exv10w14



 





Exhibit 10.14




AIG LOCK-UP AGREEMENT




     THIS AIG LOCK-UP AGREEMENT (this “Agreement”) is dated as of December 27, 2007 by and
among NovaRay Medical, Inc., a Delaware corporation (the “Company”), and certain
stockholders of the Company listed on Schedule A attached hereto (collectively, the
“AIG Stockholders”).



     WHEREAS, to induce the Company and the Lead Investor to enter into the Series A Convertible
Preferred Stock Purchase Agreement dated as of the date hereof (the “Purchase Agreement”)
by and among the Company and certain investors (the “Investors”), the AIG Stockholders have
agreed not to sell any shares of the Company’s common stock (the “Common Stock”) or any
securities that may otherwise be convertible into or exercisable for shares of its Common Stock
(“Convertible Securities” and together with the Common Stock, the “Securities”),
that such AIG Stockholders presently own or may acquire after the date hereof, except in accordance
with the terms and conditions set forth herein. Capitalized terms used herein without definition
shall have the meanings assigned to such terms in the Purchase Agreement.



     NOW, THEREFORE, in consideration of the covenants and conditions hereinafter contained, the
parties hereto agree as follows:



     1. Restriction on Transfer; Term. The AIG Stockholders hereby agree with the Company
that the AIG Stockholders will not offer, sell, contract to sell, assign, transfer, hypothecate,
pledge or grant a security interest in, or otherwise dispose of, or enter into any transaction
which is designed to, or might reasonably be expected to, result in the disposition of (whether by
actual disposition or effective economic disposition due to cash settlement or otherwise by the
Company or any affiliate of the Company or any person in privity with the Company or any affiliate
of the Company), directly or indirectly, any Securities from the period commencing on the Initial
Closing and expiring on the earlier of: (i) Effectiveness Date (as defined in Section 1 of the
Registration Rights Agreement), or (ii) the termination or waiver by the Company of the obligations
of the stockholders set forth in Section 1 of the Stockholders Lock-Up Agreement (the
“Period”). In the event of expiration pursuant to (ii) above, the Company shall promptly
provide the AIG Stockholders with notice of any such waiver or termination. The restrictions in
the first sentence of this Section 1 shall not apply to (a) shares of Common Stock or other
securities acquired in open market transactions by the AIG Stockholder after the Initial Closing,
(b) a transfer of Securities made in a privately-negotiated transaction between such AIG
Stockholder and the transferee (the “AIG Transferee”) not involving a sale on the open
market or otherwise through or reportable on the over-the-counter market, NASDAQ or other similar
stock exchange, provided that the AIG Transferee agrees in writing to be bound by the same
restrictions of this Section 1.



     2. Ownership. During the Period, the AIG Stockholders shall retain all rights of
ownership in the Securities, including, without limitation, voting rights (if any) and the right to
receive any dividends, if any, that may be declared in respect thereof.



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     3. Company and Transfer Agent. The Company is hereby authorized to disclose the
existence of this Agreement to its transfer agent. The Company and its transfer agent are hereby
authorized to decline to make any transfer of Securities if such transfer would constitute a
violation or breach of this Agreement and the Purchase Agreement.



     4. Notices. All notices, demands, consents, requests, instructions and other
communications to be given or delivered or permitted under or by reason of the provisions of this
Agreement or in connection with the transactions contemplated hereby shall be in writing and shall
be deemed to be delivered and received by the intended recipient as follows: (i) if personally
delivered, on the business day of such delivery (as evidenced by the receipt of the personal
delivery service), (ii) if mailed certified or registered mail return receipt requested, four (4)
business days after being mailed, (iii) if delivered by overnight courier (with all charges having
been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight
courier service of recognized standing), or (iv) if delivered by facsimile transmission, on the
business day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent
after that time, on the next succeeding business day (as evidenced by the printed confirmation of
delivery generated by the sending party’s telecopier machine). If any notice, demand, consent,
request, instruction or other communication cannot be delivered because of a changed address of
which no notice was given (in accordance with this Section 4), or the refusal to accept same, the
notice, demand, consent, request, instruction or other communication shall be deemed received on
the second business day the notice is sent (as evidenced by a sworn affidavit of the sender). All
such notices, demands, consents, requests, instructions and other communications will be sent to
the following addresses or facsimile numbers as applicable.


