Exhibit 10.1

SETTLEMENT AGREEMENT AND RELEASE

PARTIES

This SETTLEMENT AGREEMENT AND RELEASE (the “Agreement”) is dated as of
September 4, 2009 and is entered into by and among the following natural persons
and corporations which are parties to various cases now pending before the Los
Angeles Superior Court, as set forth below, plus one company which is not a
party but highly interested in the proceedings:

HISTOSTEM, INC. (“H-USA”) is a corporation, formed and existing under the laws
of the State of Delaware, and based in Los Angeles, California.

HISTOSTEM CORP. (“HK”) is a corporation, formed and existing under the laws of
South Korea, and based in Seoul, South Korea. HK is a party to the
Reorganization and Stock Exchange Agreement (the “Merger”) with Stem Cell
Therapy International, Inc.

STEM CELL THERAPY INTERNATIONAL, INC. (“SCII” or the “Company”) is a corporation
formed and existing under the laws of the State of Nevada and based in Tampa,
Florida. SCII is a Party to this Agreement, but is not a party to any of the
Litigation set forth below. SCII is a party to the Merger with HK.

DR. HOON HAN (“Dr. Han”) is a natural person and resident of South Korea. He is
a founder, major shareholder, Chairman and Chief Executive Officer of HK.

MICHAEL SHEN (“Mr. Shen”) is a natural person and resident of California, and
CEO of H-USA.

ROBERT C. ROSEN (“Mr. Rosen”) is a natural person, and an attorney at law in the
state of California.

ROSEN & ASSOCIATES, P.C. (“Rosen & Associates” or “R&A” collectively, with
Mr. Rosen, “the Rosen Parties”) is a Professional Corporation formed and
existing under the laws of the State of California. Mr. Rosen is the President
of Rosen & Associates.

THE LITIGATION

Histostem, Inc. v. Histostem Corp. American Arbitration Association Case
No. 50 133 T 00059 06 (“AAA Arbitration”). This Arbitration was initiated by
H-USA against HK for breach of the Underlying Agreements.

 

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Histostem, Inc. v. Han. Los Angeles Superior Court (“LASC”) Case No. BC 355 927.
The present parties are HK, H-USA, Dr. Hoon Han and Mr. Shen.

Rosen et al. v. Han LASC Case No. BC 398 577 (related to BC 355 927) Plaintiffs.
The Rosen Parties sued Dr. Han for Malicious Prosecution.

Histostem et al v. Han, Court of Appeal, Case No. B212338

This is an appeal by HK from the granting of a Motion for Summary Judgment
granted by the Hon. Terry A. Green in BC 355 92; the Notice of Appeal was filed
on November 26, 2008.

The litigation matters above are also referred to as the “Actions.” The Actions
are resolved as a result of this settlement. H-USA, Mr. Shen and the Rosen
Parties are also referred to herein as “Plaintiffs.” HK and Dr. Han are also
referred to herein as “Defendants.” Plaintiffs and Defendants and SCII are
referred to individually, as appropriate, as “Party” and collectively as the
“Parties.”

TERMS OF THE SETTLEMENT

NOW THEREFORE, in consideration of the mutual promises set forth herein and
other valuable consideration, the sufficiency of which is hereby acknowledged,
the Parties agree as follows:

CONTINGENT ON CLOSE OF SCII-HK MERGER

This Agreement is contingent upon the close of the SCII-HK Merger and
specifically, this Agreement is contingent that at the close of the SCII-HK
Merger, SCII will acquire no less than 90% of the total fully diluted equity of
HK and this settlement is also contingent upon, if HK merges with any entity
prior to the close of the Merger with SCII, HK being the surviving entity. This
Agreement is also contingent upon the terms of the HK-SCII merger not materially
varying from those described in filings made with the SEC commencing in March
2008 to the date the last signatory executes this Agreement. These filings with
the SEC include, but are not limited to, the Reorganization and Stock Purchase
Agreement dated as of March 10, 2008 and all Amendments thereto (the “Merger”).
The only material alterations to the terms of the Merger as described in SEC
filings are described in detail in Exhibit A hereto (which shall be completed by
Defendants and SCII within 15 days of the final execution of this Agreement).

A merger meeting all of these conditions described in the above paragraph shall
be referred to as the Qualifying SCII-HK Merger, and the closing of such shall
be referred to as a “Qualified Closing.” A Qualified Closing must take place
within the time specified in one of the following (i) or (ii): (i) a Qualified
Closing must occur by November 30, 2009 or such date thereafter as it may be
extended by the Extension

 

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Option (as defined below); OR (ii) if, and only if, the shareholder vote on the
HK-SCII merger is made by written consent and filing of an Information Statement
with the SEC, a Qualified Closing has not occurred by October 31, 2009 or such
date thereafter as it may be extended by the Extension Option (as defined
below). The specific dates referenced in subsections (i) and (ii) in the
immediately preceding sentence (November 30, 2009 and October 31, 2009,
respectively) shall be automatically deemed extended by ninety (90) calendar
days unless Robert Rosen, on behalf of all holders of these and the other
Warrants issued pursuant to the Settlement Agreement the “Holders”), gives
written notice to SCII that the extension is declined by the Holders (the
Extension Option”).

If a Qualified Closing does not take place within the time as specified
immediately above, then this Agreement shall be null and void and of no further
force and effect. All cash, warrants and other consideration shall be returned
by Plaintiffs and the Parties will continue with the Actions, except that all
parties shall stipulate to the dismissal of SCII from any actions in which it is
then a party. The remaining parties will then work together to set trial dates
as soon as practical.

CONSIDERATION BY DEFENDANTS

CASH

Defendants shall pay $100,000 as follows: $33,333 upon the execution of this
Agreement; $33,333 on September 4, 2010; and $33,334 on September 4, 2011.
Payments shall be made to the Rosen and Associates, P.C. Trust Account.

To assure that Defendants comply with the second and third cash payment
obligations, Defendants shall cause SCII to issue two stock certificates of SCII
common shares, in the denomination of 200,000 shares each made out to
“Histostem, Inc., a Delaware company” (the “Certificate” or “Certificates”). R&A
shall hold in escrow the two Certificates. If Defendants fail to make the second
$33,333 payment on or before September 4, 2010, Plaintiffs shall have the option
to turn over to H-USA the first Certificate which shall be honored by Defendants
and SCII, in all respects. If Defendants do make the second payment by
September 4, 2010, R&A shall mark the Certificate cancelled and return it to
Robert Ross. If Defendants fail to make the third $33,334 payment on or before
September 4, 2011, Plaintiffs shall have the option to turn over to H-USA the
second Certificate which shall be honored by Defendants and SCII in all
respects. If Defendants do make the third payment by September 4, 2011, R&A
shall mark the Certificate cancelled and return it to Robert Ross.

Plaintiffs shall have the further right to seek the Court’s enforcement pursuant
to CCP Section 664.6 if Defendants fail to make one or both of the cash payments
and Plaintiffs cannot have full use of either or both Certificates.

 

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If Plaintiffs receive any or all of the shares represented by the Certificates,
such shares shall not be included in any calculations made pursuant to the
Equity in SCII section below.

EQUITY IN SCII

Warrants. SCII estimates that the number of its fully diluted total outstanding
shares of common stock as of the fifth trading day following the closing of the
SCII-HK Merger will be One Hundred Twenty Three Million, Two Hundred Thirty
Eight Thousand, Five Hundred Thirty Eight (123,238,538). It is an objective of
this Settlement Agreement that Plaintiffs, including their designees, will
receive warrants for shares representing seven-and-one-half percent of the fully
diluted total outstanding shares of common stock as of the fifth trading day
following the closing of the SCII-HK merger. This objective will be accomplished
by the issuance of Initial Warrants, Adjustment Warrants, and True-Up Warrants,
as described below.

