Document:

Exhibit 10.5
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of August       , 2007 (this “Agreement”), is among Advanced Cell Technology, Inc., a Delaware corporation (the “Company”), all of the Subsidiaries of the Company (such subsidiaries, the “Guarantors” and together with the Company, the “Debtors”) and the holders of the Company’s Amortizing Senior Secured Convertible Debentures issued on August       , 2007 in the original aggregate principal amount of $             ; the holders of the Company’s Amortizing Convertible Debentures issued on August 30, 2006 in the original principal amount of $10,981,250 of which $8,270,423 remains outstanding, and the holders of the Company’s Amortizing Convertible Debentures issued on September 15, 2005; in the original principal amount of $22,276,250 of which $3,051,725 remains outstanding (collectively, the “Debentures”) signatory hereto, their endorsees, transferees and assigns (collectively, the “Secured Parties”).
W I T N E S S E T H:
WHEREAS, pursuant to the Securities Purchase Agreement, dated as of September 15, 2005 (the “2005 Purchase Agreement”), the Securities Purchase Agreement, dated as of August 30, 2006 (the “2006 Purchase Agreement”), and the Securities Purchase Agreement dated as of August      , 2007 (the “2007 Purchase Agreement” and collectively, the “Purchase Agreements”) the Secured Parties, pursuant to the applicable Purchase Agreement, have severally agreed to extend the loans to the Company evidenced by the Debentures;
WHEREAS, pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the “Guarantee”), the Guarantors have jointly and severally agreed to guarantee and act as surety for payment of such Debentures;
WHEREAS, in order to induce the Secured Parties party to the 2007 Purchase Agreement (the “2007 Secured Parties”) to extend the loans evidenced by the Debentures, each Debtor has agreed to execute and deliver to the 2007 Secured Parties this Agreement and to grant the 2007 Secured Parties a security interest in certain property of such Debtor to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the Debentures and the Guarantors’ obligations under the Guarantee;
WHEREAS, in order to induce the Secured Parties party to the 2006 Purchase Agreement (the “2006 Secured Parties”) to consent to consummation of the 2007 Purchase Agreement, each Debtor has agreed to execute and deliver to the 2006 Secured Parties this Agreement and to grant the 2006 Secured Parties a security interest in certain property of such Debtor to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the Debentures and the Guarantors’ obligations under the Guarantee;
WHEREAS, in order to induce the Secured Parties party to the 2005 Purchase Agreement (the “2005 Secured Parties”) to consent to consummation of the 2007 Purchase Agreement, each Debtor has agreed to execute and deliver to the 2005 Secured Parties this Agreement and to grant 

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the 2005 Secured Parties a security interest in certain property of such Debtor to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the Debentures and the Guarantors’ obligations under the Guarantee; and
WHEREAS, the rights of the Secured Parties hereunder shall be pari passu with each other Secured Party and enforced through the agent for the Secured Parties appointed pursuant to Section 18 hereunder.
NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1.                                       Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.  Terms used but not otherwise defined in this Agreement that are defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”, “investment property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have the respective meanings given such terms in Article 9 of the UCC.
(a)                            “Collateral” means the collateral in which the Secured Parties are granted a security interest by this Agreement and which shall include the following personal property of the Debtors, whether presently owned or existing or hereafter acquired or coming into existence, wherever situated, and all additions and accessions thereto and all substitutions and replacements thereof, and all proceeds, products and accounts thereof, including, without limitation, all proceeds from the sale or transfer of the Collateral and of insurance covering the same and of any tort claims in connection therewith, and all dividends, interest, cash, notes, securities, equity interest or other property at any time and from time to time acquired, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Securities (as defined below):
(i)   All goods, including, without limitation, (A) all machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special and general tools, fixtures, test and quality control devices and other equipment of every kind and nature and wherever situated, together with all documents of title and documents representing the same, all additions and accessions thereto, replacements therefor, all parts therefor, and all substitutes for any of the foregoing and all other items used and useful in connection with any Debtor’s businesses and all improvements thereto; and (B) all inventory;

(ii)                                All contract rights and
other general intangibles, including, without limitation, all partnership
interests, membership interests, stock or other securities, rights under any of
the Organizational Documents, agreements related to the Pledged Securities,
licenses, distribution and other agreements, computer software (whether “off-the-shelf”,
licensed from any third party or developed by any Debtor), computer software
development rights, leases, franchises, customer 

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lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, and income tax refunds;

(iii)                           All accounts, together with all instruments, all documents of title representing any of the foregoing, all rights in any merchandising, goods, equipment, motor vehicles and trucks which any of the same may represent, and all right, title, security and guaranties with respect to each account, including any right of stoppage in transit;
(iv)                              All documents, letter-of-credit rights, instruments and chattel paper;
(v)                                 All commercial tort claims;
(vi)                              All deposit accounts and all cash (whether or not deposited in such deposit accounts);
(vii)                           All investment property;
(viii)                        All supporting obligations; and
(ix)                                All files, records, books of account, business papers, and computer programs; and
(x)                                   the products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(ix) above.
Without limiting the generality of the foregoing, the “Collateral” shall include all investment property and general intangibles respecting ownership and/or other equity interests in each Guarantor, including, without limitation, the shares of capital stock and the other equity interests listed on Schedule H hereto (as the same may be modified from time to time pursuant to the terms hereof), and any other shares of capital stock and/or other equity interests of any other direct or indirect subsidiary of any Debtor obtained in the future, and, in each case, all certificates representing such shares and/or equity interests and, in each case, all rights, options, warrants, stock, other securities and/or equity interests that may hereafter be received, receivable or distributed in respect of, or exchanged for, any of the foregoing and all rights arising under or in connection with the Pledged Securities, including, but not limited to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein shall be deemed to constitute an assignment of any asset which, in the event of an assignment, becomes void by operation of applicable law or the assignment of which is otherwise prohibited by applicable law (in each case to the extent that such applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law); provided, however, that to the extent 

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permitted by applicable law, this Agreement shall create a valid security interest in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security interest in the proceeds of such asset.
(b)                           “Intellectual Property” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof, and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress, service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto, (iv) all trade secrets arising under the laws of the United States, any other country or any political subdivision thereof, (v) all rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all causes of action for infringement of the foregoing.
(c)                                  “Majority in Interest” means, at any time of determination, at least 67% in interest (based on then-outstanding principal amounts of Debentures at the time of such determination) of the Secured Parties.
(d)                                 “Necessary Endorsement” means undated stock powers endorsed in blank or other proper instruments of assignment duly executed and such other instruments or documents as the Agent (as that term is defined below) may reasonably request.
(e)                            “Obligations” means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of any Debtor to the Secured Parties either (i) under this Agreement, the Debentures, the Guarantee and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, or (ii) related to any other liabilities or obligations associated with any indebtedness for borrowed money from any Secured Party to any Debtor, in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that 

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are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from any of the Secured Parties as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time.  Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) principal of, and interest on the Debentures and the loans extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Debtors from time to time under or in connection with this Agreement, the Debentures, the Guarantee and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith; and (iii) all amounts (including but not limited to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving any Debtor.
(f)                              “Organizational Documents” means with respect to any Debtor, the documents by which such Debtor was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Debtor (such as bylaws, a partnership agreement or an operating, limited liability or members agreement).
(g)                           “Pledged Securities” shall have the meaning ascribed to such term in Section 4(i).
(h)                               “2005 Transaction Documents” means and collectively refers to the 2005 Purchase Agreement, the Debentures and warrants issued thereunder, and the registration rights agreement executed and delivered by the Company and the 2005 Secured Parties in connection with the financing contemplated by the 2005 Purchase Agreement.
(i)                                     “2006 Transaction Documents” means and collectively refers to the 2006 Purchase Agreement, the Debentures and warrants issued thereunder, and the registration rights agreement executed and delivered by the Company and the 2006 Secured Parties in connection with the financing contemplated by the 2006 Purchase Agreement.
(j)                                     “UCC” means the Uniform Commercial Code of the State of New York and or any other applicable law of any state or states which has jurisdiction with respect to all, or any portion of, the Collateral or this Agreement, from time to time.  It is the intent of the parties that defined terms in the UCC should be construed in their broadest sense so that the term “Collateral” will be construed in its broadest sense.  Accordingly if there are, from time to time, changes to defined terms in the UCC that broaden the definitions, they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones shall be controlling.
2.                               Grant of Security Interest in Collateral. As an inducement for the Secured Parties to extend the loans as evidenced by the Debentures and to secure the complete and timely 

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payment, performance and discharge in full, as the case may be, of all of the Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants and hypothecates to the Secured Parties a security interest in and to, a lien upon and a right of set-off against all of their respective right, title and interest of whatsoever kind and nature in and to, the Collateral (a “Security Interest” and, collectively, the “Security Interests”).

3.                                       Delivery of Certain Collateral.  Contemporaneously or prior to the execution
of this Agreement, each Debtor shall deliver or cause to be delivered to the
Agent (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each
case, together with all Necessary Endorsements. 
The Debtors are, contemporaneously with the execution hereof, delivering
to Agent, or have previously delivered to Agent, a true and correct copy of
each Organizational Document governing any of the Pledged Securities.

