Exhibit 4.1
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE
UNDER
SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO STEM
CELL
INNOVATIONS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
Principal Amount: $1,000,000.00
Issue Date: November ___, 2006
SECURED CONVERTIBLE NOTE
------------------------
FOR VALUE RECEIVED, STEM CELL INNOVATIONS, INC., a Delaware
corporation
(hereinafter called "Borrower"), hereby promises to pay to ALPHA
CAPITAL
ANSTALT, Pradafant 7, 9490 Furstentums, Vaduz, Lichtenstein,
Fax:
011-42-32323196 (the "Holder") or order, without demand, the sum of
One Million
Dollars ($1,000,000.00), with simple interest accruing on November
___, 2007
(the "Maturity Date"), if not paid sooner.
This Note has been entered into pursuant to the terms of a
subscription
agreement between the Borrower and the Holder, dated of even date
herewith (the
"Subscription Agreement"), and shall be governed by the terms of
such
Subscription Agreement. Unless otherwise separately defined herein,
all
capitalized terms used in this Note shall have the same meaning as
is set forth
in the Subscription Agreement. The following terms shall apply to
this Note:
ARTICLE I
GENERAL PROVISIONS
1.1 Interest
Rate. Simple interest payable on this Note shall
accrue at the annual rate of ten percent (10%). Interest will be
payable on
March 31, 2007 and on the last day of each calendar quarter
thereafter and on
the Maturity Date, accelerated or otherwise, when the principal and
remaining
accrued but unpaid interest shall be due and payable.
1.2.
Payment Grace Period. The Borrower shall have a ten (10)
business day grace period to pay any monetary amounts due under
this Note, after
which grace period and during the pendency of an Event of Default
(as defined in
Article III) a default interest rate of eighteen percent (18%) per
annum shall
apply to the amounts owed hereunder.
1.3.
Conversion Privileges. The Conversion Privileges set forth in
Article II shall remain in full force and effect immediately from
the date
hereof and until the Note is paid in full regardless of the
occurrence of an
Event of Default. The Note shall be payable in full on the Maturity
Date, unless
previously converted into Common Stock in accordance with Article
II hereof;
provided, that if an Event of Default has occurred that has not
been timely
cured, the Borrower may not pay this Note, without the consent of
the Holder,
until one year after the later of the date the Event of Default has
been cured
or one year after the Maturity Date.
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ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal due under
this
Note into Shares of the Borrower's Common Stock, $.01 par value per
share
("Common Stock") as set forth below.
2.1.
Conversion into the Borrower's Common Stock.
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(a) The Holder
shall have the right from and after the
Issue Date of the issuance of this Note and then at any time until
this Note is
fully paid, to convert any outstanding and unpaid principal portion
of this
Note, and accrued interest if any, at the election of the Holder
(the date of
giving of such notice of conversion being a "Conversion Date") into
fully paid
and nonassessable shares of Common Stock as such stock exists on
the date of
issuance of this Note, or any shares of capital stock of Borrower
into which
such Common Stock shall hereafter be changed or reclassified, at
the conversion
price as defined in Section 2.1(b) hereof (the "Conversion Price"),
determined
as provided herein. Upon delivery to the Borrower of a completed
Notice of
Conversion, a form of which is annexed hereto, Borrower shall issue
and deliver
to the Holder within five (5) business days after the Conversion
Date (such
fifth day being the "Delivery Date") that number of shares of
Common Stock for
the portion of the Note converted in accordance with the foregoing.
At the
election of the Holder, the Borrower will deliver accrued but
unpaid interest on
the Note in the manner provided in Section 1.3 through the
Conversion Date
directly to the Holder on or before the Delivery Date (as defined
in the
Subscription Agreement). The number of shares of Common Stock to be
issued upon
each conversion of this Note shall be determined by dividing that
portion of the
principal of the Note and interest to be converted, by the
Conversion Price.
(b) Subject to
adjustment as provided in Section 2.1(c)
hereof, the Conversion Price per share shall be $0.10.
(c) The
Conversion Price and number and kind of shares or
other securities to be issued upon conversion determined pursuant
to Section
2.1(a), shall be subject to adjustment from time to time upon the
happening of
certain events while this conversion right remains outstanding, as
follows:
A.
