Document:

Exhibit 10.1

 

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

 

This Settlement Agreement
and Mutual Release is made and entered into as of December 31, 2012 (the “Agreement”), by and among CAMOFI Master
LDC (“CAMOFI”) and CAMHZN Master LDC (“CAMZHN”) (collectively, the “Holders”)
and Advanced Cell Technology, Inc. (“Advanced Cell” or the “Company”). The Holders and Advanced
Cell are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

WHEREAS, the Holders held
and/or hold certain Common Stock Purchase Warrant(s) and certain Convertible Debentures, as amended, previously issued by Advanced
Cell (the “Securities”); and

 

WHEREAS, Holders have asserted
that the number of shares of common stock of Advanced Cell they were and/or are entitled to acquire under the Securities should
have been and/or should be adjusted pursuant to the terms of the Securities; and

 

WHEREAS, the Parties have
a good faith disagreement as to (a) whether the number of shares of common stock of Advanced Cell, par value $0.001 per share,
that Holders were and/or are entitled to acquire under the Securities should have been and/or should be adjusted pursuant to the
terms of the Securities and (b) if the number of shares of common stock of Advanced Cell Holders were and/or are entitled to acquire
under the Securities should have been and/or should be adjusted, the correct number of shares that should have been and/or should
be adjusted; and

 

WHEREAS, the Holders brought
an action in the Supreme Court of New York, New York County (the “Court”), docket number 652816/2011 regarding
the number of shares of common stock subject to the Securities (the “Litigation”); and

 

WHEREAS, the Parties desire
to resolve their differences in order to avoid the cost and distraction of litigation.

 

AGREEMENTS

 

NOW, THEREFORE, in consideration
of the foregoing and the mutual covenants hereinafter set forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Holders and Advanced Cell hereby agree as follows:

 

1)       Court
Order; Closing.

 

a)       Court
Order. Upon the execution and delivery of this Agreement, the parties will cause their respective counsel to file a joint application
with the Court seeking the Court’s approval of the fairness to the Holders of the issuance of the Shares, the issuance of
the Debentures (as defined below), the terms of this Agreement and the transactions contemplated hereunder, and the issuance of
the Shares and the Debentures pursuant to the exemption from registration provided by Section 3(a)(10) of the Securities Act of
1933, as amended (“1933 Act”) (such order is referred to herein as the “Court Order”). “Shares”
means Four Million Five Hundred Thousand Dollars ($4,500,000) in freely tradable shares of Advanced Cell common stock, payable
within two Business Days (as defined below) of the Court Order being granted. Such number of shares of common stock shall be based
on the least of (a) $.056 per share; (b) the closing price of the common stock on the day immediately prior to the execution of
the Agreement; and (c) the volume-weighted average price reported by Bloomberg LP (“VWAP”) for the thirty (30)
day period before the Shares are received. When said Shares are issued, all will be freely tradable pursuant to the 1933 Act and
shall be duly authorized, fully paid and non-assessable shares of Company common stock.

 

    	 

    	 

    

 

 

b)       Closing.  The
closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of
Richardson & Patel, LLP, 750 Third Avenue, 9th Floor, New York, New York 10017, at 9:30 a.m. local time on the first
Business Day (as defined below) immediately following the date on which the Court Order is entered on the docket of the Court or
such other date and time as the Holders and Advanced Cell may mutually determine (the “Closing Date”). The deliveries
actually delivered under Section 1(c) and 1(d) at the Closing shall be deemed delivered simultaneously. “Business Day”
means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required
by law to remain closed.

 

c)       Advanced
Cell’s Deliveries on and after the Closing. Subject to Holders’ compliance with Section 1(d), Advance Cell shall:

 

i.       cause
Interwest Transfer (together with any subsequent transfer agent, the “Transfer Agent”) through the Depository
Trust Company (“DTC”) Fast Automated Securities Transfer Program, to credit the Shares (78.9% of such shares
to CAMOFI and 21.1% of such shares to CAMHZN, respectively) to Holders’ balance accounts with DTC through its Deposit/Withdrawal
at Custodian system at the Closing:

 

