SUBSCRIPTION AGREEMENT
Exhibit
10.1
This
SUBSCRIPTION AGREEMENT (this “Agreement”) is made and entered
into as of __________, 2016, by and among MetaStat, Inc., a Nevada
corporation (the “Company”), and each of the
eligible investors who executes this Agreement and whose names are
set forth on the signature pages hereto (individually, a
“Subscriber” and
collectively, the “Subscribers”).
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ARTICLE
I
Section
1.1 Subscription. The Company is
offering to each Subscriber and each Subscriber hereby irrevocably
subscribes for and agrees to purchase from the Company the number
of Units as set forth on such Subscriber’s signature page
hereto at a Purchase Price of $10,000 per Unit for aggregate
consideration as set forth on the Subscriber’s signature page
hereto (the “Subscription
Proceeds”), subject to a minimum subscription of one
(1) Unit ($10,000), unless the Company in its sole discretion
agrees to accept a subscription for a lesser number of Units. All
subscriptions are irrevocable by the Subscriber. The subscription
is not transferable or assignable by the Subscriber.
Section
1.2 Payment.
(a) The
Subscription Proceeds shall be paid to Signature Bank, as escrow
agent for the Company (the “Escrow Agent”), by wire transfer
of immediately available funds in U.S. dollars (or in the form of a
personal or cashier’s check) in accordance with the wire and
delivery instructions attached hereto as Exhibit B.
The Subscription Proceeds must accompany the documents indicated in
Section 1.3 below.
(b) If
the Subscription Proceeds are paid to the Escrow Agent, the
Subscriber acknowledges and agrees that this Agreement and any
other documents delivered in connection herewith will be held by
certain Agents on behalf of the Company, and any Subscription
Proceeds will be deposited in an escrow account (the
“Escrow
Account”), held by the Escrow Agent. In the event that
this Agreement is not accepted in whole or in part by the Company
for whatever reason, this Agreement and any other documents
delivered in connection herewith will be returned to the Subscriber
by the Agents at the address of the Subscriber as set forth on the
Subscriber’s signature page hereto, and any Subscription
Proceeds deposited in the Escrow Account shall be returned to the
Subscriber by the Escrow Agent in accordance with the payment
information provided by the Agent to the Escrow Agent.
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(c) In
connection with the Note Exchange, certain Subscribers who are
holders of the Company’s indebtedness in an amount of up to
$2,151,000 may tender their indebtedness in the form of promissory
notes to the Company in lieu of payment of the Subscription
Proceeds as described in Section 1.2(a) above.
(i) this
Agreement;
(ii)
the Confidential Private Subscriber Questionnaire, which is
attached as Exhibit
B to the Memorandum; and
(iii)
the Registration Rights Agreement, which is attached as
Exhibit C to the
Memorandum.
Section
1.4 Obligations of the Escrow
Agent. The Subscription Proceeds may be deposited by the
Subscriber on behalf of certain Agents in the Escrow Account
pursuant to the instructions in Exhibit A
attached hereto. The Subscriber agrees that the Escrow Agent shall
have no accountability or obligations to the Subscriber whatsoever,
and acknowledges that the Escrow Agent is accountable only to the
Company and certain Agents. The Subscriber agrees that when the
Subscription Proceeds are deposited in the Escrow Account, the
Escrow Agent’s only duty shall be to deliver the Subscription
Proceeds to the Company or its designees, all solely according to
payment instructions submitted jointly by the Company and certain
Agents (the “Payment
Instructions”), and the Escrow Agent shall require no
further instructions from the Subscriber in delivering the same to
the Company or its designees. In the event the Company rejects this
subscription in whole or in part, the Escrow Agent shall return the
Subscription Proceeds directly to the investor without interest or
deduction there from. The proceeds of the Escrow Account shall be
distributed in accordance with Section 1.5.
