Exhibit 10.1
 
SECURITIES PURCHASE AGREEMENT
 
This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of December
31, 2014 by and among MetaStat, Inc., a Nevada corporation (the “Company”), and
each of the Purchasers whose names are set forth on the signature pages hereto
(individually, a “Purchaser” and collectively, the “Purchasers”).
 
RECITALS
 
WHEREAS, the Company and the Purchasers are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b)
of Regulation D (“Regulation D”) as promulgated by the United States Securities
and Exchange Commission (the “Commission”) under the Securities Act of 1933, as
amended (the “Securities Act”); and
 
WHEREAS, the Company is offering (the “Offering”) units (each a “Unit” and
collectively the “Units”), each Unit consisting of one (1) share of the
Company’s Series B Convertible Preferred Stock, par value $0.0001 per share
(each a “Preferred Share” and collectively the “Preferred Shares”), convertible
into shares of its common stock, par value $0.0001 per share (the “Common Stock”
and, the shares of Common Stock issuable upon conversion of the Preferred
Shares, the “Conversion Shares”), (ii) warrants (the “Series A Warrants”)
exercisable to purchase a number of shares of Common Stock equal to seventy-five
percent (75%) of the aggregate number of Conversion Shares issuable upon
conversion of the Preferred Shares issued by the Company to such Purchaser, and
(iii) in the event any Purchaser purchases a minimum of $500,000 of Units on or
before December 31, 2014, warrants (the “Series B Warrants” and, together with
the Series A Warrants, the “Warrants”) exercisable to purchase a number of
shares of Common Stock equal to twenty-five percent (25%) of the aggregate
number of Conversion Shares issuable upon conversion of the Preferred Shares
issued by the Company to such Purchaser. Shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the “Warrant Shares.”  The
designation, rights, preferences and other terms and provisions of the Preferred
Shares are set forth in the Certificate of Designation of the Relative Rights
and Preferences of the Series B Convertible Preferred Stock attached hereto as
Exhibit A (the “Certificate of Designation”).  The Units, the Preferred Shares,
the Conversion Shares, the Warrants and the Warrant Shares are sometimes
collectively referred to as the “Securities”).
 
AGREEMENT
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers hereby
agree as follows:
 
ARTICLE I

 
Purchase and Sale of the Units
 
Section 1.1                      Purchase and Sale of the Units. Upon the
following terms and conditions, the Company is offering to each Purchaser and
each Purchase is purchasing from the Company the number of Units consisting of
Preferred Shares and Warrants set forth opposite such Purchaser’s name on such
Purchaser’s signature page hereto.

 
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Section 1.2                      Purchase Price and Closing. Subject to the
terms and conditions hereof, the Company agrees to issue and sell to the
Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the Units for a
purchase price of $5,500.00 per Unit (the “Per Unit Purchase Price”) for an
aggregate purchase price of up to $3,492,500 (the “Purchase Price”) or 635
Units, provided, however, that a portion of the  Purchase Price may also be paid
by certain Purchasers converting outstanding indebtedness owed to such
Purchasers by the Company as evidenced by promissory notes up to an aggregate
principal amount of $150,000 held by such Purchasers.  The initial closing (the
“Initial Closing”) of the purchase and sale of the Units to be acquired by the
Purchasers from the Company under this Agreement shall take place at such time
as Purchasers have executed this Agreement, and all of the conditions set forth
in Article IV hereof and applicable to the Initial Closing shall have been
fulfilled or waived in accordance herewith (the “Initial Closing Date”). After
the Initial Closing, the Company may conduct any number of additional closings
(each, an “Additional Closing” and, together with the Initial Closing, a
“Closing”) so long as the final Additional Closing occurs on or before the 90th
day following the Initial Closing Date. Such Additional Closings may utilize a
third party escrow agent in connection therewith. Subject to all conditions to
Closing have been satisfied or waived, each Closing shall take place at such
time and place as the parties shall agree (a “Closing Date”).
 
Section 1.3                      Warrants. Each of the Purchasers shall be
issued Series A Warrants to purchase 7,500 Warrant Shares for each Unit or
Preferred Share purchased at an initial exercise price per share of $0.70.  Any
Purchaser who purchases a minimum of $500,000 of Units on or before December 31,
2014, will also receive Series B Warrants to purchase 2,500 Warrant Shares for
each Unit or Preferred Share purchased at an initial exercise price per share of
$0.55. The Series A Warrants and the Series B Warrants, in substantially the
forms attached hereto as Exhibits B-1 and B-2, respectively, shall expire on
March 31, 2020.
 
Section 1.4                      Conversion Shares; Warrant Shares. The Company
has authorized and has reserved and covenants to continue to reserve, free of
preemptive rights and other similar contractual rights of stockholders, such
number of Conversion Shares and Warrant Shares as shall from time to time be
sufficient to effect the conversion of all of the Preferred Shares and exercise
of the Warrants then outstanding.

 
Section 1.5                      Registration Rights.  The Purchasers shall have
the registration rights contained in the registration rights agreement dated as
of the date hereof among the Company and the Purchasers, in substantially the
form attached hereto as Exhibit C (the “Registration Rights Agreement”).
 
ARTICLE II
 
Representations and Warranties
 
Section 2.1                      Representations and Warranties of the
Company.  The Company hereby represents and warrants to the Purchasers, as of
the date hereof (except as set forth on the Schedule of Exceptions attached
hereto with each numbered Schedule corresponding to the section number herein)
and as of each Closing Date (except for the representations and warranties that
speak as of a specific date, which shall be made as of such date), as follows:
 
(a)           Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Nevada and has the requisite corporate power to own, lease
and operate its properties and assets and to conduct its business as it is now
being conducted.  Except as set forth on Schedule 2.1(a), the Company is duly
qualified to do business and is in good standing in every jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect (as defined in Section 2.1(g) hereof) on the Company’s
consolidated financial condition.

 
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(b)           Corporate Power; Authority and Enforcement. The Company has the
requisite corporate power and authority to enter into and perform this
Agreement, the Certificate of Designation, the Warrants, the Registration Rights
Agreement and any other documentation in connection with the Offering
(collectively, the “Transaction Documents”), and to issue and sell the Units in
accordance with the terms hereof. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required.  Each of the Transaction Documents constitutes, or shall constitute
when executed and delivered, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general application.
 
