Document:

Series B Convertible Participating Preferred Stock

 Exhibit 10.1 
 SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK 
 AND WARRANT PURCHASE AGREEMENT 
 This SERIES B CONVERTIBLE PARTICIPATING
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the “Agreement”) is dated as of October 27, 2009 by and among NovaRay Medical, Inc., a Delaware Corporation (the “Company”), and each of the
Purchasers of shares of Series B Convertible Participating Preferred Stock and Warrants of the Company whose names are set forth on Exhibit A hereto (individually, a “Purchaser” and collectively, the
“Purchasers”). 
 The parties hereto agree as follows: 
 ARTICLE I 
 Purchase and Sale of Preferred Stock and Warrants 
 Section 1.1 Purchase and Sale of Stock. Upon
the following terms and conditions, the Company shall issue and sell to the Purchasers and each of the Purchasers shall purchase from the Company the number of shares (the “Preferred Shares”) of the Company’s Series B
Convertible Participating Preferred Stock, par value $0.0001 per share (the “Preferred Stock”), at a purchase price of $15.00 per Preferred Share, convertible into shares of the Company’s common stock, par value $0.0001
per share (the “Common Stock”), set forth opposite such Purchaser’s name on Exhibit A hereto. The designation, rights, preferences and other terms and provisions of the Series B Convertible Participating
Preferred Stock are set forth in the Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible Participating Preferred Stock attached hereto as Exhibit B (the “Certificate of
Designation”). The Company and the Purchasers are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D (“Regulation
D”), as promulgated by the United States Securities and Exchange Commission (the “Commission”), under the Securities Act of 1933, as amended (the “Securities Act”), or Section 4(2) of
the Securities Act. 
 Section 1.2 Warrants. Upon the following terms and conditions and for no additional
consideration, each of the Purchasers shall be issued a warrant, in substantially the form attached hereto as Exhibit C, to purchase up to a number of shares of Common Stock equal to one hundred percent (100%) of the number of
Conversion Shares (as defined below) issuable as of the respective Closing (as defined below), rounded down to the nearest whole share, as set forth opposite such Purchaser’s name on Exhibit A hereto (the “Series B
Warrants” and/or the “Warrants”). Any shares of Common Stock issuable upon exercise of the Warrants (and such shares when issued) are herein referred to as the “Warrant Shares.” The
Warrants shall expire five (5) years following the Initial Closing Date and shall have an exercise price per share equal to its Warrant Price (as defined in the applicable Warrant). 
 Section 1.3 NovaRay Note Holders. Subject to the terms and conditions of this Agreement, at the Initial Closing (as defined
below), the Company shall issue and deliver to each Purchaser who is holder (each a “NovaRay Note Holder” and collectively the “NovaRay Note Holders”) of a NovaRay Note or NovaRay Notes in the
aggregate principal amount plus accrued interest through

 
October 27, 2009 as set forth opposite such NovaRay Note Holder’s name on Exhibit A hereto, the Preferred Shares and Series B Warrants against delivery by such NovaRay
Note Holder to the Company of evidence of cancellation of the NovaRay Note in a form reasonably acceptable to the Company. In addition, within five (5) days of the Initial Closing, the Company will deliver to each NovaRay Note Holder a cash
payment equal to the amount of interest accrued on the NovaRay Note between October 27, 2009 and the Initial Closing which is listed beneath the caption “Interest Payment” opposite such NovaRay Note Holder’s name on
Exhibit A attached hereto (the “Accrued Interest Payment”). 
 Section 1.4
Conversion Shares. The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a number of shares of Common Stock equal to one hundred ten
percent (110%) of the number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all of the Preferred Shares and exercise of all of the Warrants then outstanding. Any shares of Common Stock issuable
upon conversion of the Preferred Shares are herein referred to as the “Conversion Shares”. The Preferred Shares, the Conversion Shares and the Warrant Shares are sometimes collectively referred to as the
“Shares”. 
 Section 1.5 Purchase Price and Closings. In consideration
of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Company agrees to issue and sell to the Purchasers and, in consideration of and in express reliance upon the representations,
warranties, covenants, terms and conditions of this Agreement, the Purchasers, severally but not jointly, agree to purchase the numbers of Preferred Shares and Warrants set forth opposite their respective names on Exhibit A. The
minimum purchase price paid at the Initial Closing (as defined below) will be $3,000,000 (excluding any Purchase Price paid by cancellation of the NovaRay Notes) and the maximum aggregate purchase price paid at all closings (including by
cancellation of the NovaRay Notes) will be $10,000,000 (the aggregate of all such purchase prices paid at any Closing, the “Purchase Price”). The Preferred Shares and Warrants may be sold and funded in separate closings
(each, a “Closing”), in each case pursuant to terms of this Agreement and provided that each Purchaser executes a signature page hereto and to each of the other Transaction Documents (as defined in
Section 2.1(b) hereof) to which the Purchasers are a party, and thereby agrees to be bound by and subject to the terms and conditions hereof and thereof. All additional new Purchasers and all additional Preferred Shares and
Warrants to be purchased hereunder shall be reflected on Exhibit A, which shall automatically be amended without any further action by any party hereto. The initial Closing under this Agreement (the “Initial
Closing”) shall take place on or about October 27, 2009, or as soon thereafter as the Company has identified Purchasers to invest at least $3,000,000 and all other conditions to closing have been satisfied or waived (the
“Initial Closing Date”). Each subsequent Closing under this Agreement (each, a “Subsequent Closing”) shall take place upon the mutual agreement of the Company and the Purchasers participating in such
Subsequent Closing, but in no event later than forty-five (45) days from the Initial Closing Date (each, a “Subsequent Closing Date”). The Initial Closing Date and each Subsequent Closing Date are sometimes referred to
in this Agreement as the “Closing Date”. Each Closing under this Agreement shall take place at the offices of Sadis & Goldberg LLP, 551 Fifth Avenue, 21st Floor, New York, New York 10176 at 10:00 a.m., New York time, or at such other time and place as may be mutually
agreed upon. Subject to the terms and conditions of this Agreement, at each Closing the Company shall deliver or cause to be delivered to each Purchaser participating in such Closing

 
(x) a certificate for the number of Preferred Shares set forth opposite the name of such Purchaser on Exhibit A hereto and (y) any other documents required to be delivered
pursuant to Article IV hereof. At each Closing, each Purchaser shall cause its Purchase Price to be delivered by wire transfer to the Company. Notwithstanding the foregoing, in lieu of paying in cash, the holders of the NovaRay Notes
shall pay their respective portion of the Purchase Price hereunder through the cancellation of such holders’ NovaRay Notes in the respective individual amounts as listed under “NovaRay Note Principal Amount” opposite
such NovaRay Note Holder’s name on Exhibit A; provided, however, that such payments shall not be considered for purposes of determining whether the minimum purchase price obligation has been satisfied. 
 ARTICLE II 
 Representations and Warranties 
 Section 2.1 Representations and Warranties of the Company. The
Company hereby represents and warrants to each Purchaser, as of the date hereof and as of each Closing Date (except as set forth in the schedule of exceptions delivered by the Company to a Purchaser at each Closing in which such Purchaser
participates (the “Schedule of Exceptions”) with each numbered Schedule corresponding to the section number herein), as follows: 
 (a) Organization, Good Standing and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite
corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. Except as set forth on Schedule 2.1(a), the Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except for any jurisdiction(s) (alone or in the aggregate) in
which the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect (as defined in Section 2.1(c) hereof). 
 (b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Irrevocable Transfer Agent Instructions (as defined in
Section 3.12), the Certificate of Designation, the Warrants, the Omnibus Warrant Amendment (as defined in Section 3.27), in the form attached hereto as Exhibit E and the Exchange Agreements (as
defined in Section 3.26), in the form attached hereto as Exhibit F (collectively, the “Transaction Documents”) and to issue and sell the Shares and the Warrants in accordance with the terms
hereof. The execution, delivery and performance of the Transaction Documents by the Company, and the consummation by it of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary corporate action, and
no further consent or authorization of the Company or its Board of Directors or stockholders is required. This Agreement has been duly executed and delivered by the Company. The other Transaction Documents will have been duly executed and delivered
by the Company at the Closing. Each of the Transaction Documents constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or
by other equitable principles of general application. 

 (c) Capitalization. The authorized capital stock of the Company and the shares
thereof currently issued and outstanding as of the date hereof are set forth on Schedule 2.1(c) hereto. All of the outstanding shares of the Common Stock have been duly and validly authorized. Except as set forth on Schedule
2.1(c) hereto, no shares of Common Stock are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call relating to, or securities or rights convertible into, any
shares of capital stock of the Company. Except as set forth on Schedule 2.1(c) hereto, there are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company. Except as set forth on Schedule 2.1(c) hereto, the Company is not a party to any agreement granting registration or
anti-dilution rights to any person with respect to any of its equity or debt securities. Except as set forth on Schedule 2.1(c) hereto, the Company is not a party to, and it has no knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of the Company. The offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Closing complied with all applicable Federal and state
securities laws, and no stockholder has a right of rescission or claim for damages with respect thereto which would have a Material Adverse Effect (as defined below). The Company has furnished or made available to the Purchasers true and correct
copies of the Company’s Certificate of Incorporation as in effect on the date hereof (the “Certificate”), and the Company’s Bylaws as in effect on the date hereof (the “Bylaws”). For the
purposes of this Agreement, “Material Adverse Effect” means any material adverse effect on the business, operations, properties, prospects or financial condition of the Company and its subsidiaries, taken as a whole, and/or
any condition, circumstance, or situation that would prohibit or otherwise impair the ability of the Company to perform any of its obligations under this Agreement in any material respect; provided, however, that any adverse effect
that that is caused primarily by conditions generally affecting the U.S. economy shall be deemed not to be a Material Adverse Effect. 
 (d) Issuance of Shares. The Preferred Shares and the Warrants to be issued at the Closing have been duly authorized by all necessary corporate action and the Preferred Shares, when paid for and issued in accordance with the terms
hereof, shall be validly issued and outstanding, fully paid and nonassessable and entitled to the rights and preferences set forth in the Certificate of Designation. When the Conversion Shares and the Warrant Shares are paid for and issued in
accordance with the terms of the Certificate of Designation and the Warrants, respectively, such shares will be duly authorized by all necessary corporate action and validly issued and outstanding, fully paid and nonassessable, and the holders shall
be entitled to all rights accorded to a holder of Common Stock. 
 (e) No Conflicts. Except as set forth on
Schedule 2.1(e) hereto, the execution, delivery and performance of the Transaction Documents by the Company, the performance by the Company of its obligations thereunder and the consummation by the Company of the transactions
contemplated herein and therein do not and will not (i) violate any provision of the Company’s Certificate or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a
default)

 
under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument
or obligation to which the Company is a party or by which it or its properties or assets are bound, (iii) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property of the Company under any
agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including Federal and state securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases other than violations pursuant to clauses (i) and (iv) above, for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its subsidiaries is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, except for possible violations which singularly or in
the aggregate do not and will not have a Material Adverse Effect. The Company is not required under Federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents, or issue and sell the Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares in accordance with the
terms hereof or thereof (other than (x) any consent, authorization or order that has been obtained as of the date hereof, (y) any filing or registration that has been made as of the date hereof or (z) any filings which may be required
to be made by the Company with the Commission or state securities administrators subsequent to the Closing, any registration statement which may be filed pursuant hereto, and the Certificate of Designation); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Purchasers herein. 
 (f) Commission Documents, Financial Statements. Except as indicated on Schedule 2.1(f), the Company has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including material filed pursuant to Section 13(a) or 15(d)
of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein as the “Commission Documents”). The Company has delivered or made available to each of the Purchasers
(through the EDGAR system or otherwise) true and complete copies of the Commission Documents. At the times of their respective filings, the Company has complied in all material respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and, as of their respective dates, none of the Commission Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company
included in the Commission Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except (i) as

 
may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes), and fairly
present in all material respects the financial position of the Company and its subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). 
 (g) Subsidiaries. The Company does not have any subsidiaries. For the purposes of this
Agreement, “subsidiary” shall mean any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of
directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other subsidiaries. 
 (h) No Material Adverse Change. Other than as disclosed in the Company’s Commission Documents, since June 30, 2009, neither the Company nor its subsidiaries have experienced or suffered
any Material Adverse Effect. 
 (i) No Undisclosed Liabilities. Except as set forth on Schedule 2.1(i),
since June 30, 2009 neither the Company nor any of its subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those
incurred in the ordinary course of the Company’s or its subsidiaries’ respective businesses and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company or its subsidiaries, as the case may
be. 
 (j) No Undisclosed Events or Circumstances. No event or circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed, other than with respect to the transactions contemplated by this Agreement. 
 (k)
Indebtedness. Schedule 2.1(k) hereto sets forth as of the date hereof all outstanding secured and unsecured indebtedness of the Company or any subsidiary, or for which the Company or any subsidiary has commitments, in each case
that have not previously been set forth in the Commission Documents. For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed, whether individually or in
aggregate, in excess of $100,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same
are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the
present value of any lease payments in excess of $25,000 due under leases required to be capitalized in accordance with GAAP. Except as set forth on Schedule 2.1(k), neither the Company nor any subsidiary is in default with respect to
any Indebtedness. 

