Document:

iscc_8k-ex0401.htm

     

    
      Exhibit
4.1

      

      CERTIFICATE
OF DESIGNATION OF

      RIGHTS,
PREFERENCES, PRIVILEGES AND RESTRICTIONS OF

      SERIES
B PREFERRED STOCK OF

      INTERNATIONAL
STEM CELL CORPORATION

      

      

      The Board
of Directors of International Stem Cell Corporation (the “Company”) hereby
provides for the issuance of a series of preferred stock of the Company and does
hereby fix and determine the rights, preferences, privileges, restrictions and
other matters related to said series of preferred stock as follows:

      

      Section
1                Designation and
Amount.  The shares of such series shall be designated as
“Series B Preferred Stock” and the number of shares constituting such series
shall be Five Million (5,000,000).

       

      Section
2                Dividends.  The
Series B Preferred Stock shall not be entitled to receive any dividends
whatsoever, except as follows: If the Company declares and pays any dividends on
the Common Stock (other than a dividend payable in shares of Common Stock),
then, in that event, holders of shares of Series B Preferred Stock shall be
entitled to share in such dividends on a pro rata basis, as if their shares had
been converted into shares of Common Stock pursuant to Section 5(a) below
(“Common Share Equivalents”) immediately prior to the record date for
determining the shareholders of the Company eligible to receive such
dividends.

       

      Section
3                Liquidation
Preference.

       

      (a)            Preference.  In
the event of any liquidation, dissolution or winding up of the Company, either
voluntary or involuntary, subject to the rights of any holders of any debt of
the Company, the holders of Series B Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Company to the holders of Common Stock by reason of their ownership thereof, but
only after payment in full of the liquidation preferences payable to holders of
any shares of Series A Preferred Stock then outstanding, an amount per share
equal to the sum of (i) One Dollar ($1.00) for each outstanding share of Series
B Preferred Stock (the “Original Series B Issue Price”) (subject to adjustment
of such fixed dollar amount for any stock splits, stock dividends, combinations,
recapitalizations or the like) plus (ii) one percent (1%) of the Original Series
B Issue Price for every full two (2) calendar months from February 1, 2008 to
the date of such liquidation, dissolution or winding up of the
Company.  If, upon the occurrence of such event, the assets and funds
thus distributed among the holders of the Series B Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of any debt holders of the
Company and the rights of any other series of Preferred Stock that may from time
to time come into existence, the entire assets and funds of the Company legally
available for distribution shall be distributed ratably among the holders of the
Series B Preferred Stock in proportion to the amount of such stock owned by each
such holder.

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      (b)           Remaining
Assets.  Upon completion of the distribution required by
subsection (a) of this Section 3 and any other distribution that may be
required with respect to any other series of Preferred Stock that may from time
to time come in to existence, holders of the Series B Preferred Stock shall not
participate in any distribution of such remaining assets.

       

      (c)           Mergers and
Consolidations.  A merger or consolidation of the Company with
any other corporation shall not be deemed a liquidation, dissolution or winding
up of the Company within the meaning of this Section 3.

      

      (d)           Sale or Other Transfer of
All or Substantially All Assets. For purposes of this Section 3, a
liquidation, dissolution or winding up of the Company shall be deemed to include
a sale, lease, transfer or other disposition of all or substantially all of the
assets of the Company, other than to a wholly-owned subsidiary of the
Company.

      

      Section
4                Redemption.  The
Series B Preferred Stock shall not be entitled to any rights of redemption
whatsoever.

       

      Section
5                Conversion.  The
holders of the Series B Preferred Stock shall have conversion rights as follows
(the “Conversion Rights”):

       

      (a)           Right to
Convert.  Subject to Sections 5(b) and 5(c), each share of
Series B Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Company or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock (“Shares”) as is determined by dividing
the Original Series B Issue Price by the Conversion Rate (defined below)
applicable to such share, determined as hereafter provided, in effect on the
date the certificate is surrendered for conversion.  The initial
Conversion Rate per share for shares of Series B Preferred Stock shall be Fifty
Cents ($0.50) and shall thereafter be subject to adjustment as set forth in
Section 6 below (the “Conversion Rate”).

       

      (b)           Minimum
Conversion.  A holder of Series B Preferred Stock may not
convert, at any time, less than ten thousand shares of Series B Preferred Stock
or all shares of Series B Preferred Stock then owned by such holder, whichever
amount is less.

