Exhibit 10.01

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of September
7, 2016, between Neuralstem, Inc., a Delaware corporation (the “Company”), and
the purchaser identified on the signature pages hereto (including its successors
and assigns, a “Purchaser”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to Purchaser, and Purchaser, desires to purchase from the
Company, securities of the Company as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and Purchaser agree as
follows:

 

ARTICLE I.

DEFINITIONS

 

1.1                Definitions. In addition to the terms defined elsewhere in
this Agreement: (a) capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Certificate of Designation (as defined
herein), and (b) the following terms have the meanings set forth in this Section
1.1:

 

“2019 Annual Meeting” shall have the meaning ascribed to such term in Section
4.3

 

“AAA” shall have the meaning ascribed to such term in Section 5.8.

 

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

 

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

 

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

 

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

 

“Certificate of Designation” means the Certificate of Designation to be filed
prior to the Closing by the Company with the Secretary of State of Delaware, in
the form of Exhibit A attached hereto.

 

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

 

“Closing Date” means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchaser’s obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities, in each
case, have been satisfied or waived.

 

“Commercial Rules” shall have the meaning ascribed to such term in Section 5.8.

 

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

 

“Common Stock” means the common stock of the Company, par value $0.01 per share,
and any other class of securities into which such securities may hereafter be
reclassified or changed.

 

 

 

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

 

“Company Counsel” means the Silvestre Law Group, P.C., with offices located at
31200 Via Colinas, Suite 200, Westlake Village, CA 91362.

 

“Conversion Price” shall have the meaning ascribed to such term in the
Certificate of Designation.

 

“Conversion Shares” shall have the meaning ascribed to such term in the
Certificate of Designation.

 

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

 

“Disqualification Event: shall have the meaning ascribed to such term in Section
3.1(ee).

 

“Environmental Laws” shall have the meaning ascribed to such term in Section
3.1(l).

 

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

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

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

 

“Governmental Authority” means any transnational, domestic or foreign federal,
state or local governmental, regulatory or administrative authority, department,
court, agency or official, including any political subdivision thereof.”

 

“Hazardous Materials” shall have the meaning ascribed to such term in Section
3.1(l).

 

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

 

“Issuer Covered Person(s)” shall have the meaning ascribed to such term in
Section 3.1(ee).

 

“Knowledge of the Company” means the actual knowledge of the Company as opposed
to implied or ascertained knowledge.

 

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

 

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

 

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

 

“MOFCOM” means the Ministry of Commerce of the PRC or its competent local
counterparts.

 

“Money Laundering Laws” shall have the meaning ascribed to such term in Section
3.1(dd).

 

“NDRC” means the National Development and Reform Commission of the PRC or its
competent local counterparts.

 

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“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.

 

“PRC” means the People’s Republic of China.

 

“PRC Approvals” shall have the meaning ascribed to such term in Section 3.2(b)

 

“Preferred Stock” means 1,000,000 shares of the Company’s 4.50% Series A
Convertible Preferred Stock issued hereunder having the rights, preferences and
privileges set forth in the Certificate of Designation, in the form of Exhibit A
hereto.

 

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

 

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

 

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

 

“Required Minimum” means, as of any date, the maximum aggregate number of shares
of Common Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable upon
conversion in full of all shares of Preferred Stock, ignoring any conversion
limits set forth therein.

 

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

 

“SAFE” means the State Administration of Foreign Exchange of the PRC or its
competent local counterparts.

 

“SASAC” means State-owned Assets Supervision and Administration Commission of
the State Council of the PRC or its competent local counterparts.

 

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

 

“Securities” means the Common Stock, Preferred Stock, and the Underlying Shares.

 

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

 

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

 

“Standstill Period” shall have the meaning ascribed to such term in Section 4.3

 

“Stated Value” means $12.7895 per share of Preferred Stock.