 (l) Title to Assets. Except as set forth on Schedule 2.1(l), each of
the Company and the subsidiaries has good and marketable title to all of its personal property, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, or such that, individually or in the aggregate, do
not cause a Material Adverse Effect. Except as set forth on Schedule 2.1(l), all leases material to the operation or the business of the Company and each of its subsidiaries are valid and subsisting and in full force and effect. The
Company does not own any real property. 
 (m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding pending or, to the knowledge of the Company, threatened against the Company or any subsidiary which questions the validity of this Agreement or any of the other Transaction
Documents or the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto. Except as set forth in the Commission Documents, there is no material action, suit, claim, investigation, arbitration,
alternate dispute resolution proceeding or any other proceeding pending or, to the knowledge of the Company, threatened, against or involving the Company, any subsidiary or any of their respective properties or assets. Except as set forth in the
Commission Documents, there are no material outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any subsidiary or any officers or directors of the Company
or subsidiary in their capacities as such. 
 (n) Compliance with Law. The business of the Company and its subsidiaries,
has been and is presently being conducted in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances, except for such noncompliance that, individually or in the aggregate, would not cause a
Material Adverse Effect. The Company and each of its subsidiaries have all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by
it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 (o) Taxes. The Company and each of the subsidiaries has accurately prepared and filed all federal, state and other tax
returns required by law to be filed by it, has paid or made provisions for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the financial statements of the Company and
the subsidiaries for all current taxes and other charges to which the Company or any subsidiary is subject and which are not currently due and payable. None of the federal income tax returns of the Company or any subsidiary have been audited by the
Internal Revenue Service. The Company has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against the Company or any subsidiary
for any period, nor of any basis for any such assessment, adjustment or contingency. 
 (p) Certain Fees. Except as set
forth on Schedule 2.1(p) hereto, no brokers, finders or financial advisory fees or commissions will be payable by the Company or any subsidiary or any Purchaser with respect to the transactions contemplated by this Agreement.

 (q) Material Agreements. Except as set forth on Schedule 2.1(q) and
otherwise set forth in the Commission Documents, neither the Company nor any subsidiary is a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission as an exhibit to a registration statement on Form S-1 (collectively, “Material Agreements”) if the Company or any subsidiary were registering securities under the Securities Act. Except as set forth on
Schedule 2.1(q), the Company and each of its subsidiaries has in all material respects performed all the obligations required to be performed by them to date under the foregoing agreements, have received no notice of default and are
not in default under any Material Agreement now in effect, the result of which could cause a Material Adverse Effect. Except as set forth on Schedule 2.1(q), no written or oral contract, instrument, agreement, commitment, obligation,
plan or arrangement of the Company or of any subsidiary limits the payment of dividends on the Company’s Preferred Shares, other preferred stock, if any, or its Common Stock. 
 (r) Intellectual Property. The Company and its subsidiaries own, or have rights to use, all inventions, know-how, patents, patent
applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses, trade secrets and other similar rights that are necessary for the conduct of their respective businesses now operated by them which the failure to so
have would have or reasonably be expected to result in a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Schedule 2.1(r) sets forth a complete and accurate list of the Company’s
material Intellectual Property Rights. Neither the Company’s nor any subsidiary’s Intellectual Property Rights have expired or terminated, or are expected to expire or terminate, within three years from the date of this Agreement. Neither
the Company nor any subsidiary has received written notice that the Intellectual Property Rights used by the Company or any subsidiary violates or infringes upon the rights of any person. To the knowledge of the Company, the Company and its
subsidiaries’ Intellectual Property Rights do not infringe any patent, copyright, trademark, trade name or other proprietary rights of any third party, and there is no claim, action or proceeding being made or brought against, or to the
Company’s knowledge, being threatened against, the Company or any subsidiary regarding any of the Intellectual Property Rights used by the Company or any subsidiary. The Company does not have any knowledge of an infringement by another person
of any of its Intellectual Property Rights by third parties and has no reason to believe that any of its Intellectual Property Rights is unenforceable. The Company has taken commercially reasonable security measures to protect the secrecy and
confidentiality of its Intellectual Property Rights. 
 (s) Transactions with Affiliates. Except as set forth on
Schedule 2.1(s), there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) the Company or any subsidiary on the one hand, and
(b) on the other hand, any officer, employee, consultant or director of the Company, or any of its subsidiaries, or any person owning any capital stock of the Company or any subsidiary or any member of the immediate family of such officer,
employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or
stockholder. 

 (t) Securities Act of 1933. Based in material part upon the representations herein of
the Purchasers, the Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Preferred Shares and the Warrants hereunder. Neither the Company nor anyone acting
on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy any of the Shares, the Warrants or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person, or has taken or will take any action, so as to bring the issuance and sale of any of the Shares and the Warrants under the registration provisions of the Securities Act and applicable state securities
laws, and neither the Company nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection
with the offer or sale of any of the Preferred Shares and the Warrants. 
 (u) Governmental Approvals. Except for the
filing of any notice prior or subsequent to the Closing Date that may be required under applicable state and/or federal securities laws (which if required, shall be filed on a timely basis), including the filing of a Form D, a registration statement
or statements pursuant to Section 7.1, and the filing of the Certificate of Designation with the Secretary of State of Delaware, no authorization, consent, approval, license, exemption of, filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery of the Preferred Shares and the Warrants, or for the performance by the
Company of its obligations under the Transaction Documents. 
 (v) Independent Nature of Purchasers. The Company
acknowledges that the obligations of each Purchaser under the Transaction Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any
other Purchaser under the Transaction Documents. The Company acknowledges that the decision of each Purchaser to purchase securities pursuant to this Agreement has been made by such Purchaser independently of any other purchase and independently of
any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of its subsidiaries which may have
made or given by any other Purchaser or by any agent or employee of any other Purchaser. The Company acknowledges that nothing contained herein, or in any Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall
be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges that each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that for reasons of administrative convenience only, the
Transaction Documents have been prepared by counsel for one of the Purchasers and such counsel does not represent all of the Purchasers but only such Purchaser and the other Purchasers have had the opportunity to retain their own individual counsel
with respect to the transactions contemplated hereby.

 (w) Insurance. The insurance policies owned and maintained by the Company that are
material to the Company are in full force and effect, all premiums due and payable thereon have been paid (other than retroactive or retrospective premium adjustments that the Company is not currently required, but may in the future be required, to
pay with respect to any period ending prior to the date of this Agreement), and the Company has received no notice of cancellation or termination with respect to any such policy that has not been replaced on substantially similar terms prior to the
date of such cancellation. 
 Section 2.2 Representations, Warranties and Covenants of the Purchasers. Each
Purchaser hereby makes the following representations, warranties and covenants to the Company (with respect solely to itself and not with respect to any other Purchaser), as of the date hereof, and as of each Closing Date in which such Purchaser is
participating in a Closing: 
 (a) Organization and Standing of the Purchasers. If the Purchaser is an entity, such
Purchaser is a corporation, partnership or limited liability company duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. 
 (b) Authorization and Power. Each Purchaser has the requisite power and authority to enter into and perform this Agreement and to
purchase the Preferred Shares and Warrants being sold to it hereunder. The execution, delivery and performance of this Agreement by such Purchaser and the consummation by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate or partnership action, and no further consent or authorization of such Purchaser or its Board of Directors, stockholders, members, managers or partners, as the case may be, is required. This Agreement has been
duly authorized, executed and delivered by such Purchaser and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of such Purchaser enforceable against such Purchaser in accordance with the terms thereof.

 (c) No Conflicts. The execution, delivery and performance of this Agreement by each Purchaser and the consummation by
such Purchaser of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such Purchaser’s charter documents or bylaws or other organizational documents or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument or
obligation to which such Purchaser is a party or by which its properties or assets are bound, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Purchaser
or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such Purchaser’s ability to perform its obligations hereunder). Such Purchaser is not
required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to purchase the
Preferred Shares or acquire the Warrants in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, such Purchaser is assuming and relying upon the accuracy of the relevant representations and
agreements of the Company herein. 

 (d) Acquisition for Investment. Each Purchaser is acquiring the Preferred Shares and
the Warrants in the ordinary course of its business and solely for its own account for the purpose of investment and not as a nominee or with a view to or for sale in connection with distribution. Each Purchaser does not have a present intention to
sell the Preferred Shares or the Warrants in a manner that would violate the registration requirements of Federal and state securities laws, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of the
Preferred Shares or the Warrants to or through any person or entity; provided, however, that by making the representations herein and subject to Section 2.2(h) below, such Purchaser does not agree to hold the Shares
or the Warrants for any minimum or other specific term and reserves the right to dispose of the Shares or the Warrants at any time in accordance with Federal and state securities laws applicable to such disposition. Each Purchaser will not, directly
or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Preferred Shares or Warrants, nor will such Purchaser engage in any short sale that
results in a disposition of any of the Preferred Shares or Warrants by such Purchaser, except in compliance with any applicable state and Federal securities laws. Each Purchaser acknowledges that it is able to bear the financial risks associated
with an investment in the Preferred Shares and the Warrants and that it has been given full access to such records of the Company and the subsidiaries and to the officers of the Company and the subsidiaries and has carefully reviewed and considered
all such information as it has deemed necessary or appropriate to conduct such Purchaser’s due diligence investigation and has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company’s
stage of development so as to be able to evaluate the risks and merits of its investment in the Company. 
 (e) Status of
Purchasers. Each Purchaser is an “accredited investor” as defined in Regulation D promulgated under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and
such Purchaser is not a broker-dealer. 
 (f) Opportunities for Additional Information. Each Purchaser acknowledges that
such Purchaser has had the opportunity to ask questions of and receive answers from, or obtain additional information from, the executive officers of the Company concerning the financial and other affairs of the Company, and to the extent deemed
necessary in light of such Purchaser’s personal knowledge of the Company’s affairs, such Purchaser has asked such questions and received answers to the full satisfaction of such Purchaser, and such Purchaser desires to invest in the
Company. 
 (g) No General Solicitation. Each Purchaser acknowledges that the Preferred Shares and the Warrants were not
offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications. 

 (h) Rule 144. Such Purchaser understands that the Shares must be held indefinitely
unless such Shares are registered under the Securities Act or an exemption from registration is available. Such Purchaser acknowledges that such Purchaser is familiar with Rule 144 of the rules and regulations of the Commission, as amended,
promulgated pursuant to the Securities Act (“Rule 144”), and that such person has been advised that Rule 144 permits resales only under certain circumstances. Such Purchaser understands that to the extent that Rule 144 is not
available, such Purchaser will be unable to sell any Shares without either registration under the Securities Act or the existence of another exemption from such registration requirement. 
 (i) General. Such Purchaser understands that the Shares are being offered and sold in reliance on a transactional exemption from the
registration requirement of Federal and state securities laws and the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability of such Purchaser to acquire the Shares. 
 (j)
Independent Investment. Except as may be disclosed in any filings with the Commission by the Purchasers under Section 13 and/or Section 16 of the Exchange Act, no Purchaser has agreed to act with any other Purchaser for the purpose
of acquiring, holding, voting or disposing of the Shares purchased hereunder for purposes of Section 13(d) under the Exchange Act, and each Purchaser is acting independently with respect to its investment in the Shares. Each Purchaser
understands that nothing in the Agreement or any other materials presented to such Purchaser in connection with the purchase and sale of the Preferred Shares and Warrants constitutes legal, tax or investment advice. Each Purchaser has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Preferred Shares and Warrants. 
 (k) Risk of Loss; No Public Market. Each Purchaser understands that its investment in the Preferred Shares and Warrants involves a
significant degree of risk, including a risk of total loss of such Purchaser’s investment. Each Purchaser understands that there currently is no public market for the securities of the Company; that the purchase price for the Shares was
established by negotiations between the Company and the Purchasers; and that no representation is being made as to the future value of any of the Company’s securities. 
 ARTICLE III 
 Covenants 
 The Company covenants with each of the Purchasers as follows, which covenants are for the benefit of the Purchasers and their permitted
assignees hereunder. 
 Section 3.1 Securities Compliance. The Company shall notify the Commission in accordance
with its rules and regulations of the transactions contemplated by any of the Transaction Documents, including filing a Form D with respect to the Preferred Shares, Warrants, Conversion Shares and Warrant Shares as required under Regulation D and
applicable “blue sky” laws, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Preferred Shares, the Warrants, the
Conversion Shares and the Warrant Shares to the Purchasers or subsequent holders. 