(c)           Capitalization. The authorized capital stock of the Company and
the shares thereof currently issued and outstanding as of the date hereof is set
forth on Schedule 2.1(c) hereto.  All of the issued and outstanding shares of
the Common Stock have been duly and validly authorized, are fully paid and
nonassessable. Except as contemplated by the Transaction Documents or as set
forth on Schedule 2.1(c) hereto:
 
(i)           no shares of Common Stock are entitled to preemptive, conversion
or other rights and there are no outstanding options, warrants, scrip, rights to
subscribe to, call or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company;
 
(ii)           there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of  capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company;
 
(iii)           the Company is not a party to any agreement granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities; and
 
(iv)           the Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company.
 
       The offer and sale of all capital stock, convertible securities, rights,
warrants, or options of the Company issued prior to the Closing complied in all
material respects with all applicable federal and state securities laws.  The
Company has furnished or made available to the Purchasers true and correct
copies of the Company’s Articles of Incorporation, as amended and in effect on
the date hereof (the “Articles”), and the Company’s Bylaws, as amended and in
effect on the date hereof (the “Bylaws”).  Except as restricted under applicable
federal, state, local or foreign laws and regulations, the Transaction
Documents, or as set forth on Schedule 2.1(c), no written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement of the
Company shall limit the payment of dividends on the Company’s Common Stock.
 
(d)           Issuance of Securities, Etc. The Units consisting of the Preferred
Shares and the Warrants, to be issued at the Closing have been duly authorized
by all necessary corporate action and the Preferred Shares when paid for or
issued in accordance with the terms hereof, will be validly issued and
outstanding, fully paid and nonassessable and, immediately after the Closing,
the Purchasers will be the owners of all of such securities and have good and
valid title to all of such securities, free and clear of all encumbrances,
except as may be imposed under federal and state securities laws. When the
Warrant Shares are issued in accordance with the terms of the Warrants, such
Warrant Shares will be duly authorized by all necessary corporate action and
validly issued and outstanding, fully paid and nonassessable, and the holders
will be entitled to all rights accorded to a holder of Common Stock and will be
the record and beneficial owners of all of such securities and have good and
valid title to all of such securities, free and clear of all encumbrances.  When
any Conversion Shares are issued in accordance with the terms of the Series B
Preferred Stock, such Conversion Shares will be duly authorized by all necessary
corporate action and validly issued and outstanding, fully paid and
nonassessable, and the holders will be entitled to all rights accorded to a
holder of Common Stock and will be the record and beneficial owners of all of
such securities and have good and valid title to all of such securities, free
and clear of all encumbrances.

 
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(e)           Subsidiaries. Schedule 2.1(e) hereto sets forth each Subsidiary of
the Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of ownership of each Subsidiary. Each Subsidiary has been
duly incorporated or otherwise organized and is validly existing and in good
standing in each of their respective jurisdictions of incorporation or
organization.  Each Subsidiary is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary except for any
jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect.  There are no outstanding
preemptive, conversion or other rights, options, warrants or agreements granted
or issued by or binding upon any Subsidiary for the purchase or acquisition of
any shares of capital stock of any Subsidiary or any other securities
convertible into, exchangeable for or evidencing the rights to subscribe for any
shares of such capital stock. Neither the Company nor any Subsidiary is subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of the capital stock of any Subsidiary or any convertible
securities, rights, warrants or options of the type described in the preceding
sentence. Except as filed as exhibits to the Commission Documents (as defined
below), neither the Company nor any Subsidiary is party to, nor has any
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of any Subsidiary.  For the purposes of this Agreement,
“Subsidiary” shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interests having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries.
 
(f)           Commission Documents, Financial Statements. For the two year
period preceding the date hereof, the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
“Commission Documents”).  The Company has not provided to the Purchasers any
material non-public information or other information which, according to
applicable law, rule or regulation, was required to have been disclosed publicly
by the Company but which has not been so disclosed, other than (i) with respect
to the transactions contemplated by this Agreement, or (ii) pursuant to a
non-disclosure or confidentiality agreement signed by the Purchasers.  At the
time of the respective filings, the Form 10-K’s and the Form 10-Q’s filed during
the two year period preceding the date hereof complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to such documents.  The financial statements of the
Company included in the Commission Documents (the “Financial Statements”)
complied as of their respective filing dates as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the Commission or other applicable rules and regulations with respect
thereto. The Financial Statements have been prepared in accordance with United
States generally accepted accounting principles (“GAAP”) applied on a consistent
basis during the periods involved (except (i) as may be otherwise indicated in
the Financial Statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the consolidated financial position of the Company as of the dates thereof and
the results of operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments).
 
(g)           No Material Adverse Effect. Since February 28, 2014, neither the
Company, nor any Subsidiary has experienced or suffered any Material Adverse
Effect. For the purposes of this Agreement, “Material Adverse Effect” means any
material adverse effect on the business, operations, properties, or financial
condition of the Company and its Subsidiaries, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to perform any of its
obligations under this Agreement in any material respect.
 
(h)           No Undisclosed Liabilities.  Other than as disclosed on Schedule
2.1(h) or set forth in the Commission Documents, neither the Company nor the
Subsidiary has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) other than those incurred in the ordinary course of the Company’s
business since February 28, 2014 and those which, individually or in the
aggregate, do not have a Material Adverse Effect.

 
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(i)           No Undisclosed Events or Circumstances.  No event or circumstance
has occurred or exists with respect to the Company or any Subsidiary or their
respective businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
 
(j)           Indebtedness. The Financial Statements set forth all outstanding
secured and unsecured Indebtedness of the Company on a consolidated basis, or
for which the Company or any Subsidiary have commitments as of the date of
Financial Statements or any subsequent period that would require disclosure. For
the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities
for borrowed money or amounts owed (other than trade accounts payable incurred
in the ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same should be reflected in the Company’s consolidated balance sheet (or the
notes thereto), except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments due under leases
required to be capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness which, individually or
in the aggregate, would have a Material Adverse Effect.
 
