exv10w1



 





Exhibit 10.1




STEMCELLS,
INC.


10,000,000 SHARES




CONTROLLED EQUITY OFFERINGSM




SALES AGREEMENT




December 29, 2006




CANTOR FITZGERALD & CO.

110 East 59th Street

New York, NY 10022




Ladies and Gentlemen:




     STEMCELLS, INC., a Delaware corporation (the “Company”), confirms its agreement (this
“Agreement”) with Cantor Fitzgerald & Co. (“CF&Co”), as follows:



     1. Issuance and Sale of Shares. The Company agrees that, from time to time during
the term of this Agreement, on the terms and subject to the conditions set forth herein, it may
issue and sell through CF&Co, acting as agent and/or principal, up to 10,000,000 shares of the
Company’s common stock, par value $.01 per share (the “Common Stock” or the
“Shares”). The issuance and sale of Shares through CF&Co will be effected pursuant to the
Registration Statement (as defined below) filed by the Company and declared effective by the
Securities and Exchange Commission (the “Commission”), although nothing in this Agreement
shall be construed as requiring the Company to use the Registration Statement to issue Common
Stock.



     The Company has filed, in accordance with the provisions of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (collectively, the “Securities Act”),
with the Commission a registration statement on Form S-3 (File No. 333-128797), including a base
prospectus, with respect to equity offerings, including the Shares, and which incorporates by
reference documents that the Company has filed or will file in accordance with the provisions of
the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder
(collectively, the “Exchange Act”). The Company has prepared a prospectus supplement (the
“Prospectus Supplement”) to the base prospectus included as part of such registration
statement. The Company will furnish to CF&Co, for use by CF&Co, copies of one or more prospectuses
included as part of such registration statement, as supplemented by the Prospectus Supplement,
relating to the Shares. Except where the context otherwise requires, such registration statement,
as amended when it became effective, including all documents filed as part thereof or incorporated
by reference therein, and including any information contained in a Prospectus (as defined below)
subsequently filed with the Commission pursuant to Rule 424(b) under the Securities Act,
collectively, are herein called the “Registration Statement,” and the base prospectus,
including all documents incorporated therein by reference, included in the Registration Statement,
as it may be supplemented by the Prospectus Supplement, in the form filed by the Company with the
Commission pursuant to Rule 424(b) under the Securities Act is herein called the
“Prospectus.” Any reference herein to the Registration Statement, the



 









 







Prospectus or any amendment or supplement thereto shall be deemed to refer to and include the
documents incorporated by reference therein, and any reference herein to the terms “amend,”
“amendment” or “supplement” with respect to the Registration Statement or the Prospectus shall be
deemed to refer to and include the filing after the execution hereof of any document with the
Commission deemed to be incorporated by reference therein. For purposes of this Agreement, all
references to the Registration Statement, the Prospectus or to any amendment or supplement thereto
shall be deemed to include any copy filed with the Commission pursuant to its Electronic Data
Gathering Analysis and Retrieval System (“EDGAR”).



     2.  Placements. Each time that the Company wishes to issue and sell Shares hereunder
(each, a “Placement”), it will notify CF&Co by email notice (or other method mutually
agreed to in writing by the parties) containing the parameters in accordance with which it desires
the Shares to be sold, which shall at a minimum include the number of Shares to be issued (the
“Placement Shares”), the time period during which sales are requested to be made, any
limitation on the number of Shares that may be sold in any one day and any minimum price below
which sales may not be made (a “Placement Notice”), a form of which containing such minimum
sales parameters necessary is attached hereto as Schedule 1. The Placement Notice shall
originate from any of the individuals from the Company set forth on Schedule 2 (with a copy
to each of the other individuals from the Company listed on such schedule), and shall be addressed
to each of the individuals from CF&Co set forth on Schedule 2, as such Schedule 2
may be amended from time to time. The Placement Notice shall be effective upon receipt by CF&Co
unless and until (i) in accordance with the notice requirements set forth in Section 4,
CF&Co declines to accept the terms contained therein for any reason, in its sole discretion, (ii)
the entire amount of the Placement Shares have been sold, (iii) in accordance with the notice
requirements set forth in Section 4, the Company suspends or terminates the Placement
Notice, (iv) the Company issues a subsequent Placement Notice with parameters superseding those on
the earlier dated Placement Notice, or (iv) the Agreement has been terminated under the provisions
of Section 11. The amount of any discount, commission or other compensation to be paid by
the Company to CF&Co in connection with the sale of the Placement Shares shall be calculated in
accordance with the terms set forth in Schedule 3. It is expressly acknowledged and agreed
that neither the Company nor CF&Co will have any obligation whatsoever with respect to a Placement
or any Placement Shares unless and until the Company delivers a Placement Notice to CF&Co and CF&Co
does not decline such Placement Notice pursuant to the terms set forth above, and then only upon
the terms specified therein and herein. In the event of a conflict between the terms of this
Agreement and the terms of a Placement Notice, the terms of the Placement Notice will control.



     3.  Sale of Placement Shares by CF&Co. Subject to the terms and conditions herein
set forth, upon the Company’s issuance of a Placement Notice, and unless the sale of the Placement
Shares described therein has been suspended or otherwise terminated in accordance with the terms of
this Agreement, CF&Co will use its commercially reasonable efforts consistent with its normal
trading and sales practices to sell such Placement Shares up to the amount specified, and otherwise
in accordance with the terms of such Placement Notice. CF&Co will provide written confirmation to
the Company no later than the opening of the Trading Day (as defined below) next following the
Trading Day on which it has made sales of Placement Shares hereunder setting forth the number of
Placement Shares sold on such day, the compensation payable by the Company to CF&Co with respect to
such sales pursuant to Section 2, and the Net Proceeds (as



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defined below) payable to the Company, with an itemization of deductions made by CF&Co (as set
forth in Section 5(a)) from gross proceeds for the Placement Shares that it receives from such
sales. CF&Co may sell Placement Shares by any method permitted by law deemed to be an “at the
market” offering as defined in Rule 415 of the Securities Act, including without limitation sales
made directly on the NASDAQ Global Market (the “Exchange”), on any other existing trading
market for the Common Stock or to or through a market maker. With the prior express written
consent of the Company, which may be provided in its Placement Notice, CF&Co may also sell
Placement Shares in privately negotiated transactions. The Company acknowledges and agrees that (i)
there can be no assurance that CF&Co will be successful in selling Placement Shares, and (ii) CF&Co
will incur no liability or obligation to the Company or any other person or entity if it does not
sell Placement Shares for any reason other than a failure by CF&Co to use its commercially
reasonable efforts consistent with its normal trading and sales practices to sell such Placement
Shares as required under this Section 3. For the purposes hereof, “Trading Day”
means any day on which Common Stock is purchased and sold on the principal market on which the
Common Stock is listed or quoted.



     4.  Suspension of Sales. The Company or CF&Co may, upon notice to the other party in
writing (including by email correspondence to each of the individuals of the other Party set forth
on Schedule 2, if receipt of such correspondence is actually acknowledged by any of the
individuals to whom the notice is sent, other than via auto-reply) or by telephone (confirmed
immediately by verifiable facsimile transmission or email correspondence to each of the individuals
of the other Party set forth on Schedule 2), suspend any sale of Placement Shares;
provided, however, that such suspension shall not affect or impair either party’s obligations with
respect to any Placement Shares sold hereunder prior to the receipt of such notice. Each of the
Parties agrees that no such notice under this Section 4 shall be effective against the
other unless it is made to one of the individuals named on Schedule 2 hereto, as such
Schedule may be amended from time to time.



     5.  Settlement.



          (a)  Settlement of Placement Shares. Unless otherwise specified in the applicable
Placement Notice, settlement for sales of Placement Shares will occur on the third (3rd)
Business Day (or such earlier day as is industry practice for regular-way trading) following the
date on which such sales are made (each, a “Settlement Date”). The amount of proceeds to
be delivered to the Company on a Settlement Date against receipt of the Placement Shares sold (the
“Net Proceeds”) will be equal to the aggregate sales price received by CF&Co at which such
Placement Shares were sold, after deduction for (i) CF&Co’s commission, discount or other
compensation for such sales payable by the Company pursuant to Section 2 hereof, (ii) any
other amounts due and payable by the Company to CF&Co hereunder pursuant to Section 7(g)
(Expenses) hereof, and (iii) any transaction fees imposed by any governmental or self-regulatory
organization in respect of such sales.