	CAMOFI Master LDC	 
	DTC Clearing Number	443
	Institutional ID Number	00443
	Agent ID Number	00443
	Account Number	NXG 070751
	Account Name	CAMOFI MASTER LDC
	 	 

 

 

	CAMHZN Master LDC	 
	DTC Clearing Number	443
	Institutional ID Number	00443
	Agent ID Number	00443
	Account Number	NXG 070744
	Account Name	CAMHZN MASTER LDC
	 	 

ii.       deliver,
at the Closing, an aggregate of Six Million Dollars ($6,000,000) in 8% Senior Secured Convertible Debentures (the “Debentures”)
due June 30, 2015 ($4,732,781 aggregate principal amount to CAMOFI and $1,267,219 aggregate principal amount to CAMHZN, respectively),
in the forms attached hereto as Exhibit A;

 

iii.       deliver,
at the Closing, a copy of that certain Registration Rights Agreement by and among the Holders and Advanced Cell (the “RRA”)
executed by Advanced Cell, in the form attached hereto as Exhibit B, pursuant to which Advanced Cell agrees to register
the shares underlying the Debentures with the Securities and Exchange Commission;

 

    	-2-

    	 

    

iv.       pay
to the Holders, by wire transfer of immediately available funds, an aggregate of Two Million Dollars ($2,000,000) (the “Cash
Consideration”) ($1,577,594 to CAMOFI and $422,406 to CAMHZN, respectively) on or before February 28, 2013, provided
that the Holders shall be required to provide wiring instructions at least 2 Business Days prior to the date of such transfer;

 

v.       reimburse
the Costs (as defined in Section 16 below) at Closing;

 

vi.       deliver,
at the Closing, an Affidavit of Confession of Judgment (the “Affidavit”) and Judgment of Confession (“Judgment”)
in the forms attached hereto as Exhibits C and D, respectively, which may be filed by Holders with the Court, under
the circumstances set forth in Section 1(e) hereof;

 

vii.       deliver,
within 30 days of Closing (which period may be extended by the Agent in its sole discretion), copies of account control agreements
for each of the Company’s bank accounts in form and substance satisfactory to the Holders; and

 

viii.      deliver
at or prior to the Closing, a Security Agreement dated as of the date hereof among the Company, the subsidiaries of the
Company and the Holders (the “Security Agreement”) in form and substance satisfactory to the Holders pursuant to
which Holders are granted a first priority security interest in the Collateral (as defined therein) as well as documents
required thereunder, including without limitation the Intellectual Property Security Agreement (as defined therein) in form
and substance satisfactory to the Holders.

 

d)       Holders’
Deliveries at the Closing.  Subject to Advanced Cell’s compliance with Section
1(c), the Holders shall cause to be delivered, at the Closing, (i) the RRA executed by the Holders and (ii) to the undersigned
counsel for Advanced Cell a Stipulation of Dismissal, in the form attached hereto as Exhibit E (the “Stipulation”),
executed by Richardson & Patel, pursuant to which the Holders voluntarily dismiss the Litigation with prejudice subject to
satisfaction of terms hereof.

 

e)       If
(i) Advanced Cell breaches any of its obligations under Section 1(c)(i)-(v), 1(c)(vii) and 1(c)(viii) hereof and does not cure
the breach within 10 Business Days of receiving notice of the breach from Holders or (ii) there is an Event of Default under the
Debentures, Holders may file the Affidavit and Judgment with the Court. Upon Advanced Cell’s complete fulfillment of its
obligations under Section 1(c)(i)-(v), 1(c)(vii) and 1(c)(viii) hereof and its obligations under the Debentures, Holders shall
return the Affidavit and Judgment to Advanced Cell.

 

2)       No
Legends; Stop Transfer Instructions.       None of the Shares nor any certificates evidencing
any of the Shares (if a certificate therefor is requested in writing by Holders) nor the Debentures shall bear any restrictive
or other legends or notations. Advanced Cell shall not, and the Company shall cause all other Persons (as defined below) to not,
issue any stop-transfer order, instruction or other restriction with respect to any of the Shares or the Debentures. “Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity and a government or any department or agency thereof.

