EXHIBIT 10.1

 

SUBSCRIPTION AGREEMENT

 

Arch Therapeutics, Inc.

20 William Street, Suite 270

Wellesley, Massachusetts 02481

 

Ladies and Gentlemen:

 

1.                  Subscription. The undersigned (the “Purchaser”), intending
to be legally bound, hereby irrevocably agrees to purchase from Arch
Therapeutics, Inc., a Nevada corporation (the “Company”), the principal amount
of the Company’s 8% Convertible Notes due 2016 (the (“Notes”), in the form of
Exhibit A hereto, at a purchase price equal to 100% of the face amount thereof.
The Notes are convertible into shares of common stock, par value $0.001 per
share, of the Company (the “Common Stock”), at a conversion price of $0.20 per
share, subject to adjustment as specified therein. The shares of Common Stock
issuable upon the conversion of the Notes are hereinafter referred to herein as
the “Conversion Shares.” The Notes and the Conversion Shares are hereinafter
collectively referred to as the “Securities”.

 

2.             The Offering. The Company is conducting a private placement of
the Notes to accredited investors (the “Offering”). This Subscription Agreement
(this “Subscription Agreement”) is one in a series of similar subscription
agreements expected to be entered into pursuant to the Offering. No closing of
the Offering shall occur unless a minimum of $750,000 in aggregate principal
amount of the Notes has been sold in the Offering.

 

3.             Deliveries and Payment. Simultaneously with the execution hereof,
the Purchaser shall deliver to the Company a completed and executed signature
page to this Subscription Agreement. The Notes will be issued and sold by the
Company to the Purchasers at a closing (the “Closing”), to occur on or before
March 13, 2015 (the “Closing Date”). At the Closing, the Company shall issue and
sell to the Purchaser and the Purchaser shall purchase from the Company the
Notes being subscribed for by the Purchaser hereunder. On or before the Closing,
the Purchaser shall make a wire transfer payment in the full amount of the
purchase price for the Notes for which the Purchaser is subscribing in this
Subscription Agreement to be purchased on the Closing to an account specified in
writing by the Company. The funds wired by the Purchaser will be held by the
Company in a non-interest-bearing account until the earliest to occur of (a) the
Closing Date and (b) the rejection of this subscription by the Company. No
escrow account will be established or maintained in connection with the
Offering.

 

4.             Acceptance of Subscription. The Purchaser understands and agrees
that the Company, in its sole discretion, reserves the right to accept or reject
this subscription or any other subscription for Notes, in whole or in part,
notwithstanding prior receipt by the Purchaser of notice of acceptance of this
subscription. The Company shall have no obligation hereunder until the Company
executes and delivers to the Purchaser an executed copy of this Subscription
Agreement. If this subscription is rejected in whole or the Offering is
terminated, all funds received from the Purchaser will be returned without
interest or offset, and this Subscription Agreement shall thereafter be of no
further force or effect. If this subscription is rejected in part, the funds for
the rejected portion of this subscription will be returned without interest or
offset, and this Subscription Agreement will continue in full force and effect
to the extent this subscription was accepted.

 

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Within five (5) calendar days of the Closing, the Company shall deliver to the
Purchaser the Notes purchased by such Purchaser.

 

5.             Representations and Warranties of the Purchaser.

 

The Purchaser hereby acknowledges, represents, warrants, and agrees as follows:

 

(a)                The Purchaser is a validly existing corporation, limited
partnership or limited liability company and has all requisite corporate,
partnership or limited liability company power and authority to invest in the
Securities pursuant to this Agreement;

 

(b)               The execution, delivery and performance by the Purchaser of
this Agreement have been duly authorized and each will constitute the valid and
legally binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally and to
general equity principles;

 

(c)                None of the Securities are registered under the Securities
Act of 1933, as amended (the “Securities Act”), or any state securities laws.
The Purchaser understands that the offering and sale of the Notes is intended to
be exempt from registration under the Securities Act by virtue of Section
4(a)(2) thereof and the provisions of Regulation D (“Regulation D”) as
promulgated by the Securities and Exchange Commission (the “SEC”) thereunder,
based, in part, upon the representations, warranties and agreements of the
Purchaser contained in this Subscription Agreement;

