Exhibit 10.4

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: August       , 2007

Original Conversion Price (subject to adjustment herein): $0.34

$                               

AMORTIZING SENIOR SECURED CONVERTIBLE DEBENTURE

THIS AMORTIZING DEBENTURE is one of a series of duly authorized and issued
Amortizing Senior Secured Convertible Debentures of Advanced Cell Technology,
Inc., a Delaware corporation, having a principal place of business at  Alameda,
California (the “Company”), designated as its Amortizing Senior Secured
Convertible Debenture (this debenture, the “Debenture” and collectively with the
other such series of debentures, the “Debentures”).

FOR VALUE RECEIVED, the Company promises to pay to
                                                     or its registered assigns
(the “Holder” and all holders of the Debentures, collectively the “Holders”), or
shall have paid pursuant to the terms hereunder, the principal sum of
$                       by August           , 2010, or such earlier date as this
Debenture is required or permitted to be repaid as provided hereunder (the
“Maturity Date”).  This Debenture is subject to the following additional
provisions:

Section 1.                                            Definitions.  For the
purposes hereof, in addition to the terms defined elsewhere in this Debenture:
(a) capitalized terms not otherwise defined herein shall have the meanings given
to such terms in the Purchase Agreement, and (b) the following terms shall have
the following meanings:

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“Alternate Consideration” shall have the meaning set forth in Section 5(e).

“Base Conversion Price” shall have the meaning set forth in Section 5(b).

“Business Day” means any day except any Saturday, any Sunday and any day which
shall be a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law
or other government action to close.

“Buy-In” shall have the meaning set forth in Section 4(d)(v).

“Change of Control Transaction” means the occurrence after the date hereof of
any of (i) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, or (ii) the Company merges into or
consolidates with any other Person, or any Person merges into or consolidates
with the Company and, after giving effect to such transaction, the stockholders
of the Company immediately prior to such transaction own less than 66% of the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers its assets, as an entirety
or substantially as an entirety, to another Person and the stockholders of the
Company immediately prior to such transaction own less than 66% of the aggregate
voting power of the acquiring entity immediately after the transaction, (iv) a
replacement at one time or within a three year period of more than one-half of
the members of the Company’s board of directors which is not approved by a
majority of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the board of
directors on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on the date
hereof), or (v) the execution by the Company of an agreement to which the
Company  is a party or by which it is bound, providing for any of the events set
forth above in (i) or (iv).

“Common Stock” means the common stock, par value $0.001 per share, of the
Company and stock of any other class of securities into which such securities
may hereafter have been reclassified or changed into.

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Shares” means the shares of Common Stock issuable upon conversion of
this Debenture in accordance with the terms.

“Debenture Register” shall have the meaning set forth in Section 2(c).

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“Deferred Conversion Price” shall mean the redemption of this Debenture pursuant
to Section 6(b)(ii) hereof.

“Deferred Redemption” shall mean the redemption of this Debenture pursuant to
Section 6(b)(ii) hereof.

 “Deferred Redemption Amount” shall mean, as to a Deferred Redemption, the
applicable Monthly Redemption Amount.

“Deferred Redemption Date” means (i) for cash, the date the Holder requests the
Deferred Redemption and (ii) for Conversion Shares, the 5th Trading Day
following the Deferred Redemption Notice Date.

“Deferred Redemption Notice” shall have the meaning set forth in Section
6(b)(ii) hereof.

“Deferred Redemption Notice Date” shall have the meaning set forth in Section
6(b)(ii) hereof.

“Deferred Redemption Period” shall have the meaning set forth in Section
6(b)(ii) hereof.

“Deferred Redemption Share Amount” shall have the meaning set forth in Section
6(b)(ii) hereof.

“Dilutive Issuance” shall have the meaning set forth in Section 5(b).

“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).

“Effectiveness Period” shall have the meaning given to such term in the
Registration Rights Agreement.

“Equity Conditions” shall mean, during the period in question, (i) the Company
shall have duly honored all conversions and redemptions scheduled to occur or
occurring by virtue of one or more Notice of Conversions of the Holder, if any,
(ii) all liquidated damages and other amounts owing to the Holder in respect of
this Debenture shall have been paid; (iii) either (A) there is an effective
Registration Statement pursuant to which the Holder is permitted to utilize the
prospectus thereunder to resell all of the shares in question, or issuable
pursuant to the portion of this Debenture in question (and the Company is not
aware of any information that would cause it to believe such use would be
interrupted), or (B) the shares in question, or the shares issuable pursuant to
the portion of this Debenture in question, may be immediately resold pursuant to
Rule 144,  (iv) the Common Stock is trading on the Trading Market and all of the
shares issuable pursuant to the Transaction Documents are listed for trading on
a Trading Market (and

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the Company is not aware of any information that would cause it to believe
trading would be interrupted), (v) there is a sufficient number of authorized
but unissued and otherwise unreserved shares of Common Stock for the issuance of
all of the shares issuable pursuant to the Transaction Documents, (vi) there is
then existing no Event of Default, (vii) the issuance of the shares in question
(or, in the case of a redemption, the shares issuable upon conversion in full of
the redemption amount) to the Holder would not violate the limitation set forth
in Section 4(c), (viii) no public announcement of a pending or proposed
Fundamental Transaction, Change of Control Transaction or acquisition
transaction has occurred that has not been consummated, (ix) except as required
by the terms of the Transaction Documents, the Holder is not in possession of
any information provided by the Company that constitutes, or may constitute,
material non-public information and (x) in a period of 20 consecutive Trading
Days prior to the applicable date in question, the average daily trading volume
for the Common Stock on the principal Trading Market exceeds 200,000 shares.

“Event of Default” shall have the meaning set forth in Section 8.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“Exempt Redemptions” means redemption of shares by the Company solely as a
result of a redemption of a de minimus number of shares from employees, officers
or directors of the Company pursuant to termination of employment or resolution
of employment disputes with any such Persons, which issuances are approved by
the Board of Directors.

“Forced Conversion” shall have the meaning set forth in Section 6(d).

“Forced Conversion Notice” shall have the meaning set forth in Section 6(d).

“Forced Conversion Notice Date” shall have the meaning set forth in Section
6(d).

