Document:

ex10-1.htm

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of February 27, 2012, between Photovoltaic Solar Cells, Inc. (to be renamed MetaStat, Inc.), a Nevada corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this 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 each Purchaser agree as follows:

 

ARTICLE I.

 

DEFINITIONS

 

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:

 

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.5.

 

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than the third Trading Day following the date hereof.

 

“Closing Statement” means the Closing Statement in the form on Annex A attached hereto.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

  

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“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Company Counsel” means Loeb & Loeb LLP, with offices located at 345 Park Avenue, New York, New York 10154, and, with respect to matters of Nevada law, Lewis & Roca LLP.

 

“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.

 

“Escrow Agent” means Signature Bank, a New York State chartered bank, with offices at 261 Madison Avenue, New York, New York 10016.

 

“Escrow Agreement” means the escrow agreement entered into prior to the date hereof, by and between MetaStat and the Escrow Agent pursuant to which the Purchasers shall deposit Subscription Amounts with the Escrow Agent to be applied to the transactions contemplated hereunder.

 

 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

 

 “Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

 

 “Liens” means a lien, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

 “Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).

 

“MetaStat” means MetaStat, Inc., a Delaware corporation.

 

“Per Share Purchase Price” equals $1.00, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit A attached hereto.

 

  

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“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Purchasers of the Shares and the Warrant Shares.

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“Reverse Merger Transaction” shall mean the transaction whereby the Company will issue a certain number of shares of Common Stock in exchange for 100% of the ownership interest of MetaStat.  Upon completion of the Reverse Merger Transaction, MetaStat will be the direct wholly owned subsidiary of the Company.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means the Shares, the Warrants and the Warrant Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

 “Shares” means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock). 

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares and Warrants purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board or the Pink Sheets (or any successors to any of the foregoing).

 

“Transaction Documents” means this Agreement, the Warrants, the Registration Rights Agreement and all exhibits and schedules thereto and hereto.

 

  

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“Transfer Agent” means Continental Stock Transfer and Trust Company, the current transfer agent of the Company, with a mailing address of 17 Battery Park New York, NY 10004, and any successor transfer agent of the Company.

 

 “Warrants” means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to four years, in the form of Exhibit B attached hereto.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

 

ARTICLE II.

 

PURCHASE AND SALE

 

2.1 Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,  agree to purchase, up to an aggregate of $2,500,000 of Shares and Warrants.  Each Purchaser shall deliver to the Escrow Agent, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and the Company shall deliver to each Purchaser its respective Shares and a Warrant, as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree.

 

2.2 Deliveries.

 

(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i) this Agreement duly executed by the Company;

 

(ii) legal opinions of Company Counsel, substantially in the forms of Exhibits C-1 and C-2 attached hereto;

 

(iii) a copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver, on an expedited basis, a certificate evidencing a number of Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;

 

(iv) a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 25% of such Purchaser’s Shares, with an exercise price equal to $1.40, subject to adjustment therein (such Warrant certificate may be delivered within a reasonable time following the Closing Date); and

 

(v) the Registration Rights Agreement duly executed by the Company.

 

(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company or the Escrow Agent, as applicable, the following:

 

  

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(i) this Agreement duly executed by such Purchaser;

 

(ii) to Escrow Agent, such Purchaser’s Subscription Amount by wire transfer to the account specified in the Escrow Agreement; and

 

(iii) the Registration Rights Agreement duly executed by such Purchaser.

 

2.3 Closing Conditions.

 

(a)           The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed;

 

(iii) completion of the Reverse Merger Transaction; and

 

(iv) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b) The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein);

 

(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

 

(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(iv) completion of the Reverse Merger Transaction;

 

(v) there shall have been no Material Adverse Effect with respect to the Company since the date hereof;

 

(vi) each Purchaser shall have received a copy of the share exchange agreement entered into in connection with the Reverse Merger Transaction and all disclosure schedules related thereto; and

 

(vii) from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market.

 

  

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ARTICLE III.

 

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a) Subsidiaries.  All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

(b) Organization and Qualification.  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. For the purposes of this Agreement, “Material Adverse Effect” means any material adverse effect on the business, operations, properties, or financial condition of the Company and/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.

 

(c) Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of each of this Agreement and the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals.  This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

  

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(d) No Conflicts.  The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(e) Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission pursuant to the Registration Rights Agreement, (iii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Shares and Warrant Shares for trading thereon in the time and manner required thereby, and (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f) Issuance of the Securities.  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Warrant Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrants.

 

(g) Capitalization.  The capitalization of the Company is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act.  No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents.  The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other

 

  

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than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.  There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h) SEC Reports; Financial Statements.  The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for 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, immaterial, year-end audit adjustments.

 

(i) Material Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans.  The Company does not have pending before the Commission any request for confidential treatment of information.  Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or development has occurred or exists, or is reasonably expected to occur or exist, with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.

 

  

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(j) Litigation.  There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

(k) Labor Relations.  No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.  To the knowledge of the Company, no executive officer of the Company or any Subsidiary is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.  The Company and its Subsidiaries are in compliance with all applicable U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l) Compliance.  Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree, or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(m) Regulatory Permits.  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

  

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(n) Title to Assets.  The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

(o) Intellectual Property.  The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as described in the SEC Reports as necessary or required for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement.  Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect.  To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(p) Insurance.  The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount.  Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

 

(q) Transactions With Affiliates and Employees.  Except as set forth in the SEC Reports, none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

 

  

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(r) Sarbanes-Oxley; Internal Accounting Controls.  The Company and the Subsidiaries are in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date.  The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset 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 action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries 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.

 

(s) Certain Fees.  No brokerage or finder’s fees or commissions are or will be payable by the Company or  any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(t) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

(u) Investment Company. 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.

 

(v) Registration Rights.  Other than each of the Purchasers, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.

 

(w) Listing and Maintenance Requirements.  The Common Stock is registered pursuant to Section 12(b) or 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.

 

(x) Application of Takeover Protections.  The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

  

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(y) Disclosure.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person authorized to act on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information.  The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

(z) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, 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 this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(aa) Tax Status.  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 its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.

 

(bb) No General Solicitation.  Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising.  The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(cc) Accountants.  The Company’s accounting firm is set forth on Schedule 3.1(cc) of the Disclosure Schedules.  To the knowledge and belief of the Company, such accounting firm: (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ending December 31, 2011.

 

(dd) Acknowledgment Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities.

 

  

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(ee) Regulation M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement agent in connection with the placement of the Securities.

 

(ff) Stock Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated.  The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

 

3.2 Representations and Warranties of the Purchasers.  Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

 

(a) Organization; Authority.  Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser.  Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b) No Conflicts. The execution, delivery and performance of this Agreement and each of the other Transaction Documents to which such Purchaser is a party and the consummation by such Purchaser of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such Purchaser’s charter documents, bylaws, operating agreement, partnership agreement or other organizational documents or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument or obligation to which such Purchaser is a party or by which its properties or assets are bound, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Purchaser or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such Purchaser). Such Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or any other Transaction Document to which such Purchaser is a party or to purchase the Shares or acquire the Warrants in accordance with the terms hereof, provided, that for purposes of the representation made in this sentence, such Purchaser is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.

 

  

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(c) Own Account.  Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws).  Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(d) Purchaser Status.  At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer, nor an affiliate of a broker-dealer.

 

(e) Experience of Such Purchaser.  Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(f) General Solicitation.  Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

(g) Additional Representations and Warranties of Accredited Investors.  Each Purchaser, severally and not jointly, further makes the representations and warranties to the Company set forth on Exhibit D.

 

(h) Certain Transactions and Confidentiality.  Other than consummating the transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.  Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.

 

  

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The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

 

ARTICLE IV.

 

OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions.

 

(a) 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 Purchaser or in connection with a pledge as contemplated in Section 4.1(b), 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 Purchaser under this Agreement and the Registration Rights Agreement.

 

(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1, 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  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.

 

The Company acknowledges and agrees that a Purchaser 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 Purchaser 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 Purchaser’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.

 

  

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(c) Certificates evidencing the Shares and Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof), (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act so long as such shares have been sold by the Purchaser, (ii) following any sale of such Shares or Warrant Shares pursuant to Rule 144, (iii) if such Shares or Warrant Shares are eligible for sale 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 and Warrant Shares and without volume or manner-of-sale restrictions, 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 agrees that at such time as such legend is no longer required under this Section 4.1(c), it will, no later than five Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Shares or Warrant Shares, as the case may be, issued with a restrictive legend, deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends.  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 4.  Certificates for Securities subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser.

(d) Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser 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 4.1 is predicated upon the Company’s reliance upon this understanding.

 

4.2 Furnishing of Information; Public Information.  Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the Company covenants to use its commercially reasonable efforts to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.

 

4.3 Integration.  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

4.4 Securities Laws Disclosure; Publicity.  The Company shall (a) no later than 9:30 a.m. (New York City time) on the Trading Day immediately following the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission as soon as practicable following the date hereof.  From and after the issuance of the Form 8-K, the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents.  The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except: (a) as required by federal securities law in connection with (i) any registration statement contemplated by the Registration Rights Agreement and (ii) the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).

 

  

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4.5 Shareholder Rights Plan.  No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

4.6 Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other Person authorized to act on its behalf, will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

4.7 Use of Proceeds.  Except as set forth on Schedule 4.7 attached hereto, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and shall not use such proceeds: (a)  for the satisfaction of any portion of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock or Common Stock Equivalents, or (c) for the settlement of any outstanding litigation.

