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.


 



    2 


     

    




“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:


 



    5 


     

    




(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.


 



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(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.


 



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(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.


 



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(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.


 



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(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.


 



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(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.


 



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(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.


 



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(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


 



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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