 Section 3.2 Registration and Listing. Unless the Company obtains written consent
of Purchasers holding Preferred Stock representing more than fifty percent (50%) of all Preferred Stock and so long as a Purchaser beneficially owns any of the Preferred Stock, the Company shall (a) either (i) cause its Common Stock
to continue to be registered under Section 12(b) or 12(g) of the Exchange Act, or (ii) continue to voluntarily file all reports required to be filed as if the Company were so registered, and in any event shall comply in all respects with
its reporting and filing obligations under the Exchange Act, (b) comply with all requirements related to any registration statement filed pursuant to this Agreement, and (c) not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted herein.
Subject to the terms of the Transaction Documents, the Company further covenants that it will take such further action as the Purchasers may reasonably request, all to the extent required from time to time, to enable the Purchasers to sell the
Common Stock of the Company issuable upon exercise or conversion of the Preferred Stock and/or the Warrants without registration under the Securities Act within the limitation of the exemptions provided by Rule 144, unless the Company obtains
written consent of Purchasers holding Preferred Stock representing more than fifty percent (50%) of all Preferred Stock and so long as a Purchaser beneficially owns any of the Preferred Stock. Upon the request of the Purchasers, the Company
shall deliver to the Purchasers a written certification of a duly authorized officer as to whether it has complied with such requirements. 
 Section 3.3 Inspection Rights. The Company shall permit, during normal business hours and upon reasonable request and reasonable notice, each Purchaser or any employees, agents or
representatives thereof, so long as such Purchaser shall be obligated hereunder to purchase the Preferred Shares or shall beneficially own any Preferred Shares, or shall own Conversion Shares which, in the aggregate, represent more than 2% of the
total combined voting power of all voting securities then outstanding, for purposes reasonably related to such Purchaser’s interests as a stockholder, to examine and make reasonable copies of and extracts from the records and books of account
of, and visit and inspect the properties, assets, operations and business of the Company and any subsidiary, and to discuss the affairs, finances and accounts of the Company and any subsidiary with any of its officers, consultants, directors, and
key employees. As a condition to such inspection, Purchasers shall keep such information confidential; provided that such information may be disclosed (i) to the extent required by applicable law, regulation or legal process, subpoena,
civil investigative demand or other similar process, (ii) to the extent reasonably necessary in connection with the enforcement of rights under this Agreement, (iii) to any governmental, judicial or regulatory authority requiring or
requesting such information, and (iv) to its directors, officers, employees, accountants, and legal counsel who need to know such information. 
 Section 3.4 Compliance with Laws. The Company shall comply, and cause each subsidiary to comply, with all applicable laws, rules, regulations and orders, noncompliance with which could have a
Material Adverse Effect. 
 Section 3.5 Keeping of Records and Books of Account. The Company shall keep and cause
each subsidiary to keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company and its subsidiaries, and in which, for each
fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. 

 Section 3.6 Reporting Requirements. If the Commission ceases making periodic
reports filed under the Exchange Act available via the Internet, then at a Purchaser’s request the Company shall furnish the following to such Purchaser so long as such Purchaser shall be obligated hereunder to purchase the Preferred Shares or
shall beneficially own any Shares: 
 (a) Quarterly Reports filed with the Commission on Form 10-Q as soon as practical after
the document is filed with the Commission, and in any event within five (5) days after the document is filed with the Commission; 
 (b) Annual Reports filed with the Commission on Form 10-K as soon as practical after the document is filed with the Commission, and in any event within five (5) days after the document is filed with the Commission; and 
 (c) Copies of all notices and information, including without limitation notices and proxy statements in connection with any meetings, that
are provided to holders of shares of Common Stock, contemporaneously with the delivery of such notices or information to such holders of Common Stock. 
 Section 3.7 Amendments. The Company shall not amend or waive any provision of the Certificate or Bylaws of the Company in any way that would materially and adversely affect the rights of the
holders of the Preferred Stock and Warrants without the consent of Purchasers holding more than fifty percent (50%) of all Preferred Stock. No consideration shall be offered or paid to any holders of the Preferred Stock and Warrants to amend or
consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration also is offered to Purchasers holding Preferred Stock representing more than fifty percent (50%) of the aggregate outstanding
shares of Preferred Stock or Purchasers holding more than fifty percent (50%) of all shares issuable upon exercise of all Warrants, as the case may be. The Company has not, directly or indirectly, made any material agreements with any
Purchasers relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. All agreements with any Purchasers relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the Transaction Documents shall be disclosed to Purchasers in the Initial Closing. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, no
Purchaser has made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise. 
 Section 3.8 Other Agreements. The Company shall not enter into any agreement in which the terms of such agreement would restrict or impair the right or ability of the Company or any subsidiary to perform under any Transaction
Document. 
 Section 3.9 Distributions. So long as any Preferred Shares remain outstanding, the Company agrees that
it shall not (i) declare or pay any dividends or make any distributions to any holder(s) of Common Stock or (ii) purchase or otherwise acquire for value, directly or indirectly, any Common Stock or other equity security of the Company
except for (y) repurchases of shares of Common

 
Stock issued to or held by employees, officers, directors, or consultants of the Company or its subsidiaries upon termination of their employment or services pursuant to agreements providing for
the right of said repurchase, and (z) repurchases of shares of Common Stock issued to or held by employees, officers, directors, or consultants of the Company or its subsidiaries pursuant to rights of first refusal contained in agreements
providing for such rights. 
 Section 3.10 Use of Proceeds. An estimated allocation of the net proceeds from the
sale of the Shares hereunder is set forth on Schedule 3.10 hereto. The net proceeds from the sale of the Shares hereunder shall not be used by the Company to redeem any Common Stock or securities convertible, exercisable or
exchangeable into Common Stock or to settle any outstanding litigation except for fractional shares as set forth in the Exchange Agreements. 
 Section 3.11 Reservation of Shares. So long as any of the Preferred Shares or Warrants remain outstanding, the Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than one hundred ten percent (110%) of the aggregate number of shares of Common Stock needed to provide for the issuance of the Conversion Shares and the Warrant Shares. 
 Section 3.12 Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates, registered in the name of each Purchaser or its respective nominee(s), for the Conversion Shares and the Warrant Shares in such amounts as specified from time to time by each Purchaser to the Company
upon conversion of the Preferred Shares or exercise of the Warrants in the form of Exhibit D attached hereto (the “Irrevocable Transfer Agent Instructions”). Prior to registration of the Conversion Shares and
the Warrant Shares under the Securities Act, all such certificates shall bear the restrictive legend specified in Section 5.1 of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 3.12 will be given by the Company to its transfer agent and that the Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in
this Agreement. If a Purchaser provides the Company with an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that a public sale, assignment or transfer of the Shares may be made without registration under the
Securities Act or the Purchaser provides the Company with reasonable assurances that such Shares can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately
sold, the Company shall permit the transfer, and, in the case of the Conversion Shares and the Warrant Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. The Company acknowledges that a breach by it of its obligations under this Section 3.12 will cause irreparable harm to the Purchasers by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 3.12 will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Section 3.12, that the Purchasers shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond or other security being required. 

 Section 3.13 Disposition of Assets. So long as any Preferred Shares remain
outstanding, neither the Company nor any subsidiary shall sell, grant, assign, convey, mortgage, pledge, hypothecate, transfer or otherwise dispose of any of its properties, assets and rights including, without limitation, its software and
intellectual property, to any person except for licenses or sales to customers in the ordinary course of business or with the prior written consent of the holders of a majority of the Preferred Shares then outstanding. 
 Section 3.14 Reporting Status. Unless the Company obtains written consent of Purchasers holding Preferred Stock representing
more than fifty percent (50%) of all Preferred Stock and so long as a Purchaser beneficially owns any of the Preferred Stock, the Company shall timely file all reports required to be filed with the Commission pursuant to the Exchange Act, and
the Company shall not cease filing reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. 
 Section 3.15 Disclosure of Transaction. The Company shall file with the Commission a Current Report on Form 8-K (the “Form 8-K”) describing the material terms of the
transactions contemplated hereby (and attaching as exhibits thereto this Agreement, the Certificate of Designation, the form of Warrant, the form of Warrant Amendment and the form of Exchange Agreement) as soon as practicable following the Closing
Date but in no event more than four (4) Trading Days following the Closing Date, which Form 8-K shall be subject to prior review and comment by counsel for the Purchasers. “Trading Day” means any day during which the OTC
Bulletin Board (or other quotation venue or principal exchange on which the Common Stock is traded) shall be open for trading. 
 Section 3.16 [INTENTIONALLY OMITTED]. 
 Section 3.17 Pledge of Securities. The Company acknowledges
and agrees that the Shares may be pledged by a Purchaser in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Common Stock. The pledge of Common Stock shall not be deemed to be a transfer,
sale or assignment of the Common Stock hereunder, and no Purchaser effecting a pledge of Common Stock shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document; provided that a Purchaser and its pledgee shall be required to comply with the provisions of Article V hereof in order to effect a sale, transfer or assignment of Common Stock to such pledgee. At the
Purchasers’ expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Common Stock may reasonably request in connection with a pledge of the Common Stock to such pledgee by a Purchaser. 
 Section 3.18 [INTENTIONALLY OMITTED]. 
 Section 3.19 DTC. Not later than the effective date of the Registration Statement (as defined in Section 7.1), the Company shall cause its Common Stock to be eligible for
transfer with its transfer agent pursuant to the Depository Trust Company Fast Automated Securities Transfer Program. 

 Section 3.20 Sarbanes-Oxley Act. The Company shall use its best efforts to be in
compliance with the applicable provisions of the Sarbanes-Oxley Act. 
 Section 3.21 No Commissions in connection with
Conversion of Preferred Shares. In connection with the conversion of the Preferred Shares into Conversion Shares, neither the Company nor any Person acting on its behalf will take any action that would result in the Conversion Shares being
exchanged by the Company other than with the then existing holders of the Preferred Shares exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting the exchange in compliance with
Section 3(a)(9) of the Securities Act. 
 Section 3.22 Mergers and Acquisitions. Unless the Company obtains
written consent of Purchasers holding Preferred Stock representing more than fifty percent (50%) of the aggregate outstanding amount of Preferred Stock or until such time that all Preferred Stock has been converted into Conversion Shares, the
Company shall not by operation of law or otherwise, merge with, consolidate with, acquire all or substantially all of the assets or capital stock of, or otherwise combine with, any partnership, joint venture, trust, association, corporation, limited
liability company or other entity. 
 Section 3.23 Related Party Transactions. Unless the Company obtains written
consent of Purchasers holding Preferred Stock representing more than fifty percent (50%) of the aggregate outstanding amount of Preferred Stock or until such time that all Preferred Stock has been converted into Conversion Shares, the Company
shall not enter into, or agree to enter into, any agreement with any member of the Board of Directors of the Company or Triple Ring Technologies, Inc. (“Triple Ring”) except (i) such agreements identified in the
Company’s Form 10-Q filed with the Commission on August 12, 2009 as in effect as of the Initial Closing Date, (ii) agreements related to or in connection with services rendered and expenses incurred under the Professional Services
Agreement by and between Triple Ring and the Company (the “PSA”) as in effect as of the Initial Closing Date; (iii) agreements for other services rendered by Triple Ring not to exceed twenty-five thousand dollars
($25,000) in any calendar month for such other services unless the Company obtains the approval of the Audit Committee of its Board of Directors for such excess amount; and (iv) the Exchange Agreements 
 Section 3.24 Additional Debt Financing. Unless the Company obtains written consent of Purchasers holding Preferred Stock
representing more than fifty percent (50%) of the aggregate outstanding amount of Preferred Stock or until such time that all Preferred Stock has been converted into Conversion Shares, the Company shall not enter into any written agreements to
incur debt financing after the Initial Closing Date except the (i) Obligations (as defined below), (ii) compensation, reimbursement or withholding amounts for employees and service providers, (iii) amounts incurred with Triple Ring
under the PSA and for other services rendered not to exceed twenty-five thousand dollars ($25,000) in any calendar month for such other services unless the Company obtains the approval of the Audit Committee of its Board of Directors for such excess
amount, (iv) amounts arising out of the Company’s sublease agreement and expenses associated with the Company’s facilities and (v) any other amounts in an aggregate principal amount not to exceed $250,000.
“Obligations” shall mean all advances, liabilities and obligations for the payment of monetary amounts owing by Company to the Purchasers arising under this Agreement or the Transaction Documents including without limitation
all fees, charges, claims, expenses, attorneys’ fees and any other sum chargeable to the Company under this Agreement or the Transaction Documents. 