 

4.8 Indemnification.   The Company agrees to indemnify and hold harmless the Purchasers (and their respective directors, officers, managers, partners, members, shareholders, affiliates, agents, successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Purchasers as a result of any breach of the representations, warranties or covenants made by the Company herein. Each Purchaser severally but not jointly agrees to indemnify and hold harmless the Company and its directors, officers, affiliates, agents, successors and assigns from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Company as a result of any breach of the representations, warranties or covenants made by such Purchaser herein. The maximum aggregate liability of each Purchaser pursuant to its indemnification obligations under this Article VI shall not exceed the portion of the purchase price paid by such Purchaser hereunder. In no event shall any “Indemnified Party” (as defined below) be entitled to recover consequential or punitive damages resulting from a breach or violation of this Agreement.

 

4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.

 

  

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4.10 Listing of Common Stock. The Company hereby agrees to use commercially reasonable efforts to maintain the listing or quotation of the Common Stock on the Trading Market on which it is currently listed. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Shares and Warrant Shares, and will take such other action as is reasonably necessary to cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as practicable.  The Company will then take all action reasonably necessary to continue the listing or quotation and trading of its Common Stock on a Trading Market and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.

 

4.11 Equal Treatment of Purchasers.  No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration is also offered to all of the parties to this Agreement.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

 

4.12 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents and the Disclosure Schedules.  Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the issuance of the initial press release as described in Section 4.4.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.

 

4.13 Form D; Blue Sky Filings.  The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

 

4.14 Acknowledgment of Dilution.  The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions.  The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Shares and Warrant Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

 

  

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ARTICLE V.

 

MISCELLANEOUS

 

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.

 

5.2 Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.3 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 facsimile at the facsimile number set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number 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.

 

5.4 Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least a majority of the Shares then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  No waiver 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 subsequent default or a waiver of any other provision, 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.

 

5.5 Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.6 Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger).  Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.7 No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.8 and this Section 5.7.

 

  

-19-

  

5.8 Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  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 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 contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

5.9 Survival.  The representations and warranties contained herein shall survive the Closing and the delivery of the Securities for a period of one (1) year following the Closing Date.

 

5.10 Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

5.11 Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.12 Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of an exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).

 

  

-20-

  

5.13 Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction (and an indemnification related thereto).  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

5.14 Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.15 Payment Set Aside.  To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

5.16 Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereof or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents.

 

5.17 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.18 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.19 WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

  

-21-

  

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

 

	
PHOTOVOLTAIC SOLAR CELLS, INC. 

(to be renamed MetaStat, Inc.)

 

 

	
Address for Notice:

	
By:__________________________________________

     Name: Warren Lau

     Title: President

	
Fax:

	  	  

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

  

-22-

  

[PURCHASER SIGNATURE PAGES TO  SECURITIES PURCHASE AGREEMENT]

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

 

Name of Purchaser: ________________________________________________________

Signature of Authorized Signatory of Purchaser: __________________________________

Name of Authorized Signatory: ____________________________________________________

Title of Authorized Signatory: _____________________________________________________

Email Address of Authorized Signatory: ______________________________________________

Facsimile Number of Authorized Signatory: _____________________________________________

Address for Notice to Purchaser:

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

Subscription Amount: $_________________

Shares: _________________

Warrant Shares: __________________

EIN Number: _______________________

[SIGNATURE PAGES CONTINUE]

  

-23-

  

Annex A

CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date hereto, the purchasers shall purchase up to $[___________ of Common Stock and Warrants from PHOTOVOLTAIC SOLAR CELLS, INC. (to be renamed MetaStat, Inc.), a Nevada corporation (the “Company”).  All funds will be wired into an account maintained by the Company.  All funds will be disbursed in accordance with this Closing Statement.

	
Disbursement Date:

	
[________ ___, _____

	
I.   PURCHASE PRICE

 

	  
	  	
Gross Proceeds to be Received

	
$

	  	  
	
II.      DISBURSEMENTS

 

	  
	  	
 

	
$

	  	
 

	
$

	  	  	
$

	  	  	
$

	  	  	
$

	  	  
	
Total Amount Disbursed:

	
$

	  	  
	  	  
	  	  
	
WIRE INSTRUCTIONS:

 

 

	  
	
To: _____________________________________

 

 

 

 

 

	  
	
To: _____________________________________

 

 

 

 

 

	  

  

-24-

  

EXHIBIT A

 

REGISTRATION RIGHTS AGREEMENT

 

  

-25-

  

EXHIBIT B

 

FORM OF WARRANT

 

  

-26-

  

EXHIBIT C-1

 

FORM OF LOEB OPINION

 

1.           Each of the Transaction Documents to which the Company is a party constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms.

 

2.           Provided the representations of the Company and the Purchasers in the Purchase Agreement are true and correct, no consent, approval or authorization of, or designation, declaration or filing with, any governmental authority on the part of the Company is required under any federal securities law, rule or regulation in connection with the valid execution and delivery by the Company of the Transaction Documents, or the offer, sale or issuance by the Company of the Shares, the Warrants or the Warrant Shares (collectively, the “Securities”) pursuant to the Purchase Agreement and the Warrants, subject to the Company filing a Form D with the Commission following the closing of the Transactions.

 

3.           Provided the representations of the Company and the Purchasers in the Purchase Agreement are true and correct, the offer, issuance and sale of the Securities by the Company pursuant to the Purchase Agreement and the Warrants are exempt from the registration requirements of the Securities Act of 1933, as amended.

 

4.           The execution, delivery and performance of and compliance with the terms of the Transaction Documents by the Company and the issuance of the Securities pursuant to the Purchase Agreement and the Warrants do not (i) conflict with, or constitute a default (or an event that 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 material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation filed by the Company with the Commission, solely to the extent any of the foregoing is governed by the laws of the State of New York, or (ii) result in a violation of any U.S. federal securities laws or New York statute, rule or regulation.

 

  

-27-

  

EXHIBIT C-2

 

FORM OF NEVADA COUNSEL OPINION

 

1.               The Company has been incorporated and is validly existing as a corporation in good standing under the Private Corporations Law of the State of Nevada (the “NPCL”).

 

2.               The Company has all requisite power and authority to (i) execute and deliver the Transaction Documents, (ii) issue, sell, and deliver the Shares, the Warrants, and, upon exercise of the Warrants, the Warrant Shares pursuant to the Transaction Documents, and (iii) perform its obligations under, and consummate the transactions contemplated by, the Transaction Documents.

 

3.               All necessary corporate action has been duly and validly taken by the Company to authorize the execution, delivery, and performance of the Transaction Documents and the issuance and sale of the Shares, the Warrants, and the Warrant Shares.

 

4.               The Shares have been duly authorized and upon issuance in accordance with the terms of the Agreement will be validly issued, fully paid, nonassessable and free of preemptive or, to our knowledge, similar rights.  The Warrant Shares have been duly authorized and reserved for issuance, and when issued upon the exercise of the Warrants in accordance with the terms thereof, will be validly issued, fully paid, nonassessable, and free of any preemptive or, to our knowledge, similar rights.

 

5.               Neither the execution, delivery, and performance by the Company of the Transaction Documents nor the consummation of any of the transactions contemplated hereby (including, without limitation, the issuance and sale by the Company of the Shares, the Warrants, and the Warrant Shares) will (a) violate the Company’s Articles of Incorporation or Bylaws, (b) violate the NPCL, or (c) violate of laws of the State of Nevada.  We express no opinion in this paragraph as to any state securities or “Blue Sky” laws or as to compliance with anti-fraud provisions of state securities laws.

 

  

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EXHIBIT D

 

ACCREDITED INVESTOR REPRESENTATIONS

 

 

Each Purchaser, severally and not jointly, further represents and warrants to the Company as follows:

 

	
1.  

	
Such person or entity qualifies as an Accredited Investor.

 

	
2.  

	
Such person or entity has sufficient knowledge and experience in finance, securities, investments and other business matters to be able to protect such Shareholder’s interests in connection with the transactions contemplated by this Agreement.

 

	
3.  

	
Such person or entity has consulted, to the extent that it has deemed necessary, with its tax, legal, accounting and financial advisors concerning its investment in the Securities.

 

	
4.  

	
Such person or entity understands the various risks of an investment in the Securities and can afford to bear such risks for an indefinite period of time, including, without limitation, the risk of losing its entire investment in the Securities.

 

	
5.  

	
Such person or entity has had access to the Company’s publicly filed reports with the Commission and has been furnished during the course of the transactions contemplated by this Agreement with all other public information regarding the Company that such person or entity has requested and all such public information is sufficient for such person or entity to evaluate the risks of investing in the Securities.

 

	
6.  

	
Such person or entity has been afforded the opportunity to ask questions of and receive answers concerning the Company and the terms and conditions of the issuance of the Securities.

 

	
7.  

	
Such person or entity is not relying on any representations and warranties concerning the Company made by the Company or any officer, employee or agent of the Company, other than those contained in this Agreement.

 

	
8.  

	
Such person or entity is acquiring the Securities for such person’s or entity’s, as the case may be, own account, for investment and not for distribution or resale to others.

 

	
9.  

	
Such person or entity will not sell or otherwise transfer the Securities, unless either (a) the transfer of such securities is registered under the Securities Act or (b) an exemption from registration of such securities is available.

 

	
10.  

	
Such person or entity consents to the placement of a legend on any certificate or other document evidencing the Securities substantially in the form set forth in the Purchase Agreement.

 

	
11.  

	
Such person or entity understands and acknowledges that the Securities have not been recommended by any federal or state securities commission or regulatory authority, that the foregoing authorities have not confirmed the accuracy or determined the adequacy of any information concerning the Company that has been supplied to such person or entity and that any representation to the contrary is a criminal offense.