          (b)  Delivery of Placement Shares. On or before each Settlement Date, the Company
will, or will cause its transfer agent to, electronically transfer the Placement Shares being sold
by crediting CF&Co’s or its designee’s (provided CF&Co shall have given the Company written notice
of such designee at least one Business Day prior to the Settlement Date) account at The Depository
Trust Company through its Deposit and Withdrawal at Custodian System or by such other means of
delivery as may be mutually agreed upon by the parties hereto and, upon receipt


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of such Placement Shares, which in all cases shall be freely tradable, transferable,
registered shares in good deliverable form, CF&Co will deliver the related Net Proceeds in same day
funds to an account designated by the Company prior to the Settlement Date. If the Company
defaults in its obligation to deliver Placement Shares on a Settlement Date, the Company agrees
that in addition to and in no way limiting the rights and obligations set forth in Section
9(a) (Indemnification) hereto, it will (i) hold CF&Co harmless against any loss, claim, damage,
or expense (including reasonable legal fees and expenses), as incurred, arising out of or in
connection with such default by the Company and (ii) pay to CF&Co any commission, discount, or
other compensation to which it would otherwise have been entitled absent such default.




     6.  Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, CF&Co that as of the date of this Agreement and as of each
Representation Date (as defined in Section 7(m) below) on which a certificate is required
to be delivered pursuant to Section 7(m) of this Agreement, as the case may be:



          (a)  Registration Statement and Prospectus. The Company meets the requirements for
use of Form S-3 under the Securities Act. The Registration Statement has been filed with the
Commission and has been declared effective under the Securities Act. The Registration Statement has
named CF&Co as an underwriter, acting as principal and/or agent that the Company might engage in
the section entitled “Plan of Distribution.” The Company has not received, and has no notice of,
any order of the Commission preventing or suspending the use of the Registration Statement, or
threatening or instituting proceedings for that purpose. Any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement have been so described or filed. Copies
of the Registration Statement, the Prospectus, and any such amendments or supplements and all
documents incorporated by reference therein that were filed with the Commission on or prior to the
date of this Agreement have been delivered, or made available through EDGAR, to CF&Co and their
counsel. The Company has not distributed and will not distribute any offering material in
connection with the offering or sale of the Placement Shares other than the Registration Statement
and the Prospectus. The Common Stock is currently listed on the NASDAQ Global Market under the
trading symbol “STEM.”




          (b)  No Misstatement or Omission. The Registration Statement and the Prospectus
conform in all material respects with the requirements of the Securities Act. At each Settlement
Date, the Registration Statement and the Prospectus, as of such date, will conform in all material
respects with the requirements of the Securities Act. The Registration Statement does 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 not misleading. The Prospectus does not include
an untrue statement of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading. The
foregoing shall not apply to statements in, or omissions from, any such document made in reliance
upon, and in conformity with, information furnished to the Company by CF&Co specifically for use in
the preparation thereof.




          (c)  Conformity with Securities Act and Exchange Act. The documents incorporated by
reference in the Registration Statement, the Prospectus or any amendment or supplement thereto,
when such documents were or are filed with the Commission under the Securities Act or the Exchange
Act or became or become effective under the Securities Act, as the case may be,


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conformed or will conform in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable.




          (d)  Financial Information. The financial statements of the Company and the
Subsidiary (as defined below), together with the related schedules and notes thereto, set forth or
included or incorporated by reference in the Registration Statement and the Prospectus fairly
present, in all material respects, the financial condition of the Company and the Subsidiary as of
and at the dates indicated and the results of operations, changes in financial position,
stockholders’ equity and cash flows for the periods therein specified. Such financial statements,
schedules, and notes are in conformity with generally accepted accounting principles as
consistently applied in the United States throughout the periods involved (except as otherwise
stated therein). The selected financial data included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the information shown therein and, to the
extent based upon or derived from the financial statements, have been complied on a basis
consistent with the financial statements presented therein. Any pro forma financial statements of
the Company and the Subsidiary, and the related notes thereto, included or incorporated by
reference in the Registration Statement and the Prospectus present fairly the information shown
therein, have been prepared in accordance with the Commission’s rules and guidelines with respect
to pro forma financial statements and have been properly compiled on the basis described 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. The
Company and, to the Company’s knowledge, the Subsidiary (as defined below) do not have any material
liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not
disclosed in the Registration Statement and the Prospectus. No other financial statements are
required to be set forth or to be incorporated by reference in the Registration Statement or the
Prospectus under the Securities Act.




          (e)  Conformity with EDGAR Filing. The Prospectus delivered to CF&Co for use in
connection with the sale of the Placement Shares pursuant to this Agreement will be identical to
the versions of the Prospectus created to be transmitted to the Commission for filing via EDGAR,
except to the extent permitted by Regulation S-T.




          (f)  Organization. The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of Delaware with full corporate power
and authority necessary to own, hold, lease and/or operate its assets and properties and to conduct
the business in which it is engaged and as described in the Registration Statement and Prospectus;
and the Company is duly qualified as a foreign entity to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure, individually or in the
aggregate, to be so qualified and be in good standing would not have a material adverse effect on
(i) the consolidated business, operations, assets, properties, financial condition, reputation,
prospects, or results of operations of the Company and the Subsidiary (as defined herein) taken as
a whole, (ii) the transactions contemplated hereby, or (iii) the ability of the Company to perform
its obligation under this Agreement (collectively, a “Material Adverse Effect”). The
Company has full corporate power and authority necessary to enter into and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The Company is in
compliance with the laws, orders, rules, regulations and directives


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applicable to it, except for any noncompliance that, individually, or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. Complete and correct copies of the
articles of incorporation and of the bylaws of the Company and all amendments thereto have been
delivered to CF&Co.




          (g)  Subsidiary. (1) The Company has no “significant subsidiaries” (as such term is
defined in Rule 1-02 of Regulation S-X promulgated under the Securities Act) other than StemCells
California, Inc. (the “Subsidiary”). The Subsidiary has been duly formed and incorporated
and is validly existing as a corporation in good standing under the laws of the State of
California, is duly qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which its ownership or lease of property or assets or the conduct of its
business requires such qualification, except where the failure to so qualify, individually or in
the aggregate, would not have a Material Adverse Effect, and has full corporate power and authority
necessary to own, hold, lease and/or operate its assets and properties, to conduct the business in
which it is engaged and as described in the Prospectus. The Subsidiary is in compliance with the
laws, orders, rules, regulations and directives necessary to conduct its business except for any
noncompliance that, individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. A complete and correct copy of the certificate of incorporation and of
the bylaws of the Subsidiary and all amendments thereto have been delivered to CF&Co.




               (2) Other than the capital stock of the Subsidiary, the Company does not own, directly or
indirectly, any shares of stock or any other equity interests or long-term debt securities of any
corporation, firm, partnership, joint venture, association or other entity, other than the
Company’s equity interest in ReNeuron Group plc, as disclosed in the Registration Statement and the
Prospectus. All of the outstanding shares of capital stock of the Subsidiary have been duly
authorized and validly issued, are fully paid and non-assessable, and are wholly owned by the
Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
other equity or adverse claims except for any security interest, mortgage, pledge, lien,
encumbrance, or claims as would not reasonably be expected to have a Material Adverse Effect. No
options, warrants or other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligation into shares of capital stock or ownership interests in the
Subsidiary are outstanding.



          (h)  No Violation or Default. Neither the Company nor its Subsidiary is (i) in
violation of any provision of its charter or bylaws or similar organizational documents, (ii) is in
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 of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant 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) is in
violation in any respect of any statute, law, rule, regulation, ordinance, judgment, order or
decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company, its Subsidiary or any of its properties, as
applicable (including, without limitation, those administered by the Food and Drug Administration
of the U.S. Department of Health and Human Services (the
“FDA”) or by any foreign, federal,
state or local governmental or regulatory authority performing functions similar to those performed
by the FDA), except, with respect to clauses (ii) and (iii), any violations or defaults which,


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singularly or in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect. To the knowledge of the Company, no other party under any contract or other
agreement to which the Company or the Subsidiary is a party is in default in any respect
thereunder, except for any default that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. The execution, delivery and performance of this
Agreement, the issuance and sale of the Placement Shares and the consummation of the transactions
contemplated hereby will not conflict with, or result in any breach of or constitute a default
under (nor constitute any event which with notice, lapse of time or both would result in any breach
of, or constitute a default under), (i) any provision of the charter, bylaws or organizational
documents, as the case may be, of the Company or the Subsidiary, (ii) any provision of any
contract, license, repurchase agreement, management agreement, indenture, mortgage, deed of trust,
bank loan or credit agreement, note, lease or other evidence of indebtedness, or any lease,
contract or other agreement or instrument to which the Company or the Subsidiary is a party or by
which the Company or the Subsidiary, or any of their respective assets or properties may be bound
or affected, except for any breach or default that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect or (iii) any federal, state, local or
foreign law, regulation or rule or any decree, judgment or order applicable to the Company or the
Subsidiary, except for any breach or default that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.




