EX-10.3






MODIFICATION AGREEMENT




This Modification Agreement (“Agreement”) dated as of December      , 2008 is entered into by
and among Stem Cell Innovations Inc., a Delaware corporation (the “Company”), the noteholders
identified on the signature page hereto (each a “Lender” and collectively “Lenders”) and Alpha
Capital Anstalt as “Lender” and as a secured Lender (“Alpha”).



WHEREAS, the Company and the Lenders are parties to a subscription agreement dated February
14, 2006 relating to an aggregate investment of $2,350,000 by Lenders and a subscription agreement
dated November 16, 2006 relating to an aggregate secured investment of $2,000,000 by Alpha
(collectively “Subscription Agreements”) in Notes (“Notes”) convertible into $.01 par value Common
Stock of the Company and Common Stock Purchase Warrants as more fully described on Schedule A
hereto (“Warrants”); and



WHEREAS, the Company acknowledges that an Event of Default has occurred under the Notes by
virtue of, among other things, the maturity of the Notes and Company’s continuing failure to pay
the outstanding indebtedness at maturity (the “Existing Defaults”).  As a result of the occurrence
and continuation of the Existing Defaults, Alpha is entitled to, among other things, to immediately
enforce its rights and remedies against the assets and collateral (the “Collateral”) of the Company
which secure the obligations to Alpha under that certain Security Agreement (the “Security
Agreement”) and Guaranty (“Guaranty”) dated November 16, 2006 and under applicable law; and



WHEREAS, Alpha has agreed to loan to the Company an additional aggregate sum of $300,000 (“New
Funding”) in Notes to be secured pari-passu with the Notes and all sums due under the Notes and the
Transaction Documents (as hereinafter defined) dated November 16, 2006.



NOW THEREFORE, in consideration of the mutual covenants and other agreements contained in this
Agreement, the Company and the Lenders hereby agree as follows:



1. Definitions and Recitals. Capitalized terms employed and not otherwise defined
herein have the meanings attributed to them in the Subscription Agreements, Notes, Warrants,
Security Agreement, Guaranty and related transaction documents (“Transaction Documents”).



2. Ratification and Incorporation of Agreements. Except as expressly modified by
this Agreement, (a) the Company hereby acknowledges, confirms and ratifies all of the terms and
conditions set forth in, and all of its obligations under the Transaction Documents, which
documents are valid, binding and in full force and effect and (b) all of the terms and conditions
set forth in the foregoing Transaction Documents are incorporated herein by this reference as if
set forth in full herein.



3. Acknowledgement of Indebtedness and Senior Secured Liens. The Company
acknowledges and agrees that as of the date hereof, the aggregate principal amount due under the
secured Notes to Alpha comprising the “Obligations” is not less than $2,585,000. The Company
represents and agrees that the Obligations due to Alpha are secured by valid and enforceable first
priority liens and security interests against the Collateral, and that it has no offset, defense,
counterclaim, dispute or disagreement of any kind or nature whatsoever with respect to the
liability or amount of such foregoing Indebtedness or the liens and security interests securing
such Obligations. In addition to the amount set forth above, the Company is and shall be liable to
Alpha for all interest accrued and accruing, fees, costs, liquidated damages, expenses, and costs
of collection (including reasonable attorneys’ fees and expenses and other amounts due under the
Transaction Documents) heretofore or hereafter accrued or incurred in connection with the
indebtedness, including, without limitation, all attorney’s fees and expenses incurred in
connection with the negotiation and preparation of this Agreement and all documents, as provided in
the applicable Transaction Document. The Company hereby acknowledges and agrees that Existing
Defaults have occurred and are continuing, each of which constitutes an Event of Default and
entitles Lenders to accrue interest at the default rate of interest and to exercise their rights
and remedies under the Transaction Documents, applicable law or otherwise. Lenders have not
waived, presently do not intend to waive and may never waive such existing defaults and nothing
contained herein or the transactions contemplated hereby shall be deemed to constitute any such
waiver. The Company hereby acknowledges and agrees that Lenders have the right to declare the
indebtedness to be immediately due and payable under the terms of the Transaction Documents.



4. Forbearance. As consideration for Alpha’s forbearance, the Company agrees to
increase the principal amount of the Notes due and owing to Alpha by an additional 25% as more
fully described on Schedule A hereto.