Section
1.5 Closings. The Initial Closing
of the purchase and sale of the Units to be acquired by the
Subscribers from the Company under this Agreement shall take place
at such time as Subscribers have executed this Agreement to
purchase an amount as mutually agreed by the Company and the Agents
(which amount shall not include the Note Exchange pursuant to the
terms of Section 1.2(c) hereof), and all of the conditions
applicable to the Initial Closing shall have been fulfilled or
waived in accordance herewith (the “Initial Closing Date”). After the
Initial Closing, the Company may conduct any number of additional
closings at any time (each, an “Additional Closing” and, together
with the Initial Closing, a “Closing”) so long as the final
Additional Closing occurs on or before the Termination Date.
Subject to all conditions to Closing having been satisfied or
waived, each Closing shall take place at such time and place as the
parties shall agree (a “Closing Date”). For purposes of
this Agreement, a “business day” means a day (A) other
than Saturday or Sunday and (B) on which commercial banks are open
for business in New York City, New York. Closing of the Offering of
the Units shall occur in the following manner:
(a) The
Escrow Agent shall upon notice of a Closing Date jointly from the
Company and certain Agents, release to the Company or its designees
the proceeds of the Offering in accordance with the Payment
Instructions.
(b) Within
five (5) business days after each Closing Date, the Company shall
irrevocably instruct its transfer agent to deliver to the
Subscriber one or more stock certificates bearing the restrictive
legends described herein, evidencing (a) such number of Shares
equal to 5,000 multiplied by the number of Units the Subscriber is
purchasing as is set forth on Subscriber’s signature page
hereto, (b) such number of Preferred Shares equal to 500 multiplied
by the number of Units the Subscriber is purchasing as is set forth
on Subscriber’s signature page hereto, or (c) a combination
thereof as is set forth on Subscriber’s signature page
hereto.
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Section
1.6 Price Protection. For a period
of one hundred eighty (180) days following the final Closing Date,
so long as any Subscriber holds any Shares or Preferred Shares, if
the Company, at any time following the date hereof, issues any
Additional Securities (as defined below) at a price per such
Additional Security lower than the Effective Price (i.e., $2.00 per
share, subject to adjustment for any stock dividends, combinations,
splits, recapitalizations and the like with respect to the
Company’s Common Stock following the date hereof) (such lower
price, the “Subsequent
Offering Price”), upon each such issuance the Company
shall promptly cause to be issued and delivered to each Subscriber
such additional shares of Common Stock or Preferred Shares
(“Ratchet
Shares”) equal to the excess of (A) the quotient of
such Subscriber’s aggregate Purchase Price hereunder divided
by the Subsequent Offering Price (calculated, in the event of any
security convertible into or exercisable for shares of Common
Stock, based on the conversion or exercise price per share) minus
(B) the sum of the number of Shares originally issued hereunder and
the number of Ratchet Shares, if any, issued pursuant to this
Agreement prior to issuance of such additional Ratchet Shares.
Additionally, in connection with any such issuance of Ratchet
Shares, the Company shall promptly cause to be issued and delivered
to each Subscriber, Warrants to purchase such number of shares of
Common Stock equal to 50% of the number of any Ratchet Shares
issued to such Subscriber. As used herein (and except as provided
in the next succeeding sentence), “Additional Securities” means
shares of Common Stock, any other capital stock of the Company, or
any evidences of indebtedness or other securities representing or
directly or indirectly convertible into or exchangeable for capital
stock of the Company; provided, however, that if shares of Common Stock
are offered as units together with any other rights (whether
warrants, other securities representing or directly or indirectly
convertible into or exchangeable for share capital of the Company,
or other rights), the “Subsequent Offering Price” shall
be the price paid for each “unit” in such offering,
which unit shall be comprised of (i) one share of Common Stock plus
(ii) a number of such other rights as is equal to (x) the aggregate
number of such other rights offered in such transaction divided by
(y) the aggregate number of shares of Common Stock offered in such
transaction. “Additional Securities” shall exclude: (i)
stock options, shares of Common Stock and other stock awards issued
to employees or directors of, or consultants or advisors to, the
Company pursuant to its 2012 Incentive Plan, as in effect on the
date hereof and described in the Commission Documents or pursuant