          (i)  Capitalization. As of December 31, 2005, the Company had an authorized, issued
and outstanding capitalization as set forth on its balance sheet included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2005. All of the issued and outstanding shares
of capital stock of the Company have been duly and validly authorized and issued and are fully paid
and nonassessable, have been issued in compliance with all federal and state securities laws and
were not issued in violation of any preemptive right, resale right, right of first refusal or
similar right.




          (j)  Authorization; Enforceability. This Agreement has been duly authorized, executed
and delivered by the Company and is a legal, valid and binding agreement of the Company enforceable
in accordance with its terms, except to the extent that (i) enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights
generally and by general equitable principles and (ii) the indemnification and contribution
provisions of Section 9 hereof may be limited by federal or state securities laws and public policy
considerations in respect thereof.




          (k)  Capital Stock and Placement Shares in Proper Form. The capital stock of the
Company, including the Placement Shares, conforms in all material respects to the description
thereof contained in the Registration Statement and the Prospectus. The form of certificates for
the Placement Shares are in due and proper form and the holders of the Shares will not be subject
to personal liability under the Delaware General Corporation Law by reason of being such holders.




          (l)  Authorization of Placement Shares. The Placement Shares, when issued and
delivered pursuant to the terms approved by the Board of Directors or a duly designated committee
thereof, against payment therefor as provided herein, will be duly and validly authorized and
issued and fully paid and nonassessable, free and clear of any pledge, lien, encumbrance, security
interest or


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other claim, including any statutory or contractual preemptive rights, resale rights, rights
of first refusal or other similar rights, and will be registered pursuant to Section 12 of the
Exchange Act.




          (m)  Consents and Permits. (1) The Company and its Subsidiary have made all filings,
applications and submissions required by, and possesses all approvals, licenses, certificates,
certifications, clearances, consents, exemptions, marks, notifications, orders, permits and other
authorizations issued by, the appropriate federal, state or foreign regulatory authorities
(including, without limitation, the FDA, and any other foreign, federal, state or local government
or regulatory authorities performing functions similar to those performed by the FDA) necessary for
the ownership or lease of their respective properties or to conduct its businesses as described in
the Registration Statement and the Prospectus (collectively, “Permits”), except for such
Permits the failure of which to possess, obtain or make the same would not reasonably be expected
to have a Material Adverse Effect; and neither the Company nor its Subsidiary has received any
written notice of proceedings relating to the limitation, revocation, cancellation, suspension,
modification or non-renewal of any such Permit which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would have a Material Adverse Effect, and has any
reason to believe that any such license, certificate, permit or authorization will not be renewed
in the ordinary course. (2) No approval, authorization, consent or order of or filing with any
national, state or local governmental or regulatory commission, board, body, authority or agency is
required in connection with the issuance and sale of the Placement Shares or the consummation by
the Company of the transactions contemplated hereby other than (i) registration of the Placement
Shares under the Securities Act, (ii) any necessary qualification under the securities or blue sky
laws of the various jurisdictions in which the Placement Shares are being offered by CF&Co, (iii)
filing of any reports under the Exchange Act, (iv) such approvals obtained or to be obtained in
connection with the approval of the listing of the Placement Shares on the Exchange, or (v) such
approvals as may be required by the rules of the National Association of Securities Dealers
(“NASD”).




          (n)  No Preferential Rights. Except as set forth in the Registration Statement and
the Prospectus, (i) no person, as such term is defined in Rule 1-02 of Regulation S-X promulgated
under the Securities Act (each, a “Person”), has the right, contractual or otherwise, to
cause the Company to issue or sell to such Person any shares of Common Stock or shares of any other
capital stock or other securities of the Company, (ii) no Person has any preemptive rights, resale
rights, rights of first refusal, or any other rights (whether pursuant to a “poison pill” provision
or otherwise) to purchase any shares of Common Stock or shares of any other capital stock or other
securities of the Company, (iii) except as disclosed to CF&Co or its agents in connection with the
transactions contemplated hereby, no Person has the right to act as an underwriter or as a
financial advisor to the Company in connection with the offer and sale of the Shares, and (iv) no
Person has the right, contractual or otherwise, to require the Company to register under the
Securities Act any shares of Common Stock or shares of any other capital stock or other securities
of the Company, or to include any such shares or other securities in the Registration Statement or
the offering contemplated thereby, whether as a result of the filing or effectiveness of the
Registration Statement or the sale of the Placement Shares as contemplated thereby or otherwise.




          (o) 
Independent Public Accountant. Grant Thornton LLP (“Grant Thornton”),
whose report on the consolidated financial statements of the Company is filed with the Commission
as


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part of the Registration Statement and the Prospectus, are and, during the periods covered by
their report, were independent public accountants within the meaning of the Securities Act and the
Public Accounting Oversight Board (United States).




          (p)  Enforceability of Agreements. To the knowledge of the Company, all agreements
between the Company and third parties expressly referenced in the Prospectus are legal, valid and
binding obligations of the Company enforceable in accordance with their respective terms, except to
the extent that (i) enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ rights generally and by general equitable
principles and (ii) the indemnification provisions of certain agreements may be limited be federal
or state securities laws or public policy considerations in respect thereof and except for any
unenforceability that, individually or in the aggregate, would not unreasonably be expected to have
a Material Adverse Effect.




          (q)  No Litigation. Except as disclosed in the Registration Statement and the
Prospectus, there are no actions, suits, claims, investigations, inquiries or proceedings pending
or, to the best of the Company’s knowledge, threatened to which either the Company or, to the
Company’s knowledge, the Subsidiary, nor any of their respective officers or directors is a party
or of which any of their respective properties or other assets is subject at law or in equity, or
before or by any federal, state, local or foreign governmental or regulatory commission, board,
body, authority or agency that could reasonably be expected to result in a judgment, decree or
order having individually or in the aggregate a Material Adverse Effect.




          (r)  Regulatory Filings. Neither the Company nor its Subsidiary has failed to file
with the applicable regulatory authorities (including, without limitation, the FDA or any foreign,
federal, state or local governmental or regulatory authority performing functions similar to those
performed by the FDA) any filing, declaration, listing, registration, report or submission, except
for such failures that, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect; all such filings, declarations, listings, registrations, reports or
submissions were in compliance with applicable laws when filed and no deficiencies have been
asserted by any applicable regulatory authority with respect to any such filings, declarations,
listings, registrations, reports or submissions, except for any deficiencies that, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse Effect.




          (s)  Market Capitalization. As of the date of this Agreement, the aggregate market
value of the Company’s voting stock held by nonaffiliates of the Company was equal to or greater
than $150 million.




          (t)  No Material Changes. Subsequent to the respective dates as of which information
is given in, or incorporated by reference into, the Registration Statement and the Prospectus,
there has not been (i) any change, development, or event that has caused, or could reasonably be
expected to result, individually or in the aggregate, in, a Material Adverse Effect or (ii) any
change in the number of authorized shares of capital stock.




          (u)  No Material Defaults. Neither the Company nor the Subsidiary has defaulted on
any installment on indebtedness for borrowed money or on any rental on one or more long-term
leases, which defaults, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. The Company has not filed a report pursuant to Section 13(a) or 15(d)


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of the Exchange Act since the filing of its last Annual Report on Form 10-K indicating that it
(i) has failed to pay any dividend or sinking fund installment on preferred stock or (ii) has
defaulted on any installment on indebtedness for borrowed money or on any rental on one or more
long-term leases, which defaults, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.




