Document:

exv10w5

 

Exhibit 10.5

*
[***]: Certain information in this document has been omitted
and filed separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.

PROFESSIONAL SERVICES AGREEMENT

This Professional Services Agreement (“Agreement”) is entered into as of the 19th day of December,
2007 (the “Effective Date”), between Triple Ring Technologies, Inc. (“the Company”) and NovaRay,
Inc. (“the Client”).

WHEREAS, the Company has intimate knowledge of the NovaRay technology, as a number of Triple Ring’s
employees participated in the development efforts of the NovaRay technology.

WHEREAS, the Company has experience with a variety of development projects and is willing to
perform certain work hereinafter described in accordance with the provisions of this Agreement; and

WHEREAS, Client desires Company to perform such work in furtherance of Client’s business.

NOW, THEREFORE, in consideration of the mutual covenants set forth herein and intending to be
legally bound, the parties hereto agree as follows:

	1.	 	Services, Compensation, Deliverables and Schedule. The Company’s services performed hereunder
(the “Services”), compensation (including provisions for payment thereof), deliverables (the
“Deliverables”) and schedule for the performance of Services shall be as set forth in Exhibit
A (the “Statement of Work”) and in any future Statements of Work entered into in writing by
the parties, which may be amended in writing from time to time (solely as provided in Section
26), or supplemented with subsequent estimates for Services to be rendered by the Company and
agreed to in writing by the Client, and which collectively are hereby incorporated by
reference. If there is any conflict between this Agreement, any Statement of Work (including
Exhibit A and any future Statements of Work entered into in writing by the parties), or any
attachments to the Statement of Work(s), the following priority shall apply in decreasing
order of priority: this Agreement, the Statement of Work, and attachments to the Statement of
Work. The document (or portion of a document) with a higher priority shall prevail and govern
over the lower-priority document (or portion of document) in the area of conflict.
	 
	 	 	Company shall, to the best of its ability, render the Services, in a timely and professional
manner consistent with the highest industry standards, by the

 

 

	 	 	completion dates set forth in the Statement of Work and in accordance with this Agreement and
any terms set forth in the Statement of Work, including, without limitation, the timelines set
forth on page 34 (§8 — Cost and Schedule Estimates) of the proposal attached hereto as
Attachment 1 to Exhibit A entitled Project Proposal ScanCath EP/Cardiac Project (“Phase I
Proposal”) and on pages 11 and 12 of the proposal attached hereto at Attachment 2 to Exhibit A
entitled Project Proposal ScanCath Dedicated Cardio Project (“Phase II Proposal”).
	 
	 	 	Client may and Company shall appoint one of their respective employees as project manager for
the Services (each a “Project Manager,” and the “Client Project Manager” and the “Company
Project Manager”). Client shall have the right to approve of Company’s choice of Company
Project Manager. The parties expect to have a close and ongoing working relationship. To
facilitate this relationship, the Project Managers shall interact regularly and shall generally
serve as point people to ensure good communication between the parties.
	 
	 	 	Client shall have the right, upon request, to review the qualifications of such potential
employee or subcontractor. Company shall also obtain Client Project Manager’s prior written
approval for any purchases that require Client approval as provided in Exhibit A.
	 
	2.	 	Compliance with Law; FDA Filings. Company shall use its good faith effort to comply with all
applicable laws and regulations in its performance of the Services under this Agreement. To
the extent provided for in the applicable Statement of Work, Company shall be responsible, on
Client’s behalf, for submitting FDA filings, obtaining FDA approvals and communicating with
the FDA as part of the Services. Company shall provide copies to Client of all proposed
filings, applications and submissions to the FDA for review reasonably in advance to allow for
Client’s comments and shall obtain the prior written approval of Client’s Project Manager
prior to submission of such documents to the FDA. It is understood, however, that such
submissions to and communications with the FDA are at the sole direction and control of
Client. Client, and Client alone, shall be solely responsible for its own FDA regulatory
strategy, and determining the necessity or advisability of any particular filing or
communication.
	 
	3.	 	Acceptance. Client shall have thirty (30) days from its receipt of any Deliverable under the
Statement of Work to review and evaluate such Deliverable to determine whether the Deliverable
meets, to Client’s reasonable satisfaction, the requirements specific to the particular
Deliverable set forth in such Statement of Work, including the specifications set forth on
pages 6-31 of the Phase I Proposal and on pages 6-8 of the Phase II Proposal (the
“Specifications”). If Client does not accept such Deliverable within such thirty (30) day
period, Client shall, at Company’s request, explain what led to the rejection. Company shall
use commercially reasonable

 

 

	 	 	efforts to correct any such problems in the Deliverable and to deliver a corrected Deliverable
to Client for its review and acceptance as set forth above in a timely manner. If Client does
not accept such corrected Deliverable, Client, in its sole discretion and in addition to any
other available remedies, may deem Company’s failure to provide to Client an acceptable
Deliverable to be a default, and immediately terminate this Agreement pursuant to Section 18.
Client may only reject a Deliverable if it is not reasonably within the acceptable parameters
that are defined in the Statement of Work.
	 
	4.	 	Term. The term of this Agreement shall commence on the Effective Date, and shall continue in
full force and effect through December 31, 2009 , unless terminated earlier by operation of
and in accordance with this Agreement. The Agreement may only be extended thereafter by mutual
written agreement.
	 
	5.	 	Independent Contractor; Employees. Subject to the terms and conditions of this Agreement,
the Client hereby engages the Company as an independent contractor to perform the Services set
forth herein, and the Company hereby accepts such engagement. This Agreement shall not render
the Company a partner, agent of, or joint venture of or joint venturer with the Client for any
purpose. The Company is and will remain an independent contractor in its relationship with
the Client.
	 
	 	 	Notwithstanding anything express or implied in this Agreement, Company will not enter into any
contracts in the name of, or on behalf of Client, nor will Company hold itself out as having
authority to do so. It is understood and agreed that it will be necessary in the manufacturing
process for Company to enter into supply agreements on behalf of itself. If Client is neither a
party to such agreements, nor a guarantor of Company’s obligations arising under such
agreements, then it is understood that Client will be identified as a third party beneficiary
under such agreements.
	 
	 	 	All employees and agents of Company that perform Services under this Agreement are employees
and agents, respectively, of Company (and not of Client). Company will be responsible for
payment to its employees and agents of all salaries, wages, benefits, other compensation,
reimbursable travel, lodging, and other expenses to which the employees or agents may be
entitled to receive for performing Services. Company will be solely responsible for withholding
and paying all applicable payroll taxes of any nature, including social security and other
social welfare taxes or contributions, that may be due on amounts paid to employees or agents.
Company’s personnel shall not, in connection with the Services and this Agreement, be entitled
to benefits that Client provides to its employees.

 

 

	6.	 	Confidentiality. Either party to this Agreement may, in the course of fulfilling its terms,
need to disclose information to the other party that is proprietary or confidential. When such
disclosure is undertaken, the following provisions apply:

	 	a)	 	The term “Disclosing Party,” as used in this Agreement, means the party
providing Confidential Information. The “Receiving Party” is the party receiving the
information.
	 
	 	b)	 	The term “Confidential Information,” as used in this Agreement, means any
oral, written, documentary, or electronically stored information that (i) relates to
the field of scanning electron beam x-ray technology (including detection and image
processing specific to scanning electron beam x-ray sources or methods of such
developed in the course of the Services), and (ii) is received by one of the parties
from the other and, (a) in the case of written or documentary information, is marked
“Confidential,” “Proprietary” or bears a marking of like import or, (b) which the
Disclosing Party states in writing at the time of transmittal to, and receipt by, the
Receiving Party is to be considered confidential. Orally disclosed information shall
be considered confidential if clearly identified as such at the time of disclosure.
Notwithstanding the foregoing, any information disclosed by Client, whether disclosed
orally, in writing or electronically, is hereby deemed Confidential Information of
Client hereunder. Further, except for any information that is contained within the
Inventions and Records (and is deemed Client’s Confidential Information hereunder),
any information gathered visually, aurally, or otherwise arising from the physical
presence at Company offices or facilities by Client employees or contractors is hereby
deemed Confidential Information of Company. Confidential Information of either party
shall be deemed to include information provided by agents, contractors or consultants
of the Disclosing Party to the Receiving Party on behalf of the Disclosing Party,
provided such information is provided in accordance with the terms of this Section 6.
All Inventions and Records shall be deemed the Confidential Information of Client
hereunder.
	 
	 	c)	 	The term “Trade Secret”, as used in this Agreement, means any oral, written,
documentary, or electronically stored information that: (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value from its
disclosure or use; and (ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
	 
	 	d)	 	The “Confidential Information” and “Trade Secrets” do not include information
that: (i) is already known to the Receiving Party as evidenced by prior documentation
thereof; or (ii) is or becomes publicly known through no wrongful act of the Receiving
Party; or (iii) is rightfully

 

 

	 	 	 	received by the Receiving Party from a third party without restriction and without
breach of this Agreement or any other Agreement; or (iv) is approved for release by
written authorization of the Disclosing Party. Notwithstanding the foregoing, this
Section 6(d) shall not apply to the Inventions and Records.
	 
	 	e)	 	At any time, whether during the term of this Agreement or after its
termination, the Receiving Party shall not disclose to others, or use for any purpose
of its own, other than to perform its obligations or exercise its rights hereunder,
any Confidential Information obtained from the Disclosing Party, or from an affiliated
individual party or entity of the Disclosing Party, as a result of or to enable work
done pursuant to this Agreement, or generated or developed in the performance of work
under this Agreement. With respect to Trade Secrets, other than to perform its
obligations or exercise its rights hereunder, the Receiving Party agrees not to use
for any purpose whatsoever or to disclose Trade Secrets at any time during or after
the term of this Agreement; until such Trade Secrets lose their status as such by
becoming generally available to the public by independent discovery, development, or
publication. Upon expiration or termination of this Agreement, at the Disclosing
Party’s request, the Receiving Party agrees to return to the Disclosing Party or
destroy, in the Disclosing Party’s discretion, all Confidential Information of the
Disclosing Party; provided that except where such Confidential Information reasonably
relates to patent prosecution matters or obligations of Receiving Party, Receiving
Party may retain for its records a copy of such Confidential Information solely for
archival purposes.
	 
	 	f)	 	The covenants regarding Confidential Information and Trade Secrets will apply
to any Confidential Information or Trade Secrets disclosed to the Receiving Party by
the Disclosing Party before or after the Effective Date of this Agreement.
	 
	 	g)	 	The Client and the Company shall ensure that all individuals representing
either party in any capacity under this Agreement have executed agreements containing
restrictions on use and disclosure of Confidential Information and Trade Secrets no
less restrictive than those contained herein prior to granting access to any
Confidential Information or Trade Secrets to such individual.

	7.	 	Inventions. Intellectual property rights of each party shall be governed by the following:

	 	a)	 	Except as provided in the last sentence of this Section 7(a), any and all
work product, works of authorship, trade secrets, inventions, discoveries,
developments and innovations, whether or not patentable or copyrightable, including,
but not limited to the Deliverables, software in

 

 

	 		 	object and source code formats, devices and prototypes, and intellectual property
rights therein conceived, created or reduced to practice by the Company or its
employees or agents, and (A) related to (i) the Services performed hereunder
(including without limitation in the course of preparing the project proposals
attached to this Agreement and for any prior versions of them), and/or (ii)
scanning electron beam x-ray technology (including detection and image processing
specific to scanning electron beam x-ray sources or methods of such detection and
image processing developed in the course of the Services) made or invented on or
before one (1) year after termination or expiration of this Agreement, or (B) made
or invented using any Confidential Information of NovaRay at any time (before,
during or after the term of this Agreement), in each case ((A) and (B)) including
without limitation patent applications and patents claiming same (collectively,
“Inventions”), shall be the sole and exclusive property of the Client. Company
hereby assigns to Client, and agrees to execute and deliver further documentation
reflecting that assignment in the future when any such Inventions are first fixed
in a tangible medium or invented, as applicable, all right, title, and interest in
and to the Inventions. All Inventions shall be deemed the Confidential Information
of Client. Notwithstanding the foregoing, all work product, works of authorship,
trade secrets, inventions, discoveries, developments and innovations arising from
any Approved Project (in accordance with the procedure set forth in Section 13 and
without breach of Company’s confidentiality obligations set forth herein), and
intellectual property rights therein shall be the sole and exclusive property of
the Company.
	 
	 	b)	 	Company agrees to execute all papers, including patent applications,
invention assignments and copyright assignments, and otherwise agrees to assist
Client as reasonably required at Client’s reasonable expense to perfect in Client or
enforce the rights, title and other interests in the Inventions expressly granted to
Client under this Agreement. If Client is unable for any reason, after reasonable
effort, to secure Company’s signature on any document needed in connection with the
actions specified above, Company hereby irrevocably designates and appoints Client
and his or her duly authorized officers and agents as his or her agent and attorney
in fact, which appointment is coupled with an interest, to act for and in its behalf
to execute, verify and file any such documents and to do all other lawfully permitted
acts to further the purposes of the preceding paragraph with the same legal force and
effect as if executed by Company.

 

 

	 	c)	 	Any and all services performed by Company on behalf of Client prior to the
Effective Date, including services performed by Company under the Consulting Services
Agreement between Company and Client dated January 2, 2006 (the “Prior Consulting
Agreement”) as such services have specifically related to the field of scanning
electron beam x-ray technology (including detection and image processing specific to
scanning electron beam x-ray sources or methods of such detection and image
processing developed in the course of the Services) (the “Prior Services”), shall be
deemed Services performed under this Agreement. Accordingly, this Section 7 shall
apply to the work product, works of authorship, trade secrets, inventions,
discoveries, developments and innovations and the intellectual property rights
therein that arise out of the Prior Services (collectively, the “Prior IP”). Without
limiting the foregoing, all Prior IP shall be owned by Client and assigned to Company
hereunder in accordance with this Section 7. In addition, all Prior IP and records
related thereto shall be deemed the Confidential Information of Client hereunder and
subject to the provisions set forth in Article 8. If there is any conflict between
this Agreement and the Prior Consulting Agreement, this Agreement shall prevail. The
parties acknowledge that as of the November 30, 2007, the amount outstanding and owed
to Company as payment for the Prior Services is $[***] (the “Outstanding
Amount”). Client shall pay the Outstanding Amount to Company as soon as reasonably
possible following the closing of a private placement financing with aggregate
proceeds to the Client of not less than $10,000,000. Upon receipt by Company of the
Outstanding Amount, the parties acknowledge and agree that Client has paid in full
all amounts due and owing for the Prior Services as of November 30, 2007. All
amounts due and owing for Prior Services performed on or after December 1, 2007 and
prior to the Effective Date shall be invoiced and payable as provided in the
Statement of Work (Exhibit A).