 

4.                               Representations, Warranties, Covenants and Agreements of the Debtors. Except as set forth under the corresponding section of the disclosure schedules delivered to the Secured Parties concurrently herewith (the “Disclosure Schedules”), which Disclosure Schedules shall be deemed a part hereof, each Debtor represents and warrants to, and covenants and agrees with, the Secured Parties as follows:
(a)   Each Debtor has the requisite corporate, partnership, limited liability company or other power and authority to enter into this Agreement and otherwise to carry out its obligations hereunder. The execution, delivery and performance by each Debtor of this Agreement and the filings contemplated therein have been duly authorized by all necessary action on the part of such Debtor and no further action is required by such Debtor.  This Agreement has been duly executed by each Debtor.  This Agreement constitutes the legal, valid and binding obligation of each Debtor, enforceable against each Debtor in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity.
 (b)                        The Debtors have no place of business or offices where their respective books of account and records are kept (other than temporarily at the offices of its attorneys or accountants) or places where Collateral is stored or located, except as set forth on Schedule A attached hereto.  Except as specifically set forth on Schedule A, each Debtor is the record owner of the real property where such Collateral is located, and there exist no mortgages or other liens on any such real property except for Permitted Liens (as defined in the Debentures).  Except as disclosed on Schedule A, none of such Collateral is in the possession of any consignee, bailee, warehouseman, agent or processor.
(c)      Except for Permitted Liens (as defined in the Debentures) and except as set forth on Schedule B attached hereto, the Debtors are the sole owner of the Collateral (except for non-exclusive licenses granted by any Debtor in the ordinary course of business), free and clear of any liens, security interests, encumbrances, rights or claims, and are fully authorized to grant the Security Interests.  Except as set forth on Schedule B  

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attached hereto, there is not on file in any governmental or regulatory authority, agency or recording office an effective financing statement, security agreement, license or transfer or any notice of any of the foregoing (other than those that will be filed in favor of the Secured Parties pursuant to this Agreement) covering or affecting any of the Collateral.  Except as set forth on Schedule B attached hereto and except pursuant to this Agreement, as long as this Agreement shall be in effect, the Debtors shall not execute and shall not knowingly permit to be on file in any such office or agency any other financing statement or other document or instrument (except to the extent filed or recorded in favor of the Secured Parties pursuant to the terms of this Agreement).
(d)                         No written claim has been received that any Collateral or Debtor’s use of any Collateral violates the rights of any third party. There has been no adverse decision to any Debtor’s claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to any Debtor’s right to keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the best knowledge of any Debtor, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority.
(e)                              Each Debtor shall at all times maintain its books of account and records relating to the Collateral at its principal place of business and its Collateral at the locations set forth on Schedule A attached hereto and may not relocate such books of account and records or tangible Collateral unless it delivers to the Secured Parties at least 30 days prior to such relocation (i) written notice of such relocation and the new location thereof (which must be within the United States) and (ii) evidence that appropriate financing statements under the UCC and other necessary documents have been filed and recorded and other steps have been taken to perfect the Security Interests to create in favor of the Secured Parties a valid, perfected and continuing perfected first priority lien in the Collateral.
(f)                              This Agreement creates in favor of the Secured Parties a valid security interest in the Collateral, subject only to Permitted Liens (as defined in the Debentures) securing the payment and performance of the Obligations.  Upon making the filings described in the immediately following paragraph, all security interests created hereunder in any Collateral which may be perfected by filing Uniform Commercial Code financing statements shall have been duly perfected.  Except for the filing of the Uniform Commercial Code financing statements referred to in the immediately following paragraph, the recordation of the Intellectual Property Security Agreement (as defined below) with respect to copyrights and copyright applications in the United States Copyright Office referred to in paragraph (m), the execution and delivery of deposit account control agreements satisfying the requirements of Section 9-104(a)(2) of the UCC with respect to each deposit account of the Debtors, and the delivery of the certificates and other instruments provided in Section 3, no action is necessary to create, perfect or protect the security interests created hereunder.  Without limiting the generality of the foregoing, except for the execution and delivery of this Agreement by all (100%) of the 2005 Secured Parties and the 2006 Secured Parties, the filing of said financing statements, the recordation of said Intellectual Property Security Agreement, and the 

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execution and delivery of said deposit account control agreements, no consent of any third parties and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for (i) the execution, delivery and performance of this Agreement, (ii) the creation or perfection of the Security Interests created hereunder in the Collateral or (iii) the enforcement of the rights of the Agent and the Secured Parties hereunder.
(g)                           Each Debtor hereby authorizes the Agent to file one or more financing statements under the UCC, with respect to the Security Interests, with the proper filing and recording agencies in any jurisdiction deemed proper by it.
(h)                             The execution, delivery and performance of this Agreement by the Debtors does not (i) violate any of the provisions of any Organizational Documents of any Debtor or any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable law, rule or regulation applicable to any Debtor or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing any Debtor’s debt or otherwise) or other understanding to which any Debtor is a party or by which any property or asset of any Debtor is bound or affected. If any, all required consents (including, without limitation, from stockholders or creditors of any Debtor) necessary for any Debtor to enter into and perform its obligations hereunder have been obtained.
(i)                                 The capital stock and other equity interests listed on Schedule H hereto (the “Pledged Securities”) represent all of the capital stock and other equity interests of the Guarantors, and represent all capital stock and other equity interests owned, directly or indirectly, by the Company.  All of the Pledged Securities are validly issued, fully paid and nonassessable, and the Company is the legal and beneficial owner of the Pledged Securities, free and clear of any lien, security interest or other encumbrance except for the security interests created by this Agreement and other Permitted Liens (as defined in the Debentures).
(j)                                   The ownership and other equity interests in partnerships and limited liability companies (if any) included in the Collateral (the “Pledged Interests”) by their express terms do not provide that they are securities governed by Article 8 of the UCC and are not held in a securities account or by any financial intermediary.
(k)                                Except for Permitted Liens (as defined in the Debentures), each Debtor shall at all times maintain the liens and Security Interests provided for hereunder as valid and perfected first priority liens and security interests in the Collateral in favor of the Secured Parties until this Agreement and the Security Interest hereunder shall be terminated pursuant to Section 11 hereof.  Each Debtor hereby agrees to defend the same against the claims of any and all persons and entities. Each Debtor shall safeguard and protect all Collateral for the account of the Secured Parties.  At the request of the Agent, each Debtor will sign and deliver to the Agent on behalf of the Secured Parties at any 

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time or from time to time one or more financing statements pursuant to the UCC in form reasonably satisfactory to the Agent and will pay the cost of filing the same in all public offices wherever filing is, or is deemed by the Agent to be, necessary or desirable to effect the rights and obligations provided for herein. Without limiting the generality of the foregoing, each Debtor shall pay all fees, taxes and other amounts necessary to maintain the Collateral and the Security Interests hereunder, and each Debtor shall obtain and furnish to the Agent from time to time, upon demand, such releases and/or subordinations of claims and liens which may be required to maintain the priority of the Security Interests hereunder.
(l)   Except as listed on Schedule I, no Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral (except for licenses granted by a Debtor in its ordinary course of business and sales of inventory and other unused or outdated assets by a Debtor in its ordinary course of business) without the prior written consent of a Majority in Interest.
(m)                               Each Debtor shall keep and preserve its equipment, inventory and other tangible Collateral in good condition, repair and order and shall not operate or locate any such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.
(n)                                 Each Debtor shall maintain with financially sound and reputable insurers, insurance with respect to the Collateral, including Collateral hereafter acquired, against loss or damage of the kinds and in the amounts customarily insured against by entities of established reputation having similar properties similarly situated and in such amounts as are customarily carried under similar circumstances by other such entities and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient to cover the full replacement cost thereof.  Each Debtor shall cause each insurance policy issued in connection herewith to provide, and the insurer issuing such policy to certify to the Agent, that (a) the Agent will be named as lender loss payee and additional insured under each such insurance policy; (b) if such insurance be proposed to be cancelled or materially changed for any reason whatsoever, such insurer will promptly notify the Agent and such cancellation or change shall not be effective as to the Agent for at least thirty (30) days after receipt by the Agent of such notice, unless the effect of such change is to extend or increase coverage under the policy; and (c) the Agent will have the right (but no obligation) at its election to remedy any default in the payment of premiums within thirty (30) days of notice from the insurer of such default.  If no Event of Default (as defined in the Debentures) exists and if the proceeds arising out of any claim or series of related claims do not exceed $100,000, loss payments in each instance will be applied by the applicable Debtor to the repair and/or replacement of property with respect to which the loss was incurred to the extent reasonably feasible, and any loss payments or the balance thereof remaining, to the extent not so applied, shall be payable to the applicable Debtor; provided, however, that payments received by any Debtor after an Event of Default occurs and is continuing or in excess of $100,000 for any occurrence or series of related occurrences shall be paid to the Agent on behalf of the Secured Parties and, if received by such Debtor, shall be held in trust for the Secured Parties and 

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immediately paid over to the Agent unless otherwise directed in writing by the Agent.   Copies of such policies or the related certificates, in each case, naming the Agent as lender loss payee and additional insured shall be delivered to the Agent at least annually and at the time any new policy of insurance is issued.
(o)                               Each Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the Secured Parties promptly, in sufficient detail, of any material adverse change in the Collateral, and of the occurrence of any event which would have a material adverse effect on the value of the Collateral or on the Secured Parties’ security interest, through the Agent, therein.
(p)                           Each Debtor shall promptly execute and deliver to the Agent such further deeds, mortgages, assignments, security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action as the Agent may from time to time request and may in its sole discretion deem necessary to perfect, protect or enforce the Secured Parties’ security interest in the Collateral including, without limitation, if applicable, the execution and delivery of a separate security agreement with respect to each Debtor’s Intellectual Property (“Intellectual Property Security Agreement”) in which the Secured Parties have been granted a security interest hereunder, substantially in a form reasonably acceptable to the Agent, which Intellectual Property Security Agreement, other than as stated therein, shall be subject to all of the terms and conditions hereof.
(q)                           Each Debtor shall permit the Agent and its representatives and agents to inspect the Collateral during normal business hours and upon reasonable prior notice, and to make copies of records pertaining to the Collateral as may be reasonably requested by the Agent from time to time.
(r)                                Each Debtor shall take all steps reasonably necessary to diligently pursue and seek to preserve, enforce and collect any rights, claims, causes of action and accounts receivable in respect of the Collateral.
(s)                              Each Debtor shall promptly notify the Secured Parties in sufficient detail upon becoming aware of any attachment, garnishment, execution or other legal process levied against any Collateral and of any other information received by such Debtor that may materially affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Parties hereunder.
(t)                                All information heretofore, herein or hereafter supplied to the Secured Parties by or on behalf of any Debtor with respect to the Collateral is accurate and complete in all material respects as of the date furnished.
(u)                           The Debtors shall at all times preserve and keep in full force and effect their respective valid existence and good standing and any rights and franchises material to its business.

