Document:

ex10-6.htm

     

    Exhibit 10.6

    

     

    EMPLOYMENT
AGREEMENT

     

    This
EMPLOYMENT AGREEMENT (this “Agreement”) is
entered into as of this 31st day of March, 2008 by and between Dynex Capital,
Inc., a Virginia corporation (the “Company”), and Thomas
B. Akin (“Executive”).

     

     

    W1TNESSETH:

     

    WHEREAS,
Executive commenced employment with the Company on February 4,
2008;

     

    WHEREAS,
the Company desires to continue to employ and secure the exclusive services of
Executive on the terms and conditions set forth in this Agreement;
and

     

    WHEREAS,
Executive desires to accept such employment on such terms and
conditions.

     

    NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
promises contained herein and for other good and valuable consideration, the
Company and Executive hereby agree as follows:

     

    1.           Agreement to Employ.
Upon the terms and subject to the conditions of this Agreement, the Company
hereby agrees to continue to employ Executive, and Executive hereby accepts such
continued employment with the Company.

     

    2.           Term: Position and
Responsibilities; Location.

     

    (a)           Term of Employment.
Unless Executive’s employment shall sooner terminate pursuant to Section 7, the
Company shall continue to employ Executive on the terms and subject to the
conditions of this Agreement from the date first written above through February
5, 2009 (the “Employment Period”).

     

    (b)           Position and
Responsibilities.  During the Employment Period, Executive
shall serve as Chief Executive Officer (“CEO”) and shall have
such duties and responsibilities as are customarily assigned to individuals
serving in such position and such other duties consistent with Executive’s title
and position as the Board of Directors (or any committee thereof) of the Company
(the Board or such committee referred to as the “Board”) specifies
from time to time (it being understood by the parties that, notwithstanding the
foregoing, the Company is free, at any time and from time to time, to reorganize
its business operations, and that Executive’s duties and scope of responsibility
may change in connection with such reorganization).  Executive agrees
that during his employment with the Company, Executive shall devote as much of
his skill, knowledge, commercial efforts and business time as the Board shall
reasonably require to the conscientious and good faith performance of his duties
and responsibilities to the Company to the best of his ability.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (c)           Location.  During
the Employment Period, Executive’s services shall be performed primarily in the
San Francisco, California metropolitan area. However, Executive may be required
to travel in and outside of such area as the needs of the Company’s business
dictate.  Executive will also work from time-to-time out of the
Company’s office in Richmond, Virginia.

     

    3.           Base Salary. During
the Employment Period, the Company shall pay Executive a base salary at an
annualized rate of $300,000, payable in installments on the Company’s regular
payroll dates. The Board shall review Executive’s base salary annually during
the Employment Period and may increase (but not decrease) such base salary from
time to time, based on its periodic review of Executive’s performance in
accordance with the Company’s regular policies and procedures. The annual base
salary payable to Executive from time to time under this Section 4 shall
hereinafter be referred to as the “Base
Salary.”

     

    4.           Annual Incentive
Compensation. The Company has established an annual bonus based on the
return on adjusted equity of the Company (the “ROAE Bonus”).  The
Company has also established a bonus pool for 2008 related to capital raising
activities of the Company (the “Capital Bonus Pool”).  The Executive
is eligible for the ROAE Bonus and to participate in the Capital Bonus
Pool.  Attached hereto as Exhibit A, and incorporated by reference
herein, are the terms of the ROAE Bonus for the Executive.  Attached
hereto as Exhibit B, and incorporated by reference herein, are the terms of the
Capital Bonus Pool in which the Executive will participate.  For the
duration of this Agreement, the Executive will be eligible for the ROAE
Bonus.  After 2008, the Executive’s participation in the Capital Bonus
Pool shall be determined in the sole discretion of the Board. The amount of the
Capital Bonus Pool allocated to the Executive will be determined by the
Compensation Committee of the Board of Directors on each Determination
Date.  Such amounts will be paid in restricted stock of the Company
vesting on the second anniversary date of the grant as set forth on Exhibit
B.

     

    5.           Employee
Benefits.

     

    (a)           General. During the
Employment Period, Executive will be eligible to participate in the employee and
executive benefit plans and programs maintained by the Company from time to time
in which executives of the Company at Executive’s grade level are eligible to
participate, including to the extent maintained by the Company, life, medical,
dental, accidental and disability insurance plans and retirement, deferred
compensation and savings plans, in accordance with the terms and conditions
thereof as in effect from time to time.

     

    (b)           Vacation. During the
Employment Period, Executive shall be entitled to vacation on an annualized
basis of four (4) weeks per year, without carry-over accumulation. Executive
shall also be entitled to Company-designated holidays.

     

    6.           Expenses.

     

    (a)           Business Travel,
Lodging. During the Employment Period, the Company will reimburse
Executive for reasonable travel, lodging, meal and other reasonable expenses
incurred by him in connection with the performance of his duties and
responsibilities

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    hereunder
upon submission of evidence satisfactory to the Company of the incurrence and
purpose of each such expense, provided that such
expenses are permitted under the terms and conditions of the Company’s business
expense reimbursement policy.  Such expenses shall be reimbursed in
accordance with the Company’s business expense reimbursement policy but in no
event later than December 31 of the year following the year in which the
Executive incurs the related expense.

     

    7.           Termination of
Employment.

     

    (a)           Termination for Any
Reason. Executive’s employment may be terminated by the Company or the
Executive for any reason. In the event that Executive’s employment is
terminated, no termination benefits shall be payable to or in respect of
Executive except as provided in Section 7(c).

     

    (b)           
Notice of Termination;
Date of Termination.

     

    (i)           Notice of
Termination. Any termination of Executive’s employment by the Company or
by Executive (other than as a result of Executive’s death) shall be communicated
by a written Notice of Termination addressed to the other party to this
Agreement. A “Notice
of Termination” shall mean a notice stating that Executive or the
Company, as the case may be, is electing to terminate Executive’s employment
with the Company (and thereby terminating the Employment Period), stating the
proposed effective date of such termination, indicating the specific provision
of this Section 8 under which such termination is being effected and, if
applicable, setting forth in reasonable detail the circumstances claimed to
provide the basis for such termination.

     

    (ii)           Date of Termination.
The term “Date of
Termination” shall mean (i) if Executive’s employment is terminated by
his death, the date of his death, (ii) if Executive’s employment is terminated
by Executive, a date which is at least 30 days following the issuance of the
Notice of Termination and (iv) if Executive’s employment is terminated for any
other reason, the effective date of termination specified in such Notice of
Termination. The Employment Period shall expire on the Date of
Termination.

     

    (c)           Payments
Upon Certain Terminations.

     

    (i)           In
the event of a termination of Executive’s employment, the Company shall pay to
Executive, within thirty (30) days of the Date of Termination, his Base Salary
through the Date of Termination, to the extent not previously paid,
reimbursement for any unreimbursed business expenses incurred by Executive prior
to the Date of Termination that are subject to reimbursement pursuant to Section
7(a) and payment for vacation time accrued as of the Date of Termination but
unused (the “Accrued
Obligations”). In addition, in the event of any such termination of
Executive’s employment unless such termination was for Cause (as defined in
Section 7(e) below), if Executive executes and delivers to the Company a
Separation Agreement and General Release substantially in the form approved by
the Company, Executive shall be entitled to the following payments and
benefits:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (A)           the
portion of the ROAE Bonus for the fiscal year of the Company during which
Executive was employed that includes the Date of Termination, such portion to
equal the product (such product, the “Pro-Rata ROAE Bonus”)
of the ROAE Bonus that would have been payable to Executive for such fiscal year
had Executive remained employed for the entire fiscal year, determined based on
the extent to which the Company actually achieves the performance goals for such
year, multiplied by a fraction, the numerator of which is equal to the number of
days in such fiscal year that precede the Date of Termination and the
denominator of which is equal to 365, such amount to be payable to Executive on
the date such bonus would otherwise have been paid if the Executive was still
employed (the “Bonus
Payment Date”);

     

    (B)           to
the extent not already paid, the portion of the Capital Bonus Pool due the
Executive pursuant to Section 4 above for a Determination Date that precedes the
Date of Termination (the “Unpaid Capital
Bonus”) payable in cash on the Bonus Payment Date;

     

    (C)           to
the extent any incentive stock awards such as stock options, stock appreciation
rights, restricted stock, or similar which were awarded to Executive during the
Employment Period and which have not vested as of the Date of Termination, such
incentive stock awards will immediately become 100% vested and
exercisable;  and

     

    Executive
shall not have a duty to mitigate the costs to the Company under this Section
7(c)(i), nor shall any payments from the Company to Executive under items (A),
(B) or (C) of this Section 7(c)(i) be reduced, offset or canceled by any
compensation or fees earned by (whether or not paid currently) or offered to
Executive during the Severance Period by a subsequent employer or other Person
(as defined in below) for which Executive performs services, including but not
limited to consulting services. The foregoing notwithstanding, should Executive
receive or be offered health or medical benefits coverage during the Severance
Period by a subsequent employer or Person for whom Executive performs services,
Executive shall notify the Company of this within seven (7) business days of
such receipt or offer, as applicable, and all similar health and medical
benefits coverage provided by the Company to Executive shall terminate as of the
effective date of such new coverage.

     

    (ii)           Except
as specifically set forth in this Section 7(c), no termination benefits shall be
payable to or in respect of Executive’s employment with the
Company.

     

    (d)           The
payments under Section 7 are intended to be exempt from or comply with Internal
Revenue Code Section 409A and applicable guidance issued thereunder
(collectively, “Code
Section 409A”).  If it should be determined that any payment or
benefit under this Agreement constitutes a “deferral of compensation” subject to
Code Section 409A, then, notwithstanding anything in this Agreement to the
contrary, if the Executive is a “specified employee” (within the meaning of Code
Section 409A and as determined by the Company in accordance with Code Section
409A) at the time of the Executive’s separation from service (as

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    defined
in Code Section 409A), the distribution of any payment or benefit under this
Agreement on account of the Executive’s termination of employment shall be made
no earlier than the date which is six months after the date of Executive’s
separation from service (or, if earlier than the end of such six month period,
the date of the Executive’s death).  To the extent any payment or
benefit hereunder is subject to the six month delay, such payment or benefit
shall be paid immediately after the end of such six month period (or the date of
death, if earlier).  The provisions of this Agreement governing any
payment or benefit constituting a “deferral of compensation” shall be
interpreted and operated consistently with the requirements of Code Section
409A.

     

    (e)           For
purposes of this Agreement, “Cause” means (i) a material breach by Executive of
any provision of this Agreement; (ii) a material and willful violation by
Executive of any of the Company Policies; (iii) the failure by Executive to
reasonably and substantially perform the duties of his position (other than as a
result of physical or mental illness or injury); (iv) Executive’s willful
misconduct or gross negligence that has caused or is reasonably expected to
result in material injury to the business, reputation or prospects of the
Company; (v) Executive’s fraud or misappropriation of funds; or (vi) the
commission by Executive of a felony or other serious crime involving moral
turpitude; provided that in the case of any breach of clauses (i), (ii) or (iii)
that is curable, no termination there under shall be effective unless the
Company shall have given Executive notice of the event or events constituting
Cause and Executive shall have failed to cure such event or events within thirty
(30) business days after receipt of such notice.

     

    8.           Restrictive
Covenants. Each of the Company and Executive agrees that the Executive
will have a prominent role in the management of the business, and the
development of the goodwill, of the Company, and will establish and develop
relations and contacts with customers and counterparties of the Company, all of
which constitute valuable goodwill of, and could be used by Executive to compete
unfairly with, the Company. In addition, Executive recognizes that he will have
access to and become familiar with or exposed to Confidential Information (as
such term is defined below), in particular, trade secrets, proprietary
information, customer lists, counterparty lists and other valuable business
information of the Company pertaining or related to the speciality finance
industry, specifically as it relates to being a mortgage real estate investment
trust (the “Business
of the Company”). Executive agrees that Executive could cause grave harm
to the Company if he, among other things, worked for the Company’s competitors,
solicited the Company’s employees away from the Company, solicited the Company’s
customers or business counterparties upon the termination of Executive’s
employment with the Company, or misappropriated or divulged the Company’s
Confidential Information; and that as such, the Company has legitimate business
interests in protecting its goodwill and Confidential Information; and, as such,
these legitimate business interests justify the following restrictive
covenants:

     

    (a)           Confidentiality and
Non-Disclosure Covenant.

