Document:

ex106.htm

    SUBSIDIARY
GUARANTEE

    

    SUBSIDIARY
GUARANTEE, dated as of July 2, 2009 (this “Guarantee”), made by
each of the signatories hereto (together with any other entity that may become a
party hereto as provided herein, (the “Guarantors”), in
favor of OmniReliant Holdings, Inc. (the "Purchaser") to that
certain Securities Purchase Agreement, dated as of the date hereof, between
Beyond Commerce, Inc., a Nevada corporation (the “Company”) and the
Purchaser.

     

    W
I T N E S S E T H:

    

    WHEREAS,
pursuant to that certain Amended and Restated Securities Purchase Agreement,
dated as of the date hereof, by and between the Company and the Purchasers (the
“Purchase
Agreement”), the Company has agreed to sell and issue to the Purchasers,
and the Purchasers have agreed to purchase from the Company the Company’s
Secured Original Issue Discount Convertible Debentures, due 12 months from the
date of their respective issuances (the “Debentures”), subject
to the terms and conditions set forth therein; and

    

    WHEREAS, each Guarantor will directly
benefit from the extension of credit to the Company represented by the issuance
of the Debentures; and

    

    NOW, THEREFORE, in consideration of the
premises and to induce the Purchasers to enter into the Purchase Agreement and
to carry out the transactions contemplated thereby, each Guarantor hereby agrees
with the Purchasers as follows:

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    1. Definitions. Unless
otherwise defined herein, terms defined in the Purchase Agreement and used
herein shall have the meanings given to them in the Purchase Agreement. The
words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import
when used in this Guarantee shall refer to this Guarantee as a whole and not to
any particular provision of this Guarantee, and Section and Schedule references
are to this Guarantee unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms.  The following terms shall have the following
meanings:

    

    “Guarantee” means this
Subsidiary Guarantee, as the same may be amended, supplemented or otherwise
modified from time to time.

    

                 “Obligations” means
the collective reference to all obligations and undertakings of the Company of
whatever nature, monetary or otherwise, under the Debentures, the Purchase
Agreement, the Security Agreement, the Warrants, the Security and Pledge
Agreement or any other future agreement or obligations undertaken by the Company
to the Purchasers, together with all reasonable attorneys’ fees, disbursements
and all other costs and expenses of collection incurred by Purchasers in
enforcing any of such Obligations and/or this Guarantee.

    

    2. Guarantee.

    

    (a) Guarantee.

    

    
      	
              (i)  

            	
              The
      Guarantors hereby, jointly and severally, unconditionally and irrevocably,
      guarantee to the Purchasers and their respective successors, indorsees,
      transferees and assigns, the prompt and complete payment and performance
      by the Company when due (whether at the stated maturity, by acceleration
      or otherwise) of the Obligations.

            

    

    

    
      	
              (ii)  

            	
              Anything
      herein or in any other Transaction Document to the contrary
      notwithstanding, the maximum liability of each Guarantor hereunder and
      under the other Transaction Documents shall in no event exceed the amount
      which can be guaranteed by such Guarantor under applicable federal and
      state laws, including laws relating to the insolvency of debtors,
      fraudulent conveyance or transfer or laws affecting the rights of
      creditors generally (after giving effect to the right of contribution
      established in Section 2(b)).

            

    

    

    
      	
              (iii)  

            	
              Each
      Guarantor agrees that the Obligations may at any time and from time to
      time exceed the amount of the liability of such Guarantor hereunder
      without impairing the guarantee contained in this Section 2 or affecting
      the rights and remedies of the Purchasers
  hereunder.

            

    

    

    
      	
              (iv)  

            	
              The
      guarantee contained in this Section 2 shall remain in full force and
      effect until all the Obligations and the obligations of each Guarantor
      under the guarantee contained in this Section 2 shall have been satisfied
      by payment in full.

            

    

    

    
      	
              (v)  

            	
              No
      payment made by the Company, any of the Guarantors, any other guarantor or
      any other Person or received or collected by the Purchasers from the
      Company, any of the Guarantors, any other guarantor or any other Person by
      virtue of any action or proceeding or any set-off or appropriation or
      application at any time or from time to time in reduction of or in payment
      of the Obligations shall be deemed to modify, reduce, release or otherwise
      affect the liability of any Guarantor hereunder which shall,
      notwithstanding any such payment (other than any payment made by such
      Guarantor in respect of the Obligations or any payment received or
      collected from such Guarantor in respect of the Obligations), remain
      liable for the Obligations up to the maximum liability of such Guarantor
      hereunder until the Obligations are paid in
  full.

            

    

    

    
      	
              (vi)  

            	
              Notwithstanding
      anything to the contrary in this Agreement, with respect to any defaulted
      non-monetary Obligations the specific performance of which by the
      Guarantors is not reasonably possible (e.g. the issuance of the Company's
      Common Stock), the Guarantors shall only be liable for making the
      Purchasers whole on a monetary basis for the Company's failure to perform
      such Obligations in accordance with the Transaction
    Documents.

            

    

    

    
      
        
        

      

      
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    (b) Right of
Contribution. Each Guarantor hereby agrees that to the extent that a
Guarantor shall have paid more than its proportionate share of any payment made
hereunder, such Guarantor shall be entitled to seek and receive contribution
from and against any other Guarantor hereunder which has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2(c). The provisions of
this Section 2(b) shall in no respect limit the obligations and liabilities of
any Guarantor to the Purchasers, and each Guarantor shall remain liable to the
Purchasers for the full amount guaranteed by such Guarantor
hereunder.

    

    (c) No
Subrogation.  Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the
Purchasers, no Guarantor shall be entitled to be subrogated to any of the rights
of the Purchasers against the Company or any other Guarantor or any collateral
security or guarantee or right of offset held by the Purchasers for the payment
of the Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company or any other Guarantor in respect
of payments made by such Guarantor hereunder, until all amounts owing to the
Purchasers by the Company on account of the Obligations are paid in full. If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Purchasers, segregated
from other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Purchasers in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Purchasers, if required), to
be applied against the Obligations, whether matured or unmatured, in such order
as the Purchasers may determine.

    

    (d) Amendments, Etc. With
Respect to the Obligations. Each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Obligations made by the Purchasers may be rescinded by
the Purchasers and any of the Obligations continued, and the Obligations, or the
liability of any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Purchasers, and
the Purchase Agreement and the other Transaction Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Purchasers may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Purchasers for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. The
Purchasers shall have no obligation to protect, secure, perfect or insure any
Lien at any time held by them as security for the Obligations or for the
guarantee contained in this Section 2 or any property subject
thereto.

    

    (e) Guarantee Absolute and
Unconditional. Each Guarantor waives any and all notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of or proof
of reliance by the Purchasers upon the guarantee contained in this Section 2 or
acceptance of the guarantee contained in this Section 2; the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Company and
any of the Guarantors, on the one hand, and the Purchasers, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. Each Guarantor waives
to the extent permitted by law diligence,

    presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or any of the Guarantors with respect to the Obligations. Each Guarantor
understands and agrees that the guarantee contained in this Section 2 shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to (a) the validity or enforceability of the Purchase Agreement
or any other Transaction Document, any of the Obligations or any other
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Purchasers, (b) any
defense, set-off or counterclaim (other than a defense of payment or performance
or fraud or misconduct by Purchasers) which may at any time be available to or
be asserted by the Company or any other Person against the Purchasers, or (c)
any other circumstance whatsoever (with or without notice to or knowledge of the
Company or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Company for the Obligations,
or of such Guarantor under the guarantee contained in this Section 2, in
bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Purchasers may, but shall be under no obligation to, make a similar demand on or
otherwise pursue such rights and remedies as they may have against the Company,
any other Guarantor or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto, and
any failure by the Purchasers to make any such demand, to pursue such other
rights or remedies or to collect any payments from the Company, any other
Guarantor or any other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of the
Company, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Purchasers against any Guarantor. For the purposes hereof, "demand" shall
include the commencement and continuance of any legal proceedings.

    

    
      
        
        

      

      
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    (f) Reinstatement. The
guarantee contained in this Section 2 shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Purchasers upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Company or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been
made.

    

    (g) Payments. Each
Guarantor hereby guarantees that payments hereunder will be paid to the
Purchasers without set-off or counterclaim in U.S. dollars at the address set
forth or referred to in the Purchase Agreement.

    

    3. Representations and
Warranties. Each Guarantor hereby makes the following representations and
warranties to Purchasers as of the date hereof:

    

    (a) Organization and
Qualification. The Guarantor is a corporation, duly incorporated, validly
existing and in good standing under the laws of the applicable jurisdiction set
forth on Schedule 1, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Guarantor has no subsidiaries other than those identified as such
on the Disclosure Schedules to the Purchase Agreement. The Guarantor is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of any of this Guaranty in any material respect, (y) have a material adverse
effect on the results of operations, assets, prospects, or financial condition
of the Guarantor or (z) adversely impair in any material respect the Guarantor's
ability to perform fully on a timely basis its obligations under this Guaranty
(a "Material Adverse
Effect").

    

    (b) Authorization;
Enforcement.  The Guarantor has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Guaranty, and otherwise to carry out its obligations hereunder. The
execution and delivery of this Guaranty by the Guarantor and the consummation by
it of the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of the Guarantor. This Guaranty has been
duly executed and delivered by the Guarantor and constitutes the valid and
binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.

    

    (c) No Conflicts. The
execution, delivery and performance of this Guaranty by the Guarantor and the
consummation by the Guarantor of the transactions contemplated thereby do not
and will not (i) conflict with or violate any provision of its Certificate of
Incorporation or By-laws or (ii) conflict with, constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Guarantor
is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Guarantor is subject (including Federal and state
securities laws and regulations), or by which any material property or asset of
the Guarantor is bound or affected, except in the case of each of clauses (ii)
and (iii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as could not, individually or in the aggregate,
have or result in a Material Adverse Effect. The business of the Guarantor is
not being conducted in violation of any law, ordinance or regulation of any
governmental authority, except for violations which, individually or in the
aggregate, do not have a Material Adverse Effect.

    

    (d) Consents and
Approvals. The Guarantor is not required to obtain any consent, waiver,
authorization or order of, or make any filing or registration with, any court or
other federal, state, local, foreign or other governmental authority or other
person in connection with the execution, delivery and performance by the
Guarantor of this Guaranty.

    

    
      
        
        

      

      
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    (e) Purchase Agreement.
The representations and warranties of the Company set forth in the Purchase
Agreement as they relate to such Guarantor, each of which is hereby incorporated
herein by reference, are true and correct as of each time such representations
are deemed to be made pursuant to such Purchase Agreement, and the Purchasers
shall be entitled to rely on each of them as if they were fully set forth
herein, provided, that each reference in each such representation and warranty
to the Company's knowledge shall, for the purposes of this Section 3, be deemed
to be a reference to such Guarantor's knowledge.

    

    (f) Foreign
Law.  Each Guarantor has consulted with appropriate foreign
legal counsel with respect to any of the above representations for which
non-U.S. law is applicable. Such foreign counsel have advised each applicable
Guarantor that such counsel knows of no reason why any of the above
representations would not be true and accurate. Such foreign counsel were
provided with copies of this Subsidiary Guarantee and the Transaction Documents
prior to rendering their advice.

    

    4. Covenants.

    

    (a) Each
Guarantor covenants and agrees with the Purchasers that, from and after the date
of this Guarantee until the Obligations shall have been paid in full, such
Guarantor shall take, and/or shall refrain from taking, as the case may be, each
commercially reasonable action that is necessary to be taken or not taken, as
the case may be, so that no Event of Default is caused by the failure to take
such action or to refrain from taking such action by such
Guarantor.

    

    (b) So long
as any of the Obligations are outstanding, each Guarantor will not directly or
indirectly on or after the date of this Guarantee:

    

    i. except with the
prior written consent of the Agent (as defined in the Security
Agreement), enter into, create, incur,
assume or suffer to exist any indebtedness
for borrowed money of any kind, including but not limited to, a guarantee, on or
with respect to any of its property or assets now owned or hereafter acquired or
any interest therein or any income or profits therefrom that is senior to, or pari passu with, in any respect,
such Guarantor’s obligations hereunder;

    

    ii. enter into, create, incur, assume or suffer to exist any
liens of any kind, on or with respect to any of its property or assets now owned
or hereafter acquired or any interest therein or any income or profits
therefrom that is senior to, in any respect, such Guarantor’s obligations
hereunder;

    

    iii. amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holder hereunder;

    

    iv. repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de
minimis number of shares of its Common Stock or Common Stock
Equivalents;

    

    v. enter
into any agreement with respect to any of the foregoing; or

    

    vi. pay cash
dividends on any equity securities of the Company.

    

    
      
        
        

      

      
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    5. Miscellaneous.

    

    (a) Amendments in
Writing. None of the terms or provisions of this Guarantee may be waived,
amended, supplemented or otherwise modified except in writing by the
Purchasers.

    

    (b) Notices. All notices,
requests and demands to or upon the Purchasers or any Guarantor hereunder shall
be effected in the manner provided for in the Purchase Agreement; provided that any
such notice, request or demand to or upon any Guarantor shall be addressed to
such Guarantor at its notice address at: 9029 South Pecos, Suite 2800,
Henderson, NV 89074.

    

    (c) No Waiver By Course Of
Conduct; Cumulative Remedies. The Purchasers shall not by any act (except
by a written instrument pursuant to Section 5(a)), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default under the Transaction Documents or Event of Default.
No failure to exercise, nor any delay in exercising, on the part of the
Purchasers, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Purchasers of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Purchasers would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.

    

    (d) Enforcement Expenses;
Indemnification.

    

    
      	
              (i)  

            	
              Each
      Guarantor agrees to pay, or reimburse the Purchasers for, all its costs
      and expenses incurred in collecting against such Guarantor under the
      guarantee contained in Section 2 or otherwise enforcing or preserving any
      rights under this Guarantee and the other Transaction Documents to which
      such Guarantor is a party, including, without limitation, the reasonable
      fees and disbursements of counsel to the
  Purchasers.

            

    

    

    
      	
              (ii)  

            	
              Each
      Guarantor agrees to pay, and to save the Purchasers harmless from, any and
      all liabilities with respect to, or resulting from any delay in paying,
      any and all stamp, excise, sales or other taxes which may be payable or
      determined to be payable in connection with any of the transactions
      contemplated by this Guarantee.

            

    

    

    
      	
              (iii)  

            	
              Each
      Guarantor agrees to pay, and to save the Purchasers harmless from, any and
      all liabilities, obligations, losses, damages, penalties, actions,
      judgments, suits, costs, expenses or disbursements of any kind or nature
      whatsoever with respect to the execution, delivery, enforcement,
      performance and administration of this Guarantee to the extent the Company
      would be required to do so pursuant to the Purchase
    Agreement.

            

    

    

    
      	
              (iv)  

            	
              The
      agreements in this Section shall survive repayment of the Obligations and
      all other amounts payable under the Purchase Agreement and the other
      Transaction Documents.

            

    

    

    (e) Successor and
Assigns. This Guarantee shall be binding upon the successors and assigns
of each Guarantor and shall inure to the benefit of the Purchasers and their
respective successors and assigns; provided that no Guarantor may assign,
transfer or delegate any of its rights or obligations under this Guarantee
without the prior written consent of the Purchasers.

    

    (f) Set-Off. Each
Guarantor hereby irrevocably authorizes the Purchasers at any time and from time
to time while an Event of Default under any of the Transaction Documents shall
have occurred and be continuing, without notice to such Guarantor or any other
Guarantor, any such notice being expressly waived by each Guarantor, to set-off
and appropriate and apply any and all deposits, credits, indebtedness or claims,
in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Purchasers to
or for the credit or the account of such Guarantor, or any part thereof in such
amounts as the Purchasers may elect, against and on account of the obligations
and liabilities of such Guarantor to the Purchasers hereunder and claims of
every nature and description of the Purchasers against such Guarantor, in any
currency, whether arising hereunder, under the Purchase Agreement, any other
Transaction Document or otherwise, as the Purchasers may elect, whether or not
the Purchasers have made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Purchasers shall
notify such Guarantor promptly of any such set-off and the application made by
the Purchasers of the proceeds thereof, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Purchasers under this Section are in addition to other rights and
remedies(including, without limitation, other rights of set-off) which the
Purchasers may have.

    

    
      
        
        

      

      
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    (g) Counterparts. This
Guarantee may be executed by one or more of the parties to this Guarantee on any
number of separate counterparts (including by telecopy), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

    

    (h) Severability. Any
provision of this Guarantee which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

    

    (i) Section Headings. The
Section headings used in this Guarantee are for convenience of reference only
and are not to affect the construction hereof or be taken into consideration in
the interpretation hereof.