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(v)                           No Debtor will change its name, type of organization, jurisdiction of organization, organizational identification number (if it has one), legal or corporate structure, or identity, or add any new fictitious name unless it provides at least 30 days prior written notice to the Secured Parties of such change and, at the time of such written notification, such Debtor provides any financing statements or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.
(w)                               Except in the ordinary course of business, no Debtor may consign any of its inventory or sell any of its inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale without the consent of the Agent which shall not be unreasonably withheld.
(x)                               No Debtor may relocate its chief executive office to a new location without providing 30 days prior written notification thereof to the Secured Parties and so long as, at the time of such written notification, such Debtor provides any financing statements or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.
(y)                                 Each Debtor was organized and remains organized solely under the laws of the state set forth next to such Debtor’s name in Schedule D attached hereto, which Schedule D sets forth each Debtor’s organizational identification number or, if any Debtor does not have one, states that one does not exist.
(z)                                    (i) The actual name of each Debtor is the name set forth in Schedule D attached hereto; (ii) no Debtor has any trade names except as set forth on Schedule E attached hereto; (iii) no Debtor has used any name other than that stated in the preamble hereto or as set forth on Schedule E for the preceding five years; and (iv) no entity has merged into any Debtor or been acquired by any Debtor within the past five years except as set forth on Schedule E.
(aa)                            At any time and from time to time that any Collateral consists of instruments, certificated securities or other items that require or permit possession by the secured party to perfect the security interest created hereby, the applicable Debtor shall deliver such Collateral to the Agent.
(bb)                      Each Debtor, in its capacity as issuer, hereby agrees to comply with any and all orders and instructions of Agent regarding the Pledged Interests consistent with the terms of this Agreement without the further consent of any Debtor as contemplated by Section 8-106 (or any successor section) of the UCC.  Further, each Debtor agrees that it shall not enter into a similar agreement (or one that would confer “control” within the meaning of Article 8 of the UCC) with any other person or entity.
(cc)                            Each Debtor shall cause all tangible chattel paper constituting Collateral to be delivered to the Agent, or, if such delivery is not possible, then to cause such tangible chattel paper to contain a legend noting that it is subject to the security interest created by this Agreement.  To the extent that any Collateral consists of electronic chattel paper, the 

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applicable Debtor shall cause the underlying chattel paper to be “marked” within the meaning of Section 9-105 of the UCC (or successor section thereto).
(dd)                          If there is any investment property or deposit account included as Collateral that can be perfected by “control” through an account control agreement, the applicable Debtor shall, promptly upon written request of the Agent following the occurrence of an Event of Default, cause such an account control agreement, in form and substance in each case satisfactory to the Agent, to be entered into and delivered to the Agent for the benefit of the Secured Parties.
(ee)                           To the extent that any Collateral consists of letter-of-credit rights, the applicable Debtor shall,  promptly upon written request of the Agent following the occurrence of an Event of Default, cause the issuer of each underlying letter of credit to consent to an assignment of the proceeds thereof to the Secured Parties.
(ff)                            To the extent that any Collateral is in the possession of any third party, the applicable Debtor shall join with the Agent in notifying such third party of the Secured Parties’ security interest in such Collateral and shall use its best efforts to obtain an acknowledgement and agreement from such third party with respect to the Collateral, in form and substance reasonably satisfactory to the Agent.
(gg)                          If any Debtor shall at any time hold or acquire a commercial tort claim, such Debtor shall promptly notify the Secured Parties in a writing signed by such Debtor of the particulars thereof and grant to the Secured Parties in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Agent.
(hh)                          Each Debtor shall immediately provide written notice to the Secured Parties of any and all accounts which arise out of contracts with any governmental authority and, to the extent necessary to perfect or continue the perfected status of the Security Interests in such accounts and proceeds thereof, shall execute and deliver to the Agent an assignment of claims for such accounts and cooperate with the Agent in taking any other steps required, in its judgment, under the Federal Assignment of Claims Act or any similar federal, state or local statute or rule to perfect or continue the perfected status of the Security Interests in such accounts and proceeds thereof.
(ii)                                  Each Debtor shall cause each subsidiary of such Debtor to immediately become a party hereto (an “Additional Debtor”), by executing and delivering an Additional Debtor Joinder in substantially the form of Annex A attached hereto and comply with the provisions hereof applicable to the Debtors.  Concurrent therewith, the Additional Debtor shall deliver replacement schedules for, or supplements to all other Schedules to (or referred to in) this Agreement, as applicable, which replacement schedules shall supersede, or supplements shall modify, the Schedules then in effect.  The Additional Debtor shall also deliver such opinions of counsel, authorizing resolutions, good standing certificates, incumbency certificates, organizational documents, financing statements and other information and documentation as the Agent may reasonably 

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request.  Upon delivery of the foregoing to the Agent, the Additional Debtor shall be and become a party to this Agreement with the same rights and obligations as the Debtors, for all purposes hereof as fully and to the same extent as if it were an original signatory hereto and shall be deemed to have made the representations, warranties and covenants set forth herein as of the date of execution and delivery of such Additional Debtor Joinder, and all references herein to the “Debtors” shall be deemed to include each Additional Debtor.
(jj)                              Each Debtor shall vote the Pledged Securities to comply with the covenants and agreements set forth herein and in the Debentures.
(kk)                            Each Debtor shall register the pledge of the applicable Pledged Securities on the books of such Debtor.  Each Debtor shall notify each issuer of Pledged Securities to register the pledge of the applicable Pledged Securities in the name of the Secured Parties on the books of such issuer.  Further, except with respect to certificated securities delivered to the Agent, the applicable Debtor shall deliver to Agent an acknowledgement of pledge (which, where appropriate, shall comply with the requirements of the relevant UCC with respect to perfection by registration) signed by the issuer of the applicable Pledged Securities, which acknowledgement shall confirm that: (a) it has registered the pledge on its books and records; and (b) at any time directed by Agent during the continuation of an Event of Default, such issuer will transfer the record ownership of such Pledged Securities into the name of any designee of Agent, will take such steps as may be necessary to effect the transfer, and will comply with all other instructions of Agent regarding such Pledged Securities without the further consent of the applicable Debtor.
(ll)                              In the event that, upon an occurrence of an Event of Default, Agent shall sell all or any of the Pledged Securities to another party or parties (herein called the “Transferee”) or shall purchase or retain all or any of the Pledged Securities, each Debtor shall, to the extent applicable: (i) deliver to Agent or the Transferee, as the case may be, the articles of incorporation, bylaws, minute books, stock certificate books, corporate seals, deeds, leases, indentures, agreements, evidences of indebtedness, books of account, financial records and all other Organizational Documents and records of the Debtors and their direct and indirect subsidiaries; (ii) use its best efforts to obtain resignations of the persons then serving as officers and directors of the Debtors and their direct and indirect subsidiaries, if so requested; and (iii) use its best efforts to obtain any approvals that are required by any governmental or regulatory body in order to permit the sale of the Pledged Securities to the Transferee or the purchase or retention of the Pledged Securities by Agent and allow the Transferee or Agent to continue the business of the Debtors and their direct and indirect subsidiaries.
(mm)                      Without limiting the generality of the other obligations of the Debtors hereunder, each Debtor shall promptly (i) cause to be registered at the United States Copyright Office all of its material copyrights, (ii) cause the security interest contemplated hereby with respect to all Intellectual Property registered at the United States Copyright Office or United States Patent and Trademark Office to be duly 

 13
 

recorded at the applicable office, and (iii) give the Agent notice whenever it acquires (whether absolutely or by license) or creates any additional material Intellectual Property.
(nn)                          Each Debtor will from time to time, at the joint and several expense of the Debtors, promptly execute and deliver all such further instruments and documents, and take all such further action as may be necessary or desirable, or as the Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Parties to exercise and enforce their rights and remedies hereunder and with respect to any Collateral or to otherwise carry out the purposes of this Agreement.
(oo)                          Schedule F attached hereto lists all of the patents, patent applications, trademarks, trademark applications, registered copyrights, and domain names owned by any of the Debtors as of the date hereof.  Schedule F lists all material licenses in favor of any Debtor for the use of any patents, trademarks, copyrights and domain names as of the date hereof.  All material patents and trademarks of the Debtors have been duly recorded at the United States Patent and Trademark Office and all material copyrights of the Debtors have been duly recorded at the United States Copyright Office.
(pp)                          Except as set forth on Schedule G attached hereto, none of the account debtors or other persons or entities obligated on any of the Collateral is a governmental authority covered by the Federal Assignment of Claims Act or any similar federal, state or local statute or rule in respect of such Collateral.

5.                                       Effect of Pledge on Certain Rights.  If any of the Collateral subject to this
Agreement consists of nonvoting equity or ownership interests (regardless of
class, designation, preference or rights) that may be converted into voting
equity or ownership interests upon the occurrence of certain events (including,
without limitation, upon the transfer of all or any of the other stock or
assets of the issuer), it is agreed that the pledge of such equity or ownership
interests pursuant to this Agreement or the enforcement of any of Agent’s
rights hereunder shall not be deemed to be the type of event which would trigger
such conversion rights notwithstanding any provisions in the Organizational
Documents or agreements to which any Debtor is subject or to which any Debtor
is party.

 

6.                                     Defaults. The
following events shall be “Events of Default”:

 

(a)   The occurrence of an Event of Default (as defined in the Debentures) under the Debentures;
(b)   Any representation or warranty of any Debtor in this Agreement shall prove to have been incorrect in any material respect when made;
(c)   The failure by any Debtor to observe or perform any of its obligations hereunder for five (5) days after delivery to such Debtor of notice of such failure by or on behalf of a Secured Party unless such default is capable of cure but cannot be cured 

 14
 

within such time frame and such Debtor is using best efforts to cure same in a timely fashion; or
(d)   If any provision of this Agreement shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by any governmental authority having jurisdiction over any Debtor, seeking to establish the invalidity or unenforceability thereof, or any Debtor shall deny that any Debtor has any liability or obligation purported to be created under this Agreement.

7.                                       Duty To Hold In Trust.

(a)            Upon the occurrence of any Event of Default and at any time thereafter, each Debtor shall, upon receipt of any revenue, income, dividend, interest or other sums subject to the Security Interests, whether payable pursuant to the Debentures or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for the Secured Parties and shall forthwith endorse and transfer any such sums or instruments, or both, to the Secured Parties, pro-rata in proportion to their respective then-currently outstanding principal amount of Debentures for application to the satisfaction of the Obligations (and if any Debenture is not outstanding, pro-rata in proportion to the initial purchases of the remaining Debentures).
(b)           If any Debtor shall become entitled to receive or shall receive any securities or other property (including, without limitation, shares of Pledged Securities or instruments representing Pledged Securities acquired after the date hereof, or any options, warrants, rights or other similar property or certificates representing a dividend, or any distribution in connection with any recapitalization, reclassification or increase or reduction of capital, or issued in connection with any reorganization of such Debtor or any of its direct or indirect subsidiaries) in respect of the Pledged Securities (whether as an addition to, in substitution of, or in exchange for, such Pledged Securities or otherwise), such Debtor agrees to (i) accept the same as the agent of the Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of the Secured Parties; and (iii) to deliver any and all certificates or instruments evidencing the same to Agent on or before the close of business on the fifth business day following the receipt thereof by such Debtor, in the exact form received together with the Necessary Endorsements, to be held by Agent subject to the terms of this Agreement as Collateral.