to any other stock option plan, agreement or arrangement approved
by the Company’s board of directors and/or governed by the
2012 Incentive Plan; (ii) shares of Common Stock actually issued
upon the exercise of options, warrants or other convertible
securities outstanding on the date hereof, in each case provided
such issuance is pursuant to the terms of such option, warrant or
convertible security; (iii) shares of Common Stock issued by the
Company as consideration for the acquisition of all of the equity
securities and voting rights, or all or substantially all of the
assets, of any person or other reorganization or joint venture, in
each case in a transaction approved by the board of directors of
the Company and, if required under applicable law or stock exchange
regulations, the Company’s stockholders; (iv) shares of
Common Stock issued by reason of a dividend, stock split, split-up
or other distribution on ordinary shares; (v) shares of Common
Stock, options or other securities convertible into, or exercisable
for, shares of Common Stock issued (a) in connection with the
acquisition of, or licensing arrangements for, pharmaceutical
products, (b) to suppliers or third party service providers in
connection with the provision of goods or services or (c) in
connection with sponsored research, collaboration, technology
license, development, OEM, marketing or other similar agreements or
strategic partnerships, in each case pursuant to transactions
approved by the Board of Directors of the Company and not in
connection with a capital raising transaction; or (vi) any shares
of Series B Preferred Stock or dividends thereon issued on or after
the date hereof (any securities issued as described in clauses (i)
through (vi), collectively, “Excluded Securities”). For the
avoidance of doubt, Excluded Securities (and the proceeds from the
issuance thereof) shall not be included in the calculation of the
aggregate gross proceeds to the Company from sales of Additional
Securities for purposes of this Section 1.6.
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ARTICLE
II
Section
2.1 Representations and Warranties of the
Company. Except as set forth on the Company Disclosure
Schedule attached hereto, and made a part hereof, the Company
hereby represents and warrants to the Subscribers, as of the date
of each Closing Date (except for the representations and warranties
that speak as of a specific date, which shall be made as of such
date), as follows:
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(j)
Title to Assets.
Each of the Company and its Subsidiaries has good and marketable
title to (i) all properties and assets purportedly owned or used by
them as reflected in the Financial Statements, (ii) all properties
and assets necessary for the conduct of their business as currently
conducted, and (iii) all of the real and personal property
reflected in the Financial Statements free and clear of any Lien.
All leases are valid and subsisting and in full force and
effect.
(n) Taxes.
The Company and each Subsidiary, to the extent its applicable, has
accurately prepared and filed all federal, state and other tax
returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are
reflected in the consolidated financial statements of the Company
for all current taxes and other charges to which the Company or any
Subsidiary, if any, is subject and which are not currently due and
payable. None of the federal income tax returns of the Company have
been audited by the Internal Revenue Service. The
Company
has no knowledge of any additional assessments, adjustments or
contingent tax liability (whether federal, state or foreign) of any
nature whatsoever, whether pending or threatened against the
Company or any Subsidiary for any period, nor of any basis for any
such assessment, adjustment or contingency.
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(p)
Securities Act of
1933. Assuming the accuracy of the representations and
warranties of the Subscribers set forth in Section 3.1 hereof, the
Company has complied with all applicable federal and state
securities laws in connection with the offer, issuance and sale of
the Shares, Preferred Shares and Warrants hereunder. Neither the
Company nor anyone acting on its behalf, directly or indirectly,
has or will sell, offer to sell or solicit offers to buy any of the
Shares, the Preferred Shares, the Warrants or similar securities
to, or solicit offers with respect thereto from, or enter into any
preliminary conversations or negotiations relating thereto with,
any person, or has taken or will take any action so as to bring the
issuance and sale of any of the shares of Common Stock and the
Warrants in violation of the registration provisions of the
Securities Act and applicable state securities laws, and neither
the Company nor any of its affiliates, nor any person acting on its
or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of any of the
shares of Common Stock and the Warrants.