 

(d)               The Securities to be received by the Purchaser hereunder will
be acquired for such Investor’s own account, not as nominee or agent, and not
with a view to the resale or distribution of any part thereof in violation of
the Securities Act, and the Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same in violation
of the Securities Act without prejudice, however, to the Purchaser’s right at
all times to sell or otherwise dispose of all or any part of such Securities in
compliance with applicable federal and state securities laws. The Purchaser is
not a broker-dealer registered with the SEC under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), or an entity engaged in a business that
would require it to be so registered;

 

(e)                The Purchaser acknowledges that it can bear the economic risk
and complete loss of its investment in the Securities and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment contemplated hereby;

 

(f)                Neither the SEC nor any state securities commission or other
regulatory authority has approved the Securities, or passed upon or endorsed the
merits of the Offering or confirmed the accuracy or determined the adequacy of
any information provided by the Company to the Purchaser in connection with the
Offering;

 

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(g)               The Purchaser acknowledges that the Company files reports and
other documents with the SEC pursuant to the requirements of the Securities
Exchange Act of 1934, as amended (the “SEC Documents”), and that the Purchaser
and its Advisers have had access to the SEC Documents. The Purchaser has had an
opportunity to receive all information related to the Company requested by it
and to ask questions of and receive answers from the Company regarding the
Company, its business and the terms and conditions of the offering of the
Securities;

 

(h)               The Purchaser is unaware of, is in no way relying on, and did
not become aware of the Offering through or as a result of, any form of general
solicitation or general advertising;

 

(i)                 The Purchaser has taken no action that would give rise to
any claim by any person for brokerage commissions, finders’ fees or the like
relating to this Subscription Agreement or the transactions contemplated hereby
(other than commissions payable by the Company pursuant to the terms of any
contract to which the Company is a party);

 

(j)                 The Purchaser is aware that an investment in the Company is
subject to substantial risks as disclosed in the SEC Documents;

 

(k)               At the time such Purchaser was offered the Securities, it was,
at the date hereof it is, and on the date of any conversion or sale of the Notes
and/or the Conversion Shares it will be (i) an “accredited investor” as defined
in Rule 501(a) under the Securities Act and (ii) an “institutional investor” as
defined in Financial Industry Regulatory Authority Rule 5110(d)(4)(B). Such
Purchaser is not a registered broker dealer registered under Section 15(a) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or a
member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) or an
entity engaged in the business of being a broker dealer. Either such Purchaser
is not affiliated with any broker dealer registered under Section 15(a) of the
Exchange Act, or a member of FINRA or an entity engaged in the business of being
a broker dealer, or is acquiring the Notes in the ordinary course of business.
Such Purchaser maintains its principal executive office at the location
specified on its signature page hereto;

 

(l)                 Neither the Purchaser, nor any of its affiliates, nor any
person claiming by or through any of them, is subject to any “bad actor”
disqualification specified in Rule 506(d) of Regulation D (a “Disqualification
Event”). The Purchaser undertakes to update the Company in the event that the
Purchaser (or any of its affiliates, or any person claiming by or through any of
them) subsequently becomes subject to a Disqualification Event;

 

(m)             It is understood that the Notes and any certificates
representing the Conversion Shares will bear the following legend:

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND, ACCORDINGLY, MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN
REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II)
SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144, OR (III) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER
MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.

 

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(n)               The Purchaser understands and acknowledges that other
investors may not participate in the Offering.

 

6.             Representations and Warranties of the Company

 

The Company hereby acknowledges, represents, warrants, and agrees as follows:

 

(a)                The Company has the requisite power and authority to enter
into and perform its obligations under this Agreement and the Notes (the
“Transaction Documents”) and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction
Documents and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by the Company’s board of directors
and other than the 8-K Filing (as defined below) and a Form D and any other
filings as may be required by any state securities agencies, no further filing,
consent or authorization is required by the Company, its board of directors or
its stockholders or other governing body. This Agreement has been, and the other
Transaction Documents will be prior to the Closing, duly executed and delivered
by the Company, and each constitutes the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with its respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state
securities law.

