Exhibit 10.2

INTERNATIONAL STEM CELL CORPORATION

20,000,000 Units

Each Unit Consisting

of

One Share of Common Stock

and

One Series A Warrant to Purchase One Share of Common Stock

and

20,000,000 Series B Warrants, Each to Purchase One Unit

PLACEMENT AGENT AGREEMENT

July 19, 2013

Roth Capital Partners, LLC

888 San Clemente Drive

Newport Beach, CA 92660

Dear Sirs:

1. INTRODUCTION. International Stem Cell Corporation, a Delaware corporation
(the “Company”), proposes to issue and sell to the purchasers, pursuant to the
terms and conditions of this Placement Agent Agreement (this “Agreement”) and
the Subscription Agreements in the form of Exhibit A attached hereto (the
“Subscription Agreements”) entered into with the purchasers identified therein
(each a “Purchaser” and collectively, the “Purchasers”), up to an aggregate of
(i) 20,000,000 authorized but unissued shares (the “Firm Shares”) of common
stock, par value $0.001 per share (the “Common Stock”), of the Company,
(ii) Series A Warrants (the “Firm Series A Warrants”) to purchase an aggregate
of up to 20,000,000 authorized but unissued shares of Common Stock (the “Firm
Series A Warrant Shares”), and (iii) 20,000,000 warrants (the “Series B
Warrants”) to purchase an aggregate of up to (A) 20,000,000 authorized but
unissued shares of Common Stock (the “Option Shares”) and (B) Series A Warrants
(the “Option Series A Warrants”) to purchase up to 20,000,000 authorized but
unissued shares of Common Stock (the “Option Series A Warrant Shares”). The Firm
Shares and the Firm Series A Warrants shall be sold together as units (the “Firm
Units”), each Firm Unit consisting of one Firm Share and one Firm Series A
Warrant to purchase one share of Common Stock. The Firm Units will not be
separately issued or certificated and the Firm Shares and the Firm Series A
Warrants shall be immediately separable and transferable upon issuance. The Firm
Units and the Series B Warrants are hereinafter referred to as the “Firm
Securities.” The Option Shares and the Option Series A Warrants issuable upon
the exercise of the Series B Warrants are hereinafter referred to as “Option
Units”, each Option Unit consisting of one Option Share and one Option Series A
Warrant to purchase one share of Common Stock. The Option Units will not be
separately issued or certificated and the Option Shares and the Option Series A
Warrants shall be immediately separable and transferable upon issuance. The Firm
Units and the Option Units are collectively referred to as the “Units.” The Firm
Shares and the Option Shares are collectively referred to as the “Shares.” The
Firm Series A Warrants and the Option Series A Warrants are collectively
referred to as the “Series A Warrants.” The Firm

 

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Series A Warrant Shares and the Option Series A Warrant Shares are collectively
referred to as the “Series A Warrant Shares.” The Series A Warrants and the
Series B Warrants are collectively referred to as the “Warrants.” The Units, the
Shares, the Warrants and the Series A Warrant Shares are collectively referred
to as the “Securities.” The form of the Series A Warrant is attached hereto as
Exhibit B. The form of the Series B Warrant is attached hereto as Exhibit C. The
Company hereby confirms its agreement with Roth Capital Partners, LLC (the
“Placement Agent”) to act as Placement Agent in accordance with the terms and
conditions hereof.

2. AGREEMENT TO ACT AS PLACEMENT AGENT; PLACEMENT OF SECURITIES. On the basis of
the representations, warranties and agreements of the Company herein contained,
and subject to all the terms and conditions of this Agreement:

(a) The Company hereby authorizes the Placement Agent to act as its exclusive
agent to solicit offers for the purchase of all or part of the Firm Units and
the Series B Warrants from the Company in connection with the proposed offering
of the Firm Securities (the “Offering”). Until the Closing Date (as defined in
Section 4 hereof) or earlier upon termination of this Agreement pursuant to
Section 9 the Company shall not, without the prior written consent of the
Placement Agent, solicit or accept offers to purchase the Firm Securities and
the Warrants otherwise than through the Placement Agent.

(b) The Company hereby acknowledges that the Placement Agent has agreed, as
agent of the Company, to use its reasonable efforts to solicit offers to
purchase the Firm Securities from the Company on the terms and subject to the
conditions set forth in the Prospectus (as defined below). The Placement Agent
shall use reasonable efforts to assist the Company in obtaining performance by
each Purchaser whose offer to purchase Firm Securities has been solicited by the
Placement Agent and accepted by the Company, but the Placement Agent shall not,
except as otherwise provided in this Agreement, be obligated to disclose the
identity of any potential purchaser or have any liability to the Company in the
event any such purchase is not consummated for any reason. Under no
circumstances will the Placement Agent be obligated to underwrite or purchase
any Firm Securities for its own account and, in soliciting purchases of the Firm
Securities, the Placement Agent shall act solely as the Company’s agent and not
as principal.

(c) Subject to the provisions of this Section 2, offers for the purchase of the
Firm Securities may be solicited by the Placement Agent as agent for the Company
at such times and in such amounts as the Placement Agent deems advisable. The
Placement Agent shall communicate to the Company, orally or in writing, each
reasonable offer to purchase Firm Securities received by it as agent of the
Company. The Company shall have the sole right to accept offers to purchase Firm
Securities and may reject any such offer, in whole or in part. The Placement
Agent shall have the right, in its discretion reasonably exercised, without
notice to the Company, to reject any offer to purchase Firm Securities received
by it, in whole or in part, and any such rejection shall not be deemed a breach
of this Agreement.

(d) The Firm Securities are being sold to the Purchasers at an aggregate initial
public offering price of $0.15 per Firm Unit and Series B Warrant. The purchases
of Firm Securities by the Purchasers shall be evidenced by the execution of
Subscription Agreements by each of the Purchasers and the Company.

 

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(e) As compensation for services rendered, on the Closing Date (as defined in
Section 4 hereof), the Company shall (i) pay to the Placement Agent by wire
transfer of immediately available funds to an account or accounts designated by
the Placement Agent, a cash fee (the “Cash Fee”) in an aggregate amount equal to
five percent (5.0%) of the gross proceeds received by the Company from the sale
of the Firm Securities on such Closing Date and (ii) issue to the Placement
Agent, or as the Placement Agent may otherwise direct, warrants (the “Agent
Warrants”), in substantially the same form as the Series B Warrants (except that
the Agent Warrants shall be exercisable for five (5) years and shall provide for
a cashless exercise) with the transfer restrictions described below, entitling
the Placement Agent, or its assigns, to purchase additional units (the “Agent
Units”) up to an aggregate of five percent (5.0%) of the Firm Units sold in the
Offering; notwithstanding the foregoing, the Placement Agent shall not receive
any Agent Warrants with respect to gross proceeds from the sale of Firm
Securities, or Firm Units issued, to any officer or director of the Company or
their affiliates. The shares of Common Stock included in the Agent Units are
hereinafter referred to as the “Agent Shares” and the Series A Warrants included
in the Agent Units are hereinafter referred to as the “Agent Series A Warrants.”
The Agent Units will not be separately issued or certificated and the Agent
Shares and the Agent Series A Warrants shall be immediately separable and
transferable upon issuance, subject to the restrictions referenced below. The
shares of Common Stock issuable upon the exercise of the Agent Series A Warrants
are hereinafter referred to as the “Agent Series A Warrant Shares.” The Agent
Warrants, the Agent Units, the Agent Shares, the Agent Series A Warrants and the
Agent Series A Warrant Shares are hereinafter collectively referred to as the
“Agent Securities.” The Agent Securities are deemed to be compensation by the
Financial Industry Regulatory Authority (“FINRA”) and may not be sold,
transferred, pledged, hypothecated or assigned for a period of 180 days
following the effective date of the offering pursuant to FINRA Rule 5110(g)(1).
The Cash Fee and the Agent Warrants are hereinafter referred to herein as the
“Placement Fee”. The Placement Agent may retain other brokers or dealers to act
as sub-agents on its behalf in connection with the Offering, the fees of which
shall be paid out of the Placement Fee.

(f) No Firm Securities which the Company has agreed to sell pursuant to this
Agreement and the Subscription Agreements shall be deemed to have been purchased
and paid for, or sold by the Company, until such Firm Securities shall have been
delivered to the Purchaser thereof against payment by such Purchaser. If the
Company shall default in its obligations to deliver Firm Securities to a
Purchaser whose offer it has accepted, the Company shall indemnify and hold the
Placement Agent harmless against any loss, claim, damage or expense arising from
or as a result of such default by the Company in accordance with the procedures
set forth in Section 8(c) herein.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to, and agrees with, the Placement Agent and the Purchasers that:

 

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(a) The Company has prepared and filed in conformity with the requirements of
the Securities Act of 1933, as amended (the “Securities Act”), and published
rules and regulations thereunder (the “Rules and Regulations”) adopted by the
Securities and Exchange Commission (the “Commission”), a Registration Statement
(as hereinafter defined) on Form S-1 (File No. 333-184493) covering the offer
and sale of the Securities and the Agent Securities, which became effective on
July 18, 2013 (the “Effective Date”), including any amendments and supplements
thereto as may have been required to the date of this Agreement. The term
“Registration Statement” as used in this Agreement means the registration
statement (including all exhibits, financial schedules and all documents and
information deemed to be a part of the Registration Statement pursuant to
Rule 430A under the Rules and Regulations), as amended and/or supplemented to
the date of this Agreement. The Registration Statement is effective under the
Securities Act and no stop order preventing or suspending the effectiveness of
the Registration Statement or suspending or preventing the use of the Prospectus
(as defined below) has been issued by the Commission and no proceedings for that
purpose have been instituted or, to the knowledge of the Company, are threatened
by the Commission. The Company, if required by the Rules and Regulations of the
Commission, will file the Prospectus, with the Commission pursuant to Rule
424(b) under the Rules and Regulations. The term “Prospectus,” as used in
this Agreement, means the Prospectus, in the form in which it is to be filed
with the Commission pursuant to Rule 424(b) under the Rules and Regulations, or,
if the Prospectus is not to be filed with the Commission pursuant to Rule
424(b), the Prospectus in the form included as part of the Registration
Statement as of the Effective Date, except that if any revised prospectus shall
be provided to the Placement Agent by the Company for use in connection with the
offering and sale of the Securities which differs from the Prospectus (whether
or not such revised prospectus is required to be filed by the Company pursuant
to Rule 424(b) under the Rules and Regulations), the term “Prospectus” shall
refer to such revised prospectus from and after the time it is first provided to
the Placement Agent for such use. Any preliminary prospectus or prospectus
subject to completion included in the Registration Statement or filed with the
Commission pursuant to Rule 424 under the Rules and Regulations is hereafter
called a “Preliminary Prospectus.” Any reference herein to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to
Item 12 of Form S-1 which were filed under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), on or before the last to occur of the
Effective Date, the date of the Preliminary Prospectus, or the date of the
Prospectus, and any reference herein to the terms “amend,” “amendment,” or
“supplement” with respect to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include (i) the
filing of any document under the Exchange Act after the Effective Date, the date
of such Preliminary Prospectus or the date of the Prospectus, as the case may
be, which is incorporated by reference and (ii) any such document so filed. If
the Company has filed an abbreviated registration statement to register
additional securities pursuant to Rule 462(b) under the Rules and Regulations
(the “462(b) Registration Statement”), then any reference herein to the
Registration Statement shall also be deemed to include such 462(b) Registration
Statement.

(b) As of the Applicable Time (as defined below) and as of the Closing Date,
neither (i) any General Use Free Writing Prospectus (as defined below) issued at
or prior to the Applicable Time, and the Pricing Prospectus (as defined below)
and the information included on Schedule A hereto, all considered together
(collectively, the “General Disclosure Package”), (ii) any individual Limited
Use Free Writing Prospectus (as defined below), nor

 

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(iii) the bona fide electronic road show (as defined in Rule 433(h)(5) under the
Rules and Regulations), if any, that has been made available without restriction
to any person, when considered together with the General Disclosure Package,
included or will include, any untrue statement of a material fact or omitted or
as of the Closing Date will omit, to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from any
documents contained in the General Disclosure Package, in reliance upon, and in
conformity with, written information furnished to the Company by the Placement
Agent specifically for inclusion therein, which information the parties hereto
agree is limited to the Placement Agent’s Information (as defined in
Section 17). As used in this paragraph (b) and elsewhere in this Agreement:

“Applicable Time” means 8:00 A.M., New York time, on the date of this Agreement.