LIST OF WARRANT RECIPIENTS. Plaintiffs shall provide to SCII the names of up to
ten persons (which may include an entity or a trust or joint tenancy as a single
title holder) to whom the Warrants shall be issued (“Recipients”) and for each
Recipient, the number of shares to be received by such person upon exercise of
the Warrants. The list will require SCII to issue not more than ten (10) Initial
Warrants. Plaintiffs represent that Plaintiffs have disclosed, and will
disclose, to each Recipient only such information about SCII as has been filed
with the Securities and Exchange Commission, and have made no representations to
Recipients about the future of SCII, its financial projections or the future
value of its shares. Plaintiffs will provide to SCII an executed certificate,
signed by each Recipient, containing the following language:

LIMITATION ON EXERCISE AND SALES. Each holder of this Warrant acknowledges that
this Warrant and the Warrant Shares have not been registered under the
Securities Act, as of the date of issuance hereof and agrees not to sell,
pledge, distribute, offer for sale, transfer or otherwise dispose of this
Warrant, or any Warrant Shares issued upon its exercise, in the absence of
(i) an effective registration statement under the Securities Act as to this
Warrant or such Warrant Shares, as the case may be, under any applicable Blue
Sky or state securities law then in effect or (ii) an opinion of counsel,
satisfactory to the SCII, which shall be acted upon by SCII within five
(5) business days upon receipt and shall not be unreasonably withheld, that such
registration and qualification are not required.

SCII shall be under no obligation to issue the shares covered by such exercise
unless and until the Warrant Holder shall have

 

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executed a representation and warranty that states that he will not transfer the
Warrant Shares unless pursuant to an effective and current registration
statement under the Securities Act or an exemption from the registration
requirements of the Securities Act and any other applicable restrictions, in
which event the Warrant Holder shall be bound by the provisions of a legend or
legends to such effect that shall be endorsed upon the certificate(s)
representing the Warrant Shares issued pursuant to such exercise. In such event,
the Warrant Shares issued upon exercise hereof shall be imprinted with a legend
in substantially the following form:

This security has been acquired for investment and has not been registered under
the Securities Act of 1933, as amended, or applicable state securities laws.
This security may not be sold, pledged or otherwise transferred in the absence
of such registration or pursuant to an exemption there from under said Act and
such laws, supported by an opinion of counsel, reasonably satisfactory to the
SCII and its counsel, that such registration is not required.”

INITIAL WARRANTS

Following execution of this Settlement Agreement and within five business days
after SCII’s receipt of the List of Recipients from Plaintiffs described above,
SCII will issue up to ten warrants in the form attached as Exhibit B hereto for
the purchase by Recipients of a total of Nine Million, Two Hundred and Forty Two
Thousand, Eight Hundred and Ninety (9,242,890) shares of common stock of SCII,
par value $.001, at an exercise price of One-Tenth of One Cent ($.001) per share
(the “Initial Warrants”). SCII shall deliver the Initial Warrants to Rosen &
Associates.

ADJUSTMENT WARRANTS

Initial Warrant Adjustment Period. The time period beginning September 4, 2009
and ending on the date SCII issues the Initial Warrants described above shall be
known as the “Initial Warrant Adjustment Period”.

Bases for Adjustment.

Adjustment Warrants will be issued by SCII to the Recipients, if, but only if,
SCII shall do any of the following Bases for Adjustment during the Initial
Warrant Adjustment Period:

(a) pay a dividend or make a distribution on its Common Stock in shares of
Common Stock;

(b) subdivide its outstanding shares of Common Stock into a greater number of
shares;

 

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(c) combine its outstanding shares of Common Stock into a smaller number of
shares; or

(d) issue by reclassification of its outstanding shares of Common Stock any
shares of its capital stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing
corporation).

Adjustment of Initial Warrants.

In the event a Basis for Adjustment occurs during the Initial Warrant Adjustment
Period, as described above, SCII shall calculate an adjustment in the total
number of shares of common stock of SCII subject to the Initial Warrants. The
objective of the calculation is to reflect a fair allocation of the economic
effects of the event that has occurred and is a Basis for Adjustment, so that
the number of shares subject to Warrants after adjustment is seven-and-one-half
percent (71/2%) of the fully diluted total outstanding number of shares of
common stock of SCII following the event constituting the Basis for Adjustment.

For example if there occurred a three-for-one split of the common stock of SCII
during the Initial Warrant Adjustment Period, then additional Warrants for three
times the number of shares specified in the Initial Warrants would be issued; if
there was a stock dividend of one share of common stock for every outstanding
share, then the number of shares specified in the Initial Warrants would be
doubled. Such adjustments shall be made successively whenever any event listed
above shall occur.

Adjustments shall be made pro rata for each Recipient.

If the result of adjustment calculation is that warrants for additional shares
of SCII common stock are appropriate, then SCII shall issue not more than ten
warrants for the additional shares in the form attached as Exhibit B hereto;
these shall be called “Additional Warrants.” SCII shall deliver the Additional
Warrants, if any, to Rosen & Associates.

TRUE-UP CALCULATION ADJUSTMENT WARRANTS

The True-Up Calculations. Within ten (10) business days after the fifth trading
day for SCII common stock following a Qualified Closing of the SCII-HK Merger,
SCII shall perform a “true-up” calculation of the total number of fully diluted
outstanding shares of SCII common stock, in accordance with the provisions
below. SCII shall next multiply that total number by seven-and-one-half percent
(71/2%); the resulting number of shares of SCII common stock will be known as
the “True-Up Number.”

From the True-Up Number, SCII shall subtract the shares in the Initial Warrants,
and shall also subtract the shares in the Additional Warrants. The resulting
number of shares of SCII common stock, if greater than zero, will be known as
the True-Up Adjustment Number.

 

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Provisions for making True-Up Calculations.

The total number of fully diluted outstanding shares of common stock of SCII
shall be calculated using the Treasury Stock Method as defined by generally
accepted accounting principle in the United States. In addition to shares of
issued and outstanding common stock, it shall include all preferred stock,
convertible preferred stock, options, warrants, convertible debt and all
commitments to issue any of such, all as specified or limited below.

In making the calculation, it shall be assumed that :

(a) All conversions into common stock of all convertible preferred stock,
options, warrants and convertible debt have been exercised.

(b) The exercise prices of all SCII convertible preferred stock, options,
warrants and convertible debt shall be the prices pursuant to the terms of said
convertible preferred stock, options, warrants and convertible debt.

(c) All arrangements and commitments, whether oral or written, to obtain SCII
securities or convert to SCII securities shall be included in the calculation.

(d) All proceeds from the exercise of the convertible preferred stock, options,
warrants and convertible debt shall be used to purchase common stock at the
Weighted Average Closing Market Price for the five trading days following
Qualified Closing of the Merger between HK and SCII.

Weighted Average Closing Market Price Example. Assume that the following are the
closing market price and volume of shares traded on the 5 trading days following
the Qualified close of the Merger between SCII and HK:

 

     A
CLOSING PRICE    B
VOLUME    C
AxB

DAY 1

   $ 1.00    100,000    $ 100,00

DAY 2

     1.10    90,000      99,000

DAY 3

     1.20    80,000      96,000

DAY 4

     .95    100,000      95,000

Day 5

     1.00    150,000      150,000                   

TOTAL

   $ 5.20    520,000    $ 540,000

Therefore the Weighted Average Closing Market Price under the above example
would be $540,000/520,000 or $1.038 Per share.

(e) Notwithstanding the foregoing, convertible preferred stock, options,
warrants and convertible debt shall have a dilutive effect under the Treasury
Stock Method (i.e. be counted) only when the Weighted Average Market Price of
the common stock exceeds the exercise price of the convertible preferred stock,
options, warrants and convertible debt (they are “in the money”).

