Exhibit 10.5
 
EMPLOYMENT AGREEMENT
(Rouslan Semechkin)
 
THIS AGREEMENT is made as of the 30th day of December, 2008 ("Commencement
Date"), by and between International Stem Cell Corporation, a Delaware
corporation with a principal place of business at 2595 Jason Court, Oceanside,
California (the "Company"), and Rouslan Semechkin (the "Employee"), with an
address at 1 Overlook Drive, Unit 11, Amherst, New Hampshire ("Agreement").
 
FACTUAL BACKGROUND:
 
A. On December 30, 2008, the Company entered into a Preferred Stock Purchase
Agreement with Andrei Semechkin, Rouslan Semechkin and X-Master, Inc., (the
"Investors") pursuant to which the Investors agreed to purchase at least ten
(10) shares of Series D Preferred Stock from the Company for a purchase price of
up to Five Million Dollars ($5,000,000 USD). As a material and essential
inducement for the Investors to enter into the Preferred Stock Purchase
Agreement, the Company agreed to employ Rouslan Semechkin and Andrei Semechkin
in accordance with the terms thereof.
 
B. The Company wishes to employ Employee initially as a research scientist
reporting directly to the Chief Scientist and upon Employee attaining his PhD,
as Senior Research Scientist (or such other senior research position
commensurate with Employee's experience and status with the Company) and
Employee wishes to accept such employment subject to the terms and conditions of
this Agreement.
 
NOW, THEREFORE, in consideration of the foregoing, the employment provided
hereunder, and other valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
 
1. EMPLOYMENT. Upon Employee providing Company with documentation verifying
Employee's identity and legal authorization to work in the United States,
Company agrees to employ Employee, and Employee agrees to perform the duties
assigned to him for the Term of this Agreement (as defined in Section 2 of the
Agreement) pursuant to the terms and conditions set forth herein.
 
2.  TERM. The term of Employee's employment hereunder shall be for a period of
five (5) years, beginning on the Commencement Date set forth above and
continuing for a period of five (5) years following such date ("Term"), unless
sooner terminated in accordance with section 4 below.
 
3. COMPENSATION. For all services to be rendered by Employee in any capacity
hereunder, the Company shall pay Employee the following:
 

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(a) SALARY. The Company shall initially pay Employee an annual salary of Eighty
Thousand Dollars ($80,000) while he is employed as a research scientist, and an
annual salary of One Hundred Twenty Thousand Dollars ($120,000) upon Employee
attaining his PhD and corresponding promotion by the Company to Senior Research
Scientist or a similar position commensurate with Employee's experience and
status with the Company, less withholding and other taxes required by federal
and state law (the "Annual Base Salary"). Employee's Annual Base Salary shall,
in any event, be not less than the annual base salaries paid to employees of
similar position and status within the Company. Employee's Annual Base Salary
shall be payable in equal installments at such payment intervals as are the
usual custom of the Company, but not less often than monthly. Employee shall be
eligible to receive increases in his Annual Base Salary pursuant to periodic
salary reviews by the Company it being understood such increases are not
guaranteed, but are subject to Employee's job performance and the determination
by the Company, in its sole discretion, to award salary increases to Employee.
The Annual Base Salary shall not be decreased during the Term, unless the
reduction is made as part of, and is consistent with, a general reduction of the
annual base salaries paid to employees of similar position and status within the
Company.
 
(b) BENEFITS. During the Term, Employee shall be entitled to participate in all
employee welfare and health benefit plans and other employee benefit plans
established or maintained by the Company for the benefit of its employees.
Employee shall be required to comply with all conditions attendant to coverage
by such plans and shall be entitled to benefits only in accordance with the
terms and conditions of such plans as they may be amended from time to time.
Nothing herein shall be construed as requiring the Company to establish or
continue any particular benefit plan.
 
(c) VACATION AND LEAVE. During the Term, Employee shall be entitled to accrue
and carry over vacation benefits in a manner consistent with employees of
similar position and status within the Company, in accordance with the Company's
vacation policy as in effect from time to time. In addition, Employee shall be
allowed to take up to thirty (30) days unpaid leave (or such greater amount as
Employee deems necessary to attend to his business and personal affairs) during
each year of the Term.
 
(d) BONUS. Employee may also be awarded a bonus or bonuses from time to time
during the Term in such amounts, if any, and at such time, if any, as the
Company may determine, in its sole discretion. Employee shall be entitled to
participate in any annual performance bonus program for employees with bonus
amounts and performance criteria to achieve the bonus amounts as set and
formally approved by the Company in its sole discretion.
 
4. TERMINATION.
 
(a) FOR CAUSE. Although Company anticipates a mutually rewarding employment
relationship with Employee, Company may terminate Employee's employment
immediately at any time for Cause. For purposes of this Agreement, "Cause" is
defined as: (i) Employee's conviction or entry of a plea of nolo contendere for
fraud, misappropriation or embezzlement, or any felony or crime of moral
turpitude or that otherwise negatively impacts Employee's ability to
effectively perform Employee's duties hereunder; (ii) Employee's inability to
perform the essential functions of Employee's position, with or without
reasonable accommodation, due to a mental or physical disability for a period of
120 days; or (iii) Employee's death. In the event Employee's employment is
terminated in accordance with this section 4(a), Employee shall not be entitled
to payment of any further compensation, salary or benefits under the terms of
this Agreement except (i) Annual Base Salary through the date of termination;
(ii) any vested benefits under the then current employee benefit plans in which
the Employee participates; (iii) accrued but unused vacation; and (iv) any
benefit continuation or conversion rights under the then current employee
benefit plans in which the Employee participates.
 