8.                                       Rights and Remedies Upon
Default.

(a)                         Upon the occurrence of any Event of Default and at any time thereafter, the Secured Parties, acting through the Agent, shall have the right to exercise all of the remedies conferred hereunder and under the Debentures, and the Secured Parties, acting through the Agent, shall have all the rights and remedies of a secured party under the UCC.  Without limitation, the Agent, for the benefit of the Secured Parties, shall have the following rights and powers:

 15
 

(i)   The Agent shall have the right to take possession of the Collateral and, for that purpose, enter, with the aid and assistance of any person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and each Debtor shall assemble the Collateral and make it available to the Agent at places which the Agent shall reasonably select, whether at such Debtor’s premises or elsewhere, and make available to the Agent, without rent, all of such Debtor’s respective premises and facilities for the purpose of the Agent taking possession of, removing or putting the Collateral in saleable or disposable form.
(ii)                         Upon notice to the Debtors by Agent, all rights of each Debtor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise and all rights of each Debtor to receive the dividends and interest which it would otherwise be authorized to receive and retain, shall cease.  Upon such notice, Agent shall have the right to receive, for the benefit of the Secured Parties, any interest, cash dividends or other payments on the Collateral and, at the option of Agent, to exercise in such Agent’s discretion all voting rights pertaining thereto.  Without limiting the generality of the foregoing, Agent shall have the right (but not the obligation) to exercise all rights with respect to the Collateral as it were the sole and absolute owner thereof, including, without limitation, to vote and/or to exchange, at its sole discretion, any or all of the Collateral in connection with a merger, reorganization, consolidation, recapitalization or other readjustment concerning or involving the Collateral or any Debtor or any of its direct or indirect subsidiaries.
(iii)   The Agent shall have the right to operate the business of each Debtor using the Collateral and shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public or private sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as the Agent may deem commercially reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon or notice to any Debtor or right of redemption of a Debtor, which are hereby expressly waived.  Upon each such sale, lease, assignment or other transfer of Collateral, the Agent, for the benefit of the Secured Parties, may, unless prohibited by applicable law which cannot be waived, purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities of any Debtor, which are hereby waived and released.
(iv)                     The Agent shall have the right (but not the obligation) to notify any account debtors and any obligors under instruments or accounts to make payments directly to the Agent, on behalf of the Secured Parties, and to enforce the Debtors’ rights against such account debtors and obligors.

 16

(v)                                 The
Agent, for the benefit of the Secured Parties, may (but is not obligated to)
direct any financial intermediary or any other person or entity holding any
investment property to transfer the same to the Agent, on behalf of the Secured
Parties, or its designee.

(vi)                              The
Agent may (but is not obligated to) transfer any or all Intellectual Property
registered in the name of any Debtor at the United States Patent and Trademark
Office and/or Copyright Office into the name of the Secured Parties or any designee
or any purchaser of any Collateral.

(b)                                 The
Agent shall comply with any applicable law in connection with a disposition of
Collateral and such compliance will not be considered adversely to affect the
commercial reasonableness of any sale of the Collateral.  The Agent may sell the Collateral without
giving any warranties and may specifically disclaim such warranties.  If the Agent sells any of the Collateral on
credit, the Debtors will only be credited with payments actually made by the
purchaser.  In addition, each Debtor
waives any and all rights that it may have to a judicial hearing in advance of
the enforcement of any of the Agent’s rights and remedies hereunder, including,
without limitation, its right following an Event of Default to take immediate
possession of the Collateral and to exercise its rights and remedies with
respect thereto.

(c)                                  For
the purpose of enabling the Agent to further exercise rights and remedies under
this Section 8 or elsewhere provided by agreement or applicable law, each Debtor
hereby grants to the Agent, for the benefit of the Agent and the Secured
Parties, an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to such Debtor) to use, license or sublicense
following an Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and including in
such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof.

9.                                       Inter
Secured Party Rights/Consent to 2007 Transaction/Applications of Proceeds.

(a)                                  All Obligations owed to the Secured Parties shall rank in the order of priority pari  passu and pro-rata in proportion to each Secured Party’s outstanding principal amount of Debentures at any given time that a determination needs to be made of pro-rata holdings.  If an Event of Default occurs and any party hereto collects proceeds pursuant to its rights under any Obligations, the other Agent shall be immediately notified and such payment shall be shares with all of the other Secured Parties as set forth above. Notwithstanding anything to the contrary contained in the Purchase Agreements or  any document executed in connection with the Obligations and irrespective of: (i) the time, order or method of attachment or perfection of the security interests created in favor of Secured Parties, (ii) the time or order of filing or recording of financing statements or other documents filed or recorded to perfect security interests in any Collateral; (iii) anything contained in any filing or agreement to which any Secured Party now or 

 17
 

hereafter may be a party; and (iv) the rules for determining perfection or priority under the Uniform Commercial Code or any other law governing the relative priorities of secured creditors, each Secured Parties acknowledges that (x) all other Secured Parties have a valid security interest in the Collateral and (y) the security interests of the Secured Parties in any Collateral pursuant to any outstanding Obligations shall be pari  passu with each other and enforced pursuant to the terms of this Agreement through the Agent.   Each Secured Party, severally and not jointly with the other Secured Parties, shall indemnify, defend, and hold harmless the other Secured Parties against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries, and deficiencies, including interest, penalties, and reasonable professional and attorneys’ fees, including those arising from settlement negotiations, that the other Secured Parties shall incur or suffer, which arise, result from, or relate to a breach of, or failure by such Secured Party to perform under this Agreement.

(b)                                 The
2006 Secured Parties hereby (i) consent to the consummation of the transaction
contemplated pursuant to the 2007 Purchase Agreement, waive any Events of
Default that would otherwise occur under the Debentures, the 2006 Purchase Agreement,
or any registration rights agreements, warrants, documents or agreements
related to the financing contemplated by the 2006 Purchase Agreement and waive
any rights to prohibit, participate in, collect liquidated damages with respect
to or otherwise take any action solely as a result of the Company entering into
and consummating the 2007 Purchase Agreement, and any interim financing in
contemplation thereof, including, without limiting the generality of the
foregoing, all rights arising under Sections 4.13, 4.14 of the 2006 Purchase
Agreement, Section 7(c) of the 2006 Debenture and Sections 6(b), (e) and (i) of
the registration rights agreement entered into in connection with the financing
contemplated by the 2006 Purchase Agreement and (ii) agree that the 2006
Transaction Documents or any provision thereof, may be modified or amended or
the provisions hereof waived with the prior written consent of the Company and
the holders holding at least 67% of the principal amount of the debentures
issued thereunder then outstanding.

(c)                                  The
2005 Secured Parties hereby (i) consent to the consummation of the transaction
contemplated pursuant to the 2007 Purchase Agreement, waive any Events of
Default that would otherwise occur under the Debentures, the 2005 Purchase
Agreement, or any registration rights agreements, warrants, documents or
agreements related to the financing contemplated by the 2005 Purchase Agreement
and waive any rights to prohibit, participate in, collect liquidated damages
with respect to or otherwise take any action solely as a result of the Company
entering into and consummating the 2007 Purchase Agreement, and any interim
financing in contemplation thereof, including, without limiting the generality
of the foregoing, all rights arising under Sections 4.13, 4.14 of the 2005
Purchase Agreement, Section 7(c) of the 2005 Debenture and Sections 6(b), (e)
and (i) of the registration rights agreement entered into in connection with
the financing contemplated by the 2005 Purchase Agreement and (ii) agree that
the 2005 Transaction Documents or any provision thereof, may be modified or
amended or the provisions hereof waived with the prior written consent of the
Company and the holders 

 18
 

holding at least
67% of the principal amount of the debentures issued thereunder then
outstanding.

(d)                                 Subject
to required approval of the Company’s shareholders and approval of a majority
of the non-employee members of the Company’s Board of Directors, and
notwithstanding any provisions to the contrary contained in the 2005
Transaction Documents or the 2006 Transaction Documents, the Secured Parties
hereby consent to the Company establishing an employee stock ownership plan
pursuant to which the Company may issue to employees, officers, directors or
consultants (provided, however, that issuances to consultants shall not exceed
500,000 shares in any 12-month period) options for up to an additional ten
percent (10%) of the fully diluted common stock of the Company determined
immediately following the closing of the transaction contemplated by the 2007
Purchase Agreement, and registering the shares of common stock underlying such
option grants on Form S-8 (as promulgated under the Securities Act) or other
applicable form of registration statement.

(e)                                  The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring any
portion of the Collateral shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Agent in enforcing the Secured Parties’ rights hereunder
and in connection with collecting, storing and disposing of the Collateral, and
then to satisfaction of the Obligations pro rata among the Secured Parties
(based on then-outstanding principal amounts of Debentures at the time of any
such determination), and to the payment of any other amounts required by
applicable law, after which the Secured Parties shall pay to the applicable
Debtor any surplus proceeds. If, upon the sale, license or other disposition of
the Collateral, the proceeds thereof are insufficient to pay all amounts to
which the Secured Parties are legally entitled, the Debtors will be liable for
the deficiency, together with interest thereon, at the rate of 18% per annum or
the lesser amount permitted by applicable law (the “Default Rate”), and the
reasonable fees of any attorneys employed by the Secured Parties to collect
such deficiency.  To the extent permitted
by applicable law, each Debtor waives all claims, damages and demands against
the Secured Parties arising out of the repossession, removal, retention or sale
of the Collateral, unless due solely to the gross negligence or willful
misconduct of the Secured Parties as determined by a final judgment (not
subject to further appeal) of a court of competent jurisdiction.

10.                                 Securities Law Provision.  Each Debtor recognizes that Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the “Securities
Laws”), and may be compelled to resort to one or more sales to a restricted
group of purchasers who may be required to agree to acquire the Pledged
Securities for their own account, for investment and not with a view to the
distribution or resale thereof.  Each
Debtor agrees that sales so made may be at prices and on terms less favorable
than if the Pledged 

 19
 

Securities were sold to the public, and that Agent has no
obligation to delay the sale of any Pledged Securities for the period of time
necessary to register the Pledged Securities for sale to the public under the
Securities Laws.  Each Debtor shall
cooperate with Agent in its attempt to satisfy any requirements under the
Securities Laws (including, without limitation, registration thereunder if
requested by Agent) applicable to the sale of the Pledged Securities by Agent.