“Fundamental Transaction” shall have the meaning set forth in Section 5(e).

“Mandatory Default Amount”  shall equal the sum of (i) the greater of: (A) 120%
of the principal amount of this Debenture to be prepaid plus 100% of the accrued
and unpaid interest hereon, or (B) the principal amount of this Debenture to be
prepaid, divided by the Conversion Price on (x) the date the Mandatory Default
Amount is demanded or otherwise due or (y) the date the Mandatory Default Amount
is paid in full, whichever is less, multiplied by the Closing Price on (x) the
date the Mandatory Default Amount is demanded or otherwise due or (y) the date
the Mandatory Default Amount is paid in full, whichever is greater, and (ii) all
other amounts, costs, expenses and liquidated damages due in respect of this
Debenture.

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“Monthly Conversion Period” shall have the meaning set forth in Section 6(b)(i)
hereof.

“Monthly Conversion Price” shall have the meaning set forth in Section 6(b)(i)
hereof.

“Monthly Redemption” shall mean the redemption of this Debenture pursuant to
Section 6(b)(i) hereof.

 “Monthly Redemption Amount” shall mean, as to a Monthly Redemption, an amount
determined by dividing the principal amount of this Note outstanding on the
Original Issue Date by the number of calendar months from the first Monthly
Redemption Date until the Maturity Date, plus accrued but unpaid interest,
liquidated damages and any other amounts then owing to the Holder in respect of
this Debenture.

“Monthly Redemption Date” means the 1st Trading Day of each month, commencing on
the earlier of (i) September 1, 2008, (ii) the first such date immediately
following the Effective Date of the initial Registration Statement but in no
event prior to February 1, 2008 and (iii) the first such date immediately
following the date that the Conversion Shares may be sold by the Holder pursuant
to Rule 144 (or its successor Rule) without volume or manner restrictions but in
no event prior to February 1, 2008 and ending upon the full redemption of this
Debenture.

“Monthly Redemption Notice” shall have the meaning set forth in Section 6(b)(i)
hereof.

“Monthly Redemption Period” shall have the meaning set forth in Section 6(b)(i)
hereof.

“Monthly Redemption Share Amount” shall have the meaning set forth in Section
6(b)(i) hereof.

“New York Courts” shall have the meaning set forth in Section 9(d).

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

“Optional Redemption” shall have the meaning set forth in Section 6(a).

“Optional Redemption Amount” shall mean the sum of (i) 100% of the principal
amount of the Debenture then outstanding and (ii) all liquidated damages and
other amounts due in respect of the Debenture.

“Optional Redemption Notice” shall have the meaning set forth in Section 6(a).

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“Optional Redemption Notice Date” shall have the meaning set forth in Section
6(a).

“Original Issue Date” shall mean the date of the first issuance of the
Debentures regardless of the number of transfers of any Debenture and regardless
of the number of instruments which may be issued to evidence such Debenture.

“Permitted Indebtedness” means trade payables, indebtedness consisting of
capitalized lease obligations and purchase money indebtedness incurred in
connection with acquisition of capital assets and obligations under
sale-leaseback arrangements with respect to newly acquired or leased assets;
provided, however, that in each case such obligations are not secured by liens
on any assets of the Company or its Subsidiaries existing as of the date of the
Purchase Agreement and may only be secured by the assets so acquired or leased
thereafter.

“Permitted Lien” mean (a) Liens with respect to the payment of taxes or
governmental charges in all cases which are not yet due or which are subject to
a good faith contest; (b) any Liens incurred in connection with Permitted Debt
provided that such liens are not secured by assets of the Company or its
Subsidiaries other than the assets so acquired or leased; (c) statutory Liens of
landlords or equipment lessors against any property of the Company or its
Subsidiaries existing as of the date of the Purchase Agreement in favor of
suppliers, mechanics, carriers, materialmen, warehousemen or workmen; and (d)
Liens created under the Security Agreement.

“Person” means a corporation, an association, a partnership, organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.

“Pre-Redemption Conversion Shares” shall have the meaning set forth in Section
6(b)(i) hereof.

“Purchase Agreement” means the Securities Purchase Agreement, dated as of August
  , 2007, to which the Company and the original Holder are parties, as amended,
modified or supplemented from time to time in accordance with its terms.

“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the date of the Purchase Agreement, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time in
accordance with its terms.

“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement, covering among other things the
resale of the Conversion Shares and naming the Holder as a “selling stockholder”
thereunder.

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“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

“Subsidiary” shall have the meaning given to such term in the Purchase
Agreement.

“Threshold Period” shall have the meaning given to such term in Section 6(d).

“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the Nasdaq
SmallCap Market, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the OTC Bulletin Board.

“Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.

Section 2.                                            Interest and Prepayment. 
No regularly scheduled interest payments shall be made on this Debenture. Except
as otherwise set forth in this Debenture, the Company may not prepay any portion
of the principal amount of this Debenture without the prior written consent of
the Holder.

Section 3.                                            Registration of Transfers
and Exchanges.

a)                                      Different Denominations. This Debenture
is exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holder surrendering the
same.  No service charge will be made for such registration of transfer or
exchange.

b)                                     Investment Representations. This
Debenture has been issued subject to certain investment representations of the
original Holder set forth in the Purchase Agreement and may be transferred or
exchanged only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.

c)                                      Reliance on Debenture Register. Prior to
due presentment to the Company for transfer of this Debenture, the Company and
any agent of the Company may treat the Person in whose name this Debenture is
duly registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.

