EXHIBIT 10.1

EXTENSION AGREEMENT

This Extension  Agreement (this “Agreement”), dated as of January 30, 2009, is
entered into by and among International Stem Cell Corporation, a Delaware
corporation (the “Company”), International Stem Cell Corporation, a California
corporation and wholly owned Subsidiary of the Company (“ISC California”),
Lifeline Cell Technology, LLC, a California limited liability company and wholly
owned Subsidiary of the ISC California (“Lifeline”, and together with the
Company and ISC California, the “Debtors”), and Gemini Master Fund, Ltd.
(“Holder”).

R E C I T A L S:

WHEREAS, on May 14, 2008 the Company issued to the Holder that certain OID
Senior Secured Convertible Note in the original principal amount of $1,000,000
with a maturity date of January 31, 2009 (the “Note”) pursuant to that certain
Securities Purchase Agreement (“Purchase Agreement”) dated as of May 14, 2008;
initially capitalized terms used herein but not otherwise defined shall have the
meanings set forth in the Note or Purchase Agreement, as the case may be;

WHEREAS, the Company’s obligations under the Note are secured by the Security
Agreement and IP Security Agreement;

WHEREAS, the Note and Purchase Agreement were amended pursuant to that certain
Modification of Note and Security Agreement entered into as of July 22, 2008
(“Modification”) to modify the repayment obligations of the Note under Section
4.12 of the Purchase Agreement;

WHEREAS, pursuant the Purchase Agreement (as amended) the Company repaid
$500,000 of the principal amount of the Note in January 2009, and on January 29,
2009 the Holder converted $100,000 in principal amount of the Note, such that as
of the date hereof the remaining outstanding principal amount of the Note is
$400,000; and

WHEREAS, the parties hereto wish to extend the maturity date of the Note and
amend the Transaction Documents in accordance with the terms hereof;

A G R E E M E N T:

NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

1. Amendments to Note.
 
(a) Extension of Maturity Date.  The Maturity Date under the Note is hereby
extended from January 31, 2009 until the date (the “Extended Maturity Date”)
which is two (2) months following the date on which the Company deposits the
Escrow Amount into the Escrow Account (as such terms are defined below)
(“Deposit Date”).
 
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(b) Repayment/Prepayment.  The Company is no longer required to pay any
principal amount of the Note pursuant to Section 4.12 of the Purchase Agreement
(as modified by the Modification), and in addition the Company retains its right
to prepay the Note at any time pursuant to Section 6 of the Note.
 
2. Termination of Security.  Effective on the Deposit Date, the Security
Agreement and IP Security Agreement, and all the security interests granted
thereby, shall automatically terminate and the Holder’s security interest in and
lien on all the Collateral and Intellectual Property Collateral shall be
released.
 
3. Escrow.  Promptly following the execution hereof, the Company and the Holder
hereby agree to enter into an escrow agreement (“Escrow Agreement”) with Torrey
Pines Bank, a California banking association, as escrow agent (“Escrow Agent”),
in the form of Exhibit I attached hereto.   Promptly following execution of this
Agreement and such Escrow Agreement, the Company shall deposit with Escrow Agent
an amount equal to Four Hundred Thousand Dollars ($400,000) (“Escrow Amount”) in
immediately available funds to be held in escrow pursuant to the terms of the
Escrow Agreement.  The Escrow Amount shall be held in escrow by the Escrow Agent
pursuant to the Escrow Agreement to satisfy the repayment of the principal due
under the Note on the Extended Maturity Date (to the extent such principal
amount has not been converted).
 
4. Expenses.  The Company and the Holder shall each pay for its own expenses
incurred in connection herewith, and the Company and the Holder shall split
equally the fees and expenses of the Escrow Agent.
 
5. Execution of Agreement.  This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.  The exchange of copies of this Agreement and of
signature pages by facsimile transmission or PDF shall constitute effective
execution and delivery of this Agreement as to the parties and may be used in
lieu of the original Agreement for all purposes.  Signatures of the parties
transmitted by facsimile or PDF shall be deemed to be their original signatures
for any purposes whatsoever.
 
6. Section Headings, Construction.  The headings of sections in this Agreement
are provided for convenience only and will not affect its construction or
interpretation.
 
7. Waiver.  The rights and remedies of the parties to this Agreement are
cumulative and not alternative.  Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege.  To the
maximum extent permitted by applicable law:  (a) no claim or right arising out
of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
 
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8. Miscellaneous.
 
(a) Full Force and Effect.  Except as otherwise expressly provided herein, each
of the Purchase Agreement, the Note and the other agreements and transactions
contemplated thereby (“Transaction Documents”) shall remain in full force and
effect.  Except for any waivers and modifications contained herein, if any, this
Agreement shall not in any way waive or prejudice any of the rights or
obligations of the Holder or the Company under the Transaction Documents, under
any law, in equity or otherwise, and such waivers and modifications shall not
constitute a waiver or modification of any other provision of the Transaction
Documents nor a waiver or modification of any subsequent default or breach of
any obligation of the Company or of any subsequent right of the Holder.
 
(b) Authority.  Each party hereto hereby represents and warrants to the other
party that the execution and delivery by such party of this Agreement, and the
performance by such party of its obligations hereunder, have been duly and
validly authorized by such party, with no other action on the part of such party
being necessary.  This Agreement has been duly and validly executed and
delivered by such party and constitutes a legal, valid and binding obligation of
such party enforceable against such party in accordance with its terms.
 
(c) Further Assurances.  Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
 
(d) Assignment; Successors.  The Holder may assign this Agreement or its
respective rights or obligations hereunder in connection with any transfer of
the Note.  This Agreement shall be binding upon each party’s respective
successors.
 
[Signature Page Follows]
 
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
 

DEBTORS:

INTERNATIONAL STEM CELL CORPORATION, a Delaware corporation
 
By:   /s/ Kenneth Aldrich     
Name: Kenneth Aldrich
Title:   CEO
 
INTERNATIONAL STEM CELL CORPORATION, a California corporation
 
By:   /s/ Kenneth Aldrich     
Name: Kenneth Aldrich
Title:   CEO
 
LIFELINE CELL TECHNOLOGY, LLC a California limited liability company
 
By:   /s/ Kenneth Aldrich     
Name: Kenneth Aldrich
Title:   CEO
 
 

HOLDER:

GEMINI MASTER FUND, LTD.
By:           GEMINI STRATEGIES, LLC, as investment manager
 
By:   /s/ Steven Winters  
Name:   Steven Winters
Title:   Managing Member
 
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EXHIBIT I

Form of Escrow Agreement

(attached)
 
 
 
 
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