 

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Issuance of True-Up Adjustment Warrants

Based upon the calculations described above, within ten business days after the
close of the fifth trading day after a Qualified Closing of the Merger between
HK and SCII, SCII will issue up to ten warrants, in the form attached as Exhibit
B hereto, for the purchase of the same number of shares of SCII common Stock as
the True-Up Adjustment Number. Such shares will have a par value of $.001, and
an exercise price of One-Tenth of One Cent ($.001) per share. These Warrants
shall be known as “True-Up Adjustment Warrants.”

The True Up Adjustment Warrants shall be issued in the names of the Recipients
as previously provided by Plaintiffs and in the same percentage to each as the
Initial Warrants were issued to each Recipient.

As a result of the True-Up Adjustment Warrants, the Recipients shall
collectively have received, through the sum of the shares for purchase under the
Initial Warrants, the Adjustment Warrants and the True-Up Adjustment Warrants a
total number of shares amounting to seven-and-one-half percent (71/2%) of the
total fully-diluted outstanding shares of common stock of SCII.

None of the Parties to this Agreement shall do anything, directly or indirectly,
out of the ordinary to affect the Weighted Average Closing Market Price for the
five trading days following the Qualified Close of the Merger between HK and
SCII. Notwithstanding the above, SCII and HK, as it has done in the past for
similar events, shall immediately, upon execution of this Agreement, issue a
press release describing the terms of the Agreement; and, immediately following
the Qualified Close of the Merger between HK and SCII, issue a press release
describing the terms of the Merger and that SCII has acquired ninety percent
(90%) of the equity of HK,

SCII shall convert all warrants for shares of stock in SCII when validly
presented for conversion by Plaintiff or its designees.

 

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REPRESENTATIONS AND WARRANTIES OF DEFENDANTS AND SCII

Defendants and SCII represent and warrant that this Settlement Agreement and the
Reorganization and Stock Exchange Agreement, as amended, do not violate any
material provision of any corporate article, bylaw or resolution of their
respective companies, or any law or regulation of the United States or the
Republic of Korea.

SCII represents and warrants that this Settlement Agreement and the
Reorganization and Stock Exchange Agreement, as amended, do not violate any
provision of any material contract of SCII.

Defendants represents and warrants that this Settlement Agreement and the
Reorganization and Stock Exchange Agreement, as amended, do not violate any
provision of any material contract of SCII or HK.

Defendants represent and warrant that the shares of HK stock that has been or
will be issued to SCII as part of the terms of the Merger are validly issued and
authorized to be issued pursuant to: all requisite corporate powers including
all articles, bylaws and shareholder and Board of Director resolutions; as well
as all governmental laws, rules and regulations.

SCII represent and warrant that the Warrants to be issued under this Agreement
and the Shares to be issued upon the conversion of the Warrants shall be validly
issued and authorized pursuant to all requisite corporate powers including all
articles, bylaws and shareholder and Board of Director resolutions; as well as
all applicable United States and Nevada laws, rules and regulations.

Defendants and SCII represent and warrant that they plan to continue with their
Merger in all material aspects and that no other merger or other activities will
interfere with SCII obtaining ownership of ninety percent (90%) of the stock of
HK if a Qualified Closing occurs.

Defendants and SCII represent and warrant that this Settlement Agreement has
been reviewed and approved by all the members of HK’s Board of Directors and by
all the members of SCII’s Board of Directors. Defendants and SCII represent and
warrant that the persons executing this Agreement on behalf of HK and SCII have
all the requisite corporate power to execute this Agreement.

Defendants and SCII represent and warrant that each and all of them have read
this Agreement and have had the opportunity to consult with their own counsel
about any questions they may have about this Agreement.

Defendants and SCII represent and warrant that Robert C. Rosen, Esq., and
Rosen & Associates, P.C. do not represent any of the Defendants, have never
represented any of the Defendants and do not represent any of the Defendants or
SCII with respect to this Agreement.

 

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Defendants and SCII represent and warrant that neither they nor any other
person, to their knowledge, on either their behalf and/or at their request
and/or otherwise, has knowledge of any options, warrants or conversion rights
concerning SCII other than as disclosed in SCII filings with the SEC or as
identified herein.

Defendants represent and warrant that the representations and warranties of HK
as contained in the Reorganization and Stock Purchase Agreement filed with the
SEC in March 2008, particularly Paragraph 6(a) through (j)1-10 – with the
exception of Paragraph 6(I) – are true accurate and complete.

REPRESENTATIONS AND WARRANTIES OF PLAINTIFFS

Plaintiffs represent and warrant that this Agreement has been reviewed and
approved by all the members of H-USA’s Board of Directors. The person executing
this Agreement on behalf of H-USA and R & A have all the requisite corporate
power to execute this Agreement.

Plaintiffs warrant that each and all of them have read this Agreement and have
had the opportunity to consult with their own counsel about any questions they
may have about this Agreement.

CONSIDERATION BY PLAINTIFFS

Waiver of Claims. Effective upon the issuance by SCII of the True-Up Adjustment
Warrants, Plaintiffs agree that all of their claims that have accrued or arisen
as of that date, other than for enforcement of the provisions of this Settlement
Agreement, shall be and hereby are waived and shall be time-barred. Plaintiffs
agree they not pursue any such claims in arbitration or litigation in the
future.

Mutual General Releases.

Plaintiffs. Effective upon the issuance by SCII of the True Up Adjustment
Warrants, Plaintiffs, and each of them, on behalf of themselves and their
successors, assigns, beneficiaries, administrators, employees, independent
contractors, partners, associates, agents, representatives, principals, trusts,
trustees and/or attorneys and/or all other persons acting through, under and/or
in concert with them hereby voluntarily, knowingly and willingly release and
discharge SCII and each of the Defendants, from any and all liabilities, claims,
damages, causes of action,

 

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obligations, demands, equitable relief, injunctions, declaratory relief,
rescission of any agreement, losses, compensation, wages, commissions,
grievances, suits, proceedings, costs, fees and/or expenses of any kind and/or
nature whatsoever, past and/or present, ascertained and/or unascertained, known
and/or unknown, suspected and/or unsuspected, claimed and/or unclaimed which
they have, and/or have ever had by virtue of any act, omission, reason, cause
and/or thing relating to the Actions and/or which could have been asserted in
the Actions, at any time whatsoever and/or for any reason whatsoever, and/or
including, but not limited to the claims set forth in the Complaints, except for
the enforcement of rights and obligations under this Settlement Agreement.

Defendants. Defendants and SCII, and each of them, on behalf of themselves and
Defendants’ and SCII’s successors, assigns, beneficiaries, administrators,
employees, independent contractors, partners, associates, agents,
representatives, principals, trusts, trustees and/or attorneys and/or all other
persons acting through, under and/or in concert with them, hereby voluntarily,
knowingly and willingly releases and discharges each of the Plaintiffs from any
and all liabilities, claims, damages, causes of action, obligations, demands,
equitable relief, injunctions, declaratory relief, rescission of any agreement,
losses, compensation, wages, commissions, grievances, suits, proceedings, costs,
fees and/or expenses of any kind and/or nature whatsoever, past and/or present,
ascertained and/or unascertained, known and/or unknown, suspected and/or
unsuspected, claimed and/or unclaimed which they have, and/or have ever had by
virtue of any act, omission, reason, cause and/or thing relating to the Actions
and/or which could have been asserted in the Actions, at any time whatsoever
and/or for any reason whatsoever, and/or including, but not limited to the
claims set forth in the Cross-Complaints, except for the enforcement of rights
and obligations under this Settlement Agreement.

Remised Claims. Remised Claims: The Parties hereto acknowledge that HK and
Dr. Han obtained a common stock interest in H-USA at or after the time of its
formation which interest has subsequently been relinquished and that Shen and
Rosen obtained option rights to purchase equity interests in HK. All parties
hereto further acknowledge and confirm that all such rights have been and hereby
are remised and relinquished and neither HK nor Dr. Han have or claim any
interest in H-USA and neither Shen nor Rosen have or claim any interest in HK.