       

      (c)           Mechanics of
Conversion.  Before any holder of shares of Series B Preferred
Stock shall be entitled to convert the same into Shares, such holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Company or of any transfer agent for the Series B Preferred Stock and
shall give written notice to the Company at its principal corporate office, of
the election to convert the same and shall state therein the number of shares of
Series B Preferred Stock to be converted and the name or names in which the
certificate or certificates for Shares are to be issued.  The Company
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of the Series B Preferred Stock, or to the nominee or nominees of
such holder, a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which such holder shall be entitled as
aforesaid together with a cash adjustment in respect of any fraction of a share
to which the holder shall be entitled as provided in Section 5(d), and, if less
than the entire number of shares of Series B Preferred Stock represented by the
certificate or certificates surrendered is to be converted, a new certificate
for the number of shares of Series B Preferred Stock not so
converted.  For purposes of a conversion pursuant to Section 5(a),
such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of the Series B
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      (d)           No Fractional Shares.
No fractional shares of Common Stock or scrip representing fractional shares of
Common Stock shall be issued upon any conversion of any shares of Series B
Preferred Stock.  All Shares (including fractions thereof) issuable
upon conversion of more than one share of Series B Preferred Stock by a holder
thereof shall be aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share.  If, after the
aforementioned aggregation, the conversion would result in the issuance of any
fractional share, the Company shall, in lieu of issuing any fractional share,
pay cash equal to the product of such fraction multiplied by the fair market
value per share (as determined in good faith by the Board of Directors) of the
Common Stock on the date of conversion.

       

      (e)           Automatic
Conversion.  At any time (following the date on which shares of
Series B Preferred Stock are first issued) that there are less than a total of
two hundred thousand (200,000) shares of Series B Preferred Stock outstanding,
then each remaining share of Series B Preferred Stock shall automatically be
converted into such number of fully and nonassessable shares of Common Stock as
is determined by dividing the Original Series B Issue Price by the then
applicable Conversion Rate.  The Company will not be required to issue
the certificate(s) for the shares of Common Stock issued on conversion until the
certificates for the shares of Series B Preferred Stock so converted are
surrendered at the office of the Company.

       

      Section
6               Adjustments. The
Shares into which a share of Series B Preferred Stock is convertible and the
Conversion Rate shall be subject to adjustment as follows:

       

      (a)         
In case the Company shall (i) pay a dividend in shares of Common Stock or make a
distribution to all holders of shares of Common Stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock or (iv) issue by reclassification of its shares of Common Stock other
securities of the Company, the number of Shares issuable upon exercise of each
share of Series B Preferred Stock immediately prior thereto shall be adjusted so
that the Holder of each share of Series B Preferred Stock shall be entitled to
receive the kind and number of Shares or other securities of the Company which
he would have owned or would have been entitled to receive after the happening
of any of the events described above, had such share of Series B Preferred Stock
been converted immediately prior to the happening of such event or any record
date with respect thereto.  An adjustment made pursuant to this
paragraph (a) shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.

      

      (b)           In
case the Company shall issue rights, options or warrants to all holders of its
shares of Common Stock, without any charge to such holders, entitling them to
subscribe for or purchase shares of Common Stock at a price per share which is
lower on the date of issuance thereof than the then current market price per
share of Common Stock (as defined in paragraph (f) below), the number of Shares
thereafter issuable upon the conversion of each share of Series B Preferred
Stock shall be determined by multiplying the number of Shares theretofore
issuable upon conversion of each share of Series B Preferred Stock by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights, options or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights, options or warrants
plus the number of shares which the aggregate offering price of the total number
of shares of Common Stock so offered would purchase at the such then current
market price per share of Common Stock.  Such adjustment shall become
effective immediately after the date such rights, options or warrants are
issued, retroactive to the record date for the determination of stockholders
entitled to receive such rights, options or warrants.

      

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      (c)           In
case the Company shall distribute to all holders of its shares of Common Stock
evidence of its indebtedness or assets (excluding regular and ordinary cash
dividends) or rights, options or warrants or convertible securities containing
the right to subscribe for or purchase shares of Common Stock (excluding those
referred to in paragraph (b) above), then in each case the Conversion Rate shall
be adjusted to a price determined by multiplying the Conversion Rate in effect
immediately prior to such distribution by a fraction, of which the numerator
shall be the then current market price per share of Common Stock (as defined in
paragraph (f) below) on the date of such distribution, less the then fair value
(as determined in good faith by the Board of Directors of the Company) of the
portion of the assets or evidence of indebtedness so distributed or of such
rights, options, warrants or convertible securities applicable to one share of
Common Stock, and of which the denominator shall be such then current market
price per share of Common Stock.  Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the date
of distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.