 

  

-29-

  

 

 DISCLOSURE SCHEDULE TO 

 SECURITIES PURCHASE AGREEMENT 

 February 27, 2012 

 This Disclosure Schedule has been prepared by Photovoltaic Solar Cells, Inc. (to be renamed MetaStat, Inc.), a Nevada corporation (the “Company”), in connection with the representations and warranties set forth in the Securities Purchase Agreement dated February 27, 2012 (the “Purchase Agreement”) by and among the Company and the purchasers named therein (the “Purchasers”).  The representations and warranties of the Company contained in the Purchase Agreement shall be subject to the corresponding provisions set forth herein. 

 Unless otherwise expressly provided for in the Purchase Agreement, anything disclosed herein shall be the exceptions to the corresponding representations and warranties of the Company. The section numbers of this Disclosure Schedule correspond to the section numbers of the Purchase Agreement.  No disclosure in this Disclosure Schedule relating to any possible breach or violation of any agreement, law or regulation shall be construed as an admission or indication that any such breach or violation exists or has actually occurred, and nothing in this Disclosure Schedule constitutes an admission of any liability or obligation of the Company to any third party, nor an admission against its interest. 

 Capitalized terms used in this Disclosure Schedule but not otherwise defined shall have the same meaning as given to them in the Purchase Agreement. 

  

-30-

  

 Schedule 3.1(a) 

 Subsidiaries 

 

 MetaStat, Inc., a Delaware corporation. 

    

-31-

    

 

 Schedule 3.1(e) 

 Filings, Consents and Approvals 

 None. 

  

-32-

  

 Schedule 3.1(g) 

 Capitalization 

 

 

 The Company has 19,209,422 shares of its common stock issued and outstanding and has 2,067,122 common stock purchase warrants issued and outstanding with exercise prices ranging between $0.68 and $1.40 per share, and 1,116,500 stock options issued and outstanding with a strike price equal to $0.68 per share. 

 Albert Einstein College of Medicine of Yeshiva University, Massachusetts Institute of Technology, Cornell University, and the IFO-Regina Elena Cancer, and Frank Gertler, Ph.D. Institute had participation rights with respect to this financing, which participation rights were not exercised. 

    

-33-

    

 Schedule 3.1(h) 

 SEC Reports, 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. 

    

-34-

    

 Schedule 3.1(i) 

 Material Changes; Undisclosed Events, Liabilities or Developments 

 PhotoVoltaic Solar Cells, Inc. and MetaStat, Inc. entered into a Share Exchange Agreement on February 27, 2012. 

 

    

-35-

    

 Schedule 3.1(j) 

 Litigation 

 None. 

    

-36-

    

 Schedule 3.1(k) 

 Labor Relations 

 None. 

    

-37-

    

  Schedule 3.1(l) 

 Compliance 

 None. 

    

-38-

    

  Schedule 3.1(m) 

 Regulatory Permits 

 None. 

    

-39-

    

 Schedule 3.1(n) 

 Title to Assets 

 None. 

  

-40-

  

 Schedule 3.1(o) 

 Intellectual Property 

	
 1. 

	
 U.S. Provisional Patent Application No. 61/276,263, entitled “Tumor Microenvironment of Metastasis (TMEM) and Uses Thereof in Diagnosis, Prognosis, and Treatment of Tumors”, inventors: Frank Gertler, John Condeelis, Thomas Rohan, and Joan Jones; assigned to MIT, Cornell (D-4846) and Einstein (96700/1532); 

 

	
 2. 

	
 U.S. Continuation-in-part of PCT/US08/1343, entitled “Metastasis specific splice variants of Mena and uses thereof in diagnosis, prognosis and treatment of tumors”, inventors: John Condeelis, Sumanta Goswami, Paola Nistico, and Frank Gertler; assigned to Einstein, IFO and MIT (96700/1343); 

 

	
 3. 

	
 U.S. Patent Application No. 12/462,324, entitled “Metastasis specific splice variants of Mena and uses thereof in diagnosis, prognosis and treatment of tumors”, inventors: John Condeelis, Sumanta Goswami, Paola Nistico, and Frank Gertler; assigned to Einstein, IFO and MIT (96700/1533); 

 

	
 4. 

	
 European Patent Application No. 08713370.8, entitled “Metastasis specific splice variants of Mena and uses thereof in diagnosis, prognosis and treatment of tumors”, inventors: John Condeelis, Sumanta Goswami, Paola Nistico, and Frank Gertler; assigned to Einstein, IFO and MIT (96700/1534); and 

 

	
 5. 

	
 Canadian Patent Application No. 2,676,179, entitled “Metastasis specific splice variants of Mena and uses thereof in diagnosis, prognosis and treatment of tumors”, inventors: John Condeelis, Sumanta Goswami, Paola Nistico, and Frank Gertler; assigned to Einstein, IFO and MIT (96700/1535). 

  

-41-

  

 Schedule 3.1(p) 

 Insurance 

 The Company is in the process of obtaining D&O and general liability insurance and expects to have the policy in place shortly. 

    

-42-

    

 Schedule 3.1(q) 

 Transactions with Affiliates 

 We converted approximately $336,075 of debt owed to Waterford Capital Acquisition Co IX, LLC into 309,595 shares of our common stock and issued an aggregate of 36,000 shares of our common stock to certain of our officers, directors and consultants in consideration for services rendered to us. 

    

-43-

    

 Schedule 3.1(v) 

 Registration Rights 

 The Company is registering 840,000 shares of common stock issued to certain shareholders of the Company prior to entering into the Share Exchange Agreement, and 1,568,512 shares issued to Albert Einstein College of Medicine of Yeshiva University, Massachusetts Institute of Technology, Cornell University, and the IFO-Regina Elena Cancer Institute in connection with the Patent and Technology License Agreement. 

  

-44-

  

 Schedule 3.1(cc) 

 Accountants 

 MaloneBailey, LLP 

    

-45-

    

 Schedule 4.7 

 Use of Proceeds 

 None.ex10-3.htm

Exhibit 10.3

 

CONFIDENTIAL TREATMENT REQUESTED.

INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN

REQUESTED IS OMITTED AND MARKED WITH “(**)” OR OTHERWISE

CLEARLY INDICATED. AN UNREDACTED VERSION OF THIS DOCUMENT HAS

ALSO BEEN PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION.

 

LICENSE AGREEMENT

 

This Agreement is entered into as of August 26, 2010 (“Effective Date”), by and among Albert Einstein College of Medicine of Yeshiva University, a Division of Yeshiva University, a corporation organized and existing under the laws of the State of New York, having an office and place of business at 1300 Morris Park Avenue, Bronx, New York 10461 (“Einstein”), Massachusetts Institute of Technology, a Massachusetts corporation organized and existing under the laws of the State of Massachusetts, having an office and place of business at 77 Massachusetts Avenue, Cambridge, MA 02139-4307 (“MIT”), Cornell University, a non-profit institution organized and existing under the laws of the State of New York, having an office and place of business at 395 Pine Tree Road, Ithaca, NY 14850 (“Cornell”), Isituti Fisioterapici Ospitalieri, a company organized and existing under the laws of Italy, having an office and place of business at Via Elio Chianesi, 53-00144 Roma, Italy (“IFO”) (Einstein, MIT, Cornell and IFO shall be referred to individually and collectively as “Licensors”), on the one hand, and Metastat, Inc., a corporation organized and existing under the laws of the State of Delaware, having an office and place of business at 4 Autumnwood Court, The Woodlands, Texas 77380 (“Licensee”), on the other hand.

 

S t a t e m e n t

 

Licensors have developed certain hybridoma cell lines that produce Anti-pan Mena murine monoclonal antibodies (related to MIT case # (**); “(**)”, by Frank B. Gertler and Matthias Krause) and are the owners of patent applications related to (**) and uses thereof in diagnosis, prognosis and treatment of tumors.  Licensee wishes to acquire an exclusive license to Licensors’ rights in the aforementioned cell line and patent rights, and Licensors wish to grant such rights to Licensee.

 

NOW, THEREFORE, in consideration of the promises and mutual covenants, conditions and limitations herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Licensors and Licensee agree as follows:

 

1. Definitions

 

	
1.01  

	
“Agreement Patents” means the patent applications listed on Appendix A, together with any and all patents and patent applications which issue from or are based on such patent applications and from any and all divisionals, continuations, continuations-in-part (but only to the extent the claims thereof are enabled by disclosure of the parent application) and foreign counterparts of such patents and patent applications, and any and all reissues, renewals and extensions or the like of such patents and patent applications and any and all U.S. and foreign patents which are based on such patents and patent applications. Appendix A shall be updated from time-to-time by the parties.

 

	
1.02  

	
“Cell Line” means a hybridoma cell line that produces (**)

 

	
1.03  

	
“Materials” means (**) produced by the Cell Line.

 

  

-1-

  

 

	
1.04  

	
“Diagnostic Field” means products and services for diagnostic use.

 

	
1.05  

	
“Therapeutic Field” means products and services for therapeutic use.

 

	
1.06  

	
“Diagnostic Licensed Product” means any product or service in the Diagnostic Field, the development, manufacture, use, provision or sale of which: (a) is covered by a claim in an Agreement Patent; and/or (b) utilizes or includes Materials.

 

	
1.07  

	
“Therapeutic Licensed Product” means any product or service in the Therapeutic Field, the development, manufacture, use, provision or sale of which: (a) is covered by a claim in an Agreement Patent; and/or (b) utilizes or includes Materials.

 

	
1.08  

	
“Licensed Product” means, individually and collectively, Diagnostic Licensed Product and Therapeutic Licensed Product.