     

    (i)           Executive
acknowledges and agrees that the terms of this Agreement, including all
addendums and attachments hereto, are confidential. Except as required by law or
the requirements of any stock exchange, Executive agrees not to disclose any
information contained in this Agreement to anyone, other than to Executive’s
lawyer, financial

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    advisor
or immediate family members. If Executive discloses any Information contained in
this Agreement to his lawyer, financial advisor or immediate family members as
permitted herein, Executive agrees to immediately tell each such individual that
he or she must abide by the confidentiality restrictions contained herein and
keep such information confidential as well.

     

    (ii)           Executive
agrees that during his employment with the Company and thereafter, Executive
will not, directly or indirectly (A) disclose any Confidential Information to
any Person (other than, only with respect to the period that Executive is
employed by the Company, to an employee or outside advisor of the Company who
requires such information to perform his or her duties for the Company), or (B)
use any Confidential Information for Executive’s own benefit or the benefit of
any third party. “Confidential
Information” means confidential, proprietary or commercially sensitive
information relating to (i) the Company or members of its management or boards
or (ii) any third parties who do business with the Company. Confidential
Information includes, without limitation, marketing plans, business plans,
financial information and records, operation methods, personnel information,
drawings, designs, information regarding product development, customer lists, or
other commercial or business information and any other information not available
to the public generally. The foregoing obligation shall not apply to any
Confidential Information that has been previously disclosed to the public or is
in the public domain (other than by reason of a breach of Executive’s
obligations to hold such Confidential Information confidential). If Executive is
required or requested by a court or governmental agency to disclose Confidential
Information, Executive must notify the Chief Operating Officer of the Company of
such disclosure obligation or request no later than three (3) business days
after Executive learns of such obligation or request, and permit the Company to
take all lawful steps it deems appropriate to prevent or limit the required
disclosure.

     

    (b)           Non-Competition
Covenant. Executive agrees that during his employment with the Company,
Executive shall devote as much of his skill, knowledge, commercial efforts and
business time as the Board shall reasonably require to the conscientious and
good faith performance of his duties and responsibilities to the Company to the
best of his ability.  The Company acknowledges that Executive is the
managing general partner of Talkot Capital LLC and shall continue to function in
that regard during his employment with the Company.  Except for Talkot
Capital, Executive shall not, directly or indirectly, be employed by, render
services for, engage in business with or serve as an agent or consultant to any
Person other than the Company. Executive further agrees that during his
employment with the Company and for the period of one (1) year following any
termination of his employment with the Company, Executive shall not, directly or
indirectly, become employed by, render services for, engage in business with,
serve as an agent or consultant to, or become a partner, member, principal,
stockholder or other owner, or Board member of, any Person or entity that
engages in the Business of the Company, provided that
Executive shall be permitted to hold a ten percent (10%) or less interest in the
equity or debt securities of any publicly traded company.

     

    (c)           Non-Solicitation of
Employees. During the period of Executive’s employment with the Company
and for the one (1)-year period following the termination of his employment,
Executive shall not, directly or indirectly, by himself or through any third
party, whether on Executive’s own behalf or on behalf of any other Person or
entity, (i) solicit or induce or endeavor to solicit or induce, divert, employ
or retain, (ii) interfere with the

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    relationship
of the Company with, or (iii) attempt to establish a business relationship of a
nature that is competitive with the business of the Company with, any Person
that is or was (during the last twelve (12) months of Executive’s employment
with the Company) an employee of the Company or engaged to provide services to
it.

     

    9.           Work Product.
Executive agrees that all of Executive’s work product (created solely or jointly
with others, and including any intellectual property or moral rights in such
work product), given, disclosed, created, developed or prepared in connection
with Executive’s employment with the Company, whether ensuing during or after
Executive’s employment with the Company (“Work Product”) shall
exclusively vest in and be the sole and exclusive property of the Company and
shall constitute “work made for hire” (as that term is defined under Section 101
of the U.S. Copyright Act, 17 U.S.C. § 101) with the Company being the person
for whom the work was prepared. In the event that any such Work Product is
deemed not to be a “work made for hire” or does not vest by operation of law in
the Company, Executive hereby irrevocably assigns, transfers and conveys to the
Company, exclusively and perpetually, all right, title and interest which
Executive may have or acquire in and to such Work Product throughout the world,
including without limitation any copyrights and patents, and the right to secure
registrations, renewals, reissues, and extensions thereof. The Company or its
designees shall have the exclusive right to make full and complete use of, and
make changes to all Work Product without restrictions or liabilities of any
kind, and Executive shall not have the right to use any such materials, other
than within the legitimate scope and purpose of Executive’s employment with the
Company. Executive shall promptly disclose to the Company the creation or
existence of any Work Product and shall take whatever additional lawful action
may be necessary, and sign whatever documents the Company may require, in order
to secure and vest in the Company or its designee all right, title and interest
in and to all Work Product and any intellectual property rights therein
(including full cooperation in support of any Company applications for patents
and copyright or trademark registrations).

     

    10.           Return of Company
Property. In the event of termination of Executive’s employment for any
reason, Executive shall return to the Company all of the property of the Company
and its Affiliates, including without limitation all materials or documents
containing or pertaining to Confidential Information, and including without
limitation, all computers (including laptops), cell phones, keys, PDAs,
Blackberries, credit cards, facsimile machines, televisions, card access to any
Company building, customer lists, computer disks, reports, files, e-mails, work
papers, Work Product, documents, memoranda, records and software, computer
access codes or disks and instructional manuals, internal policies, and other
similar materials or documents which Executive used, received or prepared,
helped prepare or supervised the preparation of in connection with Executive’s
employment with the Company. Executive agrees not to retain any copies,
duplicates, reproductions or excerpts of such material or
documents.

     

    11.           Compliance With Company
Policies. During Executive’s employment with the Company, Executive shall
be governed by and be subject to, and Executive hereby agrees to comply with,
all Company policies, procedures, codes, rules and regulations applicable to all
employees and to executive officers of the Company, as they may be amended from
time to time in the Company’s sole discretion (collectively, the “Policies”).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    12.           Injunctive Relief with
Respect to Covenants: Forum, Venue and Jurisdiction.  Executive
acknowledges and agrees that a breach by Executive of any of Section of the
Agreement is a material breach of this Agreement and that remedies at law may be
inadequate to protect the Company in the event of such breach, and, without prejudice to any
other legal or equitable rights and remedies otherwise available to the
Company, Executive agrees to the granting of injunctive relief in the
Company’s favor in connection with any such breach or violation without proof of
irreparable harm.  Executive further agrees that if the Company is
entitled to receive from Executive its attorneys’ fees and costs to enforce the
provisions of this Agreement. Executive further acknowledges and agrees that the
Company’s obligations to pay Executive any amount or provide Executive with any
benefit or right pursuant to Section 7 is subject to Executive’s compliance with
Executive’s obligations under Sections 8 through 10 inclusive, and that in the
event of a breach by Executive of any of Section 8 through 10, the Company shall
immediately cease paying such benefits and Executive shall be obligated to
immediately repay to the Company all amounts theretofore paid to Executive
pursuant to Section 7. In addition, if not repaid, the Company shall have the
right to set off from any amounts otherwise due to Executive any amounts
previously paid pursuant to Section 7(c) (other than the Accrued Obligations).
Executive further agrees that the foregoing is appropriate for any such breach
inasmuch as actual damages cannot be readily calculated, the amount is fair and
reasonable under the circumstances, and the Company would suffer irreparable
harm if any of these Sections were breached.

     

    13.           Assumption of
Agreement. The Company shall require any Successor thereto, by agreement
in form and substance reasonably satisfactory to Executive, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Executive to compensation from the Company in the same amount and
on the same terms as Executive would be entitled hereunder if the Company had
terminated Executive’s employment Without Cause as described in Section 7,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination.

     

    14.           Indemnification. The
Company agrees both during and after the Employment Period to indemnify
Executive to the fullest extent permitted by its Certificate of Incorporation
(including payment of expenses in advance of final disposition of a proceeding)
against actions or inactions of Executive during the Employment Period as an
officer, director or employee of the Company or any of its Subsidiaries or
Affiliates or as a fiduciary of any benefit plan of any of the foregoing. The
Company also agrees to provide Executive with Directors and Officers insurance
coverage both during and, with regard to matters occurring during the Employment
Period, after the Employment Period. Such coverage shall be at a level at least
equal to the level being maintained at such time for the then current officers
and directors or, if then being maintained at a higher level with regard to any
prior period activities for officers or directors during such prior period, such
higher amount with regard to Executive’s activities during such prior
period.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    15.           Entire Agreement.
This Agreement constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof. All prior correspondence and proposals
(including but not limited to summaries of proposed terms) and all prior
promises, representations, understandings, arrangements and agreements relating
to such subject matter (including but not limited to those made to or with
Executive by any other Person and those contained in any prior employment,
consulting or similar agreement, including the Original Agreement, entered into
by Executive and the Company or any predecessor thereto or Affiliate thereof)
are merged herein and superseded hereby.

     

    16.           Survival. The
following Sections shall survive the termination of Executive’s employment with
the Company and of this Agreement.

     

    17.           Miscellaneous.

     

    (a)           Binding Effect:
Assignment. This Agreement shall be binding on and inure to the benefit
of the Company and its Successors and permitted assigns. This Agreement shall
also be binding on and inure to the benefit of Executive and his heirs,
executors, administrators and legal representatives. This Agreement shall not be
assignable by any party hereto without the prior written consent of the other
parties hereto, provided, however,
that the Company may effect such an assignment without prior written approval of
Executive upon the transfer of all or substantially all of its business and/or
assets (by whatever means), provided that the
Successor to the Company shall expressly assume and agree to perform this
Agreement in accordance with the provisions of Section 13.

     

    (b)           Choice of Forum and
Governing Law.  The parties agree that:  (i) any
litigation involving any noncompliance with or breach of the Agreement, or
regarding the interpretation, validity and/or enforceability of the Agreement,
shall be filed and conducted in the state or federal courts in Richmond,
Virginia; and (ii) the Agreement shall be interpreted in accordance with and
governed by the laws of the Commonwealth of Virginia, without regard for any
conflict of law principles.

     

    (c)           Taxes. The Company
may withhold from any payments made under this Agreement all applicable taxes,
including but not limited to income, employment and social insurance taxes, as
shall be required by law.

     

    (d)           Amendments. No
provision of this Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is approved in writing by the Board or a
Person authorized thereby and is agreed to in writing by Executive. No waiver by
any party hereto at any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No waiver of any
provision of this Agreement shall be implied from any course of dealing between
or among the parties hereto or from any failure by any party hereto to assert
its rights hereunder on any occasion or series of occasions.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (e)           Severability. In the
event that any one or more of the provisions of this Agreement shall be or
become invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby. In the event that one or more terms or provisions of this
Agreement are deemed invalid or unenforceable by the laws of Virginia or any
other state or jurisdiction in which it is to be enforced, by reason of being
vague or unreasonable as to duration or geographic scope of activities
restricted, or for any other reason, the provision in question shall be
immediately amended or reformed to the extent necessary to make it valid and
enforceable by the court of such jurisdiction charged with interpreting and/or
enforcing such provision. Executive agrees and acknowledges that the provision
in question, as so amended or reformed, shall be valid and enforceable as though
the invalid or unenforceable portion had never been included
herein.

     

    (f)           Notices. Any notice
or other communication required or permitted to be delivered under this
Agreement shall be (i) in writing, (ii) delivered personally, by courier service
or by certified or registered mail, first-class postage prepaid and return
receipt requested, (iii) deemed to have been received on the date of delivery
or, if mailed, on the third business day after the mailing thereof, and (iv)
addressed as follows (or to such other address as the party entitled to notice
shall hereafter designate in accordance with the terms hereof):

     

    (A)           If
to the Company, to it at:

     

    Chief
Operating Officer

    Dynex
Capital, Inc.

    4551 Cox
Road, Suite 300

    Glen
Allen, VA 23060

     

    (B)           If
to Executive, to his residential address as currently on file with the
Company.

     

    (g)           Voluntary Agreement: No
Conflicts. Executive represents that he is entering into this Agreement
voluntarily and that Executive’s employment hereunder and compliance with the
terms and conditions of this Agreement will not conflict with or result in the
breach by Executive of any agreement to which he is a party or by which he or
his properties or assets may be bound.

     

    (h)           Counterparts/Facsimile.
This Agreement may be executed in counterparts (including by facsimile), each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.

     

    (i)           Headings. The section
and other headings contained in this Agreement are for the convenience of the
parties only and are not intended to be a part hereof or to affect the meaning
or interpretation hereof.