 Section 3.25 Subsequent Events. Within ten (10) days following receipt of a
written request from Vision Opportunity Master Fund, Ltd. (the “Lead Investor”), the Company shall expand its Board of Directors by one (1) seat and ensure that one (1) person selected by the Lead Investor be
appointed for such seat on the Board of Directors of the Company subject to satisfactory background check by the Company’s independent auditors and approval of the Board of Directors of the Company which approval shall not be unreasonably
withheld. 
 Section 3.26 Exchange Agreement. The Company shall enter into Exchange Agreements with all holders of
its Series A-1 Preferred Stock and Common Stock who, pursuant to this Agreement, invest an amount set forth opposite the name of such Purchaser on Exhibit A hereto, substantially in the form attached hereto as Exhibit F
(the “Exchange Agreements”) and shall issue its Series B Preferred Stock in exchange for its Series A-1 Preferred Stock and Common Stock pursuant to the Exchange Agreements. 
 Section 3.27 Warrant Amendments. The Company shall enter into Warrant Amendments with the Lead Investor, Purchasers and their
affiliates concerning each of the Lead Investor’s, Purchasers’ and their affiliates’ outstanding warrants substantially in the form attached hereto as Exhibit E (the “Warrant Amendments”).

 ARTICLE IV 
 Conditions 
 Section 4.1 Conditions Precedent to the Obligation of
the Company to Sell the Shares. The obligation hereunder of the Company to issue and sell the Preferred Shares and the Warrants to each Purchaser (taken individually) is subject to the satisfaction or waiver, at or before each Closing, of each
of the conditions set forth below. These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion. 
 (a) Accuracy of Each Purchaser’s Representations and Warranties. The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when
made and as of the Closing Date applicable to such Purchaser as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such
date. 
 (b) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Closing. 
 (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. 

 (d) Delivery of Purchase Price. The Purchase Price for the Preferred Shares and
Warrants has been delivered to the Company. 
 (e) Delivery of Transaction Documents. The Transaction Documents have been
duly executed and delivered by the Purchasers to the Company. 
 (f) Cancellation of NovaRay Notes and Security
Agreement. The NovaRay Note Holders shall have agreed to cancel their NovaRay Notes in accordance with this Agreement. The NovaRay Note Holders and Vision Capital Advisors LLC shall have agreed to terminate the Security Agreement dated as of
July 2, 2009. The NovaRay Note Holders shall have agreed to terminate the covenants of the Note and Warrant Purchase Agreement dated as of July 2, 2009. 
 (g) Release of Lien. Counsel for the Company shall have received a UCC termination statement from the Lead Investor releasing the current lien on all Company assets in favor of the Lead Investor.
Such termination statement shall be held in trust by counsel for the Company until all conditions of Section 4.2 have been satisfied. 
 Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the Shares. The obligation hereunder of each Purchaser to acquire and pay for the Preferred Shares and the
Warrants is subject to the satisfaction or waiver, at or before each Closing, of each of the conditions set forth below. These conditions are for each Purchaser’s sole benefit and may be waived by such Purchaser at any time in its sole
discretion. 
 (a) Accuracy of the Company’s Representations and Warranties. Each of the representations and
warranties of the Company in this Agreement shall be true and correct in all respects as of the date when made and shall be true and correct in all material respects as of the Closing Date applicable to such Purchaser as though made at that time
(except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date). 
 (b) Performance by the Company. The Company shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the Closing. 
 (c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this
Agreement. 
 (d) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental
authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company or any subsidiary, or any of the officers, directors or affiliates of the Company or any subsidiary seeking to
restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions. 

 (e) Certificate of Designation of Rights and Preferences. Prior to the Closing, the
Certificate of Designation in the form of Exhibit B attached hereto shall have been filed with the Secretary of State of Delaware. 
 (f) Certificates. The Company shall have executed and delivered to the Purchasers the certificates for the Preferred Shares and the Warrants being acquired by such Purchaser at the Closing (in each
case, in such denominations as such Purchaser shall request). 
 (g) Resolutions. The Board of Directors of the Company
shall have adopted resolutions consistent with Section 2.1(b) hereof in a form reasonably acceptable to such Purchasers (the “Resolutions”). 
 (h) Reservation of Shares. As of the Closing Date, the Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than (i) such number of shares of Common Stock equal to one hundred ten percent (110%) of the number of shares of Common Stock as shall from time to time be sufficient to effect the conversion
of all of the Preferred Shares; and (ii) as of the date hereof, such number of shares of Common Stock equal to one hundred ten percent (110%) of the number of shares of Common Stock as shall from time to time be sufficient to effect the
exercise of the Warrants then outstanding. 
 (i) Transfer Agent Instructions. As of the Closing Date, the Irrevocable
Transfer Agent Instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent. 
 (j) Good Standing Certificates. Such Purchaser shall have received good standing certificates showing the Company and any subsidiary are validly existing and in good standing under the laws of the state of its incorporation.

 (k) Secretary’s Certificate. The Company shall have delivered to such Purchaser a secretary’s certificate,
dated as of the Closing Date, as to (i) the Resolutions, (ii) the Certificate, (iii) the Bylaws, (iv) the Certificate of Designation, each as in effect at the Closing, and (v) the authority and incumbency of the officers of
the Company executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith. 
 (l) Officer’s Certificate. The Company shall have delivered to the Purchasers a certificate of an executive officer of the Company, dated as of the Closing Date, confirming the accuracy of the Company’s representations,
warranties and covenants as of the Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.2 as of the Closing Date. 
 (m) Warrant Amendments. The Company shall have delivered to the Purchasers an executed copy of the Warrant Amendments, in
substantially the form of Exhibit E hereto. 

 (n) Exchange Agreements. The Company shall have delivered to the Purchasers an
executed copy of the Exchange Agreements, in substantially the form of Exhibit F hereto. 
 (o) Financial
Advisor. The Company shall have engaged a consultant or financial advisor acceptable to the Lead Investor. 
 (p)
Material Adverse Effect. There have been no events or occurrences on or before the Closing Date which, individually or in the aggregate, have had or would reasonably be expected to have a Material Adverse Effect. 
 ARTICLE V 
 Stock Certificate Legend 
 Section 5.1 Legend. Each certificate representing the Preferred Shares
and the Warrants, and, if appropriate, securities issued upon conversion thereof, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state securities or
“blue sky” laws): 
 THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND
UNDER APPLICABLE STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. 

The Company agrees to reissue certificates representing any of the Conversion Shares and the Warrant Shares, without the legend set forth
above if at such time, prior to making any transfer of any such securities, such holder thereof shall give written notice to the Company describing the manner and terms of such transfer and removal as the Company may reasonably request. Such
proposed transfer and removal will not be effected until: (a) either (i) the Company has received an opinion of counsel reasonably satisfactory to the Company, to the effect that the registration of the Conversion Shares or the Warrant
Shares under the Securities Act is not required in connection with such proposed transfer or (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Company with the Commission and has
become effective under the Securities Act; and (b) either (i) the Company has received an opinion of counsel reasonably satisfactory to the Company, to the effect that registration or qualification under the securities or “blue
sky” laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or “blue sky” laws has been effected or a valid exemption exists with respect thereto. The
Company will respond to any such notice from a holder within five (5) business days. In the case of any proposed transfer

 
under this Section 5.1, the Company will use reasonable efforts to comply with any such applicable state securities or “blue sky” laws, but shall in no event be
required, (x) to qualify to do business in any state where it is not then qualified, (y) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject, or (z) to comply
with state securities or “blue sky” laws of any state for which registration by coordination is unavailable to the Company. The restrictions on transfer contained in this Section 5.1 shall be in addition to, and not by
way of limitation of, any other restrictions on transfer contained in any other section of this Agreement. Whenever a certificate representing the Conversion Shares or Warrant Shares is required to be issued to a Purchaser without a legend, in lieu
of delivering physical certificates representing the Conversion Shares or Warrant Shares (provided that a registration statement under the Securities Act providing for the resale of the Warrant Shares and Conversion Shares is then in effect),
the Company shall cause its transfer agent to electronically transmit the Conversion Shares or Warrant Shares to a Purchaser by crediting the account of such Purchaser or such Purchaser’s Prime Broker with the Depository Trust Company
(“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system (to the extent not inconsistent with any provisions of this Agreement). 
 ARTICLE VI 
 Indemnification 
 Section 6.1 Indemnification of Purchasers. The Company agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, managers, partners, members, shareholders, affiliates, attorneys, agents, successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and disbursements) incurred by any such persons as a result of any inaccuracy in or breach of the representations, warranties or covenants made by the Company herein. 
 Section 6.2 Indemnification Procedure. Any party entitled to indemnification under this Article VI (an
“indemnified party”) will give prompt written notice to the party required to provide indemnification under this Article VI (the “indemnifying party”) of any matters giving rise to a
claim for indemnification; provided, that the failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article VI except
to the extent that the indemnifying party is actually prejudiced by such failure to give prompt notice. In case any action, proceeding or claim is brought against an indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the reasonable judgment of the indemnified party a conflict of interest between it and the indemnifying party may exist with respect to such action, proceeding or claim, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified party. In the event that the indemnifying party advises an indemnified party that it will contest such a claim for indemnification hereunder, or fails, within thirty
(30) days of receipt of any indemnification notice to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after
it commences such defense), then the indemnified party may, at its option, defend, settle or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects in writing to assume and does so

 
assume the defense of any such claim, proceeding or action, the indemnified party’s costs and expenses arising out of the defense, settlement or compromise of any such action, claim or
proceeding shall be losses subject to indemnification hereunder. The indemnified party shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the indemnified party which relates to such action or claim. The indemnifying party shall keep the indemnified party fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action or claim, then the indemnified party shall be entitled to participate in such defense with counsel of its choice at its sole cost
and expense. The indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent. Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the indemnified party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such claim. The indemnification required by this Article VI shall be
made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification. The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the
indemnified party against the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to pursuant to the law. 
 Section 6.3 Exclusive Remedy. After the Closing, the indemnities provided for herein shall constitute the sole and exclusive remedy of any indemnified party for damages arising out of,
resulting from or incurred in connection with any claims related to this Agreement or arising out of the issuance and sale of the Preferred Shares and the Warrants. 
 ARTICLE VII 
 Registration Rights 
 Section 7.1 Piggyback Registration Rights. If at any time when there is not an effective Registration Statement covering the
Conversion Shares and Warrant Shares, the Company shall determine to prepare and file with the Commission a registration statement (a “Registration Statement”) relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, the Company shall send to each holder of the Preferred Shares and Warrants written notice of such determination and,
if within thirty (30) days after receipt of such notice, or within such shorter period of time as may be specified by the Company in such written notice as may be necessary for the Company to comply with its obligations with respect to the
timing of the filing of such Registration Statement, any such holder shall so request

