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SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “
Agreement ”)
is dated as of February
__,
200 8
,
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 $2.
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 each 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.
“
Business Day ”
means any day except Saturday, Sunday, any day which is a
national
legal
holiday in the United States or the
Republic of Korea or any
day on which banking institutions in the State of New York
or
Seoul 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.
“
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; provided that in no event shall the Closing Date be later
than February 27, 2008.
“
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.
“
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 ”
means: (a) any liabilities for borrowed money or amounts owed in
excess of $ 25,000
(other than trade accounts payable incurred in the ordinary course
of business); (b) all guaranties, Liens,
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 $ 25,000
due under leases required to be capitalized in accordance with
GAAP.
“
Intellectual Property Rights ”
shall have the meaning ascribed to such term in Section
3.1(o).
“
Knowledge ”
(including any derivation thereof such as “
known ”
or “
knowing ”)
of a Person that is not a natural individual means that any
director or officer of such Person: (a) has actual knowledge of a
particular fact or other matter; or (b) could reasonably be
expected to discover or otherwise become aware of such fact or
other matter in the course of conducting such due investigation and
inquiry concerning the existence or truth of such fact or other
matter as a reasonably prudent person, in the ordinary and usual
course of the performance of his or her professional
responsibilities, would conduct under the same applicable
circumstances.
2
“
Liens ”
means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.
“
LRS ”
means the Law Offices of Raul Silvestre & Associates,
APLC.
“
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 ”
means that certain Exclusive Option Agreement of even date with
this Agreement executed by the parties ,
in the form of
Exhibit B attached
hereto.
“
Option Period ”
means a period of time as set forth in the Option.
“
Per Share Purchase Price ”
shall
equal $[_________]
.
“
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.
“
Report ”
shall have the meaning ascribed to such term in Section
3.1(h).
3
“
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 ”
means the most recent reports filed by the Company with the
Commission under the Securities Act and the Exchange Act, including
the exhibits thereto and documents incorporated by reference
therein, consisting specifically of: (i) Form 10-KSB filed on April
2, 2007; (ii) Form SB-2 filed on April 30, 2007; (iii) Form 10-QSB
filed on May 15, 2007; (iv), Form 10-QSB filed on August 14, 2007;
(v) Form 10-QSB filed on November 13, 2007; and (vi) Form 8-K/A
filed on November 8, 2007, all as attached hereto as
Exhibit C .
“
Securities ”
means the Shares.
“
Securities Act ”
means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“
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).
“
Subscription Amount ”
means two
million five hundred thousand U.S. dollars (US$2,500,000.00)
.
“
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.
4
“
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, such
number of Shares as shall be determined by the Subscription Amount
divided by the Per Share Purchase Price .
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(b) 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.
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 ;
(iii)
a
certificate evidencing a number of Shares equal to such
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 ;
(iii)
the
Purchaser’s Subscription Amount by a certified check or
wire transfer to the Company. Both parties acknowledge that,
such wire transfer might occur later than the Closing Date,
which is due to any matter associated with accounting process
and, in such a case, the Purchaser shall notify the Company
and use good faith effort for
completion of wire transfer but in no event shall such wire be
delayed more than 3 days after the Closing Date;
and
5
(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 ;
provided that for
the purpose of determining the ‘material’ accuracy
of the representations and warranties of the Company under
this Section 2.3(b)(i), should a concerned representation and
warranty itself contain any ‘materiality’ or
similar qualifications, such qualifications shall be
disregarded, so that only the ‘materiality’
qualification set forth in this Section 2.3(b)(i) will
apply;
(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)
this
Agreement and the other Transaction Documents, and the
transactions contemplated hereby and thereby, shall have been
duly approved by the board of directors or other pertinent
body or officer of the Purchaser;
(v)
the
sale, issuance and purchase of the Securities, on the Closing
Date, shall be legally permitted by all laws and regulations
to which the Company is subject. No proceeding, litigation,
arbitration, investigation, shall be pending or threatened and
no judgment, decision, decree, order, injunction or award
shall be outstanding, seeking to delay, restrain, make illegal
or alter the transactions contemplated by any Transaction
Document;
6
(vi)
each
of the Purchaser and the Company shall have obtained any and
all approvals, consents, permits and waivers, including those
by or from governmental authorities, necessary or appropriate
for consummation of the transactions contemplated by this
Agreement;
(vii)
there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(viii)
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
the SEC Reports where specifically referenced ,
which
Disclosure Schedules and SEC Reports, if specifically referenced,
shall be deemed a part hereof and shall qualify any representation
or warranty otherwise made herein to the extent of the disclosure
contained in the corresponding section of the Disclosure
Schedules or
the SEC Reports, if specifically referenced, would contradict any
representation or warranty contained herein, the Company makes, as
of the date hereof and as of the Closing Date, the following
representations and warranties to the Purchaser. For purposes of
this Article 3, any statement, facts, representations, or
admissions contained in the SEC Reports, if specifically
referenced, will be deemed to be included in the Disclosure
Schedule and all such information will be deemed to be fully
disclosed and furnished to the Purchaser .
(a)
Subsidiaries .
The Company has no subsidiaries.
7
(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
State
of Delaware ,
with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. The
Company is
not
in
violation or default of any of the provisions of its
certificate
or articles of incorporation, bylaws or other organizational or
charter documents. The
Company
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 ,
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.
8
(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 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 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 debt
or otherwise) or other understanding to which the Company
is
a party or by which any property or asset of the Company
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 is
subject (including federal and state securities laws and
regulations), or by which any property or asset of the
Company
is
bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result
in a Material Adverse Effect.
(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. 2
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 other
than restrictions on transfer provided for in the Transaction
Documents. The
sale of the Securities hereunder is not and will not be subject to
any preemptive rights or rights of first refusal that have not been
properly waived or complied with.
(g)
Capitalization .
The Company’s capitalization is as set forth on the
Disclosure Schedule.
9
(h)
SEC Filings; 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
“
Reports ”)
on a timely basis or has received a valid extension of such time of
filing and has filed any such Reports prior to the expiration of
any such extension. As of their respective dates, the Reports
complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable, and none of the
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
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 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 .
Specifically, but not by way of limitation, the balance sheet of
such financial statements discloses all of the Company’s
material debts, liabilities and obligations of any nature, whether
due or to become due, as of their respective dates (including,
without limitation, absolute liabilities, accrued liabilities, and
contingent liabilities) to the extent such debts, liabilities and
obligations are required to be disclosed in accordance with
GAAP .
(i)
Material Changes; Undisclosed Events, or Developments
.
Since the date of the latest audited financial statements included
within the Reports ,
except as specifically disclosed in the SEC Report filed prior to
the date hereof or
in Schedule 3.1(i) 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 Common
Stock Equivalents 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.
Except
as disclosed in the SEC Reports or contained in Schedule 3.1(i)
hereto, the Company has no indebtedness for borro