 

	
1.09  

	
“Net Sales” means the total consideration, in any form, received by Licensee, Affiliates and Sublicensees as consideration for the sale, lease, provision or other disposition of Licensed Products by Licensee and/or Affiliates and/or Sublicensees to an independent third party, less:

 

	
(a)  

	
customary and reasonable trade discounts actually taken, refunds, returns and recalls; and

 

	
(b)  

	
when included in gross sales, customary and reasonable freight, shipping, duties, and sales, V.A.T. and/or use taxes based on sales prices, but not including taxes when assessed on incomes derived from such sales.

 

If Licensee and/or Affiliates and/or Sublicensees intend to accept from independent third parties any non-cash consideration as Net Sales, Licensee must first obtain Licensors’ written approval.  For any non-cash consideration approved by Licensors and received as Net Sales, the parties will appoint an independent third party to determine, at Licensee’s expense, the present day value of such consideration and that value shall be added to Net Sales in place of the non-cash consideration.

 

In the event that, during a particular calendar quarter, a Licensed Product is sold in combination with one or more other products, whether or not such other products are packaged or otherwise physically combined with such Licensed Product, for a single price (a “Combination Product”), Net Sales from sales of a Combination Product, for purposes of calculating royalties due under this Agreement, shall be calculated by multiplying the Net Sales of the Combination Product by the fraction A/(A+B), where A is the average per unit sales price for such calendar quarter of the Licensed Product sold separately in the country of sale and B is the average per unit sales price for such calendar quarter of the other product(s) sold separately in the country of sale.  In the event that no separate sales are made of the Licensed Product and/or the other product(s) in the country of sale, separate sale prices in commensurate countries may be used instead.  In the event that no separate sales are made of the Licensed Product and/or the other product(s), Net Sales from sales of a Combination Product, for purposes of determining royalty payments on such Combination Products, shall be calculated using the entire Net Sales of such Combination Products.

 

  

-2-

  

 

	
1.10  

	
“Net Proceeds” shall mean the total consideration, in any form (including, but not limited to, license signing fees, maintenance fees, milestone and minimum payments, whether or not such fees and payments are creditable against future royalties to be paid to Licensee, research and development funds, and just that portion of the funds received for equity purchases of Licensee which exceeds the fair market value of the equity; but excluding royalties based on Net Sales of Sublicensees) that is received by Licensee from a Sublicensee in connection with the grant to said Sublicensee of rights under the Agreement Patents. If Licensee intends to accept from a Sublicensee any non-cash consideration as Net Proceeds, Licensee must first obtain Licensors’ written approval.  For any non-cash consideration approved by Licensors and received as Net Proceeds, the parties will appoint an independent third party to determine the present day value of such consideration and that value shall be added to Net Proceeds in place of the non-cash consideration.

 

	
1.11  

	
“Affiliate” means any entity, that, directly or indirectly, through one or more intermediates, controls, is controlled by, or is under common control with Licensee.  For the purposes of this definition, control shall mean the direct or indirect ownership of at least fifty percent (50%) of (i) the stock shares entitled to vote for the election of directors or (ii) ownership interest.

 

	
1.12  

	
“Sublicensee” shall mean any non-Affiliate third party to whom Licensee has granted the right to make and sell (or otherwise dispose of) Licensed Products.

 

	
1.13  

	
“Confidential Information” means any information designated as such in writing by the disclosing party, whether by letter or by the use of an appropriate proprietary stamp or legend, prior to or at the time any such confidential or proprietary materials or information are disclosed by the disclosing party to the recipient.  Notwithstanding the foregoing, information or materials which are orally or visually disclosed to the recipient by the disclosing party, or are disclosed in a writing or other tangible form without an appropriate letter, proprietary stamp or legend, shall constitute Confidential Information if the disclosing party, within thirty (30) days after such disclosure, delivers to the recipient a written document or documents describing such information or materials and referencing the place and date of such oral, visual, written or other tangible disclosure.

 

	
1.14  

	
“Marketable Securities” means shares of the common stock of Licensee that are listed or quoted for trading on the NASDAQ Global Market, the NASDAQ Global Select Market, the New York Stock Exchange, or the New York Stock Exchange Amex (each, a “Trading Market”) (a) all of which the holders thereof would have the right to sell in a sale registered pursuant to a registration statement under the Securities Act of 1933, as amended (a “Public Sale”) within 60 days following their issuance to the holders regardless of any lock-up agreements or other contractual restrictions on transfer, and (b) all of which can be reasonably expected to be able to be sold in Public Sales within 60 days of their issuance without having a material adverse effect upon the market for such securities.

 

	
1.15  

	
“Volume Weighted Average Price” means, for the applicable date, the price determined by the average of the daily volume weighted average price of the common stock of Licensee for the twenty (20) consecutive trading days ending on the trading day immediately before the applicable date on the applicable Trading Market as reported by Bloomberg L.P., based on a trading day from 9:30 a.m. to 4:02 p.m. (New York City time).

 

2. Licensors’ Agreements With U.S. Government

 

 

	
2.01  

	
Certain of the Licensors, through their employees, have and will perform research sponsored in part by the United States Government.  As a result of this government sponsorship of the aforementioned research, the United States Government retains certain rights in such research as set forth in 35 U.S.C. §200 et. seq. and applicable regulations.

 

  

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2.02  

	
The continuance of such government sponsored research by Licensors and their employees during the term of this Agreement will not constitute a breach of this Agreement.  All rights reserved to the U.S. Government under 35 U.S.C. §200 et. seq. and applicable regulations shall remain so reserved and shall in no way be affected by this Agreement. Licensors and their employees are not obligated under this Agreement to take any action which would conflict in any respect with their past, current or future obligations to the U.S. Government as to work already performed and to be performed in the future.

 

3. Agreement Patents

 

	
3.01  

	
Within ninety (90) day of the Effective Date, Licensee will reimburse Licensors for all expenses incurred prior to the Effective Date in connection with the preparation, filing, prosecution and maintenance of the Agreement Patents.  Amounts paid by Licensee pursuant to this Section 3.01 are non-refundable and not creditable against any other payment due to Licensors.

 

	
3.02  

	
As of and after the Effective Date, Licensee will pay the cost of preparing, filing, prosecuting, maintaining and resisting challenges to the validity of the Agreement Patents (as well as the cost of preparing, filing, prosecuting, maintaining and resisting challenges to the validity of corresponding applications in at least the United States, Europe (an EPO filing designating all member countries), Canada, Japan, and Australia, and in such other jurisdictions as Licensee shall determine), using patent counsel selected by Licensors.  Such payments will be due within thirty (30) days of Licensee’s receipt of an invoice from Licensors relating to said costs.  Licensee will pay the cost of defending and/or prosecuting any interference, reexamination, reissue, opposition, cancellation and nullity proceedings involving Agreement Patents.  Licensors will keep Licensee informed concerning such patents and applications and will consult with Licensee concerning the preparation, filing, prosecution, maintenance and challenges to the validity of such patents and applications.  Licensee shall cooperate with any reasonable request of Licensors in connection with any such preparation, filing, prosecution, maintenance and/or defense.  In the event that Licensee elects not to maintain, defend or prosecute any patent or patent application within the Agreement Patents, Licensee shall give Licensors thirty (30) days prior written notice of such election.  Any patents or patent applications so elected shall at the end of the notice period cease to be considered Agreement Patents, and Licensors shall then be free, at their election, to abandon or maintain the prosecution of such patent application or issued patent or grant rights to such patent application or issued patent to third parties.

 

	
3.03  

	
Amounts paid by Licensee pursuant to Section 3.02 will be non-refundable and not creditable against any other payment due to Licensors.

 

4. License Grant

 

	
4.01  

	
Subject to Article 2, Licensors hereby grant to Licensee and Affiliates: (a) a worldwide, exclusive license to use (but not to sell or transfer) the Cell Line to make Materials for use in connection with Licensed Products; (b) a worldwide, exclusive license to make, use, offer to sell and sell Materials in connection with Licensed Products; and (c) a worldwide, exclusive license to Licensors’ rights in the Agreement Patents, along with the right by Licensee only to grant sublicenses, to make, have made, use, have used, provide, import, have imported, offer to sell, sell and have sold Licensed Products. Licensee will not grant any sublicense (or amend any sublicense) under Agreement Patents unless it first submits a full and complete draft of any such proposed sublicense (or amendment) to Licensors and then receives the prior written consent of Licensors.  Licensee shall provide Licensors with a full and complete copy of any approved sublicense (or amendment) within thirty (30) days of execution thereof by Licensee. The terms of any sublicense agreement shall be consistent with the terms of this Agreement and shall include (at least) the following provisions: prohibiting any use of Licensors’ names (consistent with Section 9.01), requiring indemnification of Licensors (consistent with Section 12.04), requiring appropriate insurance (consistent with Section 12.09), and disclaiming any warranties or representations by Licensors (consistent with Sections 12.05 and 12.06).

 

  

-4-

  

 

	
4.02  

	
Notwithstanding the exclusive rights granted to Licensee pursuant to Section 4.01, Licensors shall retain the right to make, use and practice:  (i) Agreement Patents; and (ii) the Cell Line and Materials in their own laboratories solely for non-commercial scientific purposes and for continued non-commercial research.  Further, Licensors shall have the right to make available to not-for-profit scientific institutions and non-commercial researchers materials covered under Agreement Patents and the Materials, solely for non-commercial scientific and research purposes, provided this is done under a material transfer agreement.

