November 21, 2007
Exhibit 10.6
| November 21, 2007 |
STRICTLY CONFIDENTIAL
Xx. Xxxx X. Xxxxx
Chief Executive Officer
NovaRay, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Chief Executive Officer
NovaRay, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Dear Xx. Xxxxx:
This letter (the “Agreement”) constitutes the agreement between NovaRay, Inc. (the “Company”)
and Xxxxxx & Xxxxxxx, LLC (“Xxxxxx”) 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. Xxxxxx 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 Xxxxxx 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 Xxxxxx’x obligations hereunder are on a reasonable best efforts basis only and that the
execution of this Agreement does not constitute a commitment by Xxxxxx to purchase the Securities
and does not ensure the successful placement of the Securities or any portion thereof or the
success of Xxxxxx 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 Xxxxxx 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 Xxxxxx first introduced to the Company (“Xxxxxx 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 Xxxxxx Investor.
2. Warrants. As additional compensation for the Services, if Xxxxxx Investors purchase
Securities in this Offering, the Company shall cause the PubCo to issue to Xxxxxx or its
1270 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Xxx Xxxx, XX 00000
designees at the closing of the Offering (the “Closing”), warrants (the “Xxxxxx Warrants”) to purchase that
number of shares of common stock of PubCo equal to 7% of the aggregate dollar amount actually
invested by Xxxxxx Investors divided by the exercise price for the Warrants issued to all of
the investors in the Offering. The Xxxxxx 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 Xxxxxx hereunder, but only if an Offering is
consummated, the Company hereby agrees to reimburse Xxxxxx for all reasonable travel and other
out-of-pocket expenses incurred in connection with Xxxxxx’x engagement, including the reasonable
fees and expenses of Xxxxxx’x 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 Xxxxxx’x 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. Xxxxxx shall be entitled to a Placement Agent’s Fee and Xxxxxx 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 Xxxxxx 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 Xxxxxx
reasonably requests in connection with the performance of its services hereunder. The Company
understands, acknowledges and agrees that, in performing its services hereunder, Xxxxxx 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 Xxxxxx 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 Xxxxxx in connection with the provision of its services.
E. Confidentiality. In the event of the consummation or public announcement of any Offering,
Xxxxxx 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. Xxxxxx agrees not to use any confidential information concerning the
Company provided to Xxxxxx 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. Xxxxxx agrees to cooperate with counsel to the Company in that
regard.
G. Indemnity.
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1. The Company will (i) indemnify and hold harmless Xxxxxx, its dealers and its officers,
directors, employees and each person, if any, who controls Xxxxxx 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 Xxxxxx 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 Xxxxxx or any such
controlling persons specifically for use in the preparation thereof, or (B) any violations by
Xxxxxx 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 Xxxxxx’x engagement of a sub-agent or dealer selected by Xxxxxx.
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. Xxxxxx 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 Xxxxxx, 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
Xxxxxx or any such controlling persons, specifically for use in the preparation thereof. Xxxxxx
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 Xxxxxx have any liability to any
person under this
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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 Xxxxxx’x 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 Xxxxxx 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 Xxxxxx 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 Xxxxxx. Notwithstanding the foregoing, in no event shall Xxxxxx’x 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 Xxxxxx, 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 Xxxxxx agree that
it would be unjust and inequitable if the respective obligations of the
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Company and Xxxxxx 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 Xxxxxx within the meaning of the Act will have
the same rights to contribution as Xxxxxx, 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 Xxxxxx has been
retained only by the Company, that Xxxxxx is providing services hereunder as an independent
contractor (and not in any fiduciary or agency capacity) and that the Company’s engagement of
Xxxxxx 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
Xxxxxx 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 Xxxxxx, no one other than the Company is
authorized to rely upon this Agreement or any other statements or conduct of Xxxxxx, 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 Xxxxxx to the Company in connection
with Xxxxxx’x 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. Xxxxxx 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 Xxxxxx. 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 Xxxxxx 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 Xxxxxx by the Company.
J. Limitation of Xxxxxx’x Liability to the Company. Except as otherwise provided in this
Agreement, Xxxxxx and the Company further agree that neither Xxxxxx 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 Xxxxxx and that are finally judicially determined to have
resulted solely from the gross negligence or willful misconduct, including, without limitation,
fraud, of Xxxxxx.
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
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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
Xxxxxx 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 Xxxxxx, to Xxxxxx & Xxxxxxx, LLC, 0000 Xxxxxx
xx xxx Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, Telefax number (000) 000-0000, Attention: Xxxxxx
Xxxxx, and if sent to the Company, to NovaRay, Inc., 0000 Xxxxxxxxxxx Xxxx, Xxxx Xxxx, XX 00000,
Telefax number 000 000-0000, Attention: Xxxx Xxxxx. 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
Xxxxxx and the Company. This Agreement shall be binding upon and inure to the benefit of both
Xxxxxx and the Company and their respective assigns, successors, and legal representatives. This
Agreement constitutes the entire agreement of Xxxxxx 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.
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In acknowledgment that the foregoing correctly sets forth the understanding reached by Xxxxxx
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, XXXXXX & XXXXXXX, LLC |
||||
| By | /s/ Xxx Xxxxx | |||
| Name: | Xxx Xxxxx | |||
| Title: | Chief Financial Officer | |||
| Accepted and Agreed: NOVARAY, INC. |
||||
| By | /s/ Xxxx X. Xxxxx | |||
| Name: | Xxxx X. Xxxxx | |||
| Title: | CEO | |||
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