 

    	-3-

    	 

    

3)       Advanced
Cell’s Representations and Warranties. Advanced Cell represents and warrants to Holders that:

 

a)       it
is a corporation validly existing and in good standing under the laws of the State of Delaware;

 

b)       it
has all necessary power and authority (i) to conduct its business in the manner in which its business is currently being conducted,
(ii) to own and use its assets in the manner in which they are currently owned and used, and (iii) to perform its obligations under
all material contracts to which it is a party;

 

c)       each
of this Agreement, Debentures, Security Agreement, the RRA and other documents entered into in connection herewith and therewith
(collectively, the “Transaction Documents”) is a legal, valid and binding obligation of the Company enforceable
in accordance with all of its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors’ rights generally and as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable remedies, and each of this Agreement and each of
the Transaction Documents has been duly approved by its Board of Directors;

 

d)       the
execution and delivery of this Agreement and the Transaction Documents, and the consummation by Advanced Cell of the transactions
contemplated hereby and thereby, will not, directly or indirectly, with or without the passage of time or the giving of notice
(i) conflict with, result in the violation or breach any of the terms, conditions or provisions of any of the Company’s charter
documents, (ii) give any person or entity the right to declare an event of default or exercise any remedy under any material contract
of the Company, (iii) accelerate the maturity of or performance of any material contract of the Company, (iv) cancel, terminate
or modify any material contract of the Company, (v) result in the imposition or creation of any lien or other encumbrance upon
any of the Company’s assets, or (vi) give any holder of Company securities the right to receive additional shares of common
stock or other consideration in respect of their Company securities;

 

e)       all
of the Shares when issued and the shares of common stock underlying the Debentures when issued, shall be duly authorized, validly
issued, fully paid and non-assessable, free and clear of all liens or encumbrances of any nature whatsoever;

 

f)       Except
for the Court Order and the registration statement required to be filed pursuant to the RRA, the Company does not require the consent,
waiver, authorization or approval of any person or entity, or need to make any filing or registration with any court, agency or
authority in connection with the execution and delivery of this Agreement and the Transaction Documents or the consummation of
the transactions contemplated hereby or thereby;

 

    	-4-

    	 

    

g)       Except
as set forth in the Company’s public filings with the Securities and Exchange Commission, neither
the Company nor any subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company or any subsidiary under), nor has the Company or
any subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit
agreement, services, marketing or processing agreement or any other agreement or instrument to which it is a party or by which
it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order
of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws applicable to its business, except in each case
referred to in clauses (i), (ii) and (iii) hereof as could not have or reasonably be expected to have a material adverse effect.
Each material contract is in full force and effect and is enforceable in accordance with its terms, and no material defaults enforceable
against the Company or any subsidiary exist thereunder. Neither the Company nor any subsidiary has received notice from any party
to any material contract stating that it intends to terminate or amend such contract;

 

h)       the
Company’s common stock is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange
Act”), and the Company has not taken, and shall not take, any action designed to, or which to its knowledge is likely
to have the effect of, terminating the registration of its common stock under the Exchange Act nor has the Company received any
notification that the SEC is contemplating terminating such registration. The Company has not, in the 12 months preceding the date
hereof, received notice from any trading market on which the common stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of such trading market. The Company is, and has no reason
to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements,
and shall take all actions necessary or desirable to remain in compliance therewith; and

 

i)       as
long as any Holder holds shares of common stock or Debentures, the Company shall timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all reports required to be filed by  the Company
after the date hereof pursuant to the Exchange Act. As long as any Holder owns Shares or Debentures, if the Company
is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to such Holder and make publicly available
in accordance with Rule 144(c) such information as is required for such Holder to sell the Shares or any shares underlying the
Debentures under Rule 144 so long as it is a public company. The Company further covenants that
it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such
Holder to sell the Shares or any shares of Advanced Cell common stock underlying the Debentures without registration under the
1933 Act within the limitation of the exemptions provided by Rule 144.