 
in writing (which request shall specify the Conversion Shares and the Warrant Shares intended to be disposed of by the Purchasers, if any), the Company will cause the registration under the
Securities Act of all Conversion Shares and the Warrant Shares which the Company has been so requested to register by the holder, to the extent required to permit the disposition of the Conversion Shares and the Warrant Shares so to be registered;
provided that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed in connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to such holder and, thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Conversion Shares and Warrant Shares in connection with such registration (but not from its obligation to pay fees and expenses in accordance with Section 8.1 hereof), and (ii) in the case of
a determination to delay registering, shall be permitted to delay registering any Conversion Shares and Warrant Shares being registered pursuant to this Section 7.1 for the same period as the delay in registering such other
securities. The Company shall include in such Registration Statement all or any part of such Conversion Shares and Warrant Shares such holder requests to be registered; provided, however, that the Company shall not be required to
register any Conversion Shares and Warrant Shares pursuant to this Section 7.1 that are eligible for resale without limitations concerning the availability of current public information pursuant to Rule 144 of the Securities Act.
In the case of an underwritten public offering, if the managing underwriter(s) or underwriter(s) should reasonably object to the inclusion of the Conversion Shares and Warrant Shares in such Registration Statement, then if the Company after
consultation with the managing underwriter should reasonably determine that the inclusion of such Conversion Shares and Warrant Shares would materially adversely affect the offering contemplated in such Registration Statement, and based on such
determination recommends inclusion in such Registration Statement of fewer or none of the Conversion Shares and Warrant Shares of the holders, then (x) the number of Conversion Shares and Warrant Shares of the holders included in such
Registration Statement shall be reduced pro-rata among such holders (based upon the number of Conversion Shares and Warrant Shares requested to be included in the registration), if the Company after consultation with the underwriter(s) recommends
the inclusion of fewer Conversion Shares and Warrant Shares, or (y) none of the Conversion Shares and Warrant Shares of the Holders shall be included in such Registration Statement, if the Company after consultation with the underwriter(s)
recommends the inclusion of none of such Conversion Shares and Warrant Shares; provided, however, that if securities are being offered for the account of other persons or entities as well as the Company, such reduction shall not
represent a greater fraction of the number of Conversion Shares and Warrant Shares intended to be offered by the holders than the fraction of similar reductions imposed on such other persons or entities (other than the Company). 
 Section 7.2 Assignment of Registration Rights. The rights of each Purchaser hereunder, including the right to have the Company
register for resale Conversion Shares and Warrant Shares in accordance with the terms of this Agreement, shall be automatically assignable by each Purchaser to any person who acquires all or a portion of the Conversion Shares and the Warrant Shares
if: (i) the Purchaser agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or

 
assignment, furnished with written notice of (A) the name and address of such transferee or assignee, and (B) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws unless such securities
are registered in a Registration Statement pursuant to Section 7.1 (in which case the Company shall be obligated to amend such Registration Statement to reflect such transfer or assignment) or are otherwise exempt from
registration, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section 7.2, the transferee or assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement, and (v) such transfer shall have been made in accordance with the applicable requirements of this Agreement. In addition, each Purchaser shall have the right to assign its rights hereunder to any other person with
the prior written consent of the Company, which consent shall not unreasonably be withheld. The rights to assignment shall apply to the Purchasers (and to subsequent) successors and assigns. 
 Section 7.3 Underwriter Status. Subject to compliance with applicable law, the Company may not deem any Purchaser to be an
“underwriter” within the meaning of the Securities Act within any Registration Statement nor file any such Registration Statement that deems such Purchaser to be an “underwriter” without the prior written consent of such
Purchaser. 
 ARTICLE VIII 
 Miscellaneous 
 Section 8.1 Fees and Expenses. Except as
otherwise set forth in this Agreement and the other Transaction Documents, each party shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement. Notwithstanding the foregoing sentence, the Company shall pay (i) all reasonable attorneys’ fees and expenses (including disbursements and out-of-pocket
expenses) incurred by the Purchasers in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Transaction Documents and the transactions contemplated thereunder, which payment shall be made at the
Initial Closing (which fees and expenses shall not exceed $40,000), (ii) the filing and declaration of effectiveness by the Commission of a Registration Statement (which fees and expenses shall not exceed $7,500) and (iii) reasonable
attorneys’ fees and expenses (including disbursements and out-of-pocket expenses) agreed upon in writing by the Company in connection with any amendments, modifications or waivers of this Agreement or any of the other Transaction Documents. The
Company shall pay all reasonable fees and expenses incurred by the Purchasers in connection with the enforcement of this Agreement or any of the other Transaction Documents, including, without limitation, all reasonable attorneys’ fees and
expenses but only if the Purchasers are successful in any litigation or arbitration relating to such enforcement. 

 Section 8.2 Specific Enforcement, Consent to Jurisdiction. 
 (a) The Company and the Purchasers acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. 
 (b) Each of the Company and the Purchasers (i) hereby irrevocably submits to the jurisdiction of the United States District Court
sitting in the Southern District of New York and the courts of the State of New York located in New York county for the purposes of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Transaction Documents
or the transactions contemplated hereby or thereby and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Purchasers consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 8.2 shall affect or
limit any right to serve process in any other manner permitted by law. 
 Section 8.3 Entire Agreement; Amendment.
This Agreement and the Transaction Documents collectively contain the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the Transaction Documents, neither
the Company nor any of the Purchasers makes any representations, warranty, covenant or undertaking with respect to such matters and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged
herein. No provision of this Agreement may be waived or amended other than by a written instrument signed by the Company and the holders of at a majority of the Preferred Shares then outstanding, and no provision hereof may be waived other than by
an a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Preferred Shares then
outstanding. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the
Transaction Documents or holders of Preferred Shares, as the case may be. 

 Section 8.4 Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery or by facsimile at the address or number designated below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: 
  

			
	If to the Company:	    	 39655 Eureka Drive
 Newark,
California 94560
 Attn: Chief Executive Officer
 Facsimile: (510) 291-3001

		
	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 Purchaser:	    	At the address of such Purchaser set forth on Exhibit A to this Agreement, with copies to Purchaser’s counsel as set forth on Exhibit A or as
specified in writing by such Purchaser.

 Any party hereto may from time to time change its address for notices by giving at
least ten (10) days written notice of such changed address to the other party hereto. 
 Section 8.5 Rescission and
Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Purchaser exercises a material right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future actions and rights. 
 Section 8.6
Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provisions, condition or requirement
hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 
 Section 8.7 Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall
not be deemed to limit or affect any of the provisions hereof. 
 Section 8.8 Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties and their successors and assigns. 
 Section 8.9 No Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person (other than
the indemnified parties under Article VI). 

 Section 8.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Agreement shall not be interpreted
or construed with any presumption against the party causing this Agreement to be drafted. 
 Section 8.11 Survival.
The representations and warranties of the Company and the Purchasers shall survive the execution and delivery hereof and the Closings hereunder for a period of one year following the last Closing Date. 
 Section 8.12 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one and the same Agreement and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event that any signature is delivered by facsimile or electronic transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile or electronic signature were the original thereof. 
 Section 8.13 Publicity. The Company agrees that it will not include in any written materials, and will not include in any public announcement, the name of the Purchasers without the consent of the Purchasers unless and until
such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. 
 Section 8.14 Severability. The provisions of this Agreement and the Transaction Documents are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of
the provisions contained in this Agreement or the Transaction Documents shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or
part of a provision of this Agreement or the Transaction Documents and such provision shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such
provisions would be valid, legal and enforceable to the maximum extent possible. 
 Section 8.15 Further Assurances.
From and after the date of this Agreement, upon the request of any Purchaser or the Company, each of the Company and the Purchasers shall execute and deliver such instrument, documents and other writings as may be reasonably necessary or desirable
to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, the Preferred Shares, the Conversion Shares, the Warrants, the Warrant Shares, the Certificate of Designation and the other Transaction Documents.

 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by
their respective authorized officer as of the date first above written. 
  

			
	NOVARAY MEDICAL, INC.
		
	By:	 	 /s/ Marc C. Whyte

		 	Marc C. Whyte, Chief Executive Officer

 [Signature Page to Series B Stock Purchase Agreement] 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by
their respective authorized officer as of the date first above written. 
  

			
	 VISION OPPORTUNITY
 MASTER FUND, LTD.

		
	By:	 	 /s/ Adam Benowitz

	Name:	 	 Adam Benowitz

	Title:	 	 Portfolio Manager

 [Signature Page to Series B Stock Purchase Agreement]Form of Series B Warrant to Purchase Shares of Common Stock

 Exhibit 10.2 
 THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. 
 SERIES B WARRANT TO PURCHASE 
 SHARES OF COMMON STOCK 
 OF 
 NOVARAY MEDICAL, INC. 
 Expires: October [    ], 2014 
  

			
	No.: W[            ]	 	Number of Shares:
	Date of Issuance: October [    ], 2009	 	

 FOR VALUE RECEIVED, the undersigned, NOVARAY MEDICAL, INC., a Delaware corporation
(together with its successors and assigns, the “Issuer”), hereby certifies that [        ] or its registered assigns is entitled to subscribe for and purchase, during the Term
(as hereinafter defined), up to [        ] (            ) shares (subject to adjustment as hereinafter provided) of the duly authorized,
validly issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise price per share equal to the Warrant Price then in effect, subject, however, to the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall have the respective meanings specified in Section 8 hereof. 
 1. Term. The term of this Warrant shall commence on the date hereof and shall expire at 6:00 p.m., Eastern Time, on October [     ], 2014 (such period being the
“Term”). 
 2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange.

 (a) Time of Exercise. The purchase rights represented by this Warrant may be exercised in whole or in part during
the Term. 
 (b) Method of Exercise. The Holder hereof may exercise this Warrant, in whole or in part, by the surrender
of this Warrant (with the exercise form attached hereto duly executed) at the principal office of the Issuer, and by the payment to the Issuer of an amount of consideration therefor equal to the Warrant Price in effect on the date of such exercise
multiplied by the number of shares of Warrant Stock with respect to which this Warrant is then being exercised, payable at such Holder’s election (i) by certified or official bank

 
check or by wire transfer to an account designated by the Issuer, (ii) by “cashless exercise” in accordance with the provisions of subsection (c) of this
Section 2, or (iii) by a combination of the foregoing methods of payment selected by the Holder of this Warrant. 
 (c) Cashless Exercise. Notwithstanding any provisions herein to the contrary and commencing one (1) year following the Original Issue Date if the Per Share Market Value of one share of Common
Stock is greater than the Warrant Price (at the date of calculation as set forth below), the Holder may exercise this Warrant by a cashless exercise and shall receive the number of shares of Common Stock equal to an amount (as determined below) by
surrender of this Warrant at the principal office of the Issuer together with the properly endorsed Notice of Exercise in which event the Issuer shall issue to the Holder a number of shares of Common Stock computed using the following formula:

  

					
		  	X = Y -	 	(A)(Y)
		  		 	    B
	Where	  	X =	 	the number of shares of Common Stock to be issued to the Holder.
			
		  	Y =	 	the number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being
exercised.
			
		  	A =	 	the Warrant Price.
			
		  	B =	 	the Per Share Market Value of one share of Common Stock.

 (d) Issuance of Stock Certificates. In the event of any exercise of this
Warrant in accordance with and subject to the terms and conditions hereof, certificates for the shares of Warrant Stock so purchased shall be dated the date of such exercise and delivered to the Holder hereof within a reasonable time, not exceeding
three (3) Trading Days after such exercise (the “Delivery Date”) or, at the request of the Holder (provided that a registration statement under the Securities Act providing for the resale of the Warrant Stock is then in
effect and the Holder so requests in writing of the Issuer), issued and delivered to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit Withdrawal Agent Commission System
(“DWAC”) within a reasonable time, not exceeding three (3) Trading Days after such exercise, and the Holder hereof shall be deemed for all purposes to be the holder of the shares of Warrant Stock so purchased as of the
date of such exercise. Notwithstanding the foregoing to the contrary, the Issuer or its transfer agent shall only be obligated to issue and deliver the shares to the DTC on a holder’s behalf via DWAC if the Issuer and its transfer agent are
participating in DTC through the DWAC system. The Holder shall deliver this original Warrant, or an indemnification undertaking in a form reasonably satisfactory to the Issuer with respect to such Warrant in the case of its loss, theft or
destruction, at such time that this Warrant is fully exercised. With respect to partial exercises of this Warrant, the Issuer shall keep written records for the Holder of the number of shares of Warrant Stock exercised as of each date of exercise.