     

    (j)           Certain
other Definitions.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    “Affiliate”: with
respect to any Person, means any other Person that, directly or indirectly
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with the first Person, including but not limited to a Subsidiary
of any such Person.

     

     

     “Control” (including,
with correlative meanings, the terms “Controlling”, “Controlled by” and “under
common Control with”): with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.

     

    “Person”: any natural
person, firm, partnership, limited liability company, association, corporation,
company, trust, business trust, governmental authority or other
entity.

     

    “Subsidiary”: with
respect to any Person, each corporation or other Person in which the first
Person owns or Controls, directly or indirectly, capital stock or other
ownership interests
representing fifty percent (50%) or more of the combined voting power of the
outstanding voting stock or other ownership interests of such corporation or
other Person.

     

    “Successor”: of a
Person means a Person that succeeds to the first Person’s assets and liabilities
by merger, liquidation, dissolution or otherwise by operation of law, or a
Person to which all or substantially all the assets and/or business of the first
Person are transferred.

     

    IN
WITNESS WHEREOF, the Company has duly executed this Agreement by its authorized
representatives, and Executive has hereunto set his hand, in each case effective
as of the date first above written.

     

    DYNEX
CAPITAL, INC.

    

    By:     /s/
Stephen J. Benedetti     

      
        

      

    

    

    Its:     
Executive Vice President and Chief Operating Officer

      
        

      
      

    

    

    Thomas B.
Akin:

    

                                        /s/ Thomas B.
Akin

    

      
        

      

    SIGNATURE

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    EXHIBIT
A

     

    PERFORMANCE
BONUS FOR RETURN ON ADJUSTED EQUITY

     

    Certain
members of senior management (the “Participants”) will be eligible for a bonus
based on the annual return on adjusted equity of the Company (the “ROAE
Bonus”).

     

    Determination
of the Bonus Amount

     

    The bonus
amount shall be determined individually, and shall equal the product of the
Participant’s respective actual base salary paid for 2008 times the sum of (x)
the product of 50% times the Reference Rate as calculated below and (y) the
product of 50% times the percentage determined by the Compensation Committee of
the Board of Directors earned by the respective Participant relative to certain
objectives set for the Participant by the Compensation Committee.

     

    Payment
of the Bonus Amount

     

    Amounts
due to the Participants for the ROAE Bonus will be paid in cash concurrently
with the filing of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, or March 15, 2009, whichever is earlier.

     

    Determination
of Reference Rate

     

     

    The
Reference Rate will be determined based on the Return on Average Equity (ROAE).
ROAE will be determined as the Company’s net income for the period April 1, 2008
to December 31, 2008 determined in accordance with generally accepted accounting
principles, adjusted for any non-recurring extraordinary items as determined by
the Compensation Committee, divided by average common shareholder equity
excluding unrealized gains and losses and adjusted for any equity capital that
is raised until such time the capital is deployed.   The ROAE
will then be annualized for purposes of determining the Reference Rate
below.

     

    
      	 
      	 
      	 
      	
              Reference
      Rate

            	 
      
	
              ROAE
      less than 6%

            	 
      	 
      	
              -
      %

            	 
      
	
              ROAE
      6% or greater and less than 8%

            	 
      	 
      	
              25%

            	 
      
	
              ROAE
      8% or greater and less than 10%

            	 
      	 
      	
              50%

            	 
      
	
              ROAE
      10% or greater and less than 12%

            	 
      	 
      	
              75%

            	 
      
	
              ROAE
      12% or greater

            	 
      	 
      	
              100%

            	 
      

    

    

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
B

     

     

    PERFORMANCE
BONUS POOL FOR CAPITAL RAISING ACTIVITIES

     

    A
performance bonus pool for capital raising activities for calendar 2008 (the
“Capital Bonus Pool”) will be created to compensate eligible participants (the
“Participants”) for equity capital raising activities.

     

    

     

    Determination
of the Capital Bonus Pool

     

    The
amount available in the Capital Bonus Pool will be equal to 1% of the gross
amount of equity capital raised by the Company in 2008 provided that the
aggregate amount for 2008 equals or exceeds $100 million.  The equity
capital raised will exclude any amounts raised, if any, via a dividend
reinvestment program, continuous offering program, or
similar.   The amount available for the Capital Bonus Pool will
be made on the closing date of each respective offering (the “Determination
Date’).  The initial Determination Date will be on the closing date of
the first equity offering in 2008 that cumulatively exceeds $100
million.

     

    Allocation
of the Capital Bonus Pool

     

    The
Capital Bonus Pool will be allocated by the Compensation Committee of the Board
of Directors to the individual Participants based on recommendations made by the
Chief Executive Officer of the Company and the assessment by the Compensation
Committee of the Board of Directors of each Participant's performance with
respect to the equity capital raising activities of the Company.  Such
allocations will be made as eligible equity capital is raised but no less than
quarterly.

     

    Payment
of the Capital Bonus Pool

     

    Payment
of amounts due to the Participants will be made in the form of restricted common
stock of the Company during 2008, which shall vest 100% on the second
anniversary of the Determination Date.  The vesting provision will be
the only restriction with respect to the common stock issued to the
Participant.  The stock price used to calculate the number of shares
granted to each Participant shall be equal to the weighted average price per
share of that capital raised.ex10_1.htm

    
      

    

    
      

      

      THIRD
AMENDED AND RESTATED REVOLVING LINE OF CREDIT AGREEMENT

      

      BIOTIME,
INC.

      

      

      Dated as
of March 31, 2008

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      TABLE
OF CONTENTS

      

      
        	
                1.

              	 
      	
                General
      Definitions.

              	 
      	
                1

              
	 
      	 
      	 
      	 
      	 
      
	
                2.

              	 
      	
                Draws
      and Disbursements.

              	 
      	
                2

              
	 
      	 
      	 
      	 
      	 
      
	
                3.

              	 
      	
                Terms
      of Payment.

              	 
      	
                5

              
	 
      	 
      	 
      	 
      	 
      
	
                4.

              	 
      	
                Shares.

              	 
      	
                6

              
	 
      	 
      	 
      	 
      	 
      
	
                5.

              	 
      	
                Events
      of Default.

              	 
      	
                6

              
	 
      	 
      	 
      	 
      	 
      
	
                6.

              	 
      	
                Representations
      and Warranties of Borrower.

              	 
      	
                7

              
	 
      	 
      	 
      	 
      	 
      
	
                7.

              	 
      	
                Affirmative
      Covenants.

              	 
      	
                8

              
	 
      	 
      	 
      	 
      	 
      
	
                8.

              	 
      	
                Maximum
      Permitted Interest.

              	 
      	
                10

              
	 
      	 
      	 
      	 
      	 
      
	
                9.

              	 
      	
                Governing
      Law.

              	 
      	
                10

              
	 
      	 
      	 
      	 
      	 
      
	
                10.

              	 
      	
                Successors
      and Assigns.

              	 
      	
                10

              
	 
      	 
      	 
      	 
      	 
      
	
                11.

              	 
      	
                Entire
      Agreement; Amendment.

              	 
      	
                10

              
	 
      	 
      	 
      	 
      	 
      
	
                12.

              	 
      	
                Survival.

              	 
      	
                11

              
	 
      	 
      	 
      	 
      	 
      
	
                13.

              	 
      	
                Notices.

              	 
      	
                11

              
	 
      	 
      	 
      	 
      	 
      
	
                14.

              	 
      	
                Delays
      and Omissions.

              	 
      	
                11

              
	 
      	 
      	 
      	 
      	 
      
	
                15.

              	 
      	
                Rules
      of Construction.

              	 
      	
                12

              
	 
      	 
      	 
      	 
      	 
      
	
                16.

              	 
      	
                Counterparts.

              	 
      	
                12

              
	 
      	 
      	 
      	 
      	 
      
	
                17.

              	 
      	
                Exchange
      of Debt for Equity.

              	 
      	
                12

              
	 
      	 
      	 
      	 
      	 
      
	
                18.

              	 
      	
                Registration
      Rights.

              	 
      	
                13

              
	 
      	 
      	 
      	 
      	 
      
	
                19.

              	 
      	
                Legends.

              	 
      	
                15

              
	 
      	 
      	 
      	 
      	 
      
	
                20.

              	 
      	
                Investment
      Representations.

              	 
      	
                15

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      THIRD
AMENDED AND RESTATED REVOLVING LINE OF CREDIT AGREEMENT

      

      This
Third Amended and Restated Revolving Line of Credit Agreement (“Credit
Agreement”) is made and entered into as of March 31, 2008, by and among each of
the persons who have executed this Agreement as a Lender (each a “Lender,” and
collectively “Lenders”), and BioTime, Inc., a California corporation
(“Borrower”), and amends and restates that certain Revolving Line of Credit
Agreement dated April 12, 2006, the First Amended and Restated Credit Agreement
dated October 17, 2007, and the Second Amended and Restated Credit Agreement
dated February 15, 2008.

      

      RECITALS

      

      Borrower
has requested a credit facility consisting of a revolving line of credit, and
Lenders are willing to make the requested credit facility to Borrower, but only
upon the terms, and subject to the conditions, contained herein.

      

      AGREEMENT

      

      Now,
therefore, in consideration of the premises and the mutual covenants hereinafter
contained, the parties hereto agree as follows:

      

      1.        
    General
Definitions.  The following words shall have the following
meanings:

      

      1.1           “Business Day” means any day
that is not a Saturday, a Sunday, or a day on which banks are required, or
permitted, to be closed in the State of New York.

      

      1.2           “Credit Facility” means the
right of Borrower to borrow up to $2,500,000from Lenders under the terms and
conditions of this Credit Agreement and the Note.

      

      1.3           “Debtor Relief Law” means the
Bankruptcy Code of the United States of America, as amended, or any other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief law affecting
the rights of creditors generally.

      

      1.4           “Earmarked Funds” means funds
received by Borrower through (i) the sale of capital stock, (ii) loans from
other lenders, or (iii) funds in excess of $2,500,000 received by Borrower
through the collection of license fees, signing fees, milestone fees, or similar
fees (excluding royalties) under any other present or future agreement pursuant
to which Borrower grants one or more licenses to use Borrower’s patents or
technology.

      

      1.5           “Event of Default” or “Events of Default” means any
of the events specified in Section 5.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      1.6           “Loan” means the loans made by
Lenders to Borrower pursuant to this Credit Agreement, and evidenced by the
Note.

      

      1.7           “Loan Documents” means this
Credit Agreement, the Note, and the Security Agreement, and all other
agreements, instruments, and documents in favor of a Lender, now or hereafter
executed by or on behalf of Borrower and delivered to a Lender in connection
with this Credit Agreement or in connection with any of the transactions
contemplated hereby.

      

      1.8           “Maturity
Date”  means the earlier of (i) November 15, 2008, and (ii)
such date on which Borrower shall have received an aggregate of $4,000,000
through (A) the sale of capital stock, (B) the collection of license fees,
signing fees, milestone fees, or similar fees (excluding royalties) in excess of
$2,500,000 under any present or future agreement pursuant to which Borrower
grants one or more licenses to use Borrower’s patents or technology, (C) funds
borrowed from other lenders, or (D) any combination of sources under clauses (A)
through (C).

      

      1.9           “Note” means (a) each
promissory note evidencing a portion of the Loan previously advanced by certain
Lenders, and (b) each Revolving Credit Note in the form attached as EXHIBIT
A-1evidencing the new Loan amounts to be advanced by certain
Lenders.

      

      1.10           “Security Agreement” means
that certain Third Amended and Restated Security Agreement of even date among
Borrower and Lenders pursuant to which Borrower is granting Lenders a first
priority perfected security interest in certain specified collateral to secure
Borrower’s obligations under this Agreement and the Note.

      

      1.11           “Shares” means common shares,
no par value, of the Borrower.

      

      2.      
      Draws and Disbursements.

      

      2.1           Maximum Loan
Amount.  On the terms and conditions set forth in this Credit
Agreement, Lenders shall make available to Borrower the Credit Facility, as a
revolving line of credit in a principal amount not to exceed at any one time Two
Million Five Hundred Thousand Dollars ($2,500,000), less all amounts of
principal prepaid or required to be prepaid under Section 3.2.1 of this Credit
Agreement (the “Maximum Loan Amount”).  Each Lender shall be
severally, and not jointly and severally, obligated to lend the amount shown on
Schedule I.