(k)           Title to Assets. Each of the Company and its Subsidiaries has good
and marketable title to (i) all properties and assets purportedly owned or used
by them as reflected in the Financial Statements, (ii) all properties and assets
necessary for the conduct of their business as currently conducted, and (iii)
all of the real and personal property reflected in the Financial Statements free
and clear of any Lien (as defined in Section 2.1(o) hereof). All leases are
valid and subsisting and in full force and effect.
 
(l)           Actions Pending. Other than as disclosed on Schedule 2.1(l) or set
forth in the Commission Documents, there is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or any other
proceeding pending or, to the knowledge of the Company, threatened against or
involving the Company or any Subsidiary (i) which questions the validity of this
Agreement or any of the other Transaction Documents or the transactions
contemplated hereby or thereby or any action taken or to be taken pursuant
hereto or thereto or (ii) involving any of their respective properties or
assets.  To the knowledge of the Company, there are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any Subsidiary or any of
their respective executive officers or directors in their capacities as such.
 
(m)           Compliance with Law.  The Company and each Subsidiary have all
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of their respective
business as now being conducted by it unless the failure to possess such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
 
(n)           No Violation.  The business of the Company and each Subsidiary is
not being conducted in violation of any federal, state, local or foreign
governmental laws, or rules, regulations and ordinances of any of any
governmental entity, except for possible violations which singularly or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
The Company is not required under federal, state, local or foreign law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents, or issue and sell the Preferred Shares and the Warrants in accordance
with the terms hereof or thereof (other than (x) any consent, authorization or
order that has been obtained as of the date hereof, (y) any filing or
registration that has been made as of the date hereof or (z) any filings which
may be required to be made by the Company with the Commission or state
securities administrators subsequent to the Closing).

 
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(o)           No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated herein and therein do not and will not (i) violate any
provision of the Articles or Bylaws, (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is a
party or by which it or its properties or assets are bound, (iii) create or
impose a lien, mortgage, security interest, pledge, charge or encumbrance
(collectively, “Lien”) of any nature on any property of the Company under any
agreement or any commitment to which the Company is a party or by which the
Company is bound or by which any of its respective properties or assets are
bound, or (iv) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, provided, however, that, excluded from the
foregoing in all cases are such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect.
 
(p)           Taxes. The Company and each Subsidiary, to the extent its
applicable, has accurately prepared and filed all federal, state and other tax
returns required by law to be filed by it, has paid or made provisions for the
payment of all taxes shown to be due and all additional assessments, and
adequate provisions have been and are reflected in the consolidated financial
statements of the Company for all current taxes and other charges to which the
Company or any Subsidiary, if any, is subject and which are not currently due
and payable. None of the federal income tax returns of the Company have been
audited by the Internal Revenue Service. The Company has no knowledge of any
additional assessments, adjustments or contingent tax liability (whether
federal, state or foreign) of any nature whatsoever, whether pending or
threatened against the Company or any Subsidiary for any period, nor of any
basis for any such assessment, adjustment or contingency.
 
(q)           Certain Fees. Except as set forth on Schedule 2.1(q) hereto, no
brokers fees, finders’ fees or financial advisory fees or commissions will be
payable by the Company with respect to the transactions contemplated by this
Agreement and the other Transaction Documents.
 
(r)           Intellectual Property. Each of the Company and its Subsidiaries
owns or has the lawful right to use all patents, trademarks, domain names
(whether or not registered) and any patentable improvements or copyrightable
derivative works thereof, websites and intellectual property rights relating
thereto, service marks, trade names, copyrights, licenses and authorizations, if
any, and all rights with respect to the foregoing, if any, which are necessary
for the conduct of their respective business as now conducted without any
conflict with the rights of others, except where the failure to so own or
possess would not have a Material Adverse Effect (collectively, the
“Intellectual Property Rights”).  The Company has not received a written notice
that any of the Intellectual Property Rights used by the Company violates or
infringes upon the rights of any person.  There is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by any person
that the Company’s business as now conducted infringes or otherwise violates any
patent, trademark, copyright, trade secret or other proprietary rights of
another.  To the Company’s knowledge, there is no existing infringement by
another person of any of the Intellectual Property Rights that would have or
would reasonably be expected to have a Material Adverse Effect.  The Company has
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their Intellectual Property Rights, except where failure to do
so could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
 
(s)           Books and Records; Internal Accounting Controls. The books and
records of the Company and each Subsidiary accurately reflect in all material
respects the information relating to the business of the Company and the
Subsidiaries.  Except as disclosed on Schedule 2.1(s), the Company and each
Subsidiary maintains a system of “internal control over financial reporting” (as
defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset and liability accountability;
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization; and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any differences.

 
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(t)           Material Agreements. Any and all written or oral contracts,
instruments, agreements, commitments, obligations, plans or arrangements, the
Company and each Subsidiary is a party to, that a copy of which would be
required to be filed with the Commission as an exhibit to a registration
statement on Form S-1 (collectively, the “Material Agreements”) if the Company
or any Subsidiary were registering securities under the Securities Act has
previously been publicly filed with the Commission in the Commission
Documents.  Each of the Company and the Subsidiaries has in all material
respects performed all the obligations required to be performed by them to date
under the foregoing agreements, have received no notice of default and are not
in default under any Material Agreement now in effect the result of which would
cause a Material Adverse Effect.
 
(u)           Transactions with Affiliates. Except as set forth in the Financial
Statements or in the Commission Documents, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions between (a) the Company or any Subsidiary on
the one hand, and (b) on the other hand, any officer, employee, consultant or
director of the Company, or any of its Subsidiaries, or any person owning any
capital stock of the Company or any Subsidiary or any member of the immediate
family of such officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee, consultant,
director or stockholder, or a member of the immediate family of such officer,
employee, consultant, director or stockholder.
 