	8.	 	Representations and Warranties. The Company hereby represents and warrants to Client:

	 	a)	 	The performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary information acquired by the Company in
confidence or in trust prior to the execution of this Agreement.
	 
	 	b)	 	To the best of Company’s knowledge and belief, to the extent it has been
informed by Client of specific jurisdictions and regulations and/or laws applicable,
all material supplied (including without limitation the Deliverables) and work
performed under this Agreement (including without limitation the Services) complies
with or will comply with

 

 

	 	 	 	applicable United States and foreign laws, regulations, guidelines and industry
standards (collectively “Applicable Laws”), including, but not limited to the
regulations and guidelines promulgated by the United States Food and Drug
Administration.
	 
	 	c)	 	All of its employees and agents performing Services under this Agreement
are and will be contractually bound to assign all Inventions created hereunder to
Company in order to effect the intent of the parties under Section 7.
	 
	 	d)	 	The Services, including, without limitation, the Deliverables, shall
substantially conform to any standards for such Services and/or Deliverables as set
forth in the Statements of Work, including the Specifications.
	 
	 	e)	 	To the best of Company’s knowledge and belief and in the exercise of its
reasonable efforts, the Deliverables under the Statement(s) of Work do not and shall
not infringe or misappropriate any copyright or trade secret rights of any third
party.
	 
	 	f)	 	The Deliverables under the Statement(s) of Work shall not be subject to any
restrictions or to any mortgages, liens, pledges, security interests, encumbrances or
encroachments, except such liens as may arise between the parties.
	 
	 	g)	 	Company will use its good faith effort to apprise Client of all software
used in or incorporated within each Deliverable, and shall use its good faith effort
to ensure that such software is used or incorporated with appropriate permissions.
	 
	 	h)	 	All submissions or portions thereof by Company to the FDA under this
Agreement that are solely in control of Company, and all data and information
provided from Company to Client that may be submitted by or on behalf of Client to
the FDA, in each case, will be complete and accurate.

	9.	 	Indemnification.

	 	a)	 	[***]
	 
	 	b)	 	[***]

 

 

	 	 	 	 
	 
	 	c)	 	[***]

 

 

	 	d)	 	[***]
	 
	 	e)	 	[***]

	10.	 	Limitation of Liability. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR SPECIAL, EXEMPLARY,
CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR
OTHERWISE. HOWEVER, THE FOREGOING LIMITATION DOES NOT APPLY TO THE EXTENT 1) SUCH PARTY IS
REQUIRED TO INDEMNIFY THE OTHER PARTY UNDER SECTION 9 OR 2) THE DAMAGES ARISE FROM BREACH OF

 

 

	 	 	THE OBLIGATIONS SET FORTH IN SECTION 6 (REGARDING CONFIDENTIALITY).
	 
	11.	 	Non-hire Provision. During and for one (1) year after the term of this Agreement, neither
party will directly solicit the employment of the other party’s personnel, without such other
party’s prior written consent, whether employees or contractors.
	 
	12.	 	No Conflict of Interest. Company agrees during the term of this Agreement not to accept work
or enter into any agreement or accept any obligation that is inconsistent or incompatible with
Company’s obligations under this Agreement, the scope of the Services required rendered for
Client, or the scope of intellectual property assignment owed to Client. Company represents
and warrants that there is no other existing agreement or duty on Company’s part, or that of
its personnel who will perform the Services, inconsistent with this Agreement.
	 
	13.	 	Protection of Confidential Information. Company acknowledges that its engagement or
participation, directly or indirectly, in the development or commercialization of scanning
electron beam x-ray technology or approaches to such technology taken by Company in the
performance of the Services or the Deliverables (“Competitive Business”) would inherently
involve the unauthorized use or disclosure of Client’s Confidential Information. Accordingly,
to prevent any such unauthorized use or disclosure, Company agrees that it shall not, during
the term of this Agreement and for one (1) year thereafter, engage or participate, directly or
indirectly, in any such Competitive Business unless it can demonstrate to Client’s reasonable
satisfaction that there is no reasonable risk of such unauthorized use or disclosure and
Client agrees in writing to allow such Competitive Business (such business allowed by Client,
to the extent conducted without use of Client’s Confidential Information, an “Approved
Project”). Prior to any such engagement or participation in any such Competitive Business for
any third party, Company shall notify Client and shall give Client a reasonable opportunity to
determine the degree of any such risk of unauthorized use or disclosure. Company acknowledges
that the restrictions contained in this Section 13 are reasonable and necessary to protect the
legitimate interests of Client in its Confidential Information and otherwise, and constitute a
material inducement to Client to enter into this Agreement.
	 
	 	 	The parties acknowledge and agree that project(s) that Company performs for NRCT LLC, to the
extent each such project is within the scope of the Exclusive License Field of Use as such is
term defined under the agreement between Client and NRCT LLC dated October 2006, shall be
deemed an Approved Project hereunder. Company shall have the right to perform services for
such project to the extent the services are within the scope of the Exclusive License Field of
Use without obtaining Client’s prior written approval. Company shall not perform services for
NRCT LLC outside of the Exclusive License Field of Use that would constitute Competitive
Business

 

 

	 	 	hereunder without first obtaining Client’s prior written approval as provided in this Section
13.
	 
	14.	 	Results of Services. Company shall use its good faith efforts to keep complete, accurate and
authentic accounts, notes, data and records of the Services performed under this Agreement and
the results of the Services (“Records”). During the Term Client and its agents and designees
shall have the right to audit Company’s facilities, systems, Records, procedures, and
documentation related to this Agreement as well as the progress of Services and all
information and results derived from or relating to such Services, wherever performed,
including, without limitation, at third party premises. At Client’s request, Company shall
provide Client with (i) a final written report upon completion of such Services; and (ii) all
information necessary to satisfy any and all FDA conformance requirements, including all
information needed for any FDA audit (which information may be provided in the most practical
format). In addition to the weekly progress reports required under Section 1 (if requested by
Client), Company shall also promptly disclose to Client any and all information, data, results
and inventions, technology and know how (whether or not patentable) obtained from or
conceived, developed or reduced to practice in the course of performing the Services. Such
disclosure shall include, without limitation, copies of relevant data, summaries and reports.
All Records will be retained by Company for a period of five (5) years, or such longer period
as required under applicable law or regulation (“Record Retention Period”). At the end of the
Record Retention Period or Client’s earlier request, at Client’s option such Records shall
either be (a) delivered to Client or to its designee, or (b) disposed of, but only after
giving Client sixty (60) days’ prior written notice of Company’s intent to do so. All Records
shall be deemed the Confidential Information of Client hereunder.
	 
	15.	 	Audits. In addition to the Records, Company shall maintain such financial records as are
necessary to reasonably substantiate invoices and expenses under this Agreement (“Financial
Records”) to during the term of the Agreement and for two (2) years thereafter. Client and/or
its authorized agent shall have the right to audit, copy and inspect the Financial Records of
Company, at its own expense, to verify any invoices or expenses billed to Client. In
connection with any audit, Company shall also provide Client access to its personnel upon
reasonable notice. Such audits may be conducted upon reasonable notice during the term of
this Agreement and for a period of up to two (2) years after termination or expiration. At
the expiration of the foregoing period, Company may destroy all such records if not physically
requested by Client prior to the expiration of the storage term. If any financial audit
reveals an overage in any invoices or expenses billed to Client, then Company shall promptly
refund such overage to Client. In addition, if any overage differs from the amount due by ten
percent (10%) or more, then Company shall not only be liable for refunding the overage, but
shall also reimburse Client for all expenses incurred for such audit.

 

 

	16.	 	Disputes. The Company and Client recognize that disputes arising under this Agreement are
best resolved at the working level by the parties directly involved. Both parties are
encouraged to be imaginative in designing mechanisms and procedures to resolve disputes at
this level. Such efforts shall include the referral of any remaining issues in dispute to
higher authority within each participating party’s organization for resolution. Failing
resolution of conflicts at the organizational level, the Company and Client agree that any
remaining conflicts arising out of or relating to this Contract shall be submitted to
nonbinding mediation for up to thirty (30) days unless the Company and Client mutually agree
otherwise. If the dispute is not resolved during such time period through non-binding
mediation, then the parties may submit such matter to a court of competent jurisdiction for
resolution. Company recognizes that the covenants contained herein, including without
limitation in Sections 11 and 13, are reasonable and necessary to protect the legitimate
interests of Client, that Client would not have entered into this Agreement in the absence of
such covenants, and that Company’s breach or threatened breach of such covenants shall cause
Client irreparable harm and significant injury, the amount of which shall be extremely
difficult to estimate and ascertain, thus, making any remedy at law or in damages inadequate.
Therefore, Company agrees that Client shall be entitled to the issuance of injunctive relief
enjoining any breach or threatened breach of such covenants and for any other relief such
court deems appropriate. This right shall be in addition to any other remedy available to
Client at law or in equity.

	17.	 	Merger. This Agreement shall not be terminated by the merger or consolidation of the Client
or the Company into or with any other entity.

	18.	 	Termination. Client may terminate this Agreement at any time, with or without cause, by
ninety (90) days’ prior written notice to the Company. In addition, either party may
terminate this Agreement immediately if the other party shall breach any material term or
provision of this Agreement and shall fail or refuse, within thirty (30) days after receipt of
written notice from the non-breaching party regarding such breach, to cure or remedy such
breach. Upon termination or expiration, to the extent permitted by law, Company shall
transfer to Client all permits, approvals, FDA filings and all other regulatory filings
related to the Services that Company holds (if any) as of the time of termination or
expiration. All amounts owed by Client to Company under the Statement of Work shall be paid
within seven (7) days of a termination by either party.

	19.	 	Survival. The parties agree that all rights and obligations under Sections 5-11, 13-16, and
18-30 of this Agreement shall continue in effect after expiration or termination of this
Agreement.

 

 

	20.	 	Successors and Assigns. All of the provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, if any, successors, and
permitted assigns.

	21.	 	Choice of Law; Venue. The laws of the state of California shall govern the validity of this
Agreement, the construction of its terms, and the interpretation of the rights and services of
the parties hereto, without regard to conflicts of law principles. All disputes in connection
with this Agreement shall be submitted to a federal or state court located in Santa Clara
County, California. Each party hereby consents to the personal jurisdiction and venue of all
such courts and waives all defenses they may have to such personal jurisdiction and venue,
including without limitation the defense of forum non conveniens.

	22.	 	Headings. Section headings are not to be considered a part of this Agreement and are not
intended to be a full and accurate description of the contents hereof.

	23.	 	Waiver. Waiver by one party hereto of a breach of any provision of this Agreement by the
other shall not be construed as a continuing waiver.

	24.	 	Assignment. The Agreement is not assignable or transferable by Client or by the Company
without the written consent of Client and the Company, which consent shall not be unreasonably
withheld or delayed; provided, however that the consent of the Company shall not be required
for Client to assign this Agreement to an affiliate, or to its successor in interest in
connection with the transfer or sale to a third party successor of all or substantially all of
the business of Client to which this Agreement relates, whether by merger, sale of stock, sale
of assets or otherwise. Any purported assignment not in accordance with this Section 24 shall
be void.

	25.	 	Notices. Any and all notices, demands, or other communications required or desired to be
given hereunder by any party shall be in writing and shall be validly given or made to another
party if personally served, or if deposited in the United States mail, certified or
registered, postage prepaid, return receipt requested. If such notice or demand is served
personally, notice shall be deemed constructively made at the time of such personal service.
If such notice, demand, or other communication is given by mail, such notice shall be
conclusively deemed given five (5) days after deposit thereof in the United States mail
addressed to the party to whom such notice, demand, or other communication is to be given as
follows:

	 	 	 
	        If to the Client:

	 	NovaRay, Inc.
	 

	 	1850 Embarcadero Road
	 

	 	Palo Alto, CA 94303
	 

	 	United States of America
	 

	 	Attention: Jack Price

 

 

	 	 	 
	 

	 	Fax: (650) 565-8601
	 
	 	 
	        If to the Company:

	 	Triple Ring Technologies, Inc.
	 

	 	1850 Embarcadero Road

Palo Alto, CA 94303

Attention: Joe Heanue

Fax: 650-887-2205

Any party hereto may change its address for purposes of this paragraph by written notice given in
the manner provided above.

	26.	 	Modification or Amendment. No change or modification of this Agreement shall be valid unless
in writing signed by the parties hereto. No amendment shall be valid unless it is in a
document entitled “Amendment to Professional Services Agreement” and signed in writing by both
parties hereto.

	27.	 	Entire Understanding. This document and all Exhibits attached hereto constitute the entire
understanding and agreement of the parties, and any and all prior agreements, understandings,
and representations are hereby terminated and canceled in their entirety and are of no further
force and effect, including the Prior Consulting Agreement to the extent it would conflict
with this Agreement.

	28.	 	Unenforceability of Provisions. If any provision of this Agreement, or any portion thereof,
is held to be invalid and unenforceable, then the remainder of this Agreement shall
nevertheless remain in full force and effect.

	29.	 	Force Majeure. The Company shall not be responsible for delays or failures (including any
delay by the Company to make progress in the prosecution of any Services) if such delay arises
out of causes beyond its control (i.e., acts of God or of the public enemy, fires, floods,
epidemics, riots, quarantine restrictions, strikes, freight embargoes, earthquakes, electrical
outages, computer or communications failures, and severe weather).