      

      2.2           Draw
Period.  Borrower may request from Lenders advances of funds
(“Draws”) under the Credit Facility from the date of this Agreement until
November 15, 2008 (the “Draw Period”).  As amounts drawn by Borrower
hereunder are repaid, they may be reborrowed subject to the terms and conditions
of this Credit Agreement; provided, that at no time shall the aggregate
principal amount of Loan outstanding under this Credit Agreement exceed the
Maximum Loan Amount.  The Draw Period may be terminated by Borrower at
any time by written notice to Lenders. Subject to the terms and conditions of
this Credit Agreement, and provided that no Event of Default has occurred,
Lenders shall make advances to Borrower upon request as provided in this Section
2.  Upon the occurrence of an Event of Default, one of Lenders’
remedies includes Lenders’ right to terminate the Draw Period and Borrower’s
right to make Draws under this Credit Agreement.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      

      2.3           Increments.  Draws
must be in increments of not less than One Hundred Thousand Dollars ($100,000),
or the remaining amount available under the Credit Facility, whichever is
less.  Each Lender shall advance a portion of each Draw such that,
immediately after funding the Draw, the total outstanding principal amount of
the Loan funded by each Lender shall be in proportion to their respective loan
commitments shown on Schedule I.

      

      2.4           Use of Funds.  All
funds borrowed under this Credit Agreement will be used as working capital to
pay Borrower’s expenses arising in the ordinary course of business.

      

      2.5           Disbursement
Procedures.

      

      2.5.1           Borrower
hereby appoints the Chief Executive Officer, each member of its Office of the
President, and the Chief Financial Officer as the officers authorized to make
Draws under this Credit Agreement during the Draw Period.  Any one of
such officers (the “Authorized Officers”) is authorized to make Draws. Lender,
at its sole option, may require that all requests for Loan funds be in writing,
signed by an Authorized Officer, in a form acceptable to
Lenders.  Facsimile documents may be accepted by Lenders as
originals.  Any Draw by an Authorized Officer shall constitute an
ongoing representation and warranty by Borrower that at the time of request for
or payment of any Draw no Event of Default has occurred.

      

      2.5.2           Draws
shall be paid according to the Authorized Officer’s instructions, except that
checks representing Loan funds shall always be made payable to Borrower, and
wire transfers shall only be permitted if Borrower has authorized payment into
the account into which the funds are to be deposited.  The appointment
of the above-named Authorized Officer(s) shall remain in full force and effect
until written notice of revocation of appointment signed by the Chief Executive
Officer or Chief Financial Officer of Borrower has been received by
Lender.

      

      2.5.3           Lenders
shall advance Loan funds available under the Credit Facility in accordance with
Borrower’s Draws within four (4) Business Days after the receipt of the
Draw.

      

      2.5.4           Each
Draw shall be accompanied by the certificates required by Section
2.6.

      

      2.5.5           Borrower
shall indemnify and hold Lenders harmless from loss or liability of any kind
arising from or related to any action or inaction taken by Lenders in good faith
in reliance upon instructions received from any Authorized
Officer.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      

      2.6           Conditions
Precedent.  The following conditions must be satisfied before
Lenders shall be obligated to disburse any Loan to Borrower pursuant to a
Draw:

      

      2.6.1           Due
execution.  Lenders shall have received duly executed originals
of this Credit Agreement and all other Loan Documents.

      

      2.6.2           Approvals.  Lenders
shall have received evidence satisfactory to them that all consents and
approvals which are necessary for, or required as a condition of, the validity
and enforceability of this Credit Agreement and all other Loan Documents have
been obtained and are in full force and effect.

      

      2.6.3           Representations and Warranties
Correct.  All of Borrower’s representations and warranties
contained in this Credit Agreement and in any other Loan Document shall be true
and correct in all material respects on the date the Loan funds are disbursed,
and Borrower shall have delivered to Lenders a certificate executed by an
Authorized Officer to such effect.

      

      2.6.4           No Event of
Default.  No Event of Default shall have occurred, and Borrower
shall have delivered to Lenders a certificate executed by an Authorized Officer
to such effect.

      

      2.6.5           Independent
Verification.  Borrower must provide for Lenders’ review and
acceptance such documentation as may be required by Lenders to ensure Borrower
is in compliance with the terms and conditions of this Credit Agreement,
including, without limitation, resolutions of Borrower’s board of directors or a
duly constituted and authorized committee thereof, certified by the secretary or
an assistant secretary of the corporation, authorizing the execution and
delivery of this Agreement and the other Loan Documents and performance of
Borrower’s obligations hereunder and thereunder.

      

      2.6.6           Shares.  Prior to
the initial Draw under this Credit Agreement, Borrower must have issued the
Shares to Lenders as described in Section 4 of this Credit
Agreement.

      

      2.7           Amended Promissory
Notes.  Each Lender who executes this Third Amended and
Restated Credited Agreement and who holds a Note previously issued (“Original
Note”), shall tender their Original Note for an amended Note referencing the
terms of this Third Amended and Restated Revolving Line of Credit
Agreement.  Until such time an Original Note is tendered to Borrower
and an amended Note is delivered to the Lender in exchange, the capitalized
terms in the Original Note shall be deemed to have the meaning ascribed in this
Third Amended and Restated Revolving Line of Credit Agreement.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      

      3.         
   Terms of Payment.

      

      3.1           Interest.  Interest
shall accrue and be payable at the rate of (a) 10% per annum on the outstanding
principal balance of the Loan through October 31, 2007, and (b) 12% per annum on
the outstanding principal balance of the Loan from October 31, 2007 until the
Maturity Date or any earlier date on which the principal balance is paid in
full.  Interest shall accrue from the date of each disbursement of
principal pursuant to a Draw.  Accrued interest shall be paid as
follows:  (i) interest accrued on Draws made prior to March 31, 2008
shall be paid on April 30, 2008; and (ii) all other accrued interest shall be
paid with principal on the Maturity Date.  Interest will be charged on
that part of outstanding principal of the Loan which has not been paid and shall
be calculated on the basis of a 360-day year and a 30-day month.

      

      3.2           Payment of
Principal.  The outstanding principal balance of the Loan,
together with accrued interest, shall be paid in full on the Maturity
Date.

      

      3.2.1           Mandatory Prepayment of
Principal.  In the event that Borrower receives Earmarked
Funds, Borrower shall use the Earmarked Funds to prepay principal, plus accrued
interest, within two business days after such Earmarked Funds are received by
Borrower, and the amount of principal so prepaid shall reduce the Maximum Loan
Amount.

      

      3.3           Optional Prepayment of
Principal.  Borrower may prepay principal, with accrued
interest, at any time and the amount of principal so prepaid shall be available
for further Draws by Borrower during the Draw Period to the extent that the
prepayment of principal was not required under Section 3.2.1.

      

      3.4           Default Interest Rate; Late Payment
Charge.  In the event that any payment of principal or interest
is not paid within five (5) days from on the date on which the same is due and
payable, such payment shall continue as an obligation of the Borrower, and
interest thereon from the due date of such payment and interest on the entire
unpaid balance of the Loan shall accrue until paid in full at the lesser of (i)
fifteen percent (15%) per annum, or (ii) the highest interest rate permitted
under applicable law (the “Default Rate”).  From and after the
Maturity Date or upon acceleration of the Note, the entire unpaid principal
balance of the Loan with all unpaid interest accrued thereon, and any and all
other fees and charges then due at such maturity, shall bear interest at the
Default Rate.

      

      3.5           Date of Payment.  If
the date on which a payment of principal or interest on the Loan is due is a day
other than a Business Day, then payment of such principal or interest need not
be made on such date but may be made on the next succeeding Business
Day.

      

      3.6           Application of
Payments.  All payments shall be applied first to costs of
collection, next to late charges or other sums owing Lenders, next to accrued
interest, and then to principal, or in such other order or proportion as
Lenders, in their sole discretion, may determine.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      

      3.7           Currency.  All
payments shall be made in United States Dollars.

      

      4.          
  Shares. As
consideration for Lenders making the Credit Facility available to Borrower,
Borrower has issued 99,999 Shares to Lenders who were parties to this Agreement
on April 12, 2006, has issued 200,000 Shares to Lenders who were parties to this
Agreement on October 17, 2007, and has issued 10,000 Shares to a Lender who
became a party to this Agreement on February 15, 2008.  As
consideration for making the amended Credit Facility available to Borrower under
this Credit Agreement (including the extension of the Maturity Date in the case
of Loan commitments made prior to the date of this Agreement), Borrower shall
issue and deliver to each Lender one Share for each five dollars of the Lender’s
Loan commitment with respect to Loan commitments made prior to April 8, 2008,
and the lesser of (a) one Share for each five dollars of the Lender’s Loan
commitment, or (b) a number of Shares having an aggregate market value (which
shall be deemed to be the closing price of the Shares on the OTCBB on the last
day on which a closing price of the Shares was reported) equal to six percent
(6%) of the Lender’s Loan commitment, with respect to Loan commitments made on
or after April 8, 2008.  No fractional Shares shall be
issued.

      

      5.       
     Events of
Default.  The following shall constitute Events of Default: (a)
the default of Borrower in the payment of any interest or principal due under
this Credit Agreement or the Note held by any Lender; (b) the failure of
Borrower to perform or observe any other term or provision of, or covenant,
agreement, or obligation under, this Credit Agreement or any other Loan
Document; (c) any act, omission, or other event that constitutes an “Event of
Default” under the Note or the Security Agreement; (d) any representation or
warranty of Borrower contained in this Credit Agreement or in any other Loan
Document, or in any certificate delivered by Borrower pursuant to this Credit
Agreement or any other Loan Document, is false or incorrect in any material
respect when made or given; (e) Borrower becoming the subject of any order for
relief in a proceeding under any Debtor Relief Law; (f) Borrower making an
assignment for the benefit of creditors, other than repayment of the Loan, in
whole or in part, to Lenders; (g) Borrower applying for or consenting to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator, or similar officer for it or for all or any part of its property
or assets; (h) the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator, or similar officer for Borrower, or for all or any
part of the property or assets of Borrower, without the application or consent
of Borrower if such appointment continues undischarged or unstayed for sixty
(60) calendar days; (i) Borrower  instituting or consenting to any
proceeding under any Debtor Relief Law with respect to Borrower, or all or any
part of its property or assets, or the institution of any similar case or
proceeding without the consent of Borrower, if such case or proceeding continues
undismissed or unstayed for sixty (60) calendar days; (j) the dissolution or
liquidation of Borrower, or the winding-up of the business or affairs of
Borrower; (k) the taking of any action by Borrower to initiate any of the
actions described in clauses (e) through (j) of this paragraph; (l) the issuance
or levy of any judgment, writ, warrant of attachment or execution or similar
process against all or any material part of the property or assets of Borrower
if such process is not released, vacated or fully bonded within sixty (60)
calendar days after its issue or levy; or (m) any breach or default by Borrower
under any loan agreement, promissory note, or other instrument evidencing
indebtedness payable to a third party.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      

      5.1           Remedies On Default.1.6Remedies On
Default.  Upon the occurrence of an Event of Default, at
Lender’s option, all unpaid principal and accrued interest, and all other
amounts payable to Lender under this Credit Facility and any other Loan Document
shall become immediately due and payable without presentment, demand, notice of
non-payment, protest, or notice of non-payment, provided that no notice or
demand shall be required if the Event of Default is a proceeding under any
Debtor Relief Law.  Each Lender also shall have all other rights,
powers, and remedies available under this Credit Agreement and the Note or any
other Loan Document, or accorded by law or at equity.  All rights,
powers, and remedies of a Lender may be exercised at any time by the Lender and
from time to time after the occurrence of an Event of Default.  All
rights, powers, and remedies of a Lender in connection with this Credit
Agreement and the Note and any Loan Document are cumulative and not exclusive
and shall be in addition to any other rights, powers, or remedies provided by
law or equity.

      

      6.         
   Representations and Warranties of
Borrower.  Borrower represents and warrants to Lenders the
following:

      

      6.1           Organization;
Capitalization.  Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the state of California
and has all requisite corporate power and authority to own its property and to
carry on its business as now being conducted.