 

“Subscription Amount” shall mean, the aggregate amount to be paid for the Common
Stock and Preferred Stock purchased hereunder as specified below Purchaser’s
name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
funds.

 

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

 

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

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange, OTCQB or OTCQX, or any other
inter-dealer quotation system (or any successors to any of the foregoing).

 

“Transaction Documents” means this Agreement, the Certificate of Designation,
all exhibits and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means American Stock Transfer & Trust Company, the current
transfer agent of the Company, with a mailing address of 59 Maiden Lane, New
York, NY 10038 and a phone number of (718) 921-8201, and any successor transfer
agent of the Company.

 

“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion or redemption of the Preferred Stock.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1                Closing. On the Closing Date, upon the terms and subject to
the conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and the Purchaser agrees to purchase, up to an aggregate of $20,000,000.00 of
securities of the Company including such number of shares of Common Stock at a
price per share of $0.253 and such number of shares of Preferred Stock with an
aggregate Stated Value equal to $12,789,500.00 as contained in Schedule A
hereto. The Purchaser shall deliver to the Company, via wire transfer,
immediately available funds equal to its Subscription Amount and the Company
shall deliver to Purchaser its respective shares of Common Stock and Preferred
Stock as determined pursuant to Section 2.2(a), and the Company and Purchaser
shall deliver the other items set forth in Section 2.2 deliverable at the
Closing. Upon satisfaction of the covenants and conditions set forth in Sections
2.2 and 2.3, the Closing shall occur at the offices of Company Counsel or such
other location as the parties shall mutually agree.

 

2.2                Deliveries.

 

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

 

(i)                 this Agreement duly executed by the Company; and

 

(ii)                 a certificate evidencing a number of shares of Common Stock
and Preferred Stock as contained in Schedule A hereto, registered in the name of
Purchaser and evidence of the filing and acceptance of the Certificate of
Designation from the Secretary of State of Delaware.

 

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

 

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(i)                 this Agreement duly executed by Purchaser; and

 

(ii)                 Purchaser’s Subscription Amount, by wire transfer to the
account specified in Exhibit B attached hereto.

 

2.3                Closing Conditions.

 

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

 

(i)                   the accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) on the Closing Date of the representations and
warranties of the Purchaser contained herein (unless as of a specific date
therein in which case they shall be accurate as of such date);

 

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

 

(iii)                the delivery by Purchaser of the items set forth in Section
2.2(b) of this Agreement; and

 

(iv)               The Securities shall have been approved for listing by the
applicable Trading Market.

 

(b)                 The obligations of the Purchaser hereunder in connection
with the Closing are subject to the following conditions being met;

 

(i)                   the accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) when made and on the Closing Date of the
representations and warranties of the Company contained herein (unless as of a
specific date therein);

 

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

 

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

 

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

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1                Representations and Warranties of the Company. Except as set
forth in the SEC Reports (as defined below) or in the Disclosure Schedules,
which such SEC Reports and Disclosure Schedules are deemed a part hereof and
shall qualify any representation or warranty otherwise made herein to the extent
of the disclosure contained in the SEC Reports or in the corresponding section
of the Disclosure Schedules, the Company hereby makes the following
representations and warranties to Purchaser:

 

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

 

(b)                 Organization and Qualification. The Company is an entity
duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, with
the requisite power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation nor default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents where such violation would result in a
Material Adverse Effect (as defined below). Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

 

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

 

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

 

6 

 

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

 

(f)                  Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents. The
Underlying Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents. The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock for issuance of the
Underlying Shares at least equal to the Required Minimum on the date hereof.

 

(g)                 Capitalization. Except as set forth in Schedule 3.1(g), the
capitalization of the Company is as set forth in the SEC Reports. Except as set
forth on Schedule 3.1(g), the Company has not issued any capital stock since its
most recently filed periodic report under the Exchange Act, other than pursuant
to the exercise of employee stock options under the Company’s stock option
plans, the issuance of shares of Common Stock to employees pursuant to the
Company’s employee stock purchase plans and pursuant to the conversion and/or
exercise of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act. All of the outstanding
shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder,
the Board of Directors or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital stock to which the
Company is a party or, to the Knowledge of the Company, between or among any of
the Company’s stockholders.