“General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus
that is identified on Schedule A to this Agreement.

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as
defined in Rule 433 under the Rules and Regulations relating to the Securities
in the form filed or required to be filed with the Commission or, if not
required to be filed, in the form retained in the Company’s records pursuant to
Rule 433(g) under the Rules and Regulations.

“Limited Use Free Writing Prospectuses” means any Issuer Free Writing Prospectus
that is not a General Use Free Writing Prospectus.

“Pricing Prospectus” means the Preliminary Prospectus, as amended
and supplemented immediately prior to the Applicable Time, including any
document incorporated by reference therein.

(c) No order preventing or suspending the use of any Preliminary Prospectus, any
Issuer Free Writing Prospectus or the Prospectus relating to the Offering has
been issued by the Commission, and no proceeding for that purpose or pursuant to
Section 8A of the Securities Act has been instituted or threatened by the
Commission, and each Preliminary Prospectus (if any), at the time of filing
thereof, conformed in all material respects to the requirements of the
Securities Act and the Rules and Regulations, and did not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the Company makes no representations or warranties as to information
contained in or omitted from any Preliminary Prospectus, in reliance upon, and
in conformity with, written information furnished to the Company by the
Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agent’s Information (as defined
in Section 17).

 

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(d) At the time the Registration Statement became or becomes effective, at the
date of this Agreement and at the Closing Date, the Registration Statement
conformed and will conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and did not and will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; the Prospectus, at the time the Prospectus was issued and at
the Closing Date, conformed and will conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations and did not and
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing representations and warranties in this paragraph (d) shall
not apply to information contained in or omitted from the Registration Statement
or the Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to the Placement
Agent’s Information (as defined in Section 17).

(e) Each Issuer Free Writing Prospectus, if any, as of its issue date and at all
subsequent times through the completion of the public offer and sale of the Firm
Securities or until any earlier date that the Company notified or notifies the
Placement Agent as described in Section 5(e), did not, does not and will not
include any information that conflicted, conflicts or will conflict with the
information contained in the Registration Statement, Pricing Prospectus or the
Prospectus, including any document incorporated by reference therein that has
not been superseded or modified, or did not, does not or will not include an
untrue statement of a material fact or did not, does not or will not omit 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 prevailing at the
subsequent time, not misleading. The foregoing sentence does not apply to
statements in or omissions from any Issuer Free Writing Prospectus in reliance
upon, and in conformity with, written information furnished to the Company by
the Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agent’s Information (as defined
in Section 17).

(f) The documents incorporated by reference in the Prospectus, if any, when they
became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder and none of such documents contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and any further
documents so filed and incorporated by reference in the Prospectus, when such
documents become effective or are filed with the Commission, as the case may be,
will conform in all material respects to the requirements of the Securities Act
or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

 

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(g) The Company has not, directly or indirectly, distributed and will not
distribute any offering material in connection with the Offering other than any
Pricing Prospectus, the Prospectus and other materials, if any, permitted under
the Securities Act and consistent with Section 5(b) below. The Company is not an
“ineligible issuer” in connection with the offering pursuant to Rules 164, 405
and 433 under the Securities Act. The Company will file with the Commission all
Issuer Free Writing Prospectuses (other than a “road show,” as defined in Rule
433(d)(8) under the Rules and Regulations), if any, in the time and manner
required under Rules 163(b)(2) and 433(d) under the Rules and Regulations.

(h) The Company and each Subsidiary (as defined below) has been duly organized
and is validly existing in good standing (or the foreign equivalent thereof)
under the laws of each of their respective jurisdictions of organization. The
Company and each Subsidiary is duly qualified to do business and is in good
standing in each jurisdiction in which its ownership or lease of property or the
conduct of its business requires such qualification and has all power and
authority necessary to own or hold its properties and to conduct the business in
which it is engaged, except where the failure to so qualify or have such power
or authority (i) would not have, singularly or in the aggregate, a material
adverse effect on the condition (financial or otherwise), results of operations,
assets or business or prospects of the Company or any Subsidiary, taken as a
whole, or (ii) impair in any material respect the ability of the Company to
perform its obligations under this Agreement or to consummate any transactions
contemplated by the Agreement, the Registration Statement, the General
Disclosure Package or the Prospectus (any such effect as described in clauses
(i) or (ii), a “Material Adverse Effect”). The Company owns or controls,
directly or indirectly, only the following corporations, partnerships, limited
liability partnerships, limited liability companies, associations or other
entities: International Stem Cell Corporation, a California corporation,
Lifeline Skin Care, Inc., a California corporation, and Lifeline Cell
Technology, LLC, a California limited liability company (each, a “Subsidiary”
and, collectively, the “Subsidiaries”).

(i) The Company has the full right, power and authority to enter into this
Agreement, the Warrants, each of the Subscription Agreements, the Agent Warrants
and the Agent Series A Warrants and to perform and to discharge its obligations
hereunder and thereunder; and each of this Agreement, the Warrants, each of the
Subscription Agreements, the Agent Warrants and the Agent Series A Warrants have
been duly authorized, executed and delivered by the Company, and constitutes a
valid and binding obligation of the Company enforceable in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors’ rights generally and
by general principles of equity.

(j) The Firm Shares, the Firm Series A Warrants and the Series B Warrants to be
issued and sold by the Company to the Purchasers hereunder and under the
Subscription Agreements and the Firm Series A Warrant Shares have been duly
authorized, and the Firm Shares, when issued and delivered against payment
therefor as provided herein and in the Subscription Agreements and the Firm
Series A Warrant Shares, when issued and delivered upon the due exercise of the
Firm Series A Warrants, will be validly issued, fully paid and non-assessable
and free of any preemptive or similar rights and will conform to the description
thereof contained in the Registration Statement, the General Disclosure Package

 

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and the Prospectus. The Option Shares and the Option Series A Warrants issuable
upon the due exercise of the Series B Warrants have been duly authorized, and
the Option Shares, when issued and delivered upon the due exercise of the Series
B Warrants and the Option Series A Warrant Shares, when issued and delivered
upon the due exercise of the Option Series A Warrants, will be validly issued,
fully paid and non-assessable and free of any preemptive or similar rights and
will conform to the description thereof contained in the Registration Statement,
the General Disclosure Package and the Prospectus. The Agent Securities have
been duly authorized, and the Agent Shares, when issued and delivered upon the
due exercise of the Agent Warrants and the Agent Series A Warrant Shares, when
issued and delivered upon the due exercise of the Agent Series A Warrants, will
be validly issued, fully paid and non-assessable and free of any preemptive or
similar rights and will conform to the description thereof contained in the
Registration Statement, the General Disclosure Package and the Prospectus. The
Warrants and the Agent Warrants conform to the description thereof contained in
the Registration Statement, the General Disclosure Package and the Prospectus.
The Company has reserved a sufficient number of authorized but unissued shares
of Common Stock for the full exercise of the Warrants and the Agent Warrants in
accordance with their respective terms.

(k) The Company has an authorized capitalization as set forth in the
Registration Statement, the General Disclosure Package and the Prospectus, and
all of the issued shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and non-assessable, have been
issued in compliance with United States federal and state securities laws, and
conform to the description thereof contained in the Registration Statement, the
General Disclosure Package and the Prospectus. As of June 30, 2013, there were
112,590,815 shares of Common Stock issued and outstanding and an aggregate of
85,593,485 shares of Common Stock were issuable upon the exercise of all options
and warrants and conversion of all convertible securities, including the Series
B, Series D and Series G Preferred Stock, outstanding as of such date. Since
such date, the Company has not issued any securities, other than Common Stock of
the Company issued pursuant to the exercise of stock options previously
outstanding under the Company’s stock incentive plans or the issuance of
restricted Common Stock pursuant to stock incentive plans. All of the Company’s
options, warrants and other rights to purchase, exchange or convert any
securities for shares of the Company’s capital stock have been duly authorized
and validly issued and were issued in compliance with United States federal and
state securities laws. None of the outstanding shares of Common Stock was issued
in violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company. There are no
authorized or outstanding shares of capital stock, options, warrants, preemptive
rights, rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable or exercisable for, any capital
stock of the Company or any Subsidiary other than those described above or
accurately described in the Registration Statement, the General Disclosure
Package and the Prospectus. The description of the Company’s stock option, stock
bonus and other stock plans or arrangements, and the options or other rights
granted thereunder, as described in the Registration Statement, the General
Disclosure Package and the Prospectus, accurately and fairly present the
information required to be shown with respect to such plans, arrangements,
options and rights.

 

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(l) All the outstanding shares of capital stock or ownership interests of each
Subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable and, except to the extent set forth in the Registration
Statement, the General Disclosure Package and the Prospectus, are owned by the
Company directly or indirectly through one or more wholly-owned Subsidiaries,
free and clear of any claim, lien, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any third party.

(m) The execution, delivery and performance of this Agreement, the Subscription
Agreements, the Warrants and the Agent Warrants by the Company, the issue and
sale of the Securities and the Agent Securities by the Company and the
consummation of the transactions contemplated hereby and thereby will not (with
or without notice or lapse of time or both): (i) conflict with or result in a
breach or violation of any of the terms or provisions of, constitute a default
or Debt Repayment Triggering Event (as defined below) under, give rise to any
right of termination or other right or the cancellation or acceleration of any
right or obligation or loss of a benefit under, or give rise to the creation or
imposition of any lien, encumbrance, security interest, claim or charge upon any
property or assets of the Company or any Subsidiary pursuant to any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of the property or assets of the Company or
any Subsidiary is subject (each, a “Contract” and, collectively, the
“Contracts”); (ii) result in any violation of the provisions of the charter or
by-laws (or analogous governing instruments, as applicable) of the Company or
any Subsidiary; or, (iii) to the Company’s knowledge, result in the violation of
any law, statute, rule, regulation, judgment, order or decree of any court or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any Subsidiary or any of their properties or assets, except with
respect to clauses (i) and (iii), any breaches, violations or defaults which,
singularly or in the aggregate, would not have a Material Adverse Effect. A
“Debt Repayment Triggering Event” means any event or condition that gives, or
with the giving of notice or lapse of time would give the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder’s behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any Subsidiary.

(n) Except for the registration of the Securities and the Agent Securities under
the Securities Act, and such consents, approvals, authorizations, registrations
or qualifications as may be required under the Exchange Act and applicable state
or foreign securities laws, the Financial Industry Regulatory Authority
(“FINRA”) and the OTCQB maintained by OTC Markets Group Inc. (the “OTCQB”) in
connection with the offering and sale of the Securities by the Company, no
consent, approval, authorization or order of, or filing, qualification or
registration with, any court or governmental agency or body, foreign or
domestic, which has not been made, obtained or taken and is not in full force
and effect, is required for the execution, delivery and performance of this
Agreement, the Subscription Agreements, the Warrants and the Agent Warrants by
the Company, the offer or sale of the Securities or the Agent Securities or
the consummation of the transactions contemplated hereby or thereby.

 

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(o) Mayer Hoffman McCann P.C., who has certified certain financial statements
and related schedules included in the Registration Statement, the General
Disclosure Package and the Prospectus, is an independent registered public
accounting firm as required by the Securities Act and the Rules and Regulations
and the Public Company Accounting Oversight Board (United States) (the “PCAOB”).
Except as pre-approved in accordance with the requirements set forth in
Section 10A of the Exchange Act, Mayer Hoffman McCann P.C. has not been engaged
by the Company to perform any “prohibited activities” (as defined in Section 10A
of the Exchange Act).

(p) The financial statements, together with the related notes and schedules,
included in the Registration Statement, the General Disclosure Package and the
Prospectus fairly present in all material respects the financial position and
the results of operations and changes in financial position of the Company and
its Subsidiaries and other consolidated entities at the respective dates or for
the respective periods therein specified. Such statements and related notes and
schedules have been prepared in accordance with the generally accepted
accounting principles in the United States (“GAAP”) applied on a consistent
basis throughout the periods involved except as may be set forth in the related
notes included or incorporated by reference in the General Disclosure Package.
The financial statements, together with the related notes and schedules,
included in the Registration Statement, the General Disclosure Package and the
Prospectus comply in all material respects with the Securities Act, the Exchange
Act, and the Rules and Regulations and the rules and regulations under the
Exchange Act. No other financial statements or supporting schedules or exhibits
are required by the Securities Act or the Rules and Regulations to be
described or included in the Registration Statement, the General Disclosure
Package or the Prospectus. There is no pro forma or as adjusted financial
information which is required to be included in the Registration Statement, the
General Disclosure Package, or the Prospectus in accordance with the Securities
Act and the Rules and Regulations which has not been included as so required.
Any pro forma and pro forma as adjusted financial information and the related
notes included in the Registration Statement, the General Disclosure Package and
the Prospectus have been properly compiled and prepared in accordance with the
applicable requirements of the Securities Act and the Rules and Regulations and
present fairly the information shown therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances referred to
therein.