      

      6.2           Authority;
Enforceability.  Borrower has the power and authority to
execute and deliver this Credit Agreement and each of the other Loan Documents,
and to perform all of Borrower’s obligations under this Credit Agreement and the
other Loan Documents.  This Credit Agreement and each of the other
Loan Agreements has been duly authorized by, and is the valid and binding
agreement and obligation of, Borrower, enforceable in accordance with its
respective terms, except to the extent limited by any bankruptcy, insolvency, or
similar law affecting the rights of creditors generally.  There are no
corporate, contractual, statutory, regulatory, judicial, or other restrictions
of any kind upon the power and authority of Borrower to execute and deliver this
Credit Agreement or any other Loan Document, and to consummate the transactions
contemplated by this Credit Agreement and the other Loan Documents, including,
without limitation: (a) the payment of all principal and interest that may
become due on the Loan; and (b) the issuance of the Shares.  No
action, approval or consent by, or notice to or filing with, any federal, state,
municipal or other governmental department, commission, agency, regulatory
authority, or court is necessary to make this Credit Agreement or the other Loan
Documents the valid agreements binding upon Borrower in accordance with their
respective terms, or to consummate the transactions contemplated by this Credit
Agreement and the other Loan Documents.

      

      6.3           No Conflict.  The
execution and delivery of this Credit Agreement and the other Loan Documents,
and the consummation of the transactions contemplated by this Credit Agreement
and the other Loan Documents, do not and will not (a) violate any provisions of
(i) any rule, regulation, statute, or law, or (ii) the terms of any order, writ
or decree of any court or judicial or regulatory authority or body, or (iii) the
Articles of Incorporation or Bylaws of Borrower, and (b) conflict with or result
in a breach of any condition or provision or constitute a default under or
pursuant to the terms of any contract, mortgage, lien, lease, agreement,
debenture or instrument to which Borrower or any Subsidiary is a party, or which
is or purports to be binding upon Borrower, any Subsidiary, or upon any of their
respective properties, and (c) result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets or properties of Borrower or any
Subsidiary.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      

      6.4           Shares.  When issued
pursuant to this Agreement, the Shares will be validly issued and outstanding,
fully paid and non-assessable.

      

      6.5           Accuracy of
Information.  Borrower has delivered to Lenders either (a) a
copy of Borrower’s annual report on Form 10-KSB for the fiscal year ended
December 31, 2006, and quarterly reports on Form 10-QSB for the fiscal quarter
and nine months ended September 30, 2007, and all Current Reports on Form 8-K
filed by Borrower since September 30, 2007, or (b)  a copy of
Borrower’s annual report on Form 10-KSB for the fiscal year ended December 31,
2007 and all Current Reports on Form 8-K and quarterly reports on Form 10-Q
filed by Borrower since the filing of the latest Form 10-KSB (the “Disclosure
Documents”).  The financial statements contained in the Disclosure
Documents were prepared in accordance with generally accepted accounting
principles, consistently applied, and accurately reflect the financial condition
and results of operations of Borrower at and as of the dates
reported.  All financial information and other information contained
in the Disclosure Documents was true and correct in all material respects when
such reports were filed under the Exchange Act.

      

      6.6           Taxes.  Borrower has
filed when due all federal, state and local income tax returns and has filed
when due all other returns with respect to taxes which are required to be filed
with the Internal Revenue Service and the appropriate authorities of the
jurisdictions where business is transacted by them.  All items and
entries provided for or reflected in such returns are correct and are made on a
proper basis.  All amounts, if any, required to be paid, as shown on
such returns, have been paid.  None of such tax returns has been
audited.  There are no suits, actions, claims, or investigations,
inquiries or proceedings now pending against Borrower in respect of taxes,
governmental charges or assessments, nor are there any matters under discussion
with any governmental authority relating to taxes, governmental charges or
assessments asserted by any such authority.

      

      6.7           Litigation.  Except
as disclosed in the Disclosure Documents, there are no lawsuits, arbitration
proceedings, administrative proceedings, actions or claims pending or threatened
against Borrower.  No fine, penalty or other sanction has been imposed
by any federal, state, local or municipal court, judicial, administrative or
regulatory body or authority against Borrower.  There is no
outstanding order, writ, injunction or decree of any court, administrative
agency or governmental body or arbitration tribunal against or affecting
Borrower or any of its respective properties, assets, business or
prospects.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      

      7.       
     Affirmative
Covenants.  During the Draw Period, and until such time as the
entire principal balance and accrued interest on the Loan, and all other amounts
payable by Borrower under this Credit Agreement or any other Loan Document have
been paid in full, Borrower shall comply with the following covenants and
agreements:

      

      7.1           Furnish
Information.  Borrower will, at any Lender’s request, furnish
information to Lender relating to Borrower’s business and financial affairs and
permit Lender to examine Borrower’s books and records.

      

      7.2           Comply with Terms and
Conditions.  Borrower will comply with all terms and conditions
of all other Loan Documents.

      

      7.3           Financial
Reports.  Borrower will file with the Securities and Exchange
Commission, when due, all quarterly reports, annual reports, current reports,
and other documents required pursuant to the Exchange Act.

      

      7.4           Limitation on Dividends and Other
Distributions by Borrower.  Borrower shall not declare or pay
any dividend or other distribution of cash, other property (excluding shares of
capital stock and options, warrants or other rights to acquire capital stock or
stock purchase warrants of Borrower), or evidences of indebtedness, on account
of or with respect to any shares of capital stock.

      

      7.5           Insurance.  Borrower
will, and will cause its Subsidiaries, to maintain insurance with responsible
carriers against such risks and in such amounts as is customarily carried by
similar businesses with such deductible as are customarily carried by similar
businesses of similar size, including, without limitation, property and casualty
loss, workers’ compensation and interruption of business insurance.

      

      7.6           Fees and Charges of Attorneys and
Others.1.9Fees and Charges of Attorneys and Others.  In the
event that a Lender employs attorneys, accountants, appraisers, consultants, or
other professional assistance, excluding the services of any such person who is
a direct employee of a Lender, in connection with any of the following, then,
the reasonable amount of costs, expenses, and fees incurred by the Lender shall
be payable on demand.  A Lender may, at its option, add the amount of
such costs, expenses, and reasonable fees to the principal amount of the
Loan.  A Lender thereafter may charge interest on such amount at the
interest rate then applicable to the principal.  Costs, expenses, and
reasonable fees of professionals covered by this provision include such charges
for the following:

      

      7.7           The
preparation, modification, or renewal of this Credit Agreement and the Note, or
any other documentation incident to the loan transaction;

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      

      7.8           Any
litigation, dispute, proceeding or action, whether instituted by Lender,
Borrower, or any other person, relating to the Note or this Agreement, including
representation of Lender in any bankruptcy, insolvency, or reorganization case
or proceeding instituted by or against Borrower, and any attempt by Lender to
enforce any rights against Borrower;

      

      7.9           In
the event of bankruptcy or insolvency proceedings (whether state or federal)
instituted by or against Borrower or involving the Borrower or Property of the
Borrower, the Lender may recover all costs, expenses, and reasonable attorney
fees incurred to protect or defend Lender’s rights under the Note, and other
documents underlying the loan transactions whether such costs, expenses, and
attorney fees be contractual or bankruptcy related, including costs, expenses,
and attorney fees for meetings, sessions, matters, proceedings and litigation
involving issues solely distinct to federal bankruptcy law, rules and
proceedings as well as other federal and state litigation and
proceedings;

      

      7.10         The
inspection, verification, protection, collection, processing, sale, liquidation,
or disposition of security given for the Note;

      

      7.11         The
preparation and filing of all reports required to be filed by Lender under the
Exchange Act during the term of this Credit Agreement in connection with the
ownership, acquisition, or disposition of the Shares, or other equity securities
issued by Borrower.

      

      8.      
      Maximum Permitted Interest. No
provision of this Credit Agreement or any other Loan Document, or any
transaction related thereto, shall be construed or so operate as to require the
Borrower to pay interest at a greater rate than the maximum allowed by
applicable state or federal law.  Should any interest or other charges
paid or payable by the Borrower in connection with the Loan result in the
computation or earning of interest in excess of the maximum allowed by
applicable state or federal law, then any and all such excess shall be and the
same is hereby waived by Lender, and any and all such excess paid shall be
credited automatically against and in reduction of the outstanding principal
balance due of the Loan, and the portion of said excess which exceeds such
principal balance shall be paid by Lender to the Borrower.

      

      9.       
     Governing Law.  This
Credit Agreement shall be construed and governed in all respects by the laws of
the State of California.

      

      10.           Successors and
Assigns.  The provisions of this Credit Agreement shall inure
to the benefit of, and be binding upon, the respective successors, assigns,
heirs, executors and administrators of Borrower and Lenders.

      

      11.           Entire Agreement;
Amendment.  This Credit Agreement and the other Loan Documents
constitute the full and entire understanding and agreement among the parties
with regard to the subject matter thereof.  This Credit Agreement and
any term of this Credit Agreement may be amended, waived, discharged or
terminated only by a written instrument signed by the party to be charged,
provided, however, that Schedule I may be amended from time to time by Borrower
to reflect the loan commitments of new Lenders who execute a counterpart of this
Agreement, or to reflect an increase in the loan commitment of any Lender who
agrees to increase their loan commitment.

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      

      12.           Survival.  Borrower’s
representations and warranties contained in this Credit Agreement shall survive
the funding of each Draw and any investigation made by any party until the Loan
is repaid in full.

      

      13.           Notices.  All
notices and other communications required or permitted to be given pursuant to
this Agreement shall be in writing and shall be deemed given four (4) days after
being deposited in the United States mail, certified postage prepaid, return
receipt requested, or when delivered by hand, by messenger or express air
freight service, in any case addressed to the Lenders at their respective
addresses shown on Schedule I, or to Borrower as follows:

      

      

      
        	 
      	
                BioTime,
      Inc.

              
	 
      	
                6121
      Hollis Street

              
	 
      	
                Emeryville,
      California 94608

              
	 
      	
                Attention:  Steven
      Seinberg, Chief Financial Officer

              
	 
      	
                FAX:  (510)
      350-2948

              
	 
      	 
      
	 
      	
                with
      a copy to:

              
	 
      	
                Richard
      S. Soroko, Esq.

              
	 
      	
                Lippenberger,
      Thompson, Welch, Soroko & Gilbert LLP

              
	 
      	
                201
      Tamal Vista, Blvd.

              
	 
      	
                Corte
      Madera, California  94925

              

      

      

      Any party
may change its address for the purpose of this Section 13 by giving notice to
each other party in accordance with this Section 13.

      

      14.           Delays and
Omissions.  No delay or omission to exercise any right, power,
or remedy accruing to a Lender, upon any breach or default of Borrower under
this Credit Agreement or any other Loan Document, shall impair any such right,
power, or remedy of the Lender, nor shall it be construed to be a waiver of, or
an acquiescence in, any such breach or default or any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring.  Any waiver, permit, consent, or approval of any kind or
character on the part of a Lender of any breach or default by Borrower under
this Credit Agreement or any other Loan Document, or any waiver of any
provisions or conditions of this Credit Agreement or any other Loan Document by
a Lender, must be made in writing, and shall be effective only to the extent
specifically set forth in such writing.  All remedies either under
this Agreement or by law and otherwise afforded to any party shall be cumulative
and not alternative.

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      

      15.           Rules
of Construction.

      

      15.1         Titles and
Subtitles.  The titles or headings of the Sections and
paragraphs of this Credit Agreement are for convenience of reference only and
are not to be considered in construing this Credit Agreement.

      

      15.2         Singular;
Plural.  Whenever appropriate in this Agreement, terms in the
singular form shall include the plural (and vice versa) and any gender form
shall include all others.

      

      15.3         Section
Headings.  Section headings are for the convenience of the
parties and do not form a part of this Agreement.

      

      15.4         Sections and Other
References.  References in this Agreement to sections,
paragraphs, and exhibits are references to articles, sections, and paragraphs in
this Agreement and schedules and exhibits attached to this Agreement unless
specified otherwise.

      

      15.5         Severability.1.18Severability.  If
one or more provisions of this Credit Agreement are held to be unenforceable
under applicable law, each such unenforceable provision shall be excluded from
this Credit Agreement and the balance of this Credit Agreement shall be
interpreted as if each such unenforceable provision were so excluded, and the
balance of this Credit Agreement as so interpreted shall be enforceable in
accordance with its terms.

      

      16.           Counterparts.  This
Credit Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one
instrument.  Any document, including, without limitation, counterparts
of this Agreement, may be transmitted by facsimile or other electronic means and
upon receipt shall be deemed an original; provided that upon demand of the
recipient, the sender within a reasonable time of such demand shall mail or
deliver an originally signed copy of such document.