  

 2 

 (e) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.
In addition to any other rights available to the Holder, if the Issuer fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Stock pursuant to an exercise on or before the Delivery Date,
and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares
of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of shares of Warrant Stock that the Issuer was required to deliver to the Holder in connection with the exercise at issue times (B) the
Warrant Price, as may be adjusted in accordance with this Warrant, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of shares of Warrant Stock for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been issued had the Issuer timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted exercise of the Warrant for shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding
sentence the Issuer shall be required to pay the Holder $1,000. The Holder shall provide the Issuer written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief
with respect to the Issuer’s failure to timely deliver certificates representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms hereof. 
 (f) Transferability/Exchangeability of Warrant. Subject to Section 2(h) hereof, this Warrant may be transferred by
a Holder, in whole or in part, without the consent of the Issuer. If transferred pursuant to this paragraph, this Warrant may be transferred on the books of the Issuer by the Holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant at the principal office of the Issuer, properly endorsed (by the Holder executing an assignment in the form attached hereto) and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. This
Warrant is exchangeable at the principal office of the Issuer for Warrants to purchase the same aggregate number of shares of Warrant Stock, each new Warrant to represent the right to purchase such number of shares of Warrant Stock as the Holder
hereof shall designate at the time of such exchange. All Warrants issued on transfers or exchanges shall be dated the Original Issue Date and shall be identical with this Warrant except as to the number of shares of Warrant Stock issuable pursuant
thereto. 
 (g) Continuing Rights of Holder. The Issuer will, at the time of or at any time after each exercise of this
Warrant, upon the request of the Holder hereof, acknowledge in writing the extent, if any, of its continuing obligation to afford to such Holder all rights to which such Holder shall continue to be entitled after such exercise in accordance with the
terms of this Warrant; provided that if any such Holder shall fail to make, or the Issuer shall fail to honor, any such request, the failure shall not affect the continuing obligation of the Issuer to afford such rights to such Holder.

  

 3 

 (h) Compliance with Securities Laws. 
 (i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant
Stock to be issued upon exercise hereof except pursuant to an effective registration statement, or an exemption from registration, under the Securities Act and any applicable state securities laws. 
 (ii) Except as provided in paragraph (iii) below, this Warrant and all certificates representing shares of Warrant
Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form: 
 “THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.” 
 (iii) The Issuer
agrees to reissue this Warrant or certificates representing any of the Warrant Stock, without the legend set forth above if at such time, prior to making any transfer of any such securities, the Holder shall give written notice to the Issuer
describing the manner and terms of such transfer. Such proposed transfer will not be effected until: (a) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that the registration of
such securities under the Securities Act is not required in connection with such proposed transfer, or (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Issuer with the Securities
and Exchange Commission and has become effective under the Securities Act, and (b) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that registration or qualification under the
securities or “blue sky” laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or “blue sky” laws has been effected or a valid exemption exists
with respect thereto. The Issuer will respond to any such notice from a holder within five (5) Trading Days. In the case of any proposed transfer under this Section 2(h), the Issuer will pay the expenses of and use reasonable
efforts to comply with any such applicable state securities or “blue sky” laws, but shall in no event be required, (x) to qualify to do business in any state where it is not then qualified, or (y) to take any action that would
subject it to tax or to the general service of process in any state where it is not then subject. The restrictions on transfer contained in this Section 2(h)

  

 4 

 
shall be in addition to, and not by way of limitation of, any other restrictions on transfer contained in any other section of this Warrant. Whenever a certificate representing the Warrant Stock
is required to be issued to a Holder without a legend, at the request of the Holder, in lieu of delivering physical certificates representing the Warrant Stock, the Issuer shall cause its transfer agent to electronically transmit the Warrant Stock
to the Holder by crediting the account of the Holder's Prime Broker with DTC through its DWAC system (to the extent not inconsistent with any provisions of this Warrant or the Purchase Agreement). 
 (i) Accredited Investor Status. In no event may the Holder exercise this Warrant in whole or in part unless the Holder is an
“accredited investor” as defined in Regulation D under the Securities Act. 
 3. Stock Fully Paid; Reservation
and Listing of Shares; Covenants. 
 (a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of this Warrant or otherwise hereunder will, when issued in accordance with the terms of this Warrant, be duly authorized, validly issued, fully paid and non-assessable
and free from all taxes, liens and charges. The Issuer further covenants and agrees that during the period within which this Warrant may be exercised, the Issuer will at all times have authorized and reserved for the purpose of the issuance upon
exercise of this Warrant a number of authorized but unissued shares of Common Stock equal to at least one hundred ten percent (110%) of the number of shares of Common Stock issuable upon exercise of this Warrant without regard to any
limitations on exercise. 
 (b) Reservation. If any shares of Common Stock required to be reserved for issuance upon
exercise of this Warrant or as otherwise provided hereunder require registration or qualification with any Governmental Authority under any federal or state law before such shares may be so issued, the Issuer will in good faith use best efforts as
expeditiously as possible at its expense to cause such shares to be duly registered or qualified. If the Issuer shall list any shares of Common Stock on any securities exchange or market it will, at its expense, list thereon, and maintain and
increase when necessary such listing of, all shares of Warrant Stock from time to time issued upon exercise of this Warrant or as otherwise provided hereunder (provided that such Warrant Stock has been registered pursuant to a registration
statement under the Securities Act then in effect), and, to the extent permissible under the applicable securities exchange rules, all unissued shares of Warrant Stock which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or market, and will maintain such listing of, any other securities which the Holder of this Warrant shall be entitled to receive upon the exercise of this Warrant if at the
time any securities of the same class shall be listed on such securities exchange or market by the Issuer. 
 (c)
Covenants. The Issuer shall not by any action including, without limitation, amending the Certificate of Incorporation or the by-laws of the Issuer, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect

  

 5 

 
the rights of the Holder hereof against dilution (to the extent specifically provided herein) or impairment. Without limiting the generality of the foregoing, the Issuer will (i) not permit
the par value, if any, of its Common Stock to exceed the then effective Warrant Price, (ii) not amend or modify any provision of the Certificate of Incorporation or by-laws of the Issuer in any manner that would materially and adversely affect
the rights of the Holders of the Warrants, (iii) take all such action as may be reasonably necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock, free and clear of any liens,
claims, encumbrances and restrictions (other than as provided herein) upon the exercise of this Warrant, and (iv) use best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction
thereof as may be reasonably necessary to enable the Issuer to perform its obligations under this Warrant. 
 (d) Loss,
Theft, Destruction, Mutilation of Warrants. Upon receipt of evidence satisfactory to the Issuer of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon
receipt of indemnity or security satisfactory to the Issuer or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a
new Warrant of like tenor and representing the right to purchase the same number of shares of Common Stock. 
 (e) Payment of
Taxes. The Issuer will pay any documentary stamp taxes attributable to the initial issuance of the Warrant Stock issuable upon exercise of this Warrant; provided, however, that the Issuer shall not be required to pay any tax or taxes
which may be payable in respect of any transfer involved in the issuance or delivery of any certificates representing Warrant Stock in a name other than that of the Holder in respect to which such shares are issued. 
 4. Adjustment of Warrant Price and Number of Shares Issuable Upon Exercise. The Warrant Price and the number of shares of
Warrant Stock that may be purchased upon exercise of this Warrant shall be subject to adjustment from time to time as set forth in this Section 4. The Issuer shall give the Holder notice of any event described below which requires
an adjustment pursuant to this Section 4 in accordance with the notice provisions set forth in Section 5. 
 (a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale. 
 (i) In case the Issuer after the Original Issue Date shall do any of the following (each, a “Triggering Event”): (a) consolidate or merge with or into any other Person and the
Issuer shall not be the continuing or surviving Person of such consolidation or merger, or (b) permit any other Person to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving Person but, in connection
with such consolidation or merger, any Capital Stock of the Issuer shall be changed into or exchanged for Securities of any other Person or cash or any other property, or (c) transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or reclassification of its Capital Stock, then, and in the case of each such Triggering Event, proper provision shall be made to the Warrant Price and the number of shares of Warrant Stock
that may be purchased upon exercise of this Warrant so that, upon the basis and the terms and in the manner

  

 6 

 
provided in this Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof at any time after the consummation of such Triggering Event, to the extent this Warrant is not
exercised prior to such Triggering Event, to receive at the Warrant Price as adjusted to take into account the consummation of such Triggering Event, in lieu of the Common Stock issuable upon such exercise of this Warrant prior to such Triggering
Event, the Securities, cash and property to which such Holder would have been entitled upon the consummation of such Triggering Event if such Holder had exercised the rights represented by this Warrant immediately prior thereto (including the right
of a shareholder to elect the type of consideration it will receive upon a Triggering Event), subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for elsewhere in this
Section 4. Immediately upon the occurrence of a Triggering Event, the Issuer shall notify the Holder in writing of such Triggering Event and provide the calculations in determining the number of shares of Warrant Stock issuable
upon exercise of the new warrant and the adjusted Warrant Price. Upon the Holder’s request, the continuing or surviving Person as a result of such Triggering Event shall issue to the Holder a new warrant of like tenor evidencing the right to
purchase the adjusted number of shares of Warrant Stock and the adjusted Warrant Price pursuant to the terms and provisions of this Section 4(a)(i). Notwithstanding the foregoing to the contrary, this
Section 4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering Event has a class of equity securities registered pursuant to the Exchange Act, and its common stock is listed or quoted on a national
securities exchange, national automated quotation system or the OTC Bulletin Board. In the event that the surviving entity pursuant to any such Triggering Event is not a public company that is registered pursuant to the Exchange Act, or its common
stock is not listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board, then the Holder shall have the right to demand that the Issuer pay to the Holder an amount in cash equal to the value of
this Warrant calculated in accordance with the Black-Scholes formula. 
 (ii) In the event that the Holder has
elected not to exercise this Warrant prior to the consummation of a Triggering Event, so long as the surviving entity pursuant to any Triggering Event is a company that has a class of equity securities registered pursuant to the Exchange Act, and
its common stock is listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board, the surviving entity and/or each Person (other than the Issuer) which may be required to deliver any shares of
Warrant Stock (including all Securities, cash or property) upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of
the Issuer under this Warrant (and if the Issuer shall survive the consummation of such Triggering Event, such assumption shall be in addition to, and shall not release the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities, cash or property as, in accordance with the foregoing provisions of this subsection (a). 
  

 7 

 (b) Stock Dividends, Subdivisions and Combinations. If at any time the Issuer shall:

 (i) make or issue or set a record date for the holders of the Common Stock for the purpose of entitling them
to receive a dividend payable in, or other distribution of, shares of Common Stock, 
 (ii) subdivide its
outstanding shares of Common Stock into a larger number of shares of Common Stock, or 
 (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common Stock, 
 then (1) the number of shares of Common Stock for
which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such
adjustment. 
 (c) Certain Other Distributions. If at any time the Issuer shall make or issue or set a record date for
the holders of the Common Stock for the purpose of entitling them to receive any dividend or other distribution of: 
 (i) cash, 
 (ii) any evidences of its indebtedness, any shares of stock of any class or any other
Securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock), or 
 (iii) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property of any nature whatsoever (other than
cash, Common Stock Equivalents or Additional Shares of Common Stock), then (1) the number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal the product of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such adjustment multiplied by a fraction (A) the numerator of which shall be the Per Share Market Value of Common Stock at the date of taking such record and (B) the denominator of which
shall be such Per Share Market Value minus the amount allocable to one share of Common Stock of any such cash so distributable and of the fair value (as determined in good faith by the Board of any and all such evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of
shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is

  

 8 

 
exercisable immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into
shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 4(c) and,
if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding
shares of Common Stock within the meaning of Section 4(b). 
 (d) Warrant Price Adjustments. The
Warrant Price shall be subject to adjustment from time to time as follows: 
 (i)(A) In the event the Issuer
shall issue or sell any Additional Shares of Common Stock (otherwise than as provided in Sections 4(a) through (c)), at a price per share less than the Exercise Price then in effect, or without consideration, then the
Exercise Price upon each such issuance shall be reduced to a price equal to the consideration per share paid (if any) for such Additional Shares of Common Stock. 
 (B) No adjustment of the Warrant Price pursuant to this Section 4(d) shall be made in an amount less than
one cent per share, provided that any adjustments that are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to one (1) year from the date
of the event giving rise to the adjustment being carried forward, or shall be made at the end of one (1) year from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in
Sections 4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of such Warrant Price pursuant to this Section 4(d)(i) shall have the effect of increasing the Warrant Price above the Warrant Price in effect
immediately prior to such adjustment. 
 (C) For purposes of this Section 4(d)(i), in the case
of the issuance of Additional Shares of Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by the Issuer
for any underwriting or otherwise in connection with the issuance and sale thereof. 
 (D) For purposes of this
Section 4(d)(i), in the case of the issuance of the Additional Shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as
determined by the Board irrespective of any accounting treatment. 
 (E) In the case of the issuance (whether
before, on or after the Original Issue Date) of Common Stock Equivalents, the following provisions shall apply for all purposes of this Section 4(d)(i): 
 (1) The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including, without limitation, the passage of time, of such options to purchase or

  

 9 

 
rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the
manner provided in Sections 4(d)(i)(C) and 4(d)(i)(D)), if any, received by the Issuer upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights for the Common
Stock covered thereby. 
 (2) The aggregate maximum number of shares of Common Stock deliverable upon conversion
of, or in exchange (assuming the satisfaction of any conditions to convertibility or exchangeability, including, without limitation, the passage of time, for any such convertible or exchangeable securities or upon the exercise of options to purchase
or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the Issuer for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Issuer upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in Sections
4(d)(i)(C) and 4(d)(i)(D)) 
 (3) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to the Issuer upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting
from the antidilution provisions thereof, the Warrant Price, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the
actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities. 
 (4) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable securities, the Warrant Price, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities,
shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange
of such securities or upon the exercise of the options or rights related to such securities. 
 (5) The number
of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to Sections 4(d)(i)(E)(1) and 4(d)(i)(E)(2) shall be appropriately adjusted to reflect any change, termination or expiration of
the type described in either Section 4(d)(i)(E)(3) or 4(d)(i)(E)(4). 
  