11.                                 Costs
and Expenses. Each Debtor agrees to pay all reasonable out-of-pocket fees,
costs and expenses incurred in connection with any filing required hereunder,
including without limitation, any financing statements pursuant to the UCC,
continuation statements, partial releases and/or termination statements related
thereto or any expenses of any searches reasonably required by the Agent.  The Debtors shall also pay all other claims
and charges which in the reasonable opinion of the Agent is reasonably likely
to prejudice, imperil or otherwise affect the Collateral or the Security
Interests therein.  The Debtors will
also, upon demand, pay to the Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel and of any
experts and agents, which the Agent, for the benefit of the Secured Parties,
may incur in connection with (i) the enforcement of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, or (iii) the exercise or enforcement
of any of the rights of the Secured Parties under the Debentures. Until so paid,
any fees payable hereunder shall be added to the principal amount of the
Debentures and shall bear interest at the Default Rate.

12.                                 Responsibility
for Collateral. The Debtors assume all liabilities and responsibility in
connection with all Collateral, and the Obligations shall in no way be affected
or diminished by reason of the loss, destruction, damage or theft of any of the
Collateral or its unavailability for any reason.  Without limiting the generality of the foregoing,
(a) neither the Agent nor any Secured Party (i) has any duty (either before or
after an Event of Default) to collect any amounts in respect of the Collateral
or to preserve any rights relating to the Collateral, or (ii) has any
obligation to clean-up or otherwise prepare the Collateral for sale, and (b)
each Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor
thereunder.  Neither the Agent nor any
Secured Party shall have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the receipt by the
Agent or any Secured Party of any payment relating to any of the Collateral,
nor shall the Agent or any Secured Party be obligated in any manner to perform
any of the obligations of any Debtor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Agent or any Secured Party in respect of the Collateral or as
to the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Agent or to which the Agent or any Secured Party may be
entitled at any time or times.

13.                                 Security Interests Absolute. All rights of the Secured Parties and all obligations of the Debtors hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of validity or enforceability of this Agreement, the Debentures or any agreement entered into in connection with the foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the 

 20
 

Debentures or any other agreement entered into in connection with the foregoing; (c) any exchange, release or nonperfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral for, or any guarantee, or any other security, for all or any of the Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral; or (e) any other circumstance which might otherwise constitute any legal or equitable defense available to a Debtor, or a discharge of all or any part of the Security Interests granted hereby.  Until the Obligations shall have been paid and performed in full, the rights of the Secured Parties shall continue even if the Obligations are barred for any reason, including, without limitation, the running of the statute of limitations or bankruptcy.  Each Debtor expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and demand for performance. In the event that at any time any transfer of any Collateral or any payment received by the Secured Parties hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party other than the Secured Parties, then, in any such event, each Debtor’s obligations hereunder shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof.  Each Debtor waives all right to require the Secured Parties to proceed against any other person or entity or to apply any Collateral which the Secured Parties may hold at any time, or to marshal assets, or to pursue any other remedy. Each Debtor waives any defense arising by reason of the application of the statute of limitations to any obligation secured hereby.

14.                                 Term
of Agreement. This Agreement and the Security Interests shall terminate,
automatically and without any action on the part of the Agent or Secured
Parties, on the date on which all payments under the Debentures have been
indefeasibly paid in full and all other Obligations have been paid or discharged;
provided, however, that all indemnities of the Debtors contained in this
Agreement (including, without limitation, Annex B hereto) shall survive and
remain operative and in full force and effect regardless of the termination of
this Agreement.  Agent and Secured
Parties shall, at Debtor’s request, take any and all action required to
discharge any and all security interests and release to Debtor any and all
Collateral in Agent’s or Secured Parties’ possession or control.  The Secured Parties hereby agree that the
Debtor shall have the right to take all necessary action to cause the
termination and release of all security interests granted hereunder upon
termination of this Agreement and do hereby make, constitute and appoint the
Debtor their true and lawful attorney-in-fact, with power, in the name of the
Agent and Secured Parties to, after the termination of this Agreement, take any
and all such action on behalf of, and in the name of, the Agent and Secured
Parties.

15.                                 Power
of Attorney; Further Assurances.

(a)                                  Each Debtor authorizes the Agent, and does hereby make, constitute and appoint the Agent and its officers, agents, successors or assigns with full power of substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in the name of the Agent or such Debtor, to, after the occurrence and during the continuance of an Event of Default, (i) endorse any note, checks, drafts, money orders or other instruments of 

 21
 

payment (including payments payable under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Agent; (ii) to sign and endorse any financing statement pursuant to the UCC or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii) to pay or discharge taxes, liens, security interests or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral; (v) to transfer any Intellectual Property or provide licenses respecting any Intellectual Property; and (vi) generally, at the option of the Agent, and at the expense of the Debtors, at any time, or from time to time, to execute and deliver any and all documents and instruments and to do all acts and things which the Agent deems necessary to protect, preserve and realize upon the Collateral and the Security Interests granted therein in order to effect the intent of this Agreement and the Debentures all as fully and effectually as the Debtors might or could do; and each Debtor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof.  This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding.  The designation set forth herein shall be deemed to amend and supersede any inconsistent provision in the Organizational Documents or other documents or agreements to which any Debtor is subject or to which any Debtor is a party.  Without limiting the generality of the foregoing, after the occurrence and during the continuance of an Event of Default, each Secured Party is specifically authorized to execute and file any applications for or instruments of transfer and assignment of any patents, trademarks, copyrights or other Intellectual Property with the United States Patent and Trademark Office and the United States Copyright Office.
(b)                                 On a continuing basis, each Debtor will make, execute, acknowledge, deliver, file and record, as the case may be, with the proper filing and recording agencies in any jurisdiction, including, without limitation, the jurisdictions indicated on Schedule C attached hereto, all such instruments, and take all such action as may reasonably be deemed necessary or advisable, or as reasonably requested by the Agent, to perfect the Security Interests granted hereunder and otherwise to carry out the intent and purposes of this Agreement, or for assuring and confirming to the Agent the grant or perfection of a perfected security interest in all the Collateral under the UCC.
(c)                                  Each Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact, with full authority in the place and instead of such Debtor and in the name of such Debtor, from time to time in the Agent’s discretion, to take any action and to execute any instrument which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including the filing, in its sole discretion, of one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of such Debtor where permitted by law, which financing statements may (but need not) describe the Collateral as “all assets” or “all personal property” or words of like import, and ratifies all such actions taken by the Agent.  This power of attorney is coupled with an interest and shall be irrevocable for the 

 22
 

term of this Agreement and thereafter as long as any of the Obligations shall be outstanding.
16.                                 Notices. All notices, requests, demands and other communications hereunder shall be subject to the notice provision of the most recent Purchase Agreement applicable to the Secured Lender.
17.                                 Other Security. To the extent that the Obligations are now or hereafter  secured by property other than the Collateral or by the guarantee, endorsement or property of any other person, firm, corporation or other entity, then the Agent shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of the Secured Parties’ rights and remedies hereunder.
18.                                 Appointment of Agent.  The Secured Parties hereby appoint Bristol Capital Advisors, LLC or its appointed agent to act as their agent (“Bristol” or “Agent”) for purposes of exercising any and all rights and remedies of the Secured Parties hereunder. Such appointment shall continue until the earlier of the date that (a) such appointment is revoked in writing by a Majority in Interest or (b) such date that Bristol holds less than $50,000 principal amount of Debentures and all other Secured Parties hold, in the aggregate, more than $500,000 principal amount of Debentures, at which time a Majority in Interest shall appoint a new Agent.  The Agent shall have the rights, responsibilities and immunities set forth in Annex B hereto.
19.                                 Miscellaneous.
(a)                                  No course of dealing between the Debtors and the Secured Parties, nor any failure to exercise, nor any delay in exercising, on the part of the Secured Parties, any right, power or privilege hereunder or under the Debentures shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
(b)                                 All of the rights and remedies of the Secured Parties with respect to the Collateral, whether established hereby or by the Debentures or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.
(c)                                  This Agreement, together with the exhibits and schedules hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement and the exhibits and schedules hereto. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Debtors and a Majority in Interest or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.

 23
 

(d)                                 If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(e)                                  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
(f)                                    This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company and the Guarantors may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Secured Party (other than by merger).  Any Secured Party may assign any or all of its rights under this Agreement to any Person to whom such Secured Party assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of this Agreement that apply to the “Secured Parties.”
(g)                                 Each party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.
(h)                                 All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each Debtor agrees that all proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and the Debentures (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such proceeding by mailing a copy thereof via registered or certified 

 24
 

mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If any party shall commence a proceeding to enforce any provisions of this Agreement, then the prevailing party in such proceeding shall be reimbursed by the other party for its reasonable attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such proceeding.
(i)                                     This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.
(j)                                     All Debtors shall jointly and severally be liable for the obligations of each Debtor to the Secured Parties hereunder.
(k)                                  Each Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured Parties and their respective partners, members, shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar functions) (collectively, “Indemnitees”) from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from this Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties, suits, costs and expenses which result from any violation of the terms or provisions of this Agreement or the agreements underlying the Obligations, the negligence or willful misconduct of the Indemnitee.  This indemnification provision is in addition to, and not in limitation of, any other indemnification provision in the Debentures, the Purchase Agreements or any other agreement, instrument or other document executed or delivered in connection herewith or therewith.

(l)                                     Nothing
in this Agreement shall be construed to subject Agent or any Secured Party to
liability as a partner in any Debtor or any if its direct or indirect
subsidiaries that is a partnership or as a member in any Debtor or any of its
direct or indirect subsidiaries that is a limited liability company, nor shall
Agent or any Secured Party be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as applicable, of
any such Debtor or any if its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its 

 25
 

right to be substituted for such Debtor as a partner or member, as
applicable, pursuant hereto.

(m)                               To
the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of any
partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval
and waive any such noncompliance with the terms of said documents.

[SIGNATURE PAGES FOLLOW]

 26
 

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed on the day and year first above written.