      

      17.           Exchange of Debt For
Equity.  Borrower agrees that at any time on or before the
Maturity Date, each Lender may exchange their Note(s), in whole or in part,
including both unpaid principal and accrued interest, for common shares, no par
value of Borrower (“BioTime Exchange Shares”) at a price of $1.00 per share, and
for common shares, no par value of Embryome Sciences, Inc. (“ESI Exchange
Shares”) at a price of $2.00 per share.  All BioTime Exchange Shares
and all ESI Exchange Shares issued in exchange for Notes will be duly authorized
and validly issued, fully paid and non-assessable.  The right of the
Lenders to exchange their Notes for BioTime Exchange Shares and ESI Exchange
Shares, and the obligation of Borrower to deliver BioTime Exchange Shares or ESI
Exchange Shares in exchange for Notes, shall be subject to the following
conditions:

      

      17.1         The
exchange of the Note for BioTime Exchange Shares or ESI Exchange Shares shall be
exempt from registration under the Securities Act of 1933, as amended (the
“Act”) and from qualification under the California Corporate Securities Law of
1968, and from registration or qualification under the securities laws or “blue
sky” laws of other states, in reliance upon the exemptions from such
registration and qualification requirements for non-public
offerings.  Lender shall provide Borrower with such other information
and documents concerning Lender as Borrower or Embryome Sciences, Inc. (“ESI”)
may reasonably request to confirm that such exemptions from registration and
qualification are available.

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      

      17.2         The
Lender shall confirm in writing to Borrower (and to ESI if ESI Exchange Shares
are being acquired) that the Lender’s representations and warranties under
Section 20 of this Agreement are true and correct as of the date that the Lender
tenders a Note in exchange for BioTime Exchange Shares or ESI Exchange
Shares.

      

      17.3         If
on the date a Lender tenders a Note in exchange for BioTime Exchange Shares,
Borrower determines that its annual, quarterly, and current reports filed under
Section 13 of the Securities Exchange Act of 1934, as amended (“Exchange Act
Reports”), do not contain all material facts concerning Borrower that Borrower
reasonably believes a prudent investor may want to consider in deciding whether
to exchange a Note for BioTime Exchange Shares, BioTime may delay acceptance of
a tender of a Note for exchange until such time as (a) BioTime has filed such
amended or additional Exchange Act Reports as may be required to disclose all
such material facts, and (b) BioTime has delivered such amended or new Exchange
Act Reports to the Lender.  If on the date a Lender tenders a Note in
exchange for ESI Exchange Shares, Borrower determines that the Lender has not
received disclosure documents containing all material facts concerning ESI that
Borrower reasonably believes a prudent investor may want to consider in deciding
whether to exchange a Note for ESI Exchange Shares, BioTime may delay acceptance
of a tender of a Note for exchange until such time as BioTime has prepared and
delivered to the Lender documents disclosing all such material
facts.

      

      17.4         A
Lender may exchange a Note for BioTime Exchange Shares or ESI Exchange Shares by
delivering the Note to Borrower accompanied by a written notice of the Lender’s
election to exchange the Note (“Notice of Exchange”).  The Notice of
Exchange shall be duly executed by an authorized officer of the Lender, and
shall specify: (a) the amount of the Note being exchanged or that the entire
amount of the Note (which will include the unpaid principal balance plus accrued
interest as of the date the notice of exchange is received by Borrower) is being
exchanged; (b) whether the Note is being tendered in exchange for BioTime
Exchange Shares or ESI Exchange Shares; and (c) if the Note is being tendered in
part for BioTime Exchange Shares and in part for ESI Exchange Shares, the
portion of the Note being exchanged for each.  Lender shall also
provide such signature guarantees and other information, documents and
instruments as any transfer agent or registrar of the BioTime Exchange Shares or
ESI Exchange Shares may required for the issuance or transfer of such
shares.

      

      17.5         A
tender of a Note in exchange for BioTime Exchange Shares or ESI Exchange Shares
may not be revoked by the Lender.

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      

      17.6         Provided,
that Borrower then controls ESI, Borrower shall cause ESI to enter into a
Registration Rights Agreement, in the form attached as Exhibit B, with a Lender
at the time the Lender acquires ESI Exchange Shares from Borrower.

      

      18.           Registration
Rights.

      

      18.1         Borrower
agrees, at its expense, upon written request from the Lenders, to use
commercially reasonable efforts to register under the Act, the Shares and
BioTime Exchange Shares and to take such other actions as may be necessary to
allow the Shares and BioTime Exchange Shares to be freely tradable, without
restrictions, in compliance with all regulatory requirements.  A
written request for registration shall specify the quantity of the Shares and
BioTime Exchange Shares intended to be sold, the plan of distribution and the
identity of the sellers, which may include the Lender and assignees of its
rights hereunder (collectively, “Selling Securities Holders”), and whether the
registration shall be pursuant to an underwritten public offering or a “shelf’
registration pursuant to Rule 415 (or similar rule that may be adopted by the
Securities and Exchange Commission).  Borrower shall not be obligated
to file more than two such registration statements, other than registration
statements on Form S-3.  Borrower shall use commercially reasonable
efforts keep such registration statements effective for a period of at least
nine months, except that registration statements on Form S-3 shall be kept
effective for at least three years (or such lesser period as the parties may
agree, but in no event beyond the completion of the distribution or
distributions being made pursuant thereto).  Borrower shall utilize
Form S-3 if it qualifies for such use.  Borrower shall make all
filings required with respect to the registration statements and will use
commercially reasonable efforts to cause such filings to become effective, so
that the Shares and BioTime Exchange Shares being registered shall be registered
or qualified for sale under the securities or blue sky laws of such
jurisdictions as shall be reasonably appropriate for distribution of the Shares
and BioTime Exchange Shares covered by the registration
statement.  Borrower will furnish to the Selling Securities Holders
such numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act and such other related documents as
the Selling Securities Holders may reasonably request in order to effect the
sale of the Shares and BioTime Exchange Shares.  To effect any
offering pursuant to a registration statement under this Section, Borrower shall
enter into an agreement containing customary representations and warranties, and
indemnification and contribution provisions, all for the benefit of Selling
Securities Holders, and, in the case of an underwritten public offering. an
underwriting agreement with an investment banking firm selected by the Lender
and reasonably acceptable to Borrower, containing such customary representations
and warranties, and indemnification and contribution
provisions  Borrower shall have no obligation to make any cash
settlement or payment to the Lenders or any holder of Shares and BioTime
Exchange Shares, or to issue any additional Shares or BioTime Exchange Shares,
in the event that Borrower is unable to effect or maintain in effect the
registration of the Shares or BioTime Exchange Shares under the Act or any state
securities law despite Borrower’s commercially reasonable efforts so to
do.

      

      18.2         If,
at any time, Borrower proposes to register any of its securities under the Act
(otherwise than pursuant to Section 18.1 above or on a Form S-8 if such form
cannot be used for registration of the Shares and BioTime Exchange Shares
pursuant to its terms), Borrower shall, as promptly as practicable, give written
notice to the Lender.  Borrower shall include in such registration
statement the Shares and BioTime Exchange Shares proposed to be sold by the
Selling Securities Holders.  Notwithstanding the foregoing, if the
offering of Borrower’s securities is to be made through underwriters, Borrower
shall not be required to include the Shares and BioTime Exchange Shares if and
to the extent that the managing underwriter reasonably believes in good faith
that such inclusion would materially adversely affect such offering unless the
Selling Securities Holders agree to postpone their sales until 10 days after the
distribution is completed.

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      

      18.3         Borrower
shall pay the cost of the registration statements filed pursuant to this
Agreement, including without limitation all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws (including counsel’s
fees and expenses in connection therewith), printing expenses, messenger and
delivery expenses, internal expenses of Borrower, listing fees and expenses, and
fees and expenses of Borrower’s counsel, independent accountants and other
persons retained or employed by Borrower.  Selling Securities Holders
shall pay any underwriters discounts applicable to the Shares and BioTime
Exchange Shares.

      

      19.           Legends.  The
Shares, the BioTime Exchange Shares, and the ESI Exchange Shares issued pursuant
to this Agreement shall bear an appropriate legend, conspicuously disclosing the
restrictions on transfer under the Act until the same are registered for sale
under the Act.  Borrower agrees that upon the sale of the Shares and
BioTime Exchange Shares pursuant to a registration statement or an exemption,
upon the presentation of the certificates containing such a legend to it’s
transfer agent, it will remove such legend.  Borrower further agrees
to remove the legend at such time as registration under the Act shall no longer
be required.

      

      20.           Investment
Representations.  Each Lender represents and warrants to
Borrower that:

      

      20.1         Lender
is relying on the information provided in the Disclosure Documents or otherwise
communicated to Lender in writing by Borrower.  Lender has not relied
on any statement or representations inconsistent with those contained in the
Disclosure Documents.  Lender has had a reasonable opportunity to ask
questions of and receive answers from the executive officers and directors of
Borrower, or one or more of its officers, concerning Borrower and to obtain
additional information, to the extent possessed or obtainable without
unreasonable effort or expense, necessary to verify the information in the
Disclosure Documents.  All such questions have been answered to
Lender’s satisfaction;

      

      20.2         Lender
understands that the Shares, BioTime Exchange Shares, and ESI Exchange Shares
are being offered and sold without registration under the Act or qualification
under the California Corporate Securities Law of 1968, or under the laws of
other states, in reliance upon the exemptions from such registration and
qualification requirements for non-public offerings.  Lender
acknowledges and understands that the availability of the aforesaid exemptions
depends in part upon the accuracy of certain of the representations,
declarations and warranties contained herein, which Lender hereby makes with the
intent that they may be relied upon by Borrower and its officers and directors,
and by ESI and its officers and directors, in determining Lender’s suitability
to acquire the Shares, BioTime Exchange Shares and ESI Exchange
Shares.  Lender understands and acknowledges that no federal, state or
other agency has reviewed or endorsed the offering of the Shares, BioTime
Exchange Shares, or ESI Exchange Shares, or made any finding or determination as
to the fairness of the offering or completeness of the information in the
Disclosure Documents;

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

      

      20.3         Lender
understands that the Shares, BioTime Exchange Shares, and ESI Exchange Shares
may not be offered, sold, or transferred in any manner unless subsequently
registered under the Act, or unless there is an exemption from such registration
available for such offer, sale or transfer;

      

      20.4         Lender
has such knowledge and experience in financial and business matters to enable
Lender to utilize the information contained in the Disclosure Documents, or
otherwise made available to Lender to evaluate the merits and risks of an
investment in the Shares, BioTime Exchange Shares, and ESI Exchange Shares, and
to make an informed investment decision with respect thereto.

      

      20.5         Lender
is acquiring the Shares, and if Lender exchanges a Note in whole or in part of
BioTime Exchange Shares or ESI Exchanges Shares Lender will be acquiring those
shares, solely for Lender’s own account and for long-term investment purposes,
and not with a view to, or for sale in connection with, any distribution of the
Shares, BioTime Exchange Shares, or ESI Exchange Shares; and

      

      20.6         Lender
is an “accredited investor,” as such term is defined in Regulation D promulgated
under the Act.

      

      

      IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.

      

      

      BORROWER:

      

      BIOTIME,
INC.

      

      

      
        	
                By

              	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                Title

              	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                By

              	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                Title

              	 
      	 
      

      

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      

      
        	
                LENDERS:

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                Alfred
      D.  Kingsley

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                GREENWAY
      PARTNERS, L.P.

              	 
      
	
                By:

              	
                Greenhouse
      Partners, L.P.,

              	 
      
	 
      	
                General
      Partner

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                By

              	 
      	 
      
	 
      	 
      	
                Alfred
      D. Kingsley, General Partner

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 	 
      
	 	
                George
      Karfunkel

              	 
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 	 
      
	 	
                Richard
      Lowish

              	 
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                Broadwood
      Partners, L.P.

              	 
      
	 
      	 
      	 
      	 
      
	
                By:

              	
                Broadwood
      Capital, Inc.,

              	 
      
	 
      	
                General
      Partner of Broadwood Partners, L.P.