	30.	 	Debarment. Company hereby certifies it does not and shall not knowingly employ, contract
with or retain any person directly or indirectly to perform Services under this Agreement if
such person is debarred under 21 U.S.C. 335a (a) or (b) or other equivalent laws, rules,
regulations or standards of any other relevant jurisdiction. Upon written request of Client,
Company shall, within ten (10) business days, provide written confirmation that it has
complied with the foregoing obligation. Company agrees to immediately disclose in writing to
Client if any employee or agent is debarred, or if any action or investigation is pending or,
to the best of Company’s knowledge, threatened, relating to the debarment of Company or any
person performing services related to this Agreement.

 

 

     IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day and year first
written above. The parties hereto agree that facsimile signatures shall be as effective as if
originals.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Triple Ring Technologies, Inc.	 	 	 	NovaRay, Inc.	 	 
	 
	By:

	 	/s/ Joseph Heanue	 	 
	 	By:
	 	/s/ Jack Price 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Joseph Heanue
	 	 	 	 	 	Name:
	 	Jack Price	 	 
	 

	 	Title:
	 	President
	 	 	 	 	 	Title:
	 	President	 	 

 

 

EXHIBIT A

STATEMENT OF WORK

Overview of Services to be performed:

Phase I ScanCath EP / Cardiac Cath Commercialization

Estimated cost for Phase I: $[***]

Attachment 1 to Exhibit A entitled Project Proposal ScanCath EP/Cardiac Project (“Phase I
Proposal”) describes in detail the activities required to update NovaRay’s existing fluoroscopy
instrument for commercial use. Phase I shall produce a system for use in both electrophysiology
(EP) and cardiac cath applications. The project includes a deliverable of a fully documented system
ready for shipment to NovaRay’s first customer site. Triple Ring’s design implementation will make
accommodations where possible for subsequent versions of the ScanCath system as described in Phase
II of this project.

Scope:

Below is a summary that outlines Triple Ring Technologies’ high-level tasks to prepare NovaRay’s
X-ray fluoroscopy system for commercial use:

	 	1.	 	[***]
	 
	 	2.	 	 [***]
	 
	 	3.	 	[***]
	 
	 	4.	 	[***]
	 
	 	5.	 	[***]
	 
	 	6.	 	[***]
	 
	 	7.	 	[***]
	 
	 	8.	 	[***]
	 
	 	9.	 	[***]
	 
	 	10.	 	[***]

	 
	 	11.	 	[***]
	 
	 	12.	 	[***]

Specifications, Tasks, Estimates and Deliverables are further described in the Phase I Proposal.

Phase II Dedicated Cardio Commercialization

Estimated cost for Phase II: $[***]

Attachment 2 to Exhibit A entitled Project Proposal ScanCath Dedicated Cardio Project (“Phase II
Proposal”) outlines in detail the activities to upgrade the ScanCath EP / Cardiac system to a
dedicated Cardio system. It is predicated on the completion of Phase I activities described
above and in more detail in the attached proposal.

 

 

Scope

Below is a high-level summary of the tasks required to upgrade NovaRay’s ScanCath EP
/Cardio system to a dedicated Cardio system for commercial use:

	 	 	 	[***]

Specifications, Tasks, Estimates, and Deliverables are further described in Phase II Proposal.

Compensation:

As compensation for the services rendered pursuant to this Agreement, the Client shall pay the
Company [***]. The Phase I Proposal and Phase II Proposal contain an overall
projected budget for the Services (the “Projected Budget”).
[***]. The invoiced amounts shall be reasonably consistent with the monthly budgets and with
the total Projected Budget [***], as modified by the mutual agreement
of the parties, or by virtue of a change in scope initiated by Client. The Client shall have the
right to audit Company to verify such invoices and expenses as provided in Section 15 of the
Agreement.

Warrants:

In addition, the Client shall provide the Company with a warrant to purchase common stock as
described in Attachment 3 to Exhibit A entitled Warrant to Purchase Shares of NovaRay, Inc.

 

 

Terms of Payment

An initial
payment (“Initial Payment”) of $[***] will be required prior to the commencement of
Services performed in Phase I. This Initial Payment shall be applied to the last invoice for Phase
2 of this project. Any remainder of the Initial Payment will be returned to the Client with the
final invoice of Phase II unless earlier terminated by Client pursuant to Section 18 of this
Agreement. If earlier terminated, the Initial Payment will be applied to any outstanding Invoices
or unbilled Services performed or material purchased by the Company. Any remainder of the Initial
Payment will be returned to the Client with the final invoice.

Company will bill the Client bi-weekly, on [***]. Payment is due 7 days after
invoice date. In addition, during the term of this Agreement, the Company shall bill and the
Client shall reimburse the Company for all reasonable, pre-approved out-of-pocket expenses which
are incurred in connection with the performance of the Services hereunder. For the avoidance of
doubt, Company must obtain the prior written approval of Client’s Project Manager for any expense
that exceeds [***]. Client shall have the right to review and approve
the terms and conditions of any such purchase.

The Company will promptly notify the Client Project Manager of any costs, expenses or fees that
will cause the overall cost and fee estimates to exceed by more than 10% of the estimate set forth
in the attached proposals of this Statement of Work.

Starting Requirements

Company will begin performance of the Services on receipt from Client of the following:

	1.	 	Signed copy of the attached proposals (Attachments 1 and 2 to this Exhibit A)
	 
	2.	 	Signed copy of the Warrant Agreement
	 
	3.	 	Signed copy of this Agreement and this Statement of Work; and
	 
	4.	 	The Initial Payment of $[***]

IN WITNESS WHEREOF the undersigned have executed this Statement of Work as of December 19, 2007.
The parties hereto agree that facsimile signatures shall be as effective as if originals.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Triple Ring Technologies, Inc.	 	 	 	NovaRay, Inc.	 	 
	 
	By:

	 	/s/ Joseph Heanue 	 	 
	 	By:
	 	/s/ Jack Price	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Joseph Heanue
	 	 	 	 	 	Name:
	 	Jack Price	 	 
	 

	 	Title:
	 	President
	 	 	 	 	 	Title:
	 	President	 	 

 

 

Attachment 1 to

Exhibit A to

Professional Services Agreement dated December 19, 2007

Project Proposal

ScanCath EP / Cardiac Project

	 	 	 
	Prepared For:

	 	NovaRay Inc.
	 

	 	1850 Embarcadero Road
	 

	 	Palo Alto, CA 94303
	 
	 	 
	Date:

	 	17 September 2007
	File:

	 	NOV.ScanCath.EP.Cardiac.prop.06.16.revD
	 
	 	 
	Prepared By:

	 	Chris Fuller
	 

	 	Triple Ring Technologies, Inc.
	 

	 	1850 Embarcadero Road
	 

	 	Palo Alto, CA 94303

					
	 	 	 	 	 
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1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 – www.tripleringtech.com

1 Table of Contents

	 	 	 	 	 
	1 Table of Contents
	 	 	2	 
	2 Introduction
	 	 	3	 
	2.1 Scope
	 	 	3	 
	3 Team Experience
	 	 	3	 
	4 ScanCath System Roadmap
	 	 	4	 
	5 NovaRay Technology Background
	 	 	4	 
	6 ScanCath EP / Cardiac Project Plan
	 	 	4	 
	6.1 NovaRay Facility Upgrades
	 	 	5	 
	6.2 System Development
	 	 	5	 
	6.2.1 Overview
	 	 	5	 
	6.2.2 X-Ray Source and Supporting Subsystems
	 	 	5	 
	6.2.3 Detector (Eye)
	 	 	7	 
	6.2.4 Image Processing Subsystem
	 	 	8	 
	6.2.5 Gantry and Patient Table
	 	 	8	 
	6.2.6 System Control Components
	 	 	9	 
	6.2.7 Other System Components
	 	 	10	 
	6.2.8 Software Development
	 	 	11	 
	6.2.9 User Interface and Controls
	 	 	13	 
	6.3 System Verification and Validation
	 	 	14	 
	6.4 Risk Management
	 	 	14	 
	6.5 UL Certification
	 	 	14	 
	6.6 Regulatory
	 	 	14	 
	6.7 Installation and Acceptance Testing
	 	 	15	 
	7 Project Assumptions
	 	 	15	 
	8 Cost and Schedule Estimates
	 	 	15	 
	8.1 Major Milestones
	 	 	15	 
	8.2 Cost Estimate Summary
	 	 	16	 
	8.3 Resource Cost Estimate
	 	 	16	 
	8.4 Material and Travel Cost Estimate
	 	 	17	 
	9 Deliverables
	 	 	17	 
	10 Reference Documentation Provided
	 	 	17	 
	11 Terms
	 	 	19	 
	12 Starting Requirements
	 	 	19	 
	13 Approval
	 	 	19	 
	14 Revision History
	 	 	19	 

					
	 	 	 	 	 
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1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

2 Introduction

This proposal outlines Triple Ring Technologies’ approach to preparing a commercial-ready, improved
version of NovaRay’s X-ray fluoroscopy system for electrophysiology (EP) / Cardiac applications.
The project culminates in the delivery of a ScanCath EP / Cardiac instrument to NovaRay’s first
customer. The proposed system architecture can be extended to both Cardiac and Vascular
fluoroscopy applications. A companion proposal, NOV.ScanCath.Dedicated.Cardio.prop.06.16,
discusses the activities required to deliver a ScanCath Dedicated Cardio instrument using the
system architecture developed here.

2.1 Scope

This proposal describes activities required to update NovaRay’s existing fluoroscopy instrument
for commercial use as the ScanCath EP / Cardiac instrument. Our design implementation will make
accommodations for subsequent versions of the ScanCath instrument, wherever possible. In
fulfilling this proposal we will:

[***]

3 Team Experience

Triple Ring is an engineering services firm focused on commercializing novel medical devices and
instrumentation. We have an extensive track record in the development of medical and biological
instrumentation, as well as sensor-based biotechnology and industrial systems. Projects for
clients have included bioimpedance instrumentation for catheter tracking and cell identification,
x-ray tubes for radiation therapy, x-ray imaging systems for whole-body CT and electrophysiology,
and detector systems for scanning electron microscopy. In-house development projects have included
an optical imaging system for sentinel node biopsy, state-of-the-art detectors for next-generation
x-ray and SPECT applications, and imaging systems for tracking a new generation of biomarkers.

Triple Ring is intimately familiar with the NovaRay technology, as numerous team members
participated in the development efforts at Cardiac Mariners and NexRay. This allows us to restart
development with minimal delay and expense. With this proposal we plan to use in-house resources
already familiar with the NovaRay system or employ or contract with former Cardiac Mariners and
NexRay employees whenever possible.

					
	 	 	 	 	 
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1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

4 ScanCath System Roadmap

The ScanCath EP / Cardiac is the first in a series of fluoroscopy instruments from NovaRay,
including ScanCath Cardio, ScanCath Neuro, and ScanCath Vascular. Table 1 contains a summary of
key user requirements from NovaRay for each instrument, and Table 2 contains a summary of
corresponding functional requirements. Advanced features for the follow-on instruments [***] are
noted here for planning purposes but are not discussed in detail within this proposal. See the
individual proposals for development of the follow-on instrumentation for discussion of those
features.

	 	 	 	 	 	 	 	 	 
	 	 	ScanCath EP	 	ScanCath Cardio	 	ScanCath Neuro	 	ScanCath Vascular
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]

Table 1: Key User Requirements for Each ScanCath Instrument

	 	 	 	 	 	 	 	 	 
	Subsystem	 	ScanCath EP	 	ScanCath Cardio	 	ScanCath Neuro	 	ScanCath Vascular
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]
	[***]
	 	[***]	 	[***]	 	[***]	 	[***]

Table 2: Key Functional Requirements for Each ScanCath Instrument

5 NovaRay Technology Background

The NovaRay instrument is [***].

[***]

Figure 1: NovaRay Source and Detector Geometry

[***]

6 ScanCath EP / Cardiac Project Plan

Our proposal for commercializing the ScanCath EP / Cardiac system comprises the following areas:

					
	 	 	 	 	 
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650.331.3476 — www.tripleringtech.com

6.1 NovaRay Facility Upgrades

All work will be performed at the NovaRay facility in Palo Alto, California. Triple Ring will
oversee and manage the upgrade to the facility to support the cooling, power, and shielding
requirements of the NovaRay instrument. [***] The upgrades will include, but are not limited
to, the following:

•      [***]

6.2 System Development

6.2.1 Overview

Figure 2 is a diagram of the NovaRay System. [***] The final configuration will be determined
at time of installation and individualized for each customer. The [***] serve the following
functions:

•      [***]

[***]

[***]

Figure 2: NovaRay System Architecture

6.2.2 X-Ray Source and Supporting Subsystems

This section describes development activities related to the components of the NovaRay system
that produce X-rays (Figure 3). These components include [***]. The activities for each of
these components are discussed in the following sections.

       [***]

Figure 3: X-ray Source and Supporting Subsystems

6.2.2.1 X-Ray Source

The X-Ray Source is made up of the following major components:

•      [***]

The ScanCath EP / Cardiac System will utilize [***]

We anticipate producing approximately [***] sources to support various project activities,
including the following:

•      [***]

To produce the sources, NovaRay’s [***]

§      [***]

					
	 	 	 	 	 
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The proposal includes the time required both to [***] It also includes the effort required
to complete the release of all components so they are suitable for use in a production
medical system. Triple Ring shall not enter into any contracts in the name of or on behalf
of NovaRay.

6.2.2.2 Collimator

The collimator is a key piece of NovaRay technology. It has the following functions:

	 	•	 	[***]

The collimator is a custom design that involves high-precision machining and assembly
techniques. No design changes are expected to the collimator for the EP system. The
following are the primary activities related to the collimator:

o [***]

6.2.2.3 Cooling Ring

                 The cooling ring performs the following functions:

	 	•	 	[***]

                 The primary activities related to the cooling ring include the following:

	 	•	 	[***]

					
	 	 	 	 	 
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650.331.3476 — www.tripleringtech.com

6.2.2.4 High Voltage Terminal Electronics (HVT)

The high voltage terminal electronics are housed [***]. They perform the following
functions:

	 	•	 	[***]

The HVT electronics are a custom design with performance and survivability optimized for the
ScanCath application. The primary activities related to the HVT electronics include the
following:

	 	•	 	[***]

Triple Ring shall not enter into any contracts in the name of or on behalf of NovaRay.