 

	
4.03  

	
Nothing contained in this Agreement shall be construed or interpreted as a grant, by implication or otherwise, of any license except as expressly specified in Section 4.01 hereof.  Licensee will not transfer the Cell Line to any third party or use the Cell Line or the Materials except as permitted by this Agreement. The license granted herein shall apply to the Licensee and Affiliates, except that Affiliates shall not have the right to grant sublicenses.  If any Affiliate exercises rights under this Agreement, such Affiliate shall be bound by all terms and conditions of this Agreement, including but not limited to indemnity and insurance provisions, which shall apply to the exercise of the rights, to the same extent as would apply had this Agreement been directly between Licensors and the Affiliate.  In addition, Licensee shall remain fully liable to Licensors for all acts and obligations of Affiliates such that acts of Affiliates shall be considered the acts of Licensee.

 

	
4.04  

	
Within (**) (**) months of Licensee’s request, Licensors will provide the Cell Line to Licensee using the shipper specified by and at the expense of Licensee.  Licensee shall be responsible for all documentation required by customs officials in the United States of America or the equivalent in any relevant foreign jurisdiction.

 

5. Confidentiality

 

	
5.01  

	
Nothing herein contained shall preclude Licensors from making required reports or disclosures to the NIH or to any other philanthropic or governmental funding organization, provided, however, that no Licensee Confidential Information is disclosed in the process.

 

	
5.02  

	
Licensee will retain in confidence Confidential Information of Licensors and Licensee will not disclose any such Confidential Information to any third party without the prior written consent of Licensors, except that Licensee shall have the right to disclose such information to any third party for commercial or research and development purposes under written terms of confidentiality and non-disclosure which are commercially reasonable.  Licensee will keep confidential all Confidential Information of Licensors for a period of (**) (**) years after termination or expiration of this Agreement, provided, however, that the obligation of confidentiality will not apply to any such information which:

 

	
(a)  

	
was known to Licensee or generally known to the public prior to its disclosure hereunder; or

 

	
(b)  

	
subsequently becomes known to the public by some means other than a breach of this Agreement, including but not limited to publication and/or laying open to inspection of any patent applications or patents; or

 

	
(c)  

	
is subsequently disclosed to Licensee by a third party having a lawful right to make such disclosure; or

 

	
(d)  

	
is required to be disclosed by regulation, law or court order to the most limited extent necessary to comply therewith, provided Licensors are given a fair opportunity to defend against such disclosure; or

 

	
(e)  

	
is independently developed by Licensee as evidenced by Licensee’s written records.

 

  

-5-

  

 

	
5.03  

	
During the term of this Agreement, it is contemplated that Licensors may become aware of Confidential Information of Licensee (“Licensee Confidential Information”).  Licensors agree to retain such Licensee Confidential Information in confidence and not to disclose any such Licensee Confidential Information to a third party without prior written consent of Licensee for a period ending (**) (**) years after termination or expiration of this Agreement, except that such obligations shall not apply to any information which:

 

	
(a)  

	
was known to Licensors or generally known to the public prior to their disclosure hereunder; or

 

	
(b)  

	
subsequently becomes known to the public by some means other than a breach of this Agreement; or

 

	
(c)  

	
is subsequently disclosed to Licensors by a third party having a lawful right to make such disclosure; or

 

	
(d)  

	
is required to be disclosed by regulation, law or court order to the most limited extent necessary to comply therewith, provided Licensee is given a fair opportunity to defend against such disclosure; or

 

	
(e)  

	
is independently developed by Licensors as evidenced by Licensors’ written records.

 

6. Royalties and Payments

 

	
6.01  

	
Licensee shall make the following payments to Licensors:

 

	
(a)  

	
Licensee will pay to Licensors (**) percent (**%) of Net Sales.

 

	
(i)  

	
Royalty Offset/Stacking Royalties. In the event that, with respect to Net Sales of Licensed Products, Licensee is paying royalties to unaffiliated third parties for patent rights such that the practice of the Agreement Patent(s) would infringe such rights, the amount due and payable to Licensor hereunder shall be proportionally reduced by (**) per cent (**%) due such third party, but in no event shall the Royalty payable to Licensors be less than (**) per cent (**%) of net sales. By example, if the royalty due other third parties equals (**) per cent (**%) of Net Sales, the Royalty due Licensor shall be (**) per cent (**%); if the royalty due other third parties equals (**) per cent (**%) of Net Sales, the Royalty due Licensors shall be (**) per cent (**%).

 

	
(b)  

	
Licensee will pay to Licensors twenty percent (**%) of Net Proceeds received by Licensee.

 

	
6.02  

	
Upon execution of this Agreement by the parties, Licensee shall issue to Licensors or their designees an aggregate number of shares (the “Shares”) of the common stock of Licensee equal to (**) percent (**%) of Licensee’s issued and outstanding common stock calculated on a fully diluted, as converted basis.  The Shares shall be issued to Licensors or their designees pursuant to a separate stock subscription agreement among Licensee and Licensors, and Licensee, Licensors and certain other stockholders of Licensee shall enter into a stockholders agreement.

 

	
6.03  

	
Licensee shall make the following license signing and license maintenance payments to Licensors:

 

	
(a)  

	
Upon execution of this Agreement by the parties, Licensee will pay to Licensors Twenty-Five Thousand Dollars (US$25,000) as a license signing fee, which payment is non-refundable and not creditable against any other payment due to Licensors pursuant to this Agreement.

 

  

-6-

  

 

	
(b)  

	
On each of the first, second, third and fourth anniversaries of the Effective Date, Licensee will pay to Licensors Thirty Thousand Dollars (US$30,000) as a license maintenance fee. This payment is non-refundable but is creditable against actual royalties and payments due to Licensors pursuant to Section 6.01 during the twelve (12) month period following each such anniversary.

 

	
(c)  

	
On the fifth anniversary of the Effective Date, Licensee will pay to Licensors Dollars (US$) as a license maintenance fee.  This payment is non-refundable but is creditable against actual royalties and payments due to Licensors pursuant to Section 6.01 during the twelve (12) month period following this anniversary.

 

	
(d)  

	
On the sixth anniversary of the Effective Date, Licensee will pay to Licensors Seventy-Five Thousand Dollars (US$75,000) as a license maintenance fee.  This payment is non-refundable but is creditable against actual royalties and payments due to Licensors pursuant to Section 6.01 during the twelve (12) month period following this anniversary.

 

	
(e)  

	
On the seventh anniversary of the Effective Date and every anniversary of the Effective Date thereafter, Licensee will pay to Licensors One Hundred Thousand Dollars (US$100,000) as a license maintenance fee.  Each such payment is non-refundable but is creditable against actual royalties and other payments due to Licensors pursuant to Section 6.01 during the twelve (12) month period following each such anniversary.

 

	
6.04  

	
Licensee shall make the following milestone payments to Licensors for Diagnostic Licensed Products:

 

	
(a)  

	
Upon each request by Licensee or an Affiliate for marketing clearance for each Diagnostic Licensed Product (or each indication for a Diagnostic Licensed Product) in any country, Licensee shall either (i) pay to Licensors (**) Dollars (US$**) in cash or, at Licensee’s option, (ii) issue to Licensors or their designees Marketable Securities having an aggregate value of (**) Dollars (US$**) as of the date of the request for the applicable marketing clearance, determined using a Volume Weighted Average Price.  Notwithstanding the foregoing, if no such request for marketing clearance has occurred by (**) (**) years from the Effective Date, then Licensee shall pay to Licensors (**) Dollars (US$**); and

 

	
(b)  

	
Upon the first commercial sale of each Diagnostic Licensed Product (or each indication for a Diagnostic Licensed Product) by Licensee or an Affiliate, Licensee shall either (i) pay to Licensors (**) Dollars (US$**) in cash or, at Licensee’s option, (ii) issue to Licensors or their designees Marketable Securities having an aggregate value of (**) Dollars (US$**) as of the date of such sale, determined using a Volume Weighted Average Price.  Notwithstanding the foregoing, if no such commercial sale has occurred by (**) (**) years from the Effective Date, then Licensee shall pay to Licensors (**) Dollars (US$**).

 

	
(c)  

	
The payments or issuances of Marketable Securities pursuant to Sections 6.04(a) and (b) are non-refundable and not creditable against any other payment due to Licensors.

 

	
6.05  

	
Licensee shall make the following milestone payments to Licensors for Therapeutic Licensed Products:

 

	
(a)  

	
Upon the initiation by Licensee or an Affiliate of the first Phase (**) clinical trial (or its foreign equivalent) for each Therapeutic Licensed Product (or each indication for a Therapeutic Licensed Product) anywhere in the world, Licensee shall either (i) pay to Licensors (**) Dollars (US$**) in cash or, at Licensee’s option, (ii) issue to Licensors or their designees Marketable Securities having an aggregate value of (**) Dollars (US$**) as of the date of the initiation of such clinical trial, determined using a Volume Weighted Average Price.  Notwithstanding the foregoing, if no such Phase (**) clinical trial has occurred by (**) (**) years from the Effective Date, then Licensee shall pay to Licensors (**) Dollars (US$**);

 

  

-7-

  

 

	
(b)  

	
Upon the initiation by Licensee or an Affiliate of the first Phase (**) clinical trial (or its foreign equivalent) for each Therapeutic Licensed Product (or each indication for a Therapeutic Licensed Product) anywhere in the world, Licensee shall either (i) pay to Licensors (**) Dollars (US$**) in cash or, at Licensee’s option, (ii) issue to Licensors or their designees Marketable Securities having an aggregate value of (**) Dollars (US$**) as of the date of the initiation of such clinical trial, determined using a Volume Weighted Average Price.  Notwithstanding the foregoing, if no such Phase (**) clinical trial has occurred by (**) (**) years from the Effective Date, then Licensee shall pay to Licensors (**) Dollars (US$**);

 

	
(c)  

	
Upon the submission of a new drug application to the FDA (or its foreign equivalent) for each Therapeutic Licensed Product (or each indication for a Therapeutic Licensed Product), Licensee shall either (i) pay to Licensors (**) Dollars (US$**) in cash or, at Licensee’s option, (ii) issue to Licensors or their designees Marketable Securities having an aggregate value of (**) Dollars (US$**) as of the date of such submission, determined using a Volume Weighted Average Price.  Notwithstanding the foregoing, if no such new drug application has been submitted to the FDA by (**) (**) years from the Effective Date, then Licensee shall pay to Licensors (**) Dollars (US$**);

 

	
(d)  

	
Upon first commercial sale of each Therapeutic Licensed Product (or each indication for a Therapeutic Licensed Product) by Licensee or an Affiliate, Licensee shall either (i) pay to Licensors (**) Dollars (US$**) in cash or, at Licensee’s option, (ii) issue to Licensors or their designees Marketable Securities having an aggregate value of (**) Dollars (US$**) as of the date of such sale, determined using a Volume Weighted Average Price; and

 

	
(e)  

	
The payments or issuances of Marketable Securities due pursuant to Sections 6.05(a) - (d) are non-refundable and not creditable against any other payment due to Licensors.