    

    (j) Integration. This
Guarantee and the other Transaction Documents represent the agreement of the
Guarantors and the Purchasers with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties
by the Purchasers relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Transaction
Documents.

    

    (k) Governing Law. THIS
GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY PRINCIPLES OF
CONFLICTS OF LAWS.

    

    (l) Submission to
Jurisdictional; Waiver. Each Guarantor hereby

    irrevocably
and unconditionally:

    

    
      	
              (i)  

            	
              submits
      for itself and its property in any legal action or proceeding relating to
      this Guarantee and the other Transaction Documents to which it is a party,
      or for recognition and enforcement of any judgment in respect thereof, to
      the non-exclusive general jurisdiction of the Courts of the State of New
      York, located in New York County, New York, the courts of the United
      States of America for the Southern District of New York, and appellate
      courts from any thereof;

            

    

    

    
      	
              (ii)  

            	
              consents
      that any such action or proceeding may be brought in such courts and
      waives any objection that it may now or hereafter have to the venue of any
      such action or proceeding in any such court or that such action or
      proceeding was brought in an inconvenient court and agrees not to plead or
      claim the same;

            

    

    

    
      	
              (iii)  

            	
              agrees
      that service of process in any such action or proceeding may be effected
      by mailing a copy thereof by registered or certified mail (or any
      substantially similar form of mail), postage prepaid, to such Guarantor at
      its address referred to in the Purchase Agreement or at such other address
      of which the Purchasers shall have been notified pursuant
      thereto;

            

    

    

    
      	
              (iv)  

            	
              agrees
      that nothing herein shall affect the right to effect service of process in
      any other manner permitted by law or shall limit the right to sue in any
      other jurisdiction; and

            

    

    

    
      	
              (v)  

            	
              waives,
      to the maximum extent not prohibited by law, any right it may have to
      claim or recover in any legal action or proceeding referred to in this
      Section any special, exemplary, punitive or consequential
      damages.

            

    

    

    
      
        
        

      

      
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(m) Acknowledgements.  Each
Guarantor hereby acknowledges that:

    

    
      	
              (i)  

            	
              it
      has been advised by counsel in the negotiation, execution and delivery of
      this Guarantee and the other Transaction Documents to which it is a
      party;

            

    

    

    
      	
              (ii)  

            	
              the
      Purchasers have no fiduciary relationship with or duty to any Guarantor
      arising out of or in connection with this Guarantee or any of the other
      Transaction Documents, and the relationship between the Guarantors, on the
      one hand, and the Purchasers, on the other hand, in connection herewith or
      therewith is solely that of debtor and creditor;
  and

            

    

    

    
      	
              (iii)  

            	
              no
      joint venture is created hereby or by the other Transaction Documents or
      otherwise exists by virtue of the transactions contemplated hereby among
      the Guarantors and the Purchasers.

            

    

    

    (n) Additional
Guarantors.  The Company shall cause each of its subsidiaries
formed or acquired on or subsequent to the date hereof to become a Guarantor for
all purposes of this Guarantee by executing and delivering an

    Assumption
Agreement in the form of Annex 1 hereto.

    

    (o) Release of
Guarantors. Subject to Section 2.6, each Guarantor will be released from
all liability hereunder concurrently with the repayment in full of all amounts
owed under the Purchase Agreement, the Debentures and the other Transaction
Documents.

    

    (p) Seniority. The
Obligations of each of the Guarantors hereunder rank senior in priority to any
other unsecured Debt (as defined in the Debentures) of such
Guarantor.

    

    (q) Waiver of Jury Trial.
EACH GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, THE PURCHASERS, HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM
THEREIN.

    

    IN
WITNESS WHEREOF, each of the undersigned has caused this Guarantee

    to be
duly executed and delivered as of the date first above written.

    

                              BOOMJ.COM,
INC.

    

                             By:    
/s/ Robert J,
McNulty

                                       Name:
Robert J, McNulty

                                       Title:   Chief
Executive Officer

    

    

    

           LOCAL
AD LINK, INC.

    

                             By:     /s/ Robert J, McNulty

                                       Name:
Robert J, McNulty

                                       Title:   Chief
Executive Officer

    

    

           OMNIRELIANT
HOLDINGS, INC.

    

          
By:      /s/
Paul Morrison

    Name: Paul Morrison

    Title: Chief Executive
Officer

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
1

    

    GUARANTORS

    

                      The
following are the names, notice addresses and jurisdiction of organization of
each Guarantor.

     

     

    

     

    
      	
              COMPANY

            	 JURISDICTION
      OF INCORPORATION	 OWNED BY
      PERCENTAGE	 
	
              Boomj.com,
      Inc.

            	 Nevada	 100%	 
	Local Ad Link,
      Inc. 	 Nevada 	 100%	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

    

                                                                                                                                                                                                                            

    

    The
address for the two subsidiaries is: 9029 South Pecos Road, Suite 2800,
Henderson, NV 89074.

                                                                 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Annex 1
to

    SUBSIDIARY
GUARANTEE

    

    ASSUMPTION
AGREEMENT, dated as of ____ __, ______ made by ______________________________, a
______________ corporation (the "Additional
Guarantor"), in favor of the Purchasers pursuant to the Purchase
Agreement referred to below. All capitalized terms not defined herein shall have
the meaning ascribed to them in such Purchase Agreement.

    

    W
I T N E S S E T H :

    

               WHEREAS,
[COMPANY], a Delaware corporation (the "Company") and the
Purchasers have entered into a Securities Purchase Agreement, dated as of
February ___, 2005 (as amended, supplemented or otherwise modified from time to
time, the "Purchase
Agreement");

    

               WHEREAS,
in connection with the Purchase Agreement, the Company and its Subsidiaries
(other than the Additional Guarantor) have entered into the Subsidiary
Guarantee, dated as of [______________ ____, 200__ (as amended, supplemented or
otherwise modified from time to time, the "Guarantee") in favor
of the Purchasers;

    

               WHEREAS,
the Purchase Agreement requires the Additional Guarantor to become a party to
the Guarantee; and

    

               WHEREAS,
the Additional Guarantor has agreed to execute and

    deliver
this Assumption Agreement in order to become a party to the
Guarantee;

    

    NOW, THEREFORE, IT IS
AGREED:

    

    1. Guarantee. By
executing and delivering this Assumption Agreement, the Additional Guarantor, as
provided in Section 5.14 of the Guarantee, hereby becomes a party to the
Guarantee as a Guarantor thereunder with the same force and effect as if
originally named therein as a Guarantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Guarantor thereunder. The information set forth in Annex 1-A hereto is hereby
added to the information set forth in Schedule 1 to the Guarantee. The
Additional Guarantor hereby represents and warrants that each of the
representations and warranties contained in Section 3 of the Guarantee is true
and correct on and as the date hereof as to such Additional Guarantor (after
giving effect to this Assumption Agreement) as if made on and as of such
date.

    

    2. Governing Law. THIS
ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

                      IN
WITNESS WHEREOF, the undersigned has caused this Assumption Agreement
to be duly executed and delivered as of the date first above
written.

    

    

                                               [ADDITIONALGUARANTOR]

    

                                                By:                                                                                                                     

                                                Name:

                                                Title:

    
11internationalstem_8k-ex1001.htm

    EXHIBIT
10.1

    
PREFERRED STOCK PURCHASE
AGREEMENT

     

    This
Preferred Stock Purchase Agreement (“Agreement”) is
effective as of June 30, 2009 (“Effective Date”), by
and among International Stem
Cell Corporation, a Delaware corporation (“Company”), and
Optimus Capital Partners, LLC, a Delaware limited liability company, doing
business as Optimus Life Sciences Capital Partners, LLC (including its
designees, successors and assigns, “Investor”).

     

    RECITALS

     

    A.    The
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue to Investor, and Investor shall purchase from
the Company, from time to time as provided herein, up to $5,000,000.00 of shares
of Series E Preferred Stock; and

     

    B.    The offer
and sale of the Securities provided for herein are being made without
registration under the Act, in reliance upon the provisions of Section 4(2) of
the Act, Regulation D promulgated under the Act, and such other exemptions from
the registration requirements of the Act as may be available with respect to any
or all of the purchases of Securities to be made hereunder.

     

    AGREEMENT

     

    NOW,
THEREFORE, IN CONSIDERATION of the premises, the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, Company and Investor agree as
follows:

     

    ARTICLE 1

    DEFINITIONS

     

    1.1    Definitions.  In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Certificate of Designations, and (b) the following terms have the meanings
indicated in this Section 1.1:

     

    “Act” means the
Securities Act of 1933, as amended.

     

    “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Act.  With
respect to Investor, without limitation, any Person owning, owned by, or under
common ownership with Investor, and any investment fund or managed account that
is managed on a discretionary basis by the same investment manager as Investor
will  be deemed to be an Affiliate.

     

    “Agreement” means this
Preferred Stock Purchase Agreement.

     

    “Automatic
Termination” has the meaning set forth in Section 3.1.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “Change in Control”
has the meaning set forth within the definition of Strategic Transaction,
below.

     

    “Certificate of
Designations” means the certificate to be filed with the Secretary of
State of the State of Delaware, in the form attached hereto as Exhibit
B.

     

    “Closing” means any
one of (i) the Commitment Closing and (ii) each Tranche Closing.

     

    “Commitment Closing”
has the meaning set forth in Section 2.2(a).

     

    “Common Shares”
includes the Fee Shares and any Warrant Shares.

     

    “Common Stock” means
the common stock, par value $0.001 per share, of Company, and any replacement or
substitute thereof, or any share capital into which such Common Stock shall have
been changed or any share capital resulting from a reclassification of such
Common Stock.

     

    “Company Termination”
has the meaning set forth in Section 3.2.

     

    “Delisting Event”
means any time during the term of this Agreement, that the Company’s Common
Stock is not listed for and actively trading on a Trading Market, or is
suspended or delisted with respect to the trading of the shares of Common Stock
on a Trading Market.

     

    “Disclosure Schedules”
means the Disclosure Schedules of the Company delivered concurrently herewith
and attached hereto.

     

    “DWAC Shares” means
all Common Shares or other shares of Common Stock issued or issuable to Investor
or any Affiliate, successor or assign of Investor, including without limitation
any Warrant Shares, all of which shall be issued in electronic form, without
restriction on resale, and delivered by Company to any specified
Deposit/Withdrawal at Custodian (DWAC) account with Depository Trust Company
(DTC), in accordance with irrevocable instructions issued to and countersigned
by the Transfer Agent, in the form attached hereto as Exhibit
C.

     

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    “Fee Shares” means a
non-refundable fee of $250,000.00 payable to Investor in cash or shares of
Common Stock valued at 100% of the closing bid price for the Common Stock on the
Trading Day immediately preceding the Commitment Closing.

     

    “GAAP” means United
States generally accepted accounting principles applied on a consistent basis
during the periods involved.

     

    “Indebtedness” means
(a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

     

    “Lock-Up Agreements”
means an agreement in the form attached as Exhibit D, executed
by each of the Company’s officers, directors and beneficial owners of 10% or
more of the Common Stock, precluding each such Person from participating in any
sale of the Common Stock from the Tranche Notice Date through the Tranche
Closing Date.

     

    “Material Agreement”
includes any loan agreement, equity investment agreement or securities
instrument to which Company is a party, any agreement or instrument to which
Company and Investor or any Affiliate of Investor is a party, and any other
material agreement listed, or required to be listed, on any of Company’s reports
filed or required to be filed with the SEC, including without limitation Forms
10-K, 10-Q or 8-K.

     

    “Maximum Tranche
Amount” means, subject to the conditions of this Agreement, the Maximum
Placement less the amount of any previously noticed and funded
Tranches.

     

    “Maximum Placement”
means $5,000,000.00.

     

    “Officer’s Closing
Certificate” means a certificate in customary form reasonably acceptable
to the Investor, executed by an authorized officer of the Company.

     

    “Opinion” means an
opinion from Company’s independent legal counsel, in the form attached as Exhibit E, or such
other form as agreed upon by the parties, to be delivered in connection with the
Commitment Closing.

     

    “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

     

    “Preferred Shares”
means shares of Series E Preferred Stock of the Company provided for in the
Certificate of Designations, to be issued to Investor pursuant to this
Agreement.

     

    “Prospectus” has the
meaning set forth in Section 4.1(hh)(iii).

     

    “Tranche” has the
meaning set forth in Section 2.3.

     

    “Tranche Amount” means
the amount of any individual put purchase, as specified by the Company, and
shall not exceed the Maximum Tranche Amount.

     

    “Tranche Closing” has
the meaning set forth in Section 2.3(f).

     

    “Tranche Closing Date”
has the meaning set forth in Section 2.3(f).

     

    “Tranche Notice” has
the meaning set forth in Section 2.3(b).

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Tranche Notice Date”
has the meaning set forth in Section 2.3(b).

     

    “Tranche Purchase
Price” has the meaning set forth in Section 2.3(b) and shall be
specified in writing by the Company.

     

    “Tranche Share Price”
means $10,000.00 per Preferred Share.  The Company may not put
fractional Preferred Shares.

     

    “Tranche Shares” means
shares of Preferred Stock that are purchased by Investor pursuant to a
Tranche.

     

    “Registration
Statement” means a valid, current and effective registration statement
registering for sale the Common Shares, and except where the context otherwise
requires, means the registration statement, as amended, including (i) all
documents filed as a part thereof or incorporated by reference therein, and (ii)
any information contained or incorporated by reference in a prospectus filed
with the SEC in connection with such registration statement, to the extent such
information is deemed under the Act to be part of the registration
statement.

     

    “Regulation D” means
Regulation D promulgated under the Act.

     

    “Required Tranche
Documents” has the meaning set forth in Section 2.3(e).

     

    “Rule 144” means Rule
144 promulgated by the SEC pursuant to the Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the SEC
having substantially the same effect.

     

    “SEC” means the United
States Securities and Exchange Commission.

     

    “Securities” includes
the Warrants, Common Shares and Preferred Shares issuable pursuant to this
Agreement.

     

    “Strategic
Transaction” means and shall be deemed to have occurred at such time upon
any of the following events:

     

    (i)    a
consolidation, merger or other business combination or event or transaction
following which the holders of Common Stock immediately preceding such
consolidation, merger, combination or event either (i) no longer hold a majority
of the shares of Common Stock or (ii) no longer have the ability to elect a
majority the board of directors of the Company (a “Change in
Control”);

     

    (ii)    the sale
or transfer of all or substantially all of the Company’s assets, other than in
the ordinary course of business; or

     

    (iii)    a
purchase, tender or exchange offer made to the holders of the outstanding shares
of Common Stock.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Subsidiary” means any
Person the Company owns or controls, or in which the Company, directly or
indirectly, owns a majority of the capital stock or similar interest that would
be disclosable pursuant to Regulation S-K, Item 601(b)(21).

     

    “Termination Date”
means the earlier of (i) the date that is one year after the Effective Date, or
(ii) the Tranche Closing Date on which the sum of the aggregate Tranche Purchase
Price for all Tranche Shares equals the Maximum Placement.

     

    “Termination Notice”
has the meaning as set forth in Section 3.2.

     

    “Trading Day” means
any day on which the Common Stock is traded on the Trading Market; provided that
it shall not include any day on which the Common Stock is (a) scheduled to trade
for less than 5 hours, or (b) suspended from trading.

     

    “Trading Market” means
the OTC Bulletin Board, the NASDAQ Capital Market, the NASDAQ Global Market, the
NASDAQ Global Select Market, the NYSE Amex, or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock.

     

    “Transaction
Documents” include this Agreement and the Exhibits hereto and
thereto.

     

    “Transfer Agent” means
Securities Transfer Corporation, or any successor transfer agent for the Common
Stock.

     

    “Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Warrants.

     

    “Warrants” means the
warrants issuable under this Agreement, in the form attached hereto as Exhibit A, to
purchase shares of Common Shares equal in value to $6,750,000.00.

     

    ARTICLE 2

    PURCHASE AND
SALE

     

    2.1   Agreement to
Purchase.  Subject
to the terms and conditions herein and the satisfaction of the conditions to
closing set forth in this Article
2:

     

    (a)    Investor
hereby agrees to purchase such amounts of Preferred Shares as the Company may,
in its sole and absolute discretion, from time to time elect to issue and sell
to Investor according to one or more Tranches pursuant to Section 2.3 below;
and

     

    (b) The
Company agrees to issue Fee Shares and Warrants to Investor pursuant to Sections 2.2(a) and 2.3(c)
below.