(q) Neither the Company nor any Subsidiary has sustained, since the date of the
latest audited financial statements included or incorporated by reference in the
Registration Statement, the General Disclosure Package and the Prospectus, any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Registration Statement, the General Disclosure Package and
the Prospectus; and, since such date, there has not been any change in the
capital stock or long-term debt of the Company or any Subsidiary or any material
adverse changes, or any development involving a prospective material adverse
change, in or affecting the business, assets, management, financial position,
prospects, stockholders’ equity or results of operations of the Company or any
Subsidiary, otherwise than as set forth or contemplated in the Registration
Statement, the General Disclosure Package and the Prospectus.

 

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(r) Except as set forth in the Registration Statement, the General Disclosure
Package and the Prospectus, there is no legal or governmental action, suit,
claim or proceeding pending to which the Company or any Subsidiary is a party or
of which any property or assets of the Company or any Subsidiary is the subject
which is required to be described in the Registration Statement, the General
Disclosure Package or the Prospectus or a document incorporated by reference
therein and is not described therein, or which, singularly or in the aggregate,
if determined adversely to the Company or any Subsidiary could have a Material
Adverse Effect or prevent the consummation of the transactions contemplated
hereby; and to the best of the Company’s knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others.

(s) Neither the Company nor any Subsidiary is in (i) violation of its charter or
by-laws (or analogous governing instrument, as applicable), (ii) default in any
respect, and no event has occurred which, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a party or
by which it is bound or to which any of its property or assets is subject or
(iii) to the Company’s knowledge, violation of any law, ordinance, governmental
rule, regulation or court order, decree or judgment to which it or its property
or assets is subject except, in the case of clauses (ii) and (iii) of this
paragraph(s), for any violations or defaults which, singularly or in the
aggregate, would not have a Material Adverse Effect.

(t) The Company and each Subsidiary possesses all licenses, certificates,
authorizations and permits issued by, and have made all declarations and filings
with, the appropriate local, state, federal or foreign regulatory agencies or
bodies which are necessary or desirable for the ownership of its properties or
the conduct of their respective businesses as described in the Registration
Statement, the General Disclosure Package and the Prospectus (collectively, the
“Governmental Permits”) except where any failures to possess or make the same,
singularly or in the aggregate, would not have a Material Adverse Effect. The
Company and each Subsidiary is in compliance with all such Governmental Permits,
and all such Governmental Permits are valid and in full force and effect, except
where any non-compliance or the validity or failure to be in full force and
effect would not, singularly or in the aggregate, have a Material Adverse
Effect. To the Company’s knowledge, all such Governmental Permits are free and
clear of any restriction or condition that are in addition to, or materially
different from those normally applicable to similar licenses, certificates,
authorizations and permits. Neither the Company nor any Subsidiary has received
notification of any revocation or modification (or proceedings related thereto)
of any such Governmental Permit and, to the Company’s knowledge, there is no
reason to believe that any such Governmental Permit will not be renewed.

(u) Neither the Company nor any Subsidiary is or, after giving effect to the
offering of the Securities and the application of the proceeds thereof as
described in the Registration Statement, the General Disclosure Package and the
Prospectus, will become an “investment company” within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations of the
Commission thereunder.

 

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(v) Neither the Company nor any Subsidiary, nor to the Company’s knowledge, any
of the Company’s and any Subsidiary’s officers, directors or affiliates has
taken or will take, directly or indirectly, any action designed or intended to
stabilize or manipulate the price of any security of the Company, or
which caused or resulted in, or which might in the future reasonably be expected
to cause or result in, stabilization or manipulation of the price of any
security of the Company.

(w) To the best of the Company’s knowledge, the Company and each Subsidiary owns
or possesses the right to use all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names, copyrights, licenses,
inventions, software, databases, know-how, Internet domain names, trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures, and other intellectual property
(collectively, “Intellectual Property”) necessary to carry on their respective
businesses as currently conducted, and as proposed to be conducted and described
in the Registration Statement, the General Disclosure Package and the
Prospectus, and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company or any Subsidiary
with respect to the foregoing except for those that could not have a Material
Adverse Effect. The Intellectual Property licenses described in the Registration
Statement, the General Disclosure Package and the Prospectus are valid, binding
upon, and enforceable by or against the parties thereto in accordance with their
terms. The Company and each Subsidiary has complied in all material respects
with, and is not in breach nor has received any asserted or threatened claim of
breach of, any Intellectual Property license, and the Company has no knowledge
of any breach or anticipated breach by any other person to any Intellectual
Property license. To the best of the Company’s knowledge, the Company’s and each
Subsidiary’s business as now conducted and as proposed to be conducted does not
and will not infringe or conflict with any valid patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses or other Intellectual
Property or franchise right of any person, except for any such acts that would
not have a Material Adverse Effect. No claim has been made against the Company
or any Subsidiary alleging the infringement by the Company or any Subsidiary of
any patent, trademark, service mark, trade name, copyright, trade secret,
license in or other intellectual property right or franchise right of any
person. The Company and each Subsidiary has taken all reasonable steps to
protect, maintain and safeguard its rights in all Intellectual Property,
including the execution of appropriate nondisclosure and confidentiality
agreements. The consummation of the transactions contemplated by this Agreement
will not result in the loss or impairment of or payment of any additional
amounts with respect to, nor require the consent of any other person in respect
of, each of the Company’s and each Subsidiary’s right to own, use, or hold for
use any of the Intellectual Property as owned, used or held for use in the
conduct of its business as currently conducted. The Company and each Subsidiary
has at all times complied in all material respects with all applicable laws
relating to privacy, data protection, and the collection and use of personal
information collected, used, or held for use by the Company or any Subsidiary in
the conduct of the Company’s or any Subsidiary’s business. No claims have been
asserted or threatened against the Company or any Subsidiary alleging a
violation of any person’s privacy or personal information or data rights and the

 

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consummation of the transactions contemplated hereby will not breach or
otherwise cause any violation of any law related to privacy, data protection, or
the collection and use of personal information collected, used, or held for use
by the Company or any Subsidiary in the conduct of the Company’s or any
Subsidiary’s business. The Company and each Subsidiary takes reasonable measures
to ensure that such information is protected against unauthorized access, use,
modification, or other misuse.

(x) The Company and each Subsidiary has good and marketable title in fee simple
to, or have valid rights to lease or otherwise use, all items of real or
personal property which are material to the business of the Company and any
Subsidiary, free and clear of all liens, encumbrances, security interests,
claims and defects that do not, singularly or in the aggregate, materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any Subsidiary; and all
of the leases and subleases material to the business of the Company or any
Subsidiary, and under which the Company or any Subsidiary holds properties
described in the Registration Statement, the General Disclosure Package and the
Prospectus, are in full force and effect, and neither the Company nor any
Subsidiary has received any notice of any material claim of any sort that has
been asserted by anyone adverse to the rights of the Company or any Subsidiary
under any of the leases or subleases mentioned above, or affecting or
questioning the rights of the Company or any Subsidiary to the continued
possession of the leased or subleased premises under any such lease or sublease.

(y) No organized labor disturbance by the employees of the Company or any
Subsidiary exists or, to the best of the Company’s knowledge, is imminent, and
the Company has no actual knowledge of any existing or imminent labor
disturbance by the employees of any of its or any Subsidiary’s principal
suppliers, manufacturers, customers or contractors, that could reasonably be
expected, singularly or in the aggregate, to have a Material Adverse Effect. The
Company is not aware that any key employee or significant group of employees of
the Company or any Subsidiary plans to terminate employment with the Company or
any Subsidiary.

(z) No “prohibited transaction” (as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder (“ERISA”), or Section 4975 of the
Internal Revenue Code of 1986, as amended from time to time (the “Code”)) or
“accumulated funding deficiency” (as defined in Section 302 of ERISA) or any of
the events set forth in Section 4043(b) of ERISA (other than events with respect
to which the thirty (30)-day notice requirement under Section 4043 of ERISA has
been waived) has occurred or could reasonably be expected to occur with respect
to any employee benefit plan of the Company or any Subsidiary which could,
singularly or in the aggregate, have a Material Adverse Effect. Each employee
benefit plan of the Company or any Subsidiary is in compliance in all material
respects with applicable law, including ERISA and the Code. The Company and each
Subsidiary has not incurred and could not reasonably be expected to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from, any pension plan (as defined in ERISA). Each pension plan for
which the Company or any Subsidiary would have any liability that is intended to
be qualified under Section 401(a) of the Code is so qualified, and nothing has
occurred, whether by action or by failure to act, which could, singularly or in
the aggregate, cause the loss of such qualification to the extent such loss
would have a Material Adverse Effect.

 

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(aa) To the best of the Company’s knowledge, the Company and each Subsidiary is
in compliance with all foreign, federal, state and local rules, laws and
regulations relating to the use, treatment, storage and disposal of hazardous or
toxic substances or waste and protection of health and safety or the environment
which are applicable to its businesses (“Environmental Laws”), except where the
failure to comply would not, singularly or in the aggregate, have a Material
Adverse Effect. There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of toxic
or other wastes or other hazardous substances regulated by Environmental Laws
(“Hazardous Substances”) by or caused by the Company or any Subsidiary (or, to
the Company’s knowledge and without independent investigation, any other entity
for whose acts or omissions the Company or any Subsidiary is or may otherwise be
liable) upon any of the property now or previously owned or leased by the
Company or any Subsidiary, or upon any other property, in violation of any law,
statute, ordinance, rule, regulation, order, judgment, decree or permit or which
would, under any law, statute, ordinance, rule (including rule of common law),
regulation, order, judgment, decree or permit, give rise to any liability,
except for any violation or liability which would not have, singularly or in the
aggregate with all such violations and liabilities, a Material Adverse Effect;
to the Company’s actual knowledge and without independent investigation, there
has been no disposal, discharge, emission or other release onto property now
leased by the Company or any Subsidiary or into the environment surrounding
such property of any Hazardous Substance, except for any such disposal,
discharge, emission, or other release in violation of Environmental Laws which
would not have, singularly or in the aggregate with all such discharges and
other releases, a Material Adverse Effect.

(bb) The Company and each Subsidiary (i) has timely filed (or filed an extension
to file) all necessary federal, state, local and foreign tax returns, and all
such filed returns were true, complete and correct, (ii) has paid all federal,
state, local and foreign taxes, assessments, governmental or other charges due
and payable for which it is liable, including, without limitation, all sales and
use taxes and all taxes which the Company or any Subsidiary is obligated to
withhold from amounts owing to employees, creditors and third parties, and
(iii) does not have any tax deficiency or claims outstanding or assessed or, to
the best of its knowledge, proposed against any of them, except those, in each
of the cases described in clauses (i), (ii) and (iii) of this paragraph (bb),
that would not, singularly or in the aggregate, have a Material Adverse Effect.
The Company and each Subsidiary has not engaged in any transaction which is a
corporate tax shelter or which could be characterized as such by the Internal
Revenue Service or any other taxing authority. The accruals and reserves on the
books and records of the Company in respect of tax liabilities for any taxable
period not yet finally determined are adequate to meet any assessments and
related liabilities for any such period, and since December 31, 2008, the
Company and each Subsidiary has not incurred any liability for taxes other than
in the ordinary course.

(cc) The Company and each Subsidiary carries, or is covered by, insurance
provided by recognized, financially sound and reputable institutions with
policies in such amounts and covering such risks as is adequate in the good
faith opinion of Company management for the

 

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conduct of their respective businesses and the value of its properties and, to
its knowledge, as is customary for companies engaged in similar businesses in
similar industries. The Company has no reason to believe that it or any
Subsidiary will not be able (i) to renew its existing insurance coverage as and
when such policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct their respective
businesses as now conducted and at a cost that would not result in a Material
Adverse Effect. Neither the Company nor any Subsidiary has been denied any
insurance coverage that it has sought or for which it has applied.