      

      (d)           No
adjustment in the number of Shares issuable hereunder shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in the number of Shares issuable upon the conversion of all Series B
Preferred Stock then outstanding; provided, however, that any adjustments which
by reason of this paragraph (d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.

      

      (e)           Whenever
the number of Shares issuable upon the conversion of each share of Series B
Preferred Stock is adjusted, as herein provided, the Conversion Rate per share
of Series B Preferred Stock payable upon conversion of each share of Series B
Preferred Stock shall be adjusted (to the nearest cent) by multiplying such
Conversion Rate immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Shares issuable upon the conversion of each
share of Series B Preferred Stock immediately prior to such adjustment, and of
which the denominator shall be the number of Shares so issuable immediately
thereafter.

      

      (f)           If
the Company shall issue, after the date upon which any shares of Series B
Preferred Stock were first issued (the “Issue Date”), (i) not less than two
hundred fifty thousand (250,000) shares of Common Stock for a purchase price per
share less than the Conversion Rate in effect immediately prior to such issuance
(other than pursuant to the exercise or conversion or options, warrants or
rights outstanding as of the Issue Date), or (ii) options, warrants or rights to
purchase shares of Common Stock, or convertible securities convertible into or
exchangeable for shares of Common Stock (such options, warrants, rights and
convertible securities are hereinafter referred to collectively as “Common Stock
Rights”), which Common Stock Rights are exercisable for or convertible into not
less than two hundred fifty thousand (250,000) shares of Common Stock at an
exercise price or conversion rate per share that is less than the Conversion
Rate in effect immediately prior to such issuance, then, in either such event,
the Conversion Rate shall automatically be adjusted to equal the purchase price
of such shares or the exercise price or conversion rate of the Common Stock
Rights, as applicable.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      (g)           Whenever
the number of Shares issuable upon the conversion of each share of Series B
Preferred Stock or the Conversion Rate is adjusted, as herein provided, the
Company shall promptly mail by first class mail, postage prepaid, to each
Holder, notice of such adjustment or adjustments setting forth the number of
Shares issuable upon the conversion of each share of Series B Preferred Stock
and the Conversion Rate after such adjustment, a brief statement of the facts
requiring such adjustment, and the computation by which such adjustment was
made.

      

      (h)           For
the purpose of this Section 6, the term “shares of Common Stock” shall mean (i)
the class of stock designated as the Common Stock of the Company as of the Issue
Date, or (ii) any other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par value, or
from par value to no par value, or from no par value to par value.  In
the event that at any time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holders shall become entitled to purchase any shares of
the Company other than shares of Common Stock, thereafter the number of such
other shares so issuable upon conversion of each share of Series B Preferred
Stock and the Conversion Rate of such shares shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions relating to the Shares contained in paragraphs (a) through (f),
inclusive, above, and the provisions of Section 7 relating to the Shares shall
apply.

      

      (i)           Upon
the expiration of any rights, options, warrants or conversion privileges, if any
thereof shall not have been exercised, the Conversion Rate and the number of
shares of Common Stock issuable upon the conversion of a share of Series B
Preferred Stock shall, upon such expiration, be readjusted and shall thereafter
be such as it would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) on the basis of (A)
the only shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the conversion of such rights, options,
warrants or conversion rights and (B) such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon such
conversion plus the consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options, warrants or conversion
rights whether or not exercised, provided, further, that no such readjustment
shall have the effect of increasing the Conversion Rate by an amount in excess
of the amount of the adjustment initially made in respect of the issuance, sale
or grant of such rights, options, warrants or conversion rights.

      

      (j)           In
case of any consolidation of the Company with or merger of the Company into
another corporation or in case of any sale or conveyance to another entity of
the property of the Company as an entirety or substantially as an entirety, the
Company or such successor or purchasing entity, as the case may be, shall be
obligated to issue to a Holder, upon conversion thereof, the same consideration
as such Holder would have owned or would have been entitled to receive after the
happening of such consolidation, merger, sale or conveyance had such Series B
Preferred Stock been converted immediately prior to such action.  If
the action involves two or more transactions involving different consideration
to holders of Common Stock, each Holder may elect which consideration to receive
pursuant to this paragraph (j).

      

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      Section
7              Payment of
Taxes.  The issuance of a stock certificate or certificates on
conversion of the Series B Preferred Stock shall be made without charge to the
converting Holder for any tax in respect of the issue thereof.  The
Holder shall be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of stock in any name other than
that of the Holder.

       

      Section
8              Reservation of Shares;
Shares to be Fully Paid.  The Company shall reserve for
issuance out of its authorized but unissued shares of Common Stock, sufficient
shares to provide for the conversion of the Series B Preferred Stock from time
to time as shares of Series B Preferred Stock are presented for
conversion.  All shares of Common Stock which may be issued upon
conversion of the Series B Preferred Stock will, upon issue, be fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.