Unknown Claims. It is the intention of the Parties to this Agreement that this
Agreement shall be effective as a full mutual general release of each and every
released matter set forth above pertaining to any and all actions, disputes and
claims which exist between the Plaintiffs, Defendants and SCII at the time of
executing this Agreement, including without limitation all claims which were
and/or could have been raised by the Plaintiffs and Defendants against one
another in the Actions.

 

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Familiarity with Section 1542 . In furtherance of this intention, the Parties
acknowledge that they are familiar with and understand Section 1542 of the Civil
Code of the State of California. Section 1542 of the California Civil Code
provides as follows:

“A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which
if known by him or her must have materially affected his or her settlement with
the debtor.”

Waiver of Section 1542. The Plaintiffs, Defendants and SCII expressly waive and
relinquish every claim, right and/or benefit which they may have subject to
California Civil Code § 1542. to the fullest extent that the Plaintiffs,
Defendants and SCII may lawfully waive such claim, right and/or benefit. In
connection with such waiver and relinquishment, the Plaintiffs, Defendants and
SCII acknowledge that they are each aware that she/he/it may hereafter discover
facts in addition to and/or different from those which are known and/or believed
to be true with respect to the subject matter of this Agreement, and that it is
the intention of the Plaintiffs, Defendants and SCII hereby to fully, finally
and forever settle and release all matters, disputes, differences, known and/or
unknown, suspected and/or unsuspected, which may now exist and/or heretofore
have existed by and among the Parties The release given herein shall be and
remain in effect as a full and complete release, notwithstanding the discovery
and/or existence of any such additional and/or different facts, except only that
the release in this paragraph shall not apply to the enforcement of rights and
obligations of each of the Parties under and pursuant to the terms of this
Settlement Agreement.

COURT RETAINS JURISDICTION

CCP Section 664.6 provides in part: “if requested by the Parties, the Court may
retain jurisdiction over the Parties to enforce the settlement until performance
is full of the terms of the settlement.”

Pursuant to CCP Section 664.6 the Los Angeles Superior Court shall retain
jurisdiction over the parties to Histostem Inc. v. Han, Case No. BC 355 927 to
enforce the terms of this Settlement Agreement.

At the insistence of the parties and to accommodate them, SCII agrees to and
shall move to intervene in the Histostem Inc. v. Han lawsuit for the limited
purpose,

 

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and only to the extent, if any, that it may fail to honor the Certificates or to
issue Warrants as provided in this Settlement Agreement, so that the Los Angeles
Superior Court may require specific performance from SCII of these obligations
under this Settlement Agreement and for no other purpose.

DISMISSAL

Within seven days after the later of:

(a) a Qualified Closing of the Merger between SCII and HK;

(b) the issuance by SCII of the True Up Adjustment Warrants;

(c) the payment by Defendants of the first cash installment of $33,333; and

(d) the delivery by SCII of two 200,000 share Certificates to Rosen &
Associates, all as described hereinabove,

Plaintiffs and Defendants shall cause the Actions to be dismissed (with the
exception of Histostem v. Han, which shall remain open for the sole purpose of
enforcing the remaining terms of this Agreement pursuant to CCP Section 664.6)
and shall serve such dismissal by fax and U.S. mail.

MISCELLANEOUS PROVISIONS

1. Attorneys’ Fees. Each of the parties to the Actions agree to bear all of
their own respective costs and expenses of litigation, including court and
arbitration costs, legal and/or attorneys’ fees, experts’ fees, expenses and
filing fees.

2. Binding. This Settlement Agreement, together with the general release herein
contained, shall be binding upon and inure to the benefit of all of the Parties.

3. Entire Agreement. Including the Reorganization and Stock Exchange Agreement,
as amended, and its exhibits and schedules, and the exhibits hereto, this
Settlement Agreement constitutes the entire agreement among the Parties. The
Parties represent and warrant that all prior negotiations and understandings and
agreements in principle by and amongst the Parties are superseded and replaced
by this Agreement. The Parties further represent and warrant that none of them
is relying upon any understanding(s), promise(s) and/or agreement(s) between
and/or amongst them other than as expressly set forth herein. Each of the
Parties acknowledge that none of the Parties, and no agent and/or counsel of a
Party, has made any promise, representation and/or warranty whatsoever, express
and/or implied, concerning the subject matter of this Agreement which is not
contained in this Agreement, to induce execution of this Agreement. Each of the
Parties acknowledge and warrant that he/she/it is not executing this Agreement
in reliance on any promise, representation and/or warranty not contained herein.

 

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4. No Admission of Liability. The Parties acknowledge that this Agreement
constitutes a complete settlement of all claims whatsoever, known and unknown,
and that it is not an admission of liability on the part of any Party hereto and
is not a concession by any party that any of the contentions of any adverse
party are true and/or meritorious except as expressly set forth in this
Agreement

5. Modification. This Agreement may only be changed and/or amended in writing,
and only by an instrument in writing specifically stating that it is a
supplement, modification and/or amendment of this Agreement and only by an
instrument in writing which is signed by each of the Parties affected by such
modification. This Agreement cannot be changed orally.

6. Governing Law. This Agreement shall be governed by the laws of the State of
California, provided, however, that it shall not be construed against any Party
as its drafter.

7. Severable. If, for any reason, any part of this Agreement is found by a court
of law to be unenforceable, the remaining portions of the Agreement shall not be
invalidated and shall remain in full force and effect provided that the entire
Agreement still caries out the intent of the Parties. Warranties, agreements and
representations of each Party contained in this Agreement shall survive its
execution and performance.

8. Cooperation. The Parties shall fully cooperate with each other as may from
time to time be necessary in connection with implementing the terms of this
Agreement.

9. Enforcement of Agreement and Attorneys Fees. If there is litigation or a
request that the Court enforce any of the terms of this Agreement, and/or
performance hereunder, the prevailing Party shall recover reasonable attorneys’
fees and costs incurred in that litigation. The term “Prevailing Party” shall be
as defined in California Civil Code Section 1717.

10. Own Counsel. Each of the Parties acknowledges that he/she/it has been
represented by counsel of their own choice in connection with the preparation
and execution of this Agreement, and that such counsel has fully and completely
explained to them each, every and all of the terms and conditions of this
Agreement. Each of the Parties acknowledges and represents that he/she/it has
also read this Agreement in full and understands and voluntarily consents to
each and every provision contained herein.

 

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11. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, and any counterpart shall have the same effect as
if all parties had executed the same counterparts. Facsimile signatures shall
have the same force and effect as original signatures.

12. Language. All pronouns and any variations thereof referred to in this
Agreement shall be deemed to refer to the masculine, feminine and/or neuter,
singular and/or plural, as the identity of the person and/or persons may
require. Dr. Han specifically acknowledges that he has had the opportunity to
have this Settlement Agreement translated into Korean.

13. Notices. Except as otherwise provided for herein, service of all papers and
things in connection with this Agreement shall be made by fax and personal
delivery on each of the following persons:

For Plaintiffs:

Robert C. Rosen, Esq.

ROSEN & ASSOCIATES, P.C.

333 South Grand Avenue, Suite 1925

Los Angeles, California 90071

(Tel: 2130362-1000)

(Fax: 213-362-1001)

For Defendants:

Robert M. Ross, Esq.

KLASS, HELMAN & ROSS

16133 Ventura Blvd., Suite 1145

Encino, CA 91436

(Fax: 818-990-2399)

 

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Scott J. Nord, Esq.

LAW OFFICES OF SCOTT J. NORD

500 North Brand Blvd., Suite 550

Glendale, CA 91203

(Fax: 818-553-8075)

For SCII:

Stem Cell Therapy International, Inc.