	
  ADVANCED CELL TECHNOLOGY, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  
	
   

  
	
  [INSERT
  NAMES OF SUBSIDIARIES]

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 27
 

[SIGNATURE PAGE OF HOLDERS TO ACTC SA]

	
  Name of Investing Entity:

  	
   

  	
   

  
	
   

  
	
  Signature of
  Authorized Signatory of Investing entity:

  	
   

  	
   

  
	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  	
   

  
	
   

  
	
  Title of
  Authorized Signatory: 

  	
   

  	
   

  
								

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 28
 

SCHEDULE A

Principal Place of Business of Debtors:

Locations Where Collateral is Located or Stored:

SCHEDULE
B

SCHEDULE
C

SCHEDULE
D

Legal Names and Organizational Identification Numbers

SCHEDULE
E

Names; Mergers and Acquisitions

SCHEDULE
F

Intellectual Property

SCHEDULE
G

Account Debtors

SCHEDULE
H

Pledged Securities

 29
 

SCHEDULE I

Permitted Licenses and Dispositions

[Mytogen-related licenses, if any]

[Pre-authorization of Biotime transaction, if any]

[Other pending licenses or disposition of assets]

 30

ANNEX A

to

SECURITY

AGREEMENT

FORM OF ADDITIONAL DEBTOR JOINDER

Security Agreement dated as of August      ,
2007 made by

ADVANCED CELL TECHNOLOGY, INC.

and its subsidiaries party thereto from time to time, as
Debtors

to and in favor of

the Secured Parties
identified therein (the “Security Agreement”)

Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.

The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Parties referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the
same extent as if the undersigned was an original signatory thereto and (c) be
deemed to have made the representations and warranties set forth therein as of
the date of execution and delivery of this Additional Debtor Joinder.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A
SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY
AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS
SET FORTH THEREIN.

Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.

An executed
copy of this Joinder shall be delivered to the Secured Parties, and the Secured
Parties may rely on the matters set forth herein on or after the date
hereof.  This Joinder shall not be
modified, amended or terminated without the prior written consent of the
Secured Parties.

IN WITNESS
WHEREOF, the undersigned has caused this Joinder to be executed in the name and
on behalf of the undersigned.

	
  

  	
  [Name of Additional Debtor]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  
							

 

[ANNEX B

to

SECURITY

AGREEMENT

THE AGENT

1. Appointment.  The
Secured Parties (all capitalized terms used herein and not otherwise defined
shall have the respective meanings provided in the Security Agreement to which
this Annex B is attached (the “Agreement”)), by their acceptance of the
benefits of the Agreement, hereby designate [         
(“[          ” or “Agent”)
as the Agent to act as specified herein and in the Agreement.  Each Secured Party shall be deemed
irrevocably to authorize the Agent to take such action on its behalf under the
provisions of the Agreement and any other Transaction Document (as such term is
defined in the Debentures) and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required of
the Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto.  The Agent
may perform any of its duties hereunder by or through its agents or employees.

2. Nature of Duties. 
The Agent shall have no duties or responsibilities except those
expressly set forth in the Agreement. 
Neither the Agent nor any of its partners, members, shareholders,
officers, directors, employees or agents shall be liable for any action taken
or omitted by it as such under the Agreement or hereunder or in connection
herewith or therewith, be responsible for the consequence of any oversight or
error of judgment or answerable for any loss, unless caused solely by its or
their gross negligence or willful misconduct as determined by a final judgment
(not subject to further appeal) of a court of competent jurisdiction.  The duties of the Agent shall be mechanical
and administrative in nature; the Agent shall not have by reason of the
Agreement or any other Transaction Document a fiduciary relationship in respect
of any Debtor or any Secured Party; and nothing in the Agreement or any other
Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of the Agreement
or any other Transaction Document except as expressly set forth herein and
therein.

3. Lack of Reliance on the
Agent.  Independently and
without reliance upon the Agent, each Secured Party, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Company and its
subsidiaries in connection with such Secured Party’s investment in the Debtors,
the creation and continuance of the Obligations, the transactions contemplated
by the Transaction Documents, and the taking or not taking of any action in
connection therewith, and (ii) its own appraisal of the creditworthiness of the
Company and its subsidiaries, and of the value of the Collateral from time to
time, and the Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Secured Party with any credit, market or
other information with respect thereto, whether coming into its possession
before any Obligations are incurred or at any time or times thereafter.  The Agent shall not be responsible to the
Debtors or any

Secured Party for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith, or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or
sufficiency of the Agreement or any other Transaction Document, or for the
financial condition of the Debtors or the value of any of the Collateral, or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of the Agreement or any other
Transaction Document, or the financial condition of the Debtors, or the value
of any of the Collateral, or the existence or possible existence of any default
or Event of Default under the Agreement, the Debentures or any of the other
Transaction Documents.

4. Certain Rights of the
Agent.  The Agent shall have
the right to take any action with respect to the Collateral, on behalf of all
of the Secured Parties.  To the extent
practical, the Agent shall request instructions from the Secured Parties with
respect to any material act or action (including failure to act) in connection
with the Agreement or any other Transaction Document, and shall be entitled to
act or refrain from acting in accordance with the instructions of Secured
Parties holding a majority in principal amount of Debentures (based on
then-outstanding principal amounts of Debentures at the time of any such
determination); if such instructions are not provided despite the Agent’s
request therefor, the Agent shall be entitled to refrain from such act or
taking such action, and if such action is taken, shall be entitled to
appropriate indemnification from the Secured Parties in respect of actions to
be taken by the Agent; and the Agent shall not incur liability to any person or
entity by reason of so refraining. 
Without limiting the foregoing, (a) no Secured Party shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the terms of the Agreement
or any other Transaction Document, and the Debtors shall have no right to question
or challenge the authority of, or the instructions given to, the Agent pursuant
to the foregoing and (b) the Agent shall not be required to take any action
which the Agent believes (i) could reasonably be expected to expose it to
personal liability or (ii) is contrary to this Agreement, the Transaction
Documents or applicable law.

5. Reliance.  The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
the proper person or entity, and, with respect to all legal matters pertaining
to the Agreement and the other Transaction Documents and its duties thereunder,
upon advice of counsel selected by it and upon all other matters pertaining to
this Agreement and the other Transaction Documents and its duties thereunder,
upon advice of other experts selected by it. 
Anything to the contrary notwithstanding, the Agent shall have no
obligation whatsoever to any Secured Party to assure that the Collateral exists
or is owned by the Debtors or is cared for, protected or insured or that the
liens granted pursuant to the Agreement have been properly or sufficiently or
lawfully created, perfected, or enforced or are entitled to any particular
priority.

6. Indemnification. 
To the extent that the Agent is not reimbursed and indemnified by the
Debtors, the Secured Parties will jointly and severally reimburse and indemnify
the Agent, in proportion to their initially purchased respective principal
amounts of Debentures, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in performing its duties hereunder or
under the Agreement or any other Transaction Document, or in any way relating
to or arising out of the Agreement or any other Transaction Document except for
those determined by a final judgment (not subject to further appeal) of a court
of competent jurisdiction to have resulted solely from the Agent’s own gross
negligence or willful misconduct.  Prior
to taking any action hereunder as Agent, the Agent may require each Secured
Party to deposit with it sufficient sums as it determines in good faith is
necessary to protect the Agent for costs and expenses associated with taking
such action.

7. Resignation by the Agent.

(a)  The Agent may
resign from the performance of all its functions and duties under the Agreement
and the other Transaction Documents at any time by giving 30 days’ prior
written notice (as provided in the Agreement) to the Debtors and the Secured
Parties.  Such resignation shall take
effect upon the appointment of a successor Agent pursuant to clauses (b) and
(c) below.

(b) 
Upon any such notice of resignation, the Secured Parties, acting by a
Majority in Interest, shall appoint a successor Agent hereunder.

(c)  If a successor Agent shall not have been so
appointed within said 30-day period, the Agent shall then appoint a successor
Agent who shall serve as Agent until such time, if any, as the Secured Parties
appoint a successor Agent as provided above. 
If a successor Agent has not been appointed within such 30-day period,
the Agent may petition any court of competent jurisdiction or may interplead
the Debtors and the Secured Parties in a proceeding for the appointment of a
successor Agent, and all fees, including, but not limited to, extraordinary
fees associated with the filing of interpleader and expenses associated
therewith, shall be payable by the Debtors on demand.

8. Rights with respect to
Collateral.  Each Secured Party agrees with all other
Secured Parties and the Agent (i) that it shall not, and shall not attempt to,
exercise any rights with respect to its security interest in the Collateral,
whether pursuant to any other agreement or otherwise (other than pursuant to
this Agreement), or take or institute any action against the Agent or any of
the other Secured Parties in respect of the Collateral or its rights hereunder
(other than any such action arising from the breach of this Agreement) and (ii)
that such Secured Party has no other rights with respect to the Collateral
other than as set forth in this Agreement and the other Transaction
Documents.  Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights,

powers,
privileges and duties of the retiring Agent and the retiring Agent shall be
discharged from its duties and obligations under the Agreement.  After any
retiring Agent’s resignation or removal hereunder as Agent, the provisions of
the Agreement including this Annex B shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.Exhibit
10.6

EXHIBIT
F

SUBSIDIARY GUARANTEE

SUBSIDIARY
GUARANTEE, dated as of August         ,
2007 (this “Guarantee”), made by each of the signatories hereto
(together with any other entity that may become a party hereto as provided
herein, the “Guarantors”), in favor of the purchasers signatory (the “Purchasers”)
the Purchase Agreements (as defined below).

WITNESSETH:

WHEREAS, pursuant to that certain Securities
Purchase Agreement, dated September 15, 2005, that certain Securities Purchase
Agreement, dated August 30, 2006 and that certain Securities Purchase Agreement
dated as of the date hereof, by and between the Company and the Purchasers (collectively,
the “Purchase Agreements”), the Company has agreed to sell and issue to
the Purchasers, and the Purchasers have agreed to purchase from the Company the
Company’s Amortizing Convertible Debentures issued on September 15, 2005,
Amortizing Convertible Debentures issued on August 30, 2006 and Amortizing
Senior Secured Convertible Debentures issued on August    , 2007
(collectively, the “Debentures”), subject to the terms and conditions
set forth therein; and

WHEREAS, each Guarantor will directly benefit
from the extension of credit to the Company represented by the issuance of the
Debentures; and

NOW, THEREFORE, in consideration of the
premises and to induce the Purchasers to enter into the applicable Purchase
Agreement and to carry out the transactions contemplated thereby, each
Guarantor hereby agrees with the Purchasers as follows:

1.                                        Definitions. Unless otherwise defined herein, terms defined in the Purchase Agreement most recently entered into with the applicable Purchaser and used herein shall have the meanings given to them in such Purchase Agreement. The words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and Section and Schedule references are to this Guarantee unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.  The following terms shall have the following meanings:

“Guarantee” means this Subsidiary
Guarantee, as the same may be amended, supplemented or otherwise modified from
time to time.