       

      Section
9               Voting Rights. The
holders of Series B Preferred Stock shall have no voting rights or powers except
as provided in this Section 9.

       

      (a)          Except
as to matters specified in Section 9(b) below, each holder of Preferred Stock
shall be entitled to vote on each matter on which holders of shares of Common
Stock are entitled to vote.  For such purposes, each share of Series B
Preferred Stock shall represent as many votes as the number of shares of Common
Stock into which it is then convertible.  Except as otherwise
expressly provided in this Section 9 or as required by law, the holders of
shares of Series B Preferred Stock and the Common Stock shall vote together as a
single class on all matters submitted to a vote of stockholders.

       

      (b)          Each
share of Series B Preferred Stock shall be entitled to one vote on any matter
relating to an adverse change in the rights of the Series B Preferred Stock or
the rights of the Holders of the Series B Preferred Stock and on any matter as
to which the approval of the holders of the Series B Preferred Stock as a class
is required by law.  Holders of Series B Preferred Stock shall vote
separately as a class on any such matter. The approval of Holders of more than a
majority of the then outstanding shares of Series B Preferred Stock shall be
required for any amendment to the rights of the Series B Preferred Stock,
including a material adverse change in the rights of the Series B Preferred
Stock or the rights of the Holders of the Series B Preferred Stock.

      

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, the Company has caused this Certificate to be executed by
William B. Adams, its Chief Financial Officer on this 8th day of May,
2008.

      

      

      ____________________

      William
B. Adams

      Chief
Financial Officer

      Attest:

      

      _________________________

      Merlito
Conception

      
 

       

      7iscc_8k-ex1001.htm

     

    
      Exhibit
10.1

       

      INTERNATIONAL
STEM CELL CORPORATION

       

      Subscription
Agreement

       

      SERIES
B PREFERRED STOCK

       

      International
Stem Cell Corporation

      2595
Jason Court

      Oceanside,
CA 92056

      

      Gentlemen:

      

      I, the
undersigned (the “Purchaser”), have been advised that INTERNATIONAL STEM CELL
CORPORATION, a Delaware corporation (the “Company”), wishes to raise cash funds
from various investors such as me by selling units (“Units”) consisting of one
(1) share of Series B Preferred Stock having the rights, preferences and
privileges set forth on Exhibit A hereto (the “Preferred Stock”), and two (2)
Common Stock Purchase Warrants in the form of Exhibit B hereto (the “Warrants),
at a price of One Dollar ($1.00) per Unit, with a minimum investment of One
Hundred Thousand Dollars ($100,000), or 100,000 Units, from each investor
(unless such minimum investment is waived by the Company as to a particular
investor in the sole discretion of the Company).  You have advised me
that officers, directors and employees of the Company may participate in this
offering, and that the Company may elect to utilize one or more broker-dealers
or finders to assist in the offering, for which assistance such broker-dealers
or finders would receive a commission and/or expenses.

      

      I
understand that there is no private placement memorandum with respect to the
offering of Units by the Company, and that, in lieu thereof, it is my
responsibility to read the filings of the Company with the Securities and
Exchange Commission and posted on the Commission’s EDGAR site, including without
limitation (i) the registration statement on Form SB-2, as amended, including
all supplements thereto pursuant to Rule 424 (collectively, the “Registration
Statement”), all Quarterly Reports on Form 10-QSB for the Company, and (iii) all
Current Reports on Form 8-K for the Company (all such EDGAR filings being
sometimes hereinafter referred to as the “SEC Filings”).

      

      I
understand that you will rely on the following information to confirm that I am
an “accredited investor” as defined in Regulation D under the Securities Act of
1933, as amended (the “Securities Act”), and that I am qualified to be a
Purchaser.

      

      This
Subscription Agreement is one of a number of such subscriptions for
Units.  By signing this Subscription Agreement, I offer to purchase
from the Company the number of Units set forth below on the terms specified
herein.  The Company reserves the right, in its complete discretion,
to reject any subscription offer.  If my offer is accepted, the
Company will execute a copy of this Subscription Agreement and return it to
me.

      

      1.  Subscription.  Upon
the terms and subject to the conditions set forth in this Subscription
Agreement, I hereby subscribe for and agree to purchase from the Company the
number of Units set forth on the Signature Page to this Subscription Agreement
(the “Subscribed Units”) at a price equal to $1.00 per Unit.  A check
or wire transfer in full payment of the purchase price must be delivered to the
Company contemporaneously with the execution and delivery of this Subscription
Agreement.

