isc_8k-ex401.htm


    
      

    

     

    Exhibit 4.1

     

    

       

      CERTIFICATE
        OF DESIGNATION OF

      RIGHTS,
        PREFERENCES, PRIVILEGES AND RESTRICTIONS OF

      SERIES
        A 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 A Preferred Stock” and the number of shares constituting such series
        shall be Five Million (5,000,000).

       

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

       


      
        
          
          

        

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

       

      Section
        5                 Conversion.  The
        holders of the Series A 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 A 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 A 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 A Preferred Stock shall be
        Ninety-Five Cents ($0.95) and shall thereafter be subject to adjustment as
        set
        forth in Section 6 below (the “Conversion Rate”).

       

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

       

      (c)           
        Mechanics of
        Conversion.  Before any holder of shares of Series A 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 A 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 A 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 A 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 A Preferred Stock represented
        by the
        certificate or certificates surrendered is to be converted, a new certificate
        for the number of shares of Series A 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 A
        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 A Preferred Stock.  All Shares (including fractions
        thereof) issuable upon conversion of more than one share of Series A 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 A Preferred Stock are first issued) that there are less than a total
        of
        two hundred thousand (200,000) shares of Series A Preferred Stock outstanding,
        then each remaining share of Series A 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 A 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 A Preferred Stock so converted are
        surrendered at the office of the Company.

       

      Section
        6                 Adjustments. The
        Shares into which a share of Series A 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 A Preferred Stock immediately prior thereto shall be adjusted
        so
        that the Holder of each share of Series A 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 A 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.


      
        
          
          

        

        
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      (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 A Preferred
        Stock shall be determined by multiplying the number of Shares theretofore
        issuable upon conversion of each share of Series A 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.

      


      (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
        A 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 A Preferred Stock is adjusted, as herein provided, the Conversion
        Rate
        per share of Series A Preferred Stock payable upon conversion of each share
        of
        Series A 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 A Preferred Stock immediately prior to such adjustment,
        and of which the denominator shall be the number of Shares so issuable
        immediately thereafter.


      
        
          
          

        

        
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      (f)           
        If the Company shall issue, after the date upon which any shares of Series
        A
        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.

       

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

       


      
        
          
          

        

        
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      (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
        A
        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).

      


      Section
        7                 Payment of
        Taxes.  The issuance of a stock certificate or certificates on
        conversion of the Series A 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 A Preferred Stock from
        time
        to time as shares of Series A Preferred Stock are presented for
        conversion.  All shares of Common Stock which may be issued upon
        conversion of the Series A 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 A 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 A 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 A 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 A Preferred Stock shall be entitled to one vote on any
        matter relating to an adverse change in the rights of the Series A Preferred
        Stock or the rights of the Holders of the Series A Preferred Stock and on
        any
        matter as to which the approval of the holders of the Series A Preferred
        Stock
        as a class is required by law. Holders of Series A 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 A Preferred Stock shall
        be
        required for any amendment to the rights of the Series A Preferred Stock,
        including a material adverse change in the rights of the Series A Preferred
        Stock or the rights of the Holders of the Series A Preferred Stock.

       


      
        
          
          

        

        
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      IN
        WITNESS WHEREOF, the Company has caused this Certificate to be executed by
        Jeffrey Janus, its President, on this 15 day of January, 2007.

       

       

      


      
        	 	 /s/
                Jeffrey
                Janus               
                01-15-08 


      

      
Attest:

      


      /s/
        Ray
        Wood                   


       

       

       

       

       

       

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