 

(h)                 SEC Reports; Financial Statements. Except as set forth in
the SEC Reports or on Schedule 3.1(h), the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, as well as any registration
statement filed pursuant to the Securities Act, are collectively referred to
herein as the “SEC Reports”). As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.

 

7 

 

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

 

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

 

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

 

(l)                   Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with all federal, state, local and foreign laws relating to
pollution or protection of human health or the environment (including ambient
air, surface water, groundwater, land surface or subsurface strata), including
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands, or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations, issued, entered, promulgated or approved thereunder (“Environmental
Laws”); (ii) have received all permits licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses;
and (iii) are in compliance with all terms and conditions of any such permit,
license or approval where in each clause (i), (ii) and (iii), the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

8 

 

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

 

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

 

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

 

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

 

9 

 

(q)                 Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports or as set forth on Schedule 3.1(q), none of the
officers or directors of the Company or any Subsidiary and, to the Knowledge of
the Company, none of the employees of the Company or any Subsidiary is presently
a party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors) that provides for the furnishing
of services to or by, providing for rental of real or personal property to or
from, providing for the borrowing of money from or lending of money to or
otherwise requiring payments by the Company to any officer, director or such
employee or, to the Knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee, stockholder, member or partner, in each case in excess of
$120,000 other than for: (i) payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock
option plan of the Company.

 

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

 

(s)                  Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall conduct its
business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.

 

(t)                  Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Company received any notification that the Commission
is contemplating terminating such registration. Except as set forth in the SEC
Reports, the Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Common Stock is
currently eligible for electronic transfer through the Depository Trust Company
or another established clearing corporation and the Company is current in
payment of the fees to the Depository Trust Company (or such other established
clearing corporation) in connection with such electronic transfer.

 

(u)                 No Integrated Offering. Assuming the accuracy of the
Purchaser’s representations and warranties set forth in Section 3.2, neither the
Company, nor any of its Affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of (i) the Securities Act which would require the
registration of any such securities under the Securities Act, or (ii) any
applicable shareholder approval provisions of any Trading Market on which any of
the securities of the Company are listed or designated.

 

(v)                 Tax Status. Except for matters that would not have or
reasonably be expected to result in a Material Adverse Effect, the Company and
its Subsidiaries each (i) has made or filed all United States federal, state and
local income and all foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations
and (iii) has set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company or of any Subsidiary know of no basis for any
such claim.

 

10 

 

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

 

(x)                 Foreign Corrupt Practices. Neither the Company nor any
Subsidiary, nor to the Knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any person acting
on its behalf of which the Company is aware) which is in violation of law or
(iv) violated in any material respect any provision of FCPA.

 

(y)                 Accountants. The Company’s accounting firm is Dixon, Hughes,
Goodman, LLC. To the belief and Knowledge of the Company, such accounting firm:
(i) is a registered public accounting firm as required by the Exchange Act and
(ii) shall express its opinion with respect to the financial statements to be
included in the Company’s Annual Report for the fiscal year ending December 31,
2016.

 

(z)                 Acknowledgment Regarding Purchaser’s Purchase of Securities.
The Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges that
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by Purchaser or any of
its respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchaser’s purchase of the Securities. The Company further represents to
Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.