“Obligations” means, in
addition to all other costs and expenses of collection incurred by Purchasers
in enforcing any of such Obligations and/or this Guarantee, all of the
liabilities and obligations (primary, secondary, direct, contingent, sole,
joint or several) due or to become due, or that are now or may be

 1
 

hereafter
contracted or acquired, or owing to, of any Debtor to the Secured Parties,
including, without limitation, all obligations under this Agreement, the Debentures,
this Guarantee and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith, in each case,
whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion
of such obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time.  Without limiting the
generality of the foregoing, the term “Obligations” shall include, without
limitation: (i) principal of, and interest on the Debentures and the loans
extended pursuant thereto; (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Debtors from time to time under or in
connection with this Agreement, the Debentures, the Guarantee and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.

2.                                        Guarantee.

(a)                                   Guarantee.

(i)                                      The
Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantee to the Purchasers and their respective successors, indorsees, transferees
and assigns, the prompt and complete payment and performance by the Company
when due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations.

(ii)                                   Anything
herein or in any other Transaction Document to the contrary notwithstanding,
the maximum liability of each Guarantor hereunder and under the other
Transaction Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws, including
laws relating to the insolvency of debtors, fraudulent conveyance or transfer
or laws affecting the rights of creditors generally (after giving effect to the
right of contribution established in Section 2(b)).

(iii)                                Each Guarantor
agrees that the Obligations may at any time and from time to time exceed the
amount of the liability of such Guarantor

 2
 

hereunder without
impairing the guarantee contained in this Section 2 or affecting the rights and
remedies of the Purchasers hereunder.

(iv)                               The guarantee contained in this Section 2
shall remain in full force and effect until all the Obligations and the
obligations of each Guarantor under the guarantee contained in this Section 2
shall have been satisfied by payment in full.

(v)                                  No payment made by the Company, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Purchasers from the Company, any of the Guarantors, any other guarantor or
any other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of any Guarantor hereunder which shall,
notwithstanding any such payment (other than any payment made by such Guarantor
in respect of the Obligations or any payment received or collected from such
Guarantor in respect of the Obligations), remain liable for the Obligations up
to the maximum liability of such Guarantor hereunder until the Obligations are
paid in full.

(vi)                               Notwithstanding anything to the contrary in
this Agreement, with respect to any defaulted non-monetary Obligations the
specific performance of which by the Guarantors is not reasonably possible
(e.g. the issuance of the Company’s Common Stock), the Guarantors shall only be
liable for making the Purchasers whole on a monetary basis for the Company’s
failure to perform such Obligations in accordance with the Transaction
Documents.

(b)                                  Right
of Contribution. Each Guarantor hereby agrees that to the extent that a
Guarantor shall have paid more than its proportionate share of any payment made
hereunder, such Guarantor shall be entitled to seek and receive contribution
from and against any other Guarantor hereunder which has not paid its proportionate
share of such payment. Each Guarantor’s right of contribution shall be subject
to the terms and conditions of Section 2(c). The provisions of this Section
2(b) shall in no respect limit the obligations and liabilities of any Guarantor
to the Purchasers, and each Guarantor shall remain liable to the Purchasers for
the full amount guaranteed by such Guarantor hereunder.

(c)                                   No
Subrogation.  Notwithstanding any
payment made by any Guarantor hereunder or any set-off or application of funds
of any Guarantor by the Purchasers, no Guarantor shall be entitled to be
subrogated to any of the rights of the Purchasers against the Company or any
other Guarantor or any collateral security or guarantee or right of offset held
by the Purchasers for the payment of the Obligations, nor shall any Guarantor
seek or be entitled to seek any contribution or reimbursement from the Company
or any other Guarantor in

 3
 

respect of
payments made by such Guarantor hereunder, until all amounts owing to the
Purchasers by the Company on account of the Obligations are paid in full. If
any amount shall be paid to any Guarantor on account of such subrogation rights
at any time when all of the Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Purchasers, segregated
from other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Purchasers in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Purchasers, if required), to
be applied against the Obligations, whether matured or unmatured, in such order
as the Purchasers may determine.

(d)                                  Amendments,
Etc. With Respect to the Obligations. Each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Obligations made by the Purchasers may be rescinded
by the Purchasers and any of the Obligations continued, and the Obligations, or
the liability of any other Person upon or for any part thereof, or any
collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
the Purchasers, and the Purchase Agreements and the other Transaction Documents
and any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Purchasers may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by the Purchasers for the payment
of the Obligations may be sold, exchanged, waived, surrendered or released. The
Purchasers shall have no obligation to protect, secure, perfect or insure any
Lien at any time held by them as security for the Obligations or for the
guarantee contained in this Section 2 or any property subject thereto.

(e)                                   Guarantee
Absolute and Unconditional. Each Guarantor waives any and all notice of the
creation, renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by the Purchasers upon the guarantee contained in this
Section 2 or acceptance of the guarantee contained in this Section 2; the
Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon the guarantee contained in this Section 2; and all dealings
between the Company and any of the Guarantors, on the one hand, and the
Purchasers, on the other hand, likewise shall be conclusively presumed to have
been had or consummated in reliance upon the guarantee contained in this Section
2. Each Guarantor waives to the extent permitted by law diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or any of the Guarantors with respect to the Obligations. Each
Guarantor understands and agrees that the guarantee contained in this Section 2
shall be construed as a continuing, absolute and unconditional guarantee of
payment without regard to (a) the validity or enforceability of the Purchase

 4
 

Agreements or any
other Transaction Document, any of the Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Purchasers, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance or fraud or
misconduct by Purchasers) which may at any time be available to or be asserted
by the Company or any other Person against the Purchasers, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Company
or such Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Company for the Obligations, or of such
Guarantor under the guarantee contained in this Section 2, in bankruptcy or in
any other instance. When making any demand hereunder or otherwise pursuing its
rights and remedies hereunder against any Guarantor, the Purchasers may, but
shall be under no obligation to, make a similar demand on or otherwise pursue
such rights and remedies as they may have against the Company, any other
Guarantor or any other Person or against any collateral security or guarantee
for the Obligations or any right of offset with respect thereto, and any
failure by the Purchasers to make any such demand, to pursue such other rights
or remedies or to collect any payments from the Company, any other Guarantor or
any other Person or to realize upon any such collateral security or guarantee
or to exercise any such right of offset, or any release of the Company, any
other Guarantor or any other Person or any such collateral security, guarantee
or right of offset, shall not relieve any Guarantor of any obligation or
liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of the Purchasers
against any Guarantor. For the purposes hereof, “demand” shall include the
commencement and continuance of any legal proceedings.

(f)                                     Reinstatement.
The guarantee contained in this Section 2 shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned
by the Purchasers upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Company or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.

(g)                                  Payments.
Each Guarantor hereby guarantees that payments hereunder will be paid to the
Purchasers without set-off or counterclaim in U.S. dollars at the address set
forth or referred to in the Purchase Agreement most recently entered into by
the applicable Purchaser.

3.                                        Representations and Warranties. Each Guarantor hereby makes the following representations and warranties to Purchasers as of the date hereof:

 5
 

(a)                                   Organization
and Qualification. The Guarantor is
a corporation, duly incorporated, validly existing and in good standing under
the laws of the applicable jurisdiction set forth on Schedule 1, with the
requisite corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. The Guarantor has
no subsidiaries other than those identified as such on the Disclosure Schedules
to the Purchase Agreements. The Guarantor is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of any of this
Guaranty in any material respect, (y) have a material adverse effect on the
results of operations, assets, prospects, or financial condition of the
Guarantor or (z) adversely impair in any material respect the Guarantor’s
ability to perform fully on a timely basis its obligations under this Guaranty
(a “Material Adverse Effect”).

(b)                                  Authorization; Enforcement.  The
Guarantor has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by this Guaranty, and otherwise to
carry out its obligations hereunder. The execution and delivery of this
Guaranty by the Guarantor and the consummation by it of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of the Guarantor. This Guaranty has been duly executed and
delivered by the Guarantor and constitutes the valid and binding obligation of
the Guarantor enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors’ rights and remedies
or by other equitable principles of general application.

(c)                                   No Conflicts. The execution, delivery and performance of this Guaranty by the
Guarantor and the consummation by the Guarantor of the transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of its Certificate of Incorporation or By-laws or (ii) conflict with,
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Guarantor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Guarantor is
subject (including Federal and state securities laws and regulations), or by
which any material property or asset of the Guarantor is bound or affected,
except in the case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as could
not, individually or in the aggregate, have or result in a Material Adverse
Effect. The business of the Guarantor is not being

 6
 

conducted in violation of any law, ordinance or regulation of any
governmental authority, except for violations which, individually or in the
aggregate, do not have a Material Adverse Effect.

(d)                                  Consents and Approvals. The Guarantor is not required to obtain any
consent, waiver, authorization or order of, or make any filing or registration
with, any court or other federal, state, local, foreign or other governmental
authority or other person in connection with the execution, delivery and
performance by the Guarantor of this Guaranty.

(e)                                   Purchase Agreement. The representations and warranties of the
Company set forth in the Purchase Agreements as they relate to such Guarantor,
each of which is hereby incorporated herein by reference, are true and correct
as of each time such representations are deemed to be made pursuant to such
Purchase Agreements, and the Purchasers shall be entitled to rely on each of
them as if they were fully set forth herein, provided that each reference in
each such representation and warranty to the Company’s knowledge shall, for the
purposes of this Section 3, be deemed to be a reference to such Guarantor’s
knowledge.

(f)                                     Foreign Law.  Each Guarantor has consulted
with appropriate foreign legal counsel with respect to any of the above
representations for which non-U.S. law is applicable. Such foreign counsel have
advised each applicable Guarantor that such counsel knows of no reason why any
of the above representations would not be true and accurate. Such foreign
counsel were provided with copies of this Subsidiary Guarantee and the
Transaction Documents prior to rendering their advice.