Attention: David Stark, CEO

Andrew Nordstrud, CFO

15837 Trackside Dr.

Odessa, Florida 33556

(Tel: 813-505-1829)

(Fax: 866-924-0751)

Richard T. Williams, Esq.

Holland & Knight LLP

633 W. Fifth Street, 21st Floor

Los Angeles, California 90071

(Tel: 213-896-2410)

(Fax: 213-896-2450)

For the Rosen Parties:

Robert C. Rosen, Esq.

ROSEN & ASSOCIATES, P.C.

333 South Grand Avenue, Suite 1925

Los Angeles, California 90071

(Tel: 213-362-1000)

(Fax: 213-362-1000)

THE PARTIES HERETO ACKNOWLEDGE THAT THEY HAVE READ THIS SETTLEMENT AGREEMENT AND
RELEASE AND FULLY KNOW,

 

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UNDERSTAND AND APPRECIATE ITS CONTENTS AND THAT THEY EXECUTE THE SAME AND MAKE
THE SETTLEMENT PROVIDED FOR HEREIN VOLUNTARILY AND OF THEIR OWN FREE WILL.

 

DATED: September     , 2009   HISTOSTEM, INC., a Delaware Corporation  
(“H-USA”)   By:  

 

    Mike Shen     Its CEO   DATED: September     , 2009  

 

  MIKE SHEN, INDIVIDUALLY DATED: September     , 2009   HISTOSTEM CORPORATION, a
Korean Corporation   By:  

 

  (Print Name)   Its  

 

  (Title) DATED: September     , 2009  

 

    DR. HOON HAN, INDIVIDUALLY  

 

17

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DATED: September     , 2009   STEM CELL THERAPY, INTERNATIONAL, INC.   By:  

 

    Dr. David Stark, CEO   By:  

 

    Andrew Nordstrud, CFO DATED: September     , 2009   ROSEN & ASSOCIATES, P.C.
  BY:  

 

  BY   ROBERT C. ROSEN   Its President DATED: September     , 2009  

 

  ROBERT C. ROSEN, INDIVIDUALLY  

AGREED AS TO FORM AND SUBSTANCE:

  DATED: September     , 2009   LAW OFFICES OF SCOTT NORD   By:  

 

    Scott Nord   Attorney for DR. HOON HAN

 

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DATED: September     , 2009   WAXLER CARNER WEINREB & BRODSKY, LLP   By  

 

    Barry Z. Brodsky   Attorneys for ROBERT ROSEN and ROSEN & ASSOCIATES, P.C.
DATED: September     , 2009   KLASS, HELMAN & ROSS, LLP   By  

 

    Robert Ross   Attorneys for HISTOSTEM CORPORATION, a Korean Corporation
DATED: September     , 2009   STEM CELL THERAPY INTERNATIONAL, INC.   By  

 

    Richard T. Williams, Esq.     HOLLAND & KNIGHT LLP   Attorneys for STEM CELL
THERAPY INTERNATIONAL, INC. DATED: September     , 2009   ROSEN & ASSOCIATES,
P.C.   By:  

 

    Robert C. Rosen   Attorneys for HISTOSTEM, INC. and MIKE SHEN

 

19

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Exhibit A

 

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Exhibit B

THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH
SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933,
AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III)
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH TRANSFER MAY LAWFULLY
BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933.

SUBJECT TO THE PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER
5:00 P.M. EASTERN TIME ON THE “EXPIRATION DATE” ) AS DEFINED BELOW IN SECTION
10.

No. [            ] Date of Issuance:                     

STEM CELL THERAPY INTERNATIONAL, INC.

WARRANT TO PURCHASE [            ] SHARES OF

COMMON STOCK

For VALUE RECEIVED, [                    ] (“Warrantholder”), is entitled to
purchase, subject to the provisions of this Warrant, from Stem Cell Therapy
International, Inc., a Nevada corporation (“Company”), at any time beginning on
the Initial Exercise Date (as defined below) and not later than 5:00 P.M.,
Eastern time, on the Expiration Date (as defined below) (the “Exercise Period”),
at an exercise price per share initially equal to one thousandth of one cents
(.001 cents) (the exercise price in effect being herein called the “Warrant
Price”), [                    ] shares (“Warrant Shares”) of the Company’s
Common Stock, par value $            per share (“Common Stock”). The number of
Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time as described herein.

Section 1. Company to Register Warrants on Books and Records. The Company shall
maintain books for the registering and transfer of the Warrant. Upon the initial
issuance of this Warrant, the Company shall issue and register the Warrant in
the name of the Warrantholder. The Company may deem and treat the registered
holder of the Warrant as the absolute owner hereof for the purpose of any
exercise or any distribution to such holder and for all other purposes, absent
actual valid executed written notice to the contrary as provided herein.

Section 2. Transfers. As provided herein, this Warrant may be transferred only
pursuant to a registration statement filed under the Securities Act of 1933, as
amended (the “Securities Act”), or an exemption from such registration. Subject
to such restrictions, the Company shall transfer this Warrant from time to time
in whole or part upon the books to be maintained by the Company for that
purpose, upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer and such other documents as may be

 

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reasonably required by the Company, including, if required by the Company, an
opinion of its counsel to the effect that such transfer is exempt from the
registration requirements of the Securities Act, to establish that such transfer
is being made in accordance with the terms hereof, and a new Warrant shall be
issued to the transferee and the surrendered Warrant shall be canceled by the
Company; provided, however, the Warrantholder may not request more than three
(3) transfers until that Warrantholder has held the Warrant for a six month
Holding Period from issuance as such term is generally used in accordance with
SEC Rule 144 transactions and no transfers will be allowed until the Initial
Exercise Date, as defined below. The initial six month holding period for any
Warrrantholder (or successor transferee if tacking of the holding period is
available under Rule 144 or any successor Rule) shall be referred to as the
“Initial Holding Period.”

Section 3. Exercise of Warrant. (a) Subject to the provisions hereof, including
the Restricted Exercise During the Initial Holding Period, the Warrantholder may
exercise this Warrant in whole or in part at any time during the Exercise Period
upon surrender of the Warrant, together with delivery of the duly executed
Warrant exercise form attached hereto as Appendix A (the “Exercise Agreement”)
and payment by cash, certified check or wire transfer of funds for the aggregate
Warrant Price for that number of Warrant Shares then being purchased, to the
Company during normal business hours on any business day at the Company’s
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the Warrantholder), or in the event of a cashless
exercise pursuant to Section 3(b) below, with the Net Issue Election Notice
attached hereto as Appendix B duly executed and completed. The Warrant Shares so
purchased shall be deemed to be issued to the Warrantholder or the
Warrantholder’s designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered (or the
Warrantholder shall have delivered evidence of loss, theft or destruction
thereof in the form of a declaration, the Warrant Price shall have been paid and
the completed Exercise Agreement shall have been delivered. Certificates for the
Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement (or Net Issue Election Notice), shall be
delivered to the Warrantholder as soon as possible, the Company’s obligation
will be to deliver instructions to the transfer agent within one (1) business
days and reasonably cooperate to obtain issuance, after this Warrant shall have
been so exercised. The certificates so delivered shall be in such denominations
as may be requested by the Warrantholder and shall be registered in the name of
the Warrantholder or such other name as shall be designated by the
Warrantholder. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the time
of delivery of such certificates, deliver to the Warrantholder a new Warrant
representing the number of shares with respect to which this Warrant shall not
then have been exercised. As used herein, “business day” means a day, other than
a Saturday or Sunday, on which banks in New York City are open for the general
transaction of business. For tax reasons the Company understands the
Warantholder will likely seek issuance to be made against concurrent sale of
some or all of the Warrant Shares, and the Company shall in good faith fully
cooperate with such intent.