(dd) The Company and each Subsidiary maintains a system of internal accounting
and other controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Except as described in the Registration Statement, the General
Disclosure Package and the Prospectus, since the end of the Company’s most
recent audited fiscal year, there has been (A) no material weakness in the
Company’s internal control over financial reporting (whether or not remediated)
and (B) no change in the Company’s internal control over financial reporting
that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.

(ee) The minute books of the Company and each Subsidiary have been made
available to the Placement Agent and counsel for the Placement Agent, and such
books (i) contain a complete summary in all material respects of all meetings
and actions of the board of directors (including each board committee) and
stockholders of the Company and each Subsidiary (or analogous governing bodies
and interest holders, as applicable), since January 1, 2010 through the date of
the latest meeting and action, and (ii) accurately, in all material respects,
reflect all transactions referred to in such minutes.

(ff) There is no franchise, lease, contract, agreement or document required by
the Securities Act or by the Rules and Regulations to be described in the
Registration Statement, the General Disclosure Package and the Prospectus or a
document incorporated by reference therein or to be filed as an exhibit to the
Registration Statement or a document incorporated by reference therein which is
not described or filed therein as required; and all descriptions of any such
franchises, leases, contracts, agreements or documents contained in the
Registration Statement, the General Disclosure Package and the Prospectus or in
a document incorporated by reference therein are accurate and complete
descriptions of such documents in all material respects. Other than as described
in the Registration Statement, the General Disclosure Package and the
Prospectus, no such franchise, lease, contract or agreement has been suspended
or terminated for convenience or default by the Company or any Subsidiary or any
of the other parties thereto, and neither the Company nor any Subsidiary has
received notice nor does the Company have any other knowledge of any such
pending or threatened suspension or termination, except for such pending or
threatened suspensions or terminations that would not reasonably be expected to,
singularly or in the aggregate, have a Material Adverse Effect.

 

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(gg) No relationship, direct or indirect, exists between or among the Company
and any Subsidiary on the one hand, and the directors, officers, stockholders
(or analogous interest holders), customers or suppliers of the Company or any
Subsidiary or any of their affiliates on the other hand, which is required to be
described in the Registration Statement, the General Disclosure Package and the
Prospectus or a document incorporated by reference therein and which is not so
described.

(hh) No person or entity has the right to require registration of shares of
Common Stock or other securities of the Company or any Subsidiary because of the
filing or effectiveness of the Registration Statement or otherwise, except for
persons and entities who have expressly waived such right in writing or who have
been given timely and proper written notice and have failed to exercise such
right within the time or times required under the terms and conditions of such
right. Except as described in the Registration Statement, the General Disclosure
Package and the Prospectus, there are no persons with registration rights or
similar rights to have any securities registered by the Company or any
Subsidiary under the Securities Act.

(ii) Neither the Company nor any Subsidiary owns any “margin securities” as that
term is defined in Regulation U of the Board of Governors of the Federal Reserve
System (the “Federal Reserve Board”), and none of the proceeds of the sale of
the Securities will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Securities
to be considered a “purpose credit” within the meanings of Regulation T, U or X
of the Federal Reserve Board.

(jj) Except for this Agreement, neither the Company nor any Subsidiary is a
party to any contract, agreement or understanding with any person that would
give rise to a valid claim against the Company or the Placement Agent for a
brokerage commission, finder’s fee or like payment in connection with the
offering and sale of the Shares and the Warrants or any transaction contemplated
by this Agreement, the Registration Statement, the General Disclosure Package or
the Prospectus.

(kk) No forward-looking statement (within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act) contained in either the
Registration Statement, the General Disclosure Package or the Prospectus has
been made or reaffirmed without a reasonable basis or has been disclosed other
than in good faith.

(ll) The Company is subject to and in compliance in all material respects with
the reporting requirements of Section 13 or Section 15(d) of the Exchange Act.
The Common Stock is registered pursuant to Section 12(g) of the 1934 Act and is
quoted on OTCQB, and the Company has taken no action designed to, or likely to
have the effect of, terminating the registration of the Common Stock under the
1934 Act or removal from quotation of the Common Stock from the OTCQB, nor has
the Company received any notification that the

 

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SEC, the OTCQB or the Financial Industry Regulatory Authority, Inc. is
contemplating terminating such registration or quotation. The Company has
obtained or will have obtained, or has made or will have made, as applicable,
all necessary consents, approvals, authorizations or orders of, or filing,
notification or registration with, the OTCQB required for the quotation and
trading of the Shares and the Warrant Shares on the OTCQB.

(mm) The Company is in material compliance with all applicable provisions of the
Sarbanes-Oxley Act of 2002 and all applicable rules and regulations promulgated
thereunder or implementing the provisions thereof (the “Sarbanes-Oxley Act”).

(nn) Neither the Company nor any Subsidiary, nor, to the best of the Company’s
knowledge, any employee or agent of the Company or any Subsidiary, has made any
contribution or other payment to any official of, or candidate for, any federal,
state, local or foreign office in violation of any law (including the Foreign
Corrupt Practices Act of 1977, as amended) or of the character required to be
disclosed in the Registration Statement, the General Disclosure Package or the
Prospectus or a document incorporated by reference therein.

(oo) There are no transactions, arrangements or other relationships between
and/or among the Company or any Subsidiary, any of their affiliates (as such
term is defined in Rule 405 of the Securities Act) and any unconsolidated
entity, including, but not limited to, any structured finance, special purpose
or limited purpose entity that could reasonably be expected to materially affect
the Company’s or any Subsidiary’s liquidity or the availability of or
requirements for their capital resources required to be described in the
Registration Statement, the General Disclosure Package and the Prospectus or a
document incorporated by reference therein which have not been described as
required.

(pp) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees or
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members, except as
disclosed in the Registration Statement, the General Disclosure Package and the
Prospectus.

(qq) The statistical and market related data included in the Registration
Statement, the General Disclosure Package and the Prospectus are based on or
derived from sources that the Company believes to be reliable and accurate, and
such data agree with the sources from which they are derived.

(rr) The operations of the Company and each Subsidiary are and have been
conducted at all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money Laundering Laws”), and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any Subsidiary with
respect to the Money Laundering Laws is pending, or to the best knowledge of the
Company, threatened.

 

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(ss) Neither the Company nor any Subsidiary nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the Company or
any Subsidiary is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and
the Company will not directly or indirectly use the proceeds of the offering, or
lend, contribute or otherwise make available such proceeds to any Subsidiary,
joint venture partner or other person or entity, for the purpose of financing
the activities of any person currently subject to any U.S.
sanctions administered by OFAC.

(tt) Neither the Company, nor any Subsidiary, nor any of their affiliates
(within the meaning of FINRA Rule 5121(b)(1)(a)) directly or indirectly
controls, is controlled by, or is under common control with, or is an associated
person (within the meaning of Article I, Section l(ee) of the By-laws of FINRA)
of, any member firm of FINRA.

(uu) All preclinical and clinical studies conducted by or on behalf of the
Company or any Subsidiary that are material to the Company and its Subsidiaries,
taken as a whole, are described in the Registration Statement, the General
Disclosure Package and the Prospectus. To the Company’s knowledge, after
reasonable inquiry, the clinical and preclinical studies conducted by or on
behalf of the Company or any Subsidiary that are described in the Registration
Statement, the General Disclosure Package or the Prospectus or the results of
which are referred to in the Registration Statement, the General Disclosure
Package or the Prospectus were and, if still ongoing, are being conducted in
material compliance with all laws and regulations applicable thereto in the
jurisdictions in which they are being conducted and with all laws and
regulations applicable to preclinical and clinical studies from which data will
be submitted to support marketing approval. The descriptions in the Registration
Statement, the General Disclosure Package and the Prospectus of the results of
such studies are accurate and complete in all material respects and fairly
present the data derived from such studies, and the Company has no knowledge of
any large well-controlled clinical study the aggregate results of which are
inconsistent with or otherwise call into question the results of any clinical
study conducted by or on behalf of the Company or any Subsidiary that are
described in the Registration Statement, the General Disclosure Package or the
Prospectus or the results of which are referred to in the Registration
Statement, the General Disclosure Package or the Prospectus. Except as disclosed
in the Registration Statement, the General Disclosure Package and the
Prospectus, the Company has not received any written notices or statements from
the United States Food and Drug Administration (the “FDA”), the European
Medicines Agency (“EMEA”) or any other governmental agency or authority
imposing, requiring, requesting or suggesting a clinical hold, termination,
suspension or material modification for or of any clinical or preclinical
studies that are described in the Registration Statement, the General Disclosure
Package or the Prospectus or the results of which are referred to in the
Registration Statement, the General Disclosure Package or the Prospectus General
Disclosure Package. The Company has not received and is otherwise not aware of
any notices, correspondence or other communication from the FDA, the EMEA or
other governmental regulatory agency or subdivision thereof, or any
institutional or ethical review boards, asserting non-compliance with any
applicable statutes, rules, regulations, orders, or other laws.

 

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(vv) Except as disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus, the Company has not received any written notices or
statements from the FDA, the EMEA or any other governmental agency, and
otherwise has no knowledge or reason to believe, that (i) any new drug
application or marketing authorization application for any product or potential
product of the Company or any Subsidiary is or has been rejected or determined
to be non-approvable or conditionally approvable; (ii) a delay in time for
review and/or approval of a marketing authorization application or marketing
approval application in any other jurisdiction for any product or potential
product of the Company or any Subsidiary is or may be required, requested or
being implemented; (iii) one or more clinical studies for any product or
potential product of the Company or any Subsidiary shall or may be requested or
required in addition to any clinical studies described in the Registration
Statement, the General Disclosure Package or the Prospectus as a precondition to
or condition of issuance or maintenance of a marketing approval for such product
or potential product; (iv) any license, approval, permit or authorization to
conduct any clinical trial of or market any product or potential product of the
Company or any Subsidiary has been, will be or may be suspended, revoked,
modified or limited, except in the cases of clauses (i), (ii), (iii) and
(iv) where such rejections, determinations, delays, requests, suspensions,
revocations, modifications or limitations would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.

(ww) Except as disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus, to the Company’s knowledge, any preclinical and
clinical testing, application for marketing approval of, manufacture,
distribution, promotion and sale of the products and potential products of the
Company or any Subsidiary is in compliance, in all material respects, with all
laws, rules and regulations applicable to such activities, including without
limitation applicable good laboratory practices, good clinical practices and
good manufacturing practices, except for such non-compliance as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The descriptions of the results of such tests and trials
contained in the Registration Statement, the General Disclosure Package and the
Prospectus are accurate in all material respects. Except to the extent disclosed
in the Registration Statement, the General Disclosure Package and the
Prospectus, the Company has not received notice of adverse finding, warning
letter or clinical hold notice from the FDA or any non-U.S. counterpart of any
of the foregoing, or any untitled letter or other correspondence or notice from
the FDA or any other governmental authority or agency or any institutional or
ethical review board alleging or asserting noncompliance with any law, rule or
regulation applicable in any jurisdiction, except notices, letters, and
correspondences and non-U.S. counterparts thereof alleging or asserting such
noncompliance as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as disclosed in the
Registration Statement, the General Disclosure Package and the Prospectus,
neither the Company nor any Subsidiary has, either voluntarily or involuntarily,
initiated, conducted or issued, or caused to be initiated, conducted or issued,
any recall, field correction, market withdrawal or replacement, safety alert,
warning, “dear doctor” letter, investigator notice, or other notice or action
relating to an alleged or potential lack of safety or efficacy of any product or
potential product of the Company or any Subsidiary, any alleged product defect
of any product or potential product of the Company or any Subsidiary, or any
violation of any material applicable law, rule, regulation or any clinical trial
or marketing license, approval, permit or authorization for any product or
potential product of

 

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the Company or any Subsidiary, and the Company is not aware of any facts or
information that would cause it to initiate any such notice or action and has no
knowledge or reason to believe that the FDA, the EMEA or any other governmental
agency or authority or any institutional or ethical review board or other
non-governmental authority intends to impose, require, request or suggest such
notice or action. The pre-clinical or clinical studies, tests, investigations,
and trials conducted by or on behalf of the Company or any Subsidiary that are
described in the Registration Statement, the General Disclosure Package or the
Prospectus were and, if still in progress, are being, conducted in compliance
with all applicable U.S. and foreign statutes, rules, regulations, orders, or
other laws, and, for any data to be submitted to the FDA pursuant to such
studies, all applicable Good Laboratory Practices and Good Clinical Practices in
all material respects.