 

4)       Advanced
Cell Release. Advanced Cell, on behalf of itself and its Affiliates (as such term is defined in Rule 405 promulgated under
the 1933 Act) shall irrevocably, fully, and finally, without further word, deed, action, execution, or further documentation, release
and discharge Holders, their respective past and present officers, directors, employees, managers, attorneys, accountants, heirs,
Affiliates and representatives (“Holder Releasees”), from any and all actions, causes of action, suits, debts,
accounts, covenants, contracts, agreements, promises, damages, judgments, claims, and demands whatsoever, in law or equity, known
or unknown which it, its successors and assigns now have or hereinafter may have against Holder Releasees, from the beginning of
time up to and including the date of this Agreement, provided, however, that nothing in this release shall limit
or affect Advanced Cell’s rights to enforce this Agreement.

 

    	-5-

    	 

    

5)       Holders’
Release. Holders, on behalf of their and their Affiliates, shall irrevocably, fully, and finally, without further word,
deed, action, execution, or further documentation, release and discharge Advanced Cell and its past and present officers, directors,
employees, managers, attorneys, accountants, heirs and representatives (“Advanced Cell Releasees”), from any
and all actions, causes of action, suits, debts, accounts, covenants, contracts, agreements, promises, damages, judgments, claims,
and demands whatsoever, in law or equity, known or unknown which they, their successors and assigns now have or hereinafter may
have against the Advanced Cell Releasees, from the beginning of time up to and including the date of this Agreement, including
all claims in respect of derivative securities relating to issuances of Company securities prior to the date hereof irrespective
of the price, if any, at which such securities were issued, provided, however, that nothing in this release shall
limit or affect Holders’ rights to enforce this Agreement, the Transaction Documents, or their rights to the Shares, the
Debentures, the shares of common stock underlying the Debentures, the Costs (as defined herein) or the Cash Consideration. Notwithstanding
the foregoing, in the event that Advanced Cell fails to comply with the provisions hereof and of the Transaction Documents such
release shall be null and void ab initio.

 

6)       Further
Agreements.

 

a)       Holders
acknowledge and agree that delivery of the items pursuant to Section 1 above shall be deemed full and complete (i) compensation
for any and all injury or damage to Holders (including consequential and exemplary damages) by reason of any alleged act, omission
or breach by Advanced Cell and/or any of its officers, directors and employees and (ii) satisfaction of all claims that were or
could have been asserted with regard to the adjustment of the number of shares of Advanced Cell common stock Holders was and/or
is entitled to acquire under the Securities so long as Advanced Cell complies with the provisions hereof and of the Transaction
Documents.

 

b)       The
parties agree that until one year from the date of this Agreement, neither such party nor any of their respective Affiliates thereof
shall, without the prior written consent of the other make any public announcement (other than, in the case of the Holders, to
their respective fund’s limited partners, lawyers, accountants, and other agents) with respect to any matter described in
this Agreement. Furthermore,  the Company shall not publicly disclose
the name of any Holder, or include the name of any Holder in any filing with the SEC or any regulatory agency or trading market,
without the prior written consent of such Holder, except (i) as required by federal securities law and (ii) to the extent such
disclosure is required by law or trading market regulations, in which case  the Company shall
provide such Holder with prior notice of such disclosure permitted under subclause (i) or (ii).

 

c)       Holders
agree that until one year from the date of this Agreement, neither Holder, nor any of then respective Affiliates, shall without
the prior written consent of Advance Cell form, join or in any way participate in a “group” as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, except that the Holders, together, shall not be deemed a “group.”

 

    	-6-

    	 

    

d)       The
Company shall by 8:30 am New York Time on the fourth (4th) trading day following the date hereof, issue a Current Report
on Form 8-K disclosing the material terms of the transactions contemplated hereby.

 

7)       Further
Assurances.       Holders and Advanced Cell shall reasonably cooperate with each other
with respect to the issuance, execution and delivery of the Shares and shares of common stock underlying the Debentures and any
and all related actions that may be required of the Parties to fulfill the agreements contained in this Agreement, including cooperation
in providing any documentation which may be requested by any broker in order to have the Shares or shares of common stock underlying
the Debentures deposited as free trading in the Holders’ account.

 

8)       Attorney
Advice. Each Party represents and warrants that in executing this Agreement, such Party has relied upon legal advice from
the attorney of its choice, that the terms of this Agreement and its consequences have been completely read and explained to such
Party by that attorney, and that such Party fully understands the terms of this Agreement. Accordingly, the Parties agree that
this Agreement shall be deemed to have been drafted jointly and any rules of construction that would require interpretation of
any ambiguities against the draft shall not be employed in interpretation of this Agreement, and are hereby expressly waived.