(b) In addition to and without limiting the rights of the Warrantholder hereof
under the terms of this Warrant, the Warrantholder may elect to receive, without
the payment by the Warrantholder of the Warrant Price, Warrant Shares equal to
the value of this Warrant or any portion hereof by the surrender of this Warrant
(or such portion of this Warrant being so exercised) together with the Net Issue
Election Notice annexed hereto as Appendix B duly executed and

 

22

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completed, at the office of the Company, or such other office or agency of the
Company as it may reasonably designate by written notice to the Warrantholder,
during normal business hours on any business day. Thereupon, the Company shall
issue to the Warrantholder such number of fully paid, validly issued and
nonassessable Warrant Shares, as is computed using the following formula:

 

   X = Y(A-B)       A   

where

X = the number of shares of Common Stock to be issued to the Warrantholder (or
such other person or persons as directed by the Warrantholder, subject to
compliance with all applicable laws) upon such exercise of the rights under this
Section 3(b)

Y = the total number of shares of Common Stock covered by this Warrant which the
Warrantholder has surrendered for cashless exercise

A = the Market Price of one share of Common Stock on the date that the
Warrantholder delivers the Net Issue Election Notice to the Company as provided
herein. “Market Price” as of a particular date shall mean the following: (i) if
the Common Stock is then listed on a national stock exchange, including the
Nasdaq Stock Market (“Nasdaq”) (including the Nasdaq Global Market), the Market
Price shall be the average of the closing sale price of one share of Common
Stock on such exchange on the five (5) trading days prior to the Valuation Date,
provided that if the Common Stock has not traded in the prior five (5) trading
sessions, the Market Price shall be the average closing sale price of the Common
Stock in the most recent five (5) trading sessions during which the Common Stock
has traded; (ii) if the Common Stock is then quoted on the National Association
of Securities Dealers, Inc. OTC Bulletin Board (the “Bulletin Board”) or such
similar exchange or association, the Market Price shall be the average of the
closing sale price of one share of Common Stock on the Bulletin Board or such
other exchange or association on the five (5) trading days prior to the
Valuation Date, provided that if the Common Stock has not traded in the prior
five (5) trading sessions, the Market Price shall be the average closing sale
price of the Common Stock in the most recent five (5) trading sessions during
which the Common Stock has traded; or (iii) if the Common Stock is not then
listed on a national stock exchange or quoted on Nasdaq, the Bulletin Board or
such other exchange or association, the fair market value of one share of Common
Stock as of the Valuation Date, shall be determined in good faith by the Board
of Directors of the Company and the Warrantholder. If the Common Stock is not
then listed on a national securities exchange, the Bulletin Board or such other
exchange or association, the Board of Directors of the Company shall respond
promptly, in writing, to an inquiry by the Warrantholder prior to the exercise
hereunder as to the fair market value of a share of Common Stock as determined
by the Board of Directors of the Company. In the event that the Board of
Directors of the Company and the Warrantholder are unable to agree upon the fair
market value in respect of subpart (iii) hereof, the Company and the
Warrantholder shall jointly select an appraiser, who is experienced in such
matters. The decision of such appraiser shall be final and conclusive, and the
cost of such appraiser shall be borne equally by the Company and the
Warrantholder. Such adjustment shall be made successively whenever such a
payment date is fixed.

 

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B = the Warrant Price in effect under this Warrant on the date that the
Warrantholder delivers the Net Issue Election Notice to the Company as provided
herein

(c) Notwithstanding anything herein to the contrary, in no event shall the
Warrantholder be entitled to exercise any portion of this Warrant in excess of
that portion of this Warrant upon exercise of which the sum of (1) the number of
shares of Common Stock beneficially owned by the Warrantholder and its
Affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised portion of this Warrant or the
unexercised or unconverted portion of any other security of the Warrantholder
subject to a limitation on conversion analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the exercise
of the portion of this Warrant with respect to which the determination of this
proviso is being made, would result in beneficial ownership by the Warrantholder
and its Affiliates of more than 9.99% of the then outstanding shares of Common
Stock. As used herein, the term “Affiliate” means any person or entity that,
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a person or entity, as such terms
are used in and construed under Rule 144 under the Securities Act. For purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso. The Warrantholder may waive the limitations set
forth herein by Twenty (20) days written notice to the Company.

(d) Notwithstanding anything to the contrary set forth in this Warrant, the
number of shares of Common Stock that may be acquired by a Warrantholder upon
exercise of the Warrants (or otherwise in respect hereof) shall be limited to
the extent necessary to ensure that, following such conversion (or other
issuance), the total number of shares of Common Stock then beneficially owned by
such Warrantholder and its Affiliates and any other 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 whose beneficial ownership of
Common Stock would be aggregated with such Warrantholder’s for purposes of
Section 13(d) of the Exchange Act, does not exceed 19.99% of the then
outstanding total number of issued and outstanding shares of Common Stock
(including for such purpose the shares of Common Stock issuable upon such
exercise). For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
and the rules and regulations promulgated thereunder. The Warrantholder does not
presently intend to, alone or together with others, make a public filing with
the Securities and Exchange Commission to disclose that it has (or that it
together with such other persons or entities have) acquired, or obtained the
right to acquire, as of the date of the first issuance of the Notes (when added
to any other securities of the Company that it or they then own or have the
right to acquire), beneficial ownership in excess of 19.99% of the outstanding
shares of Common Stock or the voting power of the Company.

(f) Notwithstanding the above, during the Initial Holding Period the
Warrantholder may only exercise the Warrant within the following limitations:
(i) if the total Warrant Shares pursuant to this Warrant (after adjustment after
any adjustments pursuant to the terms hereof to be made prior to or at the
Closing of the merger between the Company and Histostem Corp., South Korean
corporation (the SCII -HK Merger”) are less than One Hundred Thousand
(100,000) then

 

24

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the Warrantholder may request exercise of the Warrant up to five (5) in minimum
amounts of Ten Thousand (10,000) Warrant Shares per exercise (“Restricted
Exercise During the Initial Holding Period”); (ii) if the total Warrant Shares
pursuant to this Warrant (after adjustment after any adjustments pursuant to the
terms hereof to be made prior to or at the Closing of the merger between the
Company and Histostem Corp., South Korean corporation (the SCII -HK Merger”) are
greater than One Hundred Thousand (100,000) then the Warrantholder may request
exercise of the Warrant up to five (5) in minimum amounts of Fifty Thousand
(50,000) Warrant Shares per exercise (the restrictions on exercise set forth in
this sentence are referred to as the “Restricted Exercise During the Initial
Holding Period”).

Section 4. Compliance with the Securities Act of 1933; Removal of Legend;
Cooperation. The Company may cause the legend set forth on the first page of
this Warrant to be set forth on each Warrant or similar legend on any security
issued or issuable upon exercise of this Warrant, unless counsel for the Company
is of the opinion as to any such security that such legend is unnecessary. The
Company shall in good faith have its counsel issue a master opinion or otherwise
cooperate such that after the Initial Holding Period as defined herein this
Warrant and any security issued or issuable upon exercise of this Warrant as
provided for herein shall be without legend and freely tradable to the extent
allowed by applicable law, rule or regulation. In addition, during the period
from the Initial Exercise Date and through the Initial Holding Period, and
thereafter unless the Warrant has had the legend removed and is freely
transferable, and any security issued or issuable upon exercise of this Warrant
will be issued without legend and freely tradable without volume limitation
under SEC Rule 144(k) or any successor Rule, the Company shall take all steps in
good faith to assist in administratively facilitating the sale or transfer of
the Warrant and any security issued or issuable upon exercise of this Warrant to
the extent allowed by law, including arranging for the issuance of any
reasonably requested opinions of Company counsel pursuant to Rule 144. It is
understood by the parties that exercise of this Warrant may create substantial
tax liability for the Warrantholder, and the market for the shares may be
volatile, and so time will be of the essence in respect of facilitating any
sale. This is subject to the limitations on number of times a Warrantholder can
request Rule 144 sales during the Initial Holding period as set forth in
Section 10 below.