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Section 4.                                            Conversion.

a)                                      Voluntary Conversion. At any time after
the Original Issue Date until this Debenture is no longer outstanding, this
Debenture shall be convertible into shares of Common Stock at the option of the
Holder, in whole or in part at any time and from time to time (subject to the
limitations on conversion set forth in Section 4(c) hereof).  The Holder shall
effect conversions by delivering to the Company the form of Notice of Conversion
attached hereto as Annex A (a “Notice of Conversion”), specifying therein the
principal amount of this Debenture to be converted and the date on which such
conversion is to be effected (a “Conversion Date”).  If no Conversion Date is
specified in a Notice of Conversion, the Conversion Date shall be the date that
such Notice of Conversion is provided hereunder.  To effect conversions
hereunder, the Holder shall not be required to physically surrender this
Debenture to the Company unless the entire principal amount of this Debenture
has been so converted. Conversions hereunder shall have the effect of lowering
the outstanding principal amount of this Debenture in an amount equal to the
applicable conversion.  The Holder and the Company shall maintain records
showing the principal amount converted and the date of such conversions.  The
Company shall deliver any objection to any Notice of Conversion within 1
Business Day of receipt of such notice.  In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative in
the absence of manifest error. The Holder and any assignee, by acceptance of
this Debenture, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Debenture, the unpaid and
unconverted principal amount of this Debenture may be less than the amount
stated on the face hereof.

b)                                     Conversion Price.  The conversion price
in effect on any Conversion Date shall be equal to $0.34 (subject to adjustment
herein)(the “Conversion Price”).

c)                                      Holder’s Restriction on Conversion.  The
Company shall not effect any conversion of this Debenture, and the Holder shall
not have the right to convert any portion of this Debenture, to the extent that
after giving effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s Affiliates, and any other
person or entity acting as a group together with the Holder or any of the
Holder’s Affiliates) would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below).  For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by the Holder
and its Affiliates shall include the number of shares of Common Stock issuable
upon conversion of this Debenture with respect to which such determination is
being made, but shall exclude the number of shares of Common Stock which are
issuable upon (A) conversion of the remaining, unconverted principal amount of
this Debenture beneficially owned by the Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company  subject to a limitation on conversion or exercise
analogous to the limitation contained herein (including, without limitation, any
other Debentures or the Warrants) beneficially owned by the Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for purposes of this
Section 4(c)(ii), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  To the extent that

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the limitation contained in this Section 4(c)(ii) applies, the determination of
whether this Debenture is convertible (in relation to other securities owned by
the Holder together with any Affiliates) and of which principal amount of this
Debenture is convertible shall be in the sole discretion of the Holder, and the
submission of a Notice of Conversion shall be deemed to be the Holder’s
determination of whether this Debenture may be converted (in relation to other
securities owned by the Holder together with any Affiliates) and which principal
amount of this Debenture is convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction, the Holder
will be deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination.  In addition, a determination as to
any group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.   For purposes of this Section 4(c)(ii), in determining the number
of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as stated in the most recent of the
following: (A) the Company’s most recent Form 10-QSB or Form 10-KSB, as the case
may be; (B) a more recent public announcement by the Company; or (C) a more
recent notice by the Company or the Company’s transfer agent setting forth the
number of shares of Common Stock outstanding.  Upon the written or oral request
of the Holder, the Company shall within two Trading Days confirm orally and in
writing to the Holder the number of shares of Common Stock then outstanding.  In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Debenture, by the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was reported. The
“Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon conversion of this Debenture held by the
Holder.  The Beneficial Ownership Limitation provisions of this Section 4(c)(ii)
may be waived by the Holder, at the election of the Holder, upon not less than
61 days’ prior notice to the Company, to change the Beneficial Ownership
Limitation to 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon
conversion of this Debenture held by the Holder and the provisions of this
Section 4(c)(ii) shall continue to apply.  Upon such a change by the Holder of
the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99%
limitation, the Beneficial Ownership Limitation may not be further waived by the
Holder.  The provisions of this paragraph shall be construed and implemented in
a manner otherwise than in strict conformity with the terms of this Section
4(c)(ii) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Debenture.

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d)             Mechanics of Conversion

i.                                          Conversion Shares Issuable Upon
Conversion of Principal Amount.  The number of shares of Common Stock issuable
upon a conversion hereunder shall be determined by the quotient obtained by
dividing (x) the outstanding principal amount of this Debenture to be converted
by (y) the Conversion Price.

ii.                                       Delivery of Certificate Upon
Conversion. Not later than three Trading Days after any Conversion Date, the
Company will deliver or cause to be delivered to the Holder a certificate or
certificates representing the Conversion Shares which shall be free of
restrictive legends and trading restrictions (other than those required by the
Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of this Debenture. The Company shall, if available
and if allowed under applicable securities laws, use its best efforts to deliver
any certificate or certificates required to be delivered by the Company under
this Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions.

iii.                                    Failure to Deliver Certificates.  If in
the case of any Notice of Conversion such certificate or certificates are not
delivered to or as directed by the applicable Holder by the third Trading Day
after a Conversion Date, the Holder shall be entitled by written notice to the
Company at any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the principal amount of this
Debenture tendered for conversion.

iv.                                   Obligation Absolute; Partial Liquidated
Damages.  If the Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section 4(d)(ii) by the third Trading
Day after the Conversion Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1000 of principal amount
being converted, $10 per Trading Day (increasing to $20 per Trading Day after 5
Trading Days after such damages begin to accrue) for each Trading Day after such
third Trading Day until such certificates are delivered.  The Company’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such
Conversion Shares; provided, however, such delivery

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shall not operate as a waiver by the Company of any such action the Company may
have against the Holder.  In the event the Holder of this Debenture shall elect
to convert any or all of the outstanding principal amount hereof, the Company
may not refuse conversion based on any claim that the Holder or any one
associated or affiliated with the Holder has been engaged in any violation of
law, agreement or for any other reason, unless, an injunction from a court, on
notice, restraining and or enjoining conversion of all or part of this Debenture
shall have been sought and obtained and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the principal amount of this
Debenture outstanding, which is subject to the injunction, which bond shall
remain in effect until the completion of arbitration/litigation of the dispute
and the proceeds of which shall be payable to the Holder to the extent it
obtains judgment.  In the absence of an injunction precluding the same, the
Company shall issue Conversion Shares or, if applicable, cash, upon a properly
noticed conversion.  Nothing herein shall limit the Holder’s right to pursue
actual damages or declare an Event of Default pursuant to Section 8 herein for
the Company’s failure to deliver Conversion Shares within the period specified
herein and the Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.  The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any other
Section hereof or under applicable law.

