Exhibit 10.1

 

Neuralstem, Inc.

20271 Goldenrod Lane, 2nd Floor

Germantown, Maryland 20876

 

March 20, 2017

 

Sabby Healthcare Master Fund, Ltd.

Sabby Volatility Warrant Master Fund, Ltd.

c/o Sabby Management, LLC

10 Mountain view Road #205

Upper Saddle River, New Jersey 07458

 

RE: Letter Agreement

 

Dear Sirs:

We are advised that Sabby Healthcare Master Fund, Ltd. (“Sabby Health”) and
Sabby Volatility Warrant Master Fund, Ltd. (“Sabby Volatility”) (collectively
"Sabby Entities") are the record and beneficial owners of Neuralstem, Inc.
(“Neuralstem”) common stock purchase warrants (“Warrants”) entitling the Sabby
Entities to purchase an aggregate of 692,309 shares (9,000,000 shares prior to
the 1-for-13 reverse stock split effective January 6, 2017) of Neuralstem’s
common stock, $0.01 par value, as follows:

 

Warrant Holder Grant
Date Expiration
Date Number of
Shares
(pre-
reverse
stock split) Number of
Shares
(post
reverse
stock split) Issuance
Exercise
Price (pre-
reverse
stock split) Current
Exercise
Price (post
reverse
stock split,
other
adjustments) Sabby Healthcare Master Fund, Ltd. 5/6/2016 5/6/2021 6,000,000
461,539 $0.40 $3.25 Sabby Volatility Warrant Master Fund, Ltd. 5/6/2016 5/6/2021
3,000,000 230,770 $0.40 $3.25

  

 

You have indicated your desire to assist Neuralstem with its current capital
needs by waiving your ability to benefit from the remaining balance of the
current term of the Warrants, and instead exercising your Warrants in full for
cash provided that Neuralstem issues to Sabby Health and Sabby Volatility, as
applicable, as an inducement to exercise the Warrants, one (1) inducement
warrant (“Inducement Warrant(s)”) for every three (3) Warrants exercised for
cash. Each Inducement Warrant shall (i) have an issuance date of March 20, 2017,
(ii) a term of one (1) year, and (iii) have an exercise price equal to $5.80
(the closing price of Neuralstem’s common stock on March 17, 2017). The
Inducement Warrants contain provisions providing for an adjustment in the
underlying number of shares and exercise price in the event of stock splits or
dividends, subsequent rights offerings, pro rata distributions, and fundamental
transactions. Furthermore, in the event that the shares underlying the
Inducement Warrants (“Inducement Warrant Shares”) are not subject to an
effective registration statement at the time of exercise, the Inducement
Warrants may be exercised on a cashless basis after six (6) months from the
issuance date. The form of Inducement Warrant is attached hereto this agreement
as Exhibit A.

The Sabby Entities have until the Inducement Deadline (as defined below) to
exercise all 692,309 Warrants.

The Company shall file a resale registration statement for the resale of the
Inducement Warrant Shares and have it go effective prior to the release of Phase
II data related to the Company’s current clinical trial for NSI-189.  In the
event the registration statement covering the Inducement Warrant Shares is not
effective by such time, the company shall pay the undersigned holders, in cash,
as liquidated damages and not as a penalty, an amount equal to 2% per month for
each 30 day period (pro rata on a daily basis if less than 30 days) that the
registration statement is not declared effective within the time period set
forth above.

Except as expressly stated herein, this agreement is not a waiver of any
provision of the Warrants. The Inducement Warrant will be mailed within three
(3) business days of the receipt of the cash proceeds upon the exercise of the
Warrants.

Wiring instructions for payments upon the exercise of the Warrants are annexed
hereto.

Additionally, the parties hereby agree to their respective representations,
warranties and covenants set forth on Annex A attached hereto. Any term not
defined herein shall have the definition ascribed to it in the Inducement
Warrant.