 

	
6.06  

	
Only one royalty will be payable on Net Sales by Licensee and Affiliates and Sublicensees on a Licensed Product under Section 6.01(a), regardless of the number of patent claims in Agreement Patents which cover such Licensed Product.

 

	
6.07  

	
Licensee’s failure to pay full royalties, transfer stock or make complete payments under Sections 6.01, 6.02, 6.03, 6.04 or 6.05 shall be a breach of this Agreement.

 

7. Payment Reports and Records

 

	
7.01  

	
All cash payments required to be made by Licensee to Licensors pursuant to this Agreement shall be made to Licensors in U.S. Dollars by wire transfer or by check payable to Einstein and sent to Einstein’s address set out in Section 13.01. All Shares and Marketable Securities shall be issued to Licensors or their designees at Licensors’ respective addresses set out in Section 13.01 or at such address(es) provided to Licensee by Licensors as follows: (a) one-third (1/3) to Einstein; (b) one-third (1/3) to MIT; (c) two-ninths (2/9) to IFO; and (d) one-ninth (1/9) to Cornell.

 

	
7.02  

	
All payments required to be made by Licensee to Licensors (or their designees) pursuant to this Agreement shall be subject to a charge of one and one-half percent (1.5%) per month or Two Hundred and Fifty Dollars (US$250), whichever is greater, if late.  Conversion of foreign currency to U.S. dollars shall be made at the conversion rate quoted by the Wall Street Journal, averaged on the last business day of each of the three (3) consecutive calendar months constituting the calendar quarter in which the payment was earned.  Licensee will bear any loss of exchange or value and pay any expenses incurred in the transfer or conversion to U.S. dollars.

 

  

-8-

  

 

	
7.03  

	
Payment due from Licensee to Licensors pursuant to Section 6.01 will be paid within thirty (30) days after the end of each calendar year quarter during which the payment accrued.  If no royalties or other payments are due for any quarter, Licensee will send a statement signed by an officer of Licensee to that effect to Licensors.  Payment shall be accompanied by a statement of the number of Licensed Products and Combination Products sold by Licensee, Affiliates and Sublicensees in each country, total billings for such Licensed Products and Combination Products, the values of A and B used to calculate the Net Sales of Combination Products, deductions applicable to determine the Net Sales thereof, the amount of Net Sales and Net Proceeds realized by Licensee and Affiliates and Sublicensees, the amount of any deduction and a detailed listing thereof, and the total payment due from Licensee to Licensors (the “Royalty Report”).  Such Royalty Report shall be signed by an officer of Licensee. Licensee shall send copies of the Royalty Report to MIT, Cornell and IFO at the same time the Report is sent to Einstein.

 

	
7.04  

	
Licensee and Affiliates shall maintain complete and accurate books of account and records showing Net Sales and Net Proceeds.  Such books and records of Licensee and Affiliates shall be open to inspection, in confidence, during usual business hours, upon at least ten (10) business days prior notice to Licensee, by an independent certified public accountant appointed by Licensors on behalf of Licensors, who has entered into a written agreement of confidentiality with Licensors which is no less protective of Licensee’s Confidential Information than the provisions of Section 5.03 hereof and to whom Licensee has no reasonable objection, for five (5) years after the calendar year to which they pertain, for the purpose of verifying the accuracy of the payments made to Licensors by Licensee pursuant to this Agreement.  Licensee will require any Sublicensees hereunder to maintain such books and allow such inspection by Licensee and shall, on request, disclose such information, if available to Licensee, to Licensors as part of such inspection.  Inspection shall be at Licensors’ sole expense and reasonably limited to those matters related to Licensee’s payment obligations under this Agreement and shall take place not more than once per calendar year.  Any underpayment revealed by any inspection, plus interest on the underpayment amount at the rate of one and one-half percent (1.5%) per month or Two Hundred and Fifty Dollars (US$250), whichever is greater, shall be promptly paid by Licensee to Licensors.  Further, if any inspection reveals an underpayment to Licensors of ten percent (10%) or greater, then the cost of the inspection shall be paid by Licensee.

 

8. Infringement

 

	
8.01  

	
Licensee shall have the right, in its sole discretion and its expense, to initiate legal proceedings on its behalf or in Licensors’ names, if necessary, against any infringer, or potential infringer, of an Agreement Patent who imports, makes, uses, sells or offers to sell products.  Licensee shall notify Licensors of its intention to initiate such proceedings at least twenty (20) days prior to commencement thereof.  Any settlement or recovery received from any such proceeding shall be divided (**) percent (**%) to Licensee and (**) percent (**%) to Licensors after Licensee deducts from any such settlement or recovery its actual counsel fees and out-of-pocket expenses relative to any such legal proceeding.  If Licensee decides not to initiate legal proceedings against any such infringer, then Licensors shall have the right to initiate such legal proceedings.  Any settlement or recovery received from any such proceeding initiated by Licensors shall be divided (**) percent (**%) to Licensee and (**) percent (**%) to Licensors after Licensors deduct from any such settlement or recovery their actual counsel fees and out-of-pocket expenses relative to any such legal proceeding.

 

	
8.02  

	
In the event that any party initiates or carries on legal proceedings to enforce any Agreement Patent against an alleged infringer, the other parties shall fully cooperate with and supply all assistance reasonably requested at the expense of the party requesting such assistance.  Further, the other parties, at their expense, shall have the right to be represented by counsel of their choice in any such proceeding.  However, if Licensee initiates legal proceedings in Licensors’ name, Licensee shall reimburse Licensors for any reasonable out-of-pocket counsel fees of Licensors associated with the legal proceedings.  The party who initiates or carries on the legal proceedings shall have the sole right to conduct such proceedings provided, however, that such party shall consult with the other parties to this Agreement prior to entering into any settlement thereof.

 

  

-9-

  

 

9. Prohibition on Use of Names; No Publicity

 

	
9.01  

	
No party to this Agreement shall use the name of any other party without the prior written consent of such other party, except if the use of such name is required by law, regulation, federal securities law, or judicial order, in which event the party intending to use such name will promptly inform the relevant other party prior to any such required use.  No party to this Agreement will make any public announcement regarding the existence of this Agreement and/or the collaboration hereunder without obtaining the prior written consent of the other parties, except if such announcement is required by law, regulation, federal securities law or judicial order, in which event the party intending to make such announcement will promptly inform the other parties prior to such announcement.

 

10. Term and Termination

 

	
10.01  

	
Unless terminated earlier under other provisions hereof, this Agreement will expire upon the expiration of the last Agreement Patent.  Upon termination or expiration of this Agreement for any reason, Sections 5, 9, 10.08, 10.09, 12.01 through 12.10, 12.13 and 13 shall survive and all payment obligations under Articles 3 and 6 hereof accrued as of the termination date shall be paid by Licensee within thirty (30) days of such termination or expiration.

 

	
10.02  

	
Licensee may terminate this Agreement and the licenses granted hereunder by giving notice to Licensors sixty (60) days prior to such termination.  Upon such termination, Licensee shall not use Agreement Patents, the Cell Line or the Materials for any purpose and all of Licensee’s rights in Agreement Patents, the Cell Line and the Materials shall be terminated.  Further, the Cell Line and all Materials in Licensee’s possession shall be immediately destroyed (with written confirmation to Licensors) or returned to Licensors at the expense of Licensee.

 

	
10.03  

	
If Licensors or Licensee defaults on or breaches any condition of this Agreement, the aggrieved party may serve notice upon the other parties of the alleged default or breach.  If such default or breach is not remedied within sixty (60) days from the date of such notice, the aggrieved party may at its election terminate this Agreement.  Any failure to terminate hereunder shall not be construed as a waiver by the aggrieved party of its right to terminate for future defaults or breaches.  Licensee’s damages for any breach of this Agreement by Licensors will be limited to a reduction or suspension of the payment obligations of Licensee hereunder.  Upon termination of this Agreement by Licensors pursuant to this Section 10.03, the licenses granted by Licensors to Licensee shall terminate and Licensee shall not use Agreement Patents, the Cell Line or the Materials for any purpose and all of Licensee’s rights in Agreement Patents, the Cell Line and the Materials shall be terminated.  Further, the Cell Line and all Materials in Licensee’s possession shall be immediately destroyed (with written confirmation to Licensors) or returned to Licensors at the expense of Licensee.

