Document:

Exchange Agreement with Purchasers

 Exhibit 10.3 
 NOVARAY MEDICAL, INC. 
 EXCHANGE AGREEMENT 
 This Exchange Agreement (the
“Agreement”) is entered into as of October 27, 2009 by and between NovaRay Medical, Inc., a Delaware corporation (the “Company”), and the Purchasers (as defined in that certain Series B
Convertible Participating Preferred Stock and Warrant Purchase Agreement dated as of October 27, 2009, which is herein referred to as the “Purchase Agreement”). 
 R E C I T A L S 
 A. The Company, through its
Board of Directors, has decided to authorize and issue a new series of stock to be designated Series B Preferred Stock of the Company (“Series B Preferred Stock”). 
 B. The Company, through its Board of Directors, has decided to offer each Purchaser the right to exchange one (1) whole share of Series
A-1 Preferred Stock of the Company (“Series A-1 Preferred Stock”) for 1.78 shares of Series B Preferred Stock and one (1) whole share of Common Stock of the Company (“Common Stock”) for 0.178
shares of Series B Preferred Stock subject to the terms and conditions set forth below. 
 C. The rights of the Series B
Preferred Stock shall be as set forth in the Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible Preferred Stock of the Company. 
 NOW THEREFORE, in consideration of the foregoing and the mutual promises herein contained, the parties agree as follows: 
 A G R E E M E N T 
 1. Exchange of Series A-1 Preferred Stock and Common
Stock for Series B Preferred Stock. Subject to the terms and conditions hereof, Purchaser and the Company hereby agree that contemporaneously with the closing under the Purchase Agreement, to exchange up to the number of shares of Series A-1
Preferred Stock held by the Purchaser as of the date hereof multiplied by the Purchase Ratio (as defined below) and up to the number of shares of Common Stock held by the Purchaser as of the date hereof multiplied by the Purchase Ratio, as follows:
for every one (1) whole share of Series A-1 Preferred Stock, 1.78 shares of Series B Preferred Stock, and for every one (1) whole share of Common Stock, 0.178 shares of Series B Preferred Stock. For purposes hereof, the Purchase Ratio
shall equal the actual dollar amount invested by a Purchaser pursuant to the Purchase Agreement divided by the Maximum Series B Investment Amount set forth in the first Column of Exhibit A attached hereto. No fractional shares of Series B
Preferred Stock shall be issued. The initial Closing under this Agreement (the “Initial Closing”) shall take place on or about October 27, 2009 (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”. 

 2. Representations and Warranties of the Company. The Company represents and warrants
to the Purchaser that (a) the shares of Series B Preferred Stock have been duly authorized and validly issued and are fully paid and non-assessable, and (b) this Agreement has been duly authorized, executed and delivered by the Company,
and this Agreement constitutes the valid and legally binding obligation of the Company. 
 3. Investment Representations.

 3.1 This Agreement is made in reliance upon the Purchaser’s representation to the Company, which by acceptance hereof the
Purchaser hereby confirms, that the shares of Series B Preferred Stock to be received by the Purchaser will be acquired for investment for the own account of the Purchaser, not as a nominee or agent, and not with a view to the sale or distribution
of any part thereof, and that the Purchaser has no present intention of selling, granting participation in, or otherwise distributing the same, but subject nevertheless to any requirement of law that the disposition of the property of the Purchaser
shall at all times be within the control of the Purchaser. 
 3.2 The Purchaser understands that the Series B Preferred Stock is
not registered under the Securities Act of 1933, as amended (the “1933 Act”), on the basis that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the 1933 Act
pursuant to Section 4(2) and 3(a)(9) thereof, and that the Company’s reliance on such exemption is predicated on the Purchaser’s representations set forth herein. The Purchaser realizes that the basis for the exemption may not be
present if, notwithstanding such representations, the Purchaser has in mind merely acquiring shares of the Series B Preferred Stock for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise. The
Purchaser does not have any such intention. 
 3.3 The Purchaser understands that the Series B Preferred Stock may not be sold,
transferred, or otherwise disposed of without registration under the 1933 Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Series B Preferred Stock or an available exemption from registration
under the 1933 Act, the Series B Preferred Stock must be held indefinitely. In particular, the Purchaser is aware that the Series B Preferred Stock may not be sold pursuant to Rule 144 (“Rule 144”) or Rule 701
(collectively, the “Rules”) promulgated under the 1933 Act unless all of the conditions of the applicable Rules are met. Among the conditions for use of Rule 144 is the availability of current information to the public
about the Company. The Purchaser represents that, in the absence of an effective registration statement covering the Series B Preferred Stock, the Purchaser will sell, transfer, or otherwise dispose of the Series B Preferred Stock only in a manner
consistent with the representations set forth herein and then only in accordance with the provisions of Section 3.4 hereof. 