 10 

 (ii) Termination. Notwithstanding anything else contained herein, the
right to any adjustments to the Warrant Price pursuant to this Section 4(d) shall terminate upon the earlier of: (i) the expiration of the Term; or (ii) the occurrence of a Triggering Event. In addition, no adjustment to
the Warrant Price shall be made for all or any portion of this Warrant that is exercised prior to any issuance of Additional Shares of Common Stock that would require an adjustment pursuant to this Section 4(d). 
 (e) Other Provisions applicable to Adjustments under this Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect provided for in this Section 4: 
 (i) Computation of Consideration. Except as otherwise provided, to the extent that any Additional Shares of Common
Stock or any Common Stock Equivalents (or any warrants or other rights therefor) shall be issued for cash consideration, the consideration received by the Issuer therefor shall be the amount of the cash received by the Issuer therefor, or, if such
Additional Shares of Common Stock or Common Stock Equivalents are offered by the Issuer for subscription, the subscription price, or, if such Additional Shares of Common Stock or Common Stock Equivalents are sold to underwriters or dealers for
public offering without a subscription offering, the initial public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends and without taking into account any compensation, discounts or
expenses paid or incurred by the Issuer for and in the underwriting of, or otherwise in connection with, the issuance thereof). In connection with any merger or consolidation in which the Issuer is the surviving Person (other than any consolidation
or merger in which the previously outstanding shares of Common Stock of the Issuer shall be changed to or exchanged for the stock or other securities of another Person), the amount of consideration therefore shall be, deemed to be the fair value, as
determined reasonably and in good faith by the Board, of such portion of the assets and business of the nonsurviving Person as the Board may determine to be attributable to such shares of Common Stock or Common Stock Equivalents, as the case may be.
The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration received by the Issuer for issuing such warrants or other rights plus the
additional consideration payable to the Issuer upon exercise of such warrants or other rights. The consideration for any Additional Shares of Common Stock issuable pursuant to the terms of any Common Stock Equivalents shall be the consideration
received by the Issuer for issuing warrants or other rights to subscribe for or purchase such Common Stock Equivalents, plus the consideration paid or payable to the Issuer in respect of the subscription for or purchase of such Common Stock
Equivalents, plus the additional consideration, if any, payable to the Issuer upon the exercise of the right of conversion or exchange in such Common Stock Equivalents. In the event of any consolidation or merger of the Issuer in which the Issuer is
not the surviving Person or in which the previously outstanding shares of Common Stock of the Issuer shall be changed into or exchanged for the stock or other securities of another Person, or in the event of any sale of all or substantially all of
the assets of the Issuer for stock or other securities of any Person, the Issuer shall be deemed to have issued a number of shares of its Common Stock for stock or

  

 11 

 
securities or other property of the other Person computed on the basis of the actual exchange ratio on which the transaction was predicated, and for a consideration equal to the fair market value
on the date of such transaction of all such stock or securities or other property of the other Person. In the event any consideration received by the Issuer for any securities consists of property other than cash, the fair market value thereof at
the time of issuance or as otherwise applicable shall be as determined in good faith by the Board. In the event Common Stock is issued with other shares or securities or other assets of the Issuer for consideration which covers both, the
consideration computed as provided in this Section 4(e)(i) shall be allocated among such securities and assets as determined in good faith by the Board. 
 (ii) When Adjustments to Be Made. The adjustments required by this Section 4 shall be made whenever
and as often as any specified event requiring an adjustment shall occur, except that any adjustment of the number of shares of Common Stock for which this Warrant is exercisable that would otherwise be required may be postponed (except in the case
of a subdivision or combination of shares of the Common Stock, as provided for in Section 4(b)) up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made adds or
subtracts less than one percent (1%) of the shares of Common Stock for which this Warrant is exercisable immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made (x) as soon as such adjustment, together with other adjustments required by this Section 4 and not previously made, would result in a minimum adjustment, or
(y) on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. 
 (iii) Fractional Interests. In computing adjustments under this Section 4,
fractional interests in Common Stock shall be taken into account to the nearest one one-hundredth (1/100th) of a share. 
 (iv) When Adjustment Not Required. If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. 
 (h) Form of Warrant after Adjustments. The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number and kind of Securities purchasable upon the exercise of this Warrant. 
 (i) Escrow of Warrant Stock. If after any property becomes distributable pursuant to this Section 4 by reason of
the taking of any record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, and the Holder exercises this Warrant, any shares of Common Stock issuable upon exercise by reason of such adjustment
shall be deemed the last

  

 12 

 
shares of Common Stock for which this Warrant is exercised (notwithstanding any other provision to the contrary herein) and such shares or other property shall be held in escrow for the Holder by
the Issuer to be issued to the Holder upon and to the extent that the event actually takes place, upon payment of the current Warrant Price. Notwithstanding any other provision to the contrary herein, if the event for which such record was taken
fails to occur or is rescinded, then such escrowed shares shall be cancelled by the Issuer and escrowed property returned. 
 5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5, each an
“Adjustment”), the Issuer shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the event requiring the Adjustment, the amount of the Adjustment, the method by which
such Adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Warrant Price and Warrant Share Number after giving effect to such Adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each Adjustment. Any dispute between the Issuer and the Holder of this Warrant with respect to the matters set forth in such certificate may at the option of the Holder of this
Warrant be submitted to an Independent Appraiser mutually selected by the Holder and the Issuer. The Independent Appraiser shall be instructed to deliver a written opinion as to such matters to the Issuer and such Holder within thirty (30) days
after submission to it of such dispute. Such opinion shall be final and binding on the parties hereto. The costs and expenses of the initial firm selected as Independent Appraiser shall be paid equally by the Issuer and the Holder. 
 6. Fractional Shares. No fractional shares of Warrant Stock will be issued in connection with any exercise hereof, but in lieu
of such fractional shares, the Issuer shall round the number of shares to be issued upon exercise down to the nearest whole number of shares. 
 7. Ownership Cap and Exercise Restriction. Notwithstanding anything to the contrary set forth in this Warrant, at no time may a Holder of this Warrant exercise this Warrant if the number of
shares of Common Stock to be issued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock owned by such Holder and its affiliates at such time, the number of shares of Common Stock which would result in such
Holder and its affiliates beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 4.99% of the then issued and outstanding shares of Common Stock; provided,
however, that upon a holder of this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to Section 12 hereof) (the “Waiver Notice”) that such Holder would like to waive this
Section 7 with regard to any or all shares of Common Stock issuable upon exercise of this Warrant, this Section 7 will be of no force or effect with regard to all or a portion of the Warrant referenced in the
Waiver Notice; provided, further, that during the sixty-one (61) day period prior to the Expiration Date of this Warrant the Holder may waive this Section 7 upon providing the Waiver Notice at any time during
such sixty-one (61) day period, provided, further, that any Waiver Notice during the sixty-one (61) day period prior to the Expiration Date will not be effective until the Expiration Date. 
  

 13 

 8. Definitions. For the purposes of this Warrant, the following terms have the
following meanings: 
 “Additional Shares of Common Stock” means any shares of Common
Stock issued (or deemed to have been issued pursuant to Section 4(d)(i)(E)) by the Issuer after the Original Issue Date other than: (a) shares of Common Stock issued pursuant to a transaction described in
Section 4(c) hereof; (b) up to 3,750,000 shares of Common Stock (as adjusted for any stock splits, stock dividends, combinations, recapitalizations or the like) issued or deemed issued to employees, officers, or directors (if
in transactions with primarily non-financing purposes) of the Issuer directly or pursuant to a stock option plan or restricted stock purchase plan approved by the Board; (c) shares of Common Stock issued or issuable (I) in a bona fide,
firmly underwritten public offering under the Securities Act at an offering price of at least $3.00 per share (as adjusted to reflect any stock split, stock dividend, combination, recapitalization and the like with respect to the Common Stock)
resulting in gross proceeds (before underwriting discounts, commissions, expenses and fees) of at least Twenty Million Dollars ($20,000,000) in the aggregate, or (II) upon exercise of warrants or rights granted to underwriters in connection
with such a public offering; (d) shares of Common Stock issued pursuant to the conversion or exercise of convertible or exercisable securities outstanding as of the Original Issue Date or subsequently issued after the Original Issue Date in
accordance with Section 5 of the Certificate of Designations for the Series A-1 or Series B Preferred Stock of the Issuer or pursuant to the Purchase Agreement under which the Preferred Stock was issued or pursuant to the Exchange Agreement (as
defined in the Purchase Agreement); (e) shares of Common Stock issued or issuable in connection with a bona fide business acquisition of or by the Issuer, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise,
each as approved by the Board; (f) up to 500,000 shares of Common Stock (as adjusted for any stock splits, stock dividends, combinations, recapitalizations or the like) issued or issuable to persons or entities with which the Issuer has
business relationships provided such issuances are for other than primarily equity financing purposes; (g) shares of Common Stock issued or issuable in connection with any transaction where such securities so issued are excepted from the
definition “Additional Shares of Common Stock” by the affirmative vote of at least a majority of the then outstanding shares of Preferred Stock; or (h) up to 1,332,000 shares of Common Stock (as adjusted for any stock splits, stock
dividends, combinations, recapitalizations or the like) issued or issuable to Triple Ring Technologies, Inc. pursuant to warrants issued by the Issuer as of the date hereof as such warrants may be amended by vote of the Audit Committee of the
Issuer. 
 “Board” shall mean the Board of Directors of the Issuer. 
 “Capital Stock” means and includes (i) any and all shares, interests, participations or other
equivalents of or interests in (however designated) corporate stock, including, without limitation, shares of preferred or preference stock, (ii) all partnership interests (whether general or limited) in any Person which is a partnership,
(iii) all membership interests or limited liability company interests in any limited liability company, and (iv) all equity or ownership interests in any Person of any other type. 
 “Certificate of Incorporation” means the Certificate of Incorporation of the Issuer as in effect on
the Original Issue Date, and as hereafter from time to time amended, modified, supplemented or restated in accordance with the terms hereof and thereof and pursuant to applicable law. 
  

 14 

 “Common Stock” means the Common Stock of the Issuer,
par value $0.0001 per share, and any other Capital Stock into which such stock may hereafter be changed. 
 “Common Stock Equivalent” means any Convertible Security or warrant, option or other right to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Security. 
 “Convertible Securities” means evidences of indebtedness, shares of Capital Stock or other Securities
which are or may be at any time convertible into or exchangeable for Additional Shares of Common Stock. The term “Convertible Security” means one of the Convertible Securities. 
 “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar federal statute
then in effect. 
 “Expiration Date” means October [    ], 2014.