(q)
Governmental
Approvals. Except for the filing of any notice prior or
subsequent to the Closing Date that may be required under
applicable state and/or federal securities laws (which if required,
shall be filed on a timely basis), including the filing of a Form
D, Current Report on Form 8-K and a registration statement or
statements pursuant to the Registration Rights Agreement, no
authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is
or will be necessary for, or in connection with, the execution or
delivery of the Shares, the Preferred Shares or for the performance
by the Company of its obligations under the Transaction
Documents.
(r)
Investment Company
Act. The Company is not, and is not an affiliate of, and
immediately after receipt of payment for the Securities, will not
be or be an affiliate of, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that
it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as
amended.
(s)
No Integrated
Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would cause
the Offering and/or sale of the Units pursuant to this Agreement to
be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the
Units pursuant to Rule 506 under the Securities Act, nor will the
Company or any of its affiliates take any action or steps that
would cause the offering and/or sale of the Units to be integrated
with other offerings.
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(u)
Certain Fees.
Except as disclosed in the Memorandum, no brokers fees,
finders’ fees or financial advisory fees or commissions will
be payable by the Company with respect to the transactions
contemplated by this Agreement and the other Transaction
Documents.
(v)
Listing and Maintenance
Requirements. The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and the Company has taken no
action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under
the Exchange Act nor has the Company received any notification that
the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof,
received notice from the OTCQB to the effect that the Company is
not in compliance with the listing or maintenance requirements of
the OTCQB. The Company is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
ARTICLE
III
Section
3.1 Representations and Warranties of Each
of the Subscribers. Each Subscriber, severally and not
jointly with the other Subscribers, hereby makes the following
representations and warranties to the Company as of the date
hereof, with respect solely to itself and not with respect to any
other Subscriber:
(a)
Authorization and
Power. Each Subscriber has the requisite power and authority
to enter into and perform this Agreement and each of the other
Transaction Documents to which such Subscriber is a party and to
purchase the Units being sold to it hereunder. The execution,
delivery and performance of this Agreement and each of the other
Transaction Documents to which such Subscriber is a party by such
Subscriber and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate, partnership or limited liability company
action, and no further consent or authorization of such Subscriber
or its board of directors, stockholders, partners, members, or
managers, as the case may be, is required. This Agreement and each
of the other Transaction Documents to which such Subscriber is a
party has been duly authorized, executed and delivered by such
Subscriber and constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of such Subscriber
enforceable against such Subscriber in accordance with the terms
hereof.
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(b)
No Conflicts. The
execution, delivery and performance of this Agreement and each of
the other Transaction Documents to which such Subscriber is a party
and the consummation by such Subscriber of the transactions
contemplated hereby and thereby or relating hereto do not and will
not (i) result in a violation of such Subscriber’s charter
documents, bylaws, operating agreement, partnership agreement or
other organizational documents or (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any
agreement, indenture or instrument or obligation to which such
Subscriber is a party or by which its properties or assets are
bound, or result in a violation of any law, rule, or regulation, or
any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such
conflicts, defaults and violations as would not, individually or in
the aggregate, have a material adverse effect on such Subscriber).
Such Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or
any other Transaction Document to which such Subscriber is a party
or to purchase the Units in accordance with the terms hereof,
provided, that for purposes of the representation made in this
sentence, such Subscriber is assuming and relying upon the accuracy
of the relevant representations and agreements of the Company
herein.
(e)
Opportunities for
Additional Information. Such Subscriber acknowledges that
such Subscriber has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the
executive officers of the Company concerning the financial and
other affairs of the Company.
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(i)
Independent
Investment. Except as may be disclosed in any filings with
the Commission by the Subscribers under Section 13 and/or Section
16 of the Exchange Act, no Subscriber has agreed to act with any
other Subscriber for the purpose of acquiring, holding, voting or
disposing of the Units or underlying securities purchased hereunder
for purposes of Section 13(d) under the Exchange Act, and each
Subscriber is acting independently with respect to its investment
in the Units and underlying securities.