 

(aa)             Acknowledgment Regarding Purchaser’s Trading Activity. Anything
in this Agreement or elsewhere herein to the contrary notwithstanding (except
for Sections 3.2(g) and 4.10 hereof), it is understood and acknowledged by the
Company that: (i) Purchaser has not been asked by the Company to agree, nor has
Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term, (ii) past or
future open market or other transactions by Purchaser, specifically including,
without limitation, Short Sales or “derivative” transactions, before or after
the closing of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded securities, (iii)
Purchaser, and counter-parties in “derivative” transactions to which Purchaser
is a party, directly or indirectly, may presently have a “short” position in the
Common Stock and (iv) Purchaser shall not be deemed to have any affiliation with
or control over any arm’s length counter-party in any “derivative” transaction.
The Company further understands and acknowledges that (y) Purchaser may engage
in hedging activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Underlying Shares deliverable with respect to Securities are being
determined, and (z) such hedging activities (if any) could reduce the value of
the existing stockholders’ equity interests in the Company at and after the time
that the hedging activities are being conducted.  The Company acknowledges that
such aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

 

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

 

11 

 

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

 

(dd)             Money Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance with
applicable financial record-keeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, applicable money
laundering statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering Laws”), and no Action or Proceeding by or
before any court or governmental agency, authority or body or any arbitrator
involving the Company and any Subsidiary with respect to the Money Laundering
Laws is pending or, to the Knowledge of the Company or any Subsidiary,
threatened.

 

(ee)              No Disqualification Events.  With respect to the Securities to
be offered and sold hereunder in reliance on Rule 506 under the Securities Act,
none of the Company, any of its predecessors, or, to the best of the Company’s
knowledge, any affiliated issuer, any director, executive officer, other officer
of the Company participating in the offering hereunder, any beneficial owner of
20% or more of the Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is defined in Rule 405
under the Securities Act) connected with the Company in any capacity at the time
of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered
Persons”) is subject to any of the “Bad Actor” disqualifications described in
Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification
Event”), except for a Disqualification Event covered by Rule 506(d)(2) or
(d)(3). The Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The Company has
complied, to the extent applicable, with its disclosure obligations under Rule
506(e), and has furnished to the Purchaser a copy of any disclosures provided
thereunder.

 

(ff)               Other Covered Persons. The Company is not aware of any person
(other than any Issuer Covered Person) that has been or will be paid (directly
or indirectly) remuneration for solicitation of Purchaser in connection with the
sale of any Securities.

 

(gg)              Notice of Disqualification Events. The Company will notify the
Purchaser in writing, prior to the Closing Date of (i) any Disqualification
Event relating to any Issuer Covered Person and (ii) any event that would, with
the passage of time, become a Disqualification Event relating to any Issuer
Covered Person.

 

3.2                Representations and Warranties of the Purchaser. Purchaser,
for itself, hereby represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows (unless as of a specific date therein):

 

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

 

12 

 

(b)                 Governmental Authorization. The execution, delivery and
performance by the Purchaser of this Agreement and the consummation by the
Purchaser of the transactions contemplated hereby require no action by or in
respect of, or filing, declaration or registration with, any Governmental
Authority other than the filings with and/or approvals by SASAC, NDRC and MOFCOM
and the completion of the outbound investment related foreign exchange filing
with the relevant bank authorized by the SAFE required with respect to the
consummation of the transactions contemplated hereby by the Purchaser
(collectively, the “PRC Approvals”).

 

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

 

(d)                 Purchaser Status. At the time Purchaser was offered the
Securities, it was, and as of the date hereof it is, and on each date on which
it converts any shares of Preferred Stock, it will be an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the
Securities Act.

 

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

 

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

 

(g)                 Access to Information. Purchaser acknowledges that it has
had the opportunity to review the Transaction Documents (including all exhibits
and schedules thereto) and the SEC Reports and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Shares and the merits and risks of investing in the
Shares; (ii) access to information about the Company and its financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to
obtain such additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment. Purchaser acknowledges that
it has reviewed all the SEC Reports filed during the preceding 24 months,
including any risk factors contained therein, and is aware that an investment in
the Company carries a high degree of risk and that the Purchaser may lose it
entire investment.

