SECURITIES
PURCHASE AGREEMENT




This
Securities Purchase Agreement (this “Agreement”) is dated
as of December__,
2009, between Neuralstem, Inc., a Delaware corporation (the “Company”), and the
purchaser identified on the signature pages hereto (including its successors and
assigns, the “Purchaser”).




WHEREAS,
the Company has granted Purchaser an Option (as defined herein) to negotiate a
license for certain technology and/or products currently owned by the
Company.




WHEREAS,
as consideration for the Option, the Purchaser has agreed to purchase up to $1.5
million of the Company’s newly-issued shares of Common Stock.




WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(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
the Purchaser, and the 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, for all purposes of
this Agreement, the following terms have the meanings set forth in this Section
1.1:




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




“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.  With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.




“Beneficial Ownership
Limit” shall have the mean ascribed to such term in Section
4.3.




“Business Day” means
any day except Saturday, 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.




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




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“Closing Date” means
the Trading Day when 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 have been satisfied or
waived.




“Commission” means the
Securities and Exchange Commission.




“Common Stock” means
the common stock of the Company, par value $.01 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed into.




“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, rights, options,
warrants 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 SLR.




“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered concurrently
herewith.




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





“FDA” shall mean the
United States Food and Drug Administration.




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




“Indebtedness” shall
means (a) any liabilities for borrowed money or amounts owed in excess of
$250,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $250,000 due under leases required to
be capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.




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




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




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




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“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).




“Option” shall mean
that certain Exclusive Option Agreement of even date with this Agreement
executed by the parties.




“Option Period” shall
mean a period of time as set forth in the Option.




“Per Share Purchase
Price” shall equal $2.32.




“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.




“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.




“Product” shall mean
technology owned by the Company for transplantation into patients for all
indications for which necessary approval from the FDA.




“Purchaser Party”
shall have the meaning ascribed to such term in Section 4.5.




“Registration Rights
Agreement” means the Registration Rights Agreement, dated the date
hereof, among the Company and the Purchaser, in the form of Exhibit
A attached hereto.




“Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale by the
Purchaser of the Shares.




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




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




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




“Securities” means the
Shares.




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




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“Shares” means the
shares of Common Stock issued or issuable to the Purchaser pursuant to this
Agreement.




“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).




“SLG”
means the Silvestre Law Group, P.C.




“Subscription Amount”
means the aggregate amount to be paid for Shares purchased hereunder as
specified below the 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.




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




“Trading Day” means a
day on which the New York Stock Exchange is open for trading.




“Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board.




“Transaction
Documents” means this Agreement, the Option, the Registration Rights
Agreement and any other documents or agreements executed in connection with the
transactions contemplated hereunder.




“Transfer Agent” means
American Stock Transfer & Trust Company, with a mailing address of 59 Maiden
Lane New York, NY 10038 and a facsimile number of (718) 921 8116, and any
successor transfer agent of the Company.




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 $1.5 million of Shares.  The Purchaser shall
deliver to the Company, via wire transfer or a certified check, immediately
available funds equal to its Subscription Amount and the Company shall deliver
to the Purchaser the Shares as determined pursuant to Section
2.2(a), and the Company and the 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 LRS, or such other location as the parties shall
mutually agree.




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2.2 Deliveries .




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




(i)           this
Agreement duly executed by the Company;




(ii)          the
Option duly executed by the Company in substantially the form as attached hereto
as Exhibit
B;




(iii)         a
non-revocable letter from the Company to the Transfer Agent, instructing the
Transfer Agent to issue a certificate evidencing a number of Shares equal to the
Purchaser’s Subscription Amount divided by the Per Share Purchase Price,
registered in the name of such Purchaser; and




(iv)      
  the Registration Rights Agreement duly executed by the
Company.




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




(i)           this
Agreement duly executed by such Purchaser;




(ii)          the
Option duly executed by the Purchaser in substantially the form as attached
hereto as Exhibit
B;




(iii)         the
Purchaser’s Subscription Amount by wire transfer to the Company;
and




(iv)         the
Registration Rights Agreement duly executed by such Purchaser.




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 on the Closing Date of the representations and
warranties of the Purchaser contained herein;




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




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




(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 on the Closing Date of the representations and
warranties of the Company contained herein;




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(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;




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




(v)          from
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Securities at the Closing.




ARTICLE
III.