 

	
10.04  

	
If Licensee makes an assignment for the benefit of creditors or if proceedings for a voluntary bankruptcy are instituted on behalf of Licensee or if Licensee is declared bankrupt or insolvent, Licensors may, at their election, terminate this Agreement by notice to Licensee.  Upon termination of this Agreement by Licensors pursuant to this Section 10.04, the licenses granted by Licensors to Licensee shall terminate and Licensee shall not use Agreement Patents, the Cell Line or the Materials for any purpose and all of Licensee’s rights in Agreement Patents, the Cell Line and the Materials shall be terminated.  Further, the Cell Line and all Materials in Licensee’s possession shall be immediately destroyed (with written confirmation to Licensors) or returned to Licensors at the expense of Licensee.

 

  

-10-

  

 

	
10.05  

	
If Licensee is convicted of a felony relating to the manufacture, use or sale of Licensed Products or a felony relating to moral turpitude, Licensors may, at their election, terminate this Agreement by notice to Licensee.  Upon termination of this Agreement by Licensors pursuant to this Section 10.05, the licenses granted by Licensors to Licensee shall terminate and Licensee shall not use Agreement Patents, the Cell Line or the Materials for any purpose and all of Licensee’s rights in Agreement Patents, the Cell Line and the Materials shall be terminated.  Further, the Cell Line and all Materials in Licensee’s possession shall be immediately destroyed (with written confirmation to Licensors) or returned to Licensors at the expense of Licensee.

 

	
10.06  

	
Notwithstanding the provisions of Section 10.03 hereof, should Licensee fail to pay Licensors any cash, or issue to Licensors or their designees any Marketable Securities, as applicable, when due and payable under this Agreement, then upon thirty (30) days written notice Licensors may, at their election, terminate this Agreement, unless within the thirty (30) day period all delinquent amounts together with interest due and unpaid have been paid in cash, or issued in Marketable Securities (as applicable), by Licensee.  Upon termination of this Agreement by Licensors pursuant to this Section 10.06, the licenses granted by Licensors to Licensee shall terminate and Licensee shall not use Agreement Patents, the Cell Line or the Materials for any purpose and all of Licensee’s rights in Agreement Patents, the Cell Line and the Materials shall be terminated.  Further, the Cell Line and all Materials in Licensee’s possession shall be immediately destroyed (with written confirmation to Licensors) or returned to Licensors at the expense of Licensee.

 

	
10.07  

	
Termination of this Agreement by Licensee or Licensors shall not prejudice the rights of the parties accruing herein.

 

	
10.08  

	
If Licensee terminates this Agreement pursuant to Section 10.02 or if Licensors terminate this Agreement pursuant to Sections 10.03, 10.04, 10.05 or 10.06, then Licensee shall, upon such termination, assign to Licensors all right, title and interest in and to any Dependent Patents and Dependent Know-How (as defined below) developed by or for Licensee or Affiliates during the term of this Agreement, and shall, within thirty (30) days of termination, provide copies of all documents and other materials embodying Dependent Know-How to Licensors.  As used in this Section 10.08, the term “Dependent Patents” means any U.S. or foreign patent application or patent which claims an invention the practice of which would infringe a claim of a patent or patent application of the Agreement Patents or the practice of which results in a product covered by a claim of a patent or patent application of Agreement Patents.  “Dependent Know-How” means confidential information, including clinical trial information, the practical application of which would infringe a claim of a patent or patent application of Agreement Patents, or which results in a product covered by a claim of a patent or patent application of Agreement Patents. Licensee agrees to take all actions and execute any and all documents reasonably requested by Licensors to effectuate the terms of this Section 10.08.  During the time period between notice of termination and the effective date of termination Licensee will take whatever actions are necessary to prevent any Dependent Patent from becoming abandoned or canceled.

 

	
10.09  

	
If Licensee terminates this Agreement pursuant to Section 10.02 or if Licensors terminate this Agreement pursuant to Sections 10.03, 10.04, 10.05 or 10.06, Licensee shall submit a final Royalty Report to Licensors and any payments and patent costs due to Licensors hereunder as of the date of termination shall be payable within thirty (30) days of the date of termination. In addition, within ten (10) days of notice of such termination, Licensee shall provide Licensors with a report showing the status of all Dependent Patents, including, without limitation, a list of all countries where Dependent Patents have been filed and a list of all actions which must be taken with respect to the Dependent Patents and relevant due dates.

 

	
10.10  

	
Notwithstanding any provision herein to the contrary, no termination of this Agreement shall be construed as a termination of any valid sublicense of any Sublicensee hereunder, and thereafter each such Sublicensee shall be considered a direct licensee of Licensors, provided that (i) such Sublicensee is not in material breach of its sublicense agreement with Licensee, and (ii) such Sublicensee agrees in writing to assume all applicable obligations of Licensee under this Agreement.

 

  

-11-

  

 

11. Amendment and Assignment

 

	
11.01  

	
This Agreement sets forth the entire understanding between Licensors, on the one hand, and Licensee on the other hand, pertaining to the subject matter hereof and, with respect to Licensee only, supersedes and replaces the Confidential Disclosure and Non-Use Agreement between Licensor and Warren C. Lau having an effective date of April 2, 2009.

 

	
11.02  

	
Except as otherwise provided herein, this Agreement may not be amended, supplemented or otherwise modified, except by an instrument in writing signed by both parties.

 

	
11.03  

	
Without the prior written approval of the other parties, which approval shall not be unreasonably withheld, no party may assign this Agreement except that this Agreement may be assigned to an entity acquiring substantially all of such party’s business to which this Agreement relates, or in the event of a merger, consolidation, change in control or similar transaction of such party.  Any attempted assignment in contravention of this Section 11.03 shall be null and void.

 

12. Miscellaneous Provisions

 

	
12.01  

	
This Agreement shall be construed and the rights of the parties governed in accordance with the laws of the State of New York, excluding its law of conflict of laws.  Any dispute or issue arising hereunder, including any alleged breach by any party, shall be heard, determined and resolved by an action commenced in the state or federal courts in New York, New York, which the parties hereby agree shall have proper jurisdiction and venue over the issues and the parties.  Licensors and Licensee hereby agree to submit to the jurisdiction of the state or federal courts in New York and waive the right to make any objection based on jurisdiction or venue.  The New York courts shall have the right to grant all relief to which Licensors and Licensee are or shall be entitled hereunder, including all equitable relief as the Court may deem appropriate.

 

	
12.02  

	
This Agreement has been prepared jointly.

 

	
12.03  

	
If any term or provision of this Agreement or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law.

 

	
12.04  

	
Licensee agrees to indemnify Licensors and their current or former directors, governing board members, trustees, officers, faculty, medical and professional staff, employees, students and agents and their respective successors, heirs and assigns (Licensors and each such person being the “Indemnified Parties”) for the cost of defense and for damages awarded and losses and liabilities incurred, if any, as a result of any third party claims, liabilities, suits or judgments based on or arising out of the research, development, marketing, manufacture, sale and/or provision of the Cell Line and/or the Materials and/or Licensed Products by Licensee, Affiliates and Sublicensees, and/or the licenses granted under this Agreement, or otherwise related to the conduct of Licensee’s, Affiliates’ or Sublicensees’ business, so long as such claims, liabilities, suits, or judgments are not solely attributable to grossly negligent or intentionally wrongful acts or omissions by the Indemnified Parties.  This indemnity is conditioned upon Licensors’ obligation to: (i) advise Licensee of any claim or lawsuit, in writing promptly after Licensors have or the Indemnified Party has received notice of said claim or lawsuit, (ii) assist Licensee and its representatives, at Licensee’s expense, in the investigation and defense of any lawsuit and/or claim for which indemnification is provided, and (iii) permit Licensee to control the defense of such claim or lawsuit for which indemnification is provided.

 

  

-12-

  

 

	
12.05  

	
Nothing in this Agreement is or shall be construed as:

 

	
(a)  

	
A warranty or representation by Licensors that anything made or used by Licensee under any license granted in this Agreement (including, without limitation, the Cell Line, the Materials and Licensed Products) is or will be free from infringement of patents, copyrights, and other rights of third parties; or

 

	
(b)  

	
Granting by implication, estoppel, or otherwise any license, right or interest other than as expressly set forth herein.

 

	
12.06  

	
Except as expressly set forth in this Agreement, the parties MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTE OR OTHERWISE, AND THE PARTIES SPECIFICALLY DISCLAIM ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR WARRANTY OF NON-INFRINGEMENT.  IN ADDITION, NO PARTY SHALL BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

IN PARTICULAR, IN NO EVENT SHALL LICENSORS, THEIR RESPECTIVE TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES OR AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGES OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER LICENSORS SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.

 

	
12.07  

	
Licensors and Licensee represent and warrant that, to the best of their knowledge, as of the Effective Date:

 

	
(a)  

	
they have the legal right and authority to enter into this Agreement and to perform all of their obligations hereunder;

 

	
(b)  

	
when executed by all parties, this Agreement will constitute a valid and legally binding obligation and shall be enforceable in accordance with its terms; and

 

	
(c)  

	
there are no existing or threatened actions, suits or claims pending or threatened against them that may affect the performance of their obligations under the Agreement.

 

	
12.08  

	
Licensee represents and warrants that it has not relied on any information provided by Licensors or Licensors’ current or former employees and has conducted its own due diligence investigation to its own satisfaction prior to entering into this Agreement.

