Blueprint





 






Exhibit
10.1


 


SUBSCRIPTION
AGREEMENT


This
SUBSCRIPTION AGREEMENT (this “Agreement”) is made and entered
into as of __________, 2016, by and among MetaStat, Inc., a Nevada
corporation (the “Company”), and each of the
eligible investors who executes this Agreement and whose names are
set forth on the signature pages hereto (individually, a
“Subscriber” and
collectively, the “Subscribers”).


RECITALS


WHEREAS, the
Company is conducting a private placement (the “Offering”) of units (each a
“Unit” and
collectively the “Units”) to Subscribers who qualify
as “accredited investors”, as such term is defined in
Rule 501(a) of Regulation D of the Securities Act of 1933, as
amended (the “Securities
Act”);


WHEREAS, the
Company is offering up to a maximum of (the “Maximum Offering”) 2,000 Units or
$20,000,000, using certain non-exclusive registered agents (each an
“Agent” and
collectively the “Agents”);


WHEREAS, each Unit
consists of (i) 5,000 shares (the “Shares”) of the Company’s
common stock, par value $0.0001 per share (the “Common Stock”) at an effective
price of $2.00 per share (the “Effective Price”), and (ii) a
warrant to purchase 2,500 shares of Common Stock at a purchase
price of $3.00 per share and a term of 5 years (the
“Warrants”);


WHEREAS, In the
event that a Subscriber would own in excess of 4.99% or 9.99% of
the number of shares of the Common Stock outstanding on a Closing
Date (as defined herein) after giving effect to the issuance of
securities pursuant to this Agreement on such Closing Date, then,
in lieu of purchasing Shares of Common Stock as part of each Unit,
such Subscriber may purchase the number of shares of the
Company’s Series A-2 Convertible Preferred Stock (the
“Series A-2
Preferred”) set forth on the signature page hereof
(the “Preferred
Shares”). The shares of Series A-2 Preferred shall
have the rights, privileges, preferences and conversion provisions
as set forth in the form of Certificate of Designation of the
Series A-2 Preferred Stock attached hereto as Exhibit A
(the “Certificate of
Designation”), which has been filed with the Nevada
Secretary of State. The shares of Common Stock issuable upon
conversion of the Preferred Shares shall be referred to herein as
the “Conversion
Shares.” In the event a Subscriber acquires Preferred
Shares pursuant hereto, then this Agreement, including without
limitation, the representations and warranties contained herein,
shall apply to the purchase of the Preferred Shares and,
accordingly, any reference to “Units,”
“Shares,” or “securities” shall also be
deemed to include the Preferred Shares listed on such
Subscriber’s signature page hereto and all Conversion
Shares.


 


WHEREAS, the
Shares, the Preferred Shares, the Conversion Shares, the Warrants
and the Warrant Shares (as defined below) shall be referred to
herein as the "Securities".


 


WHEREAS, the
offering price is $10,000 per Unit (the “Purchase Price”);


 


WHEREAS, the Units
are being offered pursuant to the Company’s Confidential
Private Placement Memorandum (together with all exhibits,
appendices, schedules, supplements and amendments thereto,
collectively the “Memorandum”), to which this
Agreement is attached as Exhibit A;


WHEREAS, the
Units will be offered through September 30, 2016, subject to an
extension for up to an additional 30-day period as the Company and
the Agents may mutually agree (the “Termination Date”),


 


WHEREAS, the
Company may conduct an initial closing on an amount mutually agreed
by the Company and the Agents (the “Initial Closing”) or one or more
subsequent closings at any time following the Initial Closing on or
before the Termination Date. The Company may accept or reject
subscriptions in whole or in part in its discretion for any
reason;


 




 

-1-








 