From the date hereof until 5 Trading Days after the date hereof neither the
Company nor any Subsidiary shall issue, enter into any agreement to issue or
announce the issuance or proposed issuance of any shares of Common Stock or
Common Stock Equivalents. Notwithstanding the foregoing, this provision shall
not apply in respect of an Exempt Issuance. “Exempt Issuance” means the issuance
of (a) shares of Common Stock or options to employees, officers,  directors or
consultants (provided that aggregate grants to consultants cannot exceed 500,000
shares of Common Stock or Common Stock Equivalents (as defined in the Inducement
Warrant) in any 12 calendar months and that the Common Stock and Common Stock
underlying any Common Stock Equivalent is not registered pursuant to the
Securities Act) of the Company pursuant to any stock or option plan duly adopted
for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors

  

 

established for such purpose for services rendered to the Company, (b)
securities upon the exercise or exchange of or conversion of any Securities
issued hereunder and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise price, exchange price or conversion price of such securities (other
than in connection with stock splits or combinations) or to extend the term of
such securities, and (c) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors of the
Company, provided that any such issuance shall only be to a Person (or to the
equity holders of a Person) which is, itself or through its subsidiaries, an
operating company or an owner of an asset in a business synergistic with the
business of the Company and shall provide to the Company additional benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities. For
purposes of the Warrant and Underwriter 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.

The Company has not offered, and, provided Notices of Exercise have been
delivered as to all Warrants on or before the Inducement Deadline, will not
offer, any terms or consideration to any holder of other Common Stock purchase
warrants issued with, or of the same series as, or pursuant to the Underwriting
Agreement (as defined in Annex A) the Warrants, which terms and conditions are
more favorable to any such holders than the terms of this letter agreement. The
determination of whether such terms or consideration are more favorable to
another holder shall be in the sole discretion of the Sabby Entities.

The Company shall file a Current Report on Form 8-K with the Commission prior to
9 am ET on March 20, 2017 disclosing the material terms of this letter
agreement.

The Company represents, warrants and covenants that, upon acceptance of this
offer, the shares underlying the Warrants shall be issued free of any legends or
restrictions on resale by Holder and all of the Warrant Shares shall be
delivered electronically through the Depository Trust Company within 1 business
day of the date the Company receives the Warrants Exercise Price (or, with
respect to shares in that would otherwise be in excess of the Beneficial
Ownership Limitation, within 2 business days of the date the Company is notified
by Holder that its ownership is less than the Beneficial Ownership Limitation).
The terms of the Warrants, including but not limited to the obligations to
deliver the Warrant Shares, shall otherwise remain in effect as if the
acceptance of this offer were a formal Notice of Exercise (including but not
limited to any liquidated damages and compensation in the event of late delivery
of the Warrant Shares).

This offer will expire at 12:00 pm ET on Tuesday March 21, 2017 (“Inducement
Deadline”).

 

[SIGNATURE PAGE TO FOLLOW]

  

 

IN WITNESS WHEREOF, each of the parties hereto have executed this agreement as
of March 19, 2017.

  COMPANY:       NEURALSTEM, INC.       By:  ___________________________________
  Name: Richard Daly   Title:  Chief Executive Officer           SABBY ENTITIES:
      SABBY HEALTHCARE MASTER FUND, LTD.              
By:  ___________________________________   Name:     Title:       SABBY
VOLATILITY WARRANT MASTER FUND, LTD.              
By:  ___________________________________   Name:     Title:

  

 

SCHEDULE A

 

WIRING INSTRUCTIONS

 

 

 

 

 

 

  

 

EXHIBIT A

FORM OF INDUCEMENT WARRANT

 

 

 

 

 

 

  

 

Annex A

 

Representations, Warranties and Covenants of the Company. The Company hereby
makes the following representations and warranties to the undersigned:

(a)             Affirmation of Prior Representations, Warranties and Covenants.
The Company hereby represents and warrants to the undersigned that the Company’s
representations and warranties as set forth in Section 3 of the Underwriter
Agreement, dated as of May 3, 2016 (the “Underwriter Agreement”), together with
any updates in the Company’s SEC Reports subsequent to the Underwriter
Agreement, are true and correct as of the date hereof and have been fully
performed as of the date hereof. Capitalized terms not otherwise defined herein
shall have the meanings set forth in the Underwriter Agreement and Inducement
Warrant.