 

13 

 

(h)                 Certain Transactions and Confidentiality. Other than
consummating the transactions contemplated hereunder, Purchaser has not directly
or indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with Purchaser, executed any purchases or sales, including Short
Sales, of the securities of the Company during the period commencing as of the
time that Purchaser first began negotiations with the Company of the
transactions contemplated hereunder and ending immediately prior to the
execution hereof. Notwithstanding the foregoing, in the case that Purchaser is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of Purchaser’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other Persons party to this Agreement
or to Purchaser’s representatives, including, without limitation, its officers,
directors, partners, legal and other advisors, employees, agents and Affiliates,
Purchaser has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing
contained herein shall constitute a representation or warranty, or preclude any
actions, with respect to the identification of the availability of, or securing
of, available shares to borrow in order to effect Short Sales or similar
transactions in the future.

 

(i)                   Purchaser hereby represents that it has satisfied itself
as to the full observance of the laws of its jurisdiction in connection with the
purchase of the Securities or any use of this Agreement, including (i) the legal
requirements within its jurisdiction for the purchase of the Securities, (ii)
any foreign exchange restrictions applicable to such purchase, (iii) any
government or other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the Securities. The Purchaser further
represents that it will hold ten percent (10%) or greater, directly or
indirectly, of the voting interest in the Company and it shall provide such
information as the Company may request to comply with state, federal, or local
regulations. The Company’s offer and sale and the Purchaser’s purchase of,
payment for and continued beneficial ownership of the Securities will not
violate any applicable securities or other laws of the Purchaser’s jurisdiction.

 

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1                Best Efforts

 

(a)                 Subject to the terms and conditions of this Agreement, the
Purchaser shall use its best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable under
Applicable Law to consummate the transactions contemplated by this Agreement as
promptly as practicable, including (i) preparing and filing as promptly as
practicable with any Governmental Authority or other Third Party all
documentation to effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and other documents and
(ii) obtaining and maintaining all approvals, consents, registrations, permits,
authorizations and other confirmations required to be obtained from any
Governmental Authority or other Third Party that are necessary, proper or
advisable to consummate the transactions contemplated by this Agreement.

 

(b)                 In furtherance and not in limitation of the foregoing, the
Purchaser shall: make all appropriate filings required in connection with the
PRC Approvals as promptly as practicable within the applicable period required
by Applicable Law, and in any event within ninety (90) Business Days of the date
hereof, and supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to Applicable Law in
connection with the PRC Approvals

 

14 

 

4.2                Transfer Restrictions.

 

(a)                 The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of Purchaser or in connection with a pledge as
contemplated in Section 4.2(b), the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights and
obligations of the Purchaser under this Agreement.

 

(b)                 The Purchaser agree to the imprinting, so long as is
required by this Section 4.2, of a legend on any of the Securities in the
following form:

 

NEITHER THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE] HAS 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 [AND THE SECURITIES ISSUABLE UPON CONVERSION OF
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 Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. Such a pledge
or transfer would not be subject to approval of the Company and no legal opinion
of legal counsel of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such pledge. At
the Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities.

 

(c)                 Certificates evidencing the Underlying Shares shall not
contain any legend (including the legend set forth in Section 4.2(b) hereof)
following any sale of such Underlying Shares pursuant to Rule 144. Purchaser
shall provide its own legal opinion if required by the Transfer Agent to effect
the removal of the legend hereunder.