v.                                      Compensation for Buy-In on Failure to
Timely Deliver Certificates Upon Conversion. In addition to any other rights
available to the Holder, if the Company fails for any reason to deliver to the
Holder such certificate or certificates pursuant to Section 4(d)(ii) by the
third Trading Day after the Conversion Date, and if after such third Trading Day
the Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by
the Holder of the Conversion Shares which the Holder anticipated receiving upon
such conversion (a “Buy-In”), then the Company shall (A) pay in cash to the
Holder (in addition to any remedies available to or elected by the Holder) the
amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds (y) the product
of (1) the aggregate number of shares of Common Stock that the Holder
anticipated receiving from the conversion at issue multiplied by (2) the actual
sale price of the Common Stock at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation and (B) at the
option of the Holder, either reissue (if surrendered) this Debenture in a
principal amount equal to the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its delivery requirements under
Section 4(d)(ii).  For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of this Debenture with respect to which the actual sale price of the
Conversion Shares at the time of the sale (including brokerage

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commissions, if any) giving rise to such purchase obligation was a total of
$10,000 under clause (A) of the immediately preceding sentence, the Company
shall be required to pay the Holder $1,000.  The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In.  Notwithstanding anything contained herein to the contrary, if
the Holder requires the Company to make payment in respect of a Buy-In for the
failure to timely deliver certificates hereunder and the Company timely pays in
full such payment, the Company shall not be required to pay the Holder
liquidated damages under Section 4(d)(iv) in respect of the certificates
resulting in such Buy-In.

vi.                                   Reservation of Shares Issuable Upon
Conversion. The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of this Debenture, as herein provided,
free from preemptive rights or any other actual contingent purchase rights of
persons other than the Holder (and the other holders of the Debentures), not
less than such number of shares of the Common Stock as shall (subject to the
terms and conditions set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 5) upon the conversion
of the outstanding principal amount of this Debenture.  The Company covenants
that all shares of Common Stock that shall be so issuable shall, upon issue, be
duly and validly authorized, issued and fully paid, nonassessable and, if the
Registration Statement is then effective under the Securities Act, registered
for public sale in accordance with such Registration Statement.

vii.                                Fractional Shares. Upon a conversion
hereunder the Company shall not be required to issue stock certificates
representing fractions of shares of the Common Stock, but may if otherwise
permitted, make a cash payment in respect of any final fraction of a share based
on the Closing Price at such time.  If the Company elects not, or is unable, to
make such a cash payment, the Holder shall be entitled to receive, in lieu of
the final fraction of a share, one whole share of Common Stock.

viii.                             Transfer Taxes.  The issuance of certificates
for shares of the Common Stock on conversion of this Debenture shall be made
without charge to the Holder hereof for any documentary stamp or similar taxes
that may be payable in respect of the issue or delivery of such certificate,
provided that the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate upon conversion in a name other than that of the Holder of this
Debenture so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.

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Section 5.                                            Certain Adjustments.

a)                          Stock Dividends and Stock Splits.  If the Company,
at any time while this Debenture is outstanding: (A) pays a stock dividend or
otherwise makes a distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company pursuant to this Debenture), (B) subdivides
outstanding shares of Common Stock into a larger number of shares, (C) combines
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (D) issues by reclassification of shares of
the Common Stock any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event.  Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

b)                                     Subsequent Equity Sales.  If the Company
or any Subsidiary thereof, as applicable, at any time while this Debenture is
outstanding, shall offer, sell, grant any option to purchase or offer, sell or
grant any right to reprice its securities, or otherwise dispose of or issue (or
announce any offer, sale, grant or any option to purchase or other disposition)
any Common Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock, at an effective price per share less than the then
Conversion Price (such lower price, the “Base Conversion Price” and such
issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the
holder of the Common Stock or Common Stock Equivalents so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which is issued in connection with such
issuance, be entitled to receive shares of Common Stock at an effective price
per share which is less than the Conversion Price, such issuance shall be deemed
to have occurred for less than the Conversion Price on such date of the Dilutive
Issuance), then the Conversion Price shall be reduced to equal the Base
Conversion Price.  Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued.  Notwithstanding the foregoing, no
adjustment will be made under this Section 5(b) in respect of an Exempt
Issuance.  The Company shall notify the Holder in writing, no later than the
Business Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms (such notice the “Dilutive Issuance Notice”).  For purposes of
clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance,
after the date of such

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Dilutive Issuance the Holder is entitled to receive a number of Conversion
Shares based upon the Base Conversion Price regardless of whether the Holder
accurately refers to the Base Conversion Price in the Notice of Conversion.

c)                          Subsequent Rights Offerings.  If the Company, at any
time while the Debenture is outstanding, shall issue rights, options or warrants
to all holders of Common Stock (and not to Holders) entitling them to subscribe
for or purchase shares of Common Stock at a price per share that is lower than
the VWAP on the record date referenced below, then the Conversion Price shall be
multiplied by a fraction of which the denominator shall be the number of shares
of the Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered (assuming delivery to the Company in full of
all consideration payable upon exercise of such rights, options or warrants)
would purchase at such VWAP.  Such adjustment shall be made whenever such rights
or warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights,
options or warrants.

d)                         Pro Rata Distributions. If the Company, at any time
while this Debenture is outstanding, shall distribute to all holders of Common
Stock (and not to the holders of the Debenture) evidences of its indebtedness or
assets (including cash and cash dividends) or rights or warrants to subscribe
for or purchase any security, then in each such case the Conversion Price shall
be adjusted by multiplying such Conversion Price in effect immediately prior to
the record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Closing Price
determined as of the record date mentioned above, and of which the numerator
shall be such Closing Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith.  In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock.  Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.

e)                          Fundamental Transaction. If, at any time while this
Debenture is outstanding, (A) the Company effects any merger or consolidation of
the Company with or into another Person, (B) the Company effects any sale of all
or substantially all of its assets in one or a series of related transactions,
(C) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively

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converted into or exchanged for other securities, cash or property (in any such
case, a “Fundamental Transaction”), then upon any subsequent conversion of this
Debenture, the Holder shall have the right to receive, for each Conversion Share
that would have been issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction, the same kind and amount of
securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of one share of Common Stock (the
“Alternate Consideration”).  For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this Debenture
following such Fundamental Transaction.  To the extent necessary to effectuate
the foregoing provisions, any successor to the Company or surviving entity in
such Fundamental Transaction shall issue to the Holder a new debenture
consistent with the foregoing provisions and evidencing the Holder’s right to
convert such debenture into Alternate Consideration. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this paragraph (d) and insuring that this Debenture (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.

f)                            Calculations.  All calculations under this Section
5 shall be made to the nearest cent or the nearest 1/100th of a share, as the
case may be.  For purposes of this Section 5, the number of shares of Common
Stock deemed to be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding treasury shares, if any) issued
and outstanding.

g)                         Notice to the Holder.

i.                                          Adjustment to Conversion Price. 
Whenever the Conversion Price is adjusted pursuant to any of this Section 5, the
Company shall promptly mail to each Holder a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the Company shall be
deemed to have issued Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities may be converted
or exercised in the case of a Variable Rate Transaction (as defined in the
Purchase Agreement).