          (v)  Certain Market Activities. Neither the Company nor, to the Company’s knowledge,
the Subsidiary, nor, to the Company’s knowledge, any of their respective directors, officers or
controlling persons has taken, directly or indirectly, any action designed, or that has constituted
or might reasonably be expected to cause or result in, under the Exchange Act or otherwise, the
stabilization or manipulation of the price of any security of the Company to facilitate the sale or
resale of the Placement Shares.




          (w)  Broker/Dealer Relationships. Neither the Company nor the Subsidiary or any
related entities (i) is required to register as a “broker” or “dealer” in accordance with the
provisions of the Exchange Act or (ii) directly or indirectly through one or more intermediaries,
controls or is a “person associated with a [NASD] member” or “associated person of a [NASD] member”
(within the meaning of Article I of the Bylaws of the NASD).




          (x)  No Reliance. The Company has not relied upon CF&Co or legal counsel for CF&Co
for any legal, tax or accounting advice in connection with the offering and sale of the Placement
Shares.




          (y)  Taxes. The Company and, to the Company’s knowledge, the Subsidiary has filed on
a timely basis (taking into account all applicable extensions) all necessary federal, state, local
and foreign income and franchise tax returns, if any such returns were required to be filed,
through the date hereof and have paid all taxes shown as due thereon except for any failure to file
or pay which, individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. No tax deficiency has been asserted against the Company or, to the
Company’s knowledge, the Subsidiary, nor does the Company know of any tax deficiency that is likely
to be asserted against any such entity that, if determined adversely to any such entity, could
reasonably be expected to have a Material Adverse Effect. All tax liabilities, if any, are
adequately provided for on the books of the Company and, to the Company’s knowledge, the
Subsidiary, except for such tax liabilities that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.




          (z)  Intellectual Property. Except as set forth in the Prospectus, the Company and
its Subsidiary own, possess, license or have other rights to use all foreign and domestic patents,
patent applications, trade and service marks, trade and service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets, technology, Internet domain names, know-how and
other intellectual property (collectively, the “Intellectual Property”), necessary for the conduct
of their respective businesses as now conducted or as proposed in the Prospectus to be conducted
except to the extent that the failure to own, possess, license or otherwise hold adequate rights to
use such Intellectual Property would not, individually or in the aggregate, have a Material Adverse
Effect. Except as set forth in the Prospectus, (a) there are no rights of third parties to any
such Intellectual Property owned by the Company and its Subsidiary; (b) to the Company’s knowledge,
there is no infringement by third parties of any such Intellectual Property; (c) to the Company’s
knowledge, there is no pending or threatened action, suit,


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proceeding or claim by others challenging the Company’s and its Subsidiary’ rights in or to
any such Intellectual Property; (d) to the Company’s knowledge, there is no pending or threatened
action, suit, proceeding or claim by others challenging the validity or scope of any such
Intellectual Property; (e) there is no pending or, to the Company’s knowledge, threatened action,
suit, proceeding or claim by others that the Company and its Subsidiary infringe or otherwise
violate any patent, trademark, copyright, trade secret or other proprietary rights of others; and
(f) to the Company’s knowledge, there is no third-party U.S. patent or published U.S. patent
application which contains claims for which an Interference Proceeding (as defined in 35 U.S.C. §
135) have been commenced against any patent or patent application described in the Prospectus as
being owned by or licensed to the Company, in each of clauses (a)-(f) except for such infringement,
conflict or action which would not, singularly or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.




          (aa)  Clinical Studies. The clinical, pre-clinical and other studies and tests
conducted by or on behalf of or sponsored by the Company and its Subsidiary were and, if still
pending, are being conducted in accordance in all material respects with all statutes, laws, rules
and regulations, as applicable (including, without limitation, those administered by the FDA or by
any foreign, federal, state or local governmental or regulatory authority performing functions
similar to those performed by the FDA). The descriptions in the Registration Statement and
Prospectus of the results of such studies and tests are accurate and complete in all material
respects. Except as set forth in the Prospectus, neither the Company nor its Subsidiary has
received any notices or other correspondence from the FDA or any other foreign, federal, state or
local governmental or regulatory authority performing functions similar to those performed by the
FDA with respect to any ongoing clinical or pre-clinical studies or tests requiring the termination
or suspension of such studies or tests.




          (bb)  Compliance Program. The Company has established and administers a compliance
program applicable to the Company, to assist the Company and the directors, officers and employees
of the Company in complying with applicable regulatory guidelines (including, without limitation,
those administered by the FDA and any other foreign, federal, state or local governmental or
regulatory authority performing functions similar to those performed by the FDA).




          (cc)  Environmental Laws. The Company and its Subsidiary: (i) are in compliance with
any and all applicable federal, state, local and foreign laws, rules, regulations, decisions and
orders relating to the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (collectively, “Environmental Laws”); (ii)
have received and are in compliance with all permits, licenses and other approvals required of them
under applicable Environmental Laws to conduct their respective businesses as described in the
Registration Statement and the Prospectus; and (iii) have not received notice of any actual or
potential liability for the investigation or remediation of any disposal or release of hazardous or
toxic substances or wastes, pollutants or contaminants, except, in the case of any of clauses (i),
(ii) or (iii) above, for any such failure to comply or failure to receive required permits,
licenses, or other approvals or any such liability as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.




          (dd)  Accounting Controls. The Company and its Subsidiary maintain a system of
internal accounting controls sufficient to provide reasonable assurances that (i) transactions are
executed


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in accordance with management’s general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in conformity with generally
accepted accounting principles 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.




          (ee)  Disclosure Controls. The Company has established and maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15e and 15d-15e under the Exchange
Act), which are designed to ensure that material information relating to the Company is made known
to the Company’s principal executive officer and its principal financial officer by others within
those entities, and that such disclosure controls and procedures are appropriate to allow timely
decisions regarding required disclosure to be included in the Company’s periodic filings under the
Exchange Act. The Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the most recently ended quarter (such date, the
“Evaluation Date”). The Company presented in its most recently filed periodic report the
conclusions of the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Except as disclosed in the
Registration Statement and the Prospectus and since the Evaluation Date, there have been no changes
in the Company’s internal control over financial reporting (as such term is defined in Exchange Act
Rules 13a-15 and 15d-15) that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.




          (ff)  Sarbanes-Oxley. The Company is in compliance in all material respects with all
presently applicable provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”) and the rules and regulations of the Commission and NASDAQ promulgated thereunder.




          (gg)  Finder’s Fees. Neither the Company nor the Subsidiary has incurred any liability
for any finder’s fees or similar payments in connection with the transactions herein contemplated,
except as may otherwise exist with respect to CF&Co pursuant to this Agreement.




          (hh)  Labor Disputes. There are no existing or threatened labor disputes with the
employees of the Company or, to the Company’s knowledge, any Subsidiary that, individually or in
the aggregate, could reasonably be expected to have individually or in the aggregate a Material
Adverse Effect.




          (ii)  Investment Company Act. Neither the Company nor the Subsidiary, after giving
effect to the offering and sale of the Placement Shares, will be an “investment company” or an
entity “controlled” by an “investment company,” as such terms are defined in the Investment Company
Act of 1940, as amended (the “Investment Company Act”).




          (jj)  Casualty. Neither the Company nor, to the Company’s knowledge, the Subsidiary
has sustained since the date of the last audited financial statements included in the Registration
Statement and the Prospectus any loss or interference with its respective 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, in each case that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.




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          (kk)  Underwriter Agreements. The Company is not a party to any agreement with an
agent or underwriter for any other “at-the-market” or continuous equity transaction.




          (ll)  ERISA. The Company and the Subsidiary are in compliance with all presently
applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder (“ERISA”), except for any
noncompliance that, individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. No “reportable event” (as defined in section 4043 of ERISA) for which the
Pension Benefit Guaranty Corporation has not waived the notice requirement has occurred in the past
three years with respect to any “pension plan” (as defined in ERISA) for which the Company and the
Subsidiary would reasonably expect to have any liability. The Company and the Subsidiary have not
incurred and do not reasonably expect to incur liability under (i) Title IV of ERISA with respect
to termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Code.
Each “pension plan” for which the Company or the Subsidiary would have any liability that is
intended to be qualified under Section 401(a) of the Code has received a favorable determination or
opinion letter to that effect and, to the Company’s knowledge, no event has occurred since the date
of such letter that could reasonably be expected to result in the loss of such qualification.