(ii) The
Subscribers agree to the imprinting, so long as is required by this
Section 3.1(k), of a legend on any of the Securities in the
following form:
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
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(iii) The
Company acknowledges and agrees that a Subscriber may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and who agrees to be bound by the provisions of
this Agreement and the Registration Rights Agreement and, if
required under the terms of such arrangement, such Subscriber may
transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval
of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith. Further, no notice shall be required of such pledge. At
the appropriate Subscriber’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection
with a pledge or transfer of the Securities, including, if the
Securities are subject to registration pursuant to the Registration
Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act
or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders (as defined in
the Registration Rights Agreement) thereunder.
(iv) So
long as the Company has received written representations from such
Subscriber as reasonably requested by the Company in connection
with such legend removal (which shall not include representations
with respect to the sale of any securities), certificates
evidencing the Shares, the Conversion Shares, and Warrant Shares
shall not contain any legend (including the legend set forth in
Section 3.1(k)(ii) hereof), (i) while a registration statement
(including the Registration Statement) covering the resale of such
security is effective under the Securities Act, (ii) following any
sale of such Shares, Conversion Shares or Warrant Shares pursuant
to Rule 144, (iii) if such Shares, Conversion Shares or Warrant
Shares are eligible for sale under Rule 144, or (iv) if such legend
is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by
the staff of the Commission). The Company shall cause its counsel
to issue a legal opinion to its transfer agent promptly after the
Effective Date if required by its transfer agent to effect the
removal of the legend hereunder, subject to the Company receiving
written representations from such Subscriber as reasonably
requested by the Company in connection with such legend removal
(which shall not include representations with respect to the sale
of any securities). If all or any portion of a Warrant is exercised
at a time when there is an effective registration statement to
cover the resale of the Warrant Shares, or if such Shares,
Conversion Shares or Warrant Shares may be sold under Rule 144 and
the Company is then in compliance with the current public
information required under Rule 144, or if the Shares, Conversion
Shares or Warrant Shares may be sold under Rule 144 without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Shares,
Conversion Shares or Warrant Shares or if such legend is not
otherwise required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued
by the staff of the Commission) then such Warrant Shares shall be
issued free of all legends, subject to the Company receiving
written representations from such Subscriber as reasonably
requested by the Company in connection with such legend removal
(which shall not include representations with respect to the sale
of any securities). The Company agrees that following the Effective
Date or at such time as such legend is no longer required under
this Section 3.1(k)(iv), it will, no later than two Trading Days
following the delivery by a Subscriber to the Company or its
transfer agent of a certificate representing Shares, Conversion
Shares or Warrant Shares, as the case may be, issued with a
restrictive legend (such second Trading Day, the
“Legend Removal
Date”), deliver or cause to be delivered to such
Subscriber a certificate representing such shares that is free from
all restrictive and other legends, subject to the Company receiving
written representations from such Subscriber as reasonably
requested by the Company in connection with such legend removal
(which shall not include representations with respect to the sale
of any securities). The Company may not make any notation on its
records or give instructions to the transfer agent that enlarge the
restrictions on transfer set forth in this Section 3.1(k).
Certificates for Securities subject to legend removal hereunder
shall be transmitted by the transfer agent to the Subscriber by
crediting the account of the Subscriber’s prime broker with
the Depository Trust Company System as directed by such
Subscriber.