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                By:

              	 
      	 
      
	 
      	 
      	
                Neal
      C. Bradsher, President

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                The
      Life Extension Foundation

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                By:

              	 
      	 
      	 
      
	 
      	
                Saul
      Kent

              	 
      
	 
      	 
      	 
      	 
      
	
                Title

              	 
      	 
      	 
      

      

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      

      
        	
                Goren
      Brothers, LP

              	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                By:

              	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                Title:

              	
                General
      Partner

              	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                Milton
      Dresner

              	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                Joseph
      Nemeth

              	 
      	 
      

      

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      SCHEDULE
I

      

      

      
        	
                
                  Name
      and Address Of Lender

                

              	 	Amount of Loan
      Commitment
	 
      	 	 
      	 
      
	
                Alfred
      D. Kingsley

              	 	 
      	
                $250,000

              
	
                150
      East 57th
      Street, Suite 24E

              	 	 
      	 
      
	
                New
      York, NY 10022

              	 	 
      	 
      
	
                FAX:  (212)
      207-3901

              	 	 
      	 
      
	 
      	 	 
      	 
      
	
                Greenway
      Partners, LP

              	 	 
      	
                $300,000

              
	
                c/o
      Alfred D. Kingsley

              	 	 
      	 
      
	
                150
      East 57th
      Street, Suite 24E

              	 	 
      	 
      
	
                New
      York, NY 10022

              	 	 
      	 
      
	
                FAX:  (212)
      207-3901

              	 	 
      	 
      
	 
      	 	 
      	 
      
	
                George
      Karfunkel

              	 	 
      	
                $250,000

              
	
                59
      Maiden Lane

              	 	 
      	 
      
	
                New
      York, NY 10038

              	 	 
      	 
      
	
                FAX
      (718) 921-8340

              	 	 
      	 
      
	 
      	 	 
      	 
      
	
                Richard
      Lowish

              	 	 
      	
                $250,000

              
	
                85
      Elm Grove Road

              	 	 
      	 
      
	
                Barnes
      SW13 OBX, London

              	 	 
      	 
      
	
                England

              	 	 
      	 
      
	
                FAX  011-44-207-929-3994

              	 	 
      	 
      
	 
      	 	 
      	 
      
	
                Broadwood
      Partners, L.P.

              	 	 
      	
                $550,000

              
	
                724
      Fifth Avenue

              	 	 
      	 
      
	
                9th
      Floor

              	 	 
      	 
      
	
                New
      York, NY 10019

              	 	 
      	 
      
	
                FAX:  (212)
      508-5756

              	 	 
      	 
      
	 
      	 	 
      	 
      
	
                The
      Life Extension Foundation

              	 	 
      	
                $100,000

              
	
                1100
      West Commercial Blvd.

              	 	 
      	 
      
	
                Ft.
      Lauderdale, FL 33309

              	 	 
      	 
      
	
                FAX:  (954)
      202-7745

              	 	 
      	 
      
	 
      	 	 
      	 
      
	
                Goren
      Brothers, LP

              	 	 
      	
                $200,000

              
	
                150
      E. 52nd Street, 29th Fl.

              	 	 
      	 
      
	
                New
      York, NY 10022

              	 	 
      	 
      
	
                FAX:
      (212) 759-0572

              	 	 
      	 
      

      

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

      

      
        	
                Milton
      Dresner

              	 
      	 
      	
                $ 
      50,000

              
	
                c/o
      The Lewis Companies

              	 
      	 
      	 
      
	
                28777
      Northwestern Highway, Suite 100

              	 
      	 
      	 
      
	
                Southfield,
      MI 48034

              	 
      	 
      	 
      
	
                FAX
      (248) 356-4611

              	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                Joseph
      Nemeth

              	 
      	 
      	
                $100,000

              
	
                29829
      Telegraph Road, Suite 111

              	 
      	 
      	 
      
	
                Southfield,
      MI 48034

              	 
      	 
      	 
      
	
                FAX:
      (248) 357-1626

              	 
      	 
      	 
      

      

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

      

      EXHIBIT
A-1

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      REVOLVING CREDIT
NOTE

      

      

      
        	
                $___________

              	 
      	
                __________,
      2008

              

      

      

      FOR VALUE
RECEIVED, the undersigned, BioTime, Inc., a California corporation (Borrower")
hereby promises to pay to the order of ___________("Lender") the principal sum
of _____________ DOLLARS ($_______________) or such lesser amount as may from
time to time be outstanding as the Loan pursuant to that certain Third Amended
and Restated Revolving Line of Credit Agreement, dated March 31, 2008, between
Borrower and Lender (the "Credit Agreement"), together with interest on the
unpaid balance of the Loan at the rate or rates hereinafter set
forth.  This Revolving Credit Note is one of the Notes described in
the Credit Agreement.  All capitalized terms not otherwise defined in
this Note shall have the meanings defined in the Credit Agreement.

      

      1.          
  Terms of Payment.

      

      (a)           Interest
Rate.  Interest shall accrue and be payable at the rate of 12%
per annum on the outstanding principal balance of the Loan.  Interest
shall accrue from the date of each disbursement of principal pursuant to a
Draw.  Accrued interest shall be paid with principal. Interest will be
charged on that part of outstanding principal of the Loan which has not been
paid and shall be calculated on the basis of a 360-day year and a 30-day
month.

      

      (b)           Payments of
Principal.  The outstanding principal balance of the Loan,
together with accrued interest, shall be paid in full on the Maturity
Date.

      

      (c)           Mandatory Prepayment of
Principal.  In the event that Borrower receives Earmarked
Funds, Borrower shall use the Earmarked Funds to prepay principal, plus accrued
interest, within two business days after such Earmarked Funds are received by
Borrower, and the amount of principal so prepaid shall reduce the Maximum Loan
Amount.

      

      (d)           Optional Prepayment of
Principal.  Borrower may prepay principal, with accrued
interest, at any time and the amount of principal so prepaid shall be available
for further Draws by Borrower during the Draw Period to the extent that the
prepayment of principal was not required under paragraph (c) of this Section
1.

       

      (e)           Default Interest
Rate.  In the event that any payment of principal or interest
is not paid within five (5) days from on the date on which the same is due and
payable, such payment shall continue as an obligation of the Borrower, and
interest thereon from the due date of such payment and interest on the entire
unpaid balance of the Loan shall accrue until paid in full at the lesser of (i)
fifteen percent (15%) per annum, or (ii) the highest interest rate permitted
under applicable law (the "Default Rate").  From and after the
Maturity Date or upon acceleration of the Note, the entire unpaid principal
balance of the Loan with all unpaid interest accrued thereon, and any and all
other fees and charges then due at such maturity, shall bear interest at the
Default Rate.

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

       

      (f)         
  Date of
Payment.  If the date on which a payment of principal or
interest on the Loan is due is a day other than a Business Day, then payment of
such principal or interest need not be made on such date but may be made on the
next succeeding Business Day.

      

      (g)           Application of
Payments.  All payments shall be applied first to costs of
collection, next to late charges or other sums owing Lender, next to accrued
interest, and then to principal, or in such other order or proportion as Lender,
in its sole discretion, may determine.

      

      (h)           Currency.  All
payments shall be made in United States Dollars.

      

      2.           
 Events of
Default.  The following shall constitute Events of Default: (a)
the default of Borrower in the payment of any interest or principal due under
this Note or the Credit Agreement or any other Note arising under the Credit
Agreement; (b) the failure of Borrower to perform or observe any other term or
provision of this Note, or any other Note arising under the Credit Agreement, or
any term, provision, covenant, or agreement in the Credit Agreement or any other
Loan Document; (c) any act, omission, or other event that constitutes an "Event
of Default" under the Credit Agreement; (d) any representation or warranty of
Borrower contained in the Credit Agreement or in any other Loan Document, or in
any certificate delivered by Borrower pursuant to the Credit Agreement or any
other Loan Document, is false or incorrect in any material respect when made or
given; (e) Borrower becoming the subject of any order for relief in a proceeding
under any Debtor Relief Law (as defined below); (f) Borrower making an
assignment for the benefit of creditors; other than repayment of the Loan, in
whole or in part, to Lenders; (g) Borrower applying for or consenting to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator, or similar officer for it or for all or any part of its property
or assets; (h) the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator, or similar officer for Borrower, or for all or any
part of the property or assets of Borrower, without the application or consent
of Borrower, if such appointment continues undischarged or unstayed for sixty
(60) calendar days; (i) Borrower instituting or consenting to any proceeding
under any Debtor Relief Law with respect to Borrower or all or any part of its
property or assets, or the institution of any similar case or proceeding without
the consent of Borrower, if such case or proceeding continues undismissed or
unstayed for sixty (60) calendar days; (j) the dissolution or liquidation of
Borrower, or the winding-up of the business or affairs of Borrower; (k) the
taking of any action by Borrower to initiate any of the actions described in
clauses (e) through (j) of this paragraph; (l) the issuance or levy of any
judgment, writ, warrant of attachment or execution or similar process against
all or any material part of the property or assets of Borrower if such process
is not released, vacated or fully bonded within sixty (60) calendar days after
its issue or levy; or (m) any breach or default by Borrower under any loan
agreement, promissory note, or other instrument evidencing indebtedness payable
to a third party. As used in this Note, the term "Debtor Relief Law" means the
Bankruptcy Code of the United States of America, as amended, or any other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief law affecting
the rights of creditors generally.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      

      3.         
  Remedies On
Default.  Upon the occurrence of an Event of Default, at
Lender's option, all unpaid principal and accrued interest, and all other
amounts payable under this Note shall become immediately due and payable without
presentment, demand, notice of non-payment, protest, or notice of
non-payment.  Lender also shall have all other rights, powers, and
remedies available under the Credit Agreement and any other Loan Document, or
accorded by law or at equity.  All rights, powers, and remedies of
Lender may be exercised at any time by Lender and from time to time after the
occurrence of an Event of Default.  All rights, powers, and remedies
of Lender in connection with this Note and any other Loan Document are
cumulative and not exclusive and shall be in addition to any other rights,
powers, or remedies provided by law or equity.

      

      4.       
    Miscellaneous.

      

      (a)           Borrower
and all guarantors and endorsers of this Note severally waive (i) presentment,
demand, protest, notice of dishonor, and all other notices; (ii) any release or
discharge arising from any extension of time, discharge of a prior party,
release of any or all of the security for this Note, and (iii) any other cause
of release or discharge other than actual payment in full of all indebtedness
evidenced by or arising under this Note.

      

      (b)           No
delay or omission of Lender to exercise any right, whether before or after an
Event of Default, shall impair any such right or shall be construed to be a
waiver of any right or default, and the acceptance of any past-due amount at any
time by the Lender shall not be deemed to be a waiver of the right to require
prompt payment when due of any other amounts then or thereafter due and
payable.  The Lender shall not be deemed, by any act or omission, to
have waived any of Lender's rights or remedies under this Note unless such
waiver is in writing and signed by Lender and then only to the extent
specifically set forth in such writing.  A waiver with reference to
one event shall not be construed as continuing or as a bar to or waiver of any
right or remedy as to a subsequent event.

      

      (c)           Lender
may accept, indorse, present for payment, and negotiate checks marked "payment
in full" or with words of similar effect without waiving Lender's right to
collect from Borrower the full amount owed by Borrower.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      

      (d)           Time is of the essence under this
Note.  Upon any Event of Default, the Lender may exercise all
rights and remedies provided for in this Note and by law, including, but not
limited to, the right to immediate payment in full of this Note.

      

      (e)           The
rights and remedies of the Lender as provided in this Note, in the Credit
Agreement, and in the Security Agreement and in law or equity, shall be
cumulative and concurrent, and may be pursued singularly, successively, or
together at the sole discretion of the Lender, and may be exercised as often as
occasion therefor shall occur; and the failure to exercise any such right or
remedy shall in no event be construed as a waiver or a release of any such right
or remedy.

      

      (f)         
  It is expressly agreed that if this Note is referred to an attorney
or if suit is brought to collect this Note or any amount due under this Note, or
to enforce or protect any rights conferred upon Lender by this Note then
Borrower promises and agrees to pay on demand all costs, including without
limitation, reasonable attorneys' fees, incurred by Lender in the enforcement of
Lender's rights and remedies under this Note, and such other
agreements.

      

      (g)           The
terms, covenants, and conditions contained in this Note shall be binding upon
the heirs, executors, administrators, successors, and assigns of Borrower, and
each of them, and shall inure to the benefit of the heirs, executors,
administrators, successors and assigns of Lender.

      

      (h)           This
Note shall be construed under and governed by the laws of the State of
California without regard to conflicts of law.

      

      (i)          
 No provision of this Note shall be construed or so operate as to require
the Borrower to pay interest at a greater rate than the maximum allowed by
applicable state or federal law.  Should any interest or other charges
paid or payable by the Borrower in connection with this Note or the Loan result
in the computation or earning of interest in excess of the maximum allowed by
applicable state or federal law, then any and all such excess shall be and the
same is hereby waived by Lender, and any and all such excess paid shall be
credited automatically against and in reduction of the outstanding principal
balance due of the Loan, and the portion of said excess which exceeds such
principal balance shall be paid by Lender to the Borrower.

