Exhibit 10.1

 
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
 
This Convertible Note and Warrant Purchase Agreement, dated as of __________,
2013 (this “Agreement”), is entered into by and among MetaStat, Inc., a Nevada
corporation (the “Company”), and the other signatories hereto (each a “Lender”
and collectively, the “Lenders”).
 
RECITALS
 
A.           On the terms and subject to the conditions set forth herein,
Lenders are willing to purchase from Company and Company is willing to issue and
sell to Lenders, Convertible Promissory Notes in the principal amount of up to
One Million Five Hundred Thousand Dollars ($1,500,000), substantially in the
form attached hereto as Exhibit A (each a “Note” and collectively, the “Notes”);
 
B.           As additional consideration for the issuance of the Notes by the
Company, the Company is issuing to the Lenders warrants, in substantially the
form attached hereto as Exhibit B (“Warrants”), to purchase that number of
shares of the Company’s common stock, $0.0001 par value per share (the “Common
Stock”), equal to 25% of the total principal amount of Notes purchased pursuant
to this Agreement by each Lender, divided by $2.50 (the “Warrant Shares”); and
 
C.           This Agreement, the Notes, and the Warrants are referred to herein
collectively as the “Transaction Documents”).
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties, and conditions set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:
 
1. Issuance and Sale of the Note and Warrants.  In reliance upon the
representations, warranties and covenants of the parties set forth herein, the
Company agrees to issue, sell and deliver to each Lender, and each Lender
agrees, severally and not jointly, to purchase from the Company a Note in the
principal amount set forth below Lender’s name on the signature page hereto,
which Note shall include a Warrant exercisable for that number of Warrant Shares
set forth below Lender’s name on the signature page hereto. The purchase price
for the Note and Warrant shall be equal to the principal amount indicated on the
face of the Note and set forth below Lender’s name on the signature page hereto.
The Company and the Lender are executing and delivering this Agreement and
issuing the Notes and Warrants in accordance with and in reliance upon the
exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the “Securities Act”), including Regulation D (“Regulation D”),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder. The Notes, the Warrants and the Warrant Shares are
sometimes collectively referred to herein as the “Securities”.
 
2. Closing; Delivery.  The Company will deliver to Lenders the Notes against
receipt by the Company of the purchase price for the Notes in an aggregate
purchase price of up to One Million Five Hundred Thousand Dollars ($1,500,000)
(the “Purchase Price”). Each Warrant shall be issued within five (5) business
days following the receipt by the Company of the purchase price for the Note.
The initial closing (the “Initial Closing”) of the purchase and sale of the
Notes and Warrants to be acquired by the Lenders from the Company under this
Agreement shall take place at such time as Lenders have executed this Agreement
to purchase at least One Hundred Thousand Dollars ($100,000) principal amount of
Notes (the “Closing”), and all of the conditions set forth in Sections 5 and 6
hereof and applicable to the Closing shall have been fulfilled or waived in
accordance herewith (the “Closing Date”). At the Initial Closing, each Lender
shall deliver its Purchase Price by wire transfer to an account designated by
the Company according to the instructions attached hereto as Exhibit C (“Wire
Instructions”). After the Initial Closing, the Company may conduct any number of
additional closings (each, an “Additional Closing”) until $1,500,000 principal
amount of Notes have been issued and sold to the Lenders. At each Additional
Closing, each Lender shall deliver its Purchase Price by wire transfer to an
account designated by the Company according to the. Wire Instrutions.

 
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3. Representations and Warranties of the Company.  Subject to any exceptions set
forth in schedules attached hereto, and except as set forth in Commission
Documents (as defined in Section 3(g) below), which schedules and Commission
Documents are incorporated herein by this reference, the Company hereby
represents and warrants to each Lender that:
 
(a) Organization and Standing.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has all requisite corporate power and authority to carry on its business as now
conducted and proposed to be conducted as described in the Commission Documents.
The Company does not have any Subsidiaries (as defined in Section 3(h)) or own
securities of any kind in any other entity. The Company and each such Subsidiary
(as defined in Section 3(h)) is duly qualified as a foreign corporation 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. For the
purposes of this Agreement, “Material Adverse Effect” means any material adverse
effect on the business, operations, properties, prospects, 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.
 