 “Governmental Authority” means any governmental, regulatory or self-regulatory entity,
department, body, official, authority, commission, board, agency or instrumentality, whether federal, state or local, and whether domestic or foreign. 
 “Holders” mean the Persons who shall from time to time own any Warrant. The term “Holder” means one of the Holders. 
 “Independent Appraiser” means a nationally recognized or major regional investment banking firm or
firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Issuer) that is regularly engaged in the business of appraising the Capital Stock or assets of
corporations or other entities as going concerns, and which is not affiliated with either the Issuer or the Holder of any Warrant. 
 “Issuer” means NovaRay Medical, Inc., a Delaware corporation, and its successors. 
 “Majority Holders” means at any time the Holders of Warrants exercisable for a majority of the shares of Warrant Stock issuable under the Warrants at the time outstanding.

 “Original Issue Date” means the date this Warrant is issued to the Holder as set forth
above. 
 “OTC Bulletin Board” means the over-the-counter electronic bulletin board.

  

 15 

 “Other Common” means any other Capital Stock of the
Issuer of any class which shall be authorized at any time after the date of this Warrant (other than Common Stock) and which shall have the right to participate in the distribution of earnings and assets of the Issuer without limitation as to
amount. 
 “Person” means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint venture, Governmental Authority or other entity of whatever nature. 
 “Per Share Market Value” means on any particular date (a) the last closing bid price per share of the Common Stock on such date on the OTC Bulletin Board or another registered
national stock exchange on which the Common Stock is then listed, or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is
not listed then on the OTC Bulletin Board or any registered national stock exchange, the last closing bid price for a share of Common Stock in the over-the-counter market, as reported by the OTC Bulletin Board or in the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the “Pink Sheet” quotes for the applicable Trading Days preceding such date of determination, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as determined by an Independent Appraiser selected in good faith by the Majority Holders; provided, however, that the Issuer, after receipt of the determination by such
Independent Appraiser, shall have the right to select an additional Independent Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Independent Appraiser; and provided, further that
all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. The determination of fair market value by an Independent Appraiser shall be
based upon the fair market value of the Issuer determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties. In
determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or
any limitations on, voting rights. 
 “Preferred Stock” means shares of the Issuer’s
Series B Convertible Preferred Stock, par value $0.0001 per share issued to the Purchasers pursuant to the Purchase Agreement. 
 “Purchase Agreement” means the Series B Convertible Preferred Stock and Warrant Purchase Agreement dated as of October [    ], 2009, among the Issuer and the
Purchasers. 
  

 16 

 “Purchasers” means the purchasers of the Series B
Convertible Preferred Stock and the Warrants issued by the Issuer pursuant to the Purchase Agreement. 
 “Securities” means any debt or equity securities of the Issuer, whether now or hereafter authorized, any instrument convertible into or exchangeable for Securities or a Security, and any option, warrant or other
right to purchase or acquire any Security. “Security” means one of the Securities. 
 “Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute then in effect. 
 “Subsidiary” means any corporation at least 50% of whose outstanding Voting Stock shall at the time be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries. 
 “Term” has the
meaning specified in Section 1 hereof. 
 “Trading Day” means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b) if the Common Stock is not traded on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a) or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to
close. 
 “Voting Stock” means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the members of the Board (or other governing body) of such corporation, other than Capital Stock having such power only by
reason of the happening of a contingency. 
 “Warrants” means the Warrants issued and
sold pursuant to the Purchase Agreement, including, without limitation, this Warrant, and any other warrants of like tenor issued in substitution or exchange for any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e)
hereof or of any of such other Warrants. 
 “Warrant Price” initially means $1.50, as
such price may be adjusted from time to time as shall result from the adjustments specified in this Warrant, including Section 4 hereto. 
 “Warrant Share Number” means at any time the aggregate number of shares of Warrant Stock which may at such time be purchased upon exercise of this Warrant, after giving effect to
all prior adjustments and increases to such number made or required to be made under the terms hereof. 
  

 17 

 “Warrant Stock” means Common Stock issuable upon
exercise of any Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants and/or Securities, cash and property to which such Holder would have been entitled upon the occurrence of certain events set forth in
Section 4. 
 9. Other Notices. In case at any time: 
 (a) the Issuer shall make any distributions to the holders of Common Stock; or 
 (b) the Issuer shall authorize the granting to all holders of its Common Stock of rights to subscribe for or purchase any shares of Capital
Stock of any class or other rights; or 
 (c) there shall be any reclassification of the Capital Stock of the Issuer; or

 (d) there shall be any capital reorganization by the Issuer; or 
 (e) there shall be any (i) consolidation or merger involving the Issuer or (ii) sale, transfer or other disposition of all or
substantially all of the Issuer's property, assets or business (except a merger or other reorganization in which the Issuer shall be the surviving corporation and its shares of Capital Stock shall continue to be outstanding and unchanged and except
a consolidation, merger, sale, transfer or other disposition involving a wholly-owned Subsidiary); or 
 (f) there shall be a
voluntary or involuntary dissolution, liquidation or winding-up of the Issuer or any partial liquidation of the Issuer or distribution to holders of Common Stock; 
 then, in each of such cases, the Issuer shall give written notice to the Holder of the date on which (i) the books of the Issuer shall close or a record shall be taken for such dividend, distribution
or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be, shall take place. Such notice also shall specify the date as of which the
holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their certificates for Common Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be. Such notice shall be given at least twenty (20) days prior to the action in question and not less than ten (10) days prior to
the record date or the date on which the Issuer's transfer books are closed in respect thereto. This Warrant entitles the Holder to receive copies of all financial and other information distributed or required to be distributed to the holders of the
Common Stock. 
 10. Amendment and Waiver; Failure or Indulgence Not Waiver. Any term, covenant, agreement or
condition in this Warrant may be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by a written instrument or written instruments executed by the Issuer and the
Majority Holders; provided, however, that no such amendment or waiver shall reduce the Warrant Share Number, increase the Warrant Price (except as provided herein), shorten the period during which this Warrant may be exercised or modify any
provision of this Section 10 without the consent of the

  

 18 

 
Holder of this Warrant. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of this Warrant unless the same consideration is
also offered to all holders of the Warrants. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other right, power or privilege, nor shall any waiver by the Holder of any such right or rights on any one occasion be deemed a waiver of the same right or rights on any future
occasion. 
 11. Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with
the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Warrant shall not be interpreted or construed with
any presumption against the party causing this Warrant to be drafted. The Issuer and the Holder agree that venue for any dispute arising under this Warrant will lie exclusively in the state or federal courts located in New York County, New York, and
the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is not the proper venue. The Issuer and the Holder irrevocably consent to personal jurisdiction in the state and federal courts of the
state of New York. The Issuer and the Holder consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Warrant and agrees that such service
shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 11 shall affect or limit any right to serve process in any other manner permitted by law. The Issuer and the Holder hereby agree
that the prevailing party in any suit, action or proceeding arising out of or relating to this Warrant or the Purchase Agreement, shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party. The parties hereby waive
all rights to a trial by jury. 
 12. Notices. Any notice, demand, request, waiver or other communication required
or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: 
  

			
	If to the Issuer:	  	NovaRay Medical, Inc.
		  	39655 Eureka Drive
		  	Newark, California 94560
		  	Attn: Chief Executive Officer
		  	Facsimile: (510) 291-3001

  

 19 

			
	 with copies (which copies
 shall not constitute notice)
 to:
	  	Morrison & Foerster, LLP
		  	755 Page Mill Road
		  	Palo Alto, California 94304-1018
		  	Attn: Michael C. Phillips
		  	Facsimile: (650) 494-0792
		
	If to any Holder:	  	At the address of such Holder set forth on Exhibit A to the Purchase Agreement, with copies to Holder’s counsel as set forth on Exhibit A or as
specified in writing by such Holder

 Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto. 
 13. Warrant Agent. The Issuer may, by written
notice to each Holder of this Warrant, appoint an agent having an office in New York, New York for the purpose of replacing this Warrant pursuant to Section 3(d) hereof, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by such agent. 
 14. Remedies. The
Issuer stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Issuer in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and
that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

 15. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be
binding upon the successors and assigns of the Issuer, the Holder hereof and (to the extent provided herein) the Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any such Holder or Holder of Warrant Stock. 
 16. Modification and Severability. If, in any action before any court or agency legally empowered to enforce any provision
contained herein, any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the
preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained herein. 
 17. Headings. The headings of the Sections of this Warrant are for convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant. 
  

 20 

 18. Registration Rights. The Holder of this Warrant is entitled to the benefit
of certain piggyback registration rights with respect to the shares of Warrant Stock issuable upon the exercise of this Warrant pursuant to the Purchase Agreement and the registration rights with respect to the shares of Warrant Stock issuable upon
the exercise of this Warrant by any subsequent Holder may only be assigned in accordance with the terms and provisions of the Purchase Agreement and Section 2(e) hereof. 
 19. Enforcement Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Warrant,
the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 
 20. Binding Effect. The obligations of the Issuer and the Holder set forth herein shall be binding upon the successors and
assigns of each such party, whether or not such successors or assigns are permitted by the terms hereof. 
 [remainder of page
intentionally left blank] 
  

 21 

 IN WITNESS WHEREOF, the Issuer has executed this Series B Warrant as of the day and year
first above written. 
  

			
	NOVARAY MEDICAL, INC.
		
	By:	 	  

	Name:	 	Marc C. Whyte
	Title:	 	Chief Executive Officer

  

 22 

 EXERCISE FORM 
 SERIES B WARRANT 
 NOVARAY MEDICAL, INC. 
 The undersigned [    ], pursuant to the provisions of the within Warrant, hereby elects to purchase     
shares of Common Stock of NovaRay Medical, Inc. covered by the within Warrant. 
  

							
	Dated:                     	 		 	Signature	 	  

				
		 		 	Print name:	 	  

				
		 		 	Address	 	  

				
		 		 		 	  

 Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the
date of Exercise:                                  
 The undersigned is an “accredited investor” as defined in Regulation D under the Securities Act of 1933, as amended. 
 The undersigned intends that payment of the Warrant Price shall be made as (check one): 
  

			
	Cash Exercise   ̈	  	Cashless Exercise   ̈

 If the Holder has elected a Cash Exercise, the Holder shall pay the sum of
$         by certified or official bank check (or via wire transfer) to the Issuer in accordance with the terms of the Warrant. 
 If the Holder has elected a Cashless Exercise, a certificate shall be issued to the Holder for the number of shares equal to the whole number portion of the product of the calculation set forth below,
which is                     . The Issuer shall pay a cash adjustment in respect of the fractional portion of the product of the calculation
set forth below in an amount equal to the product of the fractional portion of such product and the Per Share Market Value on the date of exercise, which product is
                    . 
 X = Y - (A)(Y) 
     B 
 Where: 
 The number of shares of Common Stock to be issued to the Holder
                     (“X”). 
 The number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised
                     (“Y”). 
 The Warrant Price                      (“A”). 
 The Per Share Market Value of one share of Common Stock
                             (“B”). 
  

 i 

 ASSIGNMENT 
 FOR VALUE RECEIVED, [                    ] hereby sells, assigns and transfers unto
                                 the within Warrant and all rights evidenced
thereby and does irrevocably constitute and appoint
                                , attorney, to transfer the said Warrant on the
books of the within named corporation. 
  

							
	Dated:                     	 		 	Signature	 	  

				
		 		 	Print Name:	 	  

				
		 		 	Address	 	  

				
		 		 		 	  

  
  
 PARTIAL ASSIGNMENT 
 FOR
VALUE RECEIVED, [                    ] hereby sells, assigns and transfers unto
                                 the right to purchase
     shares of Warrant Stock evidenced by the within Warrant together with all rights therein, and does irrevocably constitute and appoint
                    , attorney, to transfer that part of the said Warrant on the books of the within named corporation. 
  

							
	Dated:                     	 		 	Signature	 	  

				
		 		 	Print Name:	 	  

				
		 		 	Address	 	  

				
		 		 		 	  

  
  
 FOR USE BY THE ISSUER ONLY: 
 This Warrant No. W[            ] canceled (or transferred or exchanged) this      day of         ,
        ,      shares of Common Stock issued therefor in the name of
                                , Warrant No.
W-                     issued for      shares of Common Stock in the name of
                                 
  

 ii

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00164-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00164-of-00352.parquet"}]]