          (mm)  Forward Looking Statements. No forward looking statement within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act contained in the the
Registration Statement and the Prospectus has been made or reaffirmed without a reasonable basis or
has been disclosed other than in good faith.




          (nn)  CF&Co Purchases. The Company acknowledges and agrees that CF&Co has informed
the Company that CF&Co may, to the extent permitted under the Securities Act and the Exchange Act,
purchase and sell shares of Common Stock for its own account while this Agreement is in effect,
provided, that (i) no such purchase or sales shall take place while a Placement Notice is in effect
(except to the extent CF&Co may engage in sales of Placement Shares purchased or deemed purchased
from the Company as a “riskless principal” or in a similar capacity) and (ii) the Company shall not
be deemed to have authorized or consented to any such purchases or sales by CF&Co.




          (oo)  No Improper Practices. (i) Neither the Company nor, to the Company’s knowledge,
the Subsidiary, nor to the Company’s knowledge, any of their respective executive officers has, in
the past five years, made any unlawful contributions to any candidate for any political office (or
failed fully to disclose any contribution in violation of law) or made any contribution or other
payment to any official of, or candidate for, any federal, state, municipal, or foreign office or
other person charged with similar public or quasi-public duty in violation of any law or of the
character required to be disclosed in the Prospectus; (ii) no relationship, direct or indirect,
exists between or among the Company or, to the Company’s knowledge, any Subsidiary or any affiliate
of any of them, on the one hand, and the directors, officers and stockholders of the Company or, to
the Company’s knowledge, any Subsidiary, on the other hand, that is required by the Securities Act
to be described in the Registration Statement and the Prospectus that is not so described; (iii) no
relationship, direct or indirect, exists between or among the Company or any Subsidiary or any
affiliate of them, on the one hand, and the directors, officers, stockholders or directors of the
Company or, to the Company’s knowledge, any Subsidiary, on the other hand, that is required by the
rules of the NASD to be described in the Registration Statement and the


-13-









 







Prospectus that is not so described; and (iv) except as described in the Prospectus, there are
no material outstanding loans or advances or material guarantees of indebtedness by the Company or,
to the Company’s knowledge, any Subsidiary to or for the benefit of any of their respective
officers or directors or any of the members of the families of any of them.




     7.  Covenants of the Company. The Company covenants and agrees with CF&Co that:



          (a)  Registration Statement Amendments. During any period in which a Prospectus
relating to any Placement Shares is required to be delivered by CF&Co under the Securities Act, (i)
the Company will notify CF&Co promptly of the time when any subsequent amendment to the
Registration Statement, other than documents incorporated by reference, has been filed with the
Commission and/or has become effective or any subsequent supplement to the Prospectus related to
the Placement Shares has been filed and of any request by the Commission for any amendment or
supplement to the Registration Statement or Prospectus or for additional information; (ii) the
Company will not file any amendment or supplement to the Registration Statement or Prospectus
relating to the Placement Shares (except for documents incorporated by reference) unless a copy
thereof has been submitted to CF&Co a reasonable period of time before the filing and CF&Co has not
reasonably objected thereto (provided, however, (A) that the failure of CF&Co to make such
objection shall not relieve the Company of any obligation or liability hereunder, or affect CF&Co’s
right to rely on the representations and warranties made by the Company in this Agreement and (B)
that the Company has no obligation to provide CF&Co any advance copy of such filing or to provide
CF&Co an opportunity to object to such filing if such filing does not name CF&Co), and the Company
will furnish to CF&Co at the time of filing thereof a copy of any document that upon filing is
deemed to be incorporated by reference into the Registration Statement or Prospectus, except for
those documents available via EDGAR; and (iii) the Company will cause each amendment or supplement
to the Prospectus relating to the Placement Shares to be filed with the Commission as required
pursuant to the applicable paragraph of Rule 424(b) of the Securities Act or, in the case of any
document to be incorporated therein by reference, to be filed with the Commission as required
pursuant to the Exchange Act, within the time period prescribed (the determination to file or not
file any amendment or supplement with the Commission under this Section 7(a), based on the
Company’s reasonable opinion or reasonable objections, shall be made exclusively by the Company).




          (b)  Notice of Commission Stop Orders. During any period in which a Prospectus
relating to any Placement Shares is required to be delivered by CF&Co under the Securities Act, the
Company will advise CF&Co, promptly after it receives notice or obtains knowledge thereof, of the
issuance or threatened issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement, of the suspension of the qualification of the Placement Shares for
offering or sale in any jurisdiction, or of the initiation or threatening of any proceeding for any
such purpose; and it will promptly use its commercially reasonable efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such a stop order should be issued.




          (c)  Delivery of Prospectus; Subsequent Changes. During any period in which a
Prospectus relating to the Placement Shares is required to be delivered by CF&Co under the
Securities Act with respect to the offer and sale of the Placement Shares, the Company will use its
reasonable best efforts to comply with all requirements imposed upon it by the Securities Act,


-14-









 







as from time to time in force, and to file on or before their respective due dates all reports
and any definitive proxy or information statements required to be filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the
Exchange Act. If during such period any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend or supplement the
Registration Statement or Prospectus to comply with the Securities Act, the Company will promptly
notify CF&Co to suspend the offering of Placement Shares during such period and the Company will
promptly amend or supplement the Registration Statement or Prospectus (at the expense of the
Company) so as to correct such statement or omission or effect such compliance.




          (d)  Listing of Placement Shares. During any period in which the Prospectus relating
to the Placement Shares is required to be delivered by CF&Co under the Securities Act with respect
to the offer and sale of the Placement Shares, the Company will use its commercially reasonable
efforts to cause the Placement Shares to be listed on the Exchange and to qualify the Placement
Shares for sale under the securities laws of such jurisdictions as CF&Co reasonably designates and
to continue such qualifications in effect so long as required for the distribution of the Placement
Shares; provided, however, that the Company shall not be required in connection therewith to
qualify as a foreign corporation or dealer in securities or file a general consent to service of
process in any jurisdiction.




          (e)  Delivery of Registration Statement and Prospectus. The Company will furnish to
CF&Co and its counsel (at the expense of the Company) copies of the Registration Statement, the
Prospectus (including all documents incorporated by reference therein) and all amendments and
supplements to the Registration Statement or Prospectus that are filed with the Commission during
any period in which a Prospectus relating to the Placement Shares is required to be delivered under
the Securities Act (including all documents filed with the Commission during such period that are
deemed to be incorporated by reference therein), in each case as soon as reasonably practicable and
in such quantities as CF&Co may from time to time reasonably request and, at CF&Co’s request, will
also furnish copies of the Prospectus to each exchange or market on which sales of the Placement
Shares may be made; provided, however, that the Company shall not be required to furnish any
document (other than the Prospectus) to CF&Co to the extent such document is available on EDGAR.




          (f)  Earnings Statement. The Company will make generally available to its security
holders as soon as practicable, but in any event not later than 15 months after the end of the
Company’s current fiscal quarter, an earnings statement covering a 12-month period that satisfies
the provisions of Section 11(a) and Rule 158 of the Securities Act.




          (g)  Expenses. The Company, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, in accordance with the provisions of Section 11
hereunder, will pay all expenses incident to the performance of its obligations hereunder,
including, but not limited to, expenses relating to (i) the preparation, printing and filing of the
Registration Statement and each amendment and supplement thereto, of each Prospectus and of each
amendment and supplement thereto (ii) the
preparation, issuance and delivery of the Placement Shares, (iii) the qualification of the


-15-









 







Placement Shares under securities laws in accordance with the provisions of Section
7(d) of this Agreement, including filing fees and any reasonable fees or disbursements of
counsel for CF&Co in connection therewith, (iv) the printing and delivery to CF&Co of copies of the
Prospectus and any amendments or supplements thereto, and of this Agreement, (v) the fees and
expenses incurred in connection with the listing or qualification of the Placement Shares for
trading on the Exchange, and (vi) filing fees and expenses, if any, of the Commission and the NASD
Corporate Finance Department.




          (h)  Use of Proceeds. The Company will use the Net Proceeds as described in the
Prospectus in the section entitled “Use of Proceeds.”




