Exhibit 10.2
SECURITY
AGREEMENT
This SECURITY AGREEMENT, dated as of
March 31, 2008 (this “ Agreement ”), is
among A dvanced 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 Original Issue Discount Senior Secured Convertible
Debentures due one year following their issuance, in the original
aggregate Principal Amount of $6,275,000 (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 Purchase Agreement (as
defined in the Debentures), the Secured Parties 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; and
WHEREAS, in order to induce the Secured Parties
to extend the loans evidenced by the Debentures, each Debtor has
agreed to execute and deliver to the Secured Parties this Agreement
and to grant the Secured Parties, pari passu with
each other Secured Party and through the Agent (as defined in
Section 18 hereof), 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.
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 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 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, the majority 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 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 Interests ” shall have the meaning
ascribed to such term in Section 4(j).
(h)
“ Pledged Securities ” shall have the meaning
ascribed to such term in Section 4(i).
(i)
“ 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 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
C 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 C 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 any
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 in
Section 4(p) hereof) 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 filing of said financing
statements, the recordation of said Intellectual Property Security
Agreement, and the 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 14 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
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 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.
(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 wi
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