WHEREAS, following
one or more closings in which 1 Unit or $10,000 has been subscribed
for in cash, certain Subscribers may surrender outstanding
indebtedness in the aggregate amount of up to $825,000 owed by the
Company as evidenced by promissory notes held by such Subscribers
for Units in lieu of paying the Purchase Price in cash (the
“Non-Convertible OID Note
Exchange”), and following one or more closings in
which an aggregate of 150.5 Units or $1,505,000 has been subscribed
for in cash, certain Subscribers may surrender outstanding
indebtedness in the aggregate amount of up to $1,326,000 owed by
the Company as evidenced by promissory notes held by such
Subscribers for Units in lieu of paying the Purchase Price in cash
(the “Promissory Note
Exchange” and together with the Non-Convertible OID
Note Exchange, the “Note
Exchange”), as more fully described in the
Memorandum;


 


WHEREAS, the
Company and the Subscribers 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; and


 


WHEREAS, the
Subscriber desires to purchase and the Company desires to sell that
amount of Units set forth on the signature page hereof on the terms
and conditions hereinafter set forth;


 


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 Subscribers hereby agree as follows:


 


ARTICLE
I


 


Subscription for
Units


 


Section
1.1        Subscription. The Company is
offering to each Subscriber and each Subscriber hereby irrevocably
subscribes for and agrees to purchase from the Company the number
of Units as set forth on such Subscriber’s signature page
hereto at a Purchase Price of $10,000 per Unit for aggregate
consideration as set forth on the Subscriber’s signature page
hereto (the “Subscription
Proceeds”), subject to a minimum subscription of one
(1) Unit ($10,000), unless the Company in its sole discretion
agrees to accept a subscription for a lesser number of Units. All
subscriptions are irrevocable by the Subscriber. The subscription
is not transferable or assignable by the Subscriber.


Section
1.2        Payment.


(a)        The
Subscription Proceeds shall be paid to Signature Bank, as escrow
agent for the Company (the “Escrow Agent”), by wire transfer
of immediately available funds in U.S. dollars (or in the form of a
personal or cashier’s check) in accordance with the wire and
delivery instructions attached hereto as Exhibit B.
The Subscription Proceeds must accompany the documents indicated in
Section 1.3 below.


(b)        If
the Subscription Proceeds are paid to the Escrow Agent, the
Subscriber acknowledges and agrees that this Agreement and any
other documents delivered in connection herewith will be held by
certain Agents on behalf of the Company, and any Subscription
Proceeds will be deposited in an escrow account (the
“Escrow
Account”), held by the Escrow Agent. In the event that
this Agreement is not accepted in whole or in part by the Company
for whatever reason, this Agreement and any other documents
delivered in connection herewith will be returned to the Subscriber
by the Agents at the address of the Subscriber as set forth on the
Subscriber’s signature page hereto, and any Subscription
Proceeds deposited in the Escrow Account shall be returned to the
Subscriber by the Escrow Agent in accordance with the payment
information provided by the Agent to the Escrow Agent.


 




 

-2-








 






(c)        In
connection with the Note Exchange, certain Subscribers who are
holders of the Company’s indebtedness in an amount of up to
$2,151,000 may tender their indebtedness in the form of promissory
notes to the Company in lieu of payment of the Subscription
Proceeds as described in Section 1.2(a) above.


Section
1.3        Documents Required from
Subscriber. In order to subscribe for the Units, each
Subscriber will be required to complete, execute and deliver to the
Company the following:


(i)           this
Agreement;


(ii)         
the Confidential Private Subscriber Questionnaire, which is
attached as Exhibit
B to the Memorandum; and


(iii)        
the Registration Rights Agreement, which is attached as
Exhibit C to the
Memorandum.


Section
1.4        Obligations of the Escrow
Agent. The Subscription Proceeds may be deposited by the
Subscriber on behalf of certain Agents in the Escrow Account
pursuant to the instructions in Exhibit A
attached hereto. The Subscriber agrees that the Escrow Agent shall
have no accountability or obligations to the Subscriber whatsoever,
and acknowledges that the Escrow Agent is accountable only to the
Company and certain Agents. The Subscriber agrees that when the
Subscription Proceeds are deposited in the Escrow Account, the
Escrow Agent’s only duty shall be to deliver the Subscription
Proceeds to the Company or its designees, all solely according to
payment instructions submitted jointly by the Company and certain
Agents (the “Payment
Instructions”), and the Escrow Agent shall require no
further instructions from the Subscriber in delivering the same to
the Company or its designees. In the event the Company rejects this
subscription in whole or in part, the Escrow Agent shall return the
Subscription Proceeds directly to the investor without interest or
deduction there from. The proceeds of the Escrow Account shall be
distributed in accordance with Section 1.5.