 

4.3                During the period from the date of this Agreement through the
date of the Company’s 2019 annual meeting of stockholders (“2019 Annual
Meeting”) (the “Standstill Period”), the Purchaser shall not:

 

(a)                 solicit proxies or written consents of stockholders, or any
other person with the right to vote or power to give or withhold consent in
respect of the Voting Securities (as defined below), or conduct, encourage,
participate or engage in any other type of referendum (binding or non-binding)
with respect to, or from the holders of Voting Securities or any other person
with the right to vote or power to give or withhold consent in respect of the
Voting Securities;

 

15 

 

(b)                 make, or in any way participate or engage in any
“solicitation” of any proxy, consent or other authority to vote any Voting
Securities, with respect to any matter;

 

(c)                 seek to place a representative on the Board of Directors or
seek the removal of any director from the Board of Directors;

 

(d)                 become a participant in any contested solicitation with
respect to the Company, including without limitation relating to the removal or
the election of directors;

 

(e)                 initiate, propose or otherwise solicit stockholders for the
approval of any stockholder proposal with respect to the Company (other than a
proposal that the Board of Directors has recommended that the Company’s
stockholders vote to approve);

 

(f)                  cause to be voted any Voting Securities that it has the
right to vote in a manner other than in accordance with the recommendation of
the Board of Directors with respect to (i) the election or removal of directors;
and (ii) stockholder proposals;

 

(g)                 without the prior written consent of the Company, form, join
or in any way participate in a partnership, limited partnership, syndicate or
other group, including without limitation a group as defined under Section 13(d)
of the Exchange Act, with respect to the Voting Securities, or otherwise support
or participate in any effort by a third party with respect to the matters set
forth in paragraphs (a) – (e) of this Section 4.3, or deposit any Voting
Securities in a voting trust or subject any Voting Securities to any voting
agreement;

 

(h)                 seek to have the Company waive, amend or modify any
provision of the Company’s Certificate of Incorporation or Bylaws, as the same
may otherwise be amended from time to time in a manner that would materially
affect the rights and obligations of the parties under this Agreement;

 

(i)                   either directly or indirectly for itself or its
affiliates, or in conjunction with any other person or entity in which it
proposes to be either a principal, partner or financing source or is acting or
proposes to act as broker or agent for compensation, effect or seek, offer or
propose (whether publicly or otherwise) to effect, or cause or participate in,
or in any way knowingly support, assist or facilitate any other person to effect
or seek, offer or propose to effect, or cause or participate in, (i) any tender
offer or exchange offer, merger, acquisition or other business combination
involving the Company or any of its subsidiaries or affiliates; (ii) any form of
business combination or acquisition or other transaction relating to a material
amount of assets or securities of the Company or any of its subsidiaries or
affiliates; or (iii) any form of restructuring, recapitalization or similar
transaction with respect to the Company or any of its subsidiaries or
affiliates;

 

(j)                  enter into any arrangements, understanding or agreements
(whether written or oral) with, or advise, finance, assist or encourage, any
other person in connection with any of the foregoing, or make any investment in
or enter into any arrangement with, any other person that engages, or offers or
proposes to engage, in any of the activities or transactions referenced in the
foregoing paragraphs of this Section 4.3;

 

(k)              publicly disclose, or cause to facilitate the public disclosure
(including the filing of any document or report with the SEC or any other
governmental agency or any disclosure to any journalist, member of the media or
securities analyst) of any intent, purposes, plan or proposal to obtain any
waiver, or consent under, or any amendment of, Section 4.3 of this Agreement;

 

16 

 

(l)                   bring any action to (x) contest the validity of this
Agreement, or (y) seek a release from the restrictions contained in this Section
4.3 of this Agreement; or

 

(m)               take or cause or induce others to take any action inconsistent
with any of the foregoing.

 

4.4                Stockholder Proposals. In furtherance of the Purchaser’s
obligations in Section 4.3 above, if, during the Standstill Period, the Company
receives notice from a stockholder, in accordance with the Company’s bylaws
and/or the rules of the U.S. Securities and Exchange Commission, of such
stockholder’s intention to nominate one or more individuals for election to the
Board, or to submit a stockholder proposal for consideration by stockholders at
a meeting of the Company’s stockholders, then on or before the tenth (10th)
Business Day prior to the scheduled date of the stockholders meeting, the
Purchaser shall deliver an irrevocable proxy to the Board with respect to all
Voting Securities in which it has a beneficial ownership interest, which proxy
shall be coupled with an interest, naming as proxy and attorney-in-fact such
individual or individual as may be designated by the Board, evidencing the
Purchaser’s instructions with respect to the voting as to all matters expected
to be submitted to stockholders at such meeting in accordance with the
Purchaser’s voting obligations set forth herein.

