Exhibit 10.19
NOVARAY, INC.
CONVERSION AGREEMENT
This Conversion Agreement (as defined
below) (the “ Agreement ”) is entered into on
December 20, 2007 by and among NovaRay, Inc., a Delaware
corporation (“ NovaRay ”) and Lloyd Investments,
L.P. (“ Holder ”).
RECITALS
WHEREAS, NovaRay borrowed funds from
Holder pursuant to the terms and conditions set forth in that
certain secured promissory note dated June 21, 2005, in the
aggregate principal amount of $53,940.77, a copy of which is
attached hereto as Exhibit A (the “ Note
”);
WHEREAS, NovaRay is currently in
negotiations with Vision Capital and its affiliates (the “
Lead Investor ”) to complete a “reverse
merger” transaction whereby a wholly-owned subsidiary
(“ Merger Sub ”) of public shell company to be
identified (“ PubCo ”) will merge with and into
NovaRay with NovaRay remaining as the surviving entity after the
merger whereby the stockholders of NovaRay will receive common
stock of PubCo in exchange for their capital stock of NovaRay (the
“ Merger ”);
WHEREAS, concurrently with or
immediately following the consummation of the Merger, the Lead
Investor and certain other investors (collectively, the “
Financing Investors ”) and PubCo will complete a
private placement financing whereby PubCo will issue and sell its
securities (the “ Qualified Financing Securities
”) to the Financing Investors for aggregate gross proceeds to
PubCo of not less than $10,000,000.00 (not including conversion of
any NovaRay indebtedness) (the “ Qualified Financing
,” and with the Merger, collectively the “ Proposed
Transaction ”); and
WHEREAS, as a material inducement to
the Financing Investors to consummate the Qualified Financing,
NovaRay and Holder desire to enter into this Agreement to provide
for automatic conversion of all principal and interest accrued
through November 15, 2007 pursuant to the Note into Qualified
Financing Securities at the initial closing of the Qualified
Financing on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of
the mutual promises and covenants herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
AGREEMENT
1. Automatic Conversion
. Notwithstanding any other conversion rights or obligations
contained in the Note, in the event that NovaRay and PubCo shall
consummate the Proposed Transaction, Holder agrees that all
principal and unpaid but accrued interest through November 15,
2007 under the Note shall, concurrently with the first closing of
such Qualified Financing, automatically convert into the Qualified
Financing Securities issued and sold by PubCo to the Financing
Investors in such Qualified Financing at a conversion price equal
to the