REPRESENTATIONS
AND WARRANTIES




3.1 Representations and
Warranties of the Company. Except as
set forth in the Disclosure Schedules and as provided for below, which
Disclosure Schedules shall be deemed a part hereof and shall qualify any
representation or otherwise made herein to the extent of the disclosure
contained in the corresponding section of the Disclosure
Schedules.  For purposes of this Agreement, any statement, facts,
representations, or admissions contained in the SEC Reports, are deemed to be
included in the Disclosure Schedule and all such information is deemed to be
fully disclosed to the Purchaser notwithstanding any wording to the contrary in
the following representations and warranties of the Company.  The
Company hereby makes the following representations and warranties to the
Purchaser subject to the qualifications contained in this
paragraph:




(a)           Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  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, then all other
references to the Subsidiaries or any of them in the Transaction Documents shall
be disregarded.




6




(b)           Organization and
Qualification.  The Company and each of the Subsidiaries 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
(as applicable), 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 or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  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,
prospects 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 each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
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, its board of directors or its stockholders in connection therewith
other than in connection with the Required Approvals.  Each
Transaction Document 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.




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(d)           No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Securities
and the consummation by the Company of the other 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, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company 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.




(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) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing
with the Commission of the Registration Statement, (iii) application(s) to each
applicable Trading Market for the listing of the Securities for trading thereon
in the time and manner required thereby and (iv) 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.




(g)           Capitalization.  The
capitalization of the Company is as set forth in its most recent quarterly
report filed on Form 10-Q with the Securities and Exchange Commission on
November 17, 2009, other than Common Stock issued 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, the issuance of stock options to purchase Common Stock pursuant
to the Company’s employee stock plans, and pursuant to the conversion or
exercise of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act.




8




(h)           SEC Reports; Financial
Statements.  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, being collectively referred to herein as the
“SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  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.




(i)         
  Material
Changes; Undisclosed Events, or Developments.  Since the date
of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof, (i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not altered its method of accounting, (iii) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (iv) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans.  The Company does not have
pending before the Commission any request for confidential treatment of
information.




(j)    
       Litigation.  To
the knowledge of the Company, and except as disclosed in the SEC Reports, there
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or  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.  To the knowledge of the Company, there has not been,
and not is any not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the
Company.




9




(k)           Labor
Relations.  No material 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 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.




(l)           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 order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as could not
have or reasonably be expected to result in a Material Adverse
Effect.




(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 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 Liens for the payment of
federal, state or other taxes, 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.




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(o)           Patents and
Trademarks.  To the knowledge of the Company, 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 necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
could have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that any of the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person.  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)           Tax
Status.  Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any
Subsidiary.




3.2 Representations and
Warranties of the Purchaser .  The
Purchaser hereby represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows:




(a)           Organization;
Authority.  Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership 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 such
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
such 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 the 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)           Own
Account.  The 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
(this representation and warranty not limiting such Purchaser’s right to sell
the Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws) in violation of the
Securities Act or any applicable state securities law.  Such Purchaser
is acquiring the Securities hereunder in the ordinary course of its
business.




(c)           Purchaser
Status.  Purchaser is either: (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act.  Such Purchaser is not required to be registered
as a broker-dealer under Section 15 of the Exchange Act.




(d)           Experience of Such
Purchaser.  The 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.  The 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.




(e)           Short Salesand Confidentiality Prior
To The Date Hereof.  Other than consummating the transactions
contemplated hereunder, the Purchaser has not, nor has any Person acting on
behalf of or pursuant to any understanding with such Purchaser, directly or
indirectly executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing from the time that the
Purchaser and Company first discussed the terms of the Option or any other
Person representing the Company setting forth the material terms of the
transactions contemplated hereunder until the date hereof (“Discussion Time”).  Other than to other Persons party
to this Agreement, such Purchaser has maintained the confidentiality of all
disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).




ARTICLE
IV.


OTHER
AGREEMENTS OF THE PARTIES




4.1 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 a Purchaser, 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 of a Purchaser under this Agreement and the Registration
Rights Agreement.




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(b)           The
Purchaser agrees to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:




THIS
SECURITY HAS NOT BEEN  REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  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.




4.2 Securities Laws Disclosure;
Publicity.  The Company shall issue a Current Report on Form
8-K, disclosing the material terms of the transactions contemplated hereby, and
filing the Transaction Documents as exhibits thereto within the required period
of time following the Closing.  The Company and the Purchaser shall
consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor the Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
the Purchaser, or without the prior consent of the Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.




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4.3 Limitation on Ownership
& Representation.