(xx) Any certificate signed by or on behalf of the Company and delivered to the
Placement Agent or to counsel for the Placement Agent shall be deemed to be a
representation and warranty by the Company to the Placement Agent and the
Purchasers as to the matters covered thereby.

4. THE CLOSING. The time and date of closing and delivery of the documents
required to be delivered to the Placement Agent pursuant to Sections 5 and 7
hereof shall be at 11:00 A.M., New York time, on July 24, 2013 (the “Closing
Date”) at the office of Lowenstein Sandler LLP, 1251 Avenue of the Americas, New
York, New York 10020.

5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the Placement
Agent and the Purchasers:

(a) To prepare the Rule 462(b) Registration Statement, if necessary, in a form
approved by the Placement Agent and file such Rule 462(b) Registration Statement
with the Commission on the date hereof; to prepare the Prospectus in a form
approved by the Placement Agent containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on rules 430A,
430B and 430C and to file such Prospectus pursuant to Rule 424(b) under the
Rules and Regulations not later than the second (2nd) business day following the
execution and delivery of this Agreement or, if applicable, such earlier time as
may be required by Rule 430A under the Rules and Regulations; until such time as
the Series B Warrants are no longer outstanding (the “Completion Date”), to
notify the Placement Agent immediately of the Company’s intention to file or
prepare any supplement or amendment to any Registration Statement or to
the Prospectus and to make no amendment or supplement to the Registration
Statement, the General Disclosure Package or to the Prospectus to which the
Placement Agent shall reasonably object by notice to the Company after a
reasonable period to review, provided, however, that the Company shall only be
required to provide the Placement Agent with a substantially final draft of any
report to be filed by the Company with the Commission pursuant to Section 13(a),
13(c) or 15(d) of the Exchange Act; until the Completion Date, to advise the
Placement Agent, promptly after it receives notice thereof, of the time when any
amendment to any Registration Statement has been filed or becomes effective
or any supplement to the General Disclosure Package or the Prospectus or any
amended Prospectus has been filed and to furnish the Placement Agent copies
thereof; to file promptly all material required to be filed by the Company with
the Commission pursuant to Rule 433(d) or 163(b)(2), as the case may be; to file
promptly

 

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all reports and any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus (or in lieu thereof, the notice referred to
in Rule 173(a) under the Rules and Regulations) is required in connection with
the offering or sale of the Securities; to advise the Placement Agent, promptly
after it receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus, any Issuer Free Writing Prospectus or the Prospectus, of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement, the General Disclosure Package or the Prospectus
or for additional information; and, in the event of the issuance of any
stop order or of any order preventing or suspending the use of any Preliminary
Prospectus, any Issuer Free Writing Prospectus or the Prospectus or suspending
any such qualification, and promptly to use its best efforts to obtain the
withdrawal of such order.

(b) The Company represents and agrees that, unless it obtains the prior consent
of the Placement Agent, it has not made and will not make any offer relating to
the Securities that would constitute a “free writing prospectus” as defined in
Rule 405 under the Rules and Regulations unless the prior written consent of the
Placement Agent has been received (each, a “Permitted Free Writing Prospectus”);
provided that the prior written consent of the Placement Agent hereto shall be
deemed to have been given in respect of the Issuer Free Writing Prospectus
included in Schedule A hereto. The Company represents that it has treated and
agrees that it will treat each Permitted Free Writing Prospectus as an Issuer
Free Writing Prospectus, comply with the requirements of Rules 164 and 433 under
the Rules and Regulations applicable to any Issuer Free Writing Prospectus,
including the requirements relating to timely filing with the Commission,
legending and record keeping and will not take any action that would result in
the Placement Agent or the Company being required to file with the Commission
pursuant to Rule 433(d) under the Rules and Regulations a free writing
prospectus prepared by or on behalf of the Placement Agent that the Placement
Agent otherwise would not have been required to file thereunder.

(c) If at any time until the Completion Date, when a Prospectus relating to the
Securities is required to be delivered under the Securities Act, any event
occurs or condition exists as a result of which the Prospectus, as then amended
or supplemented, would include any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or the
Registration Statement, as then amended or supplemented, would include any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading, or if for any other reason it is
necessary at any time to amend or supplement any Registration Statement or the
Prospectus to comply with the Securities Act or the Exchange Act, the Company
will promptly notify the Placement Agent, and upon the Placement Agent’s
request, the Company will promptly prepare and file with the Commission, at the
Company’s expense, an amendment to the Registration Statement or an amendment or
supplement to the Prospectus that corrects such statement or omission or
effects such compliance and will deliver to the Placement Agent, without charge,
such number of copies thereof as the Placement Agent may reasonably request. The
Company consents to the use of the Prospectus or any amendment or supplement
thereto by the Placement Agent.

 

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(d) If the General Disclosure Package is being used to solicit offers to buy the
Securities at a time when the Prospectus is not yet available to prospective
purchasers and any event shall occur as a result of which, in the judgment of
the Company or in the reasonable opinion of the Placement Agent, it becomes
necessary to amend or supplement the General Disclosure Package in order to make
the statements therein, in the light of the circumstances then prevailing, not
misleading, or to make the statements therein not conflict with the information
contained or incorporated by reference in the Registration Statement then on
file and not superseded or modified, or if it is necessary at any time to amend
or supplement the General Disclosure Package to comply with any law, the Company
promptly will either (i) prepare, file with the Commission (if required) and
furnish to the Placement Agent and any dealers an appropriate amendment or
supplement to the General Disclosure Package or (ii) prepare and file with the
Commission an appropriate filing under the Exchange Act which shall be
incorporated by reference in the General Disclosure Package so that the General
Disclosure Package as so amended or supplemented will not, in the light of the
circumstances then prevailing, be misleading or conflict with the Registration
Statement then on file, or so that the General Disclosure Package will comply
with law.

(e) If at any time following issuance of an Issuer Free Writing Prospectus there
occurred or occurs an event or development as a result of which such Issuer Free
Writing Prospectus conflicted or will conflict with the information contained in
the Registration Statement, any Pricing Prospectus or the Prospectus, including
any document incorporated by reference therein and any prospectus supplement
deemed to be a part thereof and not superseded or modified or included or would
include an untrue statement of a material fact or omitted or would omit 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 prevailing at the
subsequent time, not misleading, the Company has promptly notified or will
promptly notify the Placement Agent so that any use of the Issuer Free Writing
Prospectus may cease until it is amended or supplemented and has promptly
amended or will promptly amend or supplement, at its own expense, such Issuer
Free Writing Prospectus to eliminate or correct such conflict, untrue statement
or omission. The foregoing sentence does not apply to statements in or omissions
from any Issuer Free Writing Prospectus in reliance upon, and in conformity
with, written information furnished to the Company by the Placement Agent
specifically for inclusion therein, which information the parties hereto agree
is limited to the Placement Agent’s Information (as defined in Section 17).

(f) To the extent not available on the Commission’s EDGAR system or any
successor system, to furnish promptly to the Placement Agent and to counsel for
the Placement Agent a signed copy of the Registration Statement as originally
filed with the Commission, and of each amendment thereto filed with
the Commission, including all consents and exhibits filed therewith.

(g) To the extent not available on the Commission’s EDGAR system or any
successor system, to deliver promptly to the Placement Agent in New York City
such number of the following documents as the Placement Agent shall reasonably
request: (i) conformed copies

 

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of the Registration Statement as originally filed with the Commission (in each
case excluding exhibits), (ii) each Preliminary Prospectus, (iii) any
Issuer Free Writing Prospectus, (iv) the Prospectus (the delivery of the
documents referred to in clauses (i), (ii), (iii) and (iv) of this paragraph
(g) to be made not later than 10:00 A.M., New York time, on the business day
following the execution and delivery of this Agreement), (v) conformed copies of
any amendment to the Registration Statement (excluding exhibits), (vi) any
amendment or supplement to the General Disclosure Package or the Prospectus (the
delivery of the documents referred to in clauses (v) and (vi) of this paragraph
(g) to be made not later than 10:00 A.M., New York City time, on the business
day following the date of such amendment or supplement) and (vii) any document
incorporated by reference in the Registration Statement, the General Disclosure
Package or the Prospectus (excluding exhibits thereto) (the delivery of the
documents referred to in clause (vii) of this paragraph (g) to be made not later
than 10:00 A.M., New York City time, on the business day following the date of
such document).

(h) To make generally available to its stockholders as soon as practicable, but
in any event not later than eighteen (18) months after the effective date of
each Registration Statement (as defined in Rule 158(c) under the Rules and
Regulations), an earnings statement of the Company and any Subsidiary (which
need not be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule 158); and
to furnish to its stockholders as soon as practicable after the end of
each fiscal year an annual report (including a balance sheet and statements of
income, stockholders’ equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and as soon as
possible after each of the first three fiscal quarters of each fiscal year
(beginning with the first fiscal quarter after the effective date of such
Registration Statement), consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail.

(i) To take promptly from time to time such actions as the Placement Agent may
reasonably request to qualify the Securities for offering and sale under the
securities or Blue Sky laws of such jurisdictions (domestic or foreign) as the
Placement Agent may designate and to continue such qualifications in effect, and
to comply with such laws, for so long as required to permit the offer and sale
of the Securities in such jurisdictions; provided that the Company shall not be
obligated to qualify as foreign corporations in any jurisdiction in which they
are not so qualified or to file a general consent to service of process in any
jurisdiction.

(j) To the extent not available on the Commission’s EDGAR system or any
successor system, during the period of two (2) years from the date hereof, to
deliver to the Placement Agent, (i) as soon as they are available, copies of all
reports or other communications furnished to stockholders (other than reports,
proxy statements and other information that is electronically filed with the
Commission via EDGAR or any successor system), and (ii) as soon as they are
available, copies of any reports and financial statements furnished or filed
with the Commission or any national securities exchange or automatic quotation
system on which the Company’s securities are listed or quoted.

 

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(k) That the Company will not, for a period of thirty (30) days from the date of
the Prospectus (the “Lock-Up Period”), without the prior written consent of the
Placement Agent, directly or indirectly offer, sell, assign, transfer, pledge,
contract to sell, or otherwise dispose of, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock,
other than: (i) the Company’s sale of the Securities and the Agent Securities
hereunder and any exercise thereof; (ii) the issuance of restricted Common Stock
or options to acquire Common Stock pursuant to the Company’s employee benefit
plans, qualified stock option plans or other employee compensation plans as such
plans are in existence on the date hereof and described in the Prospectus; and
(iii) the issuance of Common Stock pursuant to the valid exercises of options,
warrants or rights outstanding on the date hereof. The Company will cause
each executive officer, director, stockholder, optionholder and warrantholder
listed in Schedule B to furnish to the Placement Agent, on or prior to the date
of this Agreement, a letter, substantially in the form of Exhibit D hereto,
pursuant to which each such person shall agree, among other things, not to
directly or indirectly offer, sell, assign, transfer, pledge, contract to sell,
or otherwise dispose of, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, not
to engage in any swap or other agreement or arrangement that transfers, in whole
or in part, directly or indirectly, the economic risk of ownership of Common
Stock or any such securities and not to engage in any short selling of any
Common Stock or any such securities, during the Lock-Up Period, without the
prior written consent of the Placement Agent, subject to certain other
exceptions provided for in such letter. The Company also agrees that during such
period, the Company will not file any registration statement, preliminary
prospectus or prospectus, or any amendment or supplement thereto, under the
Securities Act for any such transaction or which registers, or offers for sale,
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, except for a registration statement on Form S-8 relating to
employee benefit plans. The Company hereby agrees that (i) if it issues an
earnings release or material news, or if a material event relating to the
Company occurs, during the last seventeen (17) days of the Lock-Up Period, or
(ii) if prior to the expiration of the Lock-Up Period, the Company
announces that it will release earnings results during the sixteen (16)-day
period beginning on the last day of the Lock-Up Period, the restrictions imposed
by this paragraph (k) or the letter shall continue to apply until the expiration
of the eighteen (18)-day period beginning on the issuance of the earnings
release or the occurrence of the material news or material event.

(l) Until the Completion Date, to supply the Placement Agent with copies of all
correspondence to and from, and all documents issued to and by, the Commission
in connection with the registration of the Securities under the Securities Act
or the Registration Statement, any Preliminary Prospectus or the Prospectus, or
any amendment or supplement thereto or document incorporated by reference
therein.