      

      2.  Representations and
Warranties.  I represent and warrant to the Company
that:

      

      
        	
                A.

              	
                I
      (i) have adequate means of providing for my current needs and possible
      contingencies and I have no need for liquidity of my investment in the
      Units, (ii) can bear the economic risk of losing the entire amount of my
      investment in Units, and (iii) have such knowledge and experience that I
      am capable of evaluating the relative risks and merits of this
      investment.

              

      

      

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      
        	
                B.

              	
                I
      have received and carefully read, and am familiar with the SEC Filings,
      including, without limitation, the “Certain Risk Factors” section of the
      Registration Statement.  All documents, records and books
      pertaining to the Company and requested by me, financial and otherwise,
      have been made available or delivered to
me.

              

      

      

      
        	
                C.

              	
                I
      have had the opportunity to ask questions of and receive answers from the
      Company’s management concerning the Company’s affairs generally and the
      terms and conditions of my proposed investment in the Units.  I
      have had the opportunity, and I have been encouraged by the Company, to
      consult my financial and legal advisers in determining whether to invest
      in the Subscribed Units.

              

      

      

      
        	
                D.

              	
                I
      understand the risks implicit in the business of the
      Company.  Among other things, I understand that there is no
      assurance that the Company will be successful in obtaining the funds
      necessary for its success.

              

      

      

      
        	
                E.

              	
                No
      person or entity has made any representation or warranty whatsoever with
      respect to any matter or thing concerning the Company and this offering,
      and I am purchasing the Units based solely upon my own investigation and
      evaluation.

              

      

      

      
        	
                F.

              	
                I
      acknowledge that the Units are being sold by the Company in a non-public
      offering pursuant to the exemption from registration provided by Section
      4(2) of the Securities Act, and/or Rule 506 of Regulation D promulgated
      thereunder.  I acknowledge that this offering consequently has
      not been reviewed by the Securities and Exchange Commission.  I
      understand that no Units have been qualified pursuant to the provisions of
      the securities or other laws of applicable
  jurisdictions.

              

      

      

      
        	
                G.

              	
                The
      Units for which I subscribe are being acquired solely for my own account,
      for investment and are not being purchased with a view to or for their
      resale or distribution.  In order to induce the Company to sell
      Units to me, the Company will have no obligation to recognize the
      ownership, beneficial or otherwise, of the Units by anyone but
      me.  I understand that the Units have not been registered under
      the Securities Act by reason of a claimed exemption under the provisions
      of the Securities Act which depends, in part, upon my investment
      intention.

              

      

      

      
        	
                H.

              	
                I
      have not received any advertisement or general solicitation with respect
      to the sale of the Units.

              

      

      

      
        	
                I.

              	
                If
      I am a Registered Representative of an FINRA member firm, I acknowledge
      that I must give such firm the notice required by FINRA's Rules of Fair
      Practice or any applicable successor rule of FINRA, receipt of which must
      be acknowledged by such firm on the signature page
  hereof.

              

      

      

      
        	
                J.

              	
                Except
      as specifically indicated to the contrary on the Subscription Agreement, I
      certify that my taxpayer identification number is correct and, if I am not
      a corporation, IRA, Keogh, or Qualified Trust (as to which there would be
      no withholding), I am not subject to backup withholding on interest or
      dividends. If I have not provided a taxpayer identification number
      certified to be correct or do not make the certification that I am not
      subject to backup withholding, then I may be subject to twenty percent
      (20%) withholding on interest or dividends paid to
  me.

              

      

      

      
        	
                K.

              	
                I
      represent and warrant that I am an “accredited investor” and come within
      one or more of the categories set forth
below.

              

      

      

      
        	
                 
      

              	
                (1)

              	
                Any
      natural person whose individual net worth, or joint net worth with that
      person’s spouse, at the time of his or her purchase, exceeds
      $1,000,000;

              
	 	 	 
	 	 	      
                Explanation.  In
      calculating net worth you may include equity in personal property and real
      estate, including your principal residence, cash, short-term investments,
      stock and securities.  Equity in personal property and real
      estate should be based on the fair market value of such property less debt
      secured by such property.

              

      

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      
         

        
          	
                	
                  (2)

                	
                  Any
      natural person who had an individual income in excess of $200,000
      in  each
      of the two most recent years or joint income with that person's spouse in
      excess of $300,000 in each of those years and has a reasonable expectation
      of reaching the same income level in the current
    year;

                

        

      

      
      

      

      
        Explanation.  In
determining income, an investor should add to the investor's adjusted gross
income any amounts attributable to tax exempt income received, losses claimed as
a limited partner in any limited partnership, deductions claimed for depletion,
contributions to an IRA or KEOGH retirement plan, alimony payments, and any
amount by which income from long-term capital gains has been reduced in arriving
at adjusted gross income.