Section 5. Payment of Taxes. The Company will pay any documentary stamp taxes
attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the Warrantholder in respect of which such shares are
issued, and in such case, the Company shall not be required to issue or deliver
any certificate for Warrant Shares or any Warrant until the person requesting
the same has paid to the Company the amount of such tax or has established to
the Company’s reasonable satisfaction that such tax has been paid. The
Warrantholder shall be responsible for income taxes due under federal, state or
other law, if any such tax is due.

Section 6. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and in substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence in the form of a declaration reasonably satisfactory to
the Company of such loss, theft or destruction of the Warrant.

 

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Section 7. Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved until issued (if necessary) as contemplated by this
Section 7, out of the authorized and unissued shares of Common Stock, sufficient
shares to provide for the exercise of the rights of purchase represented by this
Warrant. The Company agrees that all Warrant Shares issued upon due exercise of
the Warrant shall be, at the time of delivery of the certificates for such
Warrant Shares (or proper exercise of the cashless exercise rights contained in
Section 3(b) hereof), duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock of the Company.

Section 8. Adjustments. Subject and pursuant to the provisions of this
Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.

(a) If the Company shall, at any time or from time to time while this Warrant is
outstanding, pay a dividend or make a distribution on its Common Stock in shares
of Common Stock, subdivide its outstanding shares of Common Stock into a greater
number of shares or combine its outstanding shares of Common Stock into a
smaller number of shares or issue by reclassification of its outstanding shares
of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of this Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
this Warrant shall be entitled to receive the number of shares of Common Stock
or other capital stock which the Warrantholder would have received if this
Warrant had been exercised immediately prior to such event upon payment of a
Warrant Price that has been adjusted to reflect a fair allocation of the
economics of such event to the Warrantholder. Such adjustments shall be made
successively whenever any event listed above shall occur.

(b) If any capital reorganization, reclassification of the capital stock of the
Company, consolidation or merger of the Company with another corporation in
which the Company is not the survivor, or sale, transfer or other disposition of
all or substantially all of the Company’s assets to another corporation shall be
effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful and adequate
provision shall be made whereby each Warrantholder shall thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
herein specified and in lieu of the Warrant Shares immediately theretofore
issuable upon exercise of the Warrant, such shares of stock, securities or
assets as would have been issuable or payable with respect to or in exchange for
a number of Warrant Shares equal to the number of Warrant Shares immediately
theretofore issuable upon exercise of the Warrant, had such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition not
taken place, and in any such case appropriate provision shall be made with
respect to the rights and interests of each Warrantholder to the end that the
provisions hereof (including, without limitation, provision for adjustment of
the Warrant Price) shall thereafter be applicable, as nearly equivalent as may
be practicable in relation to any shares of stock, securities

 

26

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or assets thereafter deliverable upon the exercise hereof. The Company shall not
effect any such consolidation, merger, sale, transfer or other disposition
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or the corporation purchasing or otherwise acquiring such assets or
other appropriate corporation or entity shall assume the obligation to deliver
to the Warrantholder, at the last address of the Warrantholder appearing on the
books of the Company, such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Warrantholder may be entitled to
purchase, and the other obligations under this Warrant. The provisions of this
paragraph (b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.

(c) In case the Company shall fix a payment date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 8(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
payment date shall be determined by multiplying the Warrant Price in effect
immediately prior to such payment date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price per share of Common Stock immediately prior to such payment
date, less the aggregate fair market value (as determined by the Company’s Board
of Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such Market Price per share of Common Stock immediately prior to such payment
date. “Market Price” as of a particular date (the “Valuation Date”) shall mean
the following: (i) if the Common Stock is then listed on a national stock
exchange, including the Nasdaq Stock Market (“Nasdaq”) (including the Nasdaq
Global Market), the Market Price shall be the average of the closing sale price
of one share of Common Stock on such exchange on the five (5) trading days prior
to the Valuation Date, provided that if the Common Stock has not traded in the
prior five (5) trading sessions, the Market Price shall be the average closing
sale price of the Common Stock in the most recent five (5) trading sessions
during which the Common Stock has traded; (ii) if the Common Stock is then
quoted on the National Association of Securities Dealers, Inc. OTC Bulletin
Board (the “Bulletin Board”) or such similar exchange or association, the Market
Price shall be the average of the closing sale price of one share of Common
Stock on the Bulletin Board or such other exchange or association on the five
(5) trading days prior to the Valuation Date, provided that if the Common Stock
has not traded in the prior five (5) trading sessions, the Market Price shall be
the average closing sale price of the Common Stock in the most recent five
(5) trading sessions during which the Common Stock has traded; or (iii) if the
Common Stock is not then listed on a national stock exchange or quoted on
Nasdaq, the Bulletin Board or such other exchange or association, the fair
market value of one share of Common Stock as of the Valuation Date, shall be
determined in good faith by the Board of Directors of the Company and the
Warrantholder. If the Common Stock is not then listed on a national securities
exchange, the Bulletin Board or such other exchange or association, the Board of
Directors of the Company shall respond promptly, in writing, to an inquiry by
the Warrantholder prior to the exercise hereunder as to the fair market value of
a share of Common Stock as determined by the Board of Directors of the Company.
In the event that the Board of Directors of the Company and the Warrantholder
are unable to agree upon the fair market

 

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value in respect of subpart (iii) hereof, the Company and the Warrantholder
shall jointly select an appraiser, who is experienced in such matters. The
decision of such appraiser shall be final and conclusive, and the cost of such
appraiser shall be borne equally by the Company and the Warrantholder. Such
adjustment shall be made successively whenever such a payment date is fixed.

(d) An adjustment to the Warrant Price shall become effective immediately after
the payment date in the case of each dividend or distribution referred to in
(c) hereof and immediately after the effective date of each other event referred
to in (a), (b) or (d) hereof which requires an adjustment. Upon any adjustment
of the Warrant Price and the number of Warrant Shares subject to this Warrant,
then and in each such case, the Company shall give written notice thereof, by
first-class mail, postage prepaid, addressed to the Warrantholder as shown on
the books of the Company, which notice shall state the Warrant Price resulting
from such adjustment and the increase or decrease, if any, in the number of
shares of Common Stock purchasable at such price upon the exercise of this
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.

(e) In the event that, as a result of an adjustment made pursuant to this
Section 8, the Warrantholder shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon exercise of this Warrant shall be subject
thereafter to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Warrant.

Section 9. Fractional Interest. The Company shall not be required to issue
fractions of Warrant Shares upon the exercise of this Warrant. If any fractional
share of Common Stock would, except for the provisions of the first sentence of
this Section 9, be deliverable upon such exercise, the Company, in lieu of
delivering such fractional share, shall pay to the exercising Warrantholder an
amount in cash equal to the Market Price of such fractional share of Common
Stock on the date of exercise.

Section 10. Expiration Date and Initial Exercise Date. This Warrant may be
exercised at any time after, and including, the first Business Day following the
closing of the HK-SCII Merger (the “Initial Exercise Date”) until the fifth
anniversary of the date of issuance set forth above (the “Final Exercise Date”)
unless it has previously expired pursuant to this Section. The day on which the
HK-SCII Merger closes is referred to herein as the “Merger Closing Date.” As
used herein “Business Day” is any calendar day on which the NASDAQ Stock Market
or its successor is open for trading.