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(b) VOLUNTARY RESIGNATION BY EMPLOYEE. Employee may resign from employment at
any time for any reason by giving sixty (60) days written notice to Company of
such intention. In such event, Company may, in its discretion, permit Employee
to work through the notice period or accept Employee's immediate resignation. In
the event of a voluntary resignation or other termination by the Employee,
Employee shall not be entitled to payment of any further compensation, salary or
benefits under the terms of this Agreement except (i) Annual Base Salary through
the date of termination; (ii) any vested benefits under the then current
employee benefit plans in which the Employee participates; (iii) accrued but
unused vacation; and (iv) any benefit continuation or conversion rights under
the then current employee benefit plans in which the Employee participates.
 
5. CONFLICTS OF INTEREST. During the term of Employee's employment with Company,
Employee must not engage in any work, paid or unpaid, that creates a conflict of
interest which materially and substantially disrupts the operations of Company.
Such work shall include, but is not limited to, directly competing with Company
in any way, or acting as an officer, director, employee, or consultant of any
business enterprise of the same nature as, or which is in direct competition
with, the business in which Company is now engaged or in which Company becomes
engaged during the term of Employee's employment with Company, as may be
determined by Company in its reasonable discretion. If Company believes such a
conflict exists during the term of this Agreement, Company may ask Employee to
choose to discontinue the other work and/or activities or resign employment with
Company. Notwithstanding the foregoing, the Company acknowledges that the
Employee may become an investor in companies and business enterprises who may be
in the same or similar business to the Company's business, and the Company
hereby agrees and acknowledges that such investments shall not violate this
section 5.
 
6. CONFIDENTIALITY AND PROPRIETARY RIGHTS. As a condition of employment,
Employee agrees to read, sign and abide by Company's Employee Invention and
Confidentiality Agreement (which agreement shall be modified to allow investment
in business enterprises who may be in the same or similar business to the
Company's business), which is provided with this Agreement and incorporated
herein by reference.
 
7. GOVERNING LAW, JURISDICTION AND VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
 
8. HEADINGS. The descriptive headings of the several sections of this Agreement
are inserted for convenience of reference only and shall not control or affect
the meanings or construction of any of the provisions hereof.
 
 

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9. SEVERABILITY AND VIOLATION OF LAWS. If any provision of this Agreement shall
be held invalid or unenforceable according to law, such provision shall be
modified to the extent necessary to bring it within the legal requirements. Any
such invalidity or unenforceability shall not affect the remaining provisions of
this Agreement, and such remaining provisions shall continue in full force and
effect.
 
10. NOTICES. Any notice or other communication required or permitted under this
agreement shall be in writing and shall be deemed to have been duly given (a)
upon hand delivery, or (b) on the third day following delivery to the U.S.
Postal Service as certified or registered mail, return receipt requested and
postage prepaid, (c) on the first day following delivery to a nationally
recognized United States overnight courier services for next business day
delivery with fee prepaid, or (d) when telecopied or sent by facsimile
transmission if an additional notice is also given under (a), (b) or (c) above
within three (3) days thereafter. Any such notice or communication shall be
directed to a party at its address set forth below or at such other address as
may be designated by a party in a notice given to all other parties hereto in
accordance with the provisions of this section.

FOR THE COMPANY:
 
Mr. Kenneth C. Aldrich
Chairman of the Board
2595 Jason Court
Oceanside, CA 92056
Telephone: (760) 940-6383
Telecopy: (760) 940-6387
 
with a copy to:
 
DL Piper
4365 Executive Drive, Suite 1100
San Diego, California 92121-2133
Attention: Douglas J. Rein, Esquire
Telephone: 858-677-1443
Fax: 858-638-5043

 
FOR THE EMPLOYEE:
 
Mr. Rouslan Semechkin
1 Overlook Drive, Unit 11

Amherst, NH 03031
 

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with a copy to:
 
McLane, Graf, Raulerson & Middleton,
Professional Association
900 Elm Street
P.O. Box 326
Manchester, NH 03105-0326
Attention: Thomas W. Hildreth, Esq.
Telephone: 603-625-6464
Telecopy: 603-625-5650

 
11. ASSIGNMENT. The rights and obligations of Company together with its
obligations and all of Employee's covenants and agreements hereunder may be
assigned by Company to any parent, subsidiary or other affiliate of the Company
by operation of law or by contractual assignment; provided, however, that the
Company shall continue to guarantee the obligations, agreements, duties and
covenants hereunder. The rights and obligations of Employee under this Agreement
are not assignable.
 
12. COMPLETE AND ENTIRE AGREEMENT. This Agreement, including the Company's
Employee Invention and Confidentiality Agreement, contains all of the terms
agreed upon by the parties with respect to the subject matter hereof and
supersedes all prior agreements, representations and warranties of the parties
as to the subject matter hereof.
 
13. AMENDMENTS. This Agreement may be amended, or any provision of the Agreement
may be waived, provided that any such amendment or waiver will be binding on the
parties only if such amendment or waiver is set forth in a writing executed by
all parties hereto. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any other
breach.
 
14. SURVIVAL. Sections 5, 6, 7, 9 and 10 shall survive expiration of the Term of
this Agreement and/or termination of Employee's employment under this Agreement.

[Signature Page Follows]
 

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

         
INTERNATIONAL STEM CELL CORPORATION
                By: /s/ Kenneth C. Aldrich
Witness
 
Kenneth C. Aldrich, CEO
                  /s/ signature   /s/ Rouslan Semechkin Witness   Rouslan
Semechkin      

 
 
 
 
[Signature Page to Employment Agreement – R. Semechkin]