 

(b)               As of the Closing, the Company shall have reserved from its
duly authorized capital stock not less than the maximum number of shares of
Common Stock issuable upon conversion of the Notes (without taking into account
any limitations on the conversion of the Notes. The issuance of the Conversion
Shares is duly authorized, and upon conversion in accordance with the Notes, the
Conversion Shares, when issued, will be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights, taxes, liens,
charges and other encumbrances with respect to the issue thereof, with the
holders thereof being entitled to all rights accorded to a holder of Common
Stock. Subject to the accuracy of the representations and warranties of the
Purchaser in this Agreement and the filing with the SEC of a Form D following
the Closing, the offer and issuance by the Company of the Securities is exempt
from registration under the Securities Act of 1933, as amended (the “Act”).

 

(c)                The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Notes and the Conversion Shares will not (i) result in a violation of the
Charter (as defined below) (including, without limitation, any certificates of
designation contained therein) or other organizational documents of the Company
or any of its Subsidiaries, any capital stock of the Company, or Bylaws (as
defined below), (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including, without limitation, federal
and state securities laws and regulations and the rules and regulations of the
OTCQB tier of the OTC Marketplace (the “Principal Market”)) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected except, in the case of
clause (ii) above, for such conflicts, defaults or rights that could not
reasonably be expected to have a Material Adverse Effect (as defined below).

 

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(d)               The Company is not required to obtain any consent from,
authorization or order of, or make any filing or registration with any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under, or contemplated by, the Transaction Documents, in each case, in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain at or
prior to the Closing have been obtained or effected on or prior to the Closing
Date, and neither the Company nor any of its Subsidiaries are aware of any facts
or circumstances which might prevent the Company from obtaining or effecting any
of the registration, application or filings contemplated by the Transaction
Documents. The Company is not in violation of the requirements of the Principal
Market and has no knowledge of any facts or circumstances which could reasonably
lead to delisting or suspension of the Common Stock therefrom in the foreseeable
future.

 

(e)                Since the date of the Company’s most recent audited financial
statements contained in a Form 10-K filed under the Securities Exchange Act of
1934 (a “Form 10-K”), there has been no material adverse change and no material
adverse development in the business, assets, liabilities, properties, operations
(including results thereof), condition (financial or otherwise) or prospects of
the Company or any of its Subsidiaries. Since the date of the Company’s most
recent audited financial statements contained in a Form 10-K, neither the
Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii)
sold any assets, individually or in the aggregate, outside of the ordinary
course of business or (iii) made any capital expenditures, individually or in
the aggregate, outside of the ordinary course of business. Neither the Company
nor any of its Subsidiaries has taken any steps to seek protection pursuant to
any law or statute relating to bankruptcy, insolvency, reorganization,
receivership, liquidation or winding up, nor does the Company or any Subsidiary
have any knowledge or reason to believe that any of their respective creditors
intend to initiate involuntary bankruptcy proceedings or any actual knowledge of
any fact which would reasonably lead a creditor to do so. The Company and its
Subsidiaries, individually and on a consolidated basis, are not as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur
at such Closing, will not be Insolvent (as defined below). For purposes of this
Section 6(e), “Insolvent” means, (I) with respect to the Company and its
Subsidiaries, on a consolidated basis, (i) the present fair saleable value of
the Company’s and its Subsidiaries’ assets is less than the amount required to
pay the Company’s and its Subsidiaries’ total Indebtedness (as defined below),
(ii) the Company and its Subsidiaries are unable to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (iii) the Company and its
Subsidiaries intend to incur or believe that they will incur debts that would be
beyond their ability to pay as such debts mature; and (II) with respect to the
Company and each Subsidiary, individually, (i) the present fair saleable value
of the Company’s or such Subsidiary’s (as the case may be) assets is less than
the amount required to pay its respective total Indebtedness, (ii) the Company
or such Subsidiary (as the case may be) is unable to pay its respective debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (iii) the Company or such Subsidiary
(as the case may be) intends to incur or believes that it will incur debts that
would be beyond its respective ability to pay as such debts mature. Neither the
Company nor any of its Subsidiaries has engaged in any business or in any
transaction, and is not about to engage in any business or in any transaction,
for which the Company’s or such Subsidiary’s remaining assets constitute
unreasonably small capital.