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ii.                                       Notice to Allow Conversion by Holder. 
If (A) the Company shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Company shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock; (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Debenture, and shall cause to be mailed to the Holder at its last addresses as
it shall appear upon the  stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled to convert this Debenture during the
20-day period commencing the date of such notice to the effective date of the
event triggering such notice.

Section 6.                                            Redemption and Forced
Conversion.

a)                          Optional Redemption at Election of Company.  Subject
to the provisions of this Section 6 the Company may deliver a notice to the
Holder (an “Optional Redemption Notice” and the date such notice is deemed
delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable
election to redeem some or all of the then outstanding Debentures, for an
amount, in cash, equal to the Optional Redemption Amount on the 10th Trading Day
following the Optional Redemption Notice Date (such date, the “Optional
Redemption Date” and such redemption, the “Optional Redemption”).  The Optional
Redemption Amount is due in full on the Optional Redemption Date.  The Company
may only effect an Optional Redemption if during the period commencing on the
Optional Redemption Notice Date through to the Optional Redemption Date and
through and including the date such Optional Redemption Amount

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is paid to the Holder, each of the Equity Conditions shall have been met.  If
any of the Equity Conditions shall cease to be satisfied at any time during the
required period, then the Holder may elect to nullify the Optional Redemption
Notice by notice to the Company within 3 Trading Days after the first day on
which any such Equity Condition has not been met (provided that if, by a
provision of the Transaction Documents the Company is obligated to notify the
Holder of the non-existence of an Equity Condition, such notice period shall be
extended to the third Trading Day after proper notice from the Company) in which
case the Optional Redemption Notice shall be null and void, ab initio.  The
Company covenants and agrees that it will honor all Notices of Conversions
tendered from the time of delivery of the Optional Redemption Notice through the
date all amounts owing thereon are due and paid in full.

b)                                     Monthly Redemption.

i.                                          On each Monthly Redemption Date, the
Company shall redeem the Monthly Redemption Amount, the sum of all liquidated
damages and any other amounts then owing to the Holder in respect of this
Debenture (the “Monthly Redemption”). The Monthly Redemption Amount due on each
Monthly Redemption Date shall be paid in cash; provided, however, as to any
Monthly Redemption and upon 20 Trading Days’ prior written irrevocable notice
(the “Monthly Redemption Notice” and the 20 Trading Day period immediately
following the Monthly Redemption Notice, the “Monthly Redemption Period”), in
lieu of a cash redemption payment the Company may elect to pay all or part of a
Monthly Redemption Amount in Conversion Shares (such dollar amount to be paid on
a Monthly Redemption Date in Conversion Shares, the “Monthly Redemption Share
Amount”) based on a conversion price equal to the lesser of (i) the then
Conversion Price and (ii) 80% of the average of the 10 Closing Prices
immediately prior to the applicable Monthly Redemption Date (subject to
adjustment for any stock dividend, stock split, stock combination or other
similar event affecting the Common Stock during such 10 Trading Day period) (the
price calculated during the 10 Trading Day period immediately prior to the
Monthly Redemption Date, the “Monthly Conversion Price” and such period, the
“Monthly Conversion Period”); provided, further, that the Company may not pay
the Monthly Redemption Amount in Conversion Shares unless, (y) from the date the
Holder receives the duly delivered Monthly Redemption Notice through and until
the date such Monthly Redemption is paid in full, the Equity Conditions, unless
waived in writing by the Holder, have been satisfied and (z) as to such Monthly
Redemption, prior to such Monthly Redemption Period (but not more than 5 Trading
Days prior to the commencement of the Monthly Redemption Period), the Company
shall have delivered to the Holder’s account with The Depository Trust Company a
number of shares of Common Stock to be applied against such Monthly Redemption
Share Amount equal to the quotient of (x) the applicable Monthly Redemption
Share Amount divided by (y) the lesser of (1) the then Conversion Price and (2)
the Monthly Conversion Price assuming for such purposes that the Monthly
Conversion Period ends 5 Trading Days prior to the

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actual Monthly Redemption Period  (the “Pre-Redemption Conversion Shares”).  The
Holder may convert, pursuant to Section 4(a), any principal amount of this
Debenture subject to a Monthly Redemption at any time prior to the date that the
Monthly Redemption Amount and all amounts owing thereon are due and paid in
full.  Unless otherwise indicated by the Holder in the applicable Notice of
Conversion, any principal amount of this Debenture converted during the
applicable Monthly Redemption Period until the date the Monthly Redemption
Amount is paid in full shall be first applied to the principal amount subject to
the Monthly Redemption Amount payable in cash and then to the Monthly Redemption
Share Amount.  Any principal amount of this Debenture converted during the
applicable Monthly Redemption Period in excess of the Monthly Redemption Amount
shall be applied against the last principal amount of this Debenture scheduled
to be redeemed hereunder, in reverse time order from the Maturity Date;
provided, however, if any such conversion is applied to such Monthly Redemption
Amount, the Pre-Redemption Conversion Shares, if any were issued in connection
with such Monthly Redemption or were not already applied to such conversions,
shall be first applied against such conversion.  The Company covenants and
agrees that it will honor all Notice of Conversions tendered up until such
amounts are paid in full.  The Company’s determination to pay a Monthly
Redemption in cash, shares of Common Stock or a combination thereof shall be
applied ratably to all of the holders of the Debentures based on their (or their
predecessor’s) initial purchases of Debentures pursuant to the Purchase
Agreement.  At any time the Company delivers a notice to the Holder of its
election to pay the Monthly Redemption Amount in shares of Common Stock, the
Company shall file a prospectus supplement pursuant to Rule 424 disclosing such
election.