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(v) In
addition to such Subscriber’s other available remedies,
subject to the Company receiving written representations from such
Subscriber as reasonably requested by the Company in connection
with such legend removal (which shall not include representations
with respect to the sale of any securities), the Company shall pay
to a Subscriber, in cash, if the Company fails to (i) issue and
deliver (or cause to be delivered) to a Subscriber by the Legend
Removal Date a certificate representing the Securities so delivered
to the Company by such Subscriber that is free from all restrictive
and other legends or (ii) if after the Legend Removal Date such
Subscriber purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such
Subscriber of all or any portion of the number of shares of Common
Stock, or a sale of a number of shares of Common Stock equal to all
or any portion of the number of shares of Common Stock that such
Subscriber anticipated receiving from the Company without any
restrictive legend, then, an amount equal to the excess of such
Subscriber’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (including brokerage
commissions and other out-of-pocket expenses, if any) (the
“Buy-In
Price”) over the product of (A) such number of
Underlying Shares that the Company was required to deliver to such
Subscriber by the Legend Removal Date multiplied by (B) the lowest
closing sale price of the Common Stock on any Trading Day during
the period commencing on the date of the delivery by such
Subscriber to the Company of the applicable Underlying Shares (as
the case may be) and ending on the date of such delivery and
payment under this clause (ii).
(vi) Each
Subscriber, severally and not jointly with the other Subscribers,
agrees with the Company that such Subscriber will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are
sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section
3.1(k) is predicated upon the Company’s reliance upon this
understanding and is subject to the Company receiving written
representations from such Subscriber as reasonably requested by the
Company in connection with such legend removal (which shall not
include representations with respect to the sale of any
securities).
ARTICLE
IV
Section
4.1 General Indemnity. The Company
agrees to indemnify and hold harmless the Subscribers (and their
respective directors, officers, managers, partners, members,
shareholders, affiliates, agents, successors and assigns) from and
against any and all losses, liabilities, deficiencies, costs,
damages and expenses (including, without limitation, reasonable
attorneys’ fees, charges and disbursements) incurred by the
Subscribers as a result of any breach of the representations,
warranties or covenants made by the Company herein. Each Subscriber
severally but not jointly agrees to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors
and assigns from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by the Company as a result of any breach of
the representations, warranties or covenants made by such
Subscriber herein. The maximum aggregate liability of each
Subscriber pursuant to its indemnification obligations under this
Article IV shall not exceed the portion of the Purchase Price paid
by such Subscriber hereunder. In no event shall any
“Indemnified Party” (as defined below) be entitled to
recover consequential or punitive damages resulting from a breach
or violation of this Agreement.
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Section
4.2 Indemnification Procedure. Any
party entitled to indemnification under this Article IV (an
“Indemnified
Party”) will give written notice to the indemnifying
party of any matters giving rise to a claim for indemnification;
provided, that the
failure of any party entitled to indemnification hereunder to give
notice as provided herein shall not relieve the indemnifying party
of its obligations under this Article IV except to the extent that
the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought
against an Indemnified Party in respect of which indemnification is
sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the
Indemnified Party a conflict of interest between it and the
indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel
reasonably satisfactory to the Indemnified Party. In the event that
the indemnifying party advises an Indemnified Party that it will
contest such a claim for indemnification hereunder, or fails,
within thirty (30) days of receipt of any indemnification notice to
notify, in writing, such person of its election to defend, settle
or compromise, at its sole cost and expense, any action, proceeding
or claim (or discontinues its defense at any time after it
commences such defense), then the Indemnified Party may, at its
option, defend, settle or otherwise compromise or pay such action
or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any
such claim, proceeding or action, the Indemnified Party’s
costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses
subject to indemnification hereunder. The Indemnified Party shall
cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party, which
relates to such action or claim. The indemnifying party shall keep
the Indemnified Party fully apprised at all times as to the status
of the defense or any settlement negotiations with respect thereto.
If the indemnifying party elects to defend any such action or
claim, then the Indemnified Party shall be entitled to participate
in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding effected without its
prior written consent, provided, however, that the indemnifying
party shall be liable for any settlement if the indemnifying party
is advised of the settlement but fails to respond to the settlement
within thirty (30) days of receipt of such notification.
Notwithstanding anything in this Article IV to the contrary, the
indemnifying party shall not, without the Indemnified Party’s
prior written consent, settle or compromise any claim or consent to
entry of any judgment in respect thereof which imposes any future
obligation on the Indemnified Party or which does not include, as
an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability
in respect of such claim. The indemnity agreements contained herein
shall be in addition to (a) any cause of action or similar rights
of the Indemnified Party against the indemnifying party or others,
and (b) any liabilities the indemnifying party may be subject to
pursuant to the law.