 3.4 The Purchaser agrees that in no event will the Purchaser make a transfer or disposition
of any of the Series B Preferred Stock (other than pursuant to an effective registration statement under the 1933 Act), unless and until (i) the Purchaser shall have notified the Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the disposition, and (ii) if requested by the Company, at the expense of the Purchaser or transferee, the Purchaser shall have furnished to the Company either (A) an opinion of
counsel, reasonably satisfactory to the Company, to the effect that such transfer may be made without registration under the 1933 Act or (B) a “no action” letter from the Securities and Exchange Commission (the
“SEC”) to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Securities and Exchange Commission that action be taken with respect thereto. The Company
will not require such a legal opinion or “no action” letter in any transaction in compliance with Rule 144. 
 3.5 The
Purchaser either (A) is an “accredited investor” within the meaning of Rule 501 of Regulation D, promulgated under the 1933 Act, as presently in effect, or (B) (i) certifies that such Purchaser is not a “U.S.
person” within the meaning of Rule 902 of Regulation S, promulgated under the 1933 Act (“Regulation S”), as presently in effect, and that such Purchaser is not acquiring the Series B Preferred Stock for the account or
benefit of any such U.S. person, (ii) agrees to resell the Series B Preferred Stock only in accordance with the provisions of such Regulation S, pursuant to registration under the 1933 Act, or pursuant to an available exemption from
registration and agrees not to engage in hedging transactions with regard to the Series B Preferred Stock unless in compliance with the 1933 Act, (iii) agrees that any certificates for any securities issued to such Purchaser shall contain a
legend to the effect that transfer is prohibited except in accordance with the provisions of such Regulation S, pursuant to registration under the 1933 Act or pursuant to an available exemption from registration and that hedging transactions
involving such Series B Preferred Stock may not be conducted unless in compliance with the 1933 Act, (iv) agrees that the Company is hereby required to refuse to register any transfer of any securities issued to such Purchaser not made in
accordance with the provisions of such Regulation S, pursuant to registration under the 1933 Act, or pursuant to an available exemption from registration. 
 4. Miscellaneous 
 4.1 Counterparts Signature; Facsimile Delivery.
This Agreement may be executed in any number of counterparts and delivered by facsimile, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 
 4.2 Additional Documents. Each party hereto agrees to execute any and all further documents and writings and to perform such other
actions which may be or become necessary or expedient to effectuate and carry out this Agreement. 
 4.3 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. 

 4.4 Severability. In case any provision in this Agreement shall be held invalid,
illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and the remaining provisions shall not in any way be affected or impaired thereby. 
 4.5 Notice. Any notice required to be given under the terms of this Agreement shall be addressed to the Company in care of its
Secretary at the office of the Company at 39655 Eureka Drive, Newark, California 94560, and any notice to be given to Purchaser shall be addressed to the Purchaser at the address given by Purchaser beneath the signature to this Agreement, or such
other address as either party to this Agreement may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or
certified and deposited (postage or registration or certification fee prepaid) in a post office or branch post office regularly maintained by the United States. 
 4.6 Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company. Where the context permits, “Purchaser” as used in this
Agreement shall include Purchaser’s executor, administrator or other legal representative or the person or persons to whom Purchaser’s rights pass by will or the applicable laws of descent and distribution. 
 4.7 California Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT. 