          (i)  Notice of Other Sales. During either the pendency of any Placement Notice given
hereunder, or any period in which the Prospectus relating to the Placement Shares is required to be
delivered by CF&Co, the Company shall provide CF&Co notice as promptly as reasonably possible
before it offers to sell, contracts to sell, sells, grants any option to sell or otherwise disposes
of any shares of Common Stock (other than Placement Shares offered pursuant to the provisions of
this Agreement) or securities convertible into or exchangeable for Common Stock, warrants or any
rights to purchase or acquire Common Stock; provided, that such notice shall not be required in
connection with the (i) issuance, grant or sale of Common Stock, options to purchase shares of
Common Stock or Common Stock issuable upon the exercise of options or other equity awards pursuant
to any employee or director stock option or benefits plan or stock ownership plan or issuances
permitted by NASD Marketplace Rule 4350(i)(1)(A)(iv) or (ii) the issuance or sale of Common Stock
pursuant to any dividend reinvestment plan that the Company may adopt from time to time provided
the implementation of such is disclosed to CF & Co. in advance or (iii) the issuance of Common
Stock upon the exercise of any currently outstanding warrants, options or other rights in effect or
outstanding and disclosed in filings by the Company available on EDGAR.




          (j)  Change of Circumstances. The Company will, at any time during the pendency of a
Placement Notice advise CF&Co promptly after it shall have received notice or obtained knowledge
thereof, of any information or fact that would alter or affect in any material respect any opinion,
certificate, letter or other document required to be provided to CF&Co pursuant to this Agreement.




          (k)  Due Diligence Cooperation. The Company will cooperate with any reasonable due
diligence review conducted by CF&Co or its agents in connection with the transactions contemplated
hereby, including, without limitation, providing information and making available documents and
senior corporate officers, during regular business hours and at the Company’s principal offices, as
CF&Co may reasonably request.




          (l)  Required Filings Relating to Placement of Placement Shares. The Company agrees
that on such dates as the Securities Act shall require, the Company will (i) file a prospectus
supplement with the Commission under the applicable paragraph of Rule 424(b) under the Securities
Act (each and every filing under Rule 424(b), a “Filing Date”), which prospectus supplement
will set forth, within the relevant period, the amount of Placement Shares sold through CF&Co, the
Net Proceeds to the Company and the compensation payable by the Company to CF&Co with respect to
such Placement Shares, and (ii) deliver such number of


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copies of each such prospectus supplement to each exchange or market on which such sales were
effected as may be required by the rules or regulations of such exchange or market.




          (m)  Representation Dates; Certificate. On or prior to the date that the first Shares
are sold pursuant to the terms of this Agreement and each time the Company (i) files the Prospectus
relating to the Placement Shares or amends or supplements the Registration Statement or the
Prospectus relating to the Placement Shares (other than a prospectus supplement filed in accordance
with Section 7(m) of this Agreement) by means of a post-effective amendment, sticker, or
supplement but not by means of incorporation of documents by reference to the Registration
Statement or the Prospectus relating to the Placement Shares; (ii) files an annual report on Form
10-K under the Exchange Act; (iii) files its quarterly reports on Form 10-Q under the Exchange Act;
or (iv) files a report on Form 8-K containing amended financial information (other than an earnings
release, to “furnish” information pursuant to Items 2.02 or 7.01 of Form 8-K or to provide
disclosure pursuant to Item 8.01 of Form 8-K relating to the reclassifications of certain
properties as discontinued operations in accordance with Statement of Financial Accounting
Standards No. 144) under the Exchange Act (each date of filing of one or more of the documents
referred to in clauses (i) through (iv) shall be a
“Representation Date”), the Company
shall furnish CF&Co with a certificate, in the form attached hereto as Exhibit 7(m). The
requirement to provide a certificate under this Section 7(m) shall be waived for any
Representation Date occurring at a time at which no Placement Notice is pending, which waiver shall
continue until the earlier to occur of the date the Company issues a Placement Notice hereunder
(which for such calendar quarter shall be considered a Representation Date) and the next occurring
Representation Date. Notwithstanding the foregoing, if the Company subsequently issues a Placement
Notice following a Representation Date when the Company relied on such waiver and did not provide
CF&Co with a certificate under this Section 7(m), then the Company shall provide CF&Co with
such Placement Notice a certificate, in the form attached hereto as Exhibit 7(m), dated the
date of the Placement Notice.



     (n) Legal Opinion. On the date of the first Placement Notice given hereunder, the
Company shall cause to be furnished to CF&Co written opinions dated as of the date of such
Placement Notice of (i) Ropes & Gray LLP (the “Company Counsel”), in a form substantially similar
to the form attached hereto as Exhibit 7(n)(1), (ii) Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo P.C., in a form reasonably acceptable to CF&Co, and (iii) Covington & Burling, in a form
reasonably acceptable to CF&Co. Within five (5) Trading Days of each subsequent Representation Date
with respect to which the Company is obligated to deliver a certificate in the form attached hereto
as Exhibit 7(m) for which no waiver is applicable, the Company shall cause to be furnished to CF&Co
a written opinion of Company Counsel in a form substantially similar to the form attached hereto as
Exhibit 7(n)(2), modified, as necessary, to relate to the Registration Statement and the
Prospectus as then amended or supplemented; provided, however, that in lieu of
such opinion, Company Counsel may furnish CF&Co with a letter to the effect that CF&Co may rely on
a prior opinion delivered under this Section 7(n) to the same extent as if it were dated the date
of such letter (except that statements in such prior opinion shall be deemed to relate to the
Registration Statement and the Prospectus as amended or supplemented at such Representation Date).







-17-









 









          (o)  Comfort Letter. On the date of the first Placement Notice given hereunder and
thereafter within five (5) Trading Days of the Representation Date with respect to which the
Company is obligated to deliver a certificate in the form attached hereto as Exhibit 7(m) for which
no waiver is applicable, the Company shall cause its independent accountants to furnish CF&Co
letters (the “Comfort Letters”), dated the date of such Representation Date, in form and
substance satisfactory to CF&Co, (i) 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 qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii)
stating, as of such date, the conclusions and findings of such firm with respect to the financial
information and other matters ordinarily covered by accountants’ “comfort letters” to underwriters
in connection with registered public offerings (the first such letter, the “Initial Comfort
Letter”) and (iii) updating the Initial Comfort Letter with any information that would have
been included in the Initial Comfort Letter had it been given on such date and modified as
necessary to relate to the Registration Statement and the Prospectus, as amended and supplemented
to the date of such letter.




          (p)  Market Activities. The Company will not, directly or indirectly take any action
designed to cause or result in, or that constitutes or might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of the Company to facilitate the
sale or resale of the Placement Shares.




          (q)  Investment Company Act. The Company will conduct its affairs in such a manner so
as to reasonably ensure that neither it nor the Subsidiary will be or become, at any time prior to
the termination of this Agreement, an “investment company,” as such term is defined in the
Investment Company Act, assuming no change in the Commission’s current interpretation as to
entities that are not considered an investment company.




     8. Conditions to CF&Co’s Obligations. The obligations of CF&Co hereunder with
respect to a Placement Notice will be subject to the continuing accuracy and completeness of the
representations and warranties made by the Company herein, to the due performance by the Company of
its obligations hereunder, to the completion by CF&Co of a due diligence review satisfactory to
CF&Co in its reasonable judgment, and to the continuing satisfaction (or waiver by CF&Co in its
sole discretion) of the following additional conditions:



          (a)  Registration Statement Effective. The Registration Statement shall have become
effective and shall be available for the (i) resale of all Placement Shares issued to CF&Co and not
yet sold by CF&Co and (ii) the sale of all Placement Shares contemplated to be issued by any
Placement Notice.




          (b)  No Material Notices. None of the following events shall have occurred and be
continuing: (i) receipt by the Company of any request for additional information from the
Commission or any other federal or state governmental authority during the period of effectiveness
of the Registration Statement, the response to which would require any post-effective amendments or
supplements to the Registration Statement or the Prospectus; (ii) the issuance by the Commission or
any other federal or state governmental authority of any stop


-18-









 







order suspending the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the Placement Shares for
sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv)
the occurrence of any event that makes any material statement made in the Registration Statement or
the Prospectus or any material document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any changes in the
Registration Statement, related Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any materially 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 and, that in the case of the Prospectus, it will not contain any materially 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 the light of the circumstances under which they were
made, not misleading.