     

    2.2   Investment
Commitment

     

    (a)    Investment
Commitment. The closing of this Agreement (the “Commitment Closing”)
shall be deemed to occur when this Agreement has been duly executed by both
Investor and the Company, and the other Conditions to the Commitment Closing set
forth in Section
2.2(b)
have been met.  On the date of the Commitment Closing, the Company
shall issue the Fee Shares to Investor.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (b)    Conditions to Investment
Commitment. As a condition precedent to the Commitment Closing, all of
the following (the “Conditions to Commitment
Closing”) shall have been satisfied prior to or concurrently with the
Company’s execution and delivery of this Agreement:

     

    (i)    the
following documents shall have been delivered to
Investor:  (A) this Agreement, executed by the Company, (B) a
Secretary’s Certificate as to (x) the resolutions of the Company’s board of
directors authorizing this Agreement and the Transaction Documents, and the
transactions contemplated hereby and thereby, (y) a copy of the Company’s
current Certificate of Incorporation, and (z) a copy of the Company’s current
Bylaws; (C) the Certificate of Designations executed by the Company and accepted
by the Secretary of State of Delaware; (D) the Opinion, and (E) a copy of the
press release announcing the transactions contemplated by this Agreement and
Current Report on Form 8-K describing the transaction contemplated by this
Agreement;

     

    (ii)    other
than for losses incurred in the ordinary course of business, there have been no
material adverse changes in the Company's business prospects or financial
condition since the date of the last balance sheet delivered to Investor,
including but not limited to incurring material liabilities;

     

    (iii)    the
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects and the Company shall have delivered an
Officer’s Closing Certificate, signed by an officer of the Company, to such
effect to Investor; and

     

    (iv)    Investor
shall have received the Fee Shares and the Warrant.

     

    (c)    Investor’s Obligation to
Purchase. Subject to the prior satisfaction of all conditions set forth
in this Agreement, following the Investor’s receipt of a validly delivered
Tranche Notice, the Investor shall be required to purchase from the Company a
number of Tranche Shares equal to the permitted Tranche Share Amount, in the
manner described below.

     

    2.3   Tranches to
Investor

     

    (a)    Procedure to Elect a
Tranche. Subject to the Maximum Tranche Amount, the Maximum Placement and
the other conditions and limitations set forth in this Agreement, at any time
beginning on the Effective Date, the Company may, in its sole and absolute
discretion, elect to exercise one or more tranches of puts (each a “Tranche”) according
to the following procedure, provided that each subsequent Tranche Notice Date
(defined below) after the first Tranche Notice Date shall be no sooner than five
(5) Trading Days following the preceding Tranche Notice Date:

     

    (b)    Delivery of Tranche
Notice. The Company shall deliver an irrevocable written notice (the
“Tranche
Notice”) the form of which is attached hereto as Exhibit F, to
Investor stating that the Company shall exercise a Tranche and stating the
number of Preferred Shares which the Company will sell to Investor at the
Tranche Share Price, and the aggregate purchase price for such Tranche (the
“Tranche Purchase
Price”).  A Tranche Notice delivered by the Company to Investor
by 5:00 p.m. New York Time on any Trading Day via facsimile or electronic mail,
with confirming copy by overnight carrier, shall be deemed delivered on the next
Trading Day (the “Tranche Notice
Date”).

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (c)    Issuance of
Warrants.  On each Tranche Notice Date, the Company shall issue
a replacement Warrant, in the form attached hereto as Exhibit A, to acquire
that portion of Warrant Shares equal in value to 135.0% of the Tranche Purchase
Price, at an exercise price equal to the closing bid price for the Common Stock
on the Trading Day immediately preceding the Tranche Notice
Date.  Each Warrant shall have a term of 5 years.

     

    (d)    Conditions Precedent to the
Right of the Company to Deliver a Tranche Notice.  The right of
the Company to deliver a Tranche Notice is subject to the satisfaction, on the
date of delivery of such Tranche Notice, of each of the following
conditions:

     

    (i)    the
Common Stock shall be listed on a Trading Market, and to the Company’s knowledge
there is no notice of any suspension or delisting with respect the trading of
the shares of Common Stock on such market or exchange;

     

    (ii)    the
representations and warranties of the Company set forth in this Agreement are
true and correct in all material respects as if made on such date (provided,
however, that any information disclosed by the Company in a filing with the SEC
prior to the date of the Tranche Notice shall be deemed to update the Disclosure
Schedules and modify the representations and warranties), and no default shall
have occurred under this Agreement, or any other agreement with Investor, or
Investor Affiliate, or any other financial agreement or agreement for borrowed
funds of the Company and the Company shall deliver an Officer’s Closing
Certificate, signed by an officer of the Company, to such effect to
Investor;

     

    (iii)    other
than for losses incurred in the ordinary course of business, there have been no
material adverse changes in the Company’s business prospects or financial
condition since the Commitment Closing, including but not limited to incurring
material liabilities;

     

    (iv)    the
Company is not, and will not be as a result of the applicable Tranche, in
default of any Material Agreement;

     

    (v)    there is
not then in effect any law, rule or regulation prohibiting or restricting the
transactions contemplated hereby, or requiring any consent or approval which
shall not have been obtained, nor is there any pending or threatened proceeding
or investigation which may have the effect of prohibiting or adversely affecting
any of the transactions contemplated by this Agreement; no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or adopted by any court or governmental authority
of competent jurisdiction that prohibits the transactions contemplated by this
Agreement, and no actions, suits or proceedings shall be in progress, pending or
threatened by any person (other than Investor or any affiliate of Investor),
that seek to enjoin or prohibit the transactions contemplated by this Agreement.
For purposes of this paragraph (v), no proceeding shall be deemed pending or
threatened unless one of the parties has received written notification thereof
prior to the applicable Tranche Closing Date;

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (vi)    all DWAC
Shares are DTC eligible and can be immediately converted into electronic form
without restriction on resale;

     

    (vii)   Company
is in compliance with all reporting requirements in order to maintain listing on
its then current Trading Market;

     

    (viii)   Company
has a current, valid and effective Registration Statement for the resale of all
previously-issued Common Shares that have not been sold by Investor, including
for the Warrant Shares issuable upon exercise of the Warrant issued in
connection with such Tranche;

     

    (ix)    Company
has a sufficient number of duly authorized shares of Common Stock for issuance
in such amount as may be required to fulfill its obligations pursuant to the
Transaction Documents and any outstanding agreements with Investor and any
Investor Affiliate;

     

    (x)    Company
has provided notice of its delivery of the Tranche Notice to all signatories of
a Lock-Up Agreement as required under the Lock-Up Agreement; and

     

    (xi)    the
number of Common Shares issuable upon exercise of the Warrant issued at that
date and Preferred Shares issuable as the Tranche Purchase Price, when
aggregated with other securities owned by Investor and its Affiliates, would not
result in beneficial ownership by Investor and its Affiliates of more than 4.99%
of the outstanding shares of Common Stock of the Company, unless such condition
is waived by Investor in writing.  For the purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act, and Rule 13d-3 thereunder.

     

    (e)    Documents Required to be
Delivered as Conditions to Closing of any Tranche. The Closing of any
Tranche and Investor’s obligations hereunder shall additionally be conditioned
upon the delivery to Investor of each of the following (the “Required Tranche
Documents”) on or before the applicable Tranche Closing
Date:

     

    (i)    a number
of Preferred Shares equal to the Tranche Share Amount shall have been delivered
to Investor or an account specified by Investor for the Tranche
Shares;

     

    (ii)    the
following documents: Opinion, Officer’s Certificate and Lock-Up
Agreements;

     

    (iii)    a “Use of
Proceeds” certificate, signed by an officer of the Company, and setting forth
how the Aggregate Tranche Price will be applied by the Company;

     

    (iv)    all
Warrant Shares shall have been timely delivered pursuant to any Exercise Notice
delivered to Company at least 2 days prior to any Tranche Closing Date;
and

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (v)    all
documents, instruments and other writings required to be delivered by the
Company to Investor on or before the Tranche Closing Date pursuant to any
provision of this Agreement in order to implement and effect the transactions
contemplated herein.

     

    (f)    Mechanics of Tranche
Closing. Each of the Company and Investor shall deliver all documents,
instruments and writings required to be delivered by either of them pursuant to
Section 2.3(e) of this
Agreement at or prior to each closing. Subject to such delivery and the
satisfaction of the conditions set forth in Section 2.3(d), the closing
of the purchase by Investor of Shares shall occur by 5:00 p.m., New York City
Time, on the date which is 10 Trading Days following the Tranche Notice Date at
the offices of Investor (each a “Tranche Closing
Date”).  On each or before each Tranche Closing Date, Investor
shall deliver to the Company the Tranche Purchase Price to be paid for such
Tranche Shares. The closing (each a “Tranche Closing”) for
each Tranche shall occur on the date that both (i) the Company has delivered to
Investor all Required Tranche Documents, and (ii) Investor has delivered to the
Company such Tranche Purchase Price.

     

    (g)    Limitation on Investor’s
Obligation to Purchase and Company’s Obligation to
Sell.  Notwithstanding anything herein to the contrary, in the
event the closing price of the Common Stock during the 9 Trading Days following
the Tranche Notice falls below 75% of the average of the closing bid price in
the 9 Trading Days prior to the Tranche Notice Date: (i) Investor may, at its
option, and without penalty, decline to purchase the applicable Tranche Shares
on the Tranche Closing Date; or (ii) Company may, at its option, and without
penalty, terminate the Tranche Notice and decline to sell the applicable Tranche
Shares on the Tranche Closing Date.  In the event that either
Purchaser or Company declines to proceed with the contemplated transaction,
Investor (i) shall return to the Company (A) all unexercised Warrants issued in
connection with the Tranche Notice, and (B) any shares of Common Stock then held
by Investor as a result of an exercise of the Warrant issued in connection with
the Tranche Notice, and (b) shall pay Company ninety-three percent (93%) of the
amount Investor received from the sale of any shares issued upon exercise by
Investor of the Warrant issued in connection with the Tranche
Notice.

     

    2.4    Maximum
Placement.  Investor
shall not be obligated to purchase any additional Tranche Shares once the
aggregate Tranche Purchase Price paid by Investor equals the Maximum
Placement.

     

    ARTICLE 3

    TERMINATION

     

    3.1    Automatic
Termination.  This
Agreement and the Company’s right to initiate subsequent Tranches to Investor
under this Agreement shall terminate permanently (each, an “Automatic
Termination”) upon the occurrence of any of the following:

     

    (a)    if, at
any time, either the Company or any director or executive officer of the Company
has engaged in a transaction or conduct related to the Company that has resulted
in (i) a SEC enforcement action, or (ii) a civil judgment or criminal conviction
for fraud or misrepresentation, or for any other offense that, if prosecuted
criminally, would constitute a felony under applicable law;

     

    
      
        
        

      

      
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    (b)    on any
date after a Delisting Event that lasts for an aggregate of 20 Trading Days
during any calendar year;

     

    (c)    if at any
time the Company has filed for and/or is subject to any bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors instituted by or against
the Company or any subsidiary of the Company;

     

    (d)    the
Company is in default of any loan agreement, equity investment agreement or
instrument, or any other Material Agreement, which default would have a Material
Adverse Effect (as defined below);

     

    (e)    the
Company is in default of any material provision of any agreement with the
Investor, or Investor Affiliate following any applicable notice and opportunity
to cure;

     

    (f)    upon the
occurrence of a Strategic Transaction;

     

    (g)    so long
as any Preferred Shares are outstanding, the Company effects or publicly
announces its intention to create a security senior to the Series E Preferred
Stock with respect to liquidation rights or substantially altering the capital
structure of the Company in a manner that materially adversely effects the
rights and preferences of the Series E Preferred Stock;

     

    (h)    the
Company has breached any material covenant in this Agreement following any
applicable notice and opportunity to cure; and

     

    (i)    on the
Termination Date.

     

    3.2    Company
Termination.  The
Company may terminate (a “Company Termination”)
this Agreement and its right to initiate future Tranches by providing 30 days
advanced written notice (“Termination Notice”)
to Investor, by facsimile or electronic mail and overnight courier, at any
time.

     

    3.3    Effect of
Termination.  The
termination of this Agreement will have no effect on any Common Shares,
Preferred Shares, Warrants or DWAC Shares previously issued or delivered, or on
any rights of any holder thereof.  Notwithstanding any other
provision, all fees paid to Investor or its counsel are
non-refundable.

     

    ARTICLE 4

    REPRESENTATIONS AND
WARRANTIES

     

    4.1    Representations and
Warranties of the Company.  Except
as set forth under the corresponding section of the Disclosure Schedules which
Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to Investor:

     

    
      
        
        

      

      
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    (a)    Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule 4.1(a).  The
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are duly authorized,
validly issued, fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.  If the Company has no
subsidiaries, then references in the Transaction Documents to the Subsidiaries
will be disregarded.

     

    (b)    Organization and
Qualification.  Each of the Company and the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company’s ability to perform in
any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

     

    (c)    Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder or thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company other than the filing of the Certificate of
Designations.  Each of the Transaction Documents has been (or upon
delivery will be) duly executed by the Company and, when delivered in accordance
with the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally
and general principles of equity.  Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational or
charter documents except where such violation could not, individually or in the
aggregate, constitute a Material Adverse Effect.

     

    
      
        
        

      

      
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    (d)    No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Securities
and the consummation by the Company of the other transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected, or (iv)
conflict with or violate the terms of any agreement by which the Company or any
Subsidiary is bound or to which any property or asset of the Company or any
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

     

    (e)    Filings, Consents and
Approvals.  Neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than the filing of the Certificate of Designations.

     

    (f)    Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens.  The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Securities at least
equal to the number of Securities which could be issued pursuant to the terms of
this Agreement based on the current anticipated exercise price of the
Warrants.

     

    (g)    Capitalization.  The
capitalization of the Company is as described in the Company’s most recent
periodic report filed with the SEC.  The Company has not issued any
capital stock since such filing other than as set forth on Schedule 4.1(g).  No
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.  Except (i) as a result of purchase and sale of
the Securities, (ii) as described in the SEC Reports, or (iii) as set forth on
Schedule 4.1(g), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or
securities convertible into or exercisable for shares of Common
Stock.  The issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than Investor) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange, or reset price under
such securities. All of the outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  No further approval or authorization of
any stockholder, the Board of Directors of the Company or others is required for
the issuance and sale of the shares of the Securities.  Except as
disclosed in the SEC Reports, there are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders.

     

    
      
        
        

      

      
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    (h)    SEC Reports; Financial
Statements.  The Company has filed all reports required to be
filed by it under the Act and the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the Effective Date (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials, including the exhibits thereto, being collectively referred
to herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of any
such extension.  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Act and the
Exchange Act and the rules and regulations of the SEC promulgated thereunder,
and none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.  The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the time of
filing.  Such financial statements have been prepared in accordance
with GAAP, except as may be otherwise specified in such financial statements or
the notes thereto and except that unaudited financial statements may not contain
all footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

     

    (i)    Material
Changes.  Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the SEC, (iii) the Company has
not altered its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans.  The Company does not have pending before the SEC any
request for confidential treatment of information.

     

    
      
        
        

      

      
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    (j)    Litigation.  There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”), which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities, or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor to the
knowledge of the Company any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary
duty.  There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the SEC involving the
Company or any current or former director or officer of the
Company.  The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Act.

     

    (k)    Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.

     

    (l)    Compliance.  Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
except in each case as could not have a Material Adverse Effect.

     

    (m)    Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

     

    (n)    Title to
Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance.

     

    
      
        
        

      

      
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    (o)    Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a written notice that the Intellectual Property Rights used by the Company or
any Subsidiary violates or infringes upon the rights of any Person. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights of the Company.

     

    (p)    Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including but not limited to directors and officers insurance coverage
at least equal to the Maximum Placement.  To the best of Company’s
knowledge, such insurance contracts and policies are accurate and
complete.  Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

     

    (q)    Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) for other employee benefits, including stock option agreements under any
stock option plan of the Company.

     

    (r)    Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002, which are applicable to
it as of the date of the Commitment Closing.  The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.  The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company's most recently
filed periodic report under the Exchange Act, as the case may be, is being
prepared.  The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of the date prior to
the filing date of the most recently filed periodic report under the Exchange
Act (such date, the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Except as disclosed
in the SEC Reports, since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the Company's knowledge,
in other factors that could significantly affect the Company's internal
controls.

     

    
      
        
        

      

      
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    (s)    Certain
Fees.  Except for payment of the Commitment Fee, no brokerage
or finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement.  Investor shall have no obligation with respect to any
fees or with respect to any claims made by or on behalf of other Persons, as a
result of agreements made by the Company or its officers or directors, for fees
of a type contemplated in this Section 4.1(s) that may be
due in connection with the transactions contemplated by this
Agreement.

     

    (t)    Private Placement.
Assuming the accuracy of Investor representations and warranties set forth in
Section 4.2, no registration
under the Act is required for the offer and sale of the Securities by the
Company to Investor as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of any
Trading Market.

     

    (u)    Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.  The Company shall conduct its business in a manner so that
it will not become subject to the Investment Company Act.