 

9)       All
Other Agreements Terminated. Except for this Agreement, the Transaction Documents and the documents entered into in connection
herewith and therewith, all other agreements between the Parties hereto, including all agreements between Advanced Cell and any
entity controlled by the Holders or its principals (including, without limitations, the Securities), are hereby deemed terminated,
canceled, null and void, and of no force or effect.

 

10)       No
Representations. Each Party acknowledges and represents that, in executing this Agreement, such Party has not relied upon
any inducements, promises or representations made by any Party or any person or entity representing or serving such Party, unless
expressly set forth in this Agreement.

 

11)       Disputed
Claim. This Agreement pertains to a disputed claim and does not constitute an admission of liability or wrongdoing by any
Party for any purpose.

 

12)       Assignment.
Each Party represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim
and other matter which it purports to release herein, and that it has not heretofore assigned or transferred, or purported to assign
or transfer, to any person, firm, association, corporation or other entity, any right, title or interest in any such claim or other
matter. In the event that such representation is false, and any such claim or matter is asserted against any Party hereto (and/or
the successor of such Party) by any Party or entity who is the assignee or transferee of such claim or matter, the Party shall
fully indemnify, defend and hold harmless the Party against which such claim or matter is asserted (and its successors) from and
against such claim or matter and from all actual costs, demands, fees, expenses, liabilities, and damages which that Party (and/or
its successors) incurs as a result of the assertion of such claim or matter. It is the intention of the Parties that this indemnity
does not require payment as a condition precedent to recovery by a Party under this indemnity. Nothing in this Agreement shall
prevent the Holders from selling, assigning or transferring their rights hereunder, including without limitation the Shares, the
Debentures, or the shares of common stock of the Company underlying the Debentures, or any of the consideration received hereunder,
to any third parties; provided, that such assignment is in accordance with all applicable state and federal securities
laws.

 

    	-7-

    	 

    

13)       Authority
to Bind Parties. Each Party executing this Agreement represents and warrants to the other Party that the individual executing
this Agreement on behalf of such Party has the power and authority to execute this Agreement and to bind the Party to the terms
and conditions of this Agreement by executing this Agreement.

 

14)       Modifications.
This Agreement may not be amended, canceled, revoked or otherwise modified except by written agreement subscribed by all of the
Parties to be charged with such modification.

 

15)       Agreement
Binding on Successors. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their
respective partners, employees, agents, servants, heirs, administrators, executors, successors, representatives, transferees and
assigns. The Parties agree to execute all documents necessary to effectuate this transaction.

 

16)       Costs
and Attorneys’ Fees. Advanced Cell hereby agrees to reimburse the Holders for any legal fees incurred in connection
with the Litigation, including its settlement (the “Costs”) provided that such reimbursement shall not exceed
$335,000. Other than as set forth in the preceding sentence, each Party agrees to be responsible for its own costs and attorneys’
fees, provided however, that:

 

a)       In
the event of any action, suit or other proceeding instituted to remedy, prevent or obtain relief from a breach of this Agreement
or the Transaction Documents, arising out of a breach of this Agreement or the Transaction Documents, or pertaining to a declaration
of rights under this Agreement or the Transaction Documents, the prevailing Party in such action, suit or other proceeding shall
recover all of it attorneys’ fees and costs incurred therein, including any and all appeals or petitions therefrom; it being
agreed and understood that no right is granted hereby to recover any fees or costs for any legal actions taken prior to the date
of this Agreement.

 

b)       As
used herein, Costs shall be deemed to mean the full and actual costs of any legal services actually performed by Holders' internal
and external counsel in connection with the matters involved, calculated on the basis of the usual fee charged by the attorneys
performing such services.

 

17)       Notices.
All notices shall be sent by overnight courier and by e-mail to the addresses designated below and shall be deemed received on
the date of transmission.

 

    	-8-

    	 

    

 

	If to Advanced Cell:	 	Mr. Gary Rabin
	 	 	Chief Executive Officer
	 	 	Advanced Cell Technology, Inc.
	 	 	1510 11th Street
	 	 	Santa Monica, CA 90401
	 	 	(310) 756-1212
	 	 	grabin@advancedcell.com
	 	 	 
	with a copy to:	 	Daniel Brown, Esq.
	 	 	
