METASTAT, INC. FIRST AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF PREFERENCES, RIGHTS AND LIMITATIONS OF SERIES B CONVERTIBLE PREFERRED STOCK

       The undersigned, the Chief Executive Officer of MetaStat, Inc., a Nevada corporation (the “Corporation”), in accordance with the provisions of the Nevada Revised Statutes, does hereby certify:

 

       That pursuant to the authority conferred upon the Board of Directors by the Articles of Incorporation of the Corporation, a series of preferred stock, par value $0.0001 per share, designated as “Series B Convertible Preferred Stock” and consisting of One Thousand (1,000) shares, was created on December 31, 2014 by means of the filing of a Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock of the Corporation (the “Certificate of Designation”) with the Secretary of State of the State of Nevada;

 

       That this First Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock of the Corporation was duly approved by the Corporation’s Board of Directors in accordance with the provisions of Section 78.195 of the Nevada Revised Statutes and by the requisite holders of the Corporation’s Series B Convertible Preferred Stock in accordance with the Certificate of Designation; and

 

       That this First Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock of the Corporation hereby amends and restates the provisions of the Certificate of Designation in full to read in its entirety as follows:

       NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of Series B Convertible Preferred Stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of Series B Convertible Preferred Stock as follows:

 

                 “Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 50% of the voting securities of the Corporation, or (b) a replacement at one time or within a one year period of more than one-half of the members of the Corporation's board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (c) the execution by the Corporation of an agreement to which the Corporation  is a party or by which it is bound, providing for any of the events set forth above in (a) or (b).

 

“Common Stock" means the Corporation's common stock, par value $0.0001 per share, and stock of any other class into which such shares may hereafter have been reclassified or changed.

“Conversion Shares” shall have the meaning given such term is Section 5(c)(i) hereof.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

                                     “Holder” shall have the meaning given such term in Section 2 hereof.

                 “Issuance Date” means the initial issuance date of the Series B Preferred Stock pursuant to the Purchase Agreement.

 

“Person” means a corporation, an association, a partnership, an organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

“Purchase Agreement” means the Amended and Restated Securities Purchase Agreement, dated March 27, 2015, by and among the Corporation and the purchasers named therein.

 

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

 

                 “Trading Day” means a day on which the principal Trading Market is open for trading; provided, that in the event that the Common Stock is not listed or quoted on a Trading Market, then Trading Day shall mean a Business Day.

 

                 “Trading Market” means whichever of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question:  the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the OTC Bulletin Board or any tier of the OTC Markets Group, Inc.  (or any successors to any of the foregoing).

 

Section 2.       Designation and Amount; Rank; and Dividends.

 

           a)            Designation and Amount.  The series of preferred stock shall be designated as its Series B Convertible Preferred Stock (the “Series B Preferred Stock”) and the number of shares so designated shall be one thousand (1,000) shares (which shall not be subject to increase without the consent of a majority of the holders of the Series B Preferred Stock (each, a “Holder” and collectively, the “Holders”). Each share of Series B Preferred Stock shall have a stated value equal to $5,500 (as may be adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Stated Value”). Capitalized terms not otherwise defined herein shall have the meaning given such terms in Section 1 hereof.

 

           b)            Rank.  All shares of the Series B Preferred Stock shall rank (i) senior to the Corporation’s Common Stock, Series A Convertible Preferred Stock, and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series B Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series B Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary

           c)            Dividends.  The Corporation shall pay to the holders of the Series B Preferred Stock dividends from net profits or net assets of the Corporation legally available for the payment of such dividends, which shall begin to accrue on and be cumulative from the date of issuance of the Series B Preferred (whether or not such dividends have been declared) in an annual amount equal to the product of (x) the Stated Value of such Series B Preferred and (y) eight percent (8%) per annum (the “Dividend Amount”). The Dividend Amount shall be payable quarterly on March 31, June 30, September 30 and December 31 of each year, commencing on March 31, 2015, either in cash or in kind by issuance by the Corporation of additional shares of Series B Preferred (the “PIK Shares”) at the sole option of the Corporation.  In the event that the applicable Dividend Amount is not paid in cash within thirty (30) days of the relevant dividend payment date for such Dividend Amount (the “Dividend Payment Date”), the Corporation shall be deemed for all purposes to have elected to pay the relevant Dividend Amount in PIK Shares.  If the Corporation elects or is deemed to have elected to pay any Dividend Amount in PIK Shares, each Holder shall be deemed to be the Holder of record of such Holder’s pro rata share of the PIK Shares issuable with respect to the relevant Dividend Amount notwithstanding that the stock transfer books of the Corporation shall then be closed or that certificates evidencing such PIK Shares shall not have been actually delivered to such Holder. In the event that dividends on the Series B Preferred Stock are paid with PIK Shares, each such PIK Share (i) shall be valued at the Stated Value and (ii) shall have the same Stated Value as each share of Series B Preferred Stock with respect to which the PIK Share constituted a dividend.  No dividends shall be paid on any Common Stock of the Corporation or any capital stock of the Corporation that ranks junior to or on parity with the Series B Preferred Stock during any fiscal year of the Corporation until dividends in the aggregate Dividend Amount per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series B Preferred Stock for the current and each prior Dividend Payment Date shall have been paid or declared and set apart for payment to the Holders.