Section
1.5        Closings. The Initial Closing
of the purchase and sale of the Units to be acquired by the
Subscribers from the Company under this Agreement shall take place
at such time as Subscribers have executed this Agreement to
purchase an amount as mutually agreed by the Company and the Agents
(which amount shall not include the Note Exchange pursuant to the
terms of Section 1.2(c) hereof), and all of the conditions
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 at any time (each, an “Additional Closing” and, together
with the Initial Closing, a “Closing”) so long as the final
Additional Closing occurs on or before the Termination Date.
Subject to all conditions to Closing having been satisfied or
waived, each Closing shall take place at such time and place as the
parties shall agree (a “Closing Date”). For purposes of
this Agreement, a “business day” means a day (A) other
than Saturday or Sunday and (B) on which commercial banks are open
for business in New York City, New York. Closing of the Offering of
the Units shall occur in the following manner:


 


(a)        The
Escrow Agent shall upon notice of a Closing Date jointly from the
Company and certain Agents, release to the Company or its designees
the proceeds of the Offering in accordance with the Payment
Instructions.


 


(b)        Within
five (5) business days after each Closing Date, the Company shall
irrevocably instruct its transfer agent to deliver to the
Subscriber one or more stock certificates bearing the restrictive
legends described herein, evidencing (a) such number of Shares
equal to 5,000 multiplied by the number of Units the Subscriber is
purchasing as is set forth on Subscriber’s signature page
hereto, (b) such number of Preferred Shares equal to 500 multiplied
by the number of Units the Subscriber is purchasing as is set forth
on Subscriber’s signature page hereto, or (c) a combination
thereof as is set forth on Subscriber’s signature page
hereto.


 




 

-3-








 






Section
1.6        Price Protection. For a period
of one hundred eighty (180) days following the final Closing Date,
so long as any Subscriber holds any Shares or Preferred Shares, if
the Company, at any time following the date hereof, issues any
Additional Securities (as defined below) at a price per such
Additional Security lower than the Effective Price (i.e., $2.00 per
share, subject to adjustment for any stock dividends, combinations,
splits, recapitalizations and the like with respect to the
Company’s Common Stock following the date hereof) (such lower
price, the “Subsequent
Offering Price”), upon each such issuance the Company
shall promptly cause to be issued and delivered to each Subscriber
such additional shares of Common Stock or Preferred Shares
(“Ratchet
Shares”) equal to the excess of (A) the quotient of
such Subscriber’s aggregate Purchase Price hereunder divided
by the Subsequent Offering Price (calculated, in the event of any
security convertible into or exercisable for shares of Common
Stock, based on the conversion or exercise price per share) minus
(B) the sum of the number of Shares originally issued hereunder and
the number of Ratchet Shares, if any, issued pursuant to this
Agreement prior to issuance of such additional Ratchet Shares.
Additionally, in connection with any such issuance of Ratchet
Shares, the Company shall promptly cause to be issued and delivered
to each Subscriber, Warrants to purchase such number of shares of
Common Stock equal to 50% of the number of any Ratchet Shares
issued to such Subscriber. As used herein (and except as provided
in the next succeeding sentence), “Additional Securities” means
shares of Common Stock, any other capital stock of the Company, or
any evidences of indebtedness or other securities representing or
directly or indirectly convertible into or exchangeable for capital
stock of the Company; provided, however, that if shares of Common Stock
are offered as units together with any other rights (whether
warrants, other securities representing or directly or indirectly
convertible into or exchangeable for share capital of the Company,
or other rights), the “Subsequent Offering Price” shall
be the price paid for each “unit” in such offering,
which unit shall be comprised of (i) one share of Common Stock plus
(ii) a number of such other rights as is equal to (x) the aggregate
number of such other rights offered in such transaction divided by
(y) the aggregate number of shares of Common Stock offered in such
transaction. “Additional Securities” shall exclude: (i)
stock options, shares of Common Stock and other stock awards issued
to employees or directors of, or consultants or advisors to, the
Company pursuant to its 2012 Incentive Plan, as in effect on the
date hereof and described in the Commission Documents or pursuant
to any other stock option plan, agreement or arrangement approved
by the Company’s board of directors and/or governed by the
2012 Incentive Plan; (ii) shares of Common Stock actually issued
upon the exercise of options, warrants or other convertible
securities outstanding on the date hereof, in each case provided
such issuance is pursuant to the terms of such option, warrant or
convertible security; (iii) shares of Common Stock issued by the
Company as consideration for the acquisition of all of the equity
securities and voting rights, or all or substantially all of the
assets, of any person or other reorganization or joint venture, in
each case in a transaction approved by the board of directors of
the Company and, if required under applicable law or stock exchange
regulations, the Company’s stockholders; (iv) shares of
Common Stock issued by reason of a dividend, stock split, split-up
or other distribution on ordinary shares; (v) shares of Common
Stock, options or other securities convertible into, or exercisable
for, shares of Common Stock issued (a) in connection with the
acquisition of, or licensing arrangements for, pharmaceutical
products, (b) to suppliers or third party service providers in
connection with the provision of goods or services or (c) in
connection with sponsored research, collaboration, technology
license, development, OEM, marketing or other similar agreements or
strategic partnerships, in each case pursuant to transactions
approved by the Board of Directors of the Company and not in
connection with a capital raising transaction; or (vi) any shares
of Series B Preferred Stock or dividends thereon issued on or after
the date hereof (any securities issued as described in clauses (i)
through (vi), collectively, “Excluded Securities”). For the
avoidance of doubt, Excluded Securities (and the proceeds from the
issuance thereof) shall not be included in the calculation of the
aggregate gross proceeds to the Company from sales of Additional
Securities for purposes of this Section 1.6.