 

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(f)                No event, liability, development or circumstance has occurred
or exists, or is reasonably expected to exist or occur with respect to the
Company, any of its Subsidiaries or any of their respective businesses,
properties, liabilities, prospects, operations (including results thereof) or
condition (financial or otherwise), that (i) would be required to be disclosed
by the Company under applicable securities laws on a registration statement on
Form S-1 filed with the SEC relating to an issuance and sale by the Company of
its Common Stock and which has not been publicly announced, (ii) could have a
material adverse effect on any Purchaser’s investment hereunder or (iii) could
have a Material Adverse Effect. “Material Adverse Effect” means any material
adverse effect on (i) the business, properties, assets, liabilities, operations
(including results thereof), condition (financial or otherwise) or prospects of
the Company or any Subsidiary, individually or taken as a whole, (ii) the
transactions contemplated hereby or (iii) the authority or ability of the
Company or any of its Subsidiaries to perform any of their respective
obligations under this Agreement or the Warrants.

 

(g)               Neither the Company, any of its Subsidiaries or any director,
officer, agent, employee, nor any other Person acting for or on behalf of the
foregoing (individually and collectively, a “Company Affiliate”) have violated
the U.S. Foreign Corrupt Practices Act or any other applicable anti-bribery or
anti-corruption laws, nor has any Company Affiliate offered, paid, promised to
pay, or authorized the payment of any money, or offered, given, promised to
give, or authorized the giving of anything of value, to any officer, employee or
any other person acting in an official capacity for any Government Entity, as
defined below, to any political party or official thereof or to any candidate
for political office (individually and collectively, a “Government Official”) or
to any person under circumstances where such Company Affiliate knew or was aware
of a high probability that all or a portion of such money or thing of value
would be offered, given or promised, directly or indirectly, to any Governmental
Official, for the purpose of: (i)(1) influencing any act or decision of such
Government Official in his/her official capacity, (2) inducing such Government
Official to do or omit to do any act in violation of his/her lawful duty, (3)
securing any improper advantage, or (4) inducing such Government official to
influence or affect any act or decision of any Government Entity, or (ii)
assisting the Company or its subsidiary in obtaining or retaining business for
or with, or directing business to, the Company or its subsidiary. “Government
Entity” as used in the previous paragraph means any government or any
department, agency or instrumentality thereof, including any entity or
enterprise owned or controlled by a government, or a public international
organization.

 

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(h)               Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or employs any member of a union. The
Company believes that its and its Subsidiaries’ relations with their respective
employees are good. No executive officer (as defined in Rule 501(f) promulgated
under the 1933 Act) or other key employee of the Company or any of its
Subsidiaries has notified the Company or any such Subsidiary that such officer
intends to leave the Company or any such Subsidiary or otherwise terminate such
officer’s employment with the Company or any such Subsidiary. No executive
officer or other key employee of the Company or any of its Subsidiaries is, or
is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer or other
key employee (as the case may be) does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters. The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(i)                 It is understood and acknowledged by the Company that (i)
following the public disclosure of the transactions contemplated by this
Agreement in connection with the Form 8-K Filing (as defined below), in
accordance with the terms thereof, the Purchaser has not been asked by the
Company or any of its Subsidiaries to agree, nor has the Purchaser agreed with
the Company or any of its Subsidiaries, to desist from effecting any
transactions in or with respect to (including, without limitation, purchasing or
selling, long and/or short) any securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold any of the
Securities for any specified term; (ii) the Purchaser, and counterparties in
“derivative” transactions to which any the Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock which was
established prior to the Purchaser’s knowledge of the transactions contemplated
by this Agreement; and (iii) the Purchaser shall not be deemed to have any
affiliation with or control over any arm’s length counterparty in any
“derivative” transaction. The Company further understands and acknowledges that
following the public disclosure of the transactions contemplated by this
Agreement pursuant to the Form 8-K Filing, the Purchaser may engage in hedging
and/or trading activities at various times during the period that the Securities
are outstanding and (b) such hedging and/or trading activities, if any, can
reduce the value of the existing stockholders’ equity interest in the Company
both at and after the time the hedging and/or trading activities are being
conducted. The Company acknowledges that such aforementioned hedging and/or
trading activities do not constitute a breach of this Agreement or the Warrants
or any of the documents executed in connection herewith or therewith.