5. Alpha’s Conversion Price. Section 2.1(b) of the Notes issued only to Alpha is
deleted in its entirety and replaced with the following:



“Subject to adjustment as provided in Section 2.1(c) hereof,
the Conversion Price per share shall be the lessor of (i)
$.01, or (ii) 80% of the average of the lowest three day
closing prices of the common stock for the ten days
preceding a Conversion Date.”



6. Anti-Dilution Waiver. In connection with the reset of the Conversion Price of the
Notes issued to Alpha described in Section 4 above, the undersigned Lenders waive their reset
rights or future anti-dilution rights granted pursuant to Section 12(a) of the Subscription
Agreement – Most Favored Nation, Section 2.1(c)D of the Note and Section 3.4 of the Warrant.



7. Lenders’ Conversion Price Reduction. The Conversion Price of the Convertible
Notes issued to Lenders, Longview Fund L.P. and John V. Winfield, is reduced to $0.03. In
connection therewith, Lenders, Longview Fund L.P. and John V. Winfield, waive any reset or future
anti-dilution grants pursuant to Section 12(a) of the Subscription Agreement – Most Favored
National, Section 2.1(c)D of the Note and Section 3.4 of the Warrant.



8. Share Reservation. The Company agrees to reserve on behalf of Alpha from its
authorized but unissued shares of Common Stock an aggregate of 800,000,000 shares. The Company
agrees to provide to Alpha within one day of execution of this Agreement a Board Resolution
memorializing this reservation.



9. Share Restriction. Lenders hereby agree that for a period of one year commencing
on the Closing Date of the New Funding (“Restriction Period”), Lenders will not convert and/or
sell, transfer or otherwise dispose of any shares of Common Stock or any options, warrants or other
rights to purchase shares of Common Stock or any other security of the Company which Lenders own or
have a right to acquire as of the date hereof, other than in connection with an offer made to all
shareholders of the Company in connection with merger, consolidation or similar transaction
involving the Company. Lenders further agree that the Company is authorized to and the Company
agrees to place “stop orders” on its books to prevent any transfer of shares of Common Stock or
other securities of the Company held by Lenders in violation of this Agreement. The Company agrees
not to allow to occur any transaction inconsistent with this Agreement. Any subsequent issuance to
and/or acquisition by Lenders of Common Stock or options or instruments convertible into Common
Stock will be subject to the provisions of this Agreement. The provisions of this Share
Restriction may be waived only by Alpha. Lenders further agree that the aforementioned Share
Restriction provisions shall not apply to Alpha.



10. Actual Reservation Date. The Actual Reservation Date as defined in the February
14, 2006 Transaction Documents is July 6, 2006.



11. Chassman Loan. Within thirty-five (35) days of the date hereof, Margie Chassman
(“Chassman”) agrees to loan the Company the sum of $50,000. Failure by Chassman to timely loan the
Company said sum will be an Event of Default under the Note and additionally Alpha will be released
from having to advance any additional funds to the Company.



12. Chassman Debt. Additionally, upon reduction of the par value of the Company’s
Common Stock no later than March 31, 2009, Chassman will convert a $1,000,000 of debt owed by the
Company to Chassman into 1,470,588,236 shares of the Company’s Common Stock at a per share price of
$.00068, which shares will be issued to Chassman or her designees.



13. Chassman Assignment   Additionally, upon reduction of the par value of the
Company’s Common Stock no later than March 31, 2009, Chassman will assign 50,000,000 shares of the
Company’s Common Stock to John V. Winfield, one of the Lenders herein.



14. Representations and Warranties by Company. The Company represents and warrants
that all outstanding debts of the Company as of the date of this Agreement are disclosed on
Schedule B hereto.



15. Representations and Warranties. In order to induce the Lenders to enter into
this Agreement and to forbear with respect to the Existing Defaults in the manner provided in this
Agreement, the Company represents and warrants to each of the Lenders as follows:



A. Power and Action. The Company has all requisite corporate power and authority to
enter into this Agreement and to carry out the transactions contemplated by, and perform its
obligations hereunder and thereunder.



B. Authorization and Agreement. The execution and delivery of this Agreement by the
Company and the performance hereunder and thereunder have been duly authorized by all necessary
action. This Agreement has been duly executed and delivered by the Company.



C. Enforceability. This Agreement constitutes the legal, valid and binding
obligations of the Company enforceable against the Company in accordance with its terms.