 




 

-4-








 






ARTICLE
II


Representations and
Warranties of the Company


Section
2.1        Representations and Warranties of the
Company. Except as set forth on the Company Disclosure
Schedule attached hereto, and made a part hereof, the Company
hereby represents and warrants to the Subscribers, as of the date
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. 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
on the Company’s consolidated financial condition.
“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 or the
Transaction Documents (as defined below) in any material
respect.


(b)        Corporate
Power; Authority and Enforcement. The Company has the
requisite corporate power and authority to enter into and perform
this Agreement, the Registration Rights Agreement, the Warrants and
any other document in connection with the Memorandum (collectively,
the “Transaction
Documents”), to carry out the provisions of
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)        Internal
Documents. 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 its articles of
incorporation, by-laws or other organizational or charter documents
including, but not limited to, all documents setting forth and/or
establishing the terms, rights, conditions and/or limitations of
any of the Company’s stock (the “Internal Documents”), (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 (other than clause (i)
above) are such conflicts, defaults, terminations,
amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect.


 




 

-5-








 






(d)        Issuance
of Units, Etc. The Units, the Shares the Preferred Shares,
the Conversion Shares and the Warrants comprising the Units, to be
issued at each Closing have been duly authorized by all necessary
corporate action and the 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
each Closing, the Subscribers 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 shares of Common Stock
underlying the Warrants (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.


(e)        Subsidiaries.
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. 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. MetaStat Biomedical Corporation, a Delaware
corporation, is wholly owned by the Company and is the
Company’s only Subsidiary.


(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
Subscribers 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
Subscribers, if any. 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). The Company is an issuer that is subject to
Rule 144(i) under the Securities Act.


 




 

-6-








 






(g)        No
Material Adverse Effect. Since February 28, 2015, neither
the Company, nor any Subsidiary has experienced or suffered any
Material Adverse Effect.


(h)        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.


(i)        Memorandum,
Use of Proceeds. The Memorandum, as of its date or such
later date on which the Memorandum is amended or supplemented, did
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Company hereby
covenants to use the monies raised from the Offering as described
in the “Use of Proceeds” section of the
Memorandum.