 

i.    The amount of dividends payable for any period shorter than a full year shall be determined on the basis of twelve 30-day months and a 360-day year.  Cash dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.

 

ii.    In the event that the Corporation shall at any time pay a dividend on the Common Stock, it shall, at the same time, pay to each Holder a dividend equal to the dividend that would have been payable to such Holder if the shares of Series B Preferred Stock held by such Holder had been converted into Common Stock on the date of determination of holders of Common Stock entitled to receive such dividends; and provided, further, that so long as any shares of the Series B Preferred Stock are outstanding, no dividends shall be declared or paid or set apart for payment on any other preferred stock of the Corporation of any series ranking, as to dividends, junior to or on a parity with the Series B Preferred, unless a dividend shall be paid at the same time to each holder of Series B Preferred, in an amount such that the holders of such other series of preferred stock, on the one hand, and the Holders, on the other, receive dividends in the same relative proportions that each would have received had all such shares of preferred stock been converted into Common Stock immediately prior to the declaration of a dividend on such preferred stock.

      a)           Subject to the limitations set forth in Section 7 herein, the holder of each share of Series B Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Series B Preferred Stock could be converted for purposes of determining the shares entitled to vote at any regular, annual or special meeting of stockholders of the Corporation, and shall have voting rights and powers equal to the voting rights and powers of the Common Stock (except as otherwise expressly provided herein or as required by law, voting together with the Common Stock as a single class) and shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Corporation. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Series B Preferred Stock held by each Holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

 

      b)           So long as at least twenty five percent (25%) of the shares of Series B Preferred Stock issued pursuant to the Purchase Agreement remain outstanding, the Corporation shall not, without the affirmative vote or consent of the Holders of at least a majority of the Series B Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting, in which the Holders of the Series B Preferred Stock vote separately as a class: (i) authorize, create, issue, increase or decrease the authorized or issued amount of any class or series of stock, including but not limited to the issuance of any more shares of preferred stock, ranking pari passu or senior to the Series B Preferred Stock, with respect to maturity dates, dividend payments, redemption features or distribution of assets on liquidation, dissolution or winding up; (ii) amend, alter or repeal the provisions of the Series B Preferred Stock, whether by merger, consolidation or otherwise, so as to adversely affect any right, preference, privilege or voting power of the Series B Preferred Stock; (iii) amend the Articles of Incorporation or By-Laws of the Corporation so as to affect materially and adversely any right, preference, privilege or voting power of the Series B Preferred Stock or (iv) enter into any agreement with respect to the foregoing.

Section 4.        Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets of the Corporation, whether such assets are capital or surplus, for each share of Series B Preferred Stock an amount equal to its Stated Value plus any accrued but unpaid dividends (the “Liquidation Preference”) before any distribution or payment shall be made to the holders of any other class or series of stock of the Corporation, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be distributed among the Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A Change of Control Transaction shall be treated as a Liquidation. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each record Holder and the Holders shall be entitled to convert their shares of Series B Preferred Stock into Common Stock pursuant to Section 5 hereof at any time prior to the consummation of a Liquidation.

           a)            Conversions at Option of Holder. The Holder of any share or shares of Series B Preferred Stock shall have the right, at its option at any time, to convert any such shares of Series B Preferred Stock into such number of fully paid and nonassessable whole shares of Common Stock as is obtained by multiplying (i) the number of shares of Series B Preferred Stock so to be converted by (ii) the Liquidation Preference per share and dividing the result by the conversion price of $0.55 per share or, if there has been an adjustment of the conversion price, by the conversion price as last adjusted and in effect at the date any share or shares of Series B Preferred are surrendered for conversion (such price, or such price as last adjusted, being referred to herein as the “Conversion Price”).  Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”). Each Notice of Conversion shall specify the number of shares of Series B Preferred Stock to be converted, the number of shares of Series B Preferred Stock owned prior to the conversion at issue, the number of shares of Series B Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Notice of Conversion to the Corporation by facsimile or electronic mail (email) (the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error.  To effect conversions, as the case may be, of shares of Series B Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing such shares of Series B Preferred Stock to the Corporation unless all of the shares of Series B Preferred Stock represented thereby are so converted, in which case the Holder shall deliver the certificate representing such shares of Series B Preferred Stock promptly following the Conversion Date at issue.  Shares of Series B Preferred Stock converted or redeemed in accordance with the terms hereof shall be canceled and may not be reissued.