ARTICLE
V
Section
5.1 Fees and Expenses. Except as
otherwise set forth in this Agreement and the other Transaction
Documents, each party shall pay the fees and expenses of its
advisors, counsel, accountants and other experts, if any, and all
other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this
Agreement.
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Section
5.2 Consent to Jurisdiction. Each
of the Company and the Subscribers (i) hereby irrevocably submits
to the exclusive jurisdiction of the United States District Court
sitting in the Southern District of New York and the courts of the
State of New York located in New York county for the purposes of
any suit, action or proceeding arising out of or relating to this
Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby and (ii) hereby waives,
and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or
proceeding is improper. Each of the Company and the Subscribers
consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such
party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this
Section 5.2 shall affect or limit any right to serve process in any
other manner permitted by law. Each party hereby irrevocably waives
personal service of process and consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
Section
5.3 Entire Agreement; Amendment.
This Agreement, the Memorandum and the other Transaction Documents
contains the entire understanding and agreement of the parties with
respect to the matters covered hereby and, except as specifically
set forth herein or in the Transaction Documents and the
Memorandum, neither the Company nor any of the Subscribers makes
any representations, warranty, covenant or undertaking with respect
to such matters and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are
merged herein. No provision of this Agreement nor any of the
Transaction Documents may be waived or amended other than by a
written instrument signed by the Company and the holders of over
fifty percent (50%) of the aggregate number of Shares and
Conversion Shares issued or issuable upon conversion of the
Preferred Shares then outstanding (the “Majority Holders”). No such
amendment shall be effective to the extent that it applies to less
than all of the holders of the Shares, Preferred Shares and
Conversion Shares then outstanding. No consideration shall be
offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents
unless the same consideration is also offered to all of the parties
to the Transaction Documents.
Section
5.4 Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via electronic mail or
“Email” at the Email address set forth on the signature
pages attached hereto at or prior to 5:30 p.m. (New York City time)
on a Trading Day (defined below), (b) the next Trading Day after
the date of transmission, if such notice or communication is
delivered via Email at the Email address set forth on the signature
pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the
second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the
signature pages attached hereto. For purposes hereof,
“Trading Day”
means a day on which the OTCQB is open for trading.
Section
5.5 Waivers. No waiver by any party
of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any other provisions, condition
or requirement hereof, nor shall any delay or omission of any party
to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
-15-
Section
5.6 Headings. The section headings
contained in this Agreement (including, without limitation, section
headings and headings in the exhibits and schedules) are inserted
for reference purposes only and shall not affect in any way the
meaning, construction or interpretation of this Agreement. Any
reference to the masculine, feminine, or neuter gender shall be a
reference to such other gender as is appropriate. References to the
singular shall include the plural and vice versa.
Section
5.7 Successors and Assigns. This
Agreement may not be assigned by a party hereto without the prior
written consent of the Company or the Subscribers, as applicable,
provided,
however, that,
subject to federal and state securities laws and as otherwise
provided in the Transaction Documents, a Subscriber may assign its
rights and delegate its duties hereunder in whole or in part (i) to
a third party acquiring all or substantially all of its shares of
Common Stock or Warrants in a private transaction or (ii) to an
affiliate, in each case, without the prior written consent of the
Company or the other Subscribers, after notice duly given by such
Subscriber to the Company provided, that no such
assignment or obligation shall affect the obligations of such
Subscriber hereunder and that such assignee agrees in writing to be
bound, with respect to the transferred securities, by the
provisions hereof that apply to the Subscribers. The provisions of
this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
Section
5.8 No Third Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other person.
Section
5.9 Governing Law. This Agreement
shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the
conflicts of law principles which would result in the application
of the substantive law of another jurisdiction. This Agreement
shall not be interpreted or construed with any presumption against
the party causing this Agreement to be drafted.