 


(j)        
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.
All leases are valid and subsisting and in full force and
effect.


 


(k)       Actions
Pending. 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.


(l)        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.


(m)        No
Violation of Law. 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 Units 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).


(n)        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.


 




 

-7-








 






(o)       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.


(p)      
Securities Act of
1933. Assuming the accuracy of the representations and
warranties of the Subscribers set forth in Section 3.1 hereof, the
Company has complied with all applicable federal and state
securities laws in connection with the offer, issuance and sale of
the Shares, 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
Shares, the Preferred Shares, the Warrants 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 shares of Common Stock and the
Warrants 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 and the Warrants.


(q)     
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, Current Report on Form 8-K and a registration statement or
statements pursuant to the Registration Rights Agreement, 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 Shares, the Preferred Shares or for the performance
by the Company of its obligations under the Transaction
Documents.


(r)      
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.


(s)      
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 Units 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
Units 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 Units to be integrated
with other offerings.


 




 

-8-








 






(t)        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.


(u)      
Certain Fees.
Except as disclosed in the Memorandum, 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.


(v)      
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.


ARTICLE
III


Representations
and Warranties of the Subscribers


Section
3.1        Representations and Warranties of Each
of the Subscribers. Each Subscriber, severally and not
jointly with the other Subscribers, 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 Subscriber:


(a)      
Authorization and
Power. Each Subscriber has the requisite power and authority
to enter into and perform this Agreement and each of the other
Transaction Documents to which such Subscriber 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 Subscriber is a party by such
Subscriber 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 Subscriber
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 Subscriber is a
party has been duly authorized, executed and delivered by such
Subscriber and constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of such Subscriber
enforceable against such Subscriber in accordance with the terms
hereof.


 




 

-9-








 






(b)     
No Conflicts. The
execution, delivery and performance of this Agreement and each of
the other Transaction Documents to which such Subscriber is a party
and the consummation by such Subscriber of the transactions
contemplated hereby and thereby or relating hereto do not and will
not (i) result in a violation of such Subscriber’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
Subscriber 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 Subscriber 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 Subscriber).
Such Subscriber 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 Subscriber is a party
or to purchase the Units in accordance with the terms hereof,
provided, that for purposes of the representation made in this
sentence, such Subscriber is assuming and relying upon the accuracy
of the relevant representations and agreements of the Company
herein.


(c)        Status
of Subscribers. Such Subscriber is an “accredited
investor” as defined in Regulation D under the Securities Act
and as set forth on such Confidential Private Subscriber
Questionnaire attached as Exhibit B to the Memorandum.
Such Subscriber is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act and such Subscriber is not a
broker-dealer, nor an affiliate of a broker-dealer, unless
indicated on such Confidential Private Subscriber
Questionnaire.


(d)       Acquisition
for Investment. Such Subscriber is acquiring the Units and
underlying securities 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 Subscriber does not have a present intention to
sell Units or underlying securities, nor a present arrangement
(whether or not legally binding) or intention to effect any
distribution of the Units or underlying securities to or through
any person or entity; provided, however, that by making the
representations herein, such Subscriber does not agree to hold the
Units or underlying securities for any minimum or other specific
term and reserves the right to dispose of the Units or underlying
securities at any time in accordance with federal and state
securities laws applicable to such disposition. Each Subscriber
acknowledges that it is able to bear the financial risks associated
with an investment in the Units 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.


(e)      
Opportunities for
Additional Information. Such Subscriber acknowledges that
such Subscriber 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.


(f)        No
General Solicitation. Such Subscriber acknowledges that the
Units and the underlying securities were not offered to such
Subscriber by means of (i) to such Subscriber's knowledge, any form
of general or public solicitation, (ii) general advertising, or
(iii) 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 Subscriber was invited by any of the
foregoing means of communications.