6.2.2.5 High Voltage Power Supply

This unit serves as the power supply for the X-ray source. The updated design will provide
voltage from [***] with a maximum power output of [***] Although the ScanCath EP / Cardiac
source will operate at [***] maximum, this supply is adequate for the higher source powers
anticipated in the Cardio instrument. Primary activities anticipated for this unit are as
follows:

	 	•	 	[***]

6.2.2.6 Deflection Electronics

The deflection electronics control the focus and scanning (deflection) of the electron beam
within the X-ray source. They include the following components:

	 	•	 	[***]

All of the deflection electronics are a custom design, optimized for use with the NovaRay
system. The primary activities related to the deflection electronics include the following:

                         • [***]

6.2.3 Detector (Eye)

The detector (also referred to as the X-ray sensor or Eye) detects and counts x-ray photons
that have passed from the X-ray source through the imaging volume (i.e. the patient). It
comprises [***]

[***]

Figure 4: Detector (Eye) Functional Blocks

The detector provides the following logical functions:

[***]

					
	 	 	 	 	 
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[***]

6.2.4 Image Processing Subsystem

6.2.4.1 Reconstruction Computer

The reconstruction computer converts raw data from the detector into images centered at
various focal planes based on input from the system operator. [***]

[***]

[***]

6.2.4.2 Image Post Processing System (IPP)

The Image Post Processing System block diagram is shown in is Figure 5. It manages the
display, acquisition, and playback of real time images that are generated by the system.

                  [***]

Figure 5: Image Post Processing System

[***]

• [***]

In the supplied NovaRay documentation various elements of this system have also been
referred to as the Camtronics System, Video Display Processor (VDP), and Video Image
Processor (VIP).

6.2.5 Gantry and Patient Table

The existing gantry and patient table were developed as engineering prototypes with cosmetic
covers for purposes of engineering evaluation and customer presentations. Work is required to
make these subsystems ready for clinical use. In particular, the gantry design requires [***]

[***]

[***]

Figure 6: Gantry

					
	 	 	 	 	 
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[***]

Figure 7: Patient Table Subsystem

6.2.6 System Control Components

This section describes system components which are involved in general control of the system
and not covered elsewhere.

6.2.6.1 System Controller

The system controller is a PC-based computer with two custom designed PCI boards installed
(Figure 8). The controller runs the control software (either clinical or engineering), which
operators use to control the system. The computer and PCI boards are illustrated in Figure 8.

[***]

Figure 8: System Controller

6.2.6.1.1 System Control Computer

The system control computer is a PC-based computer used by operators to control the system.
How users interact with the control computer depends on the mode of operation:

	 	•	 	[***]

The control computer houses two custom PCI boards used for system control; these boards are
discussed in the following section. The activities related to the System Control Computer
include the following:

	 	•	 	[***]

6.2.6.1.2 PCI Board Control Electronics

There are two custom designed PCI-based boards used for system control in the existing
NovaRay system. The system control computer (see preceding section) houses these boards.
The boards, and their primary functions, are as follows:

	 	o	 	[***]

6.2.6.2 Other Control Electronics

In addition to the electronics in the system controller, the following electronics also are
used to control the system:

	 	o	 	[***]

					
	 	 	 	 	 
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6.2.7 Other System Components

6.2.7.1 Power Distribution Unit

The Power Distribution Unit (PDU) is a purchased item modified specifically for the NovaRay
system (Figure 9). It is a single unit that provides power distribution and isolation for all
system
units, as well as an integral UPS for the system control computer. No modifications to the
design of this unit are anticipated.

[***]

Figure 9: Power Distribution Unit

The PDU specifications are as follows:

	 	•	 	[***]

6.2.7.2 Heat Exchanger

The Heat Exchanger is a purchased item modified specifically for use with the NovaRay system.
It serves to establish temperature regulation of the water used to cool system components
such as the x-ray source and deflection amplifier assembly. Specifications are:

[***]

6.2.7.3 Cables and Plumbing

[***]

					
	 	 	 	 	 
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6.2.8 Software Development

Software development activities include [***]

6.2.8.1 System Software

The system software provides the means of controlling and linking the various instrument
subsystems and comprises the set of individual software modules shown in Figure 10. [***]

[***]

Figure 10: Software Blocks

Critical elements of the system software are described in the following sections.

6.2.8.1.1 System Controller

The system controller is the master controller for the imaging system. It coordinates all imaging
activities, user interactions, and hardware configurations, and internally monitors system health
and status for both operational and preventive maintenance purposes. All application-level
software modules operate within the system controller; those modules are described below.

6.2.8.1.1.1 Application Modules (not shown in the figure)

	 	•	 	There are three application software modules which operate on the system
controller: [***]

6.2.8.1.2 I/O Interfaces

[***]

6.2.8.1.3 Communication Protocols

[***]

6.2.8.1.4 Imaging Control Modules (SDC, SDM, MPRE, VDP, FPSE, SDA)

Various modules control x-ray and imaging system operation and manage the image generation
process. Each module has its own software set which configures and manages its local
hardware components and communicates with the system controller through the CCN.

[***]

6.2.8.1.5 Scan Control Modules (BSC, IOC)

[***]

6.2.8.1.6 Motion Control Modules (Mot. Ctrl. And Mot. Ctrl. UI)

[***]

					
	 	 	 	 	 
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6.2.8.1.7 User Interface Modules (Mot. Ctrl. UI and Img. Ctrl. UI)

[***]

6.2.8.2 Test stand support software

[***]

6.2.8.3 Support for Algorithm Development

[***]

					
	 	 	 	 	 
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6.2.9 User Interface and Controls

[***]

The following user interface and controls will be provided in the NovaRay System:

	 	•	 	[***]

[***]

Figure 11: X-ray/Image Control

[***]

Figure 12: Setup

[***]

Figure 13: Screen Flow

[***]

Figure 14: Patient Entry Screen

[***]

Figure 15: View Saved Runs

[***]

Figure 16: Real-Time Image Display

[***]

Figure 17: Archived Image

					
	 	 	 	 	 
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[***]

Figure 18: Motion Controller

• [***]

Detailed user interface screens are included under the proposal subfolder “NovaRay\User
Interface”

6.3 System Verification and Validation

We will integrate the subsystems into complete Cardio fluoroscopy instruments and verify their
performance against the design specifications. The master validation plan, NOV.VVPL.Rev1,
describes our approach to a comprehensive validation plan. It defines the process and
activities for validating:

	 	•	 	[***]

[***]

Figure 19: Validation Process

6.4 Risk Management

TRT shall use its good faith efforts to follow the guidelines established in IEC 60601-1,
5th Edition in regards to risk management. TRT shall use its good faith efforts to
follow the recommendations of the Risk Analysis performed for the existing NovaRay system which
is detailed in NovaRay.RA.Rev1

6.5 UL Certification

We will manage the UL certification process required as a condition of the FDA’s 510(k)
marketing clearance and before commercial distribution. Equipment will be certified to the
relevant sections of UL/IEC/CSA 60601-1, as well as any other appropriate standards and
regulations.

6.6 Regulatory

This System was granted clearance by the FDA in September of 1998 [510(k) # K982345], and is
indicated for use “in generating real-time fluoroscopic images in patients where medically
indicated”. We do not anticipate that the proposed changes to the NovaRay System will be
significant enough to warrant any additional marketing clearance from the Food and Drug
Administration. Although not defined at this time, any changes in indications for use or
additional features not claimed in the original filing will, however, require 510(k) filing.
Regulatory filing support is not included in the scope of this proposal.

					
	 	 	 	 	 
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1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

     6.7 Installation and Acceptance Testing

We will support installation and acceptance testing of a pilot production unit at NovaRay’s first
customer site. However, shipping, installation, and service are NovaRay tasks that are outside the
scope of this proposal.

7 Project Assumptions

     The following assumptions apply to the ScanCath EP / Cardiac development effort:

	 	1.	 	Design, development and manufacturing shall occur under a fully implemented
Quality System as defined in 21 CFR 820.
	 
	 	2.	 	TRT has full access to all NovaRay technology and equipment, its software, and
all appropriate documentation.
	 
	 	3.	 	Updated specifications for the detector, reconstruction computer, and Image
Post Processor are available prior to the project start
	 
	 	4.	 	NovaRay’s supply of ASICs for the EP detector are sufficient, and additional
fabrication runs are not required.
	 
	 	5.	 	Vendors previously identified by NovaRay can supply components and subsystems.
	 
	 	6.	 	Thin film deposition will not be done in-house
	 
	 	7.	 	Triple Ring will have at least 30 days to staff the project.
	 
	 	8.	 	User and service manuals are not included (but NovaRay will, to avoid doubt,
have the right to use data generated by Triple Ring in the user and services manuals
prepared by NovaRay).
	 
	 	9.	 	Manufacturing level documentation will be limited to use by experienced
personnel. It will not be appropriate for use on a general assembly line.
	 
	 	10.	 	The following validation activities will not be done: .

	 	•	 	Environmental testing, e.g. temperature cycling and humidity
	 
	 	•	 	Storage and simulated shipping

8 Cost and Schedule Estimates

The ScanCath EP / Cardiac project schedule covers a [***] period and assumes a start date of [***]
There are two primary project phases:

	 	 	 	Phase 1a: EP / Cardiac Subsystem Development [***]

Phase 1b: EP System Integration, Validation, and UL Certification [***]

[***]

Figure 20: Revised Schedule

     • Major Milestones

     8.1 Major Milestones (Revised Schedule)

     • [***]

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

     8.2 Cost Estimate Summary

	 	 	 	 	 	 	 
	Summary	 	Phase 1a	 	Phase 1b	 	Totals
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	Total $’s

	 	[***]
	 	[***]
	 	[***]

     Phase 1a – Detector, Source, Image Reconstruction Restart

     Phase 1b – System Integration, Verification, Validation, UL Approval, and Shipment

Table 3: Cost Summary for ScanCath EP / Cardiac System

     8.3 Resource Cost Estimate

ScanCath EP / Cardiac

Estimated Resource Budget

	 	 	 	 	 	 	 
	Discipline	 	Phase 1a	 	Phase 1b	 	Total
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	 
	 	 	 	 	 	 
	Resource Total

	 	[***]
	 	[***]
	 	[***]

Table 4: ScanCath EP / Cardiac Estimated Resources Costs

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

     8.4 Material and Travel Cost Estimate

ScanCath EP / Cardiac

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Materials	 	 	 	 	 	Phase 1a	 	Phase 1b
	#	 	Part #	 	Description	 	Qty	 	Unit Cost	 	Cost	 	Tooling	 	Qty	 	Unit Cost	 	Cost	 	Tooling
	1

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	 	 	[***]
	 	[***]
	 	[***]	 	 
	2

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 	 	 
	3

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	4

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	5

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	6

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	7

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	8

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	9

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	10

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	11

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	12

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	13

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 	 	 
	14

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	15

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 
	16

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 	 	 	 	 
	17

	 	 	 	[***]
	 	 	 	 	 	[***]
	 	 	 	[***]
	 	 	 	 	 	[***]
	18

	 	 	 	[***]
	 	 	 	 	 	[***]
	 	[***]
	 	[***]	 	 	 	 	 	 
	19

	 	 	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	 	 	[***]
	 	[***]
	 	[***]	 	 
	 

	 	 	 	 	 	Sub-Total
	 	 	 	[***]
	 	[***]
	 	Sub-Total
	 	 	 	[***]
	 	[***]
	 

	 	 	 	 	 	Contingency
	 	[***]
	 	[***]
	 	[***]
	 	Contingency
	 	[***]
	 	[***]
	 	[***]
	 

	 	 	 	 	 	Sub-Total
	 	 	 	[***]
	 	[***]
	 	Sub-Total
	 	 	 	[***]
	 	[***]
	 

	 	 	 	 	 	Handling
	 	[***]
	 	[***]
	 	[***]
	 	Handling
	 	[***]
	 	[***]
	 	[***]
	 

	 	 	 	 	 	Total Each
	 	 	 	[***]
	 	[***]
	 	Total Each
	 	 	 	[***]
	 	[***]
	 	 	 	 	 	 	Materials Phase 1	 	[***]	 	 	 	Materials Phase 2	 	[***]	 	 

Table 5: ScanCath EP / Cardiac Material and Travel Cost Estimate

9 Deliverables

     This proposal includes the following deliverables:

	 	1.	 	[***]
	 
	 	2.	 	[***]
	 
	 	3.	 	[***]
	 
	 	4.	 	[***]
	 
	 	5.	 	[***]
	 
	 	6.	 	[***]
	 
	 	7.	 	[***]
	 
	 	8.	 	[***]

10 Reference Documentation Provided

	 	 	 
	Description	 	Filename
	Product Requirements for ScanCath system

	 	NOV.PRD.Rev1.ScanCath System
	Product Requirements for Image Post Processor

	 	NOV.PRD.Rev1.Image Post Processor
	Master V&V Plan

	 	NOV.VVPL.Rev1
	Risk Analysis

	 	NOV.RA.Rev1

					
	 	 	 	 	 
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1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

	 	 	 
	Description	 	Filename
	Image Processing Subsystem Architecture

	 	NOV.Image.Arch.Rev1
	Fault Tree Analysis

	 	NOV.FTA.Rev1
	ScanCath Cardio Proposal

	 	NOV.ScanCath.Cardio.prop.06.16.revB

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

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650.331.3476 — www.tripleringtech.com

11 Terms

A deposit will be required before the project starts, and will be applied to invoices at the end of
the project. Triple Ring Technologies, Inc. will bill the client [***] Payment is due [***] days
after invoice date.

