isc_8k-ex1002.htm


    Exhibit
10.2

    


    CERTIFICATE
OF DESIGNATION OF

    RIGHTS,
PREFERENCES, PRIVILEGES AND RESTRICTIONS OF

    SERIES
C 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 C Preferred Stock” and the number of shares constituting such series
shall be Three Million (3,000,000).

    


    Section
2 Dividends.  The
Series C 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 C 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 C 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 or shares of Series B Preferred Stock
then outstanding, an amount per share equal to the sum of (i) One Dollar ($1.00
for each outstanding share of Series C Preferred Stock (the “Original Series C
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 C Issue Price for every full two (2)
calendar months from August 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 C
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 C Preferred Stock in proportion to the amount of
such stock owned by each such holder.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    (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 C 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 C Preferred Stock shall not be entitled to any rights of redemption
whatsoever.

    


    Section
5     Conversion.  The
holders of the Series C 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 C 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 C 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 C Preferred Stock shall be
Twenty-Five Cents ($0.25) and shall thereafter be subject to adjustment as set
forth in Section 6 below (the “Conversion Rate”).

    


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

    


    (c)  Mechanics of
Conversion.  Before any holder of shares of Series C 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 C 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 C 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 C 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 C Preferred Stock represented by the
certificate or certificates surrendered is to be converted, a new certificate
for the number of shares of Series C 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 C
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.


    
      
         


      

      
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    (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 C Preferred Stock.  All Shares
(including fractions thereof) issuable upon conversion of more than one share of
Series C 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 C Preferred Stock are first issued) that there are less than a total of
two hundred thousand (200,000) shares of Series C Preferred Stock outstanding,
then each remaining share of Series C 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 C 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 C Preferred Stock so converted are
surrendered at the office of the Company.

    


    Section
6     Adjustments. The
Shares into which a share of Series C 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 C Preferred Stock immediately prior thereto shall be adjusted so
that the Holder of each share of Series C 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 C 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 5(d) above), the number of Shares
thereafter issuable upon the conversion of each share of Series C Preferred
Stock shall be determined by multiplying the number of Shares theretofore
issuable upon conversion of each share of Series C 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.


    
      
         


      

      
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    (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 5(d) above) 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 C
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 C
Preferred Stock is adjusted, as herein provided, the Conversion Rate per share
of Series C Preferred Stock payable upon conversion of each share of Series C
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 C 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 C
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.


    
      
         


      

      
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    (g)           Whenever
the number of Shares issuable upon the conversion of each share of Series C
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 C 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 C 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 C
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 C
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).


    
      
         


      

      
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    Section
7     Payment of
Taxes.  The issuance of a stock certificate or certificates on
conversion of the Series C 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 C Preferred Stock from time
to time as shares of Series C Preferred Stock are presented for
conversion.  All shares of Common Stock which may be issued upon
conversion of the Series C 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 C 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 Series C 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 C 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 C 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 C Preferred Stock shall be entitled to one vote on any matter
relating to an adverse change in the rights of the Series C Preferred Stock or
the rights of the Holders of the Series C Preferred Stock and on any matter as
to which the approval of the holders of the Series C Preferred Stock as a class
is required by law, including, but not limited to, any increase in the number of
Series C Preferred Stock issuable by the Company.  Holders of Series C
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 C Preferred Stock shall be required for any amendment to the rights of
the Series C Preferred Stock, including a material adverse change in the rights
of the Series C Preferred Stock or the rights of the Holders of the Series C
Preferred Stock.

    


    (c)       So
long as not less than 25% of the maximum number of issued shares of Series C
Preferred Stock remain outstanding, the holders of a majority of the shares of
Series C Preferred Stock, exclusively and as a separate class, shall be entitled
to nominate and elect one (1) director to serve on the Board of Directors of the
Company.  Any director elected by holders of the Series C Preferred
Stock may be removed without cause by, and only by, the affirmative vote of a
majority of the holders of the Series C Preferred Stock, given either at a
special meeting of such stockholders duly called for that purpose or pursuant to
a written consent of such stockholders.  At any meeting held for the
purpose of electing a director, the presence in person or by proxy of the
holders of a majority of the outstanding shares of Series C Preferred Stock
shall constitute a quorum for the purpose of electing such
director.  A vacancy in any directorship filled by the holders of the
Series C Preferred Stock shall be filled only by vote or written consent in lieu
of a meeting of the holders of not less than a majority of the outstanding
shares of Series C Preferred Stock.


    
      
         


      

      
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    IN
WITNESS WHEREOF, the Company has caused this Certificate to be executed by
William B. Adams, its Chief Financial Officer, on this 18th day of August,
2008.

    


     

    
      	 	By:  /s/William B.
      Adams                           
	 	       
      William B. Adams
	Attest:  /s/ Jacqueline A.
      Adams                       
      	 
	              Jacqueline
      A. Adams