If to the Company:



Novaray Medical, Inc.

1850 Embarcadero

Palo Alto, CA 94303

Attention: Chief Financial Officer

Tel. No.: (408) 966-5738

Fax No.: (650) 565-8601



With copies to:



Morrison & Foerster, LLP

755 Page Mill Road

Palo Alto, California 94304-1018

Attn: Michael C. Phillips

Facsimile: (650) 494-0792



If to any AIG Stockholder:




          At the address of such AIG Stockholder set forth below the signature below




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or to such other address as any party may specify by notice given to the other party in accordance
with this Section 4.




     5. Amendment. This Agreement and the obligations of the parties hereunder may not be
modified, amended, altered, supplemented, terminated, waived or released except (i) by a written
agreement executed by each of the parties hereto, and (ii) written consent of the Lead Investor,
which consent shall not be unreasonably withheld.



     6. Entire Agreement. This Agreement contain the entire understanding and agreement of
the parties relating to the subject matter hereof and supersedes all prior and/or contemporaneous
understandings and agreements of any kind and nature (whether written or oral) among the parties
with respect to such subject matter, all of which are merged herein. The restrictions placed on the
AIG Stockholders hereunder are no more burdensome than those placed any other stockholder of the
Company who are otherwise subject to a lock-up agreement with the Company.



     7. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to be performed in that
state, without regard to any of its principles of conflicts of laws or other laws which would
result in the application of the laws of another jurisdiction. This Agreement shall be construed
and interpreted without regard to any presumption against the party causing this Agreement to be
drafted.



     8. Waiver of Jury Trial. EACH OF THE PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES UNCONDITIONALLY AND
IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK LOCATED
IN NEW YORK COUNTY AND THE FEDERAL DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK WITH
RESPECT TO ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, AND EACH OF THE PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY OBJECTION TO VENUE IN NEW YORK COUNTY OR SUCH DISTRICT, AND AGREES THAT SERVICE OF ANY
SUMMONS, COMPLAINT, NOTICE OR OTHER PROCESS RELATING TO SUCH SUIT, ACTION OR OTHER PROCEEDING MAY
BE EFFECTED IN THE MANNER PROVIDED IN SECTION 4.



     9. Severability. The parties agree that if any provision of this Agreement be held to
be invalid, illegal or unenforceable in any jurisdiction, that holding shall be effective only to
the extent of such invalidity, illegally or unenforceability without invalidating or rendering
illegal or unenforceable the remaining provisions hereof, and any such invalidity, illegally or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. It is the intent of the parties that this Agreement be fully enforced to
the fullest extent permitted by applicable law.



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     10. Binding Effect; Assignment. This Agreement and the rights and obligations
hereunder may not be assigned by any party hereto without the prior written consent of the other
parties hereby. This Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.



     11. Headings. The section headings contained in this Agreement (including, without
limitation, section headings and headings in the exhibits and schedules) are inserted for reference
purposes only and shall not affect in any way the meaning, construction or interpretation of this
Agreement. Any reference to the masculine, feminine, or neuter gender shall be a reference to such
other gender as is appropriate. References to the singular shall include the plural and vice
versa.



     12. Counterparts. This Agreement may be executed in two or more counterparts, and by
the different parties hereto in separate counterparts, each of which when executed shall be deemed
to be an original, and all of which, when taken together, shall constitute one and the same
document. This Agreement shall become effective when one or more counterparts, taken together,
shall have been executed and delivered by all of the parties.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above herein.



	 	 	 	 	 
	 	NOVARAY MEDICAL, INC.

 	 
	 	By:  	/s/ Jack Price	 
	 	 	Name:  	Jack Price 	 
	 	 	Title:  	CEO 	 
	 




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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above herein.



	 	 	 	 	 
	AIG HORIZON PARTNERS FUND, L.P.,

as a Lender




By: AIG Horizon Partners GP, L.P., its General Partner




By: AIG Horizon Partners LLC, its General Partner




By: AIG Global Investment Corp., its Managing Member

 	 	 
	By:  	/s/ F.T. Chong	 	 
	 	Name:  	F.T.
Chong	 	 
	 	Title:  	Managing Director	 	 
	 



Address for Notices:




277 Park Avenue, 43rd Floor

New York, New York 10172

Attn: F.T. Chong

Fax: (646) 857-8842




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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above herein.



	 	 	 	 	 
	AIG HORIZON SIDE-BY-SIDE FUND, L.P.,as a Lender



By: AIG Horizon SBS GP, L.P.,

its General Partner



By: AIG Horizon Partners, LLC,

its General Partner



By: AIG Global Investment Corp.,

its Managing Member

 	 	 
	By:  	/s/ F.T. Chong	 	 
	 	Name:  	F.T. Chong	 	 
	 	Title:  	Managing Director	 	 
	 



Address for Notices:




277 Park Avenue, 43rd Floor

New York, New York 10172

Attn: F.T. Chong

Fax: (646) 857-8842




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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above herein.



	 	 	 	 	 
	AIG PRIVATE EQUITY PORTFOLIO, L.P.,

as a Lender




By: AIG PEP GP, L.P., its General Partner




By: AIG PEP, LLC, its General Partner




By: AIG Global Investment Corp., its Sole Member

 	 	 
	By:  	/s/ F.T. Chong	 	 
	 	Name:  	F.T. Chong	 	 
	 	Title:  	Managing Director	 	 
	 



Address for Notices:




277 Park Avenue, 43rd Floor

New York, New York 10172

Attn: F.T. Chong

Fax: (646) 857-8842




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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above herein.



	 	 	 	 	 
	AIU INSURANCE COMPANY,

as a Lender




By: AIG Global Investment Corp.,

its investment advisor

 	 	 
	By: 	/s/
F. T. Chong	 	 
	 	Name: 	F. T. Chong	 	 
	 	Title: 	Managing Dircetor	 	 
	 



Address for Notices:




277 Park Avenue, 43rd Floor

New York, New York 10172

Attn: F.T. Chong

Fax: (646) 857-8842




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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above herein.



	 	 	 	 	 
	COMMERCE AND INDUSTRY INSURANCE COMPANY,

as a Lender




By: AIG Global Investment Corp.,

its investment advisor

 	 	 
	By: 	/s/
F. T. Chong	 	 
	 	Name: 	F. T. Chong	 	 
	 	Title: 	Managing Director	 	 
	 



Address for Notices:




277 Park Avenue, 43rd Floor

New York, New York 10172

Attn: F.T. Chong

Fax: (646) 857-8842





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Schedule A




	 	 	 
	AIG STOCKHOLDER	 	SECURITIES BENEFICIALLY OWNED
	1. AIG Horizon Partners Fund, L.P.

	 	Common Shares: 70,464

Series A Preferred Shares: 21,924

Series A Warrants: 7,308
	 
	 	 
	2. AIG Horizon Side-By-Side Fund, L.P.

	 	Common Shares: 157,443

Series A Preferred Shares: 48,986

Series A Warrants: 16,328
	 
	 	 
	3. AIG Private Equity Portfolio, L.P.

	 	Common Shares: 123,312

Series A Preferred Shares: 38,367

Series A Warrants: 12,789
	 
	 	 
	4. AIU Insurance Company

	 	Common Shares: 371,037

Series A Preferred Shares: 115,443

Series A Warrants: 38,481
	 
	 	 
	5. Commerce and Industry Insurance
Company

	 	Common Shares: 378,744

Series A Preferred Shares: 218,224

Series A Warrants: 72,741