(v)           Securities Act of 1933. Assuming the accuracy of the
representations of the Purchasers set forth in Section 2.2 hereof, the Company
has complied with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Preferred Shares and Warrants
hereunder. Neither the Company nor anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy any of the
Units or similar securities to, or solicit offers with respect thereto from, or
enter into any preliminary conversations or negotiations relating thereto with,
any person, or has taken or will take any action so as to bring the issuance and
sale of any of the Units in violation of the registration provisions of the
Securities Act and applicable state securities laws, and neither the Company nor
any of its affiliates, nor any person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D under the Securities Act) in connection with the offer or sale
of any of the shares of Common Stock.
 
(w)           Governmental Approvals. Except for the filing of any notice prior
or subsequent to the Closing Date that may be required under applicable state
and/or federal securities laws (which if required, shall be filed on a timely
basis), including the filing of a Form D and a registration statement or
statements, no authorization, consent, approval, license, exemption of, filing
or registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution or delivery of the Units, or for the
performance by the Company of its obligations under the Transaction Documents.
 
(x)           Employees. Except as disclosed on Schedule 2.1(x), neither the
Company nor any Subsidiary has any collective bargaining arrangements covering
any of its employees.  Except as disclosed in the Commission Documents, Schedule
2.1(x) sets forth a list of the employment contracts, agreements regarding
proprietary information, non-competition agreements, non-solicitation
agreements, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company. Since February 28, 2014, no
officer, consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, would have a Material
Adverse Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment or engagement with the
Company or any Subsidiary.
 
(y)           Absence of Certain Developments. Except as disclosed on Schedule
2.1(y), since February 28, 2014, neither the Company nor the Subsidiaries have:
 
(i)           issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;

 
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(ii)           borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company’s or such Subsidiary’s business;
 
(iii)           discharged or satisfied any Lien or paid any obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business;
 
(iv)           declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock;
 
(v)           sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business;
 
(vi)           sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
 
(vii)           suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
 
(viii)           made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
 
(ix)           made capital expenditures or commitments therefor that aggregate
in excess of $50,000;
 
(x)           entered into any other transaction other than in the ordinary
course of business, or entered into any other material transaction, whether or
not in the ordinary course of business;
 
(xi)           made charitable contributions or pledges in excess of $10,000;
 
(xii)           suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
 
(xiii)           experienced any material problems with labor or management in
connection with the terms and conditions of their employment;
 
(xiv)           effected any two or more events of the foregoing kind which in
the aggregate would be material to the Company or its subsidiaries; or
 
(xv)           entered into an agreement, written or otherwise, to take any of
the foregoing actions.
 
(z)           Investment Company Act. The Company is not, and is not an
affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an affiliate of, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.  The Company shall conduct its
business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.

 
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(aa)           No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering and/or sale
of the Preferred Shares and Warrants pursuant to this Agreement to be integrated
with prior offerings by the Company for purposes of the Securities Act which
would prevent the Company from selling the Preferred Shares pursuant to Rule 506
under the Securities Act, nor will the Company or any of its affiliates take any
action or steps that would cause the offering and/or sale of the Preferred
Shares and Warrants to be integrated with other offerings.
 
(bb)           Sarbanes-Oxley Act. The Company is in compliance in all material
respects with the applicable provisions of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”), and the rules and regulations promulgated thereunder,
that are effective and for which compliance by the Company is required as of the
date hereof.  The Company has established disclosure controls and procedures (as
such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) for
the Company and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no changes in the Company’s internal control over financial reporting
(as such term is defined in the Exchange Act) that has materially affected, or
is reasonably likely to materially affect, the Company’s internal control over
financial reporting.
 
(cc)           Shell Company Status.  The Company is not currently an issuer
identified in Securities Act Rule 144(i)(1).
 
(dd)           Listing and Maintenance Requirements.  The Common Stock is
registered pursuant to Section 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration.  The Company has not, in the 12
months preceding the date hereof, received notice from the OTCQB to the effect
that the Company is not in compliance with the listing or maintenance
requirements of the OTCQB.  The Company is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
 
Section 2.2                      Representations and Warranties of Each of the
Purchasers. Each Purchaser, severally and not jointly with the other Purchasers,
hereby makes the following representations and warranties to the Company as of
the date hereof, with respect solely to itself and not with respect to any other
Purchaser:
 
(a)           Organization and Good Standing of the Purchasers. If the Purchaser
is an entity, such Purchaser is a corporation, partnership or limited liability
company duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization.
 
(b)           Authorization and Power. Such Purchaser has the requisite power
and authority to enter into and perform this Agreement and each of the other
Transaction Documents to which such Purchaser is a party and to purchase the
Units, being sold to it hereunder. The execution, delivery and performance of
this Agreement and each of the other Transaction Documents to which such
Purchaser is a party by such Purchaser and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate, partnership or limited liability company action, and no
further consent or authorization of such Purchaser or its Board of Directors,
stockholders, partners, members, or managers, as the case may be, is required.
This Agreement and each of the other Transaction Documents to which such
Purchaser is a party has been duly authorized, executed and delivered by such
Purchaser and constitutes, or shall constitute when executed and delivered, a
valid and binding obligation of such Purchaser enforceable against such
Purchaser in accordance with the terms hereof.

 
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(c)           No Conflicts. The execution, delivery and performance of this
Agreement and each of the other Transaction Documents to which such Purchaser is
a party and the consummation by such Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser’s charter documents, bylaws, operating agreement,
partnership agreement or other organizational documents or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Purchaser is a party or by which its
properties or assets are bound, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on such Purchaser). Such Purchaser is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or any other
Transaction Document to which such Purchaser is a party or to purchase the
Preferred Shares or acquire the Warrants in accordance with the terms hereof,
provided, that for purposes of the representation made in this sentence, such
Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
 
(d)           Status of Purchasers. Such Purchaser is an “accredited investor”
as defined in Regulation D under the Securities Act and as set forth on such
“Accredited Investor Questionnaire” attached hereto as Exhibit D and made part
hereof. Such Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act and such Purchaser is not a broker-dealer, nor an
affiliate of a broker-dealer.
 