Section
5.10 Survival. The representations
and warranties of the Company and the Subscribers shall survive the
execution and delivery hereof and the Closing hereunder for a
period of one (1) year following the Closing Date.
Section
5.11 Counterparts. This Agreement
may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement and
shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being
understood that all parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.
Section
5.12 Publicity. The Company agrees
that it will not disclose, and will not include in any public
announcement, the name of the Subscribers without the consent of
the Subscribers unless and until such disclosure is required by law
or applicable regulation, and then only to the extent of such
requirement.
Section
5.13 Severability. The provisions of
this Agreement and the Transaction Documents are severable and, in
the event that any court of competent jurisdiction shall determine
that any one or more of the provisions or part of the provisions
contained in this Agreement or the Transaction Documents shall, for
any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not
affect any other provision or part of a provision of this Agreement
or the Transaction Documents and such provision shall be reformed
and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been
contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
-16-
Section
5.14 Further Assurances. From and
after the date of this Agreement, upon the request of any
Subscriber or the Company, each of the Company and the Subscribers
shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this
Agreement, the Shares, the Preferred Shares, the Conversion Shares,
the Warrants, the Warrant Shares, the Registration Rights Agreement
and the other Transaction Documents.
[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]
-17-
IN
WITNESS WHEREOF, the parties hereto have caused this Subscription
Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
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By:__________________________________________
Name:
Title:
Address for Notice:
00 Xxxxxxx Xxx., 0xx
Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, CEO; or
Xxxxxx Xxxxxxxxxxxx, Vice President, Finance
Telephone No.: (000) 000-0000
Facsimile No. (000) 000-0000
Email: xxxxxxxxx@xxxxxxxx.xxx and xxxxxxxxxxxxx@xxxxxxxx.xxx
With a
copy to (which shall not constitute notice):
|
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Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
Email: xxxxxxx@xxxx.xxx
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[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR SUBSCRIBERS FOLLOWS]
-18-
SUBSCRIBER
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
IN
WITNESS WHEREOF, the undersigned have caused this Subscription
Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of
Subscriber: ________________________
Signature of Authorized Signatory of
Subscriber: ________________________
Name of
Authorized Signatory: ________________________
Title
of Authorized Signatory: ________________________
Email
Address of Authorized Signatory:
________________________
Phone
Number of Authorized Signatory:
________________________
Facsimile Number of
Authorized Signatory: ______________________
__
Address
for Notice to Subscriber:
________________________
________________________
________________________
Address
for Delivery of Securities to Subscriber (if not same as address
for notice):
________________________
________________________
________________________
Subscription
Proceeds (Number of Units Subscribed For x Purchase Price of
$10,000): $__________
Shares
to be Issued to Subscriber (Number of Units Subscribed For x
5,000): __________
And/or
Preferred Shares to be Issued to Subscriber (Number of Units
Subscribed For x 500): _________
Warrant
to be Issued to Subscriber (Number of Units Subscribed For x
2,500): __________
Subscriber’s
Tax I.D. or Social Security Number: __________
-19-
EXHIBIT A
TO THE SUBSCRIPTION AGREEMENT
FORM OF SERIES A-2 CERTIFICATE OF DESIGNATION
A-1
EXHIBIT B
TO THE SUBSCRIPTION AGREEMENT
ESCROW WIRE INSTRUCTIONS
B-2
COMPANY
DISCLOSURE SCHEDULE
Schedule
2.1(g) and Schedule 2.1(h)
The
Company currently anticipates that its cash and cash equivalents
will be sufficient to fund its operations through February 2017,
without raising additional capital in this offering or another
similar offering. While the Company is seeking to raise additional
capital, the Company is actively pursuing a strategic alliance,
joint venture, business combination or other similar transaction
with various third parties. However, the Company may not be
able to complete such a transaction in the timely manner that is
required by it in light of its current cash needs. In the event the
Company does not timely obtain necessary equity and/or debt
financing to continue its operations, or it is unable to timely
consummate a strategic alliance, joint venture, business
combination or other similar type of transaction, it will be forced
to cease operations.