 




 

-10-








 






(g)        Rule
144. Such Subscriber understands that the Units and the
Securities comprising the Units must be held indefinitely unless
such Shares, Conversion Shares and Warrant Shares are registered
under the Securities Act or an exemption from registration is
available. Such Subscriber acknowledges that such Subscriber 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 Subscriber understands that
to the extent that Rule 144 is not available, such Subscriber will
be unable to sell any Shares, Preferred Shares, Conversion Shares,
Warrants or Warrant Shares without either registration under the
Securities Act or the existence of another exemption from such
registration requirement.


(h)        General.
Such Subscriber understands that the Units and underlying
securities 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 Subscriber
set forth herein in order to determine the applicability of such
exemptions and the suitability of such Subscriber to acquire the
Units and underlying securities.


(i)        
Independent
Investment. Except as may be disclosed in any filings with
the Commission by the Subscribers under Section 13 and/or Section
16 of the Exchange Act, no Subscriber has agreed to act with any
other Subscriber for the purpose of acquiring, holding, voting or
disposing of the Units or underlying securities purchased hereunder
for purposes of Section 13(d) under the Exchange Act, and each
Subscriber is acting independently with respect to its investment
in the Units and underlying securities.


(j)        Company’s
Business. The Memorandum reflects the Company’s
current intentions and business, financial and other information
currently available to the Company and, as such, the Subscriber
understands and acknowledges that the precise nature of the
Company’s operations, use of proceeds, capital needs, and
other factors inherent in the Company’s business can be
expected to change from time to time.


(k)        Legend.
(i) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a
Subscriber or in connection with a pledge as contemplated in
Section 3.1(k)(ii), the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and the
Registration Rights Agreement and shall have the rights and
obligations of a Subscriber under this Agreement and the
Registration Rights Agreement.


(ii)           The
Subscribers agree to the imprinting, so long as is required by this
Section 3.1(k), of a legend on any of the Securities in the
following form:


THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.


 




 

-11-








 






(iii)           The
Company acknowledges and agrees that a Subscriber may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and who agrees to be bound by the provisions of
this Agreement and the Registration Rights Agreement and, if
required under the terms of such arrangement, such Subscriber may
transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval
of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith. Further, no notice shall be required of such pledge. At
the appropriate Subscriber’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection
with a pledge or transfer of the Securities, including, if the
Securities are subject to registration pursuant to the Registration
Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act
or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders (as defined in
the Registration Rights Agreement) thereunder.


(iv)           So
long as the Company has received written representations from such
Subscriber as reasonably requested by the Company in connection
with such legend removal (which shall not include representations
with respect to the sale of any securities), certificates
evidencing the Shares, the Conversion Shares, and Warrant Shares
shall not contain any legend (including the legend set forth in
Section 3.1(k)(ii) hereof), (i) while a registration statement
(including the Registration Statement) covering the resale of such
security is effective under the Securities Act, (ii) following any
sale of such Shares, Conversion Shares or Warrant Shares pursuant
to Rule 144, (iii) if such Shares, Conversion Shares or Warrant
Shares are eligible for sale under Rule 144, or (iv) if such legend
is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by
the staff of the Commission). The Company shall cause its counsel
to issue a legal opinion to its transfer agent promptly after the
Effective Date if required by its transfer agent to effect the
removal of the legend hereunder, subject to the Company receiving
written representations from such Subscriber as reasonably
requested by the Company in connection with such legend removal
(which shall not include representations with respect to the sale
of any securities). If all or any portion of a Warrant is exercised
at a time when there is an effective registration statement to
cover the resale of the Warrant Shares, or if such Shares,
Conversion Shares or Warrant Shares may be sold under Rule 144 and
the Company is then in compliance with the current public
information required under Rule 144, or if the Shares, Conversion
Shares or Warrant Shares may be sold under Rule 144 without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Shares,
Conversion Shares or Warrant Shares or if such legend is not
otherwise required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued
by the staff of the Commission) then such Warrant Shares shall be
issued free of all legends, subject to the Company receiving
written representations from such Subscriber as reasonably
requested by the Company in connection with such legend removal
(which shall not include representations with respect to the sale
of any securities). The Company agrees that following the Effective
Date or at such time as such legend is no longer required under
this Section 3.1(k)(iv), it will, no later than two Trading Days
following the delivery by a Subscriber to the Company or its
transfer agent of a certificate representing Shares, Conversion
Shares or Warrant Shares, as the case may be, issued with a
restrictive legend (such second Trading Day, the
“Legend Removal
Date”), deliver or cause to be delivered to such
Subscriber a certificate representing such shares that is free from
all restrictive and other legends, subject to the Company receiving
written representations from such Subscriber as reasonably
requested by the Company in connection with such legend removal
(which shall not include representations with respect to the sale
of any securities). The Company may not make any notation on its
records or give instructions to the transfer agent that enlarge the
restrictions on transfer set forth in this Section 3.1(k).
Certificates for Securities subject to legend removal hereunder
shall be transmitted by the transfer agent to the Subscriber by
crediting the account of the Subscriber’s prime broker with
the Depository Trust Company System as directed by such
Subscriber.