     

    (v)    Registration
Rights.  No Person has any right to cause the Company to effect
the registration under the Act of any securities of the Company.

     

    (w)    Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and the Company has taken no action designed
to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration.  The Company has not, in the 12 months preceding the
Effective Date, received notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.

     

    
      
        
        

      

      
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    (x)    Application of Takeover
Protections.  The Company and its Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti takeover provision under the Company’s
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to Investor as a
result of Investor and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation the
Company’s issuance of the Securities and Investor’s ownership of the
Securities.

     

    (y)    Disclosure.  The
Company confirms that, except with respect to the information that will be, and
to the extent that it timely is, publicly disclosed pursuant to Section 2.2(b)(i)(E),
neither the Company nor any other Person acting on its behalf has provided
Investor or its agents or counsel with any information that constitutes or might
constitute material, non-public information.  The Company understands
and confirms that Investor will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company.  All
disclosure provided to Investor regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company with respect to the representations and
warranties made herein are true and correct with respect to such representations
and warranties and do not contain any untrue statement of a material fact or,
when taken together, omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.  The Company acknowledges and agrees that no
Investor makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 4.2
hereof.

     

    (z)    No Integrated
Offering. Neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated
with prior offerings by the Company for purposes of the Act or which could
violate any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Trading Market.

     

    (aa)   Financial
Condition/Indebtedness.  Based on the financial condition of
the Company as of the date of the Commitment Closing: (i) the fair saleable
market value of the Company’s assets exceeds the amount that will be required to
be paid on or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company's
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid.  The Company does not
intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances, which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the date of the Commitment Closing.  The SEC
Reports set forth as of the dates thereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments.  Neither the Company nor any Subsidiary is
in default with respect to any Indebtedness.

     

    
      
        
        

      

      
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    (bb)    Tax
Status.  The Company and each of its Subsidiaries has made or
filed all federal, state and foreign income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply.  There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.  The
Company has not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal, statue or
local tax.  None of the Company’s tax returns is presently being
audited by any taxing authority.

     

    (cc)    No General Solicitation or
Advertising in Regard to this Transaction.  Neither the Company
nor, to the knowledge of the Company, any of its directors or officers (i) has
conducted or will conduct any general solicitation (as that term is used in Rule
502(c) of Regulation D) or general advertising with respect to the sale of the
Securities, or (ii) made any offers or sales of any security or solicited any
offers to buy any security under any circumstances that would require
registration of the Securities under the Act or made any “directed selling
efforts” as defined in Rule 902 of Regulation S.

     

    (dd)    Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.

     

    (ee)    Acknowledgment Regarding
Investor’s Purchase of Securities.  The Company acknowledges
and agrees that Investor is acting solely in the capacity of arm’s length
purchaser with respect to this Agreement and the transactions contemplated
hereby.  The Company further acknowledges that Investor is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
statement made by Investor or any of its representatives or agents in connection
with this Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to Investor’s purchase of the
Securities.  The Company further represents to Investor that the
Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.

     

    
      
        
        

      

      
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    (ff)    Accountants.  The
Company’s accountants are set forth in the SEC Reports.  To the
Company’s knowledge, such accountants are a registered public accounting firm as
required by the Act.

     

    (gg)    No Disagreements with
Accountants and Lawyers.  There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to its
accountants and lawyers.

     

    (hh)    Registration Statements and
Prospectuses.

     

    (i)    Company
will use its best efforts to promptly file (but in no event later than 30 days
after the Effective Date) and cause to become effective as soon as possible a
Registration Statement for the sale of all Common Shares.  Each
Registration Statement shall comply when it becomes effective, and, as amended
or supplemented, at the time of any Tranche Notice Date, Tranche Closing Date,
or issuance of any Common Shares, and at all times during which a prospectus is
required by the Act to be delivered in connection with any sale of Common
Shares, will comply, in all material respects, with the requirements of the
Act.

     

    (ii)    Each
Registration Statement, as of its respective effective time, will not, as
applicable, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.

     

    (iii)    Each
prospectus (within the meaning of the Act) related to the sale or offering of
any Common Shares (“Prospectus”) will
comply, as of its date and the date it  will be filed with the
SEC,  and, at the time of any Tranche Notice Date, Tranche Closing
Date, or issuance of any Common Shares, and at all times during which a
prospectus is required by the Act to be delivered in connection with any sale of
Common Shares, will comply, in all material respects, with the requirements of
the Act.

     

    (iv)    At no
time during the period that begins on the date a Prospectus is filed with the
SEC and ends at the time a prospectus is no longer required by the Act to be
delivered in connection with any sale of Common Shares did or will any such
Prospectus, as then amended or supplemented, include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and at no time during such period will such Prospectus, as
then amended or supplemented, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.

     

    (v)    Each
Registration Statement will meet, and the offering and sale of the Common Shares
as contemplated hereby complies with, and will comply with, the requirements of
Rule 415 under the Act.

     

    
      
        
        

      

      
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    (vi)    The
Company has not, directly or indirectly, used or referred to any “free writing
prospectus” (as defined in Rule 405 under the Act) except in compliance with
Rules 164 and 433 under the Act.

     

    (vii)    The
Company is not an “ineligible issuer” (as defined in Rule 405 under the Act) as
of the eligibility determination date for purposes of Rules 164 and 433 under
the Act with respect to the offering of the Common Shares contemplated by any
Registration Statement, without taking into account any determination by the SEC
pursuant to Rule 405 under the Act that it is not necessary under the
circumstances that the Company be considered an “ineligible
issuer”.

     

    4.2    Representations and
Warranties of Investor. Investor hereby represents and warrants as of the
Effective Date as follows:

     

    (a)    Organization;
Authority.  Investor is an entity validly existing and in good
standing under the laws of the jurisdiction of its organization with full right,
company power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder.  The execution, delivery and performance by
Investor of the transactions contemplated by this Agreement have been duly
authorized by all necessary company or similar action on the part of
Investor.  Each Transaction Document to which it is a party has been
(or will be) duly executed by Investor, and when delivered by Investor in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of Investor, enforceable against it in accordance with its terms,
except (i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.  The principal executive
office of Investor is the address provided for notices pursuant to this
Agreement.

     

    (b)    Investor
Status.  At the time Investor was offered the Securities, it
was, and at the Effective Date it is: (i) an “accredited investor” as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(a) under the
Act.

     

    (c)    Experience of
Investor.  Investor, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment.  Investor is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

     

    (d)    General
Solicitation.  Investor is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

     

    
      
        
        

      

      
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    (e)    No Other
Representations.  The Company acknowledges and agrees that
Investor does not make or has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in this Section 4.2.

     

    ARTICLE 5

    OTHER AGREEMENTS OF THE
PARTIES

     

    5.1    Transfer
Restrictions

     

    (a)    The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other
than pursuant to an effective Registration Statement or Rule 144, to the Company
or to an Affiliate of Investor or in connection with a pledge as contemplated in
Section 5.1(b), the Company
may require the transferor thereof to provide to the Company an opinion of Luce
Forward Hamilton & Scripps LLP, or other counsel selected by the transferor
and reasonably acceptable to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the
Act.

     

    (b)    Investor
agrees to the imprinting, so long as is required by this Section 5.1, of the following
legend on any certificate evidencing Securities:

     

    NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

     

    The
Company agrees to cause such legend to be removed immediately upon effectiveness
of a Registration Statement, subject to receipt of undertakings in customarily
acceptable form regarding Investor’s compliance, in connection with any sale of
the Securities, with (i) the manner of sale provisions set forth in the
Prospectus and (ii) the prospectus delivery requirements of the Securities Act,
or when any Common Shares are eligible for sale under Rule
144.  Company further acknowledges and agrees that Investor may from
time to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities to a
financial institution that is an “accredited investor” as defined in Rule 501(a)
under the Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, Investor may transfer
pledged or secured Securities to the pledgees or secured
parties.  Such a pledge or transfer would not be subject to approval
of the Company and no legal opinion of legal counsel of the pledgee, secured
party or pledgor shall be required in connection therewith.  Further,
no notice shall be required of such pledge.  At the Investor’s
expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in connection with
a pledge or transfer of the Securities.

     

    
      
        
        

      

      
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    5.2    Furnishing of
Information.  As
long as Investor owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the Effective Date
pursuant to the Exchange Act.  Upon the request of Investor, the
Company shall deliver to Investor a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
Investor owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to Investor and make publicly
available in accordance with Rule 144(c) such information as is required for
Investor to sell the Securities under Rule 144.  The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, all to the extent required from time to time to enable such
Person to sell such Securities without registration under the Act within the
limitation of the exemptions provided by Rule 144.

     

    5.3    Integration.  The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Act of the sale of the Securities to
Investor or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market such that it
would require stockholder approval prior to the closing of such other
transaction unless stockholder approval is obtained before the closing of such
subsequent transaction.

     

    5.4    Securities Laws Disclosure;
Publicity.  The
Company shall, by 8:30 a.m. Eastern time on the Trading Day following the
Effective Date, issue a press release or if required file a Current Report on
Form 8-K, in each case reasonably acceptable to Investor, disclosing the
material terms of the transactions contemplated hereby.  The Company
and Investor shall consult with each other in issuing any press releases with
respect to the transactions contemplated hereby, and neither the Company nor
Investor shall issue any such press release or otherwise make any such public
statement without the prior consent of the Company, with respect to any such
press release of Investor, or without the prior consent of Investor, with
respect to any such press release of the Company, which consent shall not
unreasonably be withheld, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of Investor, or
include the name of Investor in any filing with the SEC or any regulatory agency
or Trading Market, without the prior written consent of Investor, except (i) as
required by federal securities law in connection with any registration statement
under which the Common Shares are registered, and (ii) to the extent such
disclosure is required by law or Trading Market regulations, in which case the
Company shall provide Investor with prior notice of such disclosure permitted
under subclause (i) or (ii).

     

    
      
        
        

      

      
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    5.5    Shareholders Rights
Plan.  No
claim will be made or enforced by the Company or, to the knowledge of the
Company, any other Person that Investor is an “Acquiring Person” under any
shareholders rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that Investor could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the Company
and Investor. The Company shall conduct its business in a manner so that it will
not become subject to the Investment Company Act.

     

    5.6    Non-Public
Information.  The
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide Investor or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto Investor shall have executed a written agreement regarding the
confidentiality and use of such information.  The Company understands
and confirms that Investor shall be relying on the foregoing representations in
effecting transactions in securities of the Company.

     

    5.7    Reimbursement.  If
Investor becomes involved in any capacity in any proceeding by or against any
Person who is a stockholder of the Company (except as a result of sales,
pledges, margin sales and similar transactions by Investor to or with any
current stockholder), solely as a result of Investor’s acquisition of the
Securities under this Agreement, the Company will reimburse Investor for its
reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred, or will assume the defense of Investor
in such matter.  The reimbursement obligations of the Company under
this paragraph shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
Affiliates of Investor who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of Investor and any such Affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, Investor and any such Affiliate and
any such Person.  The Company also agrees that neither Investor nor
any such Affiliates, partners, directors, agents, employees or controlling
persons shall have any liability to the Company or any Person asserting claims
on behalf of or in right of the Company solely as a result of acquiring the
Securities under this Agreement, except with respect to information provided to
the Company in writing by Investor or its representatives for use in preparing
the Registration Statement.

     

    5.8    Indemnification of
Investor.  Subject
to the provisions of this Section 5.8, the Company will
indemnify and hold Investor and any Warrant holder, their Affiliates and
attorneys, and each of their directors, officers, shareholders, partners,
employees, agents, and any person who controls Investor within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act (collectively, the
“Investor
Parties” and each an “Investor Party”),
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any Investor Party may suffer or incur as a result of or
relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction
Documents, (b) any action instituted against any Investor Party,

     

    
      
        
        

      

      
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    or any of
them or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of an Investor Party, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of Investor’s representation, warranties or covenants under the
Transaction Documents or any agreements or understandings Investor may have with
any such stockholder or any violations by Investor of state or federal
securities laws or any conduct by Investor which constitutes fraud, gross
negligence, willful misconduct or malfeasance), (c)  any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement (or in a Registration Statement as amended by any
post-effective amendment thereof by the Company) or arising out of or based upon
any omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and/or (d)
any untrue statement or alleged untrue statement of a material fact included in
any Prospectus ( or any amendments or supplements to any Prospectus ), in any
free writing prospectus, in any “issuer information” (as defined in Rule 433
under the Act) of the Company, or in any Prospectus together with any
combination of one or more of the  free writing prospectuses, if any,
or arising out of or based upon any omission or alleged omission to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.

     

    If any
action shall be brought against an Investor Party in respect of which indemnity
may be sought pursuant to this Agreement, such Investor Party shall promptly
notify the Company in writing, and the Company shall have the right to assume
the defense thereof with counsel of its own choosing.  The Investor
Parties shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Investor Parties except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict with respect to
the dispute in question on any material issue between the position of the
Company and the position of the Investor Parties such that it would be
inappropriate for one counsel to represent the Company and the Investor
Parties.  The Company will not be liable to the Investor Parties under
this Agreement (i) for any settlement by an Investor Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is either attributable to Investor’s breach of any of the
representations, warranties, covenants or agreements made by Investor in this
Agreement or in the other Transaction Documents or is a result of any
information provided by Investor or its representatives to Company in writing
for inclusion in the Registration Statement.

     

    5.9    Reservation of
Securities.  The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount as may be
required to fulfill its obligations in full under the Transaction
Documents.

     

    5.10   Limited
Standstill.  The
Company will deliver to Investor on or before the each Tranche Closing Date and
will honor and will take reasonable actions to assist Investor in enforcing the
provisions of the Lock-Up Agreements with the Company’s officers, directors and
beneficial owners of 10% or more of the Common Stock.

     

    
      
        
        

      

      
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    5.11   Issuance of Additional
Securities.  The
Company shall not issue additional Common Stock or securities convertible into
Common Stock to any Person other than Investor, or an Investor Affiliate, if
such issuance would reduce the number of remaining authorized shares of Common
Stock that could be issued below the number of remaining authorized shares
issuable upon exercise of the Warrants, without previously amending its
Certificate of Incorporation to increase the number of duly authorized shares of
Common Stock by at least the amount necessary to assume a sufficient number of
shares to permit the exercise of all outstanding Warrants.

     

    5.12    Prospectus Availability and
Changes.  The
Company will make available to Investor upon request, and thereafter from time
to time to furnish Investor, as many copies of any Prospectus (or of the
Prospectus as amended or supplemented if the Company shall have made any
amendments or supplements thereto after the effective date of the applicable
Registration Statement) as Investor may request for the purposes contemplated by
the Act; and in case Investor is required to deliver  a prospectus
after the nine-month period referred to in Section 10(a)(3) of the Act in
connection with the sale of the Common Shares, or after the time a
post-effective amendment to the applicable Registration Statement is required
pursuant to Item 512(a) of Regulation S-K under the Act, the Company will
prepare, at its expense, promptly upon request such amendment or amendments to
the Registration Statement and the Prospectus as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Act or Item 512(a)
of Regulation S-K under the Act, as the case may be.

     

    The
Company will advise Investor promptly of the happening of any event within the
time during which a Prospectus is required to be delivered under the Act which
could require the making of any change in the Prospectus then being used so that
the Prospectus would not include an untrue statement of material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading, and to
advise Investor promptly if, during such period, it shall become necessary to
amend or supplement any Prospectus to cause such Prospectus to comply with the
requirements of the Act, and in each case, during such time, to prepare and
furnish, at the Company’s expense, to Investor promptly such amendments or
supplements to such Prospectus as may be necessary to reflect any such change or
to effect such compliance.

     

    ARTICLE 6

    MISCELLANEOUS

     

    6.1    Fees and
Expenses.  Except
for the $20,000.00 non-refundable document preparation fee previously paid by
the Company, the receipt of which is hereby acknowledged by Investor, and as may
be otherwise set forth in this Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this
Agreement.  The Company shall pay all stamp and other taxes and duties
levied in connection with the sale of the Securities, if any, to Investor by the
Company.

     

    
      
        
        

      

      
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    6.2    Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date after the day of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified on the signature page prior to 5:00 p.m. (New York City time) on a
Trading Day and an electronic confirmation of delivery is received by the
sender, (b) two Trading Days after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section
6.2 on a
day that is not a Trading Day or later than 5:00 p.m. (New York City time) on
any Trading Day, (c) three Trading Days following the date of mailing, if sent
by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given.  The
addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such Person.

     

    6.3    Amendments;
Waivers.  No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and Investor or,
in the case of a waiver, by the party against whom enforcement of any such
waiver is sought.  No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.