(e)           Acquisition for Investment. Such Purchaser is acquiring the
Preferred Shares and the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with a distribution.
Such Purchaser does not have a present intention to sell the Preferred Shares or
the Warrants, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of the Preferred Shares or the Warrants to
or through any person or entity; provided, however, that by making the
representations herein, such Purchaser does not agree to hold the Preferred
Shares or the Warrants for any minimum or other specific term and reserves the
right to dispose of the Preferred Shares or the Warrants at any time in
accordance with federal and state securities laws applicable to such
disposition. Each Purchaser acknowledges that it is able to bear the financial
risks associated with an investment in the Preferred Shares and the Warrants and
that it has been given full access to such records of the Company and to the
officers of the Company and received such information as it has deemed necessary
or appropriate to conduct its due diligence investigation and has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company’s stage of development so as to be able to evaluate the
risks and merits of its investment in the Company.
 
(f)           Opportunities for Additional Information. Such Purchaser
acknowledges that such Purchaser has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company.
 
(g)           No General Solicitation. Such Purchaser acknowledges that the
Preferred Shares and Warrants were not offered to such Purchaser by means of any
form of general or public solicitation or general advertising, or publicly
disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio, or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications.
 
(h)           Rule 144. Such Purchaser understands that the Preferred Shares
and/or Conversion Shares must be held indefinitely unless such Preferred Shares
and/or Conversion Shares are registered under the Securities Act or an exemption
from registration is available. Such Purchaser acknowledges that such Purchaser
is familiar with Rule 144, of the rules and regulations of the Commission, as
amended, promulgated pursuant to the Securities Act (“Rule 144”), and that such
person has been advised that Rule 144 permits resales only under certain
circumstances. Such Purchaser understands that to the extent that Rule 144 is
not available, such Purchaser will be unable to sell any Preferred Shares and/or
Conversion Shares without either registration under the Securities Act or the
existence of another exemption from such registration requirement.

 
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(i)           General. Such Purchaser understands that the Preferred Shares are
being offered and sold in reliance on a transactional exemption from the
registration requirements of federal and state securities laws and the Company
is relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Preferred Shares.
 
(j)           Independent Investment. Except as may be disclosed in any filings
with the Commission by the Purchasers under Section 13 and/or Section 16 of the
Exchange Act, no Purchaser has agreed to act with any other Purchaser for the
purpose of acquiring, holding, voting or disposing of the Shares purchased
hereunder for purposes of Section 13(d) under the Exchange Act, and each
Purchaser is acting independently with respect to its investment in the Shares.
 
(k)           Brokers. Other than as may be set forth on Schedule 2.1(q) hereto,
no Purchaser has any knowledge of any brokerage or finder’s fees or commissions
that are or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other person or
entity with respect to the transactions contemplated by this Agreement.
 
(l)           No Short Sales. The Purchaser has not directly or indirectly, nor
has any Person acting on behalf of or pursuant to any understanding with such
Purchaser, executed any Short Sales (as defined below), of the securities of the
Company during the period commencing as of the time that such Purchaser first
received a term sheet (written or oral) from the Company or any other Person
representing the Company setting forth the material terms of the transactions
contemplated by the Purchase Agreement and ending immediately prior to the
execution thereof, and such Purchaser agrees not to maintain a net short
position in the Common Stock following the Closing.  For purposes hereof, “Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under
the Securities Exchange Act of 1934 (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common Stock).
 
(m)           Confidential Information. Such Purchaser agrees that such
Purchaser and its employees, agents and representatives will keep confidential
and will not disclose, divulge or use (other than for purposes of monitoring its
investment in the Company) any confidential information which such Purchaser may
obtain from the Company pursuant to financial statements, reports and other
materials submitted by the Company to such Purchaser pursuant to this Agreement,
unless such information is known to the public through no fault of such
Purchaser or his or its employees or representatives; provided, however, that a
Purchaser may disclose such information (i) to its attorneys, accountants and
other professionals in connection with their representation of such Purchaser in
connection with such Purchaser’s investment in the Company, (ii) to any
prospective permitted transferee of the Preferred Shares, so long as the
prospective transferee agrees to be bound by the provisions of this Section
2.2(l), or (iii) to any general partner or affiliate of such Purchaser.
 
ARTICLE III
 
Covenants
 
The Company covenants with each of the Purchasers as follows, which covenants
are for the benefit of the Purchasers and their permitted assignees (as defined
herein).
 
Section 3.1                      Securities Compliance. The Company shall notify
the Commission in accordance with its rules and regulations, of the transactions
contemplated by any of the Transaction Documents, including filing a Form D with
respect to the shares of Common Stock, Warrants, the Warrant Shares as required
under Regulation D and applicable “blue sky” laws, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities to
the Purchasers or subsequent holders.

 
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Section 3.2                      Compliance with Laws. The Company shall comply,
and cause each Subsidiary to comply in all respects, with all applicable laws,
rules, regulations and orders, except for such non-compliance which singularly
or in the aggregate could not reasonably be expected to have a Material Adverse
Effect.
 
Section 3.3                      Keeping of Records and Books of Account. The
Company shall keep and cause each Subsidiary to keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
each Subsidiary.
 
Section 3.4                      Reservation of Shares. So long as any of the
Preferred Shares and Warrants remain outstanding, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, a sufficient number of shares of Common Stock needed to provide for
the issuance of the Conversion Shares and Warrant Shares.
 
Section 3.5                      Reporting Status. So long as a Purchaser
beneficially owns any of the Preferred Shares, the Company shall timely file all
reports required to be filed with the Commission pursuant to the Exchange Act as
if it was required to do so, and the Company shall not cease to file reports
under the Exchange Act notwithstanding its status as a “voluntary” filer.
 
Section 3.6                      Disclosure of Transaction. The Company shall
issue a press release describing the material terms of the transactions
contemplated hereby (the “Press Release”) as soon as practicable after the
Initial Closing of the Offering. The Company shall also file with the
Commission, the Form 8-K describing the material terms of the transactions
contemplated hereby (and attaching as exhibits thereto this Agreement, the
Certificate of Designation, the Registration Rights Agreement and each form of
Warrant) within four (4) Business Days following the Initial Closing Date of the
Offering.  “Business Day” means any day during which the OTCQB (or other
principal exchange) shall be open for trading.
 