      

      

      
        	
              	
                (3) 

              	
                 A
      bank as defined in Section 3(a)(2)
      of the Securities Act or any savings and loan
      company or other institution as defined in Section 3(a)(5) of the
      Securities Act, whether acting in its individual or fiduciary
      capacity;

              

      

      

      
        	
              	
                (4) 

              	
                 Any
      broker or dealer registered pursuant to Section 15 of the
      SecuritiesExchange
      Act of 1934, as amended;

              

      

       

      
        	
              	
                (5)

              	
                An
      insurance
      company as defined in Section 2(13) of
      the Securities Act;

              

      

       

      
        	
              	
                (6) 

              	
                An
      investment company registered under the Investment Company Act
      of 1940
      or a business development company as defined in Section 2(a)(48) of that
      Act;

              
	 	 	 
	 	(7)  	      
                A Small Business Investment Company licensed by the U.S. Small
      Business Administration
      under Section 301(c) or (d) of the Small Business Investment Act of
      1958;

              
	 	 	 
	 	(8) 	      
                An employee benefit plan within the meaning of Title I of the
      Employee Retirement
      Income Security Act of 1974, if the investment decision is made by a plan
      fiduciary, as defined in Section 3(21) of such Act, which is either a
      bank, insurance company, or registered investment advisor, or if the
      employee benefit plan has total assets in excess of $5,000,000 or, if a
      self-directed plan, with investment decisions made solely by persons that
      are accredited investors;

              
	 	 	 
	 	(9)  	      
                Any private
      business development company, as defined in Section 202(a)(22) of the Investment Advisers Act of
      1940;

              
	 	 	 
	 	(10)  	      
                An
      organization described in Section 501(c)(3) of the Internal Revenue Code,
      corporation, Massachusetts or similar business trust, or partnership, not
      formed for the specific purpose, of acquiring the securities offered, with
      total assets in excess of $5,000,000;

              
	 	 	 
	 	(11)  	      
                Any
      trust, with total assets in excess of $5,000,000, not formed for
      the specific
      purpose of acquiring the securities offered, whose purchase is directed by
      a sophisticated person as described in Rule 506(b)(2)(ii) under the Act;
      and

              
	 	 	 
	 	(12) 	      
                An
      entity in which all
      of the equity owners are accredited investors.  If the Subscriber
      belongs to this investor category only, a list of the equity owners of the
      Subscriber, and the investor category which each such equity owner
      satisfies, should be attached to this Agreement as Attachment
      A.

              

      

       

      
        	
                O.

              	
                I
      understand that the Subscribed Units and any shares issuable upon exercise
      of the Warrants (collectively, the "Covered Securities") are characterized
      as “restricted securities” under the federal securities laws inasmuch as
      they are being acquired from the Company in a transaction not involving a
      public offering, and that under such laws and applicable regulations such
      Covered Securities cannot be resold unless they are registered under the
      Securities Act or unless an exemption from registration is
      available.  It is understood that any certificates or other
      documents evidencing the Covered Securities may bear a legend
      substantially as follows:

              

      

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      “These
securities have not been registered under the Securities Act.  They
may not be sold, offered for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the securities under such Act
or an opinion of counsel satisfactory to the Company that such registration is
not required.”

      

      I hereby
agree that the Company shall be required to refuse to register any transfer of
the Covered Securities not made pursuant to registration under the Securities
Act, or pursuant to an available exemption from registration.

      

      
        	
                P.

              	
                I
      understand that the Company reserves the unrestricted right to reject or
      limit any subscription.

              

      

      

      
        	
                Q.

              	
                I
      hereby represent that, except as set forth in this Subscription Agreement,
      no representations or warranties have been made to me by the Company, the
      Managers or any agent, finder, employee or affiliate of the Company, and
      in entering into this transaction, I am not relying on any information,
      other than that contained in the Memorandum and the results of independent
      investigation by me.

              

      

      

      
        	
                R.

              	
                This
      Subscription Agreement has been duly executed and delivered by me and
      constitutes the legal, valid, binding and enforceable obligation of me,
      subject to applicable bankruptcy, insolvency and similar laws affecting
      creditors’ rights generally, and subject, as to enforceability, to general
      principles of equity.

              

      

      

      
        	
                S.