The “Expiration Date” of the Warrants as used herein shall be first to occur of
the following: (i) if, and only if, the Merger Closing Date has not occurred by
November 30, 2009 or such date thereafter as it may be extended by the Extension
Option (as defined below); (ii) if, and only if, the shareholder vote on the
HK-SCII merger is made by written consent and filing of an Information Statement
with the SEC, if, and only if, the Merger Closing Date has not occurred by
October 31, 2009 or such date thereafter as it may be extended by the Extension
Option (as defined below); (iii) if the Warrant has not been sooner terminated
pursuant to subsections (i) or (ii) immediately above, the Expiration Date shall
be the fifth anniversary of the date of issuance set forth above. SCII shall

 

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send a signed notice of the Merger Closing Date after the HK-SCII Merger is
closed to be attached to this Warrant for future reference. The dates referenced
in subsections (i) and (ii) in the first sentence of this paragraph related to
the Expiration Date shall be automatically deemed extended by ninety
(90) calendar days unless Robert Rosen, on behalf of all holders of these and
the other Warrants issued pursuant to the Settlement Agreement the “Holders”),
gives written notice to SCII that the extension is declined by the Holders. As
used herein “Settlement Agreement” refers to that certain Settlement Agreement
and Release by and among and executed by Michael Shen, Robert Rosen, Rosen and
Associates, P. C., Dr. Hoon Han, Histostem Corp., Histostem, Inc. and the
Company dated             , 20    .

Section 11. Benefits. Nothing in this Warrant shall be construed to give any
person, firm or corporation (other than the Company and the Warrantholder. any
legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.

Section 12. Notices to Warrantholder. Upon the happening of any event requiring
an adjustment of the Warrant Price, the Company shall promptly give written
notice thereof to the Warrantholder at the address appearing in the records of
the Company, stating the adjusted Warrant Price and the adjusted number of
Warrant Shares resulting from such event and setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
Failure to give such notice to the Warrantholder or any defect therein shall not
affect the legality or validity of the subject adjustment.

Section 13. Identity of Transfer Agent. The Transfer Agent for the Common Stock
is Standard Transfer and Trust. Upon the appointment of any subsequent transfer
agent for the Common Stock or other shares of the Company’s capital stock
issuable upon the exercise of the rights of purchase represented by the Warrant,
the Company will mail to the Warrantholder a statement setting forth the name
and address of such transfer agent.

Section 14. Notices. Unless otherwise provided, any notice required or permitted
under this Warrant shall be given in writing and shall be deemed effectively
given as hereinafter described on the earlier of (i) if given by personal
delivery, then such notice shall be deemed given upon such delivery, (ii) if
given by facsimile or electronic mail, then such notice shall be deemed given
upon receipt of confirmation of complete transmittal, (iii) if given by mail,
then such notice shall be deemed given upon the earlier of (A) receipt of such
notice by the recipient or (B) three (3) days after such notice is deposited in
first class mail, postage prepaid, (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one
business day after delivery to such carrier, and (v) upon actual receipt by the
party to whom the notice is required to be given. All notices shall be addressed
as follows: if to the Warrantholder, at its address as set forth in the
Company’s books and records and, if to the Company, at the address as follows,
or at such other address as the Warrantholder or the Company may designate by
ten (10) days’ advance written notice to the other:

If to the Company:

 

29

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With a copy to:

Section 16. Assignment. The Warrantholder may transfer its rights hereunder, in
whole or in part, to any other person, if which person shall agree in writing to
be bound by the terms and conditions of this Warrant, and provided that written
notice is given to the Company of any such transfer in accordance with Appendix
C and such transfer is in accordance with applicable law, including the
securities laws. Upon receipt by the Company of notice by the Warrantholder of a
permissible transfer of any portion of this Warrant in accordance with the terms
hereof, the Company shall promptly deliver to such transferee a Warrant in the
form hereof exercisable for the number of Warrant Shares the right of which to
purchase has been transferred. This right is subject to the limitations on
transfers set forth in section 9 above.

Section 17. Successors. All the covenants and provisions hereof by or for the
benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.

Section 18. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Warrant shall be governed by, and construed in accordance with, the internal
laws of the State of California, without reference to the choice of law
provisions thereof. The Company and, by accepting this Warrant, the
Warrantholder, each irrevocably submits to the exclusive jurisdiction of the
courts of the State of California located in Los Angeles and the United States
District Court for the Central District of California for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this Warrant
and the transactions contemplated hereby. Service of process in connection with
any such suit, action or proceeding may be served on each party hereto anywhere
in the world by the same methods as are specified for the giving of notices
under this Warrant. The Company and, by accepting this Warrant, the
Warrantholder, each irrevocably consents to the jurisdiction of any such court
in any such suit, action or proceeding and to the laying of venue in such court.
The Company and, by accepting this Warrant, the Warrantholder, each irrevocably
waives any objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.

Section 19. No Rights as Stockholder. Prior to the exercise of this Warrant, the
Warrantholder shall not have or exercise any rights as a stockholder of the
Company by virtue of its ownership of this Warrant.

Section 20. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the Company and the then current Warrantholder, and such change,
waiver, discharge or termination shall be binding on all future Warrantholders.

Section 21. Section Headings. The section headings in this Warrant are for the
convenience of the Company and the Warrantholder and in no way alter, modify,
amend, limit or restrict the provisions hereof.

**********

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as
of the          day of             , 2009.

 

STEM CELL THERAPY INTERNATIONAL, INC.   By:  

 

  Name:     Title:  

 

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APPENDIX A

STEM CELL THERAPY INTERNATIONAL, INC.

WARRANT EXERCISE FORM

To STEM CELL THERAPY INTERNATIONAL, INC.

The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant (“Warrant”) for, and to purchase thereunder by
the payment of the Warrant Price and surrender of the Warrant,
            shares of Common Stock (“Warrant Shares”) provided for therein, and
requests that certificates for the Warrant Shares be issued as follows:

 

  

 

      Name      

 

      Address      

     

     

     

      Federal Tax ID or Social Security No.   

 

and delivered by    (certified mail to the above address, or    (electronically
(provide DWAC Instructions:            ), or    (other (specify):
                                         
                                                ).

and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned’s Assignee as below
indicated and delivered to the address stated below.

 

Dated:                     ,              Note: The signature must correspond
with the name of the Warrantholder as written on the first page of the Warrant
in every particular, without alteration or enlargement or any change whatever,
unless the Warrant has been assigned.   Signature:  

 

 

     

  Name (please print)  

     

 

     

  Address  

     

  Federal Identification or   Social Security No.  

 

Assignee:

 

     

 

     

 

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APPENDIX B

Net Issue Election Notice

To: STEM CELL THERAPY INTERNATIONAL, INC.

Date:[                    ]

The undersigned hereby elects under Section 3(b) of this Warrant to surrender
the right to purchase [                    ] shares of Common Stock pursuant to
this Warrant and hereby requests the issuance of [                    ] shares
of Common Stock. The certificate(s) for the shares issuable upon such net issue
election shall be issued in the name of the undersigned or as otherwise
indicated below.

 

 

Signature

 

Name for Registration

 

Mailing Address

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APPENDIX C

ASSIGNMENT FORM

FOR VALUE RECEIVED,                                          hereby sells,
assigns and transfers to the transferee named below [the rights to purchase
            of the number of Warrant Shares under] this Warrant, together with
all right, title and interest therein. [The right to purchase the remaining
number of Warrant Shares shall remain the property of the undersigned.] The
transferee agrees to be bound by the terms and conditions of this Warrant and
represents that it is at the time of transfer, and will be on each date on which
it exercises the Warrant, an “accredited investor” as defined in Rule 501(a) of
Regulation D, as amended, under the Securities Act of 1933.

Dated:                     

 

[NAME OF WARRANTHOLDER]

By

 

 

 

Signature

Name:

 

 

 

(Please Print)

Address:

 

 

 

 

 

 

 

TRANSFEREE: Name:  

 

 

(Please Print)

Address: