Exhibit 10.1
NOVARAY MEDICAL,
INC.
EXCHANGE AGREEMENT
This Exchange Agreement (the “
Agreement ”) is entered into as of August 21,
2009 by and between NovaRay Medical, Inc., a Delaware corporation
(the “ Company ”), and WHEATLEY MEDTECH
PARTNERS, L.P., LYNDA WIJCIK, W CAPITAL PARTNERS II, L.P.,
BIOBRIDGE LLC, HEARTSTREAM CAPITAL B.V. and LLOYD INVESTMENTS, L.P.
(individually a “ Series A Preferred Stockholder
” and collectively, the “ Series A Preferred
Stockholders ”).
R E C I T A L S
A. The Company, through its Board of
Directors, has decided to authorize and issue a new series of stock
to be designated Series A-1 Preferred Stock of the Company (“
Series A-1 Preferred Stock ”).
B. The Company, through its Board of
Directors, has decided to offer the Series A Preferred Stockholder
the right to exchange ten (10) whole shares of Series A
Preferred Stock of the Company (“ Series A Preferred
Stock ”) for one (1) whole share of Series A-1
Preferred Stock.
C. The rights of the Series A-1
Preferred Stock shall be as set forth in the Certificate of
Designation of the Relative Rights and Preferences of the Series
A-1 Convertible Preferred Stock of the Company.
NOW THEREFORE, in consideration of
the foregoing and the mutual promises herein contained, the parties
agree as follows:
A G R E E M E N T
1. Exchange of Series A Preferred
Stock for Series A-1 Preferred Stock . Subject to the terms and
conditions hereof, Series A Preferred Stockholder and the Company
hereby exchange all shares of Series A Preferred Stock held by the
Series A Preferred Stockholder as follows: (i) for every ten
(10) whole shares of Series A Preferred Stock, one
(1) whole share of Series A-1 Preferred Stock until less than
ten (10) whole shares of Series A Preferred Stock remains and
(ii) such remaining number of whole shares of Series A
Preferred Stock (less than ten (10)) for $2.67 in cash for
each remaining share of Series A Preferred Stock. No fractional
shares of Series A-1 Preferred Stock shall be issued. To the extent
any Series A Preferred Stockholder has any rights under the Series
A Convertible Preferred Stock and Warrant Purchase Agreement dated
as of December 27, 2007 with respect to the Series A Preferred
Stock, such rights shall hereafter apply mutatis
mutandis with respect to the Series A-1 Preferred
Stock.
2. Representations and Warranties
of the Company . The Company represents and warrants to the
Series A Preferred Stockholder that (a) the shares of Series
A-1 Preferred Stock have been duly authorized and validly issued
and are fully paid and non-assessable, and (b) this Agreement
has been duly authorized, executed and delivered by the Company,
and this Agreement constitutes the valid and legally binding
obligation of the Company.
3. Investment Representations
.
3.1 This Agreement is made in
reliance upon the Series A Preferred Stockholder’s
representation to the Company, which by acceptance hereof the
Series A Preferred Stockholder hereby confirms, that the shares of
Series A-1 Preferred Stock to be received by the Series A Preferred
Stockholder will be acquired for investment for the own account of
the Series A Preferred Stockholder, not as a nominee or agent, and
not with a view to the sale or distribution of any part thereof,
and that the Series A Preferred Stockholder has no present
intention of selling, granting participation in, or otherwise
distributing the same, but subject nevertheless to any requirement
of law that the disposition of the property of the Series A
Preferred Stockholder shall at all times be within the control of
the Series A Preferred Stockholder.
3.2 The Series A Preferred
Stockholder understands that the Series A-1 Preferred Stock is not
registered under the Securities Act of 1933, as amended (the
“ 1933 Act ”), on the basis that the sale
provided for in this Agreement and the issuance of securities
hereunder is exempt from registration under the 1933 Act pursuant
to Section 4(2) and 3(a)(9) thereof, and that the
Company’s reliance on such exemption is predicated on the
Series A Preferred Stockholder’s representations set forth
herein. The Series A Preferred Stockholder realizes that the basis
for the exemption may not be present if, notwithstanding such
representations, the Series A Preferred Stockholder has in mind
merely acquiring shares of the Series A-1 Preferred Stock for a
fixed or determinable period in the future, or for a market rise,
or for sale if the market does not rise. The Series A Preferred
Stockholder does not have any such intention.
3.3 The Series A Preferred
Stockholder understands that the Series A-1 Preferred Stock may not
be sold, transferred, or otherwise disposed of without registration
under the 1933 Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the Series
A-1 Preferred Stock or an available exemption from registration
under the 1933 Act, the Series A-1 Preferred Stock must be held
indefinitely. In particular, the Series A Preferred Stockholder is
aware that the Stock may not be sold pursuant to Rule 144
(“ Rule 144 ”) or Rule 701 (collectively,
the “ Rules ”) promulgated under the 1933 Act
unless all of the conditions of the applicable Rules are met. Among
the conditions for use of Rule 144 is the availability of
current information to the public about the Company. The Series A
Preferred Stockholder represents that, in the absence of an
effective registration statement covering the Series A-1 Preferred
Stock, the Series A Preferred Stockholder will sell, transfer, or
otherwise dispose of the Series A-1 Preferred Stock only in a
manner consistent with the representations set forth herein and
then only in accordance with the provisions of Section 3.4
hereof.
3.4 The Series A Preferred
Stockholder agrees that in no event will the Series A Preferred
Stockholder make a transfer or disposition of any of the Series A-1
Preferred Stock (other than pursuant to an effective registration
statement under the 1933 Act), unless and until (i) the Series
A Preferred Stockholder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the disposition, and
(ii) if requested by the Company, at the expense of the Series
A
2
Preferred Stockholder or transferee, the Series
A Preferred Stockholder shall have furnished to the Company either
(A) an opinion of counsel, reasonably satisfactory to the
Company, to the effect that such transfer may be made without
registration under the 1933 Act or (B) a “no
action” letter from the Securities and Exchange
Commis