D. No Violation or Conflict. The execution and delivery by the Company of this
Agreement and the performance by the Company hereunder and thereunder do not and will not (i)
contravene, in any respect, any provision of any law, regulation, decree, ruling, judgment or order
that is applicable to the Company or its properties or other assets, or (ii) result in a breach of
or constitute a default under the charter, bylaws or other organizational documents of the Company
or any material agreement, indenture, lease or instrument binding upon the Company or its
properties or other assets.



E. Governmental Consents. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is required for the due
execution, delivery and performance by the Company of this Agreement.



F. Effect on Agreements. Except as specifically provided herein, all of the
Transaction Documents remain in full force and effect in accordance with their respective terms,
including without limitation any Security Agreement and Subsidiary Guaranty, each of which remain
in full force and effect.



G. Jury Trial. The Company makes the following waiver knowingly, voluntarily, and
intentionally, and understands that each of the Lenders, in entering into this Agreement, is
relying thereon. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY PRESENT OR FUTURE RIGHT TO A JURY IN
ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE LENDERS, OR EITHER OF THEM, ARE OR BECOME A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE LENDERS, OR EITHER OF THEM, OR IN
WHICH THE LENDERS, OR EITHER OF THEM, IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY
ARISES OUT OF, OR IS IN RESPECT OF, ANY RELATIONSHIP BETWEEN THE COMPANY OR ANY SUCH PERSON, AND
THE LENDERS, OR EITHER OF THEM.



H. Governing Law: Consent to Jurisdiction and Venue. THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS AND DECISIONS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS, AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED WITHIN THE COUNTY OF NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN COMPANY AND LENDERS PERTAINING TO THIS AGREEMENT, THE
NOTES OR ANY OF THE OTHER AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT.



I. Waiver of Claims by the Company. The Company hereby acknowledges and agrees that
it has no offsets, defenses, claims, or counterclaims against the Lenders, or either of them, or
any of the Lenders’ respective officers, directors, employees, members, managers, affiliates,
attorneys, representatives, predecessors, successors, or assigns with respect to the Indebtedness,
or otherwise, and that if the Company now has, or ever did have, any such offsets, defenses,
claims, or counterclaims against the Lenders, or either of them, or any of the Lenders’ respective
officers, directors, employees, affiliates, attorneys, representatives, predecessors, successors,
or assigns, whether known or unknown, at law or in equity, from the beginning of the world through
this date and through the time of execution of this Agreement, all of them are hereby expressly
WAIVED, and the Company hereby RELEASES the Lenders and the Lenders’ respective officers,
directors, employees, affiliates, attorneys, representatives, predecessors, successors, and assigns
from any liability therefor.



J. Release. In consideration of the agreements of the Lenders contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company on behalf of itself and its successors, assigns, heirs, executor,
administrator and other legal representatives, hereby, jointly and severally, absolutely,
unconditionally and irrevocably releases, remises and forever discharges each of the Lenders, their
successors and assigns, and their respective present and former shareholders, affiliates,
subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, members,
managers, agents and other representatives (the Lenders and all such other parties being
hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and
from all demands, actions, causes of action, suits, covenants, contracts, controversies,
agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other
claims, counterclaims, defenses, rights of set off, demands and liabilities whatsoever
(individually, a “Claim” and collectively, “Claims”) of every name and nature, known or unknown,
suspected or unsuspected, both at law and in equity, which the Company, or any of its officers,
directors, employees, successors, assigns, heirs, executor, administrator or other legal
representatives, as the case may be, may now or hereafter own, hold, have or claim to have against
the Releasees or any of them for, upon, or by reason of any nature, cause or thing whatsoever which
arises at any time on or prior to the day and date of this Agreement, for or on account of, or in
relation to, or in any way in connection with the Transaction Documents as amended and supplemented
through the date hereof, or otherwise. The Company understands, acknowledges and agrees that the
release set forth above may be pleaded as a full and complete defense and may be used as a basis
for an injunction against any action, suit or other proceeding which may be instituted, prosecuted
or attempted in breach of the provisions of such release. The Company agrees that no fact, event,
circumstance, evidence or transaction which could now be asserted or which may hereafter be
discovered shall affect in any manner the final and unconditional nature of the release set forth
above.



K. Covenant Not to Sue. The Company, on behalf of itself and its successors,
shareholders, assigns, heirs, executor, administrator and other legal representatives, hereby
jointly and severally, absolutely, unconditionally and irrevocably, covenants and agrees with each
Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any
Releasee on the basis of any Claim released, remised and discharged by the Company. If the Company
or any party on its behalf violates the foregoing covenant, the Company agrees to pay, in addition
to such other damages as any Releasee may sustain as a result of such violation, all attorneys’
fees and costs incurred by any Releasee as a result of such violation.



