exv10w5



 



Exhibit 10.5

FINANCIAL ADVISORY AGREEMENT




THIS FINANCIAL ADVISORY AGREEMENT (“Agreement” or “FAA”) is made and entered into on this the
18th day of October, 2006, by and between Halter Financial Group, L.P., a Texas limited
partnership (“HFG”), and International Stem Cell Corporation, a California corporation (the
“Company”).



W I T N E S S E T H:




WHEREAS, the Company desires to engage HFG to provide certain financial advisory and
consulting services as specifically enumerated below commencing as of the date hereof related to
the Going Public Transaction and the Post-Transaction Period (each as hereinafter defined), and HFG
is willing to be so engaged.



NOW, THEREFORE, for and in consideration of the covenants set forth herein and the mutual
benefits to be gained by the parties hereto, and other good and valuable consideration, the receipt
and adequacy of which are now and forever acknowledged and confessed, the parties hereto hereby
agree and intend to be legally bound as follows:



1. Retention. As of the date hereof, the Company hereby retains and HFG hereby agrees
to be retained as the Company’s financial advisor during the term of this Agreement. The Company
acknowledges that HFG shall have the right to engage third parties to assist it in its efforts to
satisfy its obligations hereunder. In its capacity as a financial advisor to the Company, HFG
will:



A.  Going Public Transaction.





Assist the Company in evaluating the manner of effecting a going public transaction
with a public shell corporation (“Pubco”) domiciled in the United States of America and
quoted on the “OTC BB” (a “Going Public Transaction”). It is anticipated that (a) upon
consummation of the Going Public Transaction, (b) the closing of the Company’s current
private placement of securities (the “Company Offering”) and (c) the closing of the private
placement of Pubco (the “Pubco Offering”) contemplated to be undertaken immediately upon the
closing of the Going Public Transaction, which together with the Company Offering will
generate estimated gross offering proceeds of $10,000,000, the Company’s current
stockholders, investors in the Company Offering and the Pubco Offering, respectively, will
hold 93.5% of all the issued and outstanding shares of Pubco’s common capital stock.




Specifically, ownership by the former shareholders of Pubco following the Going Public
Transaction and the Pubco offering shall therefore consist of 2,210,000 shares of common
stock. Ownership of the balance of Pubco common stock shall be held as follows:
approximately 21,790,000 shares of common stock will be held by the Company’s shareholders
immediately prior to such transactions, and an estimated 10,000,000 shares will be issued to
investors in the Pubco Offering, a total of approximately 34,000,000 shares. In order to
permit the completion of share splits or



 





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other capital structure adjustments to Pubco that may be required prior to closing, no
adjustment in the shares to be held by the initial Pubco shareholders shall be made for the
possible oversubscription or undersubscription of the Pubco Offering by Brookstreet
Securities, the Company’s placement agent.




B. Post Transaction Period




Upon consummation of the Going Public Transaction, HFG agrees to:




(i) assist Pubco in obtaining a new CUSIP number and a new stock symbol upon the
changing of its name;




(ii) if necessary, coordinate with the Company’s legal counsel the preparation and
assembly of application materials for the listing of Pubco’s common stock on a national
stock exchange; and




(iii) provide Pubco with such additional financial advisory services as may be
reasonably requested, to the extent HFG has the expertise or legal right to render such
services.




C. Tax Considerations




The Going Public Transaction shall be accomplished in a manner determined to the
satisfaction of the Company to be a tax deferred transaction under the Internal Revenue
Code, it being anticipated that the form of transaction shall consist of an exchange of the
outstanding shares of the Company for newly issued shares of Pubco.



2. Authorization. Subject to the terms and conditions of this Agreement, the Company
hereby appoints HFG to act on a best efforts basis as its consultant during the Authorization
Period (as hereinafter defined). HFG hereby accepts such appoint, with it being expressly
acknowledged that HFG is acting in the capacity of independent contractor and not as agent of
either the Company, affiliates of the Company or Pubco.



3. Authorization Period. HFG’s engagement hereunder shall become effective on the
date hereof (the “Effective Date”) and will automatically terminate (the “Termination Date”) on the
first to occur of the following: (a) 60 days from the Effective Date in the event the Going Public
Transaction has not been completed, (b) the mutual decision of the parties not to move forward with
the Going Public Transaction or (c) 12 months from the Effective Date.



4. Fees and Expenses. In consideration for the services to be provided for hereunder
the Company shall pay to HFG the amount of $450,000 (the “Fee”) to be paid on the closing date of
the Going Public Transaction. The Company shall be under no obligation to pay any part of the Fee
to HFG in the event this Agreement is terminated as a result of the failure of the Company and
Pubco to effect the Going Public Transaction.



5. Due Diligence . The Company shall have the right to perform a due diligence
investigation of Pubco and shall be under no obligation to effect the Going Public Transaction
unless it is satisfied, in its sole discretion, with the results of its diligence investigation.



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6. Indemnification. The parties hereto shall indemnify each other to the extent
provided for in this paragraph. Except as a result of an act of gross negligence or willful
misconduct on the part of a party hereto, no party shall be liable to another party, or its
officers, directors, employees, shareholders or affiliates, for any damages sustained as a result
of an act or omission taken or made under this Agreement. In those cases where gross negligence or
willful misconduct of a party is alleged and proven, the non-damaged party agrees to defend,
indemnify and hold the damaged party harmless from and against any and all reasonable costs,
expenses and liabilities suffered or sustained as a result of the act of gross negligence or
willful misconduct.



7. Lock Up. HFG agrees that, without the prior written consent of the Company, it will
not sell, transfer or otherwise dispose of greater than 1/12th of its holdings in Pubco
every 30 days commencing on the closing date of the Going Public Transaction. However, in the event
HFG does not sell or otherwise dispose of all of the allotted number of Pubco shares that may be
sold in a given 30 day period, HFG may sell such unsold shares at any time thereafter.




8. Governing Law. This Agreement shall be governed by the laws of the State of Texas.



IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
above written.



	 	 	 
	 

	 	HFG:
	 
	 	 
	 

	 	Halter Financial Group, L.P.
	 
	 	 
	 

	 	By: [TIMOTHY P. HALTER]
	 

	 	     Timothy P. Halter, Chairman, Halter
	 

	 	Financial Group GP, LLC, its General Partner
	 
	 	 
	 

	 	The Company:
	 

	 	International Stem Cell Corporation
	 
	 	 
	 

	 	By: [KENNETH C. ALDRICH]
	 

	 	Name: Kenneth C. Aldrich
	 

	 	Its: Chairman






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