 

ii.                                       Notwithstanding anything to the
contrary in Section 6(b)(i), the Holder shall have the right to defer up to 3
Monthly Redemptions (whether in cash or shares) in any 12 month period until a
future date determined at the Holder’s sole discretion (each a “Deferred
Redemption”). In the event the Holder elects to receive a cash Deferred
Redemption, such Deferred Redemption shall be payable pursuant to the procedures
for payment under a Monthly Redemption in Section 6(b)(i) on the Deferred
Redemption Date. In the event the Holder elects to receive a share Deferred
Redemption, the Holder shall provide the Company at least 5 days’ prior written
notice (the “Deferred Redemption Notice” and such date, the “Deferred Redemption
Notice Date”) of its election to receive payment of such Deferred Redemption
(such shares, the “Deferred Redemption Share Amount”) which shall be based on a
conversion price equal to 80% of the average of the 10 Closing Prices
immediately prior to the Deferred Redemption Notice Date (subject to adjustment
for any stock dividend, stock split, stock combination or other similar event
affecting the Common Stock during such 10 Trading Day period) (the price
calculated during the 10 Trading Day period immediately prior to the Deferred
Redemption Date, the “Deferred Conversion Price” and such period, the “Deferred
Redemption Period”). The Holder may convert, pursuant to

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Section 4(a), any principal amount of this Debenture subject to a Deferred
Redemption at any time prior to the date that the Deferred Redemption Amount and
all amounts owing thereon are due and paid in full.  Unless otherwise indicated
by the Holder in the applicable Notice of Conversion, any principal amount of
this Debenture converted during a Deferred Redemption Period until the date the
Deferred Redemption Amount is paid in full shall be first applied to the
principal amount subject to the Deferred Redemption Amount payable in cash and
then to the Deferred Redemption Share Amount.  Any principal amount of this
Debenture converted during the applicable Deferred Redemption Period in excess
of the Deferred Redemption Amount shall be applied against the last principal
amount of this Debenture scheduled to be redeemed hereunder, in reverse time
order from the Maturity Date; provided, however, if any such conversion is
applied to such Deferred Redemption Amount, the Deferred Redemption Conversion
Shares, if any were issued in connection with such Deferred Redemption or were
not already applied to such conversions, shall be first applied against such
conversion.  The Company covenants and agrees that it will honor all Notice of
Conversions tendered up until such amounts are paid in full.  At any time a
Holder delivers a Deferred Redemption Notice, the Company shall file a
prospectus supplement pursuant to Rule 424 disclosing such election.

 

c)                                      Redemption Procedure.  The payment of
cash pursuant to the Monthly Redemption, an Optional Redemption or a Deferred
Redemption, shall be made on the Monthly Redemption Date, the Optional
Redemption Date or the Deferred Redemption Date, as applicable.  If any portion
of the cash payment for a Monthly Redemption, an Optional Redemption or a
Deferred Redemption, as applicable shall not be paid by the Company by the
respective due date, interest shall accrue thereon at the rate of 18% per annum
(or the maximum rate permitted by applicable law, whichever is less) until the
payment of the Monthly Redemption Amount, the Optional Redemption Amount or the
Deferred Redemption Amount, as applicable, plus all amounts owing thereon is
paid in full.  Alternatively, if any portion of the Monthly Redemption Amount,
the Optional Redemption Amount or the Deferred Redemption Amount, as applicable,
remains unpaid after such date, the Holder may elect, by written notice to the
Company given at any time thereafter, to invalidate ab initio such redemption,
notwithstanding anything herein contained to the contrary, and, with respect the
failure to honor the Optional Redemption as applicable, the Company shall have
no further right to exercise such Optional Redemption.  Notwithstanding anything
to the contrary in this Section 6, the Company’s determination to redeem in cash
or its elections under Section 6(b) shall be applied among the Holders of
Debentures ratably. The Holder may elect to convert the outstanding principal
amount of the Debenture pursuant to Section 4 prior to actual payment in cash
for any redemption under this Section 6 by fax delivery of a Notice of
Conversion to the Company.

d)                                     Forced Conversion. Notwithstanding
anything herein to the contrary, if after the Effective Date, (i) each of the
Closing Prices for any 20 consecutive Trading Days (such period commencing only
after the Effective Date, such period the “Threshold

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Period”)) exceeds the then Conversion Price by 200% (subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and other
similar transactions of the Common Stock that occur after the Original Issue
Date) or (ii) the Company consummates a bona fide firm commitment public
underwritten offering of the Common Stock by a nationally recognized investment
bank of its Common Stock for an offering price that is equal to or exceeds the
then Conversion Price by 200%, the Company may, within 1 Trading Day of the end
of any such period or offering, deliver a notice to the Holder (a “Forced
Conversion Notice” and the date such notice is received by the Holder, the
“Forced Conversion Notice Date”) to cause the Holder to immediately convert all
or part of the then outstanding principal amount of Debentures pursuant to
Section 4.  The Company may only effect a Forced Conversion Notice if all of the
Equity Conditions are met through the applicable Threshold Period (or public
offering period) until the date of the applicable Forced Conversion and through
and including the date such shares of Common Stock are issued to the Holder. 
Any Forced Conversion shall be applied ratably to all Holders based on their
initial purchases of Debentures pursuant to the Purchase Agreement.  For
purposes of clarification, a Forced Conversion shall be subject to all of the
provisions of Section 4, including, without limitation, the provision requiring
payment of liquidated damages and limitations on conversions.