 

(j)                 Neither the Company nor any of its Subsidiaries has, and, to
the knowledge of the Company, no Person acting on their behalf has, directly or
indirectly, (i) taken any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company or any
of its Subsidiaries to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for soliciting purchases
of, any of the Securities (other than the Placement Agent), or (iii) paid or
agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company or any of its Subsidiaries.

 

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(k)               Except as disclosed in the Form 8-K Filing, the Company
confirms that neither it nor any other Person acting on its behalf has provided
the Purchaser or their agents or counsel with any information that constitutes
or could reasonably be expected to constitute material, non-public information
concerning the Company or any of its Subsidiaries, other than the existence of
the transactions contemplated by this Agreement. The Company understands and
confirms that the Purchaser will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Purchaser regarding the Company and its Subsidiaries, their businesses and
the transactions contemplated hereby, furnished by or on behalf of the Company
or any of its Subsidiaries is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each press release issued by the
Company or any of its Subsidiaries during the twelve (12) months preceding the
date of this Agreement did not at the time of release contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. No event
or circumstance has occurred or information exists with respect to the Company
or any of its Subsidiaries or its or their business, properties, liabilities,
prospects, operations (including results thereof) or conditions (financial or
otherwise), which, under applicable law, rule or regulation, requires public
disclosure at or before the date hereof or announcement by the Company but which
has not been so publicly disclosed. The Company acknowledges and agrees that the
Purchaser does not make and has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Section 5.

 

7.             Press Release and Form 8-K. The Company and the Purchaser agree
that the Company shall issue a press release and file a Form 8-K disclosing the
material terms of the transactions contemplated hereby and attaching a copy of
the Subscription Agreement and Notes (the “Form 8-K Filing”), and shall be in a
form reasonably acceptable to the Purchaser. From and after the Form 8-K Filing,
the Company shall have disclosed all material, non-public information (if any)
provided to the Purchaser by the Company or any of its Subsidiaries or any of
their respective officers, directors, employees or agents in connection with the
transactions contemplated by this Agreement. The Company shall not, and the
Company shall cause each of its Subsidiaries and each of its and their
respective officers, directors, employees and agents not to, provide the
Purchaser with any material, non-public information regarding the Company or any
of its Subsidiaries from and after the Form 8-K Filing without the express prior
written consent of such Purchaser.

 

8.             Modification. This Subscription Agreement shall not be modified
or waived except by an instrument in writing signed by the party against whom
any such modification or waiver is sought.

 

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9.             Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed effectively given:
(a) upon personal delivery to the party notified, (b) when sent by confirmed
email or facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (c) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (d)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All
communications shall be sent to the parties at their respective address, email
or facsimile number set forth on the signature page hereto, or to such other
address as such party shall have furnished in writing in accordance with the
provisions of this Section 9.

 

10.           Assignability. This Subscription Agreement and the rights,
interests and obligations hereunder are not transferable or assignable by the
Purchaser and the transfer or assignment of any Securities acquired by the
Purchaser shall be made only in accordance with all applicable laws.

 

11.           Applicable Law. This Subscription Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts to be wholly- performed within said State.

 

12.           Dispute Resolution. The parties (a) hereby irrevocably and
unconditionally submit to the jurisdiction of the state courts of New York
located in New York county and to the jurisdiction of the United States District
Court for the Southern District of New York for the purpose of any suit, action
or other proceeding arising out of or based upon this Agreement, (b) agree not
to commence any suit, action or other proceeding arising out of or based upon
this Agreement except in such courts, and (c) hereby waive, and agree not to
assert, by way of motion, as a defense, or otherwise, in any such suit, action
or proceeding, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.

