may put the Warrant to the Company, in whole but not in part, for a price equal to the sum of (x) the Warrant Purchase Price and (y) 8% per annum multiplied by the Warrant Purchase Price, compounded annually from the issue date. The Warrant contains customary
1
adjustments for stock splits, dividends, reclassifications and certain mergers and consolidations, and is transferable by BAC to certain affiliated entities.
The description of the Warrant under this Item 1.01 is qualified in its entirety by the terms of the Warrant itself, which is filed as Exhibit 10.20 to this Current Report on Form 8-K.
Board Agreement
On February 15, 2008, the Company entered into an Agreement (the
Board Agreement
) among the Company, BAC and Robert Stuckelman, John Minnick, John Romm, M.D., and Stuart Silverman, M.D., each a member of the board of directors of the Company (each of Messrs. Stuckelman, Minnick, Romm and Silverman being collectively referred to as the
Resigning Board Members
). Pursuant to the terms of the Board Agreement, BAC and the Company terminated certain agreements dated May 17, 2007 relating to the rights and obligations of BAC and the Company regarding voting and otherwise supporting the nominations of members of the Board of Directors of the Company. In addition, the Board Agreement required that each of the Resigning Board Members submit his resignation as a board member of the Company concurrently with the execution thereof, and each of BAC and the Resigning Board Members executed and delivered a mutual general release of claims against each other. The Board Agreement was a condition of BACs willingness to enter into the Credit Agreement.
The description of the Board Agreement under this Item 1.01 is qualified in its entirety by the terms of the Board Agreement itself, which is filed as Exhibit 10.21 to this Current Report on Form 8-K.
New Office Lease.
On February 15, 2008, the Board of Directors also approved a new office lease with L.A.T. Investment Corporation, which is to be effective as of March 1, 2008. The new lease will move the Companys existing corporate offices, computer center and warehouse facilities from its existing 9,496 square feet in the buildings 12
th
floor to new space consisting of 10,949 square feet on the buildings third floor. The lease term is five years, with an option for the Company to renew for an additional five-year term. Monthly rent will be $13,686 during the first year, with 3% annual increases, plus certain operating expenses.
This summary description of the new office lease is qualified in its entirety by reference to the terms of the definitive lease agreement which the Company will file as an exhibit to its next Quarterly Report on Form 10-QSB.
Item 1.02
Termination of a Material Definitive Agreement.
Pursuant to the Board Agreement described under Item 1.01 of this Current Report on Form 8-K, two agreements with BAC, each dated May 17, 2007, as filed with the Companys Current Report on Form 8-K on May 23, 2007, relating to the rights and obligations of BAC and the Company regarding voting and otherwise supporting the nominations of members of the Board of Directors of the Company, were terminated and are of no further force and effect.
Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information provided under Item 1.01 of this Current Report on Form 8-K with respect to the Credit Agreement is incorporated by reference into this Item 2.03.
Item 3.02
Unregistered Sales of Equity Securities.
The information provided under Item 1.01 of this Current Report on Form 8-K with respect to the Common Stock Purchase Warrant is incorporated by reference into this Item 3.02. The Warrant was offered and sold to BAC, an accredited investor, in a private placement transaction not subject to the registration requirement pursuant to Section 4(2) of the Securities Act of 1933, as amended.
Item 3.03