(b) Corporate Power.  The Company has all requisite legal and corporate power to
enter into, execute and deliver the Transaction Documents This Agreement, and,
upon issuance, the Notes and Warrants will be, valid and binding obligations of
the Company, enforceable in accordance with their respective terms, except as
the same may be limited by bankruptcy, insolvency, moratorium, and other laws of
general application affecting the enforcement of creditors’ rights.
 
(c) Authorization.  All corporate and legal action on the part of the Company,
its officers, directors and shareholders necessary for the execution and
delivery of the Transaction Documents, the sale and issuance of the Note and the
Warrants, and the performance of the Company’s obligations hereunder and under
the other Transaction Documents, have been taken. When paid for and issued in
accordance with the terms hereof, the Notes shall be validly issued and
outstanding, free and clear of all liens, encumbrances and rights of refusal of
any kind. When the Warrant Shares are issued and paid for in accordance with the
terms of this Agreement, such Warrant Shares will be duly authorized by all
necessary corporate action and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a holder
of Common Stock.
 
(d) Capitalization.  The authorized capital stock of the Company as of the date
hereof is set forth on Schedule 3(d) hereto. All of the outstanding shares of
the Common Stock and any other outstanding security of the Company have been
duly and validly authorized and validly issued, fully paid and nonassessable.
Except as set forth in this Agreement, no shares of Common Stock or any other
security of the Company are entitled to preemptive rights, registration rights,
rights of first refusal or similar 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. Except for customary transfer restrictions
contained in agreements entered into by the Company in order to sell restricted
securities, the Company is not a party to or bound by any agreement or
understanding granting registration or anti-dilution rights to any person with
respect to any of its equity or debt securities. The Company is not a party to,
and it has no knowledge of, any agreement or understanding restricting the
voting or transfer of any shares of the capital stock of the Company. Except as
disclosed below, (i) there are no outstanding debt securities, or other form of
material debt of the Company or any of its Subsidiaries, (ii) there are no
contracts, commitments, understandings, agreements or arrangements under which
the Company or any of its Subsidiaries is required to register the sale of any
of their securities under the Securities Act, (iii) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings, agreements or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (iv) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities, (v) the Company does not have any stock appreciation rights or
“phantom stock” plans or agreements, or any similar plan or agreement and (vi)
as of the date of this Agreement, to the Company’s and each of its Subsidiaries’
knowledge, no person or group of related persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act (as defined
below)) or has the right to acquire by agreement with or by obligation binding
upon the Company, beneficial ownership of in

 
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 excess of 5% of the Common Stock. Any person with any right to purchase
securities of the Company that would be triggered as a result of the
transactions contemplated hereby or by any of the other Transaction Documents
has waived such rights or the time for the exercise of such rights has passed,
except where failure of the Company to receive such waiver would not have a
Material Adverse Effect. There are no options, warrants or other outstanding
securities of the Company (including, without limitation, any equity securities
issued pursuant to any Company Plan) the vesting of which will be accelerated by
the transactions contemplated hereby or by any of the other Transaction
Documents. None of the transactions contemplated by this Agreement or by any of
the other Transaction Documents shall cause, directly or indirectly, the
acceleration of vesting of any options issued pursuant the Company’s stock
option plans.
 