              	
                Each
      of the representations and warranties herein shall survive the execution
      and delivery of this Subscription Agreement, any investigation by or on
      behalf of the Company and the issuance of the Subscribed
      Units.

              

      

      

      The
foregoing representations and warranties are true and accurate as of the date
hereof, shall be true and accurate as of the date of the delivery of the funds
to the Company and shall survive such delivery.

      

      3. Indemnification.  I
understand the meaning and legal consequences of the representations and
warranties contained herein, and I will indemnify and hold harmless the Company,
its officers, directors, managers and representatives involved in the offer or
sale of the Units to me, as well as each of the managers and representatives,
employees and agents and other controlling persons of each of them, from and
against any and all loss, damage or liability due to or arising out of a breach
of any representation or warranty of mine contained in this Subscription
Agreement.

      

      4. Revocation.  I
will not cancel, terminate or revoke this Subscription Agreement or any
agreement made by me hereunder and this Subscription Agreement shall survive my
death or disability.

      

      5.  Termination of
Agreement.  If this subscription is rejected by the Company,
then this Subscription Agreement shall be null and void and of no further force
and effect, no party shall have any rights against any other party hereunder,
and the Company shall promptly return to me any and all funds delivered with
this Subscription Agreement.

      

      6.  Miscellaneous.

      

      
        	
                A.

              	
                Any
      dispute involving, arising out of or related to the interpretation,
      application or enforcement of this Subscription Agreement shall be
      submitted to binding arbitration before the American Arbitration
      Association, whose rules applicable to commercial disputes shall apply
      except as modified hereby.  The arbitration hearing shall take
      place in Los Angeles County, California before one arbitrator, who shall
      be a retired judge.  The arbitrator shall comply with the
      provisions hereof unless the parties to the arbitration consent in writing
      otherwise.  The arbitrator may award attorney and expert witness
      fees and costs to the successful party and may award exemplary or punitive
      damages as well. The arbitrator shall submit a written finding of facts
      and conclusions of law.  The arbitrator shall have authority
      only to interpret and apply provisions of this Subscription Agreement and
      shall have no authority to add to, subtract from or modify terms of this
      Subscription Agreement except to the extent otherwise provided
      herein.  The judgment of the arbitrator shall be binding and may
      be entered as a final judgment by any court having jurisdiction over the
      parties hereto.  THE PARTIES UNDERSTAND AND ACKNOWLEDGE THAT
      UNDER THIS SECTION EACH WAIVES THE RIGHT TO TRIAL BY JURY IN CONNECTION
      WITH ANY ARBITRABLE CONTROVERSY OR CLAIM.  Prior to arbitration,
      if the parties agree they shall first participate in mediation of any
      dispute.  The mediator shall be selected pursuant to the rules
      of the American Arbitration Association unless otherwise agreed by the
      parties, and shall be conducted in accordance with the mediation
      procedures of the American Arbitration Association; provided, however,
      that a matter subject to mediation pursuant to this Section that is not
      resolved by mediation within thirty (30) days shall be submitted to
      binding arbitration pursuant to this
Section.

              

      

      

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      
        	
                B.

              	
                This
      Subscription Agreement is expressly not intended for the benefit of any
      other person; and except and only to the extent provided by applicable
      statute, no such creditor or third party shall have any rights under this
      Subscription Agreement.

              

      

      

      
        	
                C.

              	
                Except
      as otherwise provided in this Subscription Agreement, any notice required
      or permitted to be given pursuant to the provisions of this Subscription
      Agreement shall be effective as of the day personally delivered, or if
      sent by mail, on the third day after deposit with the United States Postal
      Service, prepaid and addressed to the intended recipient at the address
      set forth below the signature of such party to this Subscription Agreement
      or such other address specified in writing by such party pursuant to
      written notice in accordance herewith, or, if sent by facsimile, when
      confirmed.

              

      

      

      
        	
                D.

              	
                This
      Subscription Agreement constitutes the entire agreement between the
      parties pertaining to the subject matter of the transactions contemplated
      by this Subscription Agreement.  This Subscription Agreement
      supersedes all written or oral, prior and contemporaneous agreements,
      representations, warranties and understandings of the parties with respect
      thereto.

              

      

      

      
        	
                E.

              	
                This
      Subscription Agreement and the rights of stockholders shall be governed by
      and construed and enforced in accordance with the internal laws of the
      state of California, inclusive of any statutes of limitation, but without
      regard to the conflict of laws rules thereof.  Jurisdiction and
      venue for any action concerning a dispute involving, arising out of or
      related to the interpretation, application or enforcement of this
      Subscription Agreement shall be in Los Angeles County,
      California.

              

      

      

      
        	
                F.