        Sheppard, Mullin, Richter & Hampton LLP

        

        30 Rockefeller Plaza

        

        New York, NY 10112-0015

        

        (310) 228-3717

        

        dbrown@sheppardmullin.com

	 	 	 
	If to Holders:	 	CAMOFI Master LDC CAMHZN Master LDC c/o Centrecourt Asset Management LLC 350 Madison Avenue, 8th Floor New York, New York  10017 (646) 758-6752   rsmithline@centrecourtam.com
	 	 	 
	with a copy to:	 	David B. Gordon, Esq.
	 	 	Richardson & Patel LLP
	 	 	750 Third Avenue, 9th Floor
	 	 	New York, NY 10017
	 	 	(646) 755-7315
	 	 	dgordon@richardsonpatel.com

 

 

    	-9-

    	 

    

 

 

18)       Governing
Law; Forum. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. 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 to such party at the address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall (i) be deemed to limit
in any way any right to serve process in any manner permitted by law or (ii) be deemed or operate to preclude any party hereto
from bringing suit or taking other legal action against any other party hereto in any other jurisdiction to collect on such other
party’s obligations hereunder to such party or to enforce a judgment or other court ruling in favor of such party against
such other party. EACH OF THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THE COURT SHALL BE THE COURT TO RETAIN JURISDICTION
TO ENFORCE THE TERMS OF THIS AGREEMENT. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST,
A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

19)       Severability.
Should any provision of this Agreement be declared or be determined by any court of competent jurisdiction or tribunal to be illegal
or invalid, the validity of the remaining parts, terms or provisions shall not be effected thereby and said illegal or invalid
part, term or provision shall be severed and deemed not to be a part of this Agreement.

 

20)       Counterparts
and Facsimile Execution. This Agreement may be executed in one or more counterparts, by PDF, or by facsimile, each of which
when executed and delivered shall be an original, and all of which when executed shall constitute one and the same instrument.

 

 

 

[Signature Pages Follow]

 

    	-10-

    	 

    

 

 

IN WITNESS WHEREOF, the Parties hereto, agreeing
to be bound hereby, execute this Agreement upon the date first set forth above.

 

	 	CAMHZN Master LDC
	 	 	
         

         

         
	 
	 	By:	/s/ Richard Smithline	 
	 	 	Name: Richard Smithline
	 	 	Title: Director
	 	 
	 	CAMOFI MASTER LLC.
	 	 	
         

         

         
	 
	 	By:	/s/ Richard Smithline	 
	 	 	Name: Richard Smithline
	 	 	Title: Director

 

 

 

 

	[Settlement Agreement and Mutual Release Signature Page]

 

 

    	 

    	 

    

 

 

IN WITNESS WHEREOF, the Parties hereto, agreeing
to be bound hereby, execute this Agreement upon the date first set forth above.

 

	 	ADVANCED CELL TECHNOLOGY, INC.
	 	 	
         

         

         
	 
	 	By:	/s/ Gary Rabin	 
	 	 	Name: Gary Rabin
	 	 	Title: Chief Executive Officer

 

 

 

 

 

 

 

 

 

	[Settlement Agreement and Mutual Release Signature Page]

 

    	 

    	 

    

Exhibit A

 

Form of Debenture

 

[See Exhibits
10.2 and 10.3 to the Form 8-K filed by Advanced Cell Technology, Inc. on January 17, 2013]

 

 

 

 

 

 

 

 

 

 

 

    	 

    	 

    

Exhibit B

 

Form of Registration Rights Agreement

 

[See Exhibit
10.4 to the Form 8-K filed by Advanced Cell Technology, Inc. on January 17, 2013]

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 

    	 

    

Exhibit C

 

Form of Affidavit

 

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK

	
        --------------------------------------------------------------x

        CAMOFI MASTER LDC and CAMZHN MASTER LDC,

        Plaintiffs,

         

        v.

        ADVANCED CELL TECHNOLOGY, INC.,

         

        Defendant.

        --------------------------------------------