     

    6.4    Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

     

    6.5    Successors and
Assigns.  This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns.  The Company may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of Investor, which consent will not be unreasonably withheld or
delayed.  Investor may assign any or all of its rights under this
Agreement to any Person to whom Investor assigns or transfers any Securities,
provided such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions hereof that apply to the
“Investor”.

     

    6.6    No Third-Party
Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set forth
in Section
5.8.

     

    6.7    Governing
Law.  All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof.  Each party agrees that
all legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New
York.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction

     

    
      
        
        

      

      
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    contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper or inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.  The
parties hereby waive all rights to a trial by jury.  If either party
shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

     

    6.8    Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery, exercise and/or conversion of the Securities, as
applicable.

     

    6.9    Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

     

    6.10   Severability.  If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

     

    6.11   Replacement of
Securities.  If
any certificate or instrument evidencing any Securities is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested.  The
applicants for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs associated with the issuance of such
replacement Securities.

     

    6.12    Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of Investor and the Company will be
entitled to specific performance under the Transaction Documents.  The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be
adequate.

     

    
      
        
        

      

      
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    6.13    Payment Set
Aside.  To
the extent that the Company makes a payment or payments to Investor pursuant to
any Transaction Document or Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

     

    6.14    Liquidated
Damages.  The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due and
payable shall have been canceled.

     

    6.15    Construction.  The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.

     

    6.16    Time of the
Essence.  Time
is of the essence with respect to all provisions of this Agreement that specify
a time for performance.

     

    6.17    Entire
Agreement.  The
Transaction Documents, together with the exhibits and schedules thereto, contain
the entire understanding of the parties, and supersede all prior and
contemporaneous agreements, term sheets, communications, discussions and
understandings, oral or written, which the parties acknowledge have been merged
into such documents, exhibits and schedules.  Neither party has relied
upon any agreement, promise or representation not expressly set forth in the
Transaction Documents and each party agrees that it may only rely on the
agreements, promises and representations set forth therein.

     

    
      
        
        

      

      
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    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.

     

     

    
      	INTERNATIONAL STEM
      CELL CORPORATION	 
	 	 	 
	By:	/s/ Kenneth C.
      Aldrich	 
	 	Kenneth C. Aldrich,
      Chief Executive Officer	 
	 	 	 
	 	 	 
	 	 	 
	OPTIMUS LIFE
      SCIENCES CAPITAL PARTNERS, LLC	 
	 	 	 
	By:	/s/ Terry
      Peizer	 
	 	Terry Peizer,
      Managing Director	 
	 	 	 

    

     

    
      
        
        

      

      
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    Addresses
for Notice

     

    

    To
Company:

    

    International
Stem Cell Corporation:

    2595
Jason Court

    Oceanside,
CA 92056

    Attention:  Kenneth
C. Aldrich, CEO

    Fax
No.:  (760) 940-6387

    Email:  kaldrich@intlstemcell.com

    

    with a
copy to:

    

    DLA Piper
LLP (US)

    4365
Executive Drive, Suite 1100

    San
Diego, CA  92121

    Attention:  Douglas
J. Rein

    Fax:  (858)
677-1401

    Email:  doug.rein@dlapiper.com

    

    To
Investor:

     

    Optimus
Life Sciences Capital Partners, LLC

    11150
Santa Monica Boulevard, Suite 1500

    Los
Angeles, CA 90025

    Attention:
Terry Peizer, Managing Director

    Fax No.:
(310) 444-5300

    Email:  terry@Optimuscapital.com

     

    w/ copy
to:

     

    Luce
Forward Hamilton & Scripps LLP

    601 South
Figueroa Street, Suite 3900

    Los
Angeles, CA 90017

    Attention:  John
C. Kirkland, Esq.

    Fax No.:
(213) 452-8035

    Email:
jkirkland@luce.com

     

    
      
        
        

      

      
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    Exhibit
A

     

    Form
of Warrant

     

    
      
        
        

      

      
        Exhibit
A

        
          

        

      

      
        
        

      

    

     

    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

     

    

     

    International
Stem Cell Corporation

     

    Warrant
To Purchase Common Stock

    
    

     

    
      	Warrant No.:
      2009-[_____]	
              Issuance
      Date:  June 30, 2009

            
	 	 
	Number of Warrant
      Shares:  [_______________]	
              Initial Exercise
      Price:  [$____]

            

    

     

     

    International
Stem Cell Corporation, a Delaware corporation (“Company”), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, [_______________], the
holder hereof or its designees or assigns (“Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company, at
the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Common Stock (including any Warrants to Purchase Common
Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any
time or times on or after the date hereof, but not after 11:59 p.m.,
New York time, on the fifth anniversary of the Issuance Date (subject to
acceleration under the terms of Section 3.2), that number of duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock set forth
above (the “Warrant
Shares”); provided, however, that this Warrant may only be exercised for
that number of shares equal to 135.0% of the cumulative amount of Tranche
Purchase Prices (as defined in the Purchase Agreement) under Tranche Exercise
Notices delivered prior to the date of exercise.  Upon delivery by
Company of a Tranche Exercise Notice, Holder shall deliver any Warrants that are
not exercisable by reason of the limitation set forth above to the Company in
return for issuance of a Warrant, with terms established by the Purchase
Agreement, that is then exercisable.  Except as otherwise defined
herein, capitalized terms in this Warrant shall have the meanings set forth in
ARTICLE 13.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    ARTICLE 1

    EXERCISE OF
WARRANT.

     

    1.1    Mechanics
of Exercise.  Subject to the terms and conditions hereof , this
Warrant may be exercised by the Holder on any day on or after the date hereof,
in whole or in part, by (i) delivery of a written notice to the Company, in
the form attached hereto as Exhibit A (the
“Exercise
Notice”), of the Holder’s election to exercise this Warrant and
(ii) payment to the Company of an amount equal to the applicable Exercise
Price multiplied by the number of Warrant Shares as to which this Warrant is
being exercised (the “Aggregate Exercise
Price”) in cash or by wire transfer of immediately available funds, by
the issuance and delivery of a recourse promissory note substantially in the
form attached hereto as Exhibit B (each, a
“Recourse
Note”), or by cashless exercise pursuant to Section 1.3.  The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder.  Execution and delivery of the Exercise Notice
with respect to less than all of the Warrant Shares shall have the same effect
as cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares.  On the
next business day after the date on which the Company has received each of the
Exercise Notice and the Aggregate Exercise Price (the “Exercise Delivery
Documents”) by 5:00 p.m. New York time on a business day (such next
business day, the “Share Delivery
Date”), the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of the Exercise Delivery Documents to the Holder and the
Company’s transfer agent (the “Transfer Agent”) and
credit such aggregate number of Warrant Shares to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
The Depository Trust Company (DTC) Fast Automated Securities Transfer (FAST)
Program through its Deposit/Withdrawal Agent Commission (DWAC)
system.  In the event the Company receives the Exercise Delivery
Documents after 5:00 p.m. New York time, the Share Delivery Date will be
computed from the next business day.  Upon delivery of the Exercise
Delivery Documents, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date such Warrant Shares
are credited to the Holder’s DTC account.  If this Warrant is
submitted in connection with any exercise pursuant to this Section 1.1 and the
number of Warrant Shares represented by this Warrant submitted for exercise is
greater than the number of Warrant Shares being acquired upon an exercise, then
the Company shall as soon as practicable and in no event later than three
Business Days after any exercise and return of the previously issued Warrant and
at its own expense, issue a new Warrant (in accordance with Section 6.4) representing the
right to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares with respect
to which this Warrant is exercised.  No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but rather the number
of shares of Common Stock to be issued shall be rounded up to the nearest whole
number.  The Company shall pay any and all taxes which may be payable
with respect to the issuance and delivery of Warrant Shares upon exercise of
this Warrant.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    1.2    Exercise
Price.  For purposes of this Warrant, “Exercise Price” means
an amount equal to the Closing Sale Price of a Share of Common Stock on the
Trading Day immediately preceding the Issuance Date per Warrant Share, subject
to adjustment as provided herein.

     

    1.3    Cashless
Exercise.  Notwithstanding anything contained herein to the
contrary, if at any time there is not a current, valid and effective
registration statement covering the Warrant Shares that are the subject of the
Exercise Notice (the “Unavailable Warrant
Shares”), the Holder may, in its sole discretion, exercise this Warrant
in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares
of Common Stock determined according to the following formula (a “Cashless
Exercise”):

     

    Net
Number = (B-C) x
A

    B

    

    For
purposes of the foregoing formula:

    

    A = the
total number of shares with respect to which this Warrant is then being
exercised.

     

    B = the
average of the Closing Sale Prices of the shares of Common Stock (as reported by
Bloomberg) for the five (5) consecutive Trading Days ending on the date
immediately preceding the date of the Exercise Notice.

     

    C = the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

     

    1.4    Company’s
Failure to Timely Deliver Securities.  If the Company
shall fail for any reason or for no reason to timely credit the Holder’s balance
account with DTC for such number of shares of Common Stock to which the Holder
is entitled upon the Holder’s exercise of this Warrant, then, in addition to all
other remedies available to the Holder, the Company shall pay in cash to the
Holder on each day after such Business Day that the issuance of such shares of
Common Stock is not timely effected an amount equal to 1.5% of the product of
(A) the sum of the number of shares of Common Stock not issued to the
Holder on a timely basis and to which the Holder is entitled and (B) the
Closing Sale Price of the shares of Common Stock on the Trading Day immediately
preceding the last possible date which the Company could have issued such shares
of Common Stock to the Holder without violating Section 1.1.  In
addition to the foregoing, if the Company shall fail to timely credit the
Holder’s balance account with DTC for the number of shares of Common Stock to
which the Holder is entitled upon the Holder’s exercise hereunder, and if on or
after such Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of shares of Common Stock issuable upon such exercise that the Holder
anticipated receiving from the Company (a “Buy-In”), then the
Company shall, within one Business Day after the Holder’s request and in
the Holder’s discretion, either (i) pay cash to the Holder in an amount
equal to the Holder’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at
which point the Company’s obligation to deliver such certificate (and to issue
such shares of Common Stock) or credit such Holder’s balance account with DTC
shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such shares of Common Stock or
credit such Holder’s balance account with DTC and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of
(A) such number of shares of Common Stock, times (B) the Closing Bid
Price on the date of exercise.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    1.5    Disputes.  In the case of a
dispute as to the determination of the Exercise Price or the arithmetic
calculation of the Warrant Shares, the Company shall promptly issue to the
Holder the number of Warrant Shares that are not disputed and resolve such
dispute in accordance with Section 12.

     

    1.6    Exercise
Limitation.  Notwithstanding any other provision, at no time
may the Holder exercise
this Warrant such that the number of Warrant Shares to be received pursuant to
such exercise aggregated with all other shares of Common Stock then owned by the
Holder beneficially or deemed beneficially owned by the Holder would result in
the Holder owning more than 4.99% of all of such Common Stock as would be
outstanding on the date of exercise, as determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  In addition, as of any date, the aggregate number of
shares of Common Stock into which this Warrant is exercisable within 61 days,
together with all other shares of Common Stock then beneficially owned (as such
term is defined in Rule 13(d) under the Exchange Act) by Holder and its
affiliates, shall not exceed 9.99% of the total outstanding shares of Common
Stock as of such date.

     

    1.7    Insufficient
Authorized Shares.  If at any time
while any of the Warrants remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy
its obligation to reserve for issuance upon exercise of the Warrants at least a
number of shares of Common Stock equal to 110% of the number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of all of
the Warrants then outstanding (the “Required Reserve
Amount”) (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary
to increase the Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for the
Warrants then outstanding.  Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than 90 days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the approval of an increase in the number of authorized
shares of Common Stock.  In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    ARTICLE 2

    ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES.

     

    If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately
increased.  If the Company at any time on or after the Subscription
Date combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of Warrant Shares will be
proportionately decreased.  Any adjustment under this ARTICLE 2 shall
become effective at the close of business on the date the subdivision or
combination becomes effective.

     

    ARTICLE 3

    PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS

     

    3.1    Purchase
Rights.  If at any time
the Company grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the “Purchase Rights”),
then the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on the
exercise of this Warrant) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of shares of Common Stock are
to be determined for the grant, issue or sale of such Purchase
Rights.

     

    3.2    Fundamental
Transactions.  The
Company shall not enter into or be party to a Fundamental Transaction unless the
Successor Entity assumes in writing all of the obligations of the Company under
this Warrant in accordance with the provisions of this Section 3.2 pursuant to
written agreements in form and substance satisfactory to the Required Holders
and approved by the Required Holders prior to such Fundamental Transaction,
including agreements to deliver to each holder of Warrants in exchange for such
Warrants a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant, including, without
limitation, an adjusted exercise price equal to the value for the shares of
Common Stock reflected by the terms of such Fundamental Transaction, and
exercisable for a corresponding number of shares of capital stock equivalent to
the shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and satisfactory to the Required
Holders.  Upon the occurrence of any Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Warrant
referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    exercise
of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property) purchasable upon the exercise of this Warrant
prior to such Fundamental Transaction, such shares of stock, securities, cash,
assets or any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had this Warrant been converted
immediately prior to such Fundamental Transaction, as adjusted in accordance
with the provisions of this Warrant.  In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Common Stock are
entitled to receive securities or other assets with respect to or in exchange
for shares of Common Stock (a “Corporate Event”),
the Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant at any
time after the consummation of the Fundamental Transaction, in lieu of the
shares of the Common Stock (or other securities, cash, assets or other property)
purchasable upon the exercise of this Warrant prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Warrant been exercised immediately
prior to such Fundamental Transaction; provided, however that in the event the
Fundamental Transaction involves the issuance of cash or freely tradeable
securities by an issuer listed on the New York Stock Exchange on the Nasdaq
Stock Market, then the ability to exercise this Warrant shall expire on the
consummation of that Fundamental Transaction.  Provision made pursuant
to the preceding sentence shall be in a form and substance reasonably
satisfactory to the Required Holders.  The provisions of this Section 3.2  shall apply
similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the exercise of
this Warrant.

     

    3.3    Notwithstanding
the foregoing, in the event of a Fundamental Transaction other than one in which
the Successor Entity is a Public Successor Entity that assumes this Warrant such
that this Warrant shall be exercisable for the publicly traded common stock of
such Public Successor Entity, at the request of the Holder delivered before the
90th day after such Fundamental Transaction, the Company (or the Successor
Entity) shall purchase this Warrant from the Holder by paying to the Holder,
within five (5) Business Days after such request (or, if later, on the
effective date of the Fundamental Transaction), cash in an amount equal to the
value of the remaining unexercised portion of this Warrant on the date of such
consummation, which value shall be determined by use of the Black Scholes Option
Pricing Model using a volatility equal to the 100 day average historical price
volatility prior to the date of the public announcement of such Fundamental
Transaction.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    ARTICLE 4

    NONCIRCUMVENTION

     

    The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the
Holder.  Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all
action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of the SPA Warrants, 110% of the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the SPA Warrants
then outstanding (without regard to any limitations on exercise).

     

    ARTICLE 5

    WARRANT HOLDER NOT DEEMED A
STOCKHOLDER

     

    Except as
otherwise specifically provided herein, the Holder, solely in such Person’s
capacity as a holder of this Warrant, shall not be entitled to vote or receive
dividends or be deemed the holder of share capital of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the Holder, solely in such Person’s capacity as the Holder of this Warrant,
any of the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
which such Person is then entitled to receive upon the due exercise of this
Warrant.  In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on the Holder to purchase any securities
(upon exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company.  Notwithstanding this ARTICLE 5, the
Company shall provide the Holder with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.

     

    ARTICLE 6

    REISSUANCE OF
WARRANTS

     

    6.1    Transfer
of Warrant.  If this Warrant
is to be transferred, the Holder shall surrender this Warrant to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the
Holder a new Warrant (in accordance with Section 6.4), registered as
the Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 6.4) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.

     

    
      
        
        

      

      
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    6.2    Lost,
Stolen or Mutilated Warrant.  Upon receipt by
the Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the Holder to the
Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the
Holder a new Warrant (in accordance with Section 6.4) representing the
right to purchase the Warrant Shares then underlying this Warrant.

     

    6.3    Exchangeable
for Multiple Warrants.  This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Warrant or Warrants (in accordance with Section 6.4) representing in
the aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional shares of
Common Stock shall be given.

     

    6.4    Issuance
of New Warrants.  Whenever the
Company is required to issue a new Warrant pursuant to the terms of this
Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
(ii) shall represent, as indicated on the face of such new Warrant, the
right to purchase the Warrant Shares then underlying this Warrant (or in the
case of a new Warrant being issued pursuant to Section 6.1 or Section 6.3, the Warrant
Shares designated by the Holder which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of
such new Warrant which is the same as the Issuance Date, and (iv) shall
have the same rights and conditions as this Warrant.