              	
                This
      Subscription Agreement may be executed in several counterparts and all
      counterparts so executed shall constitute one Subscription Agreement
      binding on all parties hereto, notwithstanding that all the parties are
      not signatories to the original or the same
      counterpart.  Facsimile signatures shall be acceptable as if
      original signatures had been
exchanged.

              

      

      

      
        	
                G.

              	
                If
      a court or an arbitrator of competent jurisdiction holds any provision of
      this Subscription Agreement to be illegal, unenforceable or invalid in
      whole or in part for any reason, such provision shall be adjusted rather
      than voided, if possible to achieve the intent of the parties to the
      extent possible, and in any event the validity and enforceability of the
      remaining sections shall not be affected unless an essential purpose of
      this Subscription Agreement would be defeated by the loss of the illegal,
      unenforceable, or invalid provision.  Without limiting the
      foregoing, in the event that any provision of this Subscription Agreement
      relating to time period and areas of restriction shall be declared by an
      arbitrator or court of competent jurisdiction to exceed the maximum time
      period or areas such arbitrator or court deems reasonable and enforceable,
      the agreed upon time period and areas of restriction shall be deemed to
      become and thereafter be the maximum time period and areas which said
      arbitrator or court deems reasonable and
  enforceable.

              

      

      

      
        	
                H.

              	
                This
      Subscription Agreement may be amended or modified from time to time only
      by a written instrument executed by all parties
  hereto.

              

      

      

      
        	
                I.

              	
                Except
      as herein otherwise provided, this Subscription Agreement shall be binding
      upon and inure to the benefit of the parties and their respective heirs,
      executors, administrators, successors and
  assigns.

              

      

      

      
        	
                J.

              	
                Headings
      are used merely for reference purposes and do not affect content in any
      manner.

              

      

      

      
        	
                K.

              	
                Wherever
      applicable, references herein to the masculine, feminine or neuter shall
      equally apply to the neuter, feminine and
      masculine.  Furthermore, wherever applicable in this
      Subscription Agreement, the singular shall include the
      plural.  Except as otherwise provided herein, “Person” means any
      natural person, firm or corporation or any group of individuals, firms or
      corporations, or any other
entities.

              

      

      

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      
        	
                L.

              	
                Time
      is of the essence of every provision of this Subscription Agreement that
      specifies a time for performance.

              

      

      

      
        
          	
                  M.

                	
                  The
      parties agree to execute and deliver all such further documents,
      agreements and instruments and take such other and further action as may
      be necessary or appropriate to carry out the purposes and intent of this
      Subscription Agreement.

                

        

      

       

       

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      7.  Ownership
Information.  Please print here the total number of Units to be
purchased, and the exact name(s) in which the Interest(s) will be held; then
sign and date this document in the space below.

      

      Total
Units: __________ total purchase price $  _____________($1.00 per
Unit)

      

      Names:    The
Douglas R. Sonderegger Revocable Trust Dated September 18, 1998

       

      
      

       

      
        	      
                _____  Single
      Person

                _____  Joint
      Tenants (with right of Survivorship)

                _____  A
      Married Person as separate property

                _____  A
      Partnership

                _____  Other:
      ____________________________

              	
                _____
      Husband and Wife, as community property

                _____ Tenants in Common

                 

                _____ Corporation of other organization

                _____ Trust

              

      

       

      
        Social
Security Number or Tax I.D.
Number:  ____________________________________________

      

      

      Residence
Address:  ________________________________________________________________

      Mailing
Address (if
different):  ________________________________________________________

      

      Email
Address:  ______________________
___________________________________________

      

      Phone
Numbers:

      Home:

      Business

      Cell

      

      8.  Date and
Signatures – Individual
Investor.             
Dated ____________________, 2008

      

      Signature(s)                                                                  
       Purchaser Name (Print)

      

      ______________________________________        _____________________________________

      

      ______________________________________        _____________________________________

      (Each
co-owner or joint venture owner must sign – Names must be signed exactly as
listed under “Purchaser Name)

      

      9.  Date and
Signatures –Legal Entity (partnership, corp.,
etc).       Dated ___________________,
2008

      

      Name of
Entity                                                                      Number
of Partners (if applicable)

      

      ______________________________________       
_____________________________________

      Signature                                                                               
Person’s Name (Print) and Title/Position

        Of Person Signing on Behalf of
Entity

      

      

      __________________________________________

      

      ACCEPTED:

      

      INTERNATIONAL
STEM CELL CORPORATION

      

      

      

      By:                                                                                       
Dated:  ___________________, 2008

      

      Signed
________________________________

      

      
7

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