(e) No Conflicts.  The execution, delivery and performance by the Company of its
obligations under the Transaction Documents will not: (i) conflict with or
result in a breach of or a default under any of the terms or provisions of, (A)
the Company’s articles of incorporation (the “Articles”) or by-laws (“Bylaws”),
or (B) any material provision of any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company is a party or by which it
or any of its material properties or assets is bound, (ii) result in a violation
of any material provision of any law, statute, rule, regulation, or any existing
applicable decree, judgment or order by any court, Federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company, or any of its material properties or assets or (iii) result in the
creation or imposition of any material lien, charge or encumbrance upon any
material property or assets of the Company or any of its subsidiaries pursuant
to the terms of any agreement or instrument to which any of them is a party or
by which any of them may be bound or to which any of their property or any of
them is subject except, in the case of clauses (i)(B), (ii) and (iii), for such
violations, breaches, conflicts, defaults or other occurrences which,
individually or in the aggregate, would not have a Material Adverse Effect.
 
(f) No Approvals.  No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required in connection with the valid execution and delivery of the
Transaction Documents.
 
(g) Commission Documents, Financial Statements.  The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and 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 Exchange Act for the
two years preceding the date hereof (all of the foregoing including filings
incorporated by reference therein being referred to herein as the “Commission
Documents”). At the times of their respective filings, the Form 10-Q for the
fiscal quarters ended August 31, 2012, and May 31, 2012 (collectively, the “Form
10-Q”) and the Form 8-K dated March 21, 2012, as amended (the “Form 8-K”),
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and the Form
10-Q and Form 8-K did not 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 light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the Commission Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission. Such financial statements
have been prepared in accordance with generally accepted accounting principles
(“GAAP”) applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such 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 financial position of the Company and its
Subsidiaries 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).
 
(h) Subsidiaries.  Schedule 3(h) hereto sets forth each Subsidiary of the
Company, showing the

 
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(i) jurisdiction of its incorporation or organization and showing the percentage
of each person’s ownership of the outstanding stock or other interests of such
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 interest 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. All of the outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued, and are fully paid
and nonassessable. 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. 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.
 
(j) No Material Adverse Effect.  Since February 29, 2012, the Company has not
experienced or suffered any Material Adverse Effect.
 
(k) No Undisclosed Liabilities.  Neither the Company nor any of its Subsidiaries
has incurred 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 or
its Subsidiaries respective businesses or which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect.
 
(l) No Undisclosed Events or Circumstances.  Since February 29, 2012, no event
or circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective businesses, properties, prospects, 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.
 
(m) Indebtedness.  Schedule 3(1) hereto sets forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or Indebtedness for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $100,000 (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 are or should be reflected in the Company’s
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 in
excess of $100,000 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.
 
(n) Title to Assets.  Each of the Company and the Subsidiaries has good and
valid title to all of its real and personal property reflected in the Commission
Documents, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those that, individually or in the
aggregate, do not cause a Material Adverse Effect. Any leases of the Company and
each of its Subsidiaries are valid and subsisting and in full force and effect.

 
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(o) Actions Pending.  There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. There is no
action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or other proceeding pending or, to the knowledge of the Company,
threatened against or involving the Company, any Subsidiary or any of their
respective properties or assets, which individually or in the aggregate, would
reasonably be expected, if adversely determined, to have a Material Adverse
Effect. 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 officers or directors of the Company or
Subsidiary in their capacities as such, which individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
 
(p) Compliance with Law.  The business of the Company and the Subsidiaries has
been and, to the Company’s knowledge is, presently being conducted in accordance
with all applicable federal, state and local governmental laws, rules,
regulations and ordinances, except where, individually or in the aggregate, the
noncompliance therewith could not reasonably be expected to have a Material
Adverse Effect. The Company and each of its Subsidiaries have all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its 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.
 
(q) Taxes.  Except for matters that would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, the
Company and each of the Subsidiaries 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 financial statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is subject and
which are not currently due and payable. To the knowledge of the Company, none
of the federal income tax returns of the Company or any Subsidiary have been
audited by the Internal Revenue Service. The Company has no knowledge of any
additional assessments, adjustments or contingent tax liability (whether federal
or state) 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.
 
(r) Certain Fees.  Except as disclosed on Schedule 3(q), the Company has not
employed any broker or finder or incurred any liability for any brokerage or
investment banking fees, commissions, finders’ structuring fees, financial
advisory fees or other similar fees in connection with the Transaction
Documents.
 
(s) Disclosure.  To the Company’s knowledge, neither the representations and
warranties contained in this Section 3 or the schedules hereto nor any other
documents, certificates or instruments furnished to the Lenders by or on behalf
of the Company or any Subsidiary in connection with the transactions
contemplated by this Agreement contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
 
(t) Operation of Business.  The Company and each of the Subsidiaries owns or
possesses the rights 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 which are
necessary for the conduct of its business as now conducted and, to the knowledge
of the Company, without any conflict with the rights of others except where
failure to own such property or possess such rights would not have a Material
Adverse Effect.

 
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(u) Environmental Compliance.  To the best of the Company’s knowledge, the
Company and each of its Subsidiaries have obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws. “Environmental Laws”
shall mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. To the Company’s
knowledge, the Company has all necessary governmental approvals required under
all Environmental Laws as necessary for the Company’s business or the business
of any of its subsidiaries. Except for such instances as would not individually
or in the aggregate have a Material Adverse Effect and to the knowledge of the
Company, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its Subsidiaries that violate or may violate any Environmental Law after the
Closing Date or that may give rise to any environmental liability, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or related to
the manufacture, processing, distribution, use, treatment, storage (including
without limitation underground storage tanks), disposal, transport or handling,
or the emission, discharge, release or threatened release of any hazardous
substance.
 
(v) Books and Records; Internal Accounting Controls.  The records and documents
of the Company and its Subsidiaries accurately reflect in all material respects
the information relating to the business of the Company and the Subsidiaries,
the location of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any Subsidiary. The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient, in the judgment of the Company’s board of directors, 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 generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate actions are taken with respect to any differences.
 
(w) Securities Act of 1933.  Based in material part upon the representations
herein of the Lenders, the Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities 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 Securities or similar securities to, or solicit
offers with respect thereto from, or enter into any 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 Securities under the registration provisions
of the Securities Act and applicable state securities laws. 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 Securities.
 
(x) Employees.  Neither the Company nor any Subsidiary has any collective
bargaining arrangements or agreements covering any of its employees. Neither the
Company nor any Subsidiary has any employment contract, agreement regarding
proprietary information, non­competition agreement, non-solicitation agreement,
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 or such Subsidiary required to be disclosed
in the Commission Documents that is not so disclosed. No officer, consultant or
key employee of the Company or any Subsidiary whose termination, either
individually or in the aggregate, would be reasonably likely to 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.

 
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4. Representations and Warranties by Lender.  Each Lender represents and
warrants severally and not jointly, to the Company as of the time of issuance of
the Note and Warrants as follows:
 
(a) Organization and Standing.  If Lender is an entity, Lender is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite corporate or other entity
power and authority to carry on its business as now conducted and proposed to be
conducted. If Lender is an entity, the address of its principal place of
business is as set forth on the signature page hereto, and if Lender is an
individual, the address of its principal residence is as set forth on the
signature page hereto.
 
(b) Power.  If Lender is an entity, Lender has all requisite legal and corporate
or other entity power and authority to enter into, execute and deliver each of
the Transaction document to which it is a party. Each Transaction Document to
which Lender is a party has been duly and validly authorized, executed and
delivered by Lender is the valid and binding obligation of Lender, enforceable
in accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, moratorium, and other laws of general application affecting the
enforcement of creditors’ rights.
 
(c) Authorization.  If Lender is an entity, all corporate or other entity and
legal action on the part of Lender, its officers, directors, managers,
shareholders, partners, or members, as applicable, necessary for the execution
and delivery of the Transaction Documents to which it is a party, the purchase
of the Note and the performance of Lender’s obligations such Transaction
Documents have been taken.
 
(d) No Conflict; Required Filings and Consents.  Neither the execution and
delivery of this Agreement or the other Transaction Documents by Lender nor the
performance by Lender of its obligations hereunder will: (i) if Lender is an
entity, conflict with Lender’s Articles or Bylaws, or other similar
organizational documents; (ii) violate any statute, law, ordinance, rule or
regulation, applicable to Lender or any of the properties or assets of Lender;
or (iii) violate, breach, be in conflict with or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or permit the termination of any provision of, or result in the
termination of, the acceleration of the maturity of, or the acceleration of the
performance of any obligation of Lender under, or result in the creation or
imposition of any lien upon any properties, assets or business of Lender under,
any material contract or any order, judgment or decree to which Lender is a
party or by which it or any of its assets or properties is bound or encumbered
except, in the case of clauses (ii) and (iii), for such violations, breaches,
conflicts, defaults or other occurrences which, individually or in the
aggregate, would not have a material adverse effect on its ability to perform
its obligations under the Transaction Documents.
 
(e) Acquisition for Investment.  The Lender is purchasing the Securities solely
for its own account for the purpose of investment and not with a view to or for
sale in connection with distribution. The Lender does not have a present
intention to sell any of the Securities, nor a present arrangement (whether or
not legally binding) or intention to effect any distribution of any of the
Securities to or through any person or entity; provided, however, that by making
the representations herein, such Lender does not agree to hold the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with Federal and state securities laws
applicable to such disposition. The Lender acknowledges that it (i) has such
knowledge and experience in financial and business matters such that Lender is
capable of evaluating the merits and risks of Lender’s investment in the
Company, (ii) is able to bear the financial risks associated with an investment
in the Securities, (iii) has been given full access to such records of the
Company and to the officers of the Company as it has deemed necessary or
appropriate to conduct its due diligence investigation, and (iv) has had the
opportunity to ask representatives of the Company certain questions and request
certain additional information regarding the finances, operations, business and
prospects of the Company and has had any and all such questions and requests
answered to its satisfaction.

 
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(f) Rule 144. The Lender understands that the Securities are “restricted
securities” as defined in Rule 144, and must be held indefinitely unless such
Securities are registered under the Securities Act or an exemption from
registration is available. The Lender acknowledges that such person 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 Lender
has been advised that Rule 144 permits resales only under certain circumstances.
The Lender understands that to the extent that Rule 144 is not available, such
Lender will be unable to sell any Securities without either registration under
the Securities Act or the existence of another exemption from such registration
requirement.
 
(g) No General Solicitation.  The Lender acknowledges that the Securities were
not offered to such Lender 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, radio or the interne, or (ii) any seminar or meeting
to which such Lender was invited by any of the foregoing means of
communications. The Lender, in making the decision to purchase the Securities,
has relied upon independent investigation made by it and has not relied on any
information or representations made by third parties.
 
(h) Accredited Investor.  The Lender is an “accredited investor” as such term is
defined in Rule 501 of Regulation D under the Securities Act and as set forth in
Exhibit D attached hereto and made a part hereof, and such Lender has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Securities. Such Lender is not
required to be registered as a broker-dealer under Section 15 of the Exchange
Act and such Lender is not a broker-dealer. The Lender acknowledges that an
investment in the Securities is speculative and involves a high degree of risk.
 
5. Conditions Precedent to the Obligation of the Company to Close and to Sell
the Securities.  The obligation hereunder of the Company to close and issue and
sell the Securities to the Lenders at the Closing is subject to the satisfaction
or waiver, at or before the Closing 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 the Lenders’ Representations and Warranties.  The
representations and warranties of each Lender shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all 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
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of such date.
 
(b) Performance by the Lenders.  Each Lender shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Lenders at or prior to the Closing Date.
 
(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 the Securities shall
have been delivered to the Company on the Closing Date.
 
(e) Delivery of Transaction Documents.  The Transaction Documents shall have
been duly executed and delivered by the Lenders to the Company.

 
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6. Conditions Precedent to the Obligation of the Lenders to Close and to
Purchase the Securities.  The obligation hereunder of the Lenders to purchase
the Securities and consummate the transactions contemplated by this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Lenders’ sole benefit
and may be waived by the Lenders at any time in their 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 shall be true and correct in all material respects (except
for those representations and warranties that are qualified by materiality or
Material Adverse Effect, which shall be true and correct in all 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 material respects
(except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, 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 material 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 Date.
 
(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) Notes.  At or prior to the Closing Date, the Company shall have delivered to
the Lenders the Notes (in such denominations as each Lender may request).
 
(f) Secretary’s Certificate.  The Company shall have delivered to the Lenders a
secretary’s certificate, dated as of the Closing Date, as to (i) the resolutions
adopted by the Board of Directors approving the transactions contemplated
hereby, (ii) the Articles, (iii) the Bylaws, each as in effect at the Closing,
and (iv) the authority and incumbency of the officers of the Company executing
the Transaction Documents and any other documents required to be executed or
delivered in connection therewith.
 
(g) Officer’s Certificate.  On the Closing Date, the Company shall have
delivered to the Lenders a certificate signed by an executive officer on behalf
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 paragraphs (b)-(d) of this Section 6 as of the Closing Date.
 
(h) Material Adverse Effect.  No Material Adverse Effect shall have occurred at
or before the Closing Date.
 
(i) Delivery of Transaction Documents.  The Transaction Documents shall have
been duly executed and delivered by the Company to the Lenders.
 
7. Covenants.  The Company covenants with each Lender as follows, which
covenants are for the benefit of each Lender and their respective permitted
assignees.

 
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(a) 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 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 Lenders,
or their respective subsequent holders.
 
(b) Compliance with Laws.  The Company shall comply, and cause each Subsidiary
to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which would be reasonably likely to have a Material Adverse
Effect.
 
(c) 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 its Subsidiaries, and in which,
for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
 
(d) Reporting Status.  So long as a Lender beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed with
the Commission pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
 
(e) Disclosure of Transaction.  The Company shall file with the Commission a
Current Report on Form 8-K (the “Form 8-K”) describing the material terms of the
transactions contemplated hereby (and attaching as exhibits thereto this
Agreement, the form of Note and any press release) as soon as practicable
following the Closing Date but in no event more than four (4) Trading Days
following the Closing Date. “Trading Day” means any day during which the
principal exchange on which the Common Stock is traded shall be open for
trading.
 
8. Indemnification.
 
(a) General Indemnity.  The Company agrees to indemnify and hold harmless the
Lenders (and their respective 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 Lenders
as a result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Company herein. Each Lender 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 result of any inaccuracy in or breach of the representations,
warranties or covenants made by such Lender herein. The maximum aggregate
liability of each Lender pursuant to its indemnification obligations under this
Section 8 shall not exceed the portion of the Purchase Price paid by such Lender
hereunder and the maximum aggregate liability of the Company pursuant to its
indemnification obligations under this Section 8 shall not exceed the aggregate
Purchase Price received by the Company hereunder.
 
(b) Indemnification Procedure.  Any party entitled to indemnification under this
Section 8 (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 Section 8 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

 
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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 affected without its prior written consent. Notwithstanding
anything in this Section 8 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
indemnification required by this Section 8 shall be made by periodic payments of
the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, so long as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. 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.
 
9. Participation Right.  The Company currently anticipates an equity or equity
based financing or a series of equity financings following the date of this
Agreement resulting in gross proceeds to the Company totaling at least
$3,500,000 (inclusive of the Notes) (a “Qualified Financing”). Each Lender shall
have the right, but not the obligation, to participate in the Qualified
Financing up to an amount equal to the product obtained by multiplying (A) the
Purchase Price set forth opposite such Lender’s name on the signature page
attached hereto by (B) 1.15, on the terms and conditions of such Qualified
Financing (the “Participation Right”). In connection with each Participation
Right, the Company shall provide written notice to each Lender of the terms and
conditions of the Qualified Financing at least ten business days prior to the
anticipated first closing of such Qualified Financing (“QF Notice”). Each Lender
electing to exercise its Participation Right shall notify the Company, in
writing, of such election at least five business days prior to the anticipated
closing date set forth in the QF Notice (“Participation Notice”). In the event
the Lender does not return a Participation Notice to the Company within such
five business day period, the Participation Right granted hereunder shall
terminate and be of no further force and effect.
 
10. Miscellaneous.
 
(a) Fees and Expenses.  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.
 
(b) Confidentiality; Non-Public Information.  Lender acknowledges and agrees
that that the existence of this Agreement and the information contained herein
and in the other Transaction Documents is of a confidential nature and shall
not, without the prior written consent of the Company, be disclosed by Lender to
any person or entity, other than Lender’s personal financial and legal advisors
for the sole purpose of evaluating an investment in the Company, and that it
shall not, without the prior written consent of the Company, directly or
indirectly, make any statements, public announcements or release to trade
publications or the press with respect to the subject matter of this Agreement
or the Note. Lender further acknowledges and agrees that the information
contained herein and in the other documents relating to this transaction may be
regarded as material non-public information under United States federal
securities laws, and that United States federal securities laws prohibit any
person who has received material non-public information relating to the Company
from purchasing or selling securities of the Company, or from communicating such
information to any person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell securities of the
Company. Accordingly, until such time as any such non-public information has
been adequately disseminated to the public, Lender shall not purchase or sell
any securities of the Company, or communicate such information to any other
person.

 
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(c) Governing Law.  This Agreement and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to 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.
 
(d) Consent to Jurisdiction; Venue.
 
The parties agree that venue for any dispute arising under this Agreement will
lie exclusively in the state or federal courts located in New York, New York,
and the parties irrevocably waive any right to raise forum non conveniens or any
other argument that New York is not the proper venue. The parties irrevocably
consent to personal jurisdiction in the state and federal courts of the state of
New York. The Company and each Lender consent to process being served in any
such suit, action or proceeding by mailing a copy thereof 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 10(d) shall affect or limit any right to serve
process in any other manner permitted by law. The Company and the Lenders hereby
agree that the prevailing party in any suit, action or proceeding arising out of
or relating to the Securities, this Agreement or the other Transaction
Documents, shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party. The parties hereby waive all rights to a trial by jury.
 
(e) Entire Agreement.  This Agreement together with the exhibits attached hereto
constitutes the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof.
 
(f) Notices.  All notices and other communications required or permitted
hereunder shall be in writing and shall be hand delivered or sent via facsimile,
overnight courier service or mailed by certified or registered mail, postage
prepaid, return receipt requested, addressed or sent to the addresses listed on
the signature page hereto or at such other addresses as the parties shall have
furnished to each other in writing. Notices sent via hand delivery shall be
effective when received, notices sent facsimile shall be effective upon written
confirmation of transmission (if also sent by another form of notice permitted
hereunder within 24 hours of sending the facsimile), notices sent by overnight
courier shall be effective upon receipt, and notices mailed by certified or
registered mail, postage prepaid return receipt requested, shall be effective
five business days after deposit with the U.S. Postal Service.
 
(g) Successors and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns. After the Closing,
the assignment by a party to this Agreement of any rights hereunder shall not
affect the obligations of such party under this Agreement. The Lenders may
assign the Securities and its rights under this Agreement and the other
Transaction Documents and any other rights hereto and thereto without the
consent of the Company.
 
(h) No Third Party Beneficiaries.  Except as contemplated by Section 9 hereof,
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.
 
(i) Validity.  If any provision of this Agreement or the Note shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
 
(j) Counterparts.  This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall be deemed to
constitute one instrument.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 
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IN WITNESS WHEREOF, the parties have caused this Note Purchase Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date and year first written above.
 
ADDRESS:
METASTAT, INC.:
   
MetaStat, Inc.
8 Hillside Ave, Suite 207
Montclair, NJ 07042
Attention: Warren C. Lau, President
Telephone No.: (973) 744-7618
Facsimile No. (832) 442-3452
By:                                                                
Name:
Title: 
   

 

ADDRESS:
LENDER:
     
By:                                                                
Name:
Title:
 
Principal Amount of Note Purchased: $__________
 
Number of Warrant Shares (Principal Amount of Note Purchased multiplied by 25%
and divided by $2.50):  _____________________

 

 
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Schedule 3(d)
 
Capitalization

The Company has 21,054,418 shares of its Common Stock issued and outstanding and
has 2,653,372 Common Stock purchase warrants issued and outstanding with
exercise prices ranging between $0.68 and $1.50 per share, and 1,116,500 stock
options issued and outstanding with a strike price equal to $0.68 per share.

The Company entered into Registration Rights Agreements dated February 27, 2012
and May 1, 2012, as amended.

 
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Schedule 3(h)
Subsidiaries
 
MetaStat BioMedical Inc., a Delaware corporation.

 
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Schedule 3.1(g)
Commission Documents; Financial Statements
 
 
The initial filing of the Company’s quarterly reports on Form 10-Q for the
periods ended August 31, 2011 and November 30, 2011 did not contain XBRL filings
and accordingly, such filings are deemed to have been filed late. The Company
filed amendments to both filings on February 23, 2012 to comply with the
requirements of the Exchange Act.

Dr. Patrick Mooney, one of the Company’s independent directors, was the
President, Chief Executive Officer and Chairman of Aphton Corporation (NASDAQ:
APHT), a biopharmaceutical company, from 2004 to 2006.  On May 23, 2006, Aphton
Corporation declared bankruptcy under Chapter 11 of the United States Bankruptcy
Code.

 
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Schedule 3(q)
Certain Fees
 
The Company has engaged Noble Financial Capital Markets (“Noble”) as exclusive
lead placement agent with respect to the offering of the Notes and Warrants
(collectively, “Securities”). As compensation for Noble’s services hereunder,
the Company has paid Noble a non-refundable retainer fee of $25,000. At each
closing of the sale of Securities pursuant to this Agreement (“Closing”) to
purchasers introduced by Noble, Noble shall be paid a cash fee equal to 8% of
the aggregate gross proceeds received from a sale of the Securities (“Fee”) to
such purchasers. The cash Fee(s) shall be paid by the Company to Noble within
three (3) business days of each Closing. Additionally, at each Closing of any
sale of the Securities, Noble shall have the right to purchase cashless exercise
warrants to purchase Common Stock equal to the aggregate gross proceeds received
from a sale of Securities to purchasers introduced by Noble divided by the price
at which the Company sold Common Stock to purchasers introduced by Noble at each
Closing, multiplied by 10%. Such warrants will have a term of five years and
will be transferable to Noble employees and affiliates, provided that such
transferees are accredited investors as defined under federal securities
laws.  Noble shall also be entitled to a one-time piggyback registration right
with respect to the shares underlying such warrants. Noble has waived any
placement fees, as more fully described above, for any purchasers introduced by
the Company.
 
In addition, Noble has entered into a Master Selected Dealers Agreement with
Rockwell Global Capital, LLC (“Rockwell”), whereby Rockwell shall received 90%
of the total gross placement fees, as more fully described above, for any
purchasers introduced by Rockwell.

 
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EXHIBIT A
 
FORM OF NOTE

 
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EXHIBIT B
 
FORM OF WARRANT

 
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EXHIBIT C
 
WIRE INSTRUCTIONS

 

 
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EXHIBIT D
ACCREDITED INVESTOR QUESTIONNAIRE
 
 
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