 

           b)            Mandatory Conversion. Subject to the limitations set forth in Section 7(b) hereof, each share of Series B Preferred Stock shall be converted, automatically and without further action on the part of any person or the Corporation, into such number of fully paid and nonassessable whole shares of Common Stock as is obtained by dividing (i) the  Liquidation Preference per share of Series B Preferred Stock by (ii) the Conversion Price at such time when the Corporation provides written notice to each holder of Series B Preferred Stock certifying that Corporation’s Common Stock has been listed on a national stock exchange such as the NASDAQ, New York Stock Exchange or NYSE MKT. Holders of shares of the Series B Preferred Stock so converted may deliver to the Corporation at its executive office, or to the Corporation’s transfer agent, as applicable, the certificate or certificates for the Series B Preferred Stock so converted. As promptly as practicable thereafter, the Corporation shall issue, or shall cause its transfer agent to issue and deliver to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled. Until such time as a holder of shares of the Series B Preferred Stock shall surrender its certificates therefor as provided above, such certificates shall be deemed to represent the shares of Common Stock issuable pursuant to this Section 5(b).   Notwithstanding the foregoing to the contrary, a registration statement providing for the resale of the Conversion Shares shall be in effect prior to any mandatory conversion pursuant to this Section 5(b).

            a)            Most Favored Nation.  For a period of up to 30 months after March 31, 2015, if the Corporation issues or sells, agrees to issue or sell, or is deemed to have issued or sold, any New Securities (as defined below) in a private placement or public offering (a “Subsequent Financing”), the Holders of Series B Preferred Stock may exchange all of the Series B Preferred Stock at the Liquidation Preference plus all Series A Warrants issued to the Holders of Series B Preferred Stock in the Offering for the securities issued in the Subsequent Financing on the same terms of such Subsequent Financing.  Notwithstanding the foregoing to the contrary, such Holders of Series B Preferred Stock shall maintain the rights contained in this Section 8(a) during such 30-month period notwithstanding any prior exercise of the rights contained herein.  This right shall expire upon the earlier of (i) September 30, 2017 and (ii) the consummation of a bona fide underwritten public offering in which the Corporation receives aggregate gross proceeds of at least $5,000,000.  As used herein, “New Securities” means shares of the Common Stock, any other securities, options, warrants or other rights where upon exercise or conversion the purchaser or recipient receives shares of the Common Stock, or other securities with similar rights to the Common Stock, except for Excluded Stock.

 

            b) Notices.  Any and all notices or other communications or deliveries to be provided by the Holders hereunder, including, without limitation, any Notice of Conversion, shall  be  in  writing  and  delivered  personally,  by  facsimile,  by electronic mail (email) or sent  by  a nationally recognized overnight courier service, addressed to the Corporation.  Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, electronic mail (email), or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile telephone number, electronic mail (email) address or address of such Holder appearing on the books of the Corporation, or if no such facsimile telephone number, electronic mail (email) address, or address appears, at the principal place of business of the Holder.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified, or electronic mail (email) at the electronic mail (email) address specified in this Section prior to 5:30 p.m. (New York City time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified or electronic mail (email) at the electronic mail (email) address specified in this Section later than 5:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given

 

            c)        Lost or Mutilated Series B Preferred Stock Certificate.   If a Holder’s Series B Preferred Stock  certificate shall  be  mutilated,  lost,  stolen  or  destroyed,  the  Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series B Preferred Stock so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Corporation.

            d)        Transfer and Assignment.  The rights of each Holder hereunder shall be automatically assignable by each Holder to any Person (other than a known competitor of the Corporation) of all or a portion of the Series B Preferred Stock if: (i) the Holder agrees in writing  with  the  transferee  or  assignee  to  assign  such  rights,  and  a  copy  of  such agreement is furnished to the Corporation within a reasonable time after such assignment, (ii) the Corporation is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and  (b)  the  number  of  shares  of  Preferred  Stock  with  respect  to  which  are  being transferred or assigned, and (iii) following such transfer or assignment the further disposition of such Series B Preferred Stock is restricted under the Securities Act and applicable state securities laws.  The rights to transfer and assign the Series B Preferred Stock shall apply to the Holders (and to subsequent) successors and assigns.

 

            e)        Waiver.  Any waiver by the Corporation or the Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation.   The failure of the Corporation or the Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation. Any waiver must be in writing.

 

            f)         Severability.  If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest.

 

            g)        Next Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

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