16. Conflict of Interest. Grushko & Mittman, P.C. (“G&M”) has represented each of
the Lenders and/or their respective affiliates (each, including such affiliates, collectively, a
“Client”) in other transactions prior to or concurrent with, but unrelated to, this Agreement and
the New Funding. Each of the Clients anticipates that G&M will continue to represent the other
Lender or any of such other Lender’s affiliates with respect to other matters concurrent with and
subsequent to the consummation of this Agreement and the New Funding. All such past, current and
future representations of any Client (other than this Agreement) are referred to as G&M -Client
Representations. Each Lender, for itself and its affiliates, hereby confirms that it has waived,
and continues to waive, any claim that the work performed by G&M in connection with the preparation
of this Agreement and the New Funding (or any matter arising thereunder) represents a conflict of
interest on the part of G&M and confirms that G&M may continue to act for the other Lender or any
of such other Lender’s affiliates with respect to all G&M -Client Representations.




17. Miscellaneous.



A. The Company acknowledges that the “Securities” issuable to Lenders upon conversion of Notes
and exercise of Warrants and that for the purposes of the Lenders’ holding periods under Rule 144
under the Securities Act, the Lenders shall be deemed to have acquired the Securities and on the
date they acquired the original Notes and Warrants. The Company agrees not to take a position
contrary to this paragraph. In connection therewith, the Company shall also obtain and deliver to
each of the Lenders and to Company’s transfer agent for the Securities, a legal opinion from
counsel opining that the Securities may be resold by Lenders under Rule 144 of the Securities Act
without any restrictions or limitations and that any restrictive legends on the certificates
evidencing the Securities may be removed prior to or in connection with the resale by Lenders of
the Securities.



B. The Company undertakes to make a public announcement on Form 8-K describing the terms of
this Agreement not later than the fourth business day after the execution of this Agreement.



C. This Agreement (i) contains the entire understanding of the parties with respect to the
subject matter hereof, (ii) may not be amended except in writing signed by all of the parties
hereto, (iii) shall inure to the benefit of the parties hereto and their respective successors and
assigns, (iv) may be executed in multiple counterparts, each of which shall be deemed to be an
original and all of which taken together shall constitute one and the same agreement.



D. Any determination that any provision of this Agreement or any application thereof is
invalid, illegal, or unenforceable in any respect in any instance shall not affect the validity,
legality, or enforceability of such provision in any other instance, or the validity, legality, or
enforceability of any other provision of this Agreement. Section headings used herein are for
convenience of reference only, are not part of this Agreement, and are not to be taken into
consideration in interpreting this Agreement.



E. The Company represents and warrants that it (a) has engaged counsel and understands fully
the terms of this Agreement and the consequences of the execution and delivery of this Agreement,
(b) has been afforded an opportunity to have this Agreement reviewed by, and to discuss this
Agreement with such attorneys and other persons as the Company may wish, and (c) has entered into
this Agreement and executed and delivered all documents in connection herewith of its own free will
and accord and without threat, duress or other coercion of any kind by any person. The parties
hereto acknowledge and agree that neither this Agreement nor the other documents executed pursuant
hereto shall be construed more favorably in favor of one than the other based upon which party
drafted the same, it being acknowledged that all parties hereto contributed substantially to the
negotiation and preparation of this Agreement and the other documents executed pursuant hereto or
in connection herewith.



F. In making proof of this Agreement, it shall not be necessary to produce or account for more
than one counterpart thereof signed by each of the parties hereto. Delivery of any executed
counterpart of this Agreement by telefacsimile or electronic communication shall have the same
force and effect as delivery of an original executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile or electronic communication
also shall deliver an original executed counterpart of this Agreement, but the failure to deliver
an original executed counterpart shall not affect the validity, enforceability, and binding effect
of this Agreement as to such party or any other party.



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18. Each of the undersigned states that he has read the foregoing Agreement and understands
and agrees to it and the terms set forth herein represents the entire agreement between the
parties.




STEM CELL INNOVATIONS INC.




the “Company”



By:      



(authorized officer)



	 	 	 
	ALPHA CAPITAL ANSTALT

	 	LONGVIEW FUND L.P.
	By:      

	 	By:      






     


JOHN V. WINFIELD




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