      

      
        	
                BORROWER:

              	 
      	
                BIOTIME,
      INC.

              	 
	 
      	 
      	 
      	 	 
	
                 

              	 
      	
                By

              	 	 
	
              	 
      	
                Title

              	 	 
	 
      	 
      	 
      	 	 
	
              	 
      	
                By

              	 	 
	
              	 
      	
                Title

              	 	 

      

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      

      EXHIBIT
B

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      REGISTRATION
RIGHTS AGREEMENT

      

      This
Registration Rights Agreement ("Agreement") is entered into as of _______, 200__
by and between Embryome Sciences, Inc., a California corporation ("ESI"), and
________________ (“Shareholder”).

      

      WHEREAS,
concurrently herewith, Shareholder is acquiring shares of ESI common stock from
ESI”s parent corporation BioTime, Inc. in exchange for a promissory note issued
by BioTime, Inc. pursuant to a Third Amended Credit Agreement (the “Credit
Agreement”);

      

      WHEREAS,
BioTime may issue and sell additional shares of ESI common stock to other
lenders pursuant to the Credit Agreement;

      

      WHEREAS,
ESI agrees to grant the Shareholder and other persons who acquire ESI common
stock from BioTime pursuant to the Credit Agreement certain registration
rights;

      

      NOW,
THEREFORE, the parties agree as follows:

      

      1.           
 Registration
Rights.

      

      1.1           Certain
Definitions.  As used in this Agreement, the following terms
shall have the following respective meanings:

      

      (a)           "Act" shall mean the
Securities Act of 1933, as amended, or any similar federal statute and the rules
and regulations of the Commission thereunder, all as the same shall be in effect
at the time

      

      (b)           "Commission" shall
mean the United States Securities and Exchange Commission.

      

      (c)           "Common Stock" shall
mean shares now or hereafter authorized of any class of common stock of ESI and
any other shares of ESI, howsoever designated, which have the right (subject
always to prior rights of any class or series of preferred stock) to participate
in the distribution of the assets and earnings of ESI without limit as to per
share amount.

      

      (d)           "Holders" shall mean
the holders (and their transferees as permitted by Section 4) of Registrable
Securities who have registration rights under this Agreement.

      

      (e)           "Initiating Holders"
shall mean any Holders who individually or in the aggregate are holders of not
less than twenty percent (20%) of the aggregate of all Registrable Securities
then outstanding.

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      

      (f)         
  The terms "register," "registered," and
"registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Act, and the declaration or ordering of the
effectiveness of such registration statement.

      

      (g)           "Registrable
Securities" means the Common Stock acquired by Holders or their
predecessors in interest from BioTime, Inc. in exchange for a promissory note
pursuant to the Credit Agreement, but excluding, in all cases, any such Common
Stock sold by a Holder (x) in a transaction in which his, her or its rights
under this Agreement are not assigned, (y) pursuant to a registration statement
under the Act that has been declared effective, or (z) in a transaction pursuant
to Rule 144 (or any similar provision then in force) under the Act.

      

      2.          
  Registration
Rights.

      

      2.1           Demand
Rights.  ESI agrees, at its expense, upon written request from
Initiating Holders, to use commercially reasonable efforts to register the
Registrable Securities under the Act, and to take such other actions as may be
necessary to allow the Registrable Securities to be freely tradable, without
restrictions, in compliance with all federal and state regulatory
requirements.  Initiating Holders may exercise their rights under this
Section 2.1 only after ESI has completed at least one pubic offering of its
Common Stock registered under the Act and is required to file periodic reports
with the Commission under Section 12 or 15(d) of the Securities Exchange Act of
1934, as amended.  ESI shall have no obligation to make any cash
settlement or payment to the Initiating Holders or any other Holders, or to
issue any additional Common Stock, in the event that ESI is unable to effect or
maintain in effect the registration of the Registrable Securities under the Act
or any state securities law despite ESI’s commercially reasonable efforts so to
do.

      

      (a)           A
written request for registration shall specify the quantity of the Registrable
Securities intended to be sold, the plan of distribution and the identity of the
seller(s) (collectively, ASelling
Shareholders@),
and whether the registration shall be pursuant to an underwritten public
offering or a Ashelf=
registration pursuant to Rule 415 (or similar rule that may be adopted by the
Commission).

      

      (b)           ESI
shall not be obligated to file more than two registration statements under this
Section 2.1, other than registration statements on Form S-3.

      

      (c)           ESI
shall use commercially reasonable efforts keep all registration statements
effective for a period of twelve months, except that registration statements on
Form S-3 shall be kept effective for at least three years (or such lesser period
as the parties may agree, but in no event beyond the completion of the
distribution or distributions being made pursuant thereto).  ESI shall
utilize Form S-3 if it qualifies for such use.  ESI shall make all
filings required with respect to the registration statements and will use
commercially reasonable efforts to cause such filings to become effective, so
that the Registrable Securities being registered shall be registered or
qualified for sale under the securities or blue sky laws of such jurisdictions
as shall be reasonably appropriate for the distribution of the Registrable
Securities covered by the registration statement.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      

      (d)           ESI
will furnish to the Selling Shareholders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act and such other related documents as the Selling Shareholders may reasonably
request in order to effect the sale of the Registrable Securities.

      

      (e)           To
effect any offering pursuant to a registration statement under this Section 2.1,
ESI shall enter into an agreement containing customary representations and
warranties, and indemnification and contribution provisions, all for the benefit
of Selling Shareholders, and, in the case of an underwritten public offering, an
underwriting agreement with an investment banking firm selected by the Selling
Shareholders and reasonably acceptable to ESI, containing such customary
representations and warranties, and indemnification and contribution
provisions.

      

      2.2           “Piggy-Back”
Rights’  If, at any time, ESI proposes to register any of its
securities under the Act for its own account or for the account any other
security holder (otherwise than pursuant to Section 2.1 above or on a Form S-8
if such form cannot be used for registration of the Registrable Securities
pursuant to its terms), ESI shall, as promptly as practicable, give written
notice to all Holders.  ESI shall include in such registration
statement the Registrable Securities proposed to be sold by the Selling
Shareholders.

      

      (a)           If
the registration of which ESI gives notice is for a registered public offering
involving an underwriting, ESI shall so advise all holders of Registrable
Securities as a part of the written notice given pursuant to this Section and in
such event the right of any Selling Shareholder to registration pursuant to this
Section shall be conditioned upon such Selling Shareholder's participation in
such underwriting and the inclusion of such Selling Shareholder's Registrable
Securities in the underwriting to the extent provided herein.  All
Selling Shareholders proposing to distribute their securities through such
underwriting shall (together with ESI and the other security holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by ESI.

      

      (b)           Notwithstanding
the foregoing, if the offering of ESI’s securities is to be made through
underwriters, ESI shall not be required to include the Registrable Securities if
and to the extent that the managing underwriter reasonably believes in good
faith that such inclusion would materially adversely affect such
offering.

      

      (c)           Notwithstanding
any other provision of this Section 2.2, if the managing underwriter determines
that marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may (subject to the allocation priority
set forth below) exclude some or all Registrable Securities from such
registration and underwriting.  ESI shall so advise all Selling
Shareholders and the other holders of securities distributing their securities
through such underwriting, and the number of shares of Registrable Securities
and other securities that may be included in the registration and underwriting
shall be allocated in the following manner.  ESI may exclude shares of
all holders of registration rights without any exclusion of shares offered by
ESI.  In the event of any exclusion of shares held by holders of
registration rights, the number of shares that may be included in the
registration and underwriting shall be allocated among all Selling Shareholders
and other security holders having registration rights in proportion, as nearly
as practicable, to the respective amounts of securities which would otherwise be
entitled to inclusion in such registration at the time of filing the
registration statement.  If any Selling Shareholder disapproves of the
terms of any such underwriting, such Selling Shareholder may elect to withdraw
therefrom by written notice to ESI and the underwriter.  Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      

      (d)           ESI
will furnish to the Selling Shareholders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act and such other related documents as the Selling Shareholders may reasonably
request in order to effect the sale of the Registrable Securities.

      

      3.         
   Expenses. ESI shall
pay the cost of the registration statements filed pursuant to this Agreement,
including without limitation all registration and filing fees, fees and expenses
of compliance with securities or blue sky laws (including counsel=s
fees and expenses in connection therewith), printing expenses, messenger and
delivery expenses, internal expenses of ESI, listing fees and expenses, and fees
and expenses of ESI=s
counsel, independent accountants and other persons retained or employed by
ESI.  Selling Shareholders shall pay any underwriters discounts and
commissions applicable to the Registrable Securities sold.

      

      4.        
    Transfer of Registration
Rights.  The rights to require ESI to register securities under
this Agreement may be assigned:  (a) to an "affiliate" (defined as an
entity that controls, is controlled by, or under common control with the
transferor); (b) to any trust of which the transferor is a settlor and the
beneficiaries of which are the transferor or any parent, child, grandchild or
spouse of the transferor; or (c) to any other transferee or assignee (other than
a transferee or assignee who acquires the securities in a transaction registered
under the Act or in a transaction under Rule 144) if the transfer (1) involves
100% of the transferor's Registrable Securities, or (2) involves at least 50,000
shares of Registrable Securities, or (3) to constituent members, partners, or
shareholders of the transferor who agree to act through a single representative;
provided, that ESI shall be under no obligation to provide any such transferee
with any notice required to be given to Holders unless and until the transferor
or transferee has given ESI written notice of such transfer and the name and
address of the transferee or assignee, and identifies the securities with
respect to which such registration rights are being assigned.  Nothing
in this Section shall be construed in any way to limit any restriction or
condition on transfer of any Registrable Securities imposed by any other
agreement between a Holder and ESI, the Act, any rule or regulation promulgated
under the Act or any state securities or blue sky law or any rule or regulation
thereunder.

      

      5.        
    Information.  Each
Selling Shareholder shall furnish to ESI, upon request by ESI, such information
regarding such Selling Shareholder and the distribution proposed by such Selling
Shareholder as shall be required to be included in any registration statement,
prospectus, offering circular or other document in connection with any
registration, qualification or compliance referred to in
this  Agreement.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      

      6.        
    Termination and Application
of Agreement.  The registration obligations of ESI shall expire
three years after an underwritten public offering pursuant to an effective
registration statement under the Act, at an aggregate public offering price of
at least $5,000,000 in gross proceeds and a per share price of at least
$5.00.  No holder of registration rights shall be entitled to exercise
such rights at any time that their Registrable Securities may be sold under Rule
144 and the number of shares of Registrable Securities they hold is less than or
equal to the maximum number of such shares that may be sold under paragraph (e)
of Rule 144 or any applicable volume limitation of any successor rule or
regulation promulgated by the Commission.

      

      7.         
   Miscellaneous.

      

      7.1           Governing
Law.  This Agreement shall be governed in all respects by the
laws of California.

      

      7.2           Successors and
Assigns.  Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties
hereto.

      

      7.3           Entire Agreement;
Amendment.  This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.  Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated orally, but only by a written
instrument signed by ESI and Holders of two-thirds of the Registrable Securities
which have not been resold to the public.

      

      7.4           Notices,
etc.  All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or otherwise delivered by hand, by messenger or overnight air
freight services, addressed (a) if to a Holder at such address as such Holder
shall have furnished to ESI in writing, or (b) if to ESI, at 6121 Hollis Street,
Emeryville, California 94608, or at such other address as ESI shall have
furnished to the Holders in writing.

      

      7.5           Severability.  In
case any provision of this Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.

      

      7.6           Titles and
Subtitles.  The titles of the sections and subparagraphs of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      

      7.7           Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one
instrument.  This Agreement may be executed with signatures
transmitted among the parties by facsimile, and no party shall deny the validity
of a signature or this Agreement signed and transmitted by facsimile on the
basis that a signed document is represented by a copy or facsimile and not an
original.

      

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

      

      

      ESI:

      

      Embryome
Sciences, Inc.

      

      
        	
                By:

              	 
      	 
	 
      	
                Michael
      D. West

              	 
	 
      	
                Chief
      Executive Officer

              	 
	 
      	 
      	 
	 
      	 
      	 
	
                By:

              	 
      	 
	 
      	
                Judith
      Segall, Secretary

              	 
	 
      	 
      	 
	 
      	 
      	 
	
                SHAREHOLDER:

              	 
	 
      	 
      	 
	 
      	 
      	 
	 
      	 
      	 

      

       

    

     

    6

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