     

    ARTICLE 7

    NOTICES

     

    Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 6.2 of the
Purchase Agreement.  The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Warrant, including in
reasonable detail a description of such action and the reason
therefore.  Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to holders of shares of Common Stock as such or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder.

     

    
      
        
        

      

      
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    ARTICLE 8

    AMENDMENT AND
WAIVER

     

    Except as
otherwise provided herein, the provisions of this Warrant may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the Required Holders; provided that no such action may increase the
exercise price of any SPA Warrant or decrease the number of shares or class of
stock obtainable upon exercise of any SPA Warrant without the written consent of
the Holder.  No such amendment shall be effective to the extent that
it applies to less than all of the holders of the SPA Warrants then
outstanding.

     

    ARTICLE 9

    GOVERNING
LAW

     

    This
Warrant shall be governed by and construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.

     

    ARTICLE 10

    CONSTRUCTION;
HEADINGS

     

    This
Warrant shall be deemed to be jointly drafted by the Company and the Holder and
shall not be construed against any person as the drafter hereof.  The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.

     

    ARTICLE 11

    DISPUTE
RESOLUTION

     

    In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within 2
Business Days of receipt of the Exercise Notice giving rise to such dispute, as
the case may be, to the Holder.  If the Holder and the Company are
unable to agree upon such determination or calculation of the Exercise Price or
the Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall,
within 2 Business Days submit via facsimile (a) the disputed determination
of the Exercise Price to an independent, reputable investment bank selected by
Holder and approved by Company, which approval may not be unreasonably withheld
or delayed, or (b) the disputed arithmetic calculation of the Warrant
Shares to the Company’s independent registered public accounting
firm.  The Company shall cause at its expense the investment bank or
the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
10 Business Days from the time it receives the disputed determinations or
calculations.  Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.

     

    
      
        
        

      

      
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    ARTICLE 12

    REMEDIES, OTHER OBLIGATIONS,
BREACHES AND INJUNCTIVE RELIEF

     

    The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant, at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the right of the Holder right to pursue actual damages for
any failure by the Company to comply with the terms of this
Warrant.  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate.  The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holder of this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required.

     

    ARTICLE 13

    DEFINITIONS

     

    For
purposes of this Warrant, the following terms shall have the following
meanings:

     

    13.1    “Bloomberg” means
Bloomberg Financial Markets.

     

    13.2    “Business Day” means
any day other than Saturday, Sunday or other day on which commercial banks in
The City of New York are authorized or required by law to remain
closed.

     

    13.3    “Closing Bid Price”
and “Closing Sale
Price” means, for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security on the Principal
Market, as reported by Bloomberg, or, if the Principal Market begins to operate
on an extended hours basis and does not designate the closing bid price or the
closing trade price, as the case may be, then the last bid price or last trade
price, respectively, of such security prior to 4:00:00 p.m., New York time,
as reported by Bloomberg, or, if the Principal Market is not
the principal securities exchange or trading market for such security, the last
closing bid price or last trade price, respectively, of such security on the
principal securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic

     

    
      
        
        

      

      
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    bulletin
board for such security as reported by Bloomberg, or, if no closing bid price or
last trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly
the National Quotation Bureau, Inc.).  If the Closing Bid Price or the
Closing Sale Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as
the case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder.  If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to ARTICLE 11.  All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.

    13.4    “Common Stock” means
(i) the Company’s shares of Common Stock, par value $0.001 per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.

     

    13.5    “Convertible
Securities” means any stock or securities (other than Options) directly
or indirectly convertible into or exercisable or exchangeable for shares of
Common Stock.

     

    13.6    “Eligible Market”
means the Principal Market, The New York Stock Exchange, Inc., The NASDAQ
Global Select Market, The NASDAQ Global Market, The NASDAQ Capital Market, or
the NYSE Amex Stock Exchange.

     

    13.7    “Fundamental
Transaction” means that the (A) Company shall, directly or
indirectly, in one or more related transactions, (i) consolidate or merge
with or into (whether or not the Company is the surviving corporation) another
Person or Persons, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (iii) allow another Person to make a purchase, tender
or exchange offer that is accepted by the holders of more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
(iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding shares of Common Stock (not including any
shares of Common Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify its Common Stock, or (B) any “person” or “group”
(as these terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act) is or shall become the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of
the aggregate Common Stock of the Company, other than persons or groups who
exceed such ownership level as of the date of issuance of this
Warrant.

     

    
      
        
        

      

      
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    13.8    “Options” means any
rights, warrants or options to subscribe for or purchase shares of Common Stock
or Convertible Securities.

     

    13.9    “Parent Entity” of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed
on an Eligible Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.

     

    13.10    “Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.

     

    13.11    “Purchase Agreement”
means the Preferred Stock Purchase Agreement dated June 30, 2009, by and among
the Company and the investors referred to therein.

     

    13.12    “Principal Market”
means The OTC Bulletin Board of FINRA.

     

    13.13    “Public Successor
Entity” means a Successor Entity that is a publicly traded corporation
whose stock is quoted or listed for trading on an Eligible Market.

     

    13.14    “Required Holders”
means the Holders of the SPA Warrants representing at least a majority of shares
of Common Stock underlying the SPA Warrants then outstanding.

     

    13.15    “SPA Warrant(s)” means
a warrant to purchase Common Stock of the Company issued pursuant to the
Purchase Agreement.

     

    13.16    “Successor Entity”
means the Person (or, if so elected by the Required Holders, the Parent Entity)
formed by, resulting from or surviving any Fundamental Transaction or the Person
(or, if so elected by the Required Holders, the Parent Entity) with which such
Fundamental Transaction shall have been entered into.

     

    13.17    “Trading Day” means
any day on which the Common Stock are traded on the Principal Market, or, if the
Principal Market is not the principal trading market for the Common Stock, then
on the principal securities exchange or securities market on which the Common
Stock is then traded; provided that “Trading Day” shall
not include any day on which the Common Stock is scheduled to trade on such
exchange or market for less than 4.5 hours or any day that the Common Stock is
suspended from trading during the final hour of trading on such exchange or
market (or if such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York time).

     

    
      
        
        

      

      
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    IN
WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to
be duly executed as of the Issuance Date set out above.

     

    
    

     

    
      	 	INTERNATIONAL STEM
      CELL CORPORATION
	 	 	 
	 	

              By:

            	

               

            
	 	

              Name:

            	

               

            
	 	

              Title:

            	

               

            

    

     

    
      
        
        

      

      
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    EXHIBIT A

     

    EXERCISE
NOTICE

     

     

    INTERNATIONAL
STEM CELL CORPORATION

     

    The
undersigned hereby exercises the right to purchase ________________ shares of
the shares of Common Stock (“Warrant Shares”) of
International Stem Cell Corporation, a Delaware corporation (“Company”), evidenced
by the attached Warrant to Purchase Common Stock (“Warrant”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.  The Holder intends that payment of the
Exercise Price shall be made as:

     

    ___           Cash
Exercise with respect to ____________ Warrant Shares

     

    ___           Cashless
Exercise with respect to ____________ Warrant Shares

     

    ___           Recourse
Note Exercise with respect to ____________ Warrant Shares

     

    Please
issue

    
      	 	___	
              A
      certificate or certificates representing said shares of Common Stock in
      the namespecified below

            
	 	 	 
	
               
      

            	
              ___

            	
              Said
      shares in electronic form to the Deposit/Withdrawal at Custodian (DWAC)
      account with Depository Trust Company (DTC) specified
    below.

            

    

     

    

    _______________________________

    By:_____________________________

    Name:___________________________

    Title:____________________________

    

    
      
        
        

      

      
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    ACKNOWLEDGMENT

     

    The
Company hereby acknowledges this Exercise Notice and hereby directs [_______________________________]
to issue the above indicated number of shares of Common Stock in accordance with
the Transfer Agent Instructions dated June 30, 2009 from the Company and
acknowledged and agreed to by the transfer agent.

     

    
       

      
        	 	International Stem
      Cell Corporation
	 	 	 
	 	

                By:

              	

                 

              
	 	

                Name:

              	

                 

              
	 	

                Title:

              	

                 

              

      

       

      
        
          
          

        

        
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    EXHIBIT B

     

    FORM OF
NOTE

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECURED
PROMISSORY NOTE

    

    

     

    
      	$[_____________]	
              Date:        [________], 2030

            

    

     

    FOR VALUE
RECEIVED, [_____________]
(“Borrower”)
promises to pay to the order of International Stem Cell Corporation (“Lender”), at [________], or at such
other place as Lender may from time to time designate in writing, the principal
sum of $[________], with interest,
as follows:

     

    1.    Interest.  The
principal balance outstanding, from time to time, shall bear interest from and
after the date hereof at the rate of 2.0% per year,
compounded annually.  Interest shall be calculated on the basis of the
number of days elapsed during the period for which interest is being calculated,
compounded annually.  Interest not paid when due shall be added to the
principal.

     

    2.    Payments.  If
not sooner paid, the entire unpaid principal balance, interest thereon and any
other charges due and payable under this Note shall be due and payable on the
fourth anniversary of the date of this Note (“Maturity Date”);
provided,
however, that in no event shall this Note be due or payable at any time
that (a) Lender is in default of any loan agreement, equity investment agreement
or instrument, or other material agreement, or (b) subject to the following
clause, there are any shares of Series E Preferred Stock of Lender issued or
outstanding; provided, further, that in the
event that Lender redeems all or a portion of the shares of Series E Preferred
Stock then held by Borrower, then Borrower shall apply, and Lender shall offset,
the proceeds of such redemption to pay down the accrued interest and outstanding
principal of this Note.  Borrower shall have the right to prepay all
or any part of the principal balance of this Note at any time without penalty or
premium.  All payments shall be first be applied to interest, then to
reduce the outstanding principal.

     

    3.    Full Recourse
Note.  THIS IS A FULL RECOURSE PROMISSORY
NOTE.  Accordingly, notwithstanding that Borrower’s obligations under
this Note are secured by the Collateral, in the event of a default hereunder,
Lender shall have full recourse to all the other assets of
Borrower.  Moreover, Lender shall not be required to proceed against
or exhaust any Collateral, or to pursue any Collateral in any particular order,
before Lender pursues any other remedies against Borrower or against any of
Borrower’s assets.

     

    4.    Security

     

    a.    Pledge.  As
security for the due and prompt payment and performance of all payment
obligations under this Note and any modifications, replacements and extensions
hereof (collectively, “Secured
Obligations”), Borrower hereby pledges and grants a security interest to
Lender in all of Borrower’s right, title, and interest in and to all of the
following, now owned or hereafter acquired or arising (together the “Collateral”):

     

    i.    Publicly
traded shares of common stock, preferred stock, bonds, notes and/or debentures
(collectively, “Pledged Securities”)
with a fair market value on the date hereof at least equal to the principal
amount of this Note, based upon the trading price of such securities on the Pink
Sheets, OTC Bulletin Board, NASDAQ Capital Market, NASDAQ Global Market, NASDAQ
Global Select Market, NYSE Amex, or New York Stock Exchange;

     

    
      
        
        

      

      
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    ii.    all
rights of Borrower with respect to or arising out of the Pledged Securities,
including voting rights, and all equity and debt securities and other property
distributed or distributable with respect thereto as a result of merger,
consolidation, dissolution, reorganization, recapitalization, stock split, stock
dividend, reclassification, exchange, redemption, or other change in capital
structure; and

     

    iii.    all
proceeds, replacements, substitutions, accessions and increases in any of the
Collateral.

     

    b.    Replacement
Securities.  In the event that Borrower sells or disposes of
any Pledged Securities during any period in which any principal balance of this
Note remains outstanding, Borrower shall promptly provide replacement securities
of equal or greater value.

     

    c.    Rights With Respect to
Distributions.  So long as no default shall have occurred and
be continuing under this Note, Borrower shall be entitled to receive any and all
dividends and distributions made with respect to the Pledged Securities and any
other Collateral.  However, upon the occurrence and during the
continuance of any default, Lender shall have the sole right (unless otherwise
agreed by Lender) to receive and retain dividends and distributions and apply
them to the outstanding balance of this Note or hold them as Collateral, at
Lender’s election.  

     

    d.    Voting
Rights.  So long as no default shall have occurred and be
continuing under this Note, Borrower shall be entitled to exercise all voting
rights pertaining to the Pledged Securities and any other
Collateral.  However, upon the occurrence and during the continuance
of any default, all rights of Borrower to exercise the voting rights that
Borrower would otherwise be entitled to exercise with respect to the Collateral
shall cease and (unless otherwise agreed by Lender) all such rights shall
thereupon become vested in Lender, which shall thereupon have the sole right to
exercise such rights.

     

    e.    Financing Statement; Further
Assurances.  Borrower agrees, concurrently with executing this
Note, that Lender may file a UCC-1 financing statement relating to the
Collateral in favor of Lender, and any similar financing statements in any
jurisdiction in which Lender reasonably determines such filing to be
necessary.  Borrower further agrees that at any time and from time to
time Borrower shall promptly execute and deliver all further instruments and
documents that Lender may request in order to perfect and protect the security
interest granted hereby (including, following an event of default, delivery of
the Collateral to hold as secured party), or to enable Lender to exercise and
enforce its rights and remedies with respect to any Collateral following an
event of default.

     

    
      
        
        

      

      
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    f.    Powers of
Lender.  Borrower hereby appoints Lender as Borrower’s true and
lawful attorney-in-fact to perform any and all of the following acts, which
power is coupled with an interest, is irrevocable until the Secured Obligations
are paid and performed in full, and may be exercised from time to time by Lender
in its discretion:  To take any action and to execute any instrument
which Lender may deem reasonably necessary or desirable to accomplish the
purposes of this Section  3f
and, more broadly, this Note including, without limitation:  (i) to
exercise voting and consent rights with respect to Collateral in accordance with
this Note, (ii) to receive, endorse and collect all instruments or other forms
of payment made payable to Borrower in respect of the Collateral or any part
thereof and to give full discharge for the same, (iii) to perform or cause
the performance of any obligation of Borrower hereunder in Borrower’s name or
otherwise, (iv) during the continuance of any default hereunder, to
liquidate any Collateral pledged to Lender hereunder and to apply proceeds
thereof to the payment of the Secured Obligations or to place such proceeds into
a cash collateral account and/or to transfer the Collateral into the name of
Lender, all at Lender’s sole discretion, (v)  to enter into any extension,
reorganization or other agreement relating to or affecting the Collateral, and,
in connection therewith, to deposit or surrender control of the Collateral, (vi)
to accept other property in exchange for the Collateral, (vii) to make any
compromise or settlement Lender deems desirable or proper, and (viii) to
execute on Borrower’s behalf and in Borrower’s name any documents required in
order to give Lender a continuing first lien upon the Collateral or any part
thereof.

     

    5.    Additional
Terms

     

    a.    No
Waiver.  The acceptance by Lender of payment of a portion of
any installment when due or an entire installment but after it is due shall
neither cure nor excuse the default caused by the failure of Borrower timely to
pay the whole of such installment and shall not constitute a waiver of Lender’s
right to require full payment when due of any future or succeeding
installments.

     

    b.    Default.  Any
one or more of the following shall constitute a “default” under this
Note:  (i) a default in the payment when due of any amount
hereunder, (ii) Borrower’s refusal to perform any material term, provision
or covenant under this Note, (iii) the commencement of any liquidation,
receivership, bankruptcy, assignment for the benefit of creditors or other
debtor-relief proceeding by or against Borrower, or subject to Section 4b, the
Collateral becomes subject to any lien, claim, or encumbrance of any third party
or is transferred by Borrower, and (iv) the levying of any attachment,
execution or other process against Borrower, or subject to Section 4b the
Collateral or any material portion thereof.

     

    c.    Default
Rights

     

    i.    Upon the
occurrence of any payment default Lender may, at its election, declare the
entire balance of principal and interest under this Note immediately due and
payable.  A delay by Lender in exercising any right of acceleration
after a default shall not constitute a waiver of the default or the right of
acceleration or any other right or remedy for such default.  The
failure by Lender to exercise any right of acceleration as a result of a default
shall not constitute a waiver of the right of acceleration or any other right or
remedy with respect to any other default, whenever
occurring.  

     

    
      
        
        

      

      
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    ii.    Further,
upon the occurrence of any non-monetary default, following 15 days notice from
Lender specifying the default and demanded manner of cure for any non-monetary
default, Lender shall thereupon and thereafter have any and all of the rights
and remedies to which a secured party is entitled after a default under the
applicable Uniform Commercial Code, as then in effect.  In addition to
its other rights and remedies, Borrower agrees that, upon the occurrence of
default, Lender may in its sole discretion do or cause to be done any one or
more of the following:

     

    (a)    Proceed
to realize upon the Collateral or any portion thereof as provided by law, and
without liability for any diminution in price which may have occurred, sell the
Collateral or any part thereof, in such manner, whether at any public or private
sale, and whether in one lot as an entirety, or in separate portions, and for
such price and other terms and conditions as is commercially reasonable given
the nature of the Collateral.