Section 7.                                            Negative Covenants. So
long as any portion of this Debenture is outstanding, unless the Holders of at
least 67% of the principal amount of Debentures then outstanding give prior
written consent, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly:

a)                                      except for Permitted Indebtedness, enter
into, create, incur, assume, guarantee 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;

b)                                     except for Permitted Liens, 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;

c)                                      amend its articles of incorporation,
bylaws or other charter documents so as to materially and adversely affect any
rights of the Holder;

d)                                     repay, repurchase or offer to repay,
repurchase or otherwise acquire more than a de minimis number of shares of its
Common Stock or Common Stock Equivalents other than as to the Conversion Shares
to the extent permitted or required under the Transaction Documents or as
otherwise permitted by the Transaction Documents;

e)                                      enter into any transaction with any
Affiliate of the Company which would be required to be disclosed in any public
filing with the Commission, unless such transaction is made on an arm’s-length
basis and expressly approved by a majority of the

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disinterested directors of the Company (even if less than a quorum otherwise
required for board approval);

f)                                        pay cash dividends or distributions on
any equity securities of the Company; or

g)                                     enter into any agreement with respect to
any of the foregoing

Section 8.                                            Events of Default.

a)                                      “Event of Default”, wherever used
herein, means any one of the following events (whatever the reason and whether
it shall be voluntary or involuntary or effected by operation of law or pursuant
to any judgment, decree or order of any court, or any order, rule or regulation
of any administrative or governmental body):

i.                                          any default in the payment of (A)
the principal amount of any Debenture, or (B) other fees owing on any Debenture,
or liquidated damages in respect of, any Debenture, as and when the same shall
become due and payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default, solely in the case of defaults under
clause (B) above, is not cured, within 3 Trading Days;

ii.                                       the Company shall fail to observe or
perform any other covenant or agreement contained in this Debenture or any other
Debenture (other than a breach by the Company of its obligations to deliver
shares of Common Stock to the Holder upon conversion which breach is addressed
in clause (xi) below) which failure is not cured, if possible to cure, within
the earlier to occur of (A) 5 Trading Days after notice of such default sent by
the Holder or by any other Holder and (B)10 Trading Days after the Company shall
become or should have become aware of such failure;

iii.                                    a default or event of default (subject
to any grace or cure period provided for in the applicable agreement, document
or instrument) shall occur under (A) any of the Transaction Documents or (B) any
other material agreement, lease, document or instrument to which the Company or
any Subsidiary is bound;

iv.                                   any representation or warranty made
herein, in any other Transaction Documents, in any written statement pursuant
hereto or thereto, or in any other report, financial statement or certificate
made or delivered to the Holder or any other holder of Debentures shall be
untrue or incorrect in any material respect as of the date when made or deemed
made;

v.                                      (i) the Company or any of its
Subsidiaries shall commence a case, as debtor, a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any Subsidiary

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commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Company or any Subsidiary thereof or (ii) there is commenced a case against the
Company or any Subsidiary thereof, under any applicable bankruptcy or insolvency
laws, as now or hereafter in effect or any successor thereto which remains
undismissed for a period of 60 days; or (iii) the Company or any Subsidiary
thereof is adjudicated by a court of competent jurisdiction insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or (iv) the Company or any Subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part of its
property which continues undischarged or unstayed for a period of 60 days; or
(v) the Company or any Subsidiary thereof makes a general assignment for the
benefit of creditors; or (vi) the Company shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its debts generally as they
become due; or (vii) the Company or any Subsidiary thereof shall call a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (viii) the Company or any Subsidiary thereof
shall by any act or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or (ix) any corporate or other
action is taken by the Company or any Subsidiary thereof for the purpose of
effecting any of the foregoing; provided, however, in the event the Company
calls a meeting with the Holders to discuss any of the foregoing, such event
shall not be deemed to trigger this Event of Default;

vi.                                   the Company or any Subsidiary shall
default in any of its obligations under any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other instrument under
which there may be issued, or by which there may be secured or evidenced any
indebtedness for borrowed money or money due under any long term leasing or
factoring arrangement of the Company in an amount exceeding $150,000, whether
such indebtedness now exists or shall hereafter be created and such default
shall result in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable;

vii.                                the Common Stock shall not be eligible for
quotation on or quoted for trading on a Trading Market and shall not again be
eligible for and quoted or listed for trading thereon within five Trading Days;

viii.                             the Company shall be a party to any Change of
Control Transaction or Fundamental Transaction, shall agree to sell or dispose
of all or in excess of 33% of its assets in one or more transactions (whether or
not such sale would constitute a Change of Control Transaction) or shall, other
than an Exempt Redemption, redeem or repurchase more than a de minimis number of
its outstanding shares of Common Stock or other equity securities of the Company

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(other than redemptions of Conversion Shares and repurchases of shares of Common
Stock or other equity securities of departing officers and directors of the
Company; provided such repurchases shall not exceed $100,000, in the aggregate,
for all officers and directors during the term of this Debenture);

ix.                                     a Registration Statement shall not have
been declared effective by the Commission on or prior to the 180th calendar day
after the Closing Date;

x.                                        if, during the Effectiveness Period
(as defined in the Registration Rights Agreement), the effectiveness of the
Registration Statement lapses for any reason or the Holder shall not be
permitted to resell Registrable Securities (as defined in the Registration
Rights Agreement) under the Registration Statement, in either case, for more
than 30 consecutive Trading Days or 60 non-consecutive Trading Days during any
12 month period; provided, however, that in the event that the Company is
negotiating a merger, consolidation, acquisition or sale of all or substantially
all of its assets or a similar transaction and in the written opinion of counsel
to the Company, the Registration Statement, would be required to be amended to
include information concerning such transactions or the parties thereto that is
not available or may not be publicly disclosed at the time, the Company shall be
permitted an additional 10 consecutive Trading Days during any 12 month period
relating to such an event;

xi.                                     the Company shall fail for any reason to
deliver certificates to the Holder prior to the third Trading Day after a
Conversion Date or any Forced Conversion Date pursuant to and in accordance with
Section 4(d) or the Company shall provide notice to the Holder, including by way
of public announcement, at any time, of its intention not to comply with
requests for conversions of any Debentures in accordance with the terms hereof;

xii.                                  William Caldwell is terminated as chief
executive officer of the Company; or

xiii.                               any monetary judgment, writ or similar final
process shall be entered or filed against the Company, any subsidiary or any of
their respective property or other assets for more than $100,000, and such
judgment, writ or similar final process shall remain unvacated, unbonded or
unstayed for a period of 45 calendar days.