 

4.5                Furnishing of Information; Public Information. Until the
earliest of the time that (i) Purchaser does not own the Securities or (ii) the
Securities may be sold pursuant to Rule 144 without any manner of sale or volume
restrictions, the Company covenants to make Current Information publicly
available as provided for pursuant to Rule 144.

 

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

 

4.7                Conversion Procedures. The form of Notice of Conversion
included in the Certificate of Designation sets forth the totality of the
procedures required of the Purchaser in order to convert the Preferred Stock.
Without limiting the preceding sentences, no ink-original Notice of Conversion
shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Conversion form be required in order to
convert the Preferred Stock. No additional legal opinion, other information or
instructions shall be required of the Purchaser to convert its Preferred Stock.
The Company shall honor conversions of the Preferred Stock and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.

 

4.8                Indemnification of Purchaser. Subject to the provisions of
this Section 4.8, the Company will indemnify and hold Purchaser and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls Purchaser (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that Purchaser Party may suffer or incur as a result of
or relating to any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction
Documents. If any action shall be brought against Purchaser Party in respect of
which indemnity may be sought pursuant to this Agreement, Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Purchaser Party. Purchaser Party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
Purchaser Party except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company has failed
after a reasonable period of time to assume such defense and to employ counsel
or (iii) in such action there is, in the reasonable opinion of counsel, a
material conflict on any material issue between the position of the Company and
the position of Purchaser Party, in which case the Company shall be responsible
for the reasonable fees and expenses of no more than one such separate counsel.
The Company will not be liable to Purchaser Party under this Agreement (y) for
any settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (z) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by Purchaser Party in this Agreement or
in the other Transaction Documents. The indemnification required by this Section
4.8 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or are incurred.
The indemnity agreements contained herein shall be in addition to any cause of
action or similar right of Purchaser Party against the Company or others and any
liabilities the Company may be subject to pursuant to law.

 

17 

 

4.9                Reservation and Listing of Securities.

 

(a)                 The Company shall maintain a reserve of the Required Minimum
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may then be required to fulfill its
obligations in full under the Transaction Documents.

 

(b)                 If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than 100% of (i) the
Required Minimum on such date, minus (ii) the number of shares of Common Stock
previously issued pursuant to the Transaction Documents, then the Board of
Directors shall use best efforts to amend the Company’s certificate or articles
of incorporation to increase the number of authorized but unissued shares of
Common Stock to at least the Required Minimum at such time (minus the number of
shares of Common Stock previously issued pursuant to the Transaction Documents),
as soon as possible, provided that the Company will not be required at any time
to authorize a number of shares of Common Stock greater than the maximum
remaining number of shares of Common Stock that could possibly be issued after
such time pursuant to the Transaction Documents.

 

(c)                 The Company shall, if applicable: (i) in the time and manner
required by the principal Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number of shares of
Common Stock at least equal to the Required Minimum on the date of such
application, (ii) take all steps necessary to cause such shares of Common Stock
to be approved for listing or quotation on such Trading Market as soon as
possible thereafter, (iii) provide to the Purchaser evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common Stock on any
date at least equal to the Required Minimum on such date on such Trading Market
or another Trading Market. The Company agrees to maintain the eligibility of the
Common Stock for electronic transfer through the Depository Trust Company or
another established clearing corporation, including, without limitation, by
timely payment of fees to the Depository Trust Company or such other established
clearing corporation in connection with such electronic transfer.

 

4.10            Certain Transactions and Confidentiality. Purchaser covenants
that neither it, nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any Short Sales, of any of the Company’s
securities during the period commencing with the execution of this Agreement and
ending at the Closing Date.  Purchaser covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company, Purchaser will maintain the confidentiality of the existence and terms
of this transaction and the information included in the Transaction Documents
and the Disclosure Schedules.