(m) Prior to the Closing Date, to furnish to the Placement Agent, as soon as
they have been prepared, copies of any unaudited interim consolidated financial
statements of the Company for any periods subsequent to the periods covered by
the financial statements appearing in the Registration Statement and the
Prospectus.

 

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(n) Prior to the Closing Date, not to issue any press release or other
communication directly or indirectly or hold any press conference with respect
to the Company, its condition, financial or otherwise, or earnings, business
affairs or business prospects (except for routine oral marketing communications
in the ordinary course of business and consistent with the past practices of the
Company and of which the Placement Agent is notified), without the prior written
consent of the Placement Agent, unless in the judgment of the Company and its
counsel, and after notification to the Placement Agent, such press release or
communication is required by law.

(o) Until the Placement Agent shall have notified the Company of the completion
of the offering of the Firm Securities, that the Company will not, and will
cause its affiliated purchasers (as defined in Regulation M under the Exchange
Act) not to, either alone or with one or more other persons, bid for or
purchase, for any account in which it or any of its affiliated purchasers has a
beneficial interest, any Securities, or attempt to induce any person to purchase
any Securities; and not to, and to cause its affiliated purchasers not to, make
bids or purchase for the purpose of creating actual, or apparent, active trading
in or of raising the price of the Securities; provided, however, that this
clause (o) shall not affect the ability of the Company’s affiliated purchasers
to purchase Securities in the Offering.

(p) Not to take any action prior to the Closing Date which would require the
Prospectus to be amended or supplemented pursuant to Section 5.

(q) To at all times comply in all material respects with all applicable
provisions of the Sarbanes-Oxley Act in effect from time to time.

(r) To apply the net proceeds from the sale of the Firm Securities as set forth
in the Registration Statement, the General Disclosure Package and the Prospectus
under the heading “Use of Proceeds.”

(s) To use its best efforts to effect, quote and maintain, subject to notice of
issuance, the Common Stock on the OTCQB or a national securities exchange.

(t) To use its best efforts to assist the Placement Agent with any filings with
FINRA and obtaining clearance from FINRA as to the amount of compensation
allowable or payable to the Placement Agent.

(u) To use its best efforts to do and perform all things required to be done or
performed under this Agreement by the Company prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Firm Securities.

(v) The Company hereby engages the Placement Agent as its exclusive agent for
the solicitation of the exercise of the Series B Warrants. The Company will
(i) assist the Placement Agent with respect to the solicitation, if requested by
the Placement Agent, and (ii) provide the Placement Agent lists of the record
and, to the extent known, beneficial owners of the Series B Warrants. For each
Series B Warrant exercised, the Company will pay the Placement Agent a
solicitation fee (the “Solicitation Fee”) of five percent (5%) of the exercise
price of the Series B Warrants. The Company shall provide the Placement Agent
with written notice of each exercise of Series B Warrants within 24 hours of the
applicable Exercise Date. Any such Solicitation Fee shall be paid to the
Placement Agent not less than five (5) business days after the Exercise Date
giving rise to such Solicitation Fee and shall be

 

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paid by wire transfer of immediately available funds to an account previously
specified by the Placement Agent. The Company agrees to disclose the arrangement
to pay solicitation fees to the Placement Agent in the General Disclosure
Package and the Prospectus. Notwithstanding the foregoing, as required by FINRA
Rule 5110(f)(2)(K), no Solicitation Fee shall be payable to the Placement Agent
hereunder in respect of the exercise of a Series B Warrant if: (i) the market
price of the underlying shares of Common Stock is lower than the exercise price
of the Series B Warrant at the time of exercise; (ii) the Series B Warrant is
held in a discretionary account of an Placement Agent at the time of exercise,
unless prior specific written approval for the exercise is received from the
holder; (iii) the arrangement to pay the Solicitation Fee is not disclosed in
the General Disclosure Package or the Prospectus or in any prospectus provided
to the holder of the Series B Warrant at the time of exercise; (iv) the Series B
Warrant is exercised in an unsolicited transaction; or (v) the holder of the
Series B Warrant has not confirmed in writing that exercise was solicited and
that the Placement Agent solicited his, her or its exercise.

6. PAYMENT OF EXPENSES. The Company agrees to pay, or reimburse if paid by the
Placement Agent, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated: (a) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Securities to the
Purchasers and the Agent Securities to the Placement Agent and any taxes payable
in that connection; (b) the costs incident to the registration of the Securities
and the Agent Securities under the Securities Act; (c) the costs incident to the
preparation, printing and distribution of the Registration Statement, any
Preliminary Prospectus, any Pricing Prospectus, any Issuer Free Writing
Prospectus, the General Disclosure Package, the Prospectus, any amendments,
supplements and exhibits thereto or any document incorporated by reference
therein and the costs of printing, reproducing and distributing any transaction
document by mail, telex or other means of communications; (d) the filing fees
and other costs (excluding fees and expenses of counsel for the Placement Agent,
if any) of any required review by FINRA of the terms of the sale of the
Securities and any filings made with FINRA; (e) any applicable listing,
quotation or other fees; (f) the filing fees and other costs (excluding fees and
expenses of counsel to the Placement Agent, if applicable) of qualifying the
Securities and the Agent Securities under the securities laws of the several
jurisdictions as provided in Section 5(i) and of preparing, printing
and distributing wrappers, Blue Sky Memoranda and Legal Investment Surveys;
(g) the cost of preparing and printing stock certificates and Warrant
agreements; (h) all fees and expenses of the registrar and transfer agent of the
Common Stock and any registrar and transfer agent of the Warrants and the Agent
Warrants; and (i) all other costs and expenses incident to the offering of the
Securities or the performance of the obligations of the Company under this
Agreement (including, without limitation, the fees and expenses of the Company’s
counsel and the Company’s independent accountants and the travel and other
reasonable documented expenses incurred by Company personnel in connection with
any “road show” including, without limitation, any expenses advanced by the
Placement Agent on the Company’s behalf (which will be promptly reimbursed));
provided that, except to the extent otherwise provided in this Section 6 and in
Sections 8 and 10, the Placement Agent shall pay its own costs and expenses. In
addition, the Company will reimburse the Placement Agent for its reasonable
out-of-pocket expenses, including legal fees and disbursements of its counsel in
connnection with the purchase and sale of the Securities contemplated hereby up
to an aggregate of $75,000.

 

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7. CONDITIONS TO THE OBLIGATIONS OF THE PLACEMENT AGENT AND THE PURCHASERS, AND
THE SALE OF THE SHARES AND THE WARRANTS. The respective obligations of the
Placement Agent hereunder and the Purchasers under the Subscription Agreements,
and the Closing of the sale of the Firm Securities, are subject to the accuracy,
when made and as of the Applicable Time and on the Closing Date, of the
representations and warranties of the Company contained herein, to the accuracy
of the statements of the Company made in any certificates pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:

(a) No stop order suspending the effectiveness of the Registration Statement or
any part thereof, preventing or suspending the use of any Preliminary
Prospectus, any Pricing Prospectus, the Prospectus or any Permitted Free Writing
Prospectus or any part thereof shall have been issued and no proceedings for
that purpose or pursuant to Section 8A under the Securities Act shall have been
initiated or threatened by the Commission, and all requests for additional
information on the part of the Commission (to be included or incorporated by
reference in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the reasonable satisfaction of the Placement Agent;
the Rule 462(b) Registration Statement, if any, each Issuer Free Writing
Prospectus, if any, and the Prospectus shall have been filed with the Commission
within the applicable time period prescribed for such filing by, and in
compliance with, the Rules and Regulations and in accordance with Section 5(a)
and the Rule 462(b) Registration Statement, if any, shall have become effective
immediately upon its filing with the Commission; and FINRA shall have raised no
objection to the fairness and reasonableness of the terms of this Agreement or
the transactions contemplated hereby.

(b) The Placement Agent shall not have discovered and disclosed to the Company
on or prior to the Closing Date that the Registration Statement or any amendment
or supplement thereto contains an untrue statement of a fact which, in the
opinion of counsel for the Placement Agent, is material or omits to state
any fact which, in the opinion of such counsel, is material and is required to
be stated therein or is necessary to make the statements therein not misleading,
or that the General Disclosure Package, any Issuer Free Writing Prospectus or
the Prospectus or any amendment or supplement thereto contains an untrue
statement of fact which, in the opinion of such counsel, is material or omits to
state any fact which, in the opinion of such counsel, is material and is
necessary in order to make the statements, in the light of the circumstances
in which they were made, not misleading.

(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of each of this Agreement, the Subscription
Agreements, the Securities, the Registration Statement, the General Disclosure
Package, each Issuer Free Writing Prospectus, if any, and the Prospectus and all
other legal matters relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all material respects to counsel for
the Placement Agent, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.

 

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(d)    (i) DLA Piper LLP shall have furnished to the Placement Agent, such
counsel’s written opinion and negative assurances statement, as counsel to the
Company, addressed to the Placement Agent and dated the Closing Date, in a form
reasonably acceptable to the Placement Agent and its counsel, subject to
reasonably acceptable qualifications, limitations and assumptions.

(ii) Louis C. Paul & Associates, PLLC shall have furnished to the Placement
Agent, such counsel’s opinion and negative assurance letter, as intellectual
property counsel for the Company’s subsidiary, Lifeline Skin Care, Inc., dated
the Closing Date, and addressed to the Placement Agent, in a form and substance
reasonably satisfactory to the Placement Agent and its counsel.

(e) The Placement Agent shall have received a letter of Mayer Hoffman McCann
P.C. on the date hereof and on the Closing Date, addressed to the Placement
Agent, confirming that they are independent public accountants within the
meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualifications of accountants under Rule 2-01 of
Regulation S-X of the Commission, and confirming, as of the date of each such
letter (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the
General Disclosure Package, as of a date not prior to the date hereof or more
than five days prior to the date of such letter), the conclusions and findings
of said firm with respect to the financial information and other matters
required by the Placement Agent.

(f) The Company shall have furnished to the Placement Agent a certificate, dated
the Closing Date, of its Chief Executive Officer, its President or a Vice
President and its Chief Financial Officer stating that (i) such officers have
carefully examined the Registration Statement, the General Disclosure Package,
any Permitted Free Writing Prospectus and the Prospectus and, in their opinion,
the Registration Statement and each amendment thereto, at the Applicable Time
and as of the date of this Agreement and as of the Closing Date did not include
any untrue statement of a material fact and did not omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and the General Disclosure Package, as of the Applicable
Time and as of the Closing Date, any Permitted Free Writing Prospectus as of its
date and as of the Closing Date, the Prospectus and each amendment or supplement
thereto, as of the respective date thereof and as of the Closing Date, did not
include any untrue statement of a material fact and did not omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances in which they were made, not misleading, (ii) since the
effective date of the Registration Statement, no event has occurred which should
have been set forth in a supplement or amendment to the Registration Statement,
the General Disclosure Package or the Prospectus, (iii) to the best of their
knowledge after reasonable investigation, as of the Closing Date, the
representations and warranties of the Company in this Agreement are true and
correct and the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date, and (iv) there has not been, subsequent to the date of the most
recent audited financial statements included or incorporated by reference in the
Registration Statement, the General Disclosure Package and the Prospectus, any
material adverse change in the financial position or results of operations of
the Company or any Subsidiary, or any change or development that, singularly or
in the aggregate, would involve a material adverse change or a prospective
material adverse change, in or affecting the condition (financial or otherwise),
results of operations, business, assets or prospects of the Company or any
Subsidiary when taken as a whole, except as set forth in the Registration
Statement, the General Disclosure Package and the Prospectus.

 

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(g) Since the date of the latest audited financial statements included in the
Registration Statement, the General Disclosure Package and the Prospectus or
incorporated by reference therein as of the date hereof, (i) neither the Company
nor any Subsidiary shall have sustained any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth in the Registration Statement, the
General Disclosure Package and the Prospectus, and (ii) there shall not have
been any change in the capital stock or long-term debt of the Company or any
Subsidiary, or any change, or any development involving a prospective change, in
or affecting the business, management, financial position, stockholders’ equity
or results of operations of the Company, otherwise than as set forth in the
Registration Statement, the General Disclosure Package and the Prospectus, the
effect of which, in any such case described in clause (i) or (ii) of this
paragraph (g) is, in the judgment of the Placement Agent, so material and
adverse as to make it impracticable or inadvisable to proceed with the sale or
delivery of the Securities on the terms and in the manner contemplated in the
General Disclosure Package.