12 Starting Requirements

Triple Ring Technologies Inc. will start this project on receipt of the following:

	 	1.	 	Signed copy of the Professional Services Agreement
	 
	 	2.	 	Signed copy of this proposal estimate
	 
	 	3.	 	Advance payment in the amount of $[***] (Advance for long term commitments)
	 
	 	4.	 	Signed copy of the Warrant Agreement

13 Approval

Client Approval:

	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	Signature:

	 	 	 	Date:	 	 
	 

	 	 
	 	 	 

14 Revision History

	 	 	 	 	 
	Revision	 	Description of Change	 	Revision Date
	revA

	 	Initial Release by CKF based on Draft13
	 	11/06/06
	revB

	 	Minor updates
	 	11/10/06
	revC

	 	Updates to schedule and budget
	 	1/17/07
	revD

	 	Updates to schedule, budget and deliverables
	 	9/11/2007
	Rev E

	 	Update
	 	12/5/07

					
	 	 	 	 	 
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Attachment 2 to

Exhibit A to

Professional Services Agreement Dated December 19, 2007

Project Proposal

ScanCath Dedicated Cardio Project

	 	 	 
	Prepared For:

	 	NovaRay Inc.
	 

	 	1850 Embarcadero Road
	 

	 	Palo Alto, CA 94303
	 
	 	 
	Date:

	 	11 September 2007
	File:

	 	NOV.ScanCath.Cardio.prop.06.16.revC
	 
	 	 
	Prepared By:

	 	Chris Fuller
	 

	 	Triple Ring Technologies, Inc.
	 

	 	1850 Embarcadero Road
	 

	 	Palo Alto, CA 94303

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

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650.331.3476 — www.tripleringtech.com

	 	 	 	 	 
	1 Table of Contents
	 	 	 	 
	 
	 	 	 	 
	1 Table of Contents
	 	 	2	 
	2 Introduction
	 	 	3	 
	2.1 Scope
	 	 	3	 
	3 Team Experience
	 	 	3	 
	4 ScanCath System Roadmap
	 	 	3	 
	5 NovaRay Technology Background
	 	 	5	 
	6 ScanCath Cardio Project Plan
	 	 	5	 
	6.1 NovaRay Facility Upgrades
	 	 	5	 
	6.2 Upgrade Key Subsystems
	 	 	5	 
	6.2.1 Source
	 	 	5	 
	6.2.2 Collimator
	 	 	5	 
	6.2.3 Detector
	 	 	5	 
	6.2.4 Optical Link between Detector and Reconstruction Computer
	 	 	5	 
	6.2.5 Reconstruction Computer
	 	 	5	 
	6.2.6 Gantry
	 	 	5	 
	6.2.7 Software
	 	 	6	 
	6.3 System Verification and Validation
	 	 	6	 
	6.4 Risk Management
	 	 	7	 
	6.5 UL Certification
	 	 	7	 
	6.6 Regulatory
	 	 	7	 
	6.7 Installation and Acceptance Testing
	 	 	7	 
	7 Project Assumptions
	 	 	7	 
	8 Cost and Schedule Estimates for ScanCath Cardio
	 	 	8	 
	8.1 Major Milestones
	 	 	8	 
	8.2 Cost Summary Estimate
	 	 	8	 
	8.3 Estimated Labor Costs
	 	 	8	 
	8.4 Estimated Material and Travel Costs
	 	 	10	 
	9 Deliverables
	 	 	11	 
	10 Reference Documentation Provided
	 	 	11	 
	11 Terms
	 	 	12	 
	12 Starting Requirements
	 	 	12	 
	13 Approval
	 	 	12	 
	14 Revision History
	 	 	12	 

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

2 Introduction

This proposal outlines Triple Ring Technologies’ approach to preparing a commercial-ready improved
version of NovaRay’s ScanCath Cardio X-ray fluoroscopy system. It is predicated on the completion
of all phase one activities described in the companion proposal NOV.ScanCath.EP.Cardiac.prop.06.16.
The development activities described here build upon the ScanCath EP / Cardiac system
architecture. This proposal culminates in the delivery of a ScanCath Cardio instrument to the
first customer.

2.1 Scope

This proposal describes the activities required to update NovaRay’s ScanCath EP fluoroscopy
instrument for commercial use as the ScanCath Cardio instrument. In fulfilling this proposal we
will:

1. [***]

2. [***]

3. [***]

4. [***]

5. [***]

6. [***]

7. [***]

8. [***]

9. [***]

10. [***]

3 Team Experience

Triple Ring is an engineering services firm focused on commercializing novel medical devices and
instrumentation. We have an extensive track record in the development of medical and biological
instrumentation, as well as sensor-based biotechnology and industrial systems. Projects for
clients have included bioimpedance instrumentation for catheter tracking and cell identification,
x-ray tubes for radiation therapy, x-ray imaging systems for whole-body CT and electrophysiology,
and detector systems for scanning electron microscopy. In-house development projects have included
an optical imaging system for sentinel node biopsy, state-of-the-art detectors for next-generation
x-ray and SPECT applications, and imaging systems for tracking a new generation of biomarkers.

Triple Ring is intimately familiar with the NovaRay technology, as numerous team members
participated in the development efforts at Cardiac Mariners and NexRay. This allows us to restart
development with minimal delay and expense. With this proposal we plan to use in-house resources
already familiar with the NovaRay system or employ or contract with former Cardiac Mariners and
NexRay employees whenever possible.

4 ScanCath System Roadmap

The ScanCath Cardio is the second in a series of fluoroscopy instruments from NovaRay, including
ScanCath EP, ScanCath Neuro, and ScanCath Vascular. Table 1 contains a summary of key user
requirements from NovaRay for each instrument, and Table 2 contains a summary of corresponding
functional requirements. Advanced features for the follow-on instruments [***] are noted here for
planning purposes but are not discussed in detail within this proposal. See the individual
proposals for development of the follow-on instrumentation for discussion of those features.

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 

Table 1: Key User Requirements for Each ScanCath Instrument

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 

Table 2: Key Functional Requirements for Each ScanCath Instrument

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

5 NovaRay Technology Background

The NovaRay instrument is [***]

[***]

Figure 1: NovaRay Source and Detector Geometry

[***]

6 ScanCath Cardio Project Plan

Most components developed for the ScanCath EP system will be used in the ScanCath Cardio
instrument. Our development efforts will focus primarily on [***] Our proposal comprises the
following areas:

6.1 NovaRay Facility Upgrades

[***]

6.2 Upgrade Key Subsystems

[***]

6.2.1 Source

We will [***]

6.2.2 Collimator

[***]

6.2.3 Detector

[***]

6.2.4 Optical Link between Detector and Reconstruction Computer

[***]

6.2.5 Reconstruction Computer

[***]

6.2.6 Gantry

[***]

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

6.2.7 Software

We will [***] We will [***]

6.3 System Verification and Validation

We will [***]:

	 	•	 	[***]

					
	 	 	 	 	 
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650.331.3476 — www.tripleringtech.com

	 	 	 	[***]

Figure 2: Validation Process

6.4 Risk Management

TRT shall follow the guidelines established in IEC 60601-1, 5th Edition in regards to
risk management. TRT shall follow the recommendations of the Risk Analysis performed for the
existing NovaRay system which is detailed in NovaRay.RA.Rev1

6.5 UL Certification

We will manage the UL certification process required as a condition of the FDA’s 510(k)
marketing clearance and before commercial distribution. Equipment will be certified to the
relevant sections of UL/IEC/CSA 60601-1, as well as any other appropriate standards and
regulations.

6.6 Regulatory

This System was granted clearance by the FDA in September of 1998 [510(k) # K982345], and is
indicated for use in “generating real time fluoroscopic images in patients where medically
indicated.” We anticipate that the following changes proposed for the ScanCath Cardio instrument
will warrant additional 510(k) marketing clearances from the Food and Drug Administration (FDA):

	 	1.	 	[***]

	 
	 	2.	 	[***]

Triple Ring will handle the necessary FDA filings as required, in a manner consistent with
NovaRay’s instructions, which Triple Ring shall obtain in advance. On each and every FDA
filing, Triple Ring shall obtain NovaRay’s advance, written consent to the filing (including
without limitation the content of the filing). As part of the process of obtaining NovaRay’s
consent, Triple Ring shall address and incorporate to NovaRay’s satisfaction any comments
NovaRay may have.

6.7 Installation and Acceptance Testing

We will install a pilot production unit at NovaRay’s first customer site and support instrument
acceptance testing. We will coordinate the necessary site engineering and preparation prior to
shipping the unit.

7 Project Assumptions

The following assumptions apply to the ScanCath Cardio development effort:

	 	1.	 	The ScanCath EP / Cardiac project proceeds according to plan.
	 
	 	2.	 	One ScanCath EP / Cardiac Beta instrument is upgraded to a ScanCath Cardio
configuration.
	 
	 	3.	 	This project begins after completion of ScanCath EP / Cardiac subsystem development
activities.
	 
	 	4.	 	Design, development and manufacturing shall occur under a fully implemented Quality
System as defined in 21 CFR 820.
	 
	 	5.	 	TRT has full access to all NovaRay Technology and equipment, its software, and all
appropriate documentation.
	 
	 	6.	 	Thin film deposition will not be done in-house.

					
	 	 	 	 	 
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1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

	 	7.	 	Triple Ring will have at least 30 days, from the date the Agreement is signed; to staff
the project.
	 
	 	8.	 	Service manual is not included (but NovaRay will, to avoid doubt, have the right to use
data generated by Triple Ring in the service manuals prepared by NovaRay).
	 
	 	9.	 	Manufacturing level documentation will be limited to use by experienced personnel. It
will not be appropriate for use on a general assembly line.
	 
	 	10.	 	The following validation activities will not be done:

	 	•	 	Environmental testing, e.g. temperature cycling and humidity
	 
	 	•	 	Storage and simulated shipping

8 Cost and Schedule Estimates for ScanCath Cardio

The Cardio project schedule covers a [***] period and assumes a start date of [***]. There are two
primary project phases:

Phase 2a: Cardio Subsystem Development [***]

Phase 2b: Cardio System Integration, Validation, and UL Certification [***]

[***]

Figure 3: Revised Schedule

8.1 Major Milestones

	 	•	 	[***]

8.2 Cost Summary Estimate

	 	 	 	 	 	 	 
	Summary	 	Phase 2a	 	Phase 2b	 	Totals
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	[***]

	 	[***]
	 	[***]
	 	[***]
	Total $’s

	 	[***]
	 	[***]
	 	[***]

Phase 2a — Detector, Source, Image Reconstruction Restart

Phase 2b — System Integration, Verification, Validation, UL Approval and Shipment

Table 3: ScanCath Cardio Cost Summary

8.3 Estimated Labor Costs

ScanCath Cardio

Estimated Resourse Budget

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

	 	 	 	 	 	 	 	 	 	 	 
	Discipline	 	Phase 2a	 	 	 	Phase 2b	 	 	 	Total
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	[***]

	 	[***]
	 	 	 	[***]
	 	 	 	[***]
	 
	 	 	 	 	 	 	 	 	 	 
	Resource Total

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	[***]

Table 4: ScanCath Cardio Estimated Labor Costs

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

     8.4 Estimated Material and Travel Costs

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Materials	 	 	Phase 2a	 	 	Phase 2b	 
	#	 	Description	 	 	Qty	 	 	Unit Cost	 	 	Cost	 	 	Tooling	 	 	Qty	 	 	Unit Cost	 	 	Cost	 	 	Tooling	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	[***]	 	 	 	 	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	 	 
	[***]
	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	[***]	 	 	 	 	 	 	 	[***]	 	 	 	 	 	 	 	 	 	 	 	[***]	 
	[***]
	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	 	 
	 
	 	 	 	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	 
	 	 	 	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	 
	 	 	 	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	 
	 	 	 	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	 
	 	 	 	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 	 	 	[***]	 
	 
	 	 	 	 	 	 	[***]	 	 	 	 	 	 	 	[***]	 	 	 	 	 	 	 	[***]	 	 	 	 	 	 	 	[***]	 	 	 	[***]	 

Table 5: ScanCath Cardio Material and Travel Costs

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

9 Deliverables

     This proposal includes the following deliverables:

	 	1.	 	[***]
	 
	 	2.	 	[***]
	 
	 	3.	 	[***]
	 
	 	4.	 	[***]
	 
	 	5.	 	[***]
	 
	 	6.	 	[***]
	 
	 	7.	 	[***]
	 
	 	8.	 	[***]

10 Reference Documentation Provided

	 	 	 
	Description	 	Filename
	Product Requirements for ScanCath System

	 	NOV.PRD.Rev1.ScanCath System
	Product Requirements for Image Post Processor

	 	NOV.PRD.Rev1.Image Post Processor
	Master V&V Plan

	 	NOV.VVPL.Rev1
	Risk Analysis

	 	NOV.RA.Rev1
	Image Processing Subsystem Architecture

	 	NOV.Image.Arch.Rev1
	Fault Tree Analysis

	 	NOV.FTA.Rev1
	ScanCath EP / Cardiac Proposal

	 	NOV.ScanCath.EP.Cardiac.prop.06.16.revB

					
	 	 	 	 	 
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	 	Triple Ring Technologies Inc.

1850 Embarcadero Way, Palo Alto, CA 94303

650.331.3476 — www.tripleringtech.com

11 Terms

A deposit will be required before the project starts, and will be applied to invoices at the end of
the project. Triple Ring Technologies, Inc. will bill the client [***] Payment is due [***] days
after invoice date.

12 Starting Requirements

Triple Ring Technologies Inc. will start this project on receipt of the following:

	 	1.	 	Signed copy of the Professional Services Agreement
	 
	 	2.	 	Signed copy of this proposal estimate
	 
	 	3.	 	Advance payment in the amount of [***]
	 
	 	4.	 	Signed copy of the Warrant Agreement

13 Approval

Client Approval:

	 	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 
	Signature:

	 	 	 	 	 	Date:	 	 
	 

	 	 
	 	 	 	 	 	 

14 Revision History

	 	 	 	 	 
	Revision	 	Description of Change	 	Revision Date
	revA

	 	Initial Release by CKF based on draft 13
	 	11/06/06
	revB

	 	Minor updates by CKF
	 	11/09/06
	revC

	 	Updated schedule and budget by CKF
	 	1/17/07
	revD

	 	Update
	 	9/11/07
	Rev E

	 	Update
	 	12/5/07

					
	 	 	 	 	 
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ATTACHMENT 3 TO

EXHIBIT A TO

PROFESSIONAL SERVICES AGREEMENT
DATED 

DECEMBER 19, 2007

 

 

THIS WARRANT AND THE SHARES PURCHASABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS
OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED..

No. WCS-1

WARRANT TO PURCHASE SHARES

OF

NOVARAY, INC.

     This certifies that, for value received, receipt and sufficiency of which are hereby
acknowledged, Triple Ring Technologies, Inc., or its registered assigns (the “Holder”), is
entitled, subject to the terms and conditions set forth below, to purchase from NovaRay, Inc., a
Delaware corporation (the “Company”), four hundred forty four thousand (444,000) shares of the
Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), at a purchase price per
share as provided for in Section 2. The term “Warrant” as used herein shall mean this Warrant, and
any warrants delivered in substitution or exchange therefor as provided herein. This Warrant is
being issued as partial consideration for certain services being provided by the Holder to the
Company pursuant to the terms and conditions of that certain Professional Services Agreement dated
December 19, 2007 (the “Services Agreement”). Capitalized terms not otherwise defined herein shall
have the meaning set forth in the Services Agreement.

     1. Term of Warrant. Subject to the terms and conditions set forth herein, this
Warrant shall be exercisable, in whole or in part, following the date of acceptance by the Company
of the Deliverables described in Attachment 1 to Exhibit A of the Services Agreement (the “Holder
Deliverables”) in accordance with the terms thereof only as provided on the Exercise Schedule
attached hereto as Addendum A, and shall otherwise be void (the “Exercise Period”);
provided, however, that in the event that the Company has not accepted the Holder
Deliverables in accordance with the terms of the Services Agreement on or prior to February 28,
2010, then this Warrant shall not be exercisable at any time, shall terminate immediately and shall
be of no further force or effect.

     2. Exercise Price.

          (a) The exercise price per share (the “Exercise Price”) shall be determined on the date of
acceptance of the Holder Deliverables by the Company in accordance with the following schedule:

 

 

	 	 	 	 	 
	 	 	Exercise Price
	Date of Acceptance of the Holder Deliverables	 	Per Share
	On or prior to March 30, 2009
	 	$	0.18	 
	On or after March 31, 2009 but on or prior to July 30, 2009
	 	$	0.45	 
	On or after July 31, 2009 but on or prior to December 30,
2009
	 	$	4.00	 
	On or after December 31, 2009 but on or prior to February
28, 2010
	 	$	8.00	 

         (b) The shares of Common Stock for which this Warrant is exercisable shall hereinafter be
referred to collectively as the “Warrant Shares.”

     3. Exercise of Warrant.

          (a) Method of Exercise. The Holder hereof may exercise this Warrant, in whole or in
part during the Exercise Period by the surrender of this Warrant (with the exercise form attached
hereto duly executed) at the principal office of the Company, and by the payment to the Company 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,
wire transfer of immediately available funds to a bank account specified by the Company, the
cancellation by the Holder of indebtedness or other obligations of the Company to the Holder, (ii)
by “cashless exercise” in accordance with the provisions of subsection (b) of this Section 3, or
(iii) by a combination of the foregoing methods of payment selected by the Holder of this Warrant.

          (b) Cashless Exercise. In addition to a cash exercise, to the extent the market value
of one share of Common Stock is greater than the Warrant Exercise 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 Company together with the properly endorsed notice of
exercise in which event the Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:

          

	 	 	 	 	 
	Where:

	 	X =
	 	the number of shares of Common Stock to be issued to the Holder
	 
	 	 	 	 
	 

	 	Y =
	 	the market value of one share of Common Stock as of the close
of the business day preceding the date of exercise

3

 

	 	 	 	 	 
	 

	 	A =
	 	the aggregate exercise price (i.e., the number of shares
being purchased multiplied time the per share strike price under the Warrant)
	 
	 	 	 	 
	 

	 	B =
	 	the aggregate market value of all shares of Common Stock
being purchased by exercise of the warrant as of the close of the business day
preceding the date of exercise.

          (c) Cashless Exercise with Share Withholding for Tax. In addition to a cash exercise
and a cashless exercise, to the extent the market value of one share of Common Stock is greater
than the Warrant Exercise Price (at the date of calculation as set forth below), the Holder may
exercise this Warrant by a cashless exercise with share withholding for tax 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 Company together with the properly endorsed notice of
exercise in which event the Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:

          

	 	 	 	 	 
	Where:

	 	X =
	 	the number of shares of Common Stock to be issued to the Holder
	 
	 	 	 	 
	 

	 	Y =
	 	the market value of one share of Common Stock as of the close
of the business day preceding the date of exercise
	 
	 	 	 	 
	 

	 	A =
	 	the aggregate exercise price (i.e., the number of shares
being purchased multiplied time the per share strike price under the Warrant),
plus the amount of money needed to satisfy Holder’s tax obligations with
respect to the exercise, at the Holder’s marginal state and federal income tax
rate (the “Tax Amount”).
	 
	 	 	 	 
	 

	 	B =
	 	the aggregate market value of all shares of Common Stock
being purchased by exercise of the warrant as of the close of the business day
preceding the date of exercise.

     As soon as reasonably practicable following the exercise, the Company shall pay the holder the
amount in cash equal to the Tax Amount.

          (d) Delivery of Stock Certificates. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its surrender for exercise as
provided above, and the person or entity entitled to receive the Warrant Shares issuable upon such
exercise shall be treated for all purposes as the holder of record of such shares as of the close
of business on such date. As promptly as practicable on or after such date and in any event within
ten (10) business days thereafter, the Company at its expense shall issue and deliver to the
person, persons, or entity entitled to receive the same, a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is exercised in part,
the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the

4

 

number of shares for which this Warrant may then be exercised. No adjustments shall be made
on Warrant Shares issuable on the exercise of this Warrant for any cash dividends paid or payable
to holders of record of Common Stock prior to the date as of which the Holder shall be deemed to be
the record holder of such Warrant Shares.

          (e) Adjustment. In the event the Company (i) splits, subdivides, or combines the
Common Stock into a different number of securities of the same class, (ii) pays a stock dividend on
the Common Stock, (iii) reclassifies the Common Stock into the same or a different number of
securities (each, an “Adjustment Event”) then the Exercise Price shall be appropriately adjusted
and this Warrant shall represent the right to acquire such number and the kind of securities that
would have been issued had the Holder exercised this Warrant immediately prior to such an
Adjustment Event.

          (f) Market Stand-Off. In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement filed under the
Securities Act, including the Company’s initial public offering, the Holder shall not sell, make
any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise
dispose or transfer for value or agree to engage in any of the foregoing transactions with respect
to this Warrant or Common Stock issued upon exercise of this Warrant without the prior written
consent of the Company or its underwriters, for such period of time after the effective date of
such registration statement as may be requested by the Company or such underwriters (not to exceed
one hundred eighty (180) days); provided, however, that all executive officers and
directors of the Company then holding Common Stock enter into similar agreements. This Section
3(f) shall only remain in effect for the two-year period following the effective date of the
Company’s initial public offering. In the event of any stock dividend, stock split,
recapitalization, or other change affecting the Company’s outstanding Common Stock effected without
receipt of consideration, then any new, substituted, or additional securities distributed with
respect to this Warrant or securities issued upon conversion of this Warrant shall be immediately
subject to the provisions of this Section 3(f). It is expressly understood and agreed that the
restrictions imposed by this Section 3(f) shall only apply to the extent the underwriter selected
by Company requests that a provision comparable to that set forth in this Section 3(f) be imposed
upon the Warrant.

     4. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal
to the Exercise Price multiplied by such fraction.

     5. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss,
theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and
substance to the Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new
warrant of like tenor and amount.

     6. Rights as Shareholder. The Holder shall not be entitled to vote or receive
dividends or be deemed the holder of Common Stock or any other securities of the Company that

5

 

may at any time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate
action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of
par value, or change of stock to no par value, consolidation, merger, conveyance, or otherwise) or
to receive notice of meetings, or to receive dividends or subscription rights or otherwise until
the Warrant shall have been exercised as provided herein.

     7. Transfer of Warrant.

          (a) Warrant Register. The Company will maintain a register (the “Warrant Register”)
containing the names and addresses of the Holder or Holders. Any Holder of this Warrant or any
portion thereof may change this address as shown on the Warrant Register by written notice to the
Company requesting such change. Any notice or written communication required or permitted to be
given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant
Register and at the address shown on the Warrant Register. Until this Warrant is transferred on
the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the
contrary.

          (b) Warrant Agent. The Company may, by written notice to the Holder, appoint an agent
for the purpose of maintaining the Warrant Register referred to in Section 7(a) hereof, issuing the
Warrant Shares or other securities then issuable upon the exercise of this Warrant, exchanging this
Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter, any such
registration, issuance, exchange, or replacement, as the case may be, shall be made at the office
of such agent.

          (c) Transferability and Nonnegotiability of Warrant. This Warrant may not be offered,
sold, transferred or otherwise disposed of for value. With respect to any permissible offer, sale
or other disposition of this Warrant or securities into which this Warrant may be converted, the
Holder will give written notice to the Company prior thereto, describing briefly the manner
thereof. Unless the Company reasonably determines that such transfer would violate applicable
securities laws, or that such transfer would adversely affect the Company’s ability to account for
future transactions to which it is a party as a pooling of interests, and notifies the Holder
thereof within ten (10) business days after receiving notice of the transfer, the Holder may effect
such transfer. Each Warrant thus transferred and each certificate representing the securities thus
transferred shall bear a legend as to the applicable restrictions on transferability in order to
ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act. The Company may
issue stop transfer instructions to its transfer agent in connection with such restrictions.

          (d) Exchange of Warrant Upon a Transfer. On surrender of this Warrant for exchange,
properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect
to compliance with the Securities Act and with the limitations on assignments and transfers and
contained in this Section 7, the Company at its expense shall issue

6

 

to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the
Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for
the number of shares issuable upon exercise hereof.

          (e) Compliance with Securities Laws.

               (i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the
Warrant Shares 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 Warrant Shares to be issued upon exercise
hereof except under circumstances that will not result in a violation of the Securities Act or any
applicable state securities laws.

               (ii) This Warrant and all certificates representing the Warrant Shares issued upon exercise
hereof or conversion thereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES AND ANY
SECURITIES OR SHARES ISSUED HEREUNDER MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THERE FROM UNDER
SAID ACT.

               (iii) The Company agrees to remove promptly, upon the request of the holder of this Warrant
and Securities issuable upon exercise of the Warrant, the legend set forth in Section 7(e)(ii)
hereof from the documents/certificates for such securities upon full compliance with this Agreement
and Rules 144 and 145.

     8. Notices.

          (a) In case:

               (i) the Company shall take a record of the holders of its Common Stock (or other stock or
securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling
them to receive any dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other right;

               (ii) of any capital reorganization of the Company, any reclassification of the capital stock
of the Company, any consolidation or merger of the Company with or into another corporation
(subject to Section 8(b) below), or any conveyance of all or substantially all of the assets of the
Company to another corporation;

               (iii) of any voluntary dissolution, liquidation or winding-up of the Company;

7

 

               (iv) of any redemption of all outstanding Common Stock; or

               (v) of the filing of the Company’s first registration statement with the U.S. Securities and
Exchange Commission (the “SEC”); then, and in each such case, the Company will mail or cause to be
mailed to the Holder or Holders a notice specifying, as the case may be, (A) the date on which a
record is to be taken for the purpose of such dividend, distribution or right, and stating the
amount and character of such dividend, distribution or right, (B) the date on which such
reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock (or such stock or securities at the time receivable
upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up, or (C) the anticipated date on which the Company expects its first registration
statement with the SEC to become effective. Such notice shall be mailed at least fifteen (15) days
prior to the date therein specified.

          (b) Notwithstanding Section 8(a) above, the Holder hereby: (i) waives its right to any notice
that may otherwise be required to be delivered by the Company pursuant to this Warrant if a
wholly-owned subsidiary of a company subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (“PubCo”), merges with, and into the Company,
whereby, following such Merger, the security holders of the Company become security holders of
PubCo and the Company becomes a wholly-owned subsidiary of PubCo (a “Reverse Merger”), and (ii)
assuming the Reverse Merger is consummated, consents to the assumption of the Warrant by PubCo and
all obligations hereunder so long as lawful and adequate provisions are made whereby the Holder
hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Common
Stock immediately theretofore purchasable and receivable upon the exercise of the rights
represented hereby), at the same aggregate exercise price, such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such Common Stock
immediately theretofore purchasable and receivable upon the exercise of the rights represented
hereby. In any Reverse Merger, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the number of shares
purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof.

          (c) All notices and other communications required or permitted hereunder shall be effective
upon receipt and shall be in writing and may be delivered in person, by telecopy, electronic mail,
overnight delivery service or three (3) business days after deposit if deposited in the United
States mail for mailing by first-class, certified mail, postage prepaid, and addressed (i) if to
the Holder, at such Holder’s address as set forth on the signature page hereto or as such Holder
shall have furnished to the Company in writing; or (ii) if to the Company, at its address set forth
on the signature page hereto, or at such other address as the Company shall have furnished to the
Holder in writing.

8

 

     9. Amendments. Any provision of this Warrant may be amended, waived or modified
(either generally or in a particular instance, either retroactively or prospectively and either for
a specified period of time or indefinitely), upon the written consent of the Company and the
Holder.

     10. Covenants of the Company.

          (a) Covenants as to the Exercise of Shares. The Company covenants and agrees that all Warrant
Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued and outstanding, fully paid and non-assessable, and free from all
taxes, liens and charges with respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise Period, have authorized and reserved,
free from preemptive rights, a sufficient number of shares of its Common Stock to provide for the
exercise of the rights represented by this Warrant. If at any time during the Exercise Period the
number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise
of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.

          (b) No Impairment. Except and to the extent as waived or consented to by the Holder, the
Company will not, by amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such action as may be
necessary or appropriate in order to protect the exercise rights of the Holder against impairment.

     11. Representations and Covenants of Holder. This Warrant has been entered into by
the Company in reliance upon the representations and covenants of the Holder below. The Holder
hereby represents and warrants to the Company the following:

          (a) The Holder is acquiring this Warrant for investment for Holder’s own account only, not as
a nominee or agent, and not with a view to, or for resale in connection with, any “distribution” of
any part thereof within the meaning of the Securities Act. The Holder has no present intention of
selling, granting any participation in, or otherwise distributing this Warrant or the Warrant
Shares. The Holder hereby represents and warrants to the Company that the entire legal and
beneficial interest of this Warrant will be held for Holder’s account only, and neither in whole or
in part for any other person. The Holder further hereby represents and warrants to the Company
that the Holder has no present contract, undertaking, agreement or arrangement with any person to
sell, transfer, or grant participation to such person or to any third person, with respect to this
Warrant or the Warrant Shares to be issued following exercise of this Warrant.

9

 

          (b) The Holder is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire this Warrant and the Warrant Shares.

          (c) The Holder understands and hereby acknowledges that the issuance of the Warrant and
Warrant Shares is being effected by the Company without registration under the Securities Act on
the basis of the fact that the issuance of the Warrant is exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to an exemption therefrom under
Section 4(2) of the Securities Act and in reliance upon Regulation D promulgated thereunder, and
that Company’s reliance upon such exemption is predicated upon, among other things, the
representations and warranties of the Holder to the Company set forth herein.

          (d) The Holder hereby represents and warrants to the Company that the Holder either has a
preexisting personal or business relationship with the Company or any of its partners, officers,
directors or controlling persons, or by reason of the Holder’s business or financial experience or
the business or financial experience of the Holder’s professional advisers who are unaffiliated
with and who are not compensated by the Company or any affiliate or selling agent of the Company,
directly or indirectly, has the capacity to protect the Holder’s own interests in connection with
the Holder’s investment in the Warrants and the Warrant Shares to be issued upon exercise of the
Warrant.

          (e) The Holder hereby further represents and warrants to the Company that (i) the Holder has
such knowledge and experience in financial and business matters (either directly or by reason of an
adviser as described above in Section 11(d)) so as to be capable of evaluating the merits and risks
of Holder’s prospective investment in the Warrant and the Warrant Shares to be issued upon exercise
of the Warrant, (ii) the Holder has received all of the information Holder has requested from the
Company that Holder considers necessary or appropriate for determining whether to accept the
Warrant, (iii)  the Holder has the ability to bear the economic risks of Holder’s prospective
investment in the Warrant Shares, and (iv) Holder is able, without materially impairing its
financial condition, to hold the Warrant and the Warrant Shares for an indefinite period of time
and to suffer complete loss on its investment in the Warrant Shares.

          (f) The Holder understands and hereby acknowledges that (i) the Warrant and the Warrant Shares
must be held indefinitely unless subsequently registered under the Securities Act or an exemption
from the registration and prospectus delivery requirements of the Securities Act is available with
respect to any sale or other disposition of such Warrant or Warrant Shares, and (ii) the Company is
not under any obligation to register such Warrant or Warrant Shares to be issued to the Holder at
any time.

          (g) The Holder is familiar with the provisions of Rule 144, promulgated under the Securities
Act, which in substance permits limited public resale of “restricted securities” acquired directly
or indirectly from the issuer thereof (or from an affiliate of such issuer) in a non-public
offering subject to the satisfaction of certain conditions, including, among other things: (i) the
availability of certain public information about the issuer of such “restricted securities,”
(ii) the resale occurring not less than one year after the holder of such “restricted

10

 

securities” has purchased and made full payment for (within the meaning of Rule 144) the
“restricted securities” to be sold, (iii) the sale being made through a broker in an unsolicited
“broker transaction” or in transactions directly with a market maker (as said term is defined under
the Securities Act), (iv) the amount of “restricted securities” being sold during any three month
period not exceeding the greater of (a) one percent (1%) of the outstanding shares of the same
class of securities as the “restricted securities” to be sold, as shown by the most recent report
or statement of the issuer, or (b) the average weekly reported volume of trading in shares of the
same class of securities as the “restricted securities” to be sold on all national securities
exchanges and/or reported through the automated quotation system of a registered securities
association during the four calendar weeks preceding the filing of notice of proposed sale, if
applicable and (v) the timely filing of a Form 144, if applicable. Holder further understands and
hereby acknowledges that, at the time Holder wishes to sell the Warrant Shares to be issued to the
Holder in connection with exercise of the Warrant, there may be no public trading market upon which
to make such a sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that, in such event, the
Holder would be precluded from selling the Warrant Shares issued to Holder in connection with
exercise of the Warrant under Rule 144, even if the one year minimum holding period had been
satisfied. The Holder further understands and hereby acknowledges that, in the event that all of
the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act or
some other exemption from the registration and prospectus delivery requirements of the Securities
Act would be required to sell the Warrant Shares to be issued to Holder in connection with exercise
of the Warrant.

          (h) The Holder is an “accredited investor” as such term is defined in Regulation D promulgated
under the Securities Act.

     12. Miscellaneous.

          (a) This Warrant shall be governed by and construed in accordance with California law, without
regard to the conflict of laws provisions thereof.

          (b) In the event of a dispute with regard to the interpretation of this Warrant, the
prevailing party may collect the cost of attorney’s fees, litigation expenses or such other
expenses as may be incurred in the enforcement of the prevailing party’s rights hereunder.

          (c) This Warrant shall be exercisable as provided for herein, except that in the event that
the expiration date of this Warrant shall fall on a Saturday, Sunday and or United States federally
recognized Holiday, this expiration date for this Warrant shall be extended to 5:00 p.m. Pacific
standard time on the business day following such Saturday, Sunday or recognized Holiday.

          (d) Successors and Assigns. All of the provisions contained herein shall be binding
upon, and inure to the benefit of, the heirs, successors and assigns of the parties hereto.

          (e) Binding on Successor Corporation. This Warrant shall not be terminated by (1) the
voluntary or involuntary dissolution of the Company; (2) any merger involving Company, whether or
not it is the surviving or resulting corporation; or (3) any transfer of all or

11

 

substantially all assets of the Company. If any such merger or transfer of assets occurs, this
Warrant shall be binding on and inure to the benefit of the surviving business entity or the
business entity to which such assets are transferred. The Company shall take all actions necessary
to ensure that the surviving business entity or the transferee, as the case may be, is bound by
this Warrant.

          (f) Headings; References. All headings used herein are used for convenience only and
shall not be used to continue or interpret this Warrant. Except as otherwise indicated, all
references herein to Sections refer to Sections hereof.

12

 

     IN WITNESS WHEREOF, NovaRay, Inc. has caused this Warrant to be executed by its officers
thereunto duly authorized.

     Dated: December 19, 2007.

	 	 	 	 	 	 	 	 	 
	 	 	THE “COMPANY”	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	NOVARAY, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Jack Price	 	 
	 	 	 	 	 	 	 
	 	 	Name:	 	Jack Price	 	 
	 	 	Title:	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address:	 	1850 Embarcadero Road

Palo Alto, CA 94303	 	 
	 	 	Telephone:	 	(650) 332-7337	 	 
	 	 	Facsimile:	 	(650) 565-8601	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	THE “HOLDER”	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TRIPLE RING TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Joseph Heanue	 	 
	 	 	 	 	 	 	 
	 	 	Name:	 	Joseph Heanue	 	 
	 	 	Title:	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address:	 	1850 Embarcadero Road

Palo Alto, CA 94303	 	 
	 	 	Telephone:	 	(650) 331-3476	 	 
	 	 	Facsimile:	 	(650) 887-2205	 	 

 

 

NOTICE OF EXERCISE

     To: NOVARAY, INC.

     1. The undersigned hereby elects to purchase                      shares of Common Stock of NOVARAY,
INC., pursuant to the terms of the attached Warrant, and o tenders herewith payment of the purchase
price for such shares in full,
o elects the Cashless Exercise option, or elects the Cashless
Exercise with Share Withholding for Tax.

     2. In exercising this Warrant, the undersigned hereby confirms and acknowledges that the
shares of Common Stock to be issued upon exercise thereof are being acquired solely for the account
of the undersigned and not as a nominee for any other party, or for investment, and that the
undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except
under circumstances that will not result in a violation of the Securities Act of 1933, as amended,
or any applicable state securities laws.

     3. Please issue a certificate or certificates representing said shares of Common Stock in the
name of the undersigned or in such other name as is specified below:

	 	 	 	 	 
	 

	 	 

	 	 
	 

	 	(Name)	 	 

     4. Please issue a new Warrant for the unexercised portion of the attached Warrant in the name
of the undersigned or in such other name as is specified below:

	 	 	 	 	 
	 

	 	 

	 	 
	 

	 	(Name)	 	 

 

 

ADDENDUM A

     Exercise Schedule:

     To the extent exercisable under its terms, the Holder hereby irrevocably elects to exercise
the Warrant (the “Exercise Period”) only on any date during the earlier of: (i) the calendar
year(s) elected by the Grantee below; or (ii) the calendar year in which the Company undergoes a
transaction which constitutes a “change in the ownership or effective control, or in the ownership
of a substantial portion of the assets” (within the meaning of Code Section 409A) of the Company
(“Change of Control”) (except to the extent such calendar year is also the calendar year elected by
the Holder below with respect to the Shares). With respect to any exercise of the Option by the
Grantee during the calendar year in which a Change of Control has occurred, the Grantee may
exercise the Option no earlier than immediately prior to the effective date of such Change of
Control.

	 	 	 
	Shares	 	Fixed Exercise Date
	1. 111,000 shares
	 	calendar year 2010
	2. 333,000 shares
	 	calendar year 2011exv10w6

 

Exhibit 10.6

	 	 	 
	 
	 	November 21, 2007

STRICTLY CONFIDENTIAL

Mr. Marc C. Whyte

Chief Executive Officer

NovaRay, Inc.

1850 Embarcadero Road

Palo Alto, CA 94303

Dear Mr. Whyte:

     This letter (the “Agreement”) constitutes the agreement between NovaRay, Inc. (the “Company”)
and Rodman & Renshaw, LLC (“Rodman”) and terminates all obligations of the parties pursuant to the
Letter Agreement dated August 28, 2006 and the Placement Agency Agreement dated March 21, 2007
(“Previous Agreements”) and is replaced by this Agreement. No sections of the Previous Agreements
shall survive the termination of the Previous Agreements and no sections of the Previous Agreements
shall be of any further force or effect. Rodman shall serve as a placement agent (the “Services”)
for the Company, on a “best efforts” basis, in connection with the proposed offer and placement by
Pubco (as defined below) of Series A Preferred Stock (the “Series A Preferred”) and warrants to
purchase common stock (the “Warrants” and together with the Series A Preferred, collectively, the
“Securities”) with aggregate gross proceeds to the Company (through PubCo) of not less than $12
million or more than $17 million (the “Offering”). The closing of the Offering will occur
simultaneously with the Company’s combination through merger or reverse merger (the “Merger”) with
a wholly-owned subsidiary of a publicly traded company (“PubCo”). The terms of the Offering and the
Securities shall be mutually agreed upon by the Company and the investors and nothing herein
implies that Rodman would have the power or authority to bind the Company or an obligation for the
Company to issue any Securities or complete the Offering. The Company expressly acknowledges and
agrees that Rodman’s obligations hereunder are on a reasonable best efforts basis only and that the
execution of this Agreement does not constitute a commitment by Rodman to purchase the Securities
and does not ensure the successful placement of the Securities or any portion thereof or the
success of Rodman with respect to securing any other financing on behalf of the Company.

     A. Fees and Expenses. In connection with the Services described above, the Company shall pay
to Rodman the following compensation (collectively, the “Placement Agent’s Compensation”):

          1. Placement Agent’s Fee. The Company shall cause PubCo to pay to Rodman a cash placement fee
(the “Placement Agent’s Fee”) equal to 7% of the aggregate purchase price paid by the purchasers
of Securities that Rodman first introduced to the Company (“Rodman Investor”) in the Offering. The
Placement Agent’s Fee will be deducted at the closing of the Offering (the “Closing”) from the
gross proceeds of the Securities sold to a Rodman Investor.

          2. Warrants. As additional compensation for the Services, if Rodman Investors purchase
Securities in this Offering, the Company shall cause the PubCo to issue to Rodman or its

1270 Avenue of the Americas, 16th Floor

New York, NY 10020

 

 

designees at the closing of the Offering (the “Closing”), warrants (the “Rodman Warrants”) to purchase that
number of shares of common stock of PubCo equal to 7% of the aggregate dollar amount actually
invested by Rodman Investors divided by the exercise price for the Warrants issued to all of
the investors in the Offering. The Rodman Warrants shall have the same terms, including exercise
price and registration rights as the Warrants issued to all the investors in the Offering.

          3. Expenses. In addition to any fees payable to Rodman hereunder, but only if an Offering is
consummated, the Company hereby agrees to reimburse Rodman for all reasonable travel and other
out-of-pocket expenses incurred in connection with Rodman’s engagement, including the reasonable
fees and expenses of Rodman’s counsel. Such reimbursement shall be limited to $20,000 without
prior written approval by the Company.

     B. Term and Termination of Engagement. The term (the “Term”) of Rodman’s engagement will
begin on the date hereof and end on the earlier of the consummation of the Offering or 15 days
after the receipt by either party hereto of written notice of termination; provided that no such
notice may be given by the Company for a period of 60 days after the date hereof. Notwithstanding
anything to the contrary contained herein, the provisions concerning confidentiality,
indemnification, contribution and the Company’s obligations to pay fees and reimburse expenses
contained herein will survive any expiration or termination of this Agreement.

     C. Fee Tail. Rodman shall be entitled to a Placement Agent’s Fee and Rodman Warrants,
calculated in the manner provided in Paragraph A, with respect to any subsequent public or private
offering or other financing or capital-raising transaction of any kind (“Subsequent Financing”) to
the extent that such financing or capital is provided to the Company (through PubCo) by investors
whom Rodman had introduced, directly or indirectly, to the Company during the Term, if such
Subsequent Financing is consummated at any time within the 18-month period following the expiration
or termination of this Agreement (the “Tail Period”).