Merger, Sale of Assets, etc. If the Borrower
at any time shall consolidate with or merge into or sell or convey
all or
substantially all its assets to any other corporation, this Note,
as to the
unpaid principal portion thereof and accrued interest thereon,
shall thereafter
be deemed to evidence the right to purchase such number and kind of
shares or
other securities and property as would have been issuable or
distributable on
account of such consolidation, merger, sale or conveyance, upon or
with respect
to the securities subject to the conversion or purchase right
immediately prior
to such consolidation, merger, sale or conveyance. The foregoing
provision shall
similarly apply to successive transactions of a similar nature by
any such
successor or purchaser. Without limiting the generality of the
foregoing, the
anti-dilution provisions of this Section shall apply to such
securities of such
successor or purchaser after any such consolidation, merger, sale
or conveyance.
B.
Reclassification, etc. If the Borrower at
any time shall, by reclassification or otherwise, change the Common
Stock into
the same or a different number of securities of any class or
classes that may be
issued or outstanding, this Note, as to the unpaid principal
portion thereof and
accrued interest thereon, shall thereafter be deemed to evidence
the right to
purchase an adjusted number of such securities and kind of
securities as would
have been issuable as the result of such change with respect to the
Common Stock
immediately prior to such reclassification or other change.
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<PAGE>
C.
Stock Splits, Combinations and Dividends. If
the shares of Common Stock are subdivided or combined into a
greater or smaller
number of shares of Common Stock, or if a dividend is paid on the
Common Stock
in shares of Common Stock, the Conversion Price shall be
proportionately reduced
in case of subdivision of shares or stock dividend or
proportionately increased
in the case of combination of shares, in each such case by the
ratio which the
total number of shares of Common Stock outstanding immediately
after such event
bears to the total number of shares of Common Stock outstanding
immediately
prior to such event..
D.
Share Issuance. So long as this Note is
outstanding, if the Borrower shall issue or agree to issue any
shares of Common
Stock except for the Excepted Issuances (as defined in the
Subscription
Agreement) for a consideration less than the Conversion Price in
effect at the
time of such issue, then, and thereafter successively upon each
such issue, the
Conversion Price shall be reduced to such other lower issue price.
For purposes
of this adjustment, the issuance of any security carrying the right
to convert
such security into shares of Common Stock or of any warrant, right
or option to
purchase Common Stock shall result in an adjustment to the
Conversion Price upon
the issuance of the above-described security and again upon the
issuance of
shares of Common Stock upon exercise of such conversion or purchase
rights if
such issuance is at a price lower than the then applicable
Conversion Price. The
reduction of the Conversion Price described in this paragraph is in
addition to
other rights of the Holder described in this Note and the
Subscription
Agreement.
(d) Whenever
the Conversion Price is adjusted pursuant to
Section 2.1(c) above, the Borrower shall promptly mail to the
Holder a notice
setting forth the Conversion Price after such adjustment and
setting forth a
statement of the facts requiring such adjustment.
(e) Borrower
will reserve from its authorized and
unissued Common Stock the number of shares of Common Stock during
the time
periods and in the amounts described in the Subscription Agreement.
Borrower
represents that upon issuance, such shares will be duly and validly
issued,
fully paid and non-assessable. Borrower agrees that its issuance of
this Note
shall constitute full authority to its officers, agents, and
transfer agents who
are charged with the duty of executing and issuing stock
certificates to execute
and issue the necessary certificates for shares of Common Stock
upon the
conversion of this Note.
2.2 Method of
Conversion. This Note may be converted by
the Holder in whole or in part as described in Section 2.1(a)
hereof and the
Subscription Agreement. Upon partial conversion of this Note, a new
Note
containing the same date and provisions of this Note shall, at the
request of
the Holder, be issued by the Borrower to the Holder for the
principal balance of
this Note and interest which shall not have been converted or
paid.
2.3 Maximum
Conversion. The Holder shall not be entitled
to convert on a Conversion Date that amount of the Note in
connection with that
number of shares of Common Stock which would be in excess of the
sum of (i) the
number of shares of Common Stock beneficially owned by the Holder
and its
affiliates on a Conversion Date, (ii) any Common Stock issuable in
connection
with the unconverted portion of the Note, and (iii) the number of
shares of
Common Stock issuable upon the conversion of the Note with respect
to which the
determination of this provision is being made on a Conversion Date,
which would
result in beneficial ownership by the Holder and its affiliates of
more than
4.99% of the outstanding shares of Common Stock of the Borrower on
such
Conversion Date. For the purposes of the provision to the
immediately preceding
sentence, beneficial ownership shall be determined in accordance
wit