(h) No action shall have been taken and no law, statute, rule, regulation or
order shall have been enacted, adopted or issued by any governmental agency or
body which would prevent the issuance or sale of the Securities or materially
and adversely affect or potentially materially and adversely affect the business
or operations of the Company or any Subsidiary; and no injunction, restraining
order or order of any other nature by any federal or state court of competent
jurisdiction shall have been issued which would prevent the issuance or sale of
the Securities or materially and adversely affect or potentially materially and
adversely affect the business or operations of the Company or any Subsidiary.

(i) Subsequent to the execution and delivery of this Agreement there shall not
have occurred any of the following: (i) trading in securities generally on the
New York Stock Exchange, NYSE MKT or the Nasdaq Stock Market or in the OTCQB or
other over-the-counter market, or trading in any securities of the Company on
any exchange or in the OTCQB or other over-the-counter market, shall have been
suspended or materially limited, or minimum or maximum prices or maximum range
for prices shall have been established on any such exchange or such market by
the Commission, by such exchange or market or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Federal or state authorities or a material disruption has
occurred in commercial banking or securities settlement or clearance services in
the United States, (iii) the United States shall have become engaged in
hostilities, or the subject of an act of terrorism, or there shall have been an
outbreak of or escalation in hostilities involving the United States, or there
shall have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such) as to make it, in the judgment of the Placement Agent, impracticable or
inadvisable to proceed with the sale or delivery of the Firm Securities on the
terms and in the manner contemplated in the Registration Statement, the General
Disclosure Package and the Prospectus.

 

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(j) The Placement Agent shall have received on or prior to the date of this
Agreement the written agreements, substantially in the form of Exhibit D hereto,
of the executive officers, directors, stockholders, optionholders and
warrantholders of the Company listed in Schedule B to this Agreement.

(k) The Company shall have entered into Subscription Agreements with each of the
Purchasers and such agreements shall be in full force and effect.

(l) FINRA shall have raised no objection as to the amount of compensation
allowable or payable to the Placement Agent as described in the General
Disclosure Package, any Pricing Prospectus or any Preliminary Prospectus.

(m) Prior to the Closing Date, the Company shall have furnished to the Placement
Agent such further information, opinions, certificates, letters or documents as
the Placement Agent shall have reasonably requested.

All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.

8. INDEMNIFICATION AND CONTRIBUTION.

(a) The Company shall indemnify and hold harmless the Placement Agent, its
affiliates and each of its and their respective directors, officers, members,
employees, representatives and agents and its affiliates, and each of its and
their respective directors, officers, members, employees, representatives and
agents and each person, if any, who controls the Placement Agent within
the meaning of Section 15 of the Securities Act of or Section 20 of the Exchange
Act (collectively the “Placement Agent Indemnified Parties,” and each a
“Placement Agent Indemnified Party”) against any loss, claim, damage, expense or
liability whatsoever (or any action, investigation or proceeding in
respect thereof), joint or several, to which such Placement Agent Indemnified
Party may become subject, under the Securities Act or otherwise, insofar as such
loss, claim, damage, expense, liability, action, investigation or proceeding
arises out of or is based upon (A) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, any
Preliminary Prospectus, any Pricing Prospectus, any Issuer Free Writing
Prospectus, any “issuer information” filed or required to be filed pursuant to
Rule 433(d) under the Rules and Regulations, or the Prospectus, or in any
amendment or supplement thereto or document incorporated by reference therein,
(B) the omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, any Pricing Prospectus, any Issuer Free Writing
Prospectus, any “issuer information” filed or required to be filed pursuant to
Rule 433(d) under the Rules and Regulations, or the Prospectus, or in any
amendment or supplement thereto or document incorporated by reference therein, a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (C) any breach of the representations and warranties
of the Company contained herein or in the

 

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Subscription Agreements or failure of the Company to perform its obligations
hereunder or thereunder or pursuant to any law, any act or failure to act, or
any alleged act or failure to act, by the Placement Agent in connection with,
or relating in any manner to, the Securities or the Offering, and which is
included as part of or referred to in any loss, claim, damage, expense,
liability, action, investigation or proceeding arising out of or based upon
matters covered by subclause (A), (B) or (C) above of this Section 8(a)
(provided that the Company shall not be liable in the case of any matter covered
by this subclause (C) to the extent that it is determined in a final judgment by
a court of competent jurisdiction that such loss, claim, damage, expense
or liability resulted directly from any such act or failure to act undertaken or
omitted to be taken by the Placement Agent through its gross negligence or
willful misconduct), and shall reimburse the Placement Agent Indemnified Party
promptly upon demand for any legal fees or other expenses reasonably incurred by
that Placement Agent Indemnified Party in connection with investigating, or
preparing to defend, or defending against, or appearing as a third party witness
in respect of, or otherwise incurred in connection with, any such loss, claim,
damage, expense, liability, action, investigation or proceeding, as such fees
and expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage, expense
or liability arises out of or is based upon an untrue statement or alleged
untrue statement in, or omission or alleged omission from the Registration
Statement, any Preliminary Prospectus, any Pricing Prospectus, any Issuer Free
Writing Prospectus, any “issuer information” filed or required to be filed
pursuant to Rule 433(d) under the Rules and Regulations, or the Prospectus, or
in any amendment or supplement thereto or document incorporated by reference
therein made in reliance upon and in conformity with written information
furnished to the Company by the Placement Agent specifically for use therein,
which information the parties hereto agree is limited to the Placement Agent’s
Information (as defined in Section 17). This indemnity agreement is not
exclusive and will be in addition to any liability, which the Company might
otherwise have and shall not limit any rights or remedies which may otherwise be
available at law or in equity to the Placement Agent Indemnified Party.

(b) The Placement Agent shall indemnify and hold harmless the Company and its
directors, its officers who signed the Registration Statement and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively the “Company
Indemnified Parties” and each a “Company Indemnified Party”) against any loss,
claim, damage, expense or liability whatsoever (or any action, investigation or
proceeding in respect thereof), joint or several, to which such Company
Indemnified Party may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, expense, liability, action, investigation
or proceeding arises out of or is based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, any
Preliminary Prospectus, any Pricing Prospectus, any Issuer Free Writing
Prospectus, any “issuer information” filed or required to be filed pursuant to
Rule 433(d) under the Rules and Regulations, or the Prospectus, or in any
amendment or supplement thereto or document incorporated by reference therein,
or (ii) the omission or alleged omission to state in the Registration Statement,
any Preliminary Prospectus, any Pricing Prospectus, any Issuer Free Writing
Prospectus, any “issuer information” filed or required to be filed pursuant to
Rule 433(d) under the Rules and Regulations, or the Prospectus, or in any
amendment or supplement

 

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thereto or document incorporated by reference therein, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by the
Placement Agent specifically for use therein, which information the parties
hereto agree is limited to the Placement Agent’s Information as defined in
Section 17 and shall reimburse the Company for any legal or other expenses
reasonably incurred by such party in connection with investigating or preparing
to defend or defending against or appearing as third party witness in
connection with any such loss, claim, damage, liability, action, investigation
or proceeding, as such fees and expenses are incurred. Notwithstanding the
provisions of this Section 8(b) in no event shall any indemnity by the Placement
Agent under this Section 8(b) exceed the total compensation received by the
Placement Agent in accordance with Section 2.5.

(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, the indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 8 notify such indemnifying party in writing of the commencement of that
action; provided, however, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have under this Section 8
except to the extent it has been materially prejudiced by such failure; and,
provided, further, that the failure to notify an indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 8. If any such action shall be brought against
an indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party (which counsel shall not, except with the written consent of
the indemnified party, be counsel to the indemnifying party). After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such action, except as provided herein, the indemnifying party shall
not be liable to the indemnified party under Section 8 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense of such action other than reasonable costs of investigation; provided,
however, that any indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense of such action but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized in writing by the Company in
the case of a claim for indemnification under Section 8(a) or Section 2(f) or
the Placement Agent in the case of a claim for indemnification under
Section 8(b), (ii) such indemnified party shall have been advised by its counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party that make it
inadvisable for joint representation by one counsel, or (iii) the indemnifying
party has failed to assume the defense of such action and employ counsel
reasonably satisfactory to the indemnified party within a reasonable period of
time after notice of the commencement of the action or the indemnifying party
does not diligently defend the action after assumption of the defense, in which
case, if such indemnified party notifies the indemnifying party in writing that
it elects to employ separate counsel at the expense of the indemnifying party,
the indemnifying party shall not have the

 

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right to assume the defense of (or, in the case of a failure to diligently
defend the action after assumption of the defense, to continue to defend) such
action on behalf of such indemnified party and the indemnifying party shall be
responsible for legal or other expenses subsequently incurred by such
indemnified party in connection with the defense of such action; provided,
however, that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all such indemnified parties (in addition to any local
counsel), which firm shall be designated in writing by the Placement Agent if
the indemnified parties under this Section 8 consist of any Placement
Agent Indemnified Party or by the Company if the indemnified parties under this
Section 8 consist of any Company Indemnified Parties. Subject to this
Section 8(c), the amount payable by an indemnifying party under Section 8 shall
include, but not be limited to, (x) reasonable legal fees and expenses of
counsel to the indemnified party and any other expenses in investigating, or
preparing to defend or defending against, or appearing as a third party witness
in respect of, or otherwise incurred in connection with, any action,
investigation, proceeding or claim, and (y) all amounts paid in settlement of
any of the foregoing. No indemnifying party shall, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of judgment with respect to any pending or threatened action or any claim
whatsoever, in respect of which indemnification or contribution could be sought
under this Section 8 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party in form and
substance reasonably satisfactory to such indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party. Subject to the provisions of the following sentence, no
indemnifying party shall be liable for settlement of any pending or threatened
action or any claim whatsoever that is effected without its written consent
(which consent shall not be unreasonably withheld or delayed), but if settled
with its written consent, if its consent has been unreasonably withheld or
delayed or if there be a judgment for the plaintiff in any such matter, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
In addition, if at any time an indemnified party shall have requested that an
indemnifying party reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated herein effected without its written
consent if (i) such settlement is entered into more than forty-five (45) days
after receipt by such indemnifying party of the request for reimbursement,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least thirty (30) days prior to such settlement being entered into
and (iii) such indemnifying party shall not have reimbursed such indemnified
party in accordance with such request prior to the date of such settlement.

(d) If the indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an indemnified party under Section 8(a) or
Section 8(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid, payable or otherwise incurred
by such indemnified party as a result of such loss, claim, damage, expense or
liability (or any action, investigation or proceeding in respect

 

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thereof), as incurred, (i) in such proportion as shall be appropriate to reflect
the relative benefits received by the Company on the one hand and the Placement
Agent on the other hand from the offering of the Securities, or (ii) if the
allocation provided by clause (i) of this Section 8(d) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) of this Section 8(d) but also the
relative fault of the Company on the one hand and the Placement Agent on the
other with respect to the statements, omissions, acts or failures to act which
resulted in such loss, claim, damage, expense or liability (or any action,
investigation or proceeding in respect thereof) as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Placement Agent on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities purchased under this Agreement (before deducting
expenses) received by the Company bear to the total Placement Fee received
by the Placement Agent in connection with the Offering, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company on the one hand and the Placement Agent on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Placement Agent on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement, omission, act or failure to act; provided that the
parties hereto agree that the written information furnished to the Company by
the Placement Agent for use in the Registration Statement, any Preliminary
Prospectus, any Pricing Prospectus, any Issuer Free Writing Prospectus,
any “issuer information” filed or required to be filed pursuant to Rule 433(d)
under the Rules and Regulations, or the Prospectus, or in any amendment or
supplement thereto or document incorporated by reference therein,
consists solely of the Placement Agent’s Information as defined in Section 17.
The Company and the Placement Agent agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage, expense,
liability, action, investigation or proceeding referred to above in this
Section 8(d) shall be deemed to include, for purposes of this Section 8(d). any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating, preparing to defend or defending against or
appearing as a third party witness in respect of, or otherwise incurred in
connection with, any such loss, claim, damage, expense, liability, action,
investigation or proceeding. Notwithstanding the provisions of this
Section 8(d), the Placement Agent shall not be required to contribute any amount
in excess of the total compensation received by the Placement Agent in
accordance with Section 2.5 less the amount of any damages which the Placement
Agent has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement, omission or alleged omission, act or alleged act or
failure to act or alleged failure to act. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

 

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9. TERMINATION. The obligations of the Placement Agent and the Purchasers
hereunder and under the Subscription Agreements may be terminated by the
Placement Agent, in its absolute discretion by notice given to the Company prior
to delivery of and payment for the Shares and the Warrants if, prior to that
time, (i) any of the conditions to closing in Section 7 shall not have been
satisfied in full and shall not have been expressly waived in writing by the
Placement Agent, (ii) any of the events described in Section 7(a), (b), (g),
(h) or (i) shall have occurred or (iii) the Purchasers shall decline to purchase
the Shares and the Warrants for any reason permitted under this Agreement or the
Subscription Agreements.