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

									
	 NOVARAY MEDICAL, INC.
 a Delaware corporation
	 		 	PURCHASERS:
					
	By:	 	 /s/ Marc C. Whyte
	 		 	By:	 	 /s/ Adam Benowitz

		 	Marc C. Whyte	 		 		 	Adam Benowitz
		 	Chief Executive Officer	 		 	Address:	 	20 W 55th Street, 5th
floor
		 		 		 		 	New York, New York 10019
					
		 		 		 	By:	 	  

		 		 		 	Address:	 	
					
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		 		 		 	Address:Omnibus Amendment

 Exhibit 10.4 
 OMNIBUS AMENDMENT 
 TO THE 
 WARRANTS TO PURCHASE 
 SHARES OF COMMON STOCK 
 OF 
 NOVARAY MEDICAL, INC. 
 THIS OMNIBUS AMENDMENT TO THE WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF NOVARAY MEDICAL, INC. (this “Amendment”), dated as of October 27, 2009, is made by and between NovaRay
Medical, Inc., a Delaware corporation (the “Issuer”), [            ], Vision Opportunity Master Fund, Ltd. (“VOMF”) and Vision Capital
Advantage Fund, L.P. (“VCAF,” and collectively with VOMF, the “Holders”). 
 Preliminary Statement 
 WHEREAS, the Issuer is the issuer and the Holders are the holders of certain warrants
to purchase shares of Common Stock of the Issuer, each as listed on Exhibit A attached hereto (collectively, the “Warrants”); and 
 WHEREAS, the Issuer and the Holders desire to amend certain provisions of the Warrants as described herein. 
 NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows: 
 1. Capitalized Terms. Capitalized terms used, but not defined, herein, shall have the meanings ascribed to such terms in the
respective Warrants. 
 2. Amendments to Warrants; Warrant Price. The definition of “Warrant Price” in
Section 8 of each of the Warrants is hereby deleted in its entirety and replaced with the following: 
 “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. 

3. Amendments to Warrants; Expiration Date. The definition of “Expiration Date” in Section 8 of each of the
Warrants is hereby deleted in its entirety and replaced with the following: 
 “Expiration Date” means
October 27, 2014. 
 4. Further Assurances. From and after the date of this Amendment, upon the request of either
Holder or the Issuer, each of the Issuer and the Holders shall execute and deliver such instruments, 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 Amendment. 

 5. Board Resolutions. Prior to the signing of this Amendment, the Issuer shall have
provided the Holders with a certified copy of the resolutions of the Board of Directors (or if the Board of Directors takes action by unanimous written consent, a copy of such unanimous written consent containing all of the signatures of the members
of the Board of Directors) of the Issuer, authorizing the execution, delivery and performance of this Amendment. 
 6.
Ratification. Except as expressly amended hereby, all of the terms, provisions and conditions of the Warrants are hereby ratified and confirmed in all respects by each party hereto and, except as expressly amended hereby, are, and hereafter
shall continue, in full force and effect. 
 7. Entire Agreement. This Amendment and the Warrants constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede all prior and contemporaneous agreements and understandings, both written and oral, between the parties with respect thereto. 
 8. Amendments. No amendment, supplement, modification or waiver of this Amendment shall be binding unless executed in writing by all
parties hereto. 
 9. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall constitute but one contract. Each party shall be entitled to rely on a facsimile signature of any other party hereunder as if it were an original. 
 10. Governing Law. This Amendment 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. 
 11. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 
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 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above
written. 
  

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

	Name:	 	Marc Whyte
	Title:	 	CEO
	
	VISION OPPORTUNITY MASTER FUND, LTD.
		
	By:	 	 /s/ Adam Benowitz

	Name:	 	Adam Benowitz
	Title:	 	Portfolio Manager
	
	VISION CAPITAL ADVANTAGE FUND, L.P.
		
	By:	 	 /s/ Adam Benowitz

	Name:	 	Adam Benowitz
	Title:	 	Portfolio Manager
	
	[                            ]
		
	By:	 	  

	Name:	 	
	Title:

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