     D. Use of Information. The Company will furnish Rodman such written information as Rodman
reasonably requests in connection with the performance of its services hereunder. The Company
understands, acknowledges and agrees that, in performing its services hereunder, Rodman will use
and rely entirely upon such information as well as publicly available information regarding the
Company and PubCo and other potential parties to an Offering and that Rodman does not assume
responsibility for independent verification of the accuracy or completeness of any information,
whether publicly available or otherwise furnished to it, concerning the Company, PubCo or otherwise
relevant to an Offering, including, without limitation, any financial information, forecasts or
projections considered by Rodman in connection with the provision of its services.

     E. Confidentiality. In the event of the consummation or public announcement of any Offering,
Rodman shall have the right to disclose its participation in such Offering, including, without
limitation, the placement at its cost of “tombstone” advertisements in financial and other
newspapers and journals. Rodman agrees not to use any confidential information concerning the
Company provided to Rodman by the Company for any purposes other than those contemplated under this
Agreement.

     F. Securities Matters. The Company shall be responsible for any and all compliance with the
securities laws applicable to it, including Regulation D and the Securities Act of 1933 (the
“Act”), and Rule 506 promulgated thereunder, and unless otherwise agreed in writing, all state
securities (“blue sky”) laws. Rodman agrees to cooperate with counsel to the Company in that
regard.

     G. Indemnity.

2

 

          1. The Company will (i) indemnify and hold harmless Rodman, its dealers and its officers,
directors, employees and each person, if any, who controls Rodman and such selected dealers
within the meaning of the Act (each an “Indemnitee”) against, and pay or reimburse each
Indemnitee for, any and all losses, claims, damages, liabilities or expenses whatsoever (or actions
or proceedings or investigations in respect thereof), joint or several (which will, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys’ fees, including appeals), to which any Indemnitee may
become subject, under the Act or otherwise, in connection with the offer and sale of the
Securities, whether such losses, claims, damages, liabilities or expenses shall result from any
claim of any Indemnitee or any third party; and (ii) reimburse each Indemnitee for any legal or
other expenses reasonably incurred in connection with investigating or defending against any such
loss, claim, action, proceeding or investigation; provided, however, that the Company will not be
liable in any such case to the extent that any such claim, damage or liability results from (A) an
untrue statement or alleged untrue statement of a material fact made in documents approved in
writing by the Company that Rodman may use on the Company’s behalf to sell the Securities (the
“Offering Documents”), or an omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading, in reliance upon
and in conformity with written information furnished to the Company by Rodman or any such
controlling persons specifically for use in the preparation thereof, or (B) any violations by
Rodman of the Act or state securities laws which does not result from a violation thereof or a
breach hereof by the Company or any of its affiliates. In addition to the foregoing agreement to
indemnify and reimburse, the Company will indemnify and hold harmless each Indemnitee against any
and all losses, claims, damages, liabilities or expenses (“Claims”) whatsoever (or actions or
proceedings or investigations in respect thereof), joint or several (which shall for all purposes
of this Agreement, include, but not be limited to, all costs of defense and investigation and all
reasonable attorneys’ fees, including appeals) to which any Indemnitee may become subject insofar
as such costs, expenses, losses, claims, damages or liabilities arise out of or are based upon the
claim of any person or entity that he or it is entitled to broker’s or finder’s fees from any
Indemnitee in connection with the Offering, provided, however, the foregoing shall not apply to any
Claim solely in connection with Rodman’s engagement of a sub-agent or dealer selected by Rodman.
Notwithstanding the foregoing, in no case shall the Company have any liability to any Indemnitee
for the gross negligence, fraud or willful misconduct of any Indemnitee.

          2. Rodman will indemnify and hold harmless the Company, its officers, directors, employees,
and any affiliate of the Company within the meaning of the Act against, and pay or reimburse any
such person for, any and all losses, claims, damages or liabilities or expenses whatsoever (or
actions, proceedings or investigations in respect thereof), joint or several (which will, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys’ fees, including appeals), to which the Company or any
such person may become subject under the Act or otherwise, whether such losses, claims, damages,
liabilities or expenses (or actions, proceedings or investigations in respect thereof) shall result
from any claim of the Company, any of its officers, directors, employees, agents or affiliates of
the Company within the meaning of the Act or any third party, insofar as such losses, claims,
damages or liabilities are based upon (i) the gross negligence, willful misconduct or fraud of any
Indemnitee, or (ii) any untrue statement or alleged untrue statement of any material fact contained
the Offering Documents but only with reference to information contained in such the Offering
Documents relating to Rodman, or an omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading, if made
or omitted in reliance upon and in conformity with written information furnished to the Company by
Rodman or any such controlling persons, specifically for use in the preparation thereof. Rodman
will reimburse the Company or any such person for any legal or other expenses reasonably incurred
(including appeals) in connection with investigating or defending against any such loss, claim,
damage, liability or action, proceeding or investigation to which such indemnity obligation
applies. Notwithstanding the foregoing, (i) in no case shall Rodman have any liability to any
person under this

3

 

Section G(2) for the gross negligence, fraud or willful misconduct of the Company
or any person entitled to indemnification hereunder and (ii) in no event shall Rodman’s indemnification obligation
hereunder exceed the fees payable to it hereunder.

     3. Promptly after receipt by an indemnified party under this Section G of notice of the
commencement of any action, claim, proceeding or investigation (“Action”), such indemnified party,
if a claim in respect thereof is to be made against the indemnifying party under this Section G,
will notify the indemnifying party of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to any indemnified
party under this Section G unless the indemnifying party has been substantially prejudiced by such
omission. The indemnifying party will be entitled to participate in, and, to the extent that it
may wish, jointly with any other indemnifying party, to assume the defense thereof subject to the
provisions herein stated, with counsel reasonably satisfactory to such indemnified party. The
indemnified party will have the right to employ separate counsel in any such Action and to
participate in the defense thereof, but the fees and expenses of such counsel will not be at the
expense of the indemnifying party if the indemnifying party has assumed the defense of the Action
with counsel reasonably satisfactory to the indemnified party; provided, however, that if the
indemnified party shall be requested by the indemnifying party to participate in the defense
thereof or counsel to the indemnified party shall have reasonably concluded in good faith and
specifically notified the indemnifying party either that there may be specific defenses available
to it which are different from or additional to those available to the indemnifying party or that
having common counsel would present such counsel with a conflict of interest, then the counsel
representing it, to the extent made necessary by such defenses, shall have the right to direct such
defenses of such Action on its behalf and in such case the reasonable fees and expenses of such
counsel in connection with any such participation or defenses shall be paid by the indemnifying
party. No settlement of any Action against an indemnified party will be made without the consent
of the indemnifying party and the indemnified party, which consent shall not be unreasonably
withheld or delayed in light of all factors of importance to such party and no indemnifying party
shall be liable to indemnify any person for any settlement of any such claim effected without such
indemnifying party’s consent.

     H. Contribution. To provide for just and equitable contribution, if (i) an indemnified party
makes a claim for indemnification pursuant to Section F hereof and it is finally determined, by a
judgment, order or decree not subject to further appeal that such claims for indemnification may
not be enforced, even though this Agreement expressly provides for indemnification in such case; or
(ii) any indemnified or indemnifying party seeks contribution under the Act, the Securities Act of
1934, as amended (the “34 Act”), or otherwise, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the Company on the one hand
and Rodman on the other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the Company on the one
hand and Rodman on the other shall be deemed to be in the same proportion as the total net proceeds
from the Offering (before deducting expenses) received by the Company bear to the total commissions
and fees received by Rodman. Notwithstanding the foregoing, in no event shall Rodman’s aggregate
indemnification and contribution obligation hereunder exceed the fees payable to it hereunder. The
relative fault, in the case of an untrue statement, alleged untrue statement, omission or alleged
omission will be determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company or by Rodman, and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such statement, alleged statement, omission or alleged omission. The Company and Rodman agree that
it would be unjust and inequitable if the respective obligations of the

4

 

Company and Rodman for contribution were determined by pro rata allocation of the aggregate losses,
liabilities, claims, damages and expenses or by any other method or allocation that does not
reflect the equitable considerations referred to in this Section H. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to
contribution from any person who is not guilty of such fraudulent misrepresentation. For purposes
of this Section H, each person, if any, who controls Rodman within the meaning of the Act will have
the same rights to contribution as Rodman, and each person, if any, who controls the Company within
the meaning of the Act will have the same rights to contribution as the Company, subject in each
case to the provisions of this Section H. Anything in this Section H to the contrary
notwithstanding, no party will be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This Section H is intended to supersede, to
the extent permitted by law, any right to contribution under the Act, the 1934 Act or otherwise
available.

     I. Limitation of Engagement to the Company. The Company acknowledges that Rodman has been
retained only by the Company, that Rodman is providing services hereunder as an independent
contractor (and not in any fiduciary or agency capacity) and that the Company’s engagement of
Rodman is not deemed to be on behalf of, and is not intended to confer rights upon, any
shareholder, owner or partner of the Company or any other person not a party hereto as against
Rodman or any of its affiliates, or any of its or their respective officers, directors, controlling
persons (within the meaning of Section 15 of the Act or Section 20 of the 34 Act), employees or
agents. Unless otherwise expressly agreed in writing by Rodman, no one other than the Company is
authorized to rely upon this Agreement or any other statements or conduct of Rodman, and no one
other than the Company is intended to be a beneficiary of this Agreement. The Company acknowledges
that any recommendation or advice, written or oral, given by Rodman to the Company in connection
with Rodman’s engagement is intended solely for the benefit and use of the Company’s management and
directors in considering a possible Offering, and any such recommendation or advice is not on
behalf of, and shall not confer any rights or remedies upon, any other person or be used or relied
upon for any other purpose. Rodman shall not have the authority to make any commitment binding on
the Company. The Company, in its sole discretion, shall have the right to reject any investor
introduced to it by Rodman. The Company agrees that it will perform and comply with the covenants
and other obligations set forth in the purchase agreement and related transaction documents between
the Company and the investors in the Offering, and that Rodman will be entitled to rely on the
representations, warranties, agreements and covenants of the Company contained in such purchase
agreement and related transaction documents as if such representations, warranties, agreements and
covenants were made directly to Rodman by the Company.

     J. Limitation of Rodman’s Liability to the Company. Except as otherwise provided in this
Agreement, Rodman and the Company further agree that neither Rodman nor any of its affiliates or
any of its their respective officers, directors, controlling persons (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act of 1934), employees or agents shall have any
liability to the Company, its security holders or creditors, or any person asserting claims on
behalf of or in the right of the Company (whether direct or indirect, in contract, tort, for an act
of negligence or otherwise) for any losses, fees, damages, liabilities, costs, expenses or
equitable relief arising out of or relating to this Agreement or the Services rendered hereunder,
except for losses, fees, damages, liabilities, costs or expenses that arise out of or are based on
any action of or failure to act by Rodman and that are finally judicially determined to have
resulted solely from the gross negligence or willful misconduct, including, without limitation,
fraud, of Rodman.

     K. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be fully performed therein. Any
disputes which arise under this Agreement, even after the termination of this Agreement, will be
heard

5

 

only in the state or federal courts located in the City of New York, State of New York. The
parties hereto expressly agree to submit themselves to the jurisdiction of the foregoing courts in the City
of New York, State of New York. The parties hereto expressly waive any rights they may have to
contest the jurisdiction, venue or authority of any court sitting in the City and State of New
York. In the event of the bringing of any action, or suit by a party hereto against the other
party hereto, arising out of or relating to this Agreement, the party in whose favor the final
judgment or award shall be entered shall be entitled to have and recover from the other party the
costs and expenses incurred in connection therewith, including its reasonable attorneys’ fees. Any
rights to trial by jury with respect to any such action, proceeding or suit are hereby waived by
Rodman and the Company.

     L. Notices. All notices hereunder will be in writing and sent by certified mail, hand
delivery, overnight delivery or telefax, if sent to Rodman, to Rodman & Renshaw, LLC, 1270 Avenue
of the Americas, 16th Floor, New York, NY 10020, Telefax number (212) 356-0536, Attention: Thomas
Pinou, and if sent to the Company, to NovaRay, Inc., 1850 Embarcadero Road, Palo Alto, CA 94303,
Telefax number 650 565-8601, Attention: Marc Whyte. Notices sent by certified mail shall be deemed
received five days thereafter, notices sent by hand delivery or overnight delivery shall be deemed
received on the date of the relevant written record of receipt, and notices delivered by telefax
shall be deemed received as of the date and time printed thereon by the telefax machine.

     M. Miscellaneous. This Agreement shall not be modified or amended except in writing signed by
Rodman and the Company. This Agreement shall be binding upon and inure to the benefit of both
Rodman and the Company and their respective assigns, successors, and legal representatives. This
Agreement constitutes the entire agreement of Rodman and the Company with respect to the subject
matter hereof and supersedes any prior agreements, including, but not limited to, the Previous
Agreements. If any provision of this Agreement is determined to be invalid or unenforceable in any
respect, such determination will not affect such provision in any other respect, and the remainder
of the Agreement shall remain in full force and effect. This Agreement may be executed in
counterparts (including facsimile counterparts), each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.

6

 

     In acknowledgment that the foregoing correctly sets forth the understanding reached by Rodman
and the Company, please sign in the space provided below, whereupon this letter shall constitute a
binding Agreement as of the date indicated above.

	 	 	 	 	 
	 	

Very truly yours,

RODMAN & RENSHAW, LLC

 	 
	 	By  	/s/
Tom Pinou
	 
	 	 	Name:  	Tom Pinou 	 
	 	 	Title:  	Chief Financial Officer	 
	 

	 	 	 	 	 
	Accepted and Agreed:

NOVARAY, INC.

 	 	 
	By  	/s/
Marc C. Whyte	 	 
	 	Name:  	Marc C. Whyte 	 	 
	 	Title:  	CEO 	 	 
	 

7

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