 

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

 

 

 

18 

 

ARTICLE V.

MISCELLANEOUS

 

5.1                Termination.  This Agreement may be terminated by Purchaser,
as to Purchaser’s obligations hereunder only and without any effect whatsoever
on the obligations between the Company and the Purchaser, by written notice to
the other party, if the Closing has not been consummated on or before December
5, 2016[1]; provided, however, that such termination will not affect the right
of any party to sue for any breach by any other party.

 

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

 

5.3                Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via facsimile or
email attachment at the facsimile number or e-mail address as set forth on the
signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on
a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile or email attachment at the
facsimile number or e-mail address as set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City
time) on any Trading Day, (c) the second (2nd) Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set forth on the
signature pages attached hereto.

 

5.4                Amendments; Waivers. No provision of this Agreement may be
waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchaser.

 

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

 

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

 

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

 

5.8                Governing Law; Arbitration. All questions concerning the
construction, validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be
determined by final binding arbitration administered by the American Arbitration
Association (“AAA”) under its Commercial Arbitration Rules and Mediation
Procedures (“Commercial Rules”) including, the international Commercial
Arbitration Supplementary Procedures. The award rendered by the arbitrator shall
be final, non-reviewable, non-appealable and binding on the parties and may be
entered and enforced in any court having jurisdiction. There shall be one
arbitrator agreed to by the parties within twenty (20) days of receipt by
respondent of the request for arbitration or if the parties fail to do so within
the prescribed 20-day period, appointed by the AAA in accordance with its
Commercial Rules. If more than one arbitration is commenced under this Agreement
and any party contends that two or more arbitrations are substantially related
and that the issues should be heard in one proceeding, the arbitrator selected
in the first-filed proceeding shall determine whether, in the interests of
justice and efficiency, the proceedings should be consolidated before that
arbitrator. The seat or place of arbitration shall be New York City, New York.
The arbitration shall be conducted and the award shall be rendered in the
English language. Except as may be required by law, neither a party nor the
arbitrator may disclose the existence, content or results of any arbitration
without the prior written consent of both parties, unless to protect or pursue a
legal right.

_____________________

[1] 90 days from the date of execution of this Agreement.

19 

 

5.9                Survival. The representations and warranties contained herein
shall survive the Closing and the delivery of the Securities.

 

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

 

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

 

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

 

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

 

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

 

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

 

20 

 

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

 

 

 

(Signature Pages Follow)

 

 

 

 

 

 

 

21 

 

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

 

 

NEURALSTEM, INC.

Address for Notice:

 

 

By:__________________________________________

Name: Richard Daly

Title: President & CEO

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

Fax:301.366.7062

 

Email:rdaly@neuralstem.com

 

 

 

 

 

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

22 

 

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

 

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

 

Name of Purchaser: _Tianjin Pharmaceutical Holding
Group___________________________________________________

Signature of Authorized Signatory of Purchaser: __________________________

Name of Authorized Signatory: _Mr. Lu
Yanchang___________________________________

Title of Authorized Signatory: __Legal
Representative___________________________________

Email Address of Authorized Signatory:
___________________________________________

Facsimile Number of Authorized Signatory:
_________________________________________

 

Address for Notice to Purchaser:

 

 

 

 

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

 

 

 

 

Subscription Amount: $20,000,000.00

Shares of Common Stock: 28,500,000

Shares of Preferred Stock: 1,000,000

EIN Number: _______________________

23 

 

SCHEDULE A

 

 

Shares of common: 28,500,000

 

Common shares underlying preferred shares: 50,551,383

 

 

 

 

 

 

 

 

 

 

EXHIBIT A

 

CERTIFICATE OF DESIGNATION

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT B

 

WIRING INSTRUCTIONS