     

    (b)    If notice
to Borrower is required, give written notice to Borrower at least ten days
before the date of sale of the Collateral or any portion thereof.

     

    (c)    Transfer
all or any part of the Collateral into Lender's name or in the name of its
nominee or nominees.

     

    (d)    Vote all
or any part of the Collateral (whether or not transferred into the name of
Lender ) and give all consents, waivers and ratifications in respect of the
Collateral and otherwise act with respect thereto, as though Lender were the
outright owner thereof.

     

    iii.    Borrower
acknowledges that all or part of foreclosure of the Collateral may be restricted
by state or federal securities laws, Lender may be unable to effect a public
sale of all or part of the Collateral, that a public sale is or may be
impractical and inappropriate and that, in the event of such restrictions,
Lender thus may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among other things,
to acquire the Collateral for their own account, for investment and not with a
view to its distribution or resale.  Borrower agrees that if
reasonably necessary Lender may resort to one or more sales to a single
purchaser or a restricted or limited group of purchasers.  Lender
shall not be obligated to make any sale or other disposition, unless the terms
thereof shall be satisfactory to it.

     

    iv.    If, in
the opinion of Lender based upon written advice of counsel, any consent,
approval or authorization of any federal, state or other governmental agency or
authority should be necessary to effectuate any sale or other disposition of any
Collateral, Borrower shall execute all such applications and other instruments
as may reasonably be required in connection with securing any such consent,
approval or authorization, and will otherwise use its commercially reasonable
best efforts to secure the same.

     

    v.    The
rights, privileges, powers and remedies of Lender shall be cumulative, and no
single or partial exercise of any of them shall preclude the further or other
exercise of any of them.  Any waiver, permit, consent or approval of
any kind by Lender of any default hereunder, or any such waiver of any
provisions or conditions hereof, must be in writing and shall be effective only
to the extent set forth in writing.  Any proceeds of any disposition
of the Collateral, or any part thereof, may be applied by Lender to the payment
of expenses incurred by Lender in connection with the foregoing, and the balance
of such proceeds shall be applied by Lender toward the payment of the Secured
Obligations.

     

    
      
        
        

      

      
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    d.    No Oral Waivers or
Modifications.  No provision of this Note may be waived or
modified orally, but only in a writing signed by Lender and
Borrower.

     

    e.    Attorney
Fees.  The prevailing party in any action by Lender to collect
any amounts due under this Note shall be entitled to recover its reasonable
attorneys fees and costs.

     

    f.    Governing
Law.  This Note has been executed and delivered in, and is to
be construed, enforced, and governed according to the internal laws of, the
State of New York without regard to its principles of conflict of
laws.

     

    g.    Severability.  Whenever
possible, each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law.  However, if any
provision of this Note shall be held to be prohibited by or invalid under
applicable law, it shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of that provision or the other
provisions of this Note.

     

    h.    Entire
Agreement.  This Note contain the entire understanding of the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect to such
matters.

     

     

    
      _______________________________

       

      By:_____________________________

      Name:___________________________

      Title:____________________________

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

    

    Exhibit
B

     

    Certificate
of Designations

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    INTERNATIONAL
STEM CELL CORPORATION

     

    CERTIFICATE
OF DESIGNATIONS OF PREFERENCES,

    RIGHTS
AND LIMITATIONS

    OF

    SERIES E
PREFERRED STOCK

     

    The
undersigned, Kenneth C. Aldrich and William B. Adams, do hereby certify
that:

     

    1.    They are the
Chief Executive Officer and Secretary, respectively, of International Stem Cell
Corporation, a Delaware corporation (the “Corporation”).

     

    2.    The
Corporation is authorized to issue 20,000,000 shares of preferred stock,
3,400,040 of which have been issued or are outstanding.

     

    3.    The following
resolutions were duly adopted by the Board of Directors:

     

    WHEREAS,
the Certificate of Incorporation of the Corporation provides for a class of its
authorized stock known as preferred stock, comprised of 20,000,000 shares,
$0.001 par value per share, issuable from time to time in one or more
series;

     

    WHEREAS,
the Board of Directors of the Corporation is authorized to fix the dividend
rights, dividend rate, voting rights, conversion rights, rights and terms of
redemption and liquidation preferences of any wholly unissued series of
preferred stock and the number of shares constituting any series and the
designation thereof, of any of them; and

     

    WHEREAS,
it is the desire of the Board of Directors of the Corporation, pursuant to its
authority as aforesaid, to fix the rights, preferences, restrictions and other
matters relating to a series of preferred stock, which shall consist of up to
500 shares of the preferred stock which the Corporation has the authority to
issue, as follows:

     

    NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for
the issuance of a series of preferred stock for cash or exchange of other
securities, rights or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series of preferred
stock as follows:

     

    TERMS OF
PREFERRED STOCK

     

    1.    Designation, Amount and Par
Value.  The series of preferred stock shall be designated as
the Corporation’s Series E Preferred Stock (the “Series E Preferred
Stock”) and the number of shares so designated shall be 500 (which shall
not be subject to increase without the consent of all of the holders of the
Series E Preferred Stock (each a “Holder” and
collectively, the “Holders”).  Each
share of Series E Preferred Stock shall have a par value of $0.001 per share.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    2.    Dividends and Other
Distributions.  Commencing on the date of the issuance of any
such shares of Series E Preferred Stock (each respectively an “Issuance Date”),
Holders of Series E Preferred Stock shall be entitled to receive dividends on
each outstanding share of Series E Preferred Stock (“Dividends”), which
shall accrue in shares of Series E Preferred Stock on a daily basis at a rate
equal to 10.0%
per annum.

     

    a.    Any
calculation of the amount of such Dividends payable pursuant to the provisions
of this Section
2 shall
be made based on a 365-day year and on the number of days actually elapsed
during the applicable calendar quarter, compounded annually.

     

    b.    So long
as any shares of Series E Preferred Stock are outstanding, no dividends or other
distributions will be paid, declared or set apart with respect to any Junior
Securities (as defined below).  As used herein, “Junior Securities”
means any series or class of the capital stock of the Corporation now or
hereafter authorized or issued by the Corporation ranking junior to the Series E
Preferred Stock with respect to dividends or distributions or upon the
liquidation, distribution of assets, dissolution or winding-up of the
Corporation, including, without limitation, the Corporation’s common stock, par
value $0.001 per share (“Common Stock”);
provided that notwithstanding the foregoing the Corporation may pay, declare or
set apart any dividend or distribution required to be paid on any shares of
Series D Preferred Stock or other preferred stock.  The Common Stock
shall not be redeemed while the Series E Preferred Stock is
outstanding.

     

    3.    Protective
Provision.  So long as any shares of Series E Preferred Stock
are outstanding, the Corporation shall not, without the affirmative approval of
the Holders of a majority of the shares of the Series E Preferred Stock then
outstanding, (a) alter or change adversely the powers, preferences or
rights given to the Series E Preferred Stock or alter or amend this Certificate
of Designations, (b) authorize or create any class of stock ranking as to
distribution of assets upon a liquidation senior to the Series E Preferred
Stock, (c) amend its certificate or articles of incorporation or other
charter documents in breach of any of the provisions hereof, (d) increase
the authorized number of shares of Series E Preferred Stock, (e) liquidate,
dissolve or wind-up the business and affairs of the  Corporation, or
effect any Deemed Liquidation Event (as defined below), or (f) enter into
any agreement with respect to the foregoing.

     

    a.    A “Deemed Liquidation
Event” shall mean: (i) a merger or consolidation in which the Corporation
is a constituent party or a subsidiary of the Corporation is a constituent party
and the Corporation issues shares of its capital stock pursuant to such merger
or consolidation, except any such merger or consolidation involving the
Corporation or a subsidiary in which the shares of capital stock of the
Corporation outstanding immediately prior to such merger or consolidation
continue to represent, or are converted into or exchanged for shares of capital
stock that represent, immediately following such merger or consolidation, at
least a majority, by voting power, of the capital stock of the surviving or
resulting corporation or if the surviving or resulting corporation is a wholly
owned subsidiary of another corporation immediately following such merger or
consolidation, the parent corporation of such surviving or resulting
corporation; or (ii) the sale, lease, transfer, exclusive license or other
disposition, in a single transaction or series of related transactions, by the
Corporation or any subsidiary of the Corporation of all or substantially all the
assets of the Corporation and its subsidiaries taken as a whole,  or
the sale or disposition (whether by merger or otherwise) of one or more
subsidiaries of the Corporation if substantially all of the assets of the
Corporation and its subsidiaries taken as a whole are held by such subsidiary or
subsidiaries, except where such sale, lease, transfer, exclusive license or
other disposition is to a wholly owned subsidiary of the
Corporation.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    b.    The
Corporation shall not have the power to effect a Deemed Liquidation Event
referred to in Section
3.a
unless the agreement or plan of merger or consolidation for such transaction
provides that the consideration payable to the stockholders of the Corporation
shall be allocated among the holders of capital stock of the Corporation in
accordance with Section 4.

     

    4.    Liquidation.

     

    a.    Upon any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, after payment or provision for payment of debts and other
liabilities of the Corporation, before any distribution or payment shall be made
to the holders of any other equity securities of the Corporation by reason of
their ownership thereof, the Holders of Series E Preferred Stock shall first be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders an amount with respect to each share of Series
E Preferred Stock equal to $10,000.00 (the “Original Series E Issue
Price”), plus any accrued but unpaid Dividends thereon (collectively, the
“Series E Liquidation
Value”).

     

    b.    After
payment has been made to the Holders of the Series E Preferred Stock of the full
amount of the Series E Liquidation Value, any remaining assets of the
Corporation shall be distributed among the holders of the Corporation's Junior
Securities in accordance with the Corporation’s  Certificates of
Designation and Certificate of Incorporation, as amended.

     

    c.    If, upon
any liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation shall be insufficient to make payment in full to all Holders, then
such assets shall be distributed among the Holders at the time outstanding,
ratably in proportion to the full amounts to which they would otherwise be
respectively entitled.

     

    5.    Redemption.

     

    a.    Corporation's Redemption
Option.  Upon or after the first anniversary of the initial
Issuance Date, the Corporation shall have the right, at the Corporation's
option, to redeem all or a portion of the shares of Series E Preferred Stock, at
a price per share of Series E Preferred Stock (the “Corporation Redemption
Price”) equal to the Series E Liquidation Value plus the following
percentages of the Original Series E Issue Price determined by reference to the
original Issuance Date of such shares of Series E Preferred Stock:

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    
    

     

    
      	 	If
      the redemption occurs	
              Additional
      percentage

            	 
	 	 	 	 
	 	

              After
      first anniversary of issuance but prior
      to second anniversary of issuance

            	
              26%

            	 
	 	 	 	 
	 	
              After second
      anniversary of issuance but prior
      to third anniversary of issuance

            	
              17%

            	 
	 	 	 	 
	 	
              After third
      anniversary of issuance but prior
      to fourth anniversary of issuance

            	
              8%

            	 
	 	 	 	 
	 	
              After fourth
      anniversary of issuance

            	
              0%

            	 

    

     

    b.    Mechanics of
Redemption.  If the Corporation elects to redeem any of the
Holders' Series E Preferred Stock then outstanding by delivering written notice
thereof via facsimile and overnight courier (“Notice of Redemption at
Option of Corporation”) to the Holder, which Notice of Redemption at
Option of Corporation shall indicate (A) the number of shares of Series E
Preferred Stock that the Corporation is electing to redeem and (B) the
Corporation Redemption Price.

     

    c.    Payment of Redemption
Price.  Upon receipt of a Notice of Redemption at Option of
Corporation by any Holder, such Holder shall promptly submit to the Corporation
such Holder’s Series E Preferred Stock certificates.  Upon receipt of
such Holder’s Series E Preferred Stock certificates, the Corporation shall pay
the Corporation Redemption Price in cash to such Holder.

     

    6.    Transferability.
The Series E Preferred Stock may only be sold, transferred, assigned, pledged or
otherwise disposed of (“Transfer”) in
accordance with state and federal securities laws.  The Corporation
shall keep at its principal office, or at the offices of a transfer agent, a
register of the Series E Preferred Stock.  Upon the surrender of any
certificate representing Series E Preferred Stock at such place, the
Corporation, at the request of the record Holder of such certificate, shall
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares represented by the surrendered certificate.  Each such new
certificate shall be registered in such name and shall represent such number of
shares as is requested by the Holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate.

     

    7.    Miscellaneous.

     

    a.    Notices.  Any
and all notices to the Corporation shall be addressed to the Corporation's
President at the Corporation's principal place of business on file with the
Secretary of State of the State of Delaware.  Any and all notices or
other communications or deliveries to be provided by the Corporation to any
Holder hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service addressed to each
Holder at the facsimile telephone number or address of such Holder appearing on
the books of the Corporation, or if no such facsimile telephone number or
address appears, at the principal place of business of the Holder. Any notice or
other communication or deliveries hereunder shall be deemed given and effective
on the earliest of

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (i) the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in this Section 7.a prior to
5:30 p.m.  (New York City time), (ii) the date after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in this Section 7.a no later than
5:30 p.m.  (New York City time) on any date and earlier than
11:59 p.m.  (New York City time) on such date, (iii) the
second business day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the
party to whom such notice is required to be given.

     

    b.    Lost or Mutilated Preferred
Stock Certificate.  Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing shares of Series E Preferred Stock, and in the case
of any such loss, theft or destruction upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the Holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory) or in the case of any such mutilation upon surrender of such
certificate, the Corporation, shall execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of shares of
such class represented by such lost, stolen, destroyed or mutilated certificate
and dated the date of such lost, stolen, destroyed or mutilated
certificate.

     

    c.    Headings.  The
headings contained herein are for convenience only, do not constitute a part of
this Certificate of Designations and shall not be deemed to limit or affect any
of the provisions hereof.

     

    RESOLVED,
FURTHER, that the Chairman, the president or any vice-president, and the
secretary or any assistant secretary, of the Corporation be and they hereby are
authorized and directed to prepare and file a Designation of Preferences, Rights
and Limitations of Series E Preferred Stock in accordance with the foregoing
resolution and the provisions of Delaware law.

     

    IN
WITNESS WHEREOF, the undersigned have executed this Certificate this 30 of June
2009.

     

    
       

      
        	/s/ Kenneth C.
      Aldrich	 	 
	
                Kenneth
      C. Aldrich

                Chief
      Executive Officer

              	 	 
	 	 	 
	 	 	 
	 	 	 
	/s/ William B.
      Adams	 	 
	
                William
      B. Adams

                Secretary

              	 	 

      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

    

    Exhibit
C

     

    Transfer
Agent Instructions

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    June 30,
2009

    
_________________________

    _________________________

    _________________________

    

    Re:  International Stem Cell
Corporation

     

    Ladies
and Gentlemen:

     

    In
accordance with the Preferred Stock Purchase Agreement (“Purchase Agreement”),
dated June 30, 2009, by and between International Stem Cell Corporation, a
Delaware corporation (“Company”), and
Optimus Life Sciences Capital Partners, LLC, a Delaware limited liability
company (“Buyer”), pursuant to
which Company shall issue and deliver shares (“Fee Shares”) of the
Company's common stock, par value $0.001 per share (“Common Stock”), and
warrants (“Warrants”) to
purchase additional shares (“Warrant Shares”) of
Common Stock (the Fee Shares and Warrant Shares, collectively, “Common Shares”), this
shall serve as our irrevocable authorization and direction to you (provided that
you are the transfer agent of the Company at such time) to issue the Fee Shares
and, in the event the holder of the Warrants elects or has elected to exercise
all or any portion of the Warrants, from time to time, upon surrender to you of
a notice of exercise of the Warrants, the Warrant Shares.

     

    Specifically,
this shall constitute an irrevocable instruction to you to process any notice of
exercise of the Warrants in accordance with the terms of these instructions as
soon as practicable. Upon your receipt of a notice of exercise of the Warrants,
you shall use your best efforts to, within three (3) trading days following the
date of receipt thereof, (A) issue and surrender to a common carrier for
overnight delivery to the address specified, a certificate, registered in the
name designated, for the number of shares of Common Stock for which the Warrant
has been exercised or (B) provided you are participating in The Depository Trust
Company (DTC) Fast Automated Securities Transfer Program, upon request, credit
such aggregate number of shares of Common Stock to the balance account with DTC
through its Deposit Withdrawal At Custodian (DWAC) system specified to initiate
the DWAC transaction.