4.                                        Covenants.

(a)                       Each
Guarantor covenants and agrees with the Purchasers that, from and after the
date of this Guarantee until the Obligations shall have been paid in full, such
Guarantor shall take, and/or shall refrain from taking, as the case may be,
each commercially reasonable action that is necessary to be taken or not taken,
as the case may be, so that no Event of Default is caused by the failure to
take such action or to refrain from taking such action by such Guarantor.

(b)                      So
long as any of the Obligations are outstanding, unless Purchasers holding at
least 67% of the aggregate principal amount of the then outstanding Debentures
shall otherwise consent in writing, each Guarantor will not directly or
indirectly on or after the date of this Guarantee:

i.                                           enter into, create, incur, assume or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 7
 

ii.                                        enter into, create, incur, assume or suffer to exist any liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;
iii.                                     amend its certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Holder hereunder;
iv.                                    repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its securities or debt obligations;
v.                                       pay cash dividends on any equity securities of the Company;
vi.                                    enter into any transaction with any Affiliate of the Guarantor which would be required to be disclosed in any public filing of the Company with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or
vii.                                 enter into any agreement with respect to any of the foregoing.
Provided, however, that the Guarantor shall not be prohibited from undertaking any of the actions described above that the Company is permitted to undertake pursuant to the terms of the Purchase Agreements, Debentures and any and all other agreements or other documents entered into in connection with the financings contemplated by the Purchase Agreements.
5.                                        Miscellaneous.

(a)                                   Amendments
in Writing. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except in writing by Purchasers
holding 67% of the principal amount of Debentures then outstanding.

(b)                                  Notices.
All notices, requests and demands to or upon the Purchasers or any Guarantor
hereunder shall be effected in the manner provided for in the Purchase
Agreement most recently entered into by the applicable Purchaser, provided that
any such notice, request or demand to or upon any

 8
 

Guarantor shall be
addressed to such Guarantor at its notice address set forth on Schedule 5(b).

(c)                                   No
Waiver By Course Of Conduct;
Cumulative Remedies. The
Purchasers shall not by any act (except by a written instrument pursuant to
Section 5(a)), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any default under
the Transaction Documents or Event of Default. No failure to exercise, nor any
delay in exercising, on the part of the Purchasers, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Purchasers of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Purchasers
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.

(d)                                  Enforcement
Expenses; Indemnification.

(i)                                      Each Guarantor agrees to pay, or reimburse the
Purchasers for, all its costs and expenses incurred in collecting against such
Guarantor under the guarantee contained in Section 2 or otherwise enforcing or
preserving any rights under this Guarantee and the other Transaction Documents
to which such Guarantor is a party, including, without limitation, the
reasonable fees and disbursements of counsel to the Purchasers.

(ii)                                   Each Guarantor agrees to pay, and to save the
Purchasers harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable in connection with any of the
transactions contemplated by this Guarantee.

(iii)                                Each Guarantor agrees to pay, and to save the
Purchasers harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Guarantee to the extent the
Company would be required to do so pursuant to the Purchase Agreements.

(iv)                               The agreements in this Section shall survive
repayment of the Obligations and all other amounts payable under the Purchase
Agreements and the other Transaction Documents.

 9
 

(e)                                   Successor
and Assigns. This Guarantee shall be
binding upon the successors and assigns of each Guarantor and shall inure to
the benefit of the Purchasers and their respective successors and assigns;
provided that no Guarantor may assign, transfer or delegate any of its rights
or obligations under this Guarantee without the prior written consent of the
Purchasers.

(f)                                     Set-Off. Each Guarantor hereby irrevocably authorizes the Purchasers at any
time and from time to time while an Event of Default under any of the
Transaction Documents shall have occurred and be continuing, without notice to
such Guarantor or any other Guarantor, any such notice being expressly waived
by each Guarantor, to set-off and appropriate and apply any and all deposits,
credits, indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Purchasers to or for the credit or the account of such Guarantor,
or any part thereof in such amounts as the Purchasers may elect, against and on
account of the obligations and liabilities of such Guarantor to the Purchasers
hereunder and claims of every nature and description of the Purchasers against
such Guarantor, in any currency, whether arising hereunder, under the Purchase
Agreements, any other Transaction Document or otherwise, as the Purchasers may
elect, whether or not the Purchasers have made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Purchasers shall notify such Guarantor promptly of any such
set-off and the application made by the Purchasers of the proceeds thereof,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Purchasers under this Section
are in addition to other rights and remedies(including, without limitation,
other rights of set-off) which the Purchasers may have.

(g)                                  Counterparts. This Guarantee may be executed by one or more of the parties to this
Guarantee on any number of separate counterparts (including by telecopy), and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.

(h)                                  Severability. Any provision of this Guarantee which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.

(i)                                      Section Headings. The Section headings used in this Guarantee
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.

(j)                                      Integration. This Guarantee and the other Transaction Documents represent the
agreement of the Guarantors and the Purchasers with respect to the

 10
 

subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Purchasers relative to subject matter
hereof and thereof not expressly set forth or referred to herein or in the
other Transaction Documents.

(k)                                   Governing Law. THIS GUARANTEE
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS.

(l)                                      Submission to Jurisdictional; Waiver. Each Guarantor hereby irrevocably and
unconditionally:

(i)                                      submits
for itself and its property in any legal action or proceeding relating to this
Guarantee and the other Transaction Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York,
located in New York County, New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from any
thereof;

(ii)                                   consents
that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in
an inconvenient court and agrees not to plead or claim the same;

(iii)                                agrees that service of process in any such
action or proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage prepaid, to
such Guarantor at its address referred to in the Purchase Agreement most
recently entered into by the applicable Purchaser or at such other address of
which the Purchasers shall have been notified pursuant thereto;

(iv)                               agrees that nothing herein shall affect the
right to effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and

(v)                                  waives, to the maximum extent not prohibited
by law, any right it may have to claim or recover in any legal action or
proceeding referred to in this Section any special, exemplary, punitive or
consequential damages.

(m)                                Acknowledgements.  Each
Guarantor hereby acknowledges that:

 11
 

(i)                                      it
has been advised by counsel in the negotiation, execution and delivery of this
Guarantee and the other Transaction Documents to which it is a party;

(ii)                                   the Purchasers have no fiduciary relationship
with or duty to any Guarantor arising out of or in connection with this
Guarantee or any of the other Transaction Documents, and the relationship
between the Guarantors, on the one hand, and the Purchasers, on the other hand,
in connection herewith or therewith is solely that of debtor and creditor; and

(iii)                                no joint venture is created hereby or by the
other Transaction Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Guarantors and the Purchasers.

(n)                                  Additional Guarantors.  The
Company shall cause each of its subsidiaries formed or acquired on or
subsequent to the date hereof to become a Guarantor for all purposes of this
Guarantee by executing and delivering an

Assumption Agreement in the form of Annex 1 hereto.

(o)                                  Release of Guarantors. Subject to Section 2.6, each Guarantor will
be released from all liability hereunder concurrently with the repayment in
full of all amounts owed under the Purchase Agreements, the Debentures and the
other Transaction Documents.

(p)                                  Seniority. The Obligations of each of the Guarantors hereunder rank senior in
priority to any other Indebtedness (as defined in the Purchase Agreements) of
such Guarantor.

(q)                                  Waiver of Jury Trial. EACH GUARANTOR
AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, THE PURCHASERS, HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM THEREIN.

*****************

 12
 

IN WITNESS WHEREOF, each of
the undersigned has caused this Guarantee

to be duly executed and delivered as of the date first above written.

	
  

  	
   

  	
  [SUBSIDIARY]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 13
 

SCHEDULE 1
GUARANTORS
The following are the names, notice addresses and jurisdiction of organization of each Guarantor.

	
  

  	
   

  	
   

  	
   

  	
  COMPANY

  	
   

  
	
   

  	
   

  	
  JURISDICTION OF

  	
   

  	
  OWNED BY

  	
   

  
	
   

  	
   

  	
  INCORPORATION

  	
   

  	
  PERCENTAGE

  	
   

  
	
     

  	
   

  	
     

  	
   

  	
     

  	
   

  
	
     

  	
   

  	
     

  	
   

  	
     

  	
   

  
	
     

  	
   

  	
     

  	
   

  	
     

  	
   

  

 

 14
 

Annex 1 to

SUBSIDIARY
GUARANTEE

ASSUMPTION AGREEMENT, dated as of          
      ,              
made by                                                          ,
a                              
corporation (the “Additional Guarantor”), in favor of the Purchasers
pursuant to the Purchase Agreement referred to below. All capitalized terms not
defined herein shall have the meaning ascribed to them in such Purchase
Agreement.

WITNESSETH:

WHEREAS, [COMPANY], a [           
corporation (the “Company”)
and the Purchasers have entered into a Securities Purchase Agreement, dated as
of [            , 2007
(as amended, supplemented or otherwise modified from time to time, the “Purchase
Agreement”);

WHEREAS, in connection with
the Purchase Agreement, the Company and its Subsidiaries (other than the
Additional Guarantor) have entered into the Subsidiary Guarantee, dated as of [              
    , 2007 (as amended, supplemented or otherwise modified
from time to time, the “Guarantee”) in favor of the Purchasers;

WHEREAS, the Purchase
Agreement requires the Additional Guarantor to become a party to the Guarantee;
and

WHEREAS, the Additional
Guarantor has agreed to execute and deliver this Assumption Agreement in order
to become a party to the Guarantee;

NOW,
THEREFORE, IT IS AGREED:

1.                                        Guarantee. By executing and delivering this Assumption Agreement, the Additional Guarantor, as provided in Section 5(n) of the Guarantee, hereby becomes a party to the Guarantee as a Guarantor thereunder with the same force and effect as if originally named therein as a Guarantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Guarantor thereunder. The information set forth in Annex 1-A hereto is hereby added to the information set forth in Schedule 1 to the Guarantee. The Additional Guarantor hereby represents and warrants that each of the representations and warranties contained in Section 3 of the Guarantee is true and correct on and as the date hereof as to such Additional Guarantor (after giving effect to this Assumption Agreement) as if made on and as of such date.
2.                                        Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 15
 

IN WITNESS
WHEREOF, the undersigned has caused this Assumption Agreement to be duly
executed and delivered as of the date first above written.

 

	
  

  	
   

  	
  [ADDITIONALGUARANTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 16

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