(a)           During
the term of the Option (or in the event the parties enter into a licensing
agreement as contemplated in the Option, during the duration of said licensing
agreement), Purchaser shall not: (i) seek to secure board representation; (ii)
enter into any voting agreement or grant a proxy to any third party with respect
to any Common Stock owned by the Purchaser; or (iii) acquire any of the
Company’s Common Stock or Common Stock Equivalents, to the extent that after
giving effect to purchase, the Purchaser (together any of Purchaser’s
Affiliates, and any other person or entity acting as a group together with such
Purchaser or any of such Purchaser’s Affiliates), would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below).  For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Purchaser and its Affiliates shall include the number
of shares of Common Stock issuable upon exercise of and Common Stock
Equivalents.  For purposes of this Section 4.3, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder, it being acknowledged by the
Purchaser that the Company is not representing to such Purchaser that such
calculation is in compliance with Section 13(d) of the Exchange Act and such
Purchaser is solely responsible for any schedules required to be filed in
accordance therewith.   To the extent that the limitation
contained in this Section 4.3 applies, the determination shall be in the sole
discretion of the Company.  In addition, a determination as to any
group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 4.3, in determining the
number of outstanding shares of Common Stock, parties may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of the Purchaser, the
Company shall within two Trading Days confirm orally and in writing to the
Purchaser the number of shares of Common Stock then outstanding.  In any
case, the number of outstanding shares of Common Stock shall specifically
exclude and any Common Shares issuable upon the exercise of an Common Stock
Equivalents then issued and outstanding.  The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately before the purchase of any additional shares of the
Company’s equity securities.




(b)           In
the event Purchaser breaches any of the covenants and agreements contained in
Section 4.3(a), Purchaser acknowledges that monetary remedies would not be
sufficient  and acknowledges that any such violation or threatened
violation will cause irreparable injury to the other party and that, in addition
to any other remedies that may be available, in law, in equity or otherwise, the
Company shall be entitled to the following remedies, cumulatively: (i) the
obtaining of injunctive relief against the threatened breach or the continuation
of any such breach, without the necessity of proving actual damages; (ii) the
termination of the Option (or license if the parties have entered into a
licensing agreement as contemplated in the Option, the termination of the
license); and (iii) a determination by the Company, in its sole discretion, that
any votes cast by the Purchaser, Affiliates acting on its behalf, or assigns
with regard to the Common Shares then owned, are improper, void and of no force
or effect, which determination will be binding on the Purchaser.




14




4.4 Use of
Proceeds.  The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes.




4.5 Indemnification of
Purchaser.   Subject to the provisions of this Section
4.5, 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 such 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 any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance).  If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such 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 such 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 such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such 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 (i) for any
settlement by Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (ii) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by such Purchaser Party in this
Agreement or in the other Transaction Documents.




4.6 Short Sales and
Confidentiality After The Date Hereof.The Purchaser covenants that
neither it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the period commencing
at the Discussion Time and ending at the expiration of the Option Period or in
the event a licensing agreement is reached between the parties, at the
termination of the licensing period.




15




4.7 Delivery of Securities After
Closing.  The Company shall deliver, or cause to be delivered,
the Securities purchased by the Purchaser within 15 Trading Days of the Closing
Date.




ARTICLE
V.


MISCELLANEOUS




5.1 Fees and
Expenses.  Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement.  The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities to the Purchaser.




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 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 at the facsimile number set forth on
the signature pages attached hereto 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 at the facsimile number 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 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 or
amended except in a written instrument signed by the Company and the Purchaser
or, in the case of a waiver, by the party against whom enforcement of any such
waived provision is sought.  No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.




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.




16




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 each Purchaser (other
than by merger).  Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided 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.




5.8 Governing
Law.  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
Delaware, 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,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the state of Delaware. Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
state of Delaware for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper or is an
inconvenient venue for such proceeding.  Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by law.  If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.




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




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 the
other party, it being understood that both 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.




17




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 Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then the Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.




5.13 Replacement of
Securities.  If any certificate or instrument evidencing the
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.




5.14 Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, 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 agrees 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.




5.15 Construction. The
parties agree that each of them and/or their respective counsel has 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 hereto.




18




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)




19


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:
                    9700
      Great Seneca Highway
                    Rockville,
      Maryland 20850By:
                  
                  
                  Attn:Name:
                  
                  e-mail:Title:
                  
                  Tel:Fax:With
      a copy to (which shall not constitute notice):





[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE
PAGE FOR PURCHASER FOLLOWS]


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[PURCHASER
SIGNATURE PAGES TO NEURALSTEM


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:
________________________________________________________________________________




Signature of Authorized Signatory of
Purchaser:
_________________________________________________________




Name of
Authorized Signatory:
__________________________________________________________________________




Title of
Authorized Signatory:
___________________________________________________________________________




Email
Address of
Purchaser:_______________________________________________________________________




Fax
Number of Purchaser:
_________________________________________________________________________




Address
for Notice of Purchaser:





Address
for Delivery of Securities for Purchaser (if not same as above):





Subscription
Amount:


$:


Shares:


#:


EIN
Number:




[SIGNATURE
PAGES CONTINUE]




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