 




 

-12-








 






(v)           In
addition to such Subscriber’s other available remedies,
subject to the Company receiving written representations from such
Subscriber as reasonably requested by the Company in connection
with such legend removal (which shall not include representations
with respect to the sale of any securities), the Company shall pay
to a Subscriber, in cash, if the Company fails to (i) issue and
deliver (or cause to be delivered) to a Subscriber by the Legend
Removal Date a certificate representing the Securities so delivered
to the Company by such Subscriber that is free from all restrictive
and other legends or (ii) if after the Legend Removal Date such
Subscriber purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such
Subscriber of all or any portion of the number of shares of Common
Stock, or a sale of a number of shares of Common Stock equal to all
or any portion of the number of shares of Common Stock that such
Subscriber anticipated receiving from the Company without any
restrictive legend, then, an amount equal to the excess of such
Subscriber’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (including brokerage
commissions and other out-of-pocket expenses, if any) (the
“Buy-In
Price”) over the product of (A) such number of
Underlying Shares that the Company was required to deliver to such
Subscriber by the Legend Removal Date multiplied by (B) the lowest
closing sale price of the Common Stock on any Trading Day during
the period commencing on the date of the delivery by such
Subscriber to the Company of the applicable Underlying Shares (as
the case may be) and ending on the date of such delivery and
payment under this clause (ii).


(vi)           Each
Subscriber, severally and not jointly with the other Subscribers,
agrees with the Company that such Subscriber will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are
sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section
3.1(k) is predicated upon the Company’s reliance upon this
understanding and is subject to the Company receiving written
representations from such Subscriber as reasonably requested by the
Company in connection with such legend removal (which shall not
include representations with respect to the sale of any
securities).


ARTICLE
IV


Indemnification


Section
4.1        General Indemnity. The Company
agrees to indemnify and hold harmless the Subscribers (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
Subscribers as a result of any breach of the representations,
warranties or covenants made by the Company herein. Each Subscriber
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
Subscriber herein. The maximum aggregate liability of each
Subscriber pursuant to its indemnification obligations under this
Article IV shall not exceed the portion of the Purchase Price paid
by such Subscriber 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.


 




 

-13-








 






Section
4.2        Indemnification Procedure. Any
party entitled to indemnification under this Article IV (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 IV 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 IV 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
V


Miscellaneous


Section
5.1        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.


 




 

-14-








 






Section
5.2        Consent to Jurisdiction. Each
of the Company and the Subscribers (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 Subscribers
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 5.2 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
5.3        Entire Agreement; Amendment.
This Agreement, the Memorandum 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 and the
Memorandum, neither the Company nor any of the Subscribers 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 aggregate number of Shares and
Conversion Shares issued or issuable upon conversion of the
Preferred Shares then outstanding (the “Majority Holders”). No such
amendment shall be effective to the extent that it applies to less
than all of the holders of the Shares, Preferred Shares and
Conversion 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
5.4        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 or
“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
5.5        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.


 




 

-15-








 






Section
5.6        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.