          (c)  Material Changes. Except as contemplated in the Prospectus, or disclosed in the
Company’s reports filed with the Commission, there shall not have been any material adverse change,
on a consolidated basis, in the authorized capital stock of the Company or any Material Adverse
Effect, or any development that could reasonably be expected to cause a Material Adverse Effect, or
a downgrading in or withdrawal of the rating assigned to any of the Company’s securities (other
than asset backed securities) by any rating organization or a public announcement by any rating
organization that it has under surveillance or review its rating of any of the Company’s securities
(other than asset backed securities), the effect of which, in the case of any such action by a
rating organization described above, in the reasonable judgment of CF&Co (without relieving the
Company of any obligation or liability it may otherwise have), is so material as to make it
impracticable or inadvisable to proceed with the offering of the Placement Shares on the terms and
in the manner contemplated in the Prospectus.




          (d)  Legal Opinion. CF&Co shall have received the opinions of Company Counsel
required to be delivered pursuant Section 7(n) on or before the date on which such delivery
of such opinion is required pursuant to Section 7(n).




          (e)  Comfort Letter. CF&Co shall have received the Comfort Letter required to be
delivered pursuant Section 7(o) on or before the date on which such delivery of such
opinion is required pursuant to Section 7(o).




          (f)  Representation Certificate. CF&Co shall have received the certificate required
to be delivered pursuant to Section 7(m) on or before the date on which delivery of such
certificate is required pursuant to Section 7(m).




          (g)  No Suspension. Trading in the Shares shall not have been suspended on the
Exchange.




          (h)  Other Materials. On each date on which the Company is required to deliver a
certificate pursuant to Section 7(m), the Company shall use its reasonable best efforts to
furnish to CF&Co such appropriate further information, certificates and documents as CF&Co may
reasonably request. All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof. The Company will furnish CF&Co with such conformed


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copies of such opinions, certificates, letters and other documents as CF&Co shall reasonably
request.




          (i)  Securities Act Filings Made. All filings with the Commission required by Rule
424 under the Securities Act to have been filed prior to the issuance of any Placement Notice
hereunder shall have been made within the applicable time period prescribed for such filing by Rule
424.




          (j)  Approval for Listing. The Placement Shares shall either have been (i) approved
for listing on the Exchange, subject only to notice of issuance, or (ii) the Company shall have
filed an application for listing of the Placement Shares on the Exchange at, or prior to, the
issuance of any Placement Notice.




          (k)  No Termination Event. There shall not have occurred any event that would permit
CF&Co to terminate this Agreement pursuant to Section 11(a).




     9.  Indemnification and Contribution.



          (a)  Company Indemnification. The Company agrees to indemnify and hold harmless
CF&Co, the directors, officers, partners, employees and agents of CF&Co and each person, if any,
who (i) controls CF&Co within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, or (ii) is controlled by or is under common control with CF&Co (a “CF&Co
Affiliate”) from and against any and all losses, claims, liabilities, expenses and damages
(including, but not limited to, any and all reasonable investigative, legal and other expenses
incurred in connection with, and any and all amounts paid in settlement (in accordance with Section
9(c)) of, any action, suit or proceeding between any of the indemnified parties and any
indemnifying parties or between any indemnified party and any third party, or otherwise, or any
claim asserted), as and when incurred, to which CF&Co, or any such person, may become subject under
the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out
of or are based, directly or indirectly, on (x) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or the Prospectus or (y) the omission or
alleged omission to state in such document a material fact required to be stated in it or necessary
to make the statements in it not misleading; provided, however, that this indemnity
agreement shall not apply to the extent that such loss, claim, liability, expense or damage arises
from or is caused directly or indirectly by an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information furnished in writing
to the Company by or on behalf of CF&Co expressly for inclusion in the Registration Statement or
Prospectus. This indemnity agreement will be in addition to any liability that the Company might
otherwise have.




          (b)  CF&Co Indemnification. CF&Co agrees to indemnify and hold harmless the Company
and its directors and each officer of the Company who signed the Registration Statement, and each
person, if any, who (i) controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act or (ii) is controlled by or is under common control with the
Company (a “Company Affiliate”) against any and all loss, liability, claim, damage and
expense to which the Company, or any such person, may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at


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common law or otherwise, as and when incurred, but only insofar as such loss, liability,
claim, damage or expense arises from or is caused directly or indirectly by an untrue statement or
omission or alleged untrue statement or omission made in reliance on and in conformity with
information furnished in writing to the Company by or on behalf of CF&Co expressly for inclusion in
the Registration Statement or Prospectus.




          (c)  Procedure. Any party that proposes to assert the right to be indemnified under
this Section 9 will, promptly after receipt of notice of commencement of any action against
such party in respect of which a claim is to be made against an indemnifying party or parties under
this Section 9, notify each such indemnifying party of the commencement of such action,
enclosing a copy of all papers served, but the omission so to notify such indemnifying party will
not relieve the indemnifying party from (i) any liability that it might have to any indemnified
party otherwise than under this Section 9 and (ii) any liability that it may have to any
indemnified party under the foregoing provision of this Section 9 unless, and only to the
extent that, such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be entitled to participate in
and, to the extent that it elects by delivering written notice to the indemnified party promptly
after receiving notice of the commencement of the action from the indemnified party, jointly with
any other indemnifying party similarly notified, to assume the defense of the action, with counsel
reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to
the indemnified party of its election to assume the defense, the indemnifying party will not be
liable to the indemnified party for any legal or other expenses except as provided below. The
indemnified party will have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably concluded (based on the written advice
of counsel) that there may be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on the written advice of counsel to the indemnified party) between
the indemnified party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or parties shall not,
in connection with any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or parties. All such
fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they
are incurred. An indemnifying party will not, in any event, be liable for any settlement of any
action or claim effected without its written consent. No indemnifying party shall, without the
prior written consent of each indemnified party, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action or proceeding relating to the matters
contemplated by this Section 9 (whether or not any indemnified party is a party thereto),
unless such settlement, compromise or consent includes an


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unconditional release of each indemnified party from all liability arising or that may arise
out of such claim, action or proceeding.




          (d)  Contribution. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing paragraphs of this
Section 9 is applicable in accordance with its terms but for any reason is held to be
unavailable from the Company or CF&Co, the Company and CF&Co will contribute to the total losses,
claims, liabilities, expenses and damages (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received by the Company from
persons other than CF&Co, if any), to which the Company and CF&Co may be subject in such proportion
as shall be appropriate to reflect the relative benefits received by the Company, on the one hand,
and CF&Co, on the other. The relative benefits received by the Company on the one hand and CF&Co on
the other hand shall be deemed to be in the same proportion as the total net proceeds from the sale
of the Placement Shares (before deducting expenses) received by the Company bear to the total
compensation received by CF&Co from the sale of Placement Shares on behalf of the Company. If,
but only if, the allocation provided by the foregoing sentence is not permitted by applicable law,
the allocation of contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the relative fault of the
Company, on the one hand, and CF&Co, on the other, with respect to the statements or omission that
resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well
as any other relevant equitable considerations with respect to such offering. Such relative fault
shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or CF&Co, on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and CF&Co agree that it would not be just and equitable if
contributions pursuant to this Section 9(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, liability, expense, or damage, or action in respect thereof, referred to above in this
Section 9(d) shall be deemed to include, for the purpose of this Section 9(d), any
legal or other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim to the extent consistent with Section
9(c) hereof. Notwithstanding the foregoing provisions of this Section 9(d), CF&Co
shall not be required to contribute any amount in excess of the commissions received by it under
this Agreement and no person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 9(d), any person
who controls a party to this Agreement within the meaning of the Securities Act, and any officers,
directors, partners, employees or agents of CF&Co, will have the same rights to contribution as
that party, and each trustee of the Company and each officer of the Company who signed the
Registration Statement will have the same rights to contribution as the Company, subject in each
case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice
of commencement of any action against such party in respect of which a claim for contribution may
be made under this Section 9(d), will notify any such party or parties from whom
contribution may be sought, but the omission to so notify will not relieve that party or parties


-22-









 







from whom contribution may be sought from any other obligation it or they may have under this
Section 9(d) except to the extent that the failure to so notify such other party materially
prejudiced the substantive rights or defenses of the party from whom contribution is sought. Except
for a settlement entered into pursuant to the last sentence of Section 9(c) hereof, no
party will be liable for contribution with respect to any action or claim settled without its
written consent if such consent is required pursuant to Section 9(c) hereof.