10. REIMBURSEMENT OF PLACEMENT AGENT’S EXPENSES. Notwithstanding anything to the
contrary in this Agreement, if (a) this Agreement shall have been terminated
pursuant to Section 9, (b) the Company shall fail to tender the Firm Securities
for delivery to the Purchasers for any reason not permitted under this
Agreement, (c) the Purchasers shall decline to purchase the Firm Securities for
any reason permitted under this Agreement or (d) the sale of the Firm Securities
is not consummated because any condition to the obligations of the Purchasers or
the Placement Agent set forth herein is not satisfied or because of the refusal,
inability or failure on the part of the Company to perform any agreement herein
or to satisfy any condition or to comply with the provisions hereof, then in
addition to the payment of amounts in accordance with Section 6 the Company
shall reimburse the Placement Agent for the reasonable documented and
accountable fees and expenses of the Placement Agent’s counsel and for such
other out-of-pocket expenses as shall have been reasonably incurred by them in
connection with this Agreement and the proposed purchase of the Firm Securities,
and upon demand the Company shall pay the full amount thereof to the Placement
Agent.

11. ABSENCE OF FIDUCIARY RELATIONSHIP. The Company acknowledges and agrees that:

(a) the Placement Agent’s responsibility to the Company is solely contractual in
nature, the Placement Agent has been retained solely to act as Placement Agent
in connection with the Offering and no fiduciary, advisory or agency
relationship between the Company and the Placement Agent has been created in
respect of any of the transactions contemplated by this Agreement, irrespective
of whether the Placement Agent has advised or is advising the Company on other
matters;

(b) the price of the Firm Securities set forth in this Agreement was established
by the Company following discussions and arms-length negotiations with the
Placement Agent and the Purchasers, and the Company is capable of evaluating and
understanding, and understands and accepts, the terms, risks and conditions of
the transactions contemplated by this Agreement;

(c) it has been advised that the Placement Agent and its affiliates are engaged
in a broad range of transactions which may involve interests that differ from
those of the Company and that the Placement Agent has no obligation to disclose
such interests and transactions to the Company by virtue of any fiduciary,
advisory or agency relationship; and

(d) it waives, to the fullest extent permitted by law, any claims it may have
against the Placement Agent for breach of fiduciary duty or alleged breach of
fiduciary duty and agrees that the Placement Agent shall have no liability
(whether direct or indirect) to the Company in respect of such a fiduciary duty
claim or to any person asserting a fiduciary duty claim on behalf of or in right
of the Company, including stockholders, employees or creditors of the Company.

 

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12. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Placement Agent, the Company,
and their respective successors and assigns. This Agreement shall also inure to
the benefit of the Purchasers, and each of their respective successors and
assigns, which shall be third party beneficiaries hereof. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, other than the persons mentioned in the preceding sentences, any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person; except that the
representations, warranties, covenants, agreements and indemnities of the
Company contained in this Agreement shall also be for the benefit of the
Placement Agent Indemnified Parties and the indemnities of the Placement Agent
shall be for the benefit of the Company Indemnified Parties. It is understood
that the Placement Agent’s responsibility to the Company is solely contractual
in nature and the Placement Agent does not owe the Company, or any other party,
any fiduciary duty as a result of this Agreement.

13. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The respective
indemnities, covenants, agreements, representations, warranties and other
statements of the Company and the Placement Agent, as set forth in this
Agreement or made by them respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation made by or on behalf
of the Placement Agent, the Company, the Purchasers or any person controlling
any of them and shall survive delivery of and payment for the Firm Securities.
Notwithstanding any termination of this Agreement, including without limitation
any termination pursuant to Sections 9 or 10, the indemnity and contribution
agreements contained in Section 8 and the covenants, representations, warranties
set forth in this Agreement shall not terminate and shall remain in full force
and effect at all times.

14. NOTICES. All statements, requests, notices and agreements hereunder shall be
in writing, and:

(a) if to the Placement Agent, shall be delivered or sent by mail, telex,
facsimile transmission or overnight courier to Roth Capital Partners, LLC, 888
San Clemente Drive, Newport Beach, California 92660, Attention: Aaron Gurewitz,
Fax: (949) 720-7227, with a copy (which shall not constitute notice) to:
Lowenstein Sandler LLP, 1251 Avenue of the Americas, New York, NY 10020,
Attention: John D. Hogoboom, Fax (973) 597-2400; and

(b) if to the Company, shall be delivered or sent by mail, telex, facsimile
transmission or overnight courier to 5950 Priestly Drive, Carlsbad, California
92008, Attention: Chief Financial Officer, Fax: (760) 476-0600, with a copy
(which shall not constitute notice) to: DLA Piper LLP, 4365 Executive Drive,
Suite 1100, San Diego, California 92121, Attention: Douglas Rein, Fax:
(858) 638-5043.

 

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Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof, except that any such statement, request, notice or
agreement delivered or sent by email shall take effect at the time of
confirmation of receipt thereof by the recipient thereof.

15. DEFINITION OF CERTAIN TERMS. For purposes of this Agreement, “business day”
means any day on which the New York Stock Exchange, Inc. is open for trading.

16. GOVERNING LAW, AGENT FOR SERVICE AND JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
including without limitation Section 5-1401 of the New York General Obligations
Law. No legal proceeding may be commenced, prosecuted or continued in any court
other than the courts of the State of New York located in the City and County of
New York or in the United States District Court for the Southern District of New
York, which courts shall have jurisdiction over the adjudication of such
matters, and the Company and the Placement Agent each hereby consent to the
jurisdiction of such courts and personal service with respect thereto. The
Company and the Placement Agent each hereby consent to personal jurisdiction,
service and venue in any court in which any legal proceeding arising out of or
in any way relating to this Agreement is brought by any third party against
the Company or the Placement Agent. The Company and the Placement Agent each
hereby waive all right to trial by jury in any legal proceeding (whether based
upon contract, tort or otherwise) in any way arising out of or relating to this
Agreement. The Company agrees that a final judgment in any such legal proceeding
brought in any such court shall be conclusive and binding upon the Company and
the Placement Agent and may be enforced in any other courts in the jurisdiction
of which the Company is or may be subject, by suit upon such judgment.

17. PLACEMENT AGENT’S INFORMATION. The parties hereto acknowledge and agree
that, for all purposes of this Agreement, the Placement Agent’s Information
consists solely of the following information in the Prospectus: the second
paragraph and the first sentence of the thirteenth paragraph under the heading
“Plan of Distribution.”

18. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any section,
paragraph, clause or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph, clause or provision hereof.
If any section, paragraph, clause or provision of this Agreement is for any
reason determined to be invalid or unenforceable, there shall be deemed to be
made such minor changes (and only such minor changes) as are necessary to make
it valid and enforceable.

19. GENERAL. This Agreement constitutes the entire agreement of the parties to
this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject
matter hereof. In this Agreement, the masculine, feminine and neuter genders and
the singular and the plural include one another. The Section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and the Placement Agent.

 

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20. COUNTERPARTS. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument and such signatures may be
delivered by facsimile.

 

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If the foregoing is in accordance with your understanding of the agreement
between the Company and the Placement Agent, kindly indicate your acceptance in
the space provided for that purpose below.

 

Very truly yours, INTERNATIONAL STEM CELL CORPORATION By:  

/s/ Andrey Semechkin

  Name: Andrey Semechkin   Title: Chief Executive Officer

 

Accepted as of the date first above written: ROTH CAPITAL PARTNERS, LLC By:  

/s/ Aaron Gurewitz

  Name: Aaron Gurewitz   Title: Head of Equity Capital Markets

 

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SCHEDULE A

General Use Free Writing Prospectuses

None

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SCHEDULE B

James Berglund

Charles J. Casamento

John Craw

Paul V. Maier

Jay Novak

Andrey Semechkin

Ruslan Semechkin

Donald A. Wright

X-Master, Inc.

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EXHIBIT A

Form of Subscription Agreement

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EXHIBIT B

Form of Series A Warrant

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EXHIBIT C

Form of Series B Warrant

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EXHIBIT D

Form of Lock Up Agreement

May     , 2013

ROTH Capital Partners, LLC

888 San Clemente Drive

Newport Beach, CA 92660

Re: INTERNATIONAL STEM CELL CORPORATION OFFERING

Dear Sirs:

In order to induce ROTH Capital Partners, LLC (“Roth”) to enter in to a certain
placement agent agreement with International Stem Cell Corporation, a Delaware
corporation (the “Company”), with respect to the public offering (the
“Offering”) of securities of the Company including shares of the Company’s
Common Stock, par value $0.001 per share (“Common Stock”), the undersigned
hereby agrees that for a period (the “lock-up period”) of thirty (30) days
following the date of the final prospectus filed by the Company with the
Securities and Exchange Commission (the “Commission”) in connection with the
Offering, the undersigned will not, without the prior written consent of Roth,
directly or indirectly, (i) offer, sell, assign, transfer, pledge, contract to
sell, or otherwise dispose of, any shares of Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock (including,
without limitation, shares of Common Stock or any such securities which may be
deemed to be beneficially owned by the undersigned in accordance with the rules
and regulations promulgated under the Securities Act of 1933, as the same may be
amended or supplemented from time to time (such shares or securities, the
“Beneficially Owned Shares”)), (ii) enter into any swap, hedge or other
agreement or arrangement that transfers in whole or in part, the economic risk
of ownership of any Beneficially Owned Shares, Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock, or
(iii) engage in any short selling of any Beneficially Owned Shares, Common Stock
or securities convertible into or exercisable or exchangeable for Common Stock.

If (i) the Company issues an earnings release or material news or a material
event relating to the Company occurs during the last seventeen (17) days of the
lock-up period, or (ii) prior to the expiration of the lock-up period, the
Company announces that it will release earnings results during the sixteen
(16)-day period beginning on the last day of the lock-up period, the
restrictions imposed by this Agreement shall continue to apply until the
expiration of the eighteen (18)-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material event.

Anything contained herein to the contrary notwithstanding, the undersigned may
transfer Beneficially Owned Shares without the prior written consent of Roth: if
the undersigned is a natural person, (a) as a bona fide gift to any member of
the immediate family (as defined below) of the undersigned or to a trust the
beneficiaries of which are exclusively the undersigned or members of the
undersigned’s immediate family, (b) by will or intestate succession upon the
death of the undersigned or (c) as a bona fide gift to a charity or educational
institution;

 

D-1

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provided, however, in each such case the transferee agrees to be bound by the
terms of this Agreement with respect to the Beneficially Owned Shares received
in a writing in form and substance reasonably satisfactory to Roth. For purposes
of this paragraph, “immediate family” shall mean a spouse, child, grandchild or
other lineal descendant (including by adoption), father, mother, brother or
sister of the undersigned.

Anything contained herein to the contrary notwithstanding, any person to whom
shares of Common Stock, securities convertible into or exercisable or
exchangeable for Common Stock or Beneficially Owned Shares are transferred from
the undersigned shall be bound by the terms of this Agreement.

The undersigned understands that the undersigned shall be released from all
obligations under this Agreement if (i) the Company notifies Roth that it does
not intend to proceed with the Offering, or (ii) the Offering is not completed
by August 1, 2013.

In addition, the undersigned hereby waives, from the date hereof until the
expiration of the thirty (30) day period following the date of the Company’s
final prospectus, any and all rights, if any, to request or demand registration
pursuant to the Securities Act of 1933, as amended, of any shares of Common
Stock or securities convertible into or exercisable or exchangeable for Common
Stock that are registered in the name of the undersigned or that are
Beneficially Owned Shares. In order to enable the aforesaid covenants to be
enforced, the undersigned hereby consents to the placing of legends and/or stop
transfer orders with the transfer agent of the Common Stock with respect to any
shares of Common Stock, securities convertible into or exercisable or
exchangeable for Common Stock or Beneficially Owned Shares.

 

By:     Name:     Title:    

 

D-2