Exhibit 10.20
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 Heartstream
Capital B.V. (“ Holder ”).
RECITALS
WHEREAS, NovaRay borrowed funds from
Holder pursuant to the terms and conditions set forth in
(a) that certain convertible promissory note dated
February 20, 2007, in the aggregate principal amount of
$300,000.00, a copy of which is attached hereto as
Exhibit A-1 (the “ First Note ”),
and (b) that certain convertible promissory note dated
March 20, 2007, in the aggregate principal amount of $250,000,
a copy of which is attached hereto as Exhibit A-2 (the
“ Second Note ” and together with the First
Note, collectively, the “ Notes ”);
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 Notes 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 Notes, in the event that NovaRay and PubCo shall
consummate the Proposed Transaction, Holder agrees that all
principal and unpaid but accrued interest through