     10.  Representations and Agreements to Survive Delivery. All representations and
warranties of the Company herein or in certificates delivered pursuant hereto shall survive, as of
their respective dates, regardless of (i) any investigation made by or on behalf of CF&Co, any
controlling persons, or the Company (or any of their respective officers, directors or controlling
persons), (ii) delivery and acceptance of the Placement Shares and payment therefor or (iii) any
termination of this Agreement.



     11.  Termination.



          (a)  CF&Co shall have the right by giving notice as hereinafter specified at any time to
terminate this Agreement if (i) any Material Adverse Effect, or any development that has actually
occurred and that is reasonably expected to cause a Material Adverse Effect has occurred that, in
the reasonable judgment of CF&Co, may materially impair the ability of CF&Co to sell the Placement
Shares hereunder, (ii) the Company shall have failed, refused or been unable to perform any
agreement on its part to be performed hereunder; provided, however, in the case of any failure of
the Company to deliver (or cause another person to deliver) any certification, opinion, or letter
required under Sections 7(m), 7(n), or 7(o), CF&Co’s right to
terminate shall not arise unless such failure to deliver (or cause to be delivered) continues for
more than thirty (30) days from the date such delivery was required to which such delivery was
required; or (iii) any other condition of CF&Co’s obligations hereunder is not fulfilled, or (iv),
any suspension or limitation of trading in the Placement Shares or in securities generally on the
Exchange shall have occurred. Any such termination shall be without liability of any party to any
other party except that the provisions of Section 7(g) (Expenses), Section 9
(Indemnification), Section 10 (Survival of Representations), Section 16 (Applicable
Law; Consent to Jurisdiction) and Section 17 (Waiver of Jury Trial) hereof shall remain in
full force and effect notwithstanding such termination. If CF&Co elects to terminate this
Agreement as provided in this Section 11(a), CF&Co shall provide the required notice as
specified in Section 12 (Notices).




          (b)  The Company shall have the right, by giving ten (10) days notice as hereinafter specified
to terminate this Agreement in its sole discretion at any time after the date of this Agreement.
Any such termination shall be without liability of any party to any other party except that the
provisions of Section 7(g), Section 9, Section 10, Section 16 and
Section 17 hereof shall remain in full force and effect notwithstanding such termination.




          (c)  CF&Co shall have the right, by giving ten (10) days notice as hereinafter specified to
terminate this Agreement in its sole discretion at any time after the date of this Agreement. Any
such termination shall be without liability of any party to any other party except that the
provisions of Section 7(g), Section 9, Section 10, Section 16 and
Section 17 hereof shall remain in full force and effect notwithstanding such termination.




-23-









 








          (d)  Unless earlier terminated pursuant to this Section 11, this Agreement shall automatically
terminate upon the issuance and sale of all of the Placement Shares through CF&Co on the terms and
subject to the conditions set forth herein; provided that the provisions of Section 7(g),
Section 9, Section 10, Section 16 and Section 17 hereof shall
remain in full force and effect notwithstanding such termination.




          (e)  This Agreement shall remain in full force and effect unless terminated pursuant to
Sections 11(a), (b), (c), or (d) above or otherwise by mutual agreement of
the parties; provided, however, that any such termination by mutual agreement shall in all cases be
deemed to provide that Section 7(g), Section 9, Section 10, Section
16 and Section 17 shall remain in full force and effect.




          (f)  Any termination of this Agreement shall be effective on the date specified in such notice
of termination; provided, however, that such termination shall not be effective until the close of
business on the date of receipt of such notice by CF&Co or the Company, as the case may be. If such
termination shall occur prior to the Settlement Date for any sale of Placement Shares, such
Placement Shares shall settle in accordance with the provisions of this Agreement.




     12.  Notices.



          All notices or other communications required or permitted to be given by any party to any
other party pursuant to the terms of this Agreement shall be in writing and if sent to CF&Co, shall
be delivered to CF&Co at Cantor Fitzgerald & Co., 110 East 59th Street, New York, New York 10022,
fax no. (212) 829-4972, Attention: ITD-Investment Banking, with copies to Stephen Merkel, General
Counsel, at the same address, and DLA Piper Rudnick Gray Cary US LLP, 1251 Avenue of the Americas,
New York, NY 10020, fax no. (212) 884-8494, Attention: Dean M. Colucci; or if sent to the Company,
shall be delivered to Stemcells, Inc., 3155 Porter Drive, Palo Alto, CA 94304, fax no.
650-475-3101, attention: Rodney Young, Chief Financial Officer, with a copy to Ropes & Gray LLP,
One International Place, Boston, MA 02110, fax no. (617) 951-7050, attention: Geoffrey Davis, Esq.
Each party to this Agreement may change such address for notices by sending to the parties to this
Agreement written notice of a new address for such purpose. Each such notice or other
communication shall be deemed given (i) when delivered personally or by verifiable facsimile
transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business
Day or, if such day is not a Business Day, on the next succeeding Business Day, (ii) on the next
Business Day after timely delivery to a nationally-recognized overnight courier and (iii) on the
Business Day actually received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid). For purposes of this Agreement, “Business Day” shall
mean any day on which the Exchange and commercial banks in the City of New York are open for
business.




     13.  Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the Company and CF&Co and their respective successors and the affiliates, controlling
persons, officers and directors referred to in Section 9 hereof. References to any of the
parties contained in this Agreement shall be deemed to include the successors and permitted assigns
of such party. Nothing in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement, except as expressly



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provided in this Agreement. Neither party may assign its rights or obligations under this
Agreement without the prior written consent of the other party.



     14.   Adjustments for Stock Splits. The parties acknowledge and agree that all
share-related numbers contained in this Agreement shall be adjusted to take into account any stock
split, stock dividend or similar event effected with respect to the Placement Shares.



     15.  Entire Agreement; Amendment; Severability. This Agreement (including all
schedules and exhibits attached hereto and placement notices issued pursuant hereto) constitutes
the entire agreement and supersedes all other prior and contemporaneous agreements and
undertakings, both written and oral, among the parties hereto with regard to the subject matter
hereof. Neither this Agreement nor any term hereof may be amended except pursuant to a written
instrument executed by the Company and CF&Co. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held invalid, illegal or
unenforceable as written by a court of competent jurisdiction, then such provision shall be given
full force and effect to the fullest possible extent that it is valid, legal and enforceable, and
the remainder of the terms and provisions herein shall be construed as if such invalid, illegal or
unenforceable term or provision was not contained herein, but only to the extent that giving effect
to such provision and the remainder of the terms and provisions hereof shall be in accordance with
the intent of the parties as reflected in this Agreement.



     16.  Applicable Law; Consent to Jurisdiction. This Agreement shall be governed by,
and construed in accordance with, the internal laws of the State of New York without regard to the
principles of conflicts of laws. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan,
for the adjudication of any dispute hereunder or in connection with any transaction contemplated
hereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof
(certified or registered mail, return receipt requested) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law.



     17.  Waiver of Jury Trial. The Company and CF&Co each hereby irrevocably waives any
right it may have to a trial by jury in respect of any claim based upon or arising out of this
agreement or any transaction contemplated hereby.



     18.  Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument. Delivery of an executed Agreement by one party to the other may be made by facsimile
transmission.



[Remainder of Page Intentionally Blank]




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          If the foregoing correctly sets forth the understanding between the Company and CF&Co, please
so indicate in the space provided below for that purpose, whereupon this letter shall constitute a
binding agreement between the Company and CF&Co.



	 	 	 	 	 
	 	Very truly
yours,



STEMCELLS, INC.

 	 
	 	By:  	/s/ Iris Brest
 	 
	 	 	Name:  	Iris Brest 	 
	 	 	Title:  	General Counsel 	 
	 
	 	ACCEPTED as of the date

first-above written:



CANTOR FITZGERALD & CO.

 	 
	 	By:  	/s/ Marc Blazer
 	 
	 	 	Marc Blazer 	 
	 	 	Head of Investment Banking 	 



 









 






	 	 	 	 	 



SCHEDULE 3




Compensation



CF&Co shall be paid compensation equal to five percent (5%) of the gross proceeds from the sales of
Shares pursuant to the terms of this Agreement.