(b)            Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this letter agreement and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of this letter agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, its board of directors
or its stockholders in connection therewith. This letter agreement has been duly
executed by the Company and, when delivered in accordance with the terms hereof,
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.

(c)             No Conflicts. The execution, delivery and performance of this
letter agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not: (i) conflict with or
violate any provision of the Company’s certificate or articles of incorporation,
bylaws or other organizational or charter documents; or (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 in connection with, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any material agreement, credit
facility, debt or other material instrument (evidencing Company debt or
otherwise) or other material understanding to which such Company is a party or
by which any property or asset of the Company is bound or affected; or (iii)
subject to any 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 is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company 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 (as defined in the Purchase Agreement).

  

 

(d)            Issuance of the Inducement Warrant. The issuance of the
Inducement Warrant is duly authorized and, upon the execution of this letter
agreement by the undersigned, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens imposed by the Company. The shares
issuable upon exercise of the Inducement Warrant (“the Inducement Warrant
Shares”), when issued in accordance with the terms of the Inducement Warrant,
will be validly issued, fully paid and nonassessable, free and clear of all
Liens imposed by the Company. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance of the Inducement
Warrant Shares in full.

(e)             Equal Consideration. Except as set forth in this letter
agreement, no consideration has been offered or paid to any person to amend or
consent to a waiver, modification, forbearance or otherwise of any provision of
any of the Underwriter Agreement or the Warrants.

(f)             Legends. Transfer Restrictions.

(i)              The Inducement Warrant and Inducement Warrant Shares may only
be disposed of in compliance with state and federal securities laws. In
connection with any transfer of Inducement Warrant or Inducement Warrant Shares
other than pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of a undersigned 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 Inducement Warrant
and Inducement Warrant Shares under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by the terms of
this letter agreement.

(ii)            The undersigned agrees to the imprinting, so long as is required
by this Section (i), of a legend on any of the Inducement Warrant and Inducement
Warrant Shares 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.

  

 

The Company acknowledges and agrees that a undersigned 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 Inducement Warrant 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
letter agreement and, if required under the terms of such arrangement, the
undersigned may transfer pledged or secured Inducement Warrant 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 undersigned’s expense, the
Company will execute and deliver such reasonable documentation as a pledgee or
secured party of Inducement Warrant may reasonably request in connection with a
pledge or transfer of the Inducement Warrant or Inducement Warrant Shares.

(iii)          Certificates evidencing the Inducement Warrant Shares shall not
contain any legend (including the legend set forth in Section (f)(ii) hereof),
(i) while a registration statement covering the resale of such security is
effective under the Securities Act, (ii) following any sale of such Inducement
Warrant Shares pursuant to Rule 144, (iii) if such Inducement 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
if required by the transfer agent to effect the removal of the legend hereunder.
If all or any portion of a Inducement Warrant is exercised at a time when there
is an effective registration statement to cover the resale of the Inducement
Warrant Shares, or if such Inducement 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 Inducement 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 Inducement 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 Inducement Warrant Shares shall
be issued free of all legends. The Company agrees that following such time as
such legend is no longer required under this Section (f), it will, no later than
three Trading

  

 

Days following the delivery by a undersigned to the Company (or its transfer
agent) of a certificate representing Inducement Warrant Shares, as the case may
be, issued with a restrictive legend (such third Trading Day, the “Legend
Removal Date”), deliver or cause to be delivered to the undersigned 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 Inducement Warrant Shares subject to
legend removal hereunder shall be transmitted by the Transfer Agent to the
undersigned by crediting the account of the undersigned’s prime broker with the
Depository Trust Company System as directed by the undersigned.