Section 3.7                      Disclosure of Material Information. The Company
and the Subsidiaries covenant and agree that neither it nor any other person
acting on its or their behalf has provided or, from and after the filing of the
Press Release, will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information (other than with respect to the transactions contemplated by this
Agreement), unless prior thereto such Purchaser shall have executed a specific
written agreement regarding the confidentiality and use of such
information.  The Company understands and confirms that each Purchaser shall be
relying on the foregoing covenants in effecting transactions in securities of
the Company.  At the time of the filing of the Press Release, no Purchaser shall
be in possession of any material, nonpublic information received from the
Company, any of its subsidiaries or any of its respective officers, directors,
employees or agents, that is not disclosed in the Press Release.  The Company
shall not disclose the identity of any Purchaser in any filing with the
Commission except as required by the rules and regulations of the Commission
thereunder.
 
Section 3.8                      Pledge of Securities. The Company acknowledges
and agrees that the Preferred Shares may be pledged by a Purchaser in connection
with a bonafide margin agreement or other loan or financing arrangement that is
secured by the Preferred Shares. The pledge of the Preferred Shares shall not be
deemed to be a transfer, sale or assignment of the Preferred Shares hereunder,
and no Purchaser effecting a pledge of the Preferred Shares shall be required to
provide the Company with any notice thereof or otherwise make any delivery to
the Company pursuant to this Agreement or any other Transaction Document;
provided, that a Purchaser and its pledgee shall be required to comply with the
provisions of Article V hereof in order to effect a sale, transfer or assignment
of Preferred Shares to such pledgee. At a Purchaser’s expense, the Company
hereby agrees to execute and deliver such documentation as a pledgee of the
Preferred Shares may reasonably request in connection with a pledge of the
Preferred Shares to such pledgee by a Purchaser, in accordance with applicable
laws relating to the transfer of the securities.
 
Section 3.9                      No Integrated Offerings. The Company shall not
make any offers or sales of any security (other than the securities being
offered or sold hereunder) under circumstances that would require registration
of the securities being offered or sold hereunder under the Securities Act.

 
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Section 3.10                      Amendments to Outstanding Options and
Warrants.  The Company shall not amend the exercise price of any outstanding
options or warrants without the prior written consent of a majority of the
Preferred Shares then outstanding.
 
Section 3.11                      Use of Proceeds.  The Company shall use the
net proceeds from the sale of the Units hereunder for general corporate purposes
and working capital purposes.
 
ARTICLE IV
 
CONDITIONS
 
Section 4.1                      Conditions Precedent to the Obligation of the
Company to Sell the Securities. The obligation hereunder of the Company to issue
and sell the Securities to the Purchasers is subject to the satisfaction or
waiver, at or before each Closing, of each of the conditions set forth below.
These conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion.
 
(a)           Accuracy of Each Purchaser’s Representations and Warranties. Each
of the representations and warranties of each Purchaser in this Agreement and
the other Transaction Documents that are qualified by materiality or by
reference to any Material Adverse Effect shall be true and correct in all
respects, and all other representations and warranties shall be true and correct
in all material respects, as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
respects as of such date.
 
(b)           Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by such Purchaser at or prior to the Closing.
 
(c)           No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
 
(d)           Delivery of Purchase Price. The Purchase Price for each of the
Units being paid for in cash shall have been delivered to the Company pursuant
to the wire instructions attached hereto as Exhibit E.
 
(e)           Delivery of Transaction Documents. The Transaction Documents to
which the Purchasers are parties shall have been duly executed and delivered by
the Purchasers to the Company.
 
Section 4.2                      Conditions Precedent to the Obligation of the
Purchasers to Purchase the Shares. The obligation hereunder of each Purchaser to
acquire and pay for the Units is subject to the satisfaction or waiver, at or
before each Closing, of each of the conditions set forth below. These conditions
are for each Purchaser’s sole benefit and may be waived by such Purchaser at any
time in its sole discretion.
 
(a)           Accuracy of the Company’s Representations and Warranties. Each of
the representations and warranties of the Company in this Agreement and the
other Transaction Documents that are qualified by materiality or by reference to
any Material Adverse Effect shall be true and correct in all respects, and all
other representations and warranties shall be true and correct in all material
respects, as of the date when made and as of the Closing Date as though made at
that time, except for representations and warranties that are expressly made as
of a particular date, which shall be true and correct in all respects as of such
date.
 
(b)           Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.

 
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(c)           No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
 
(d)           No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary, or any of the officers, directors or affiliates
of the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
 
(e)           Certificates. Promptly following each Closing, the Company shall
deliver to the Purchasers the certificates for the Preferred Shares and the
Warrants being acquired by such Purchaser at the Closing to such address set
forth next to each Purchaser’s name on the signature pages hereto with respect
to such Closing.
 
(f)           Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) hereof in a form reasonably
acceptable to such Purchaser (the “Resolutions”).
 
(g)           No Suspensions of Trading in Common Stock.  The Common Stock shall
not have been suspended, as of the Closing Date, by the Commission or the OTCQB
from trading on the OTCQB nor shall suspension by the Commission or the OTCQB
have been threatened, as of the Closing Date, either (A) in writing by the
Commission or the OTCQB or (B) by falling below the minimum listing maintenance
requirements of the OTCQB.
 
(h)           Certificate of Designation.  The Company shall have filed the
Certificate of Designation creating the Series B Convertible Preferred Stock
with the Nevada Secretary of State.
 
(i)           Officer’s Certificate. The Company shall have delivered to the
Purchasers a certificate of an executive officer of the Company, dated as of the
Closing Date, confirming the accuracy of the Company’s representations,
warranties and covenants as of the Closing Date and confirming the compliance by
the Company with the conditions precedent set forth in this Section 4.2 as of
the Closing Date.
 
(j)           Delivery of Transaction Documents. The Transaction Documents to
which the Company is a party shall have been duly executed and delivered by the
Company to the Purchasers.
 
ARTICLE V
 
Stock Certificate Legend
 
Section 5.1                      Legend. Each certificate representing the
Preferred Shares, the Conversion Shares, the Warrants and Warrant Shares and if
appropriate, securities issued upon conversion or exercise thereof, shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required by applicable state securities or “blue sky”
laws):
 
“THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION
OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.”

 
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The Company agrees to reissue certificates representing any of the Conversion
Shares or the Warrant Shares, without the legend set forth above so long as such
legend removal is in connection with a sale transaction and such holder thereof
shall give written notice to the Company describing the manner and terms of such
sale and removal as the Company may reasonably request.  In addition, such
proposed transfer and removal will not be effected until: (a) either (i) the
Company has received an opinion of counsel reasonably satisfactory to the
Company, to the effect that the registration of the Conversion Shares or the
Warrant Shares under the Securities Act is not required in connection with such
proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Company with the
Commission and has become effective under the Securities Act, and (iii) the
Company has received other evidence reasonably satisfactory to the Company that
such registration and qualification under the Securities Act and state
securities laws are not required; and (b) either (i) the Company has received an
opinion of counsel reasonably satisfactory to the Company, to the effect that
registration or qualification under the securities or “blue sky” laws of any
state is not required in connection with such proposed disposition, or (ii)
compliance with applicable state securities or “blue sky” laws has been effected
or a valid exemption exists with respect thereto. The Company will respond to
any such notice from a holder within five (5) business days. In the case of any
proposed transfer under this Section 5.1, the Company will use reasonable
efforts to comply with any such applicable state securities or “blue sky” laws,
but shall in no event be required, (x) to qualify to do business in any state
where it is not then qualified, (y) to take any action that would subject it to
tax or to the general service of process in any state where it is not then
subject, or (z) to comply with state securities or “blue sky” laws of any state
for which registration by coordination is unavailable to the Company. The
restrictions on transfer contained in this Section 5.1 shall be in addition to,
and not by way of limitation of, any other restrictions on transfer contained in
any other section of this Agreement.
 
Whenever a certificate representing the Conversion Shares or the Warrant Shares
is permitted to be issued to a Purchaser without a legend, in lieu of delivering
physical certificates representing the Conversion Shares or the Warrant Shares
(provided that a registration statement under the Securities Act providing for
the resale of the Conversion Shares and Warrant Shares is then in effect and
such shares have been sold), the Company may cause its transfer agent to
electronically transmit the Conversion Shares or Warrant Shares to a Purchaser
by crediting the account of such Purchaser or such Purchaser’s prime broker with
the DTC through its DWAC system (to the extent not inconsistent with any
provisions of this Agreement).  In addition, the Company will provide, at the
Company’s expense, such legal opinions in the future as are reasonably necessary
for the issuance and public resale of the Conversion Shares and the Warrant
Shares and conversion of the Preferred Shares and exercise of the Warrants
pursuant to an effective registration statement, Rule 144 under the Securities
Act or an exemption from registration under the Securities Act and applicable
“blue sky” laws, which opinion, if issued, shall be deemed to satisfy the
requirements of third paragraph of this Section 5.1.  Without limiting the
generality of the foregoing, in the event that Conversion Shares or Warrant
Shares are sold in a manner that complies with an exemption from registration
(including pursuant to Rule 144), the Company shall promptly instruct its
counsel (at its expense) to issue to the transfer agent an opinion permitting
removal of any legend restricting transfer pursuant to Section 5.1 hereof.
 
ARTICLE VI
 
Indemnification
 
Section 6.1                      General Indemnity. The Company agrees to
indemnify and hold harmless the Purchasers (and their respective directors,
officers, managers, partners, members, shareholders, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements) incurred by the
Purchasers as a result of any breach of the representations, warranties or
covenants made by the Company herein. Each Purchaser severally but not jointly
agrees to indemnify and hold harmless the Company and its directors, officers,
affiliates, agents, successors and assigns from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and disbursements) incurred by
the Company as a result of any breach of the representations, warranties or
covenants made by such Purchaser herein. The maximum aggregate liability of each
Purchaser pursuant to its indemnification obligations under this Article VI
shall not exceed the portion of the Purchase Price paid by such Purchaser
hereunder. In no event shall any “Indemnified Party” (as defined below) be
entitled to recover consequential or punitive damages resulting from a breach or
violation of this Agreement.

 
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Section 6.2                      Indemnification Procedure. Any party entitled
to indemnification under this Article VI (an “Indemnified Party”) will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
Indemnified Party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the Indemnified Party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Party. In the event that the indemnifying party advises an
Indemnified Party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
Indemnified Party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the Indemnified Party’s costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The Indemnified Party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party, which relates to such action or claim. The indemnifying
party shall keep the Indemnified Party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
Indemnified Party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
be liable for any settlement if the indemnifying party is advised of the
settlement but fails to respond to the settlement within thirty (30) days of
receipt of such notification. Notwithstanding anything in this Article VI to the
contrary, the indemnifying party shall not, without the Indemnified Party’s
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
Indemnified Party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such claim. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the Indemnified Party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
 
ARTICLE VII
 
Miscellaneous

 
Section 7.1                      Fees and Expenses. Except as otherwise set
forth in this Agreement and the other Transaction Documents, each party shall
pay the fees and expenses of its advisors, counsel, accountants and other
experts, if any, and all other expenses, incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
 
Section 7.2                      Specific Enforcement; Consent to Jurisdiction.
 
(a)           The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.

 
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(b)           Each of the Company and the Purchasers (i) hereby irrevocably
submits to the exclusive jurisdiction of the United States District Court
sitting in the Southern District of New York and the courts of the State of New
York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement or any of the other
Transaction Documents or the transactions contemplated hereby or thereby and
(ii) hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Each of
the Company and the Purchasers consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 7.2 shall affect or limit any right to serve
process in any other manner permitted by law.  Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
 
Section 7.3                      Entire Agreement; Amendment. This Agreement and
the other Transaction Documents contains the entire understanding and agreement
of the parties with respect to the matters covered hereby and, except as
specifically set forth herein or in the Transaction Documents, neither the
Company nor any of the Purchasers makes any representations, warranty, covenant
or undertaking with respect to such matters and they supersede all prior
understandings and agreements with respect to said subject matter, all of which
are merged herein. No provision of this Agreement nor any of the Transaction
Documents may be waived or amended other than by a written instrument signed by
the Company and the holders of over fifty percent (50%) of the Preferred Shares
then outstanding (the “Majority Holders”), and no provision hereof may be waived
other than by a written instrument signed by the party against whom enforcement
of any such waiver is sought. No such amendment shall be effective to the extent
that it applies to less than all of the holders of the Preferred Shares then
outstanding. No consideration shall be offered or paid to any person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to
the Transaction Documents.
 
Section 7.4                      Notices. Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of:
(a) the date of transmission, if such notice or communication is delivered via
electronic mail (“Email”) at the Email address set forth on the signature pages
attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day
(defined below), (b) the next Trading Day after the date of transmission, if
such notice or communication is delivered via Email at the Email address set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd) Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by the party to
whom such notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached hereto. For
purposes hereof, “Trading Day” means a day on which the OTCQB is open for
trading.
 
Section 7.5                      Waivers. No waiver by any party of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
 
Section 7.6                      Headings. The section headings contained in
this Agreement (including, without limitation, section headings and headings in
the exhibits and schedules) are inserted for reference purposes only and shall
not affect in any way the meaning, construction or interpretation of this
Agreement. Any reference to the masculine, feminine, or neuter gender shall be a
reference to such other gender as is appropriate. References to the singular
shall include the plural and vice versa.

 
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Section 7.7                      Successors and Assigns.  This Agreement may not
be assigned by a party hereto without the prior written consent of the Company
or the Purchasers, as applicable, provided, however, that, subject to federal
and state securities laws and as otherwise provided in the Transaction
Documents, a Purchaser may assign its rights and delegate its duties hereunder
in whole or in part (i) to a third party acquiring all or substantially all of
its Preferred Shares or Warrants in a private transaction or (ii) to an
affiliate, in each case, without the prior written consent of the Company or the
other Purchasers, after notice duly given by such Purchaser to the Company
provided, that no such assignment or obligation shall affect the obligations of
such Purchaser hereunder and that such assignee agrees in writing to be bound,
with respect to the transferred securities, by the provisions hereof that apply
to the Purchasers.  The provisions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns of the
parties.  Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
 
Section 7.8                      No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
 
Section 7.9                      Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York,
without giving effect to any of the conflicts of law principles which would
result in the application of the substantive law of another jurisdiction. This
Agreement shall not be interpreted or construed with any presumption against the
party causing this Agreement to be drafted.
 
Section 7.10                      Survival. The representations and warranties
of the Company and the Purchasers shall survive the execution and delivery
hereof and the Closing hereunder for a period of one (1) year following the
Closing Date.
 
Section 7.11                      Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and, all of which taken together shall constitute one and the
same Agreement and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
 
Section 7.12                      Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchasers without the consent of the Purchasers unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.
 
Section 7.13                      Severability. The provisions of this Agreement
and the Transaction Documents are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions contained in this Agreement or the Transaction Documents
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement or the Transaction
Documents and such provision shall be reformed and construed as if such invalid
or illegal or unenforceable provision, or part of such provision, had never been
contained herein, so that such provisions would be valid, legal and enforceable
to the maximum extent possible.
 
Section 7.14                      Further Assurances. From and after the date of
this Agreement, upon the request of any Purchaser or the Company, each of the
Company and the Purchasers shall execute and deliver such instrument, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement, the
Preferred Shares, the Conversion Shares, the Warrants, the Warrant Shares, the
and the other Transaction Documents.

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

METASTAT, INC.
 
 
Address for Notice:
By:__________________________________________
     Name: Oscar Bronsther, M.D.
     Title: Chief Executive Officer
 
 
 
With a copy to (which shall not constitute notice):
MetaStat, Inc.
27 Drydock Ave., Suite 29
Boston, MA 02210
Attention: Oscar Bronsther, M.D., CEO; or
Daniel Schneiderman, Vice President, Finance
Telephone No.: (212) 796-8170
Facsimile No. (646) 304-7086
Email: dan@metastat.com
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Attention:  David J. Levine, Esq.
Telephone No.: 212-407-4923
Facsimile No.: 212-818-1184
Email: dlevine@loeb.com
 
 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASERS FOLLOWS]

 
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[PURCHASER SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: ________________________
 
Signature of Authorized Signatory of Purchaser: ________________________
 
Name of Authorized Signatory: ________________________
 
Title of Authorized Signatory: ________________________
 
Email Address of Authorized Signatory: ________________________
 
Facsimile Number of Authorized Signatory: ________________________
 
Address for Notice to Purchaser:

 
Address for Delivery of Securities to Purchaser (if not same as address for
notice):
 
 
Units Purchased: ________________________

Purchase Price ($5,500 x Units Purchased): ________________________

Preferred Shares (1 x Units Purchased): ________________________

Conversion Shares (10,000 x Preferred Shares): ________________________

Series A Warrant Shares (7,500 x Preferred Shares Purchased):
________________________

Series B Warrant Shares (2,500 x Preferred Shares Purchased in the event minimum
investment is at least $500,000): ________________________

Purchaser’s Tax I.D. or Social Security Number: ________________________
 

 
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EXHIBIT A TO THE
SECURITIES PURCHASE AGREEMENT

FORM OF SERIES B CONVERTIBLE PREFERRED STOCK
 
CERTIFICATE OF DESIGNATION

 
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EXHIBIT B-1 TO THE
SECURITIES PURCHASE AGREEMENT

FORM OF SERIES A WARRANT

 
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EXHIBIT B-2 TO THE
SECURITIES PURCHASE AGREEMENT

FORM OF SERIES B WARRANT

 
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EXHIBIT C TO THE
SECURITIES PURCHASE AGREEMENT

FORM OF REGISTRATION RIGHTS AGREEMENT

 
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EXHIBIT D TO THE
SECURITIES PURCHASE AGREEMENT

ACCREDITED INVESTOR QUESTIONNAIRE

 
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EXHIBIT E TO THE
SECURITIES PURCHASE AGREEMENT

WIRE INSTRUCTIONS