b)                                     Remedies Upon Event of Default. If any
Event of Default occurs, the full principal amount of this Debenture, together
with other amounts owing in respect thereof, to the date of acceleration shall
become, at the Holder’s election, immediately due and payable in cash.   The
aggregate amount payable upon an Event of Default shall be equal to the
Mandatory Default Amount.  Commencing 5 days after the occurrence of any Event
of Default that results in the eventual acceleration of this Debenture, the
interest rate on this Debenture shall accrue at the rate of 18% per annum, or
such lower maximum

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amount of interest permitted to be charged under applicable law.  Upon the
payment in full of the Mandatory Default Amount on this entire Debenture the
Holder shall promptly surrender this Debenture to or as directed by the
Company.  The Holder need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law.  Such declaration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a
Debenture holder until such time, if any, as the full payment under this Section
shall have been received by it.  No such rescission or annulment shall affect
any subsequent Event of Default or impair any right consequent thereon.

Section 9.                                            Miscellaneous.

a)                                      Notices.  Any and all notices or other
communications or deliveries to be provided by the Holder hereunder, including,
without limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service, addressed to the Company, at the address set forth above, facsimile
number                                  , Attn:
                                                                               or
such other address or facsimile number as the Company may specify for such
purposes by notice to the Holder delivered in accordance with this Section.  Any
and all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service addressed to each
Holder at the facsimile telephone number or address of the Holder appearing on
the books of the Company, or if no such facsimile telephone number or address
appears, at the principal place of business of the Holder.  Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 5:30 p.m. (New York City time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the second Business Day following the date of mailing, if sent
by nationally recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be given.

b)                                     Absolute Obligation. Except as expressly
provided herein, no provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and liquidated damages (if any) on, this Debenture at the time,
place, and rate, and in the coin or currency, herein prescribed.  This Debenture
is a direct debt obligation of the Company.  This Debenture ranks pari passu
with all other Debentures now or hereafter issued under the terms set forth
herein.

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c)                                      Lost or Mutilated Debenture.  If this
Debenture shall be mutilated, lost, stolen or destroyed, the Company shall
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a lost, stolen or
destroyed Debenture, a new Debenture for the principal amount of this Debenture
so mutilated, lost, stolen or destroyed but only upon receipt of evidence of
such loss, theft or destruction of such Debenture, and of the ownership hereof,
and indemnity, if requested, all reasonably satisfactory to the Company.

d)                                     Governing Law.  All questions concerning
the construction, validity, enforcement and interpretation of this Debenture
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 party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by any
of the Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced in the state and federal courts sitting in the City of New
York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or such
New York Courts are improper or inconvenient venue for such proceeding.  Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Debenture 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 Debenture or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of this Debenture, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.

e)                                      Amendments and Waivers.  This Debenture,
or any provisions hereof, may be modified or amended or the provisions hereof
waived with the prior written consent of the Company and the Holder.  Any waiver
by the Company or the Holder of a breach of any provision of this Debenture
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Debenture.  The
failure of the Company or the Holder to insist upon strict adherence to any term
of this Debenture on one or more occasions shall not be considered a waiver

25

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or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Debenture.

f)                                        Severability.  If any provision of
this Debenture is invalid, illegal or unenforceable, the balance of this
Debenture shall remain in effect, and if any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.  If it shall be found that any interest or other
amount deemed interest due hereunder violates applicable laws governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum permitted rate of interest. The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on
this Debenture as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
indenture, and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefits or advantage of any such law, and covenants that
it will not, by resort to any such law, hinder, delay or impeded the execution
of any power herein granted to the Holder, but will suffer and permit the
execution of every such as though no such law has been enacted.

g)                                     Next Business Day.  Whenever any payment
or other obligation hereunder shall be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day.

h)                                     Headings.  The headings contained herein
are for convenience only, do not constitute a part of this Debenture and shall
not be deemed to limit or affect any of the provisions hereof.

i)                                         Assumption.  Any successor to the
Company or surviving entity in a Fundamental Transaction shall (i) assume in
writing all of the obligations of the Company under this Debenture and the other
Transaction Documents pursuant to written agreements in form and substance
satisfactory to the Holder (such approval not to be unreasonably withheld or
delayed) prior to such Fundamental Transaction and (ii) to issue to the Holder a
new debenture of such successor entity evidenced by a written instrument
substantially similar in form and substance to this Debenture, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the interest rates of the Debentures held by the Holder
and having similar ranking to this Debenture, and satisfactory to the Holder
(any such approval not to be unreasonably withheld or delayed).  The provisions
of this Section 9(i) shall apply similarly and equally to successive Fundamental
Transactions and shall be applied without regard to any limitations of this
Debenture.

j)                                         Secured Obligation.  The obligations
of the Company under this Debenture are secured by all assets of the Company and
each Subsidiary pursuant to the

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Security Agreement, dated as of August     , 2007, between the Company, [the
Subsidiaries of the Company and the Secured Parties (as defined therein).

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

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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by
a duly authorized officer as of the date first above indicated.

ADVANCED CELL TECHNOLOGY, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

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ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the Amortizing Senior
Secured Convertible Debenture of Advanced Cell Technology, Inc., a Delaware
corporation (the “Company”) into shares of common stock, par value $0.001 per
share (the “Common Stock”), of the Company according to the conditions hereof,
as of the date written below.  If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith.  No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Common Stock does not exceed
the amounts determined in accordance with Section 13(d) of the Exchange Act,
specified under Section 4 of this Debenture.

The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Debenture to be Converted:

Number of shares of Common Stock to be issued:

Signature:

Name:

Address:

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Schedule 1

CONVERSION SCHEDULE

The Amortizing Senior Secured Convertible Debentures in the aggregate principal
amount of $                    issued by Advanced Cell Technology, Inc.  This
Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture.

Dated: August        , 2007

Date of Conversion
(or for first entry, 
Original Issue Date)

 

Amount of
Conversion

 

Aggregate 
Principal 
Amount 
Remaining 
Subsequent to 
Conversion
(or original 
Principal 
Amount)

 

Company Attest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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