(iv)          In addition to such undersigned’s other available remedies, the
Company shall pay to an undersigned, in cash, (i) as partial liquidated damages
and not as a penalty, for each $1,000 of Inducement Warrant Shares (based on the
VWAP of the Common Stock on the date such Securities are submitted to the
Transfer Agent) delivered for removal of the restrictive legend and subject to
Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5)
Trading Days after such damages have begun to accrue) for each Trading Day after
the Legend Removal Date until such certificate is delivered without a legend and
(ii) if the Company fails to (a) issue and deliver (or cause to be delivered) to
a undersigned by the Legend Removal Date a certificate representing the
Securities so delivered to the Company by such undersigned that is free from all
restrictive and other legends and (b) if after the Legend Removal Date such
undersigned purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such undersigned 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 undersigned anticipated receiving from the Company
without any restrictive legend, then, an amount equal to the excess of such
undersigned’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 Inducement Warrant Shares
that the Company was required to deliver to such undersigned 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 undersigned to the Company of the applicable Inducement Warrant Shares (as
the case may be) and ending on the date of such delivery and payment under this
clause (ii).

  

 

(g)            Public Information Failure. At any time during the period
commencing from the six (6) month anniversary of the date hereof and ending at
such time that all of the Inducement Warrant Shares may be sold without the
requirement for the Company to be in compliance with Rule 144(c)(1) and
otherwise without restriction or limitation pursuant to Rule 144, if the Company
(i) shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) or (ii) has ever been an issuer described in Rule
144(i)(1)(i) or becomes an issuer in the future, and the Company shall fail to
satisfy any condition set forth in Rule 144(i)(2) (a “Public Information
Failure”) then, in addition to the undersigned’s other available remedies, the
Company shall pay to the undersigned, in cash, as partial liquidated damages and
not as a penalty, by reason of any such delay in or reduction of its ability to
sell the Inducement Warrant Shares, an amount in cash equal to two percent
(2.0%) of the aggregate Exercise Price of the Inducement Warrant of the
undersigned’s Securities on the day of a Public Information Failure and on every
thirtieth (30th) day (pro-rated for periods totaling less than thirty days)
thereafter until the earlier of (a) the date such Public Information Failure is
cured and (b) such time that such public information is no longer required  for
the undersigned to transfer the Inducement Warrant Shares pursuant to Rule 144. 
The payments to which the undersigned shall be entitled pursuant to this Section
(g) are referred to herein as “Public Information Failure Payments.”  Public
Information Failure Payments shall be paid on the earlier of (i) the last day of
the calendar month during which such Public Information Failure Payments are
incurred and (ii) the third (3rd) Business Day after the event or failure giving
rise to the Public Information Failure Payments is cured.  In the event the
Company fails to make Public Information Failure Payments in a timely manner,
such Public Information Failure Payments shall bear interest at the rate of 1.5%
per month (prorated for partial months) until paid in full. Nothing herein shall
limit the undersigned’s right to pursue actual damages for the Public
Information Failure, and the undersigned shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.

(h)            Listing of Common Stock. The Company shall apply to list or quote
all of the Inducement Warrant Shares on the Trading Market and promptly secure
the listing of all of the Inducement Warrant Shares on such Trading Market.

Representations, Warranties and Covenants of the undersigned. The undersigned
hereby represents, warrants and covenants as of the date hereof to the Company
as follows (unless as of a specific date therein, in which case they shall be
accurate as of such date):

(a)             Own Account. The undersigned understands that the Inducement
Warrant is a “restricted security” and has not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Inducement Warrant as principal for its own account and not with a view to or
for distributing or reselling such Inducement Warrant 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 Inducement Warrant or Inducement
Warrant Shares 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 Inducement
Warrant in violation of the Securities Act or any applicable state securities
law. The undersigned is acquiring the Inducement Warrant hereunder in the
ordinary course of its business.

(b)             Status. At the time the undersigned was offered the Inducement
Warrant, it was, and as of the date hereof it is, and on each date on which it
exercises any Inducement Warrant, 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.

  

 

(c)             Experience of the undersigned. The undersigned, 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 Inducement Warrant,
and has so evaluated the merits and risks of such investment. The undersigned is
able to bear the economic risk of an investment in the Inducement Warrant and,
at the present time, is able to afford a complete loss of such investment.