 

  

-13-

  

 

	
12.09  

	
Licensee represents and warrants that before Licensee, or an Affiliate or a Sublicensee makes any sales of Licensed Products or performs or causes any third party to perform any clinical trials or tests in human subjects involving Licensed Products, Licensee or Affiliates or Sublicensees will acquire and maintain in each country in which Licensee or Affiliates or Sublicensees shall test or sell Licensed Products, appropriate insurance coverage reasonably acceptable to Licensors, but providing coverage in respect of Licensed Products in an amount no less than (**) (US $**) per claim.  Licensee or Affiliates will not perform, or cause any third party to perform, any clinical trials or any tests in human subjects involving Licensed Products unless and until he/they obtain(s) all required regulatory approvals with respect to Licensed Products in the applicable countries.  Prior to instituting any clinical trials or any tests in human subjects, or sale of any Licensed Product, Licensee shall provide evidence of such insurance to Licensors.  If Licensors determine that such insurance is not reasonably appropriate, they shall so advise Licensee and Licensee shall delay such trials, tests or sales until the parties mutually agree that reasonably appropriate coverage is in place.  Licensors shall be listed as additional insureds in Licensee’s insurance policies.  If such insurance is underwritten on a ‘claims made’ basis, Licensee agrees that any change in underwriters during the term of this Agreement will require the purchase of ‘prior acts’ coverage to ensure that coverage will be continuous throughout the term of this Agreement.

 

	
12.10  

	
Licensee shall exercise its rights and perform its obligations hereunder in compliance with all applicable laws and regulations.  In particular, it is understood and acknowledged that the transfer of certain commodities and technical data is subject to United States laws and regulations controlling the export of such commodities and technical data, including all Export Administration Regulations of the United States Department of Commerce. These laws and regulations, among other things, prohibit or require a license for the export of certain types of technical data to certain specified countries.  Licensee hereby agrees and gives written assurance that he will comply with all United States laws and regulations controlling the export of commodities and technical data, that he will be solely responsible for any violation of such by Licensee or Affiliates or Sublicensees, and that he will defend and hold Licensors harmless in the event of any legal action of any nature occasioned by such violation.

 

	
12.11  

	
Licensee agrees (i) to obtain all regulatory approvals required for the manufacture and sale of Licensed Products prior to marketing or selling any such Licensed Products and (ii) to utilize legally appropriate patent marking on such Licensed Products.  Licensee agrees to register or record this Agreement as is required by law or regulation in any country where the license is in effect.

 

	
12.12  

	
Licensee agrees that any Licensed Products for use or sale in the United States will be manufactured substantially in the United States.

 

	
12.13  

	
Any tax required to be withheld under the laws of any jurisdiction on royalties payable to Licensors by Licensee under this Agreement will be promptly paid by Licensee for and on behalf of Licensors to the appropriate governmental authority, and Licensee will furnish Licensors with proof of payment of the tax together with official or other appropriate evidence issued by the competent governmental authority sufficient to enable Licensors to support a claim for tax credit with respect to any sum so withheld.  Any tax required to be withheld on payments by Licensee to Licensors will be an expense of and be borne solely by Licensors, and Licensee’s royalty payment(s) to Licensors following the withholding of the tax will be decreased by the amount of such tax withholding.  Licensee will cooperate with Licensors in the event Licensors elects to assert, at their own expense, exemption from any tax.

 

	
12.14  

	
 Licensee will meet all of the following due diligence requirements:

 

	
(a)  

	
Produce a business plan within (**) of the Effective Date and update the business plan annually;

 

  

-14-

  

 

	
(b)  

	
Raise (**) Dollars (US$**) in debt, equity or other financing or revenues by the (**) anniversary of the Effective Date;

 

	
(c)  

	
Raise (**)Dollars (US$**) in debt, equity or other financing or revenues by the (**) anniversary of the Effective Date; and

 

	
(d)  

	
Raise (**) Dollars (US$(**)) in debt, equity or other financing or revenues by the (**) anniversary of the Effective Date.

 

	
12.15  

	
If any one of the due diligence requirements in Section 12.14 is not met, the license shall terminate pursuant to Section 10.03 and all rights will revert back to Licensors.

 

	
12.16  

	
In the event Licensee (or any entity acting under Licensee’s control or on its behalf) initiates any proceeding or otherwise asserts any claim challenging the validity or enforceability of any of the Agreement Patents in any court, administrative agency or other forum (“Challenge”), the royalty rates set forth in Section 6.01 and the license maintenance fees set forth in Section 6.03 shall be automatically (**) on and after the date of such Challenge for the remaining term of this Agreement. Moreover, to the extent not already covered by Sections 3.01 and 3.02, Licensee agrees to pay all costs and expenses (including actual attorneys’ fees) incurred by Licensors in connection with defending a Challenge.

 

13. Notices

 

	
13.01  

	
Any notice or report required or permitted hereunder shall be given in writing, and shall be deemed to have been properly given and effective upon delivery, by registered or certified mail, return receipt requested, or by facsimile with proof of receipt and a confirmation copy sent by overnight courier, or by overnight courier, to the following addresses:

 

To Einstein:

Albert Einstein College of Medicine

 of Yeshiva University

1300 Morris Park Avenue

Bronx, New York  10461

Attention:  Office of Biotechnology

With copy to:

Kenneth P. George, Esq.

Amster, Rothstein & Ebenstein, LLP

90 Park Avenue - 21st Floor

New York, New York  10016

  

-15-

  

To MIT:

Massachusetts Institute of Technology

Technology Licensing Office, Room NE25-230

Five Cambridge Center, Kendall Square

Cambridge, MA 02142-1493

Tel: 617-253-6966

Fax: 617-258-6790

Attention: Director

To Cornell

Cornell Center for Technology Enterprise and Commercialization

395 Pine Tree Road, Suite 310

Ithaca, NY 14850

Tel: 607-254-5236

Fax: 607-254-5454

E-Mail: cctec-contracts@cornell.edu

Attention: Executive Director

To IFO

Istituti Fisioterapici Ospitalieri

Via Elio Chianesi

53-00144 Roma, Italy

Tel: 39 06 5266 2702

Fax: 39 06 5266 2736

Email: dirgen@ifo.it

Attention: Direzione Generale

To Licensee:

Metastat, Inc.

4 Autumnwood Court

The Woodlands, Texas 77380

Attention:  Warren C. Lau, President and CEO

  

-16-

  

IN WITNESS WHEREOF, the parties have entered into this Agreement effective as of the day and year first above written.

 

	  	  	
ALBERT EINSTEIN COLLEGE OF MEDICINE OF YESHIVA UNIVERSITY, A DIVISION OF YESHIVA UNIVERSITY

	  	  	  
	
WITNESS:

	  	
/s/ J. Michael Gower

	
/s/  T. [Colon]

	  	
Name:  J. Michael Gower

	
Date: October 27, 2010

	  	
Title: Vice President and CFO

	  	  	
Date: October 27, 2010

	  	  	  
	  	  	
MASSACHUSETTS INSTITUTE OF TECHNOLOGY

	  	  	  
	
WITNESS:

	  	
/s/ Lita Nelson

	
 /s/ Andrea Barry

	  	
Name: Lita L. Nelson

	
Date: September 8, 2010

	  	
Title: Director, Technology Licensing Office

	  	  	
Date: September 8, 2010

	  	  	  
	  	  	
CORNELL UNIVERSITY

	  	  	  
	
WITNESS:

	  	
/s/ Alan Pacou

	
 /s/ Danielle [Reelence]

	  	
Name: Alan Pacou

	
Date: September 1, 2010

	  	
Title:

	  	  	
Date:  September 1, 2010

	  	  	  
	  	  	
ISTITUTI FISIOTERAPICI OSPITALIERI

	  	  	  
	
WITNESS:

	  	
/s/ Francesco Bevere

	
/s/  P. [Cee**]

	  	
Name: Francesco Bevere

	
Date: October 20, 2010

	  	
Title: Direttore Generale

	  	  	
Date: October 20, 2010

	  	  	
METASTAT, INC.

	  	  	  
	
WITNESS:

	  	
/s/ Warren C. Lau

	
/s/ Matthew Balk

	  	
Name: Warren C. Lau

	
Date: August 26, 2010

	  	
Title: President and CEO

	  	  	
Date:August 26, 2010

  

-17-

  

APPENDIX A - Agreement Patents

 

	
1.

	
U.S. Provisional Patent Application No. 61/276,263, entitled “Tumor Microenvironment of Metastasis (TMEM) and Uses Thereof in Diagnosis, Prognosis, and Treatment of Tumors”, inventors: Frank Gertler, John Condeelis, Thomas Rohan, and Joan Jones; assigned to MIT, Cornell (D-4846) and Einstein (96700/1532)(**);

 

	
2.

	
U.S. Continuation-in-part of PCT/US08/1343, entitled “Metastasis specific splice variants of Mena and uses thereof in diagnosis, prognosis and treatment of tumors”, inventors: John Condeelis, Sumanta Goswami, Paola Nistico, and Frank Gertler; assigned to Einstein, IFO and MIT (96700/1343)(**);

 

	
3.

	
U.S. Patent Application No. 12/462,324, entitled “Metastasis specific splice variants of Mena and uses thereof in diagnosis, prognosis and treatment of tumors”, inventors: John Condeelis, Sumanta Goswami, Paola Nistico, and Frank Gertler; assigned to Einstein, IFO and MIT (96700/1533)(**);

 

	
4.

	
European Patent Application No. 08713370.8, entitled “Metastasis specific splice variants of Mena and uses thereof in diagnosis, prognosis and treatment of tumors”, inventors: John Condeelis, Sumanta Goswami, Paola Nistico, and Frank Gertler; assigned to Einstein, IFO and MIT (96700/1534)(**); and

 

	
5.

	
Canadian Patent Application No. 2,676,179, entitled “Metastasis specific splice variants of Mena and uses thereof in diagnosis, prognosis and treatment of tumors”, inventors: John Condeelis, Sumanta Goswami, Paola Nistico, and Frank Gertler; assigned to Einstein, IFO and MIT (96700/1535)(**).

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