     

    The
Company hereby confirms that certificates representing the Common Shares shall
not bear any legend restricting transfer of the shares thereby and should not be
subject to any stop-transfer restrictions and shall otherwise be freely
transferable on the books and records of the Company, provided that the shares
are registered for resale under the Act, or that if the shares are not
registered for sale under the Act the certificates bear the following
legend:

     

    “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.”

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    The
Company hereby confirms and you acknowledge that, in the event counsel to the
Company does not issue any opinion of counsel required to issue any Common
Shares free of legend, the Company authorizes and you will accept an opinion of
counsel from Luce Forward Hamilton & Scripps LLP.

     

    The
Company hereby confirms that no instructions other than as contemplated herein
will be given to you by the Company with respect to the Common Shares. The
Company hereby agrees that it shall not replace you as the Company's transfer
agent, until such time as the Company provides written notice to you and Buyer
that a suitable replacement has agreed to serve as transfer agent and to be
bound by the terms and conditions of these Irrevocable Transfer Agent
Instructions.

     

    The
Company and you hereby acknowledge and confirm that complying with the terms of
this Agreement does not and shall not prohibit you from satisfying any and all
fiduciary responsibilities and duties you may owe to the Company.

     

    The
Company and you acknowledge that the Buyer is relying on the representations and
covenants made by the Company and you hereunder and are a material inducement to
the Buyer to enter into the Purchase Agreement. The Company and you further
acknowledge that without such representations and covenants made hereunder, the
Buyer would not enter into the Purchase Agreement and purchase Securities
pursuant thereto.

     

    Each
party hereto specifically acknowledges and agrees that a breach or threatened
breach of any provision hereof will cause irreparable damage and that damages at
law would be an inadequate remedy if these Irrevocable Transfer Agent
Instructions were not specifically enforced.  Therefore, in the event
of a breach or threatened breach by a party hereto, including, without
limitation, the attempted termination of the agency relationship created by this
instrument, in addition to all other rights or remedies, an injunction
restraining such breach and granting specific performance of the provisions of
these Irrevocable Transfer Agent Instructions should issue without any
requirement to show any actual damage or to post any bond or other
security.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the parties have caused this letter agreement regarding
Irrevocable Transfer Agent Instructions to be duly executed and delivered as of
the date first written above.

     

    
       

      
        	 	International Stem
      Cell Corporation
	 	 	 
	 	

                By:

              	

                 

              
	 	

                Name:

              	

                 

              
	 	

                Title:

              	

                 

              

      

       

    

    

    THE
FOREGOING INSTRUCTIONS ARE ACKNOWLEDGED AND AGREED TO:

     

    
      _______________________________

       

      By:_____________________________

      Name:___________________________

      Title:____________________________

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Exhibit
D

     

    Lock-Up
Agreement

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    June 30, 2009

     

    Optimus
Life Sciences Capital Partners, LLC

    11150
Santa Monica Boulevard, Suite 1500

    Los
Angeles, CA 90025

     

    Ladies
and Gentlemen:

     

    This
Lock-Up Agreement is being delivered to you in connection with the Preferred
Stock Purchase Agreement dated as of June 30, 2009 (“Purchase Agreement”)
and entered into by and among the undersigned and Optimus Life Sciences Capital
Partners, LLC, a Delaware limited liability company (“Investor”), with
respect to the purchase without registration under the Securities Act of 1933,
as amended (the “Act”), in reliance on
Section 4(2) of the Act and Rule 506 of Regulation D promulgated thereunder, of
shares of Series E Preferred Stock and related Securities of International Stem
Cell Corporation, a Delaware corporation (“Company”).
Capitalized terms used herein without definition shall have the respective
meanings ascribed to them in the Purchase Agreement.

     

    In order
to induce Investor to enter into the Purchase Agreement, the undersigned agrees
that, for a period of seven Trading Days beginning on the date the Company
delivers a Tranche Notice to Investor (the “Tranche Notice Date”)
and ending of the date of the Tranche Closing pursuant to the terms of the
Purchase Agreement (the “Lock-up Period”), the
undersigned will not, without the prior written consent of Investor, (a) sell,
offer to sell, contract or agree to sell, hypothecate, pledge, grant any option
to purchase or otherwise dispose of or agree to dispose of, directly or
indirectly, in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section
16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC promulgated thereunder (the “Exchange Act”) with
respect to, any Common Stock of the Company or any securities convertible into
or exercisable or exchangeable for Common Stock, or warrants or other rights to
purchase Common Stock or any such securities, or any securities substantially
similar to the Common Stock, (b) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or any such securities, or warrants or other
rights to purchase Common Stock, whether any such transaction is to be settled
by delivery of Common Stock or such other securities, in cash or otherwise or
(c) publicly announce an intention to effect any transaction specified in clause
(a) or (b).

     

    The
foregoing sentence shall not apply to (a) bona fide gifts, provided the
recipient thereof agrees in writing to be bound by the terms of this Lock-Up
Agreement, (b) dispositions to any trust for the direct or indirect benefit of
the undersigned and/or the immediate family of the undersigned, provided that
such trust agrees in writing to be bound by the terms of this Lock-Up Agreement,
(c) sales made pursuant to any written sales plans established prior to the date
of this Lock-Up Agreement in conformity with the requirements of Rule 10b5-1(c)
promulgated under the Exchange Act or (d) exercise of options for Common Stock
and the disposition (whether by sale, gift or otherwise) of Common Stock
underlying such options.  Notwithstanding subsection (a) above,
the undersigned may make a bona fide gift of up to 10,000 shares of Common Stock
to a charity or other non-profit entity and

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    such
charity or entity shall not be required to be bound by the terms of this Lock-Up
Agreement; provided, however, that in the event the undersigned exercises
options during the Lock-Up Period, the undersigned may not, during the Lock-Up
Period, dispose of the number of shares of Common Stock underlying such
exercised options equal to the number of shares of Common Stock gifted by the
undersigned pursuant to this sentence during the Lock-Up Period.  For
purposes of this paragraph, “immediate family” shall mean the undersigned and
the spouse, any lineal descendent, father, mother, brother or sister of the
undersigned.

     

    The
Company agrees to provide the undersigned with notice that the Company has
delivered a Tranche Notice to Investor prior to, or simultaneous with, its
delivery of the Tranche Notice to Investor.  Such notice shall provide
the undersigned with the Tranche Notice Date and clearly indicate the beginning
of the Lock-up Period.

     

    Upon the
termination of the Purchase Agreement, this Lock-Up Agreement shall be
terminated and the undersigned shall be released from its obligations
hereunder.

     

    
    

     

    
      	 	 	Sincerely,
	 	 	 
	 	 	 
	 	 	 
	 	 	[Stockholder]

    

    

    Acknowledged
and Agreed:

     

    International
Stem Cell Corporation

     

    By:  _________________________

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    Exhibit
E

     

    Opinion

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    [DLA
PIPER LETTERHEAD]

     

    June 30,
2009

     

    Optimus
Life Sciences Capital Partners, LLC

    11150
Santa Monica Boulevard, Suite 1500

    Los
Angeles, CA 90025

     

    Re:    International Stem Cell
Corporation

     

    Ladies
and Gentlemen:

     

    We have
acted as counsel to International Stem Cell Corporation, a Delaware corporation
(“the
Company”), in connection with the sale and issuance of up to 500 shares
of Series E Preferred Stock, par value $0.001 per share (“Preferred Shares”),
along with shares (“Fee Shares”) of the
Company's common stock, par value $0.001 per share (“Common Stock”), and
warrants (“Warrants”) to
purchase additional shares of Common Stock, to Optimus Life Sciences Capital
Partners, LLC, a Delaware limited liability company (“Investor”), pursuant
to the terms of the Preferred Stock Purchase Agreement, dated as of June 30,
2009 (“Agreement”), by and
between Company and Investor.  Capitalized terms used in this opinion,
that are not otherwise defined in this opinion, shall have the respective
meanings assigned to them in the Agreement.  This opinion is being
delivered to you pursuant to Section 2.2(b)(i) of the Agreement.

     

    In
connection with the opinions expressed herein, we have reviewed the documents
and other corporate records of the Company listed on Exhibit A
hereto.  As to factual matters, we have relied solely upon, and assume
the accuracy completeness and genuineness of, a Certificate of the Chief
Executive Officer of the Company (the “Officers
Certificate”), certificates of public officials, and oral and written
representations made by the Company and its officers.  We have made no
independent investigation of any of the facts stated in any sub-certificates or
representations; however, nothing has come to our attention to lead us to
believe that such facts are inaccurate or misleading.

     

    With
respect to our opinion in Paragraph 1, as to the good standing of the Company,
we have relied exclusively on a certificate issued by the Delaware Secretary of
State, dated June 30, 2009.

     

    With
respect to our opinion in Paragraph 2, that the Fee Shares and the Warrant
Shares are, or will be, validly issued, we have assumed that such shares would
be evident by appropriate certificates, duly executed and
delivered.

     

    With
respect to our opinion in Paragraph 5, as to state or federal laws, rules,
regulations or ordinances, our opinion with respect thereto is limited to
provisions of the Delaware General Corporation Law (“Delaware Law”) and
such federal and California statutes, rules and regulations or ordinances as in
our experience are normally applicable to transactions of the sort contemplated
by the Agreement.  With respect to our opinion in Paragraph 5
regarding judgments, orders or decrees, we have relied solely upon a
representation made to us in the Officers Certificate to the effect that there
are no judgments, orders or decrees binding upon the Company.  We have
not conducted a search of any court records in any jurisdiction.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    In basing
the opinions and other matters set forth herein on “our knowledge”, the phrases
“to our knowledge” and “known to us” signify that, in the course of
representation of the Company in connection with the transactions described in
the Agreement, no information has come to the attention of Douglas Rein or
Bethany Blanton, the attorneys in this firm who have rendered or are rendering
substantial legal services to the Company in the transactions contemplated by
the Agreement, that would give any such attorney current actual knowledge that
any such matters are not accurate.  Except as otherwise stated herein,
we have undertaken no independent investigation or verification of such
matters.  No inference as to our knowledge of any matters bearing on
the accuracy of any statements so qualified should be drawn from our
representation of the Company or our rendering of the opinions contained
herein.

     

    We
express no opinion concerning any law other than the laws of the State of
California, Delaware Law and the federal law of the United States.  As
the matters of Delaware Law, we have based our opinions solely upon our
examination of such laws, and the rules and regulations of the authorities
administering such laws, all is reported in standard, unofficial
compilations.  Opinions of counsel licensed to practice law in states
other than the State of California have not been obtained to support the
opinions contained herein.  We call your attention to the fact that
the Agreement states that it is governed by and construed in accordance with the
laws of the State of New York and that we are not rendering any opinion with
respect to New York law.  We have not examined the question of what
law would govern the interpretation or enforcement of the Agreement and our
opinion is based on the assumption that the internal laws of the State of
California and federal law would govern the provisions of the Agreement and the
transactions contemplated thereby and that the laws of the State of New York
are, in substance, identical to the laws of the State of California and federal
law regarding the enforceability of the Agreement.  We note that if
the Agreement is not in fact, legal, valid, binding and enforceable under the
laws under the State of New York, the Agreement may not be enforced by a
California court under applicable conflicts of laws principles.  We
express no opinion with respect to any questions of choice of law, choice of
venue or conflicts of law.

     

    We
express no opinion as to whether the directors or stockholders of the Company
have complied with any applicable fiduciary duties in connection with the
authorization and performance of the Agreement and Transaction Documents or the
authorization of the Certificate.  We express no opinion with respect
to: (i) a compliance or noncompliance with antifraud provisions of state and
federal laws, rules and regulations concerning the issuance of securities,
including, without limitation, the accuracy and completeness of the information
provided by the Company to you in connection with the offer and sale of the
Securities, (ii) the securities laws or regulations of any jurisdiction (other
than federal securities laws and the laws of the State of California), or any
necessary qualification under state securities or “Blue Sky” laws of any state
other than California; or (iii) any state or federal laws, rules or regulations
applicable to the transactions contemplated by the Agreement because of the
nature of the business of any party thereto other than the Company.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Based
upon the foregoing, we are of the opinion that, as of the date
hereof:

     

    1.    The Company
is a corporation duly incorporated, validly existing and in good standing under
the Delaware General Corporation Law.

     

    2.    The Preferred
Shares, Fee Shares, Warrants, and shares of Common Stock (“the Warrant Shares”)
issuable upon exercise of the Warrants (collectively, “Securities”), have
been duly authorized, and the Preferred Shares, Fee Shares and Warrants are, and
when issued and duly paid for in accordance with the terms of the Agreement and
the applicable Warrant, the Warrant Shares will be, validly issued, fully paid
and non-assessable.  The issuance of the Securities will not be
subject to statutory or, to our knowledge, contractual preemptive rights of any
stockholder of the Company.

     

    3.    The Company
has the corporate power and authority to (a) execute, deliver and perform all of
its obligations under the Agreement and the Transaction Documents, and (b)
issue, sell and deliver each of the Securities.

     

    4.    The
execution, delivery and performance of the Agreement and the Transaction
Documents by the Company have been duly authorized by all requisite corporate
action on the part of the Company, and have been duly executed and delivered by
the Company.

     

    5.    The execution
and delivery of the Agreement and the Transaction Documents by the Company does
not,  and the Company’s performance of its obligations thereunder will
not, (a) violate the Certificate of Incorporation or Bylaws of the Company, as
in effect on the date hereof, (b) violate in any material respect any state or
federal law, rule, regulation or ordinance or any judgment, order or decree of
any state or federal court or governmental or administrative authority, in each
case that, to our knowledge, is applicable to the Company or its properties or
assets and which could have a material adverse effect on the Company’s business,
properties, assets, financial condition or results of operations or prevent the
performance by the Company of any material obligation under the Agreement, or
(c) except in connection with the filing of the registration statement
contemplated by the Agreement, require any authorization, consent, approval of
or other action of, notice to or filing or qualification with any state or
federal governmental authority, except as have been, or will be, made or
obtained.

     

    The
opinions expressed herein are rendered to you as of the date hereof and with
respect to such laws in effect as of the date hereof, and we assume no
obligations that supplement the opinions in the event of any change in
applicable law or in the facts upon which any of the opinions herein are
based.

     

    The
opinions expressed herein are solely for your use and these opinions may not be
relied upon by any other person, firm, corporation or other entity without our
prior written approval.  This opinion may not be quoted, filed with
any governmental authority or any other person, firm, corporation or other
entity or utilized for any other purpose without our prior written
approval.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    The
opinions expressed herein are limited to the matters set forth herein, and no
other opinion should be inferred beyond the matters expressly
stated.

     

    

     

    
      	 	Sincerely,
	 	 
	 	DLA Piper LLP
      (US)

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Exhibit
A

     

    

     

    1.    Certificate
of Incorporation, as amended, of the Company

     

    2.    Bylaws, as
amended, of the Company

     

    3.    Certificate
of Good Standing issued by the Delaware Secretary of State

     

    4.    Resolutions
of the Board of Directors adopted at a telephonic meeting of the board held on
June 26, 2009

     

    5.    The
Agreement

     

    6.    The
Certificate of Designations of Preferences, Rights and Limitations of Series E
Preferred Stock

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    Exhibit
F

     

    Tranche
Notice

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        
          	 	Dated: [________],
      2030
	 	 	 

        

         

      

    

    Optimus
Life Sciences Capital Partners, LLC

    11150
Santa Monica Boulevard, Suite 1500

    Los
Angeles, CA 90025

     

    Re:           Tranche
Notice

     

    Ladies
& Gentlemen:

     

    Pursuant
to the June 30, 2009 Preferred Stock Purchase Agreement (“Agreement’) between
International Stem Cell Corporation, a Delaware corporation (“Company”), and
Optimus Life Sciences Capital Partners, LLC (“Investor”), Company
hereby elects to exercise a Tranche.  Capitalized terms not otherwise
defined herein shall have the meanings defined in the Agreement.

     

    At the
Tranche Closing, Company will sell to Investor [___________] Preferred
Shares at $10,000 per share for a Tranche
Amount of $[___________].

     

    On behalf
of Company, the undersigned hereby certifies to Investor as
follows:

     

    1.    The
undersigned is a duly authorized officer of Company;

     

    2.    The above
Tranche Amount does not exceed the Maximum Tranche Amount; and

     

    3.    All of the
conditions precedent to the right of the Company to deliver a Tranche Notice set
forth in Section
2.3(d)
of the Agreement have been satisfied.

     

    IN
WITNESS WHEREOF, the Company has executed and delivered this Tranche Notice as
of the date first written above.

     

    
      
         

        
          	 	International Stem
      Cell Corporation
	 	 	 
	 	

                  By:

                	

                   

                
	 	

                  Name:

                	

                   

                
	 	

                  Title:

                	

                   

                

        

         

         

         

        1

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