Section
5.7        Successors and Assigns. This
Agreement may not be assigned by a party hereto without the prior
written consent of the Company or the Subscribers, as applicable,
provided,
however, that,
subject to federal and state securities laws and as otherwise
provided in the Transaction Documents, a Subscriber 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 shares of
Common Stock 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 Subscribers, after notice duly given by such
Subscriber to the Company provided, that no such
assignment or obligation shall affect the obligations of such
Subscriber 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 Subscribers. 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
5.8        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
5.9        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
5.10        Survival. The representations
and warranties of the Company and the Subscribers shall survive the
execution and delivery hereof and the Closing hereunder for a
period of one (1) year following the Closing Date.


Section
5.11        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
5.12        Publicity. The Company agrees
that it will not disclose, and will not include in any public
announcement, the name of the Subscribers without the consent of
the Subscribers unless and until such disclosure is required by law
or applicable regulation, and then only to the extent of such
requirement.


 


Section
5.13        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.


 




 

-16-








 






Section
5.14        Further Assurances. From and
after the date of this Agreement, upon the request of any
Subscriber or the Company, each of the Company and the Subscribers
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 Shares, the Preferred Shares, the Conversion Shares,
the Warrants, the Warrant Shares, the Registration Rights Agreement
and the other Transaction Documents.


 


 


[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]


 


 


 




 

-17-








 






 


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


 


	


METASTAT, INC.


 


 

	
 


	

By:__________________________________________


     Name:


     Title:


 


 



Address for Notice:


 



MetaStat, Inc.



27 Drydock Ave., 2nd
Floor



Boston, MA 02210



Attention: Douglas A. Hamilton, CEO; or



Daniel Schneiderman, Vice President, Finance



Telephone No.: (617) 531-6500



Facsimile No. (646) 304-7086



Email: dhamilton@metastat.com and dschneiderman@metastat.com


 


With a
copy to (which shall not constitute notice):

	
 


	

 



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 SUBSCRIBERS FOLLOWS]


 




 

-18-








 






 


SUBSCRIBER
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT


 


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


Name of
Subscriber: ________________________


 


Signature of Authorized Signatory of
Subscriber: ________________________


 


Name of
Authorized Signatory: ________________________


 


Title
of Authorized Signatory: ________________________


 


Email
Address of Authorized Signatory:
________________________


 


Phone
Number of Authorized Signatory:
________________________


 


Facsimile Number of
Authorized Signatory: ______________________


__


Address
for Notice to Subscriber:


 


________________________


 


________________________


 


________________________


 


Address
for Delivery of Securities to Subscriber (if not same as address
for notice):


 


________________________


 


________________________


 


________________________


 


Number
of Units Subscribed For: __________


 


Subscription
Proceeds (Number of Units Subscribed For x Purchase Price of
$10,000): $__________


 


Shares
to be Issued to Subscriber (Number of Units Subscribed For x
5,000): __________


 


And/or
Preferred Shares to be Issued to Subscriber (Number of Units
Subscribed For x 500): _________


 


Warrant
to be Issued to Subscriber (Number of Units Subscribed For x
2,500): __________


 


Subscriber’s
Tax I.D. or Social Security Number: __________


 




 

-19-








 










 



EXHIBIT A



TO THE SUBSCRIPTION AGREEMENT


 


 



FORM OF SERIES A-2 CERTIFICATE OF DESIGNATION


 


 


 
A-1








 










 



EXHIBIT B



TO THE SUBSCRIPTION AGREEMENT


 



ESCROW WIRE INSTRUCTIONS


 


 




 

B-2








 










 



COMPANY



DISCLOSURE SCHEDULE


 


Schedule
2.1(g) and Schedule 2.1(h)


 


The
Company currently anticipates that its cash and cash equivalents
will be sufficient to fund its operations through February 2017,
without raising additional capital in this offering or another
similar offering. While the Company is seeking to raise additional
capital, the Company is actively pursuing a strategic alliance,
joint venture, business combination or other similar transaction
with various third parties.  However, the Company may not be
able to complete such a transaction in the timely manner that is
required by it in light of its current cash needs. In the event the
Company does not timely obtain necessary equity and/or debt
financing to continue its operations, or it is unable to timely
consummate a strategic alliance, joint venture, business
combination or other similar type of transaction, it will be forced
to cease operations.