 

WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE
SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS
BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT
BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND
REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.

 

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13.           Blue Sky Qualification. The purchase of Notes under this
Subscription Agreement and the issuance of the Conversion Shares upon the due
conversion of the Notes are all expressly conditioned upon the exemption from
qualification of the offer and sale thereof, as applicable, from applicable
federal and state securities laws. The Company shall not be required to qualify
the Offering or any issuance of Conversion Shares under the securities laws of
any jurisdiction.

 

14.           Use of Pronouns. All pronouns and any variations thereof used
herein shall be deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the person or persons referred to may require.

 

15.           Other Terms.

 

(a)                For purposes of any presently existing securities of the
Company now held or hereafter acquired by the Purchaser or its affiliates that
provide for the adjustment of the exercise or conversion price thereof upon the
issuance or deemed issuance of shares of Common Stock at a price determined to
be less than the exercise or conversion price then in effect, the Purchaser
agrees that the effective price at which shares of Common Stock are deemed to be
issued as a result of the sale of the Notes and the other transactions
contemplated hereby shall be deemed to be $0.20 per share. By way of
clarification, the Purchaser agrees that, upon the Closing, the effect of the
issuance of the Notes and the consummation of the other transactions
contemplated hereby shall be that the adjusted “Exercise Price” of the Company’s
outstanding Series A Warrants will be reduced to $0.20 in accordance with the
terms of the Series A Warrants, resulting in an additional 5,700,000 shares of
Common Stock becoming issuable under the terms of the Series A Warrants.

 

(b)               Upon consummation of the Closing, the Series C Warrants are
hereby amended to change the “Expiration Date” thereof to 5:00 p.m., New York
time, on June 2, 2015.

 

16.           Miscellaneous.

 

(a)                This Subscription Agreement, including all attachments,
schedules and exhibits thereto, constitutes the entire agreement between the
Purchaser and the Company with respect to the subject matter hereof and
supersede all prior oral or written agreements and understandings, if any,
relating to the subject matter hereof.

 

(b)               The representations and warranties of the Purchaser made in
this Subscription Agreement shall survive the execution and delivery hereof and
delivery of the Securities.

 

(c)                Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Subscription Agreement and the
transactions contemplated hereby whether or not the transactions contemplated
hereby are consummated.

 

(d)               This Subscription Agreement may be executed in one or more
counterparts (including electronic counterparts), each of which shall be deemed
an original, but all of which shall together constitute one and the same
instrument. This Agreement will be binding on the parties hereto and their
successors, permitted assigns and legal representatives.

 

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(e)                Each provision of this Subscription Agreement shall be
considered separable and, if for any reason any provision or provisions hereof
are determined to be invalid or contrary to applicable law, such invalidity or
illegality shall not impair the operation of or affect the remaining portions of
this Subscription Agreement.

 

(f)                Paragraph and Section titles are for convenience and
descriptive purposes only and are not to be considered in construing or
interpreting this Subscription Agreement.

 

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Arch Therapeutics, Inc.

 

SIGNATURE PAGE TO THE SUBSCRIPTION AGREEMENT

 

 

Purchaser hereby elects to subscribe under the Subscription Agreement for a
total of $_______ of the Notes (NOTE: to be completed by Purchaser), and, by
execution and delivery hereof), Purchaser hereby executes the Subscription
Agreement and agrees to be bound by the terms and conditions of the Subscription
Agreement.

 

Date (NOTE: To be completed by Purchaser): _______________________________

 

If the Purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS, as TENANTS
IN COMMON, or as COMMUNITY PROPERTY:

 

      Print Name(s)   Social Security Number(s)             Signature(s) of
Purchaser(s)                 Date   Address             Fax Number   Email
Address

 

If the Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or
TRUST:

 

            Name of Entity   Federal Tax Identification Number       By:      
Name:     State of Organization Title:                         Date   Address  
          Fax Number   Email Address        

  

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Accepted:

 

ARCH THERAPEUTICS, INC.

 

 

      By:       Authorized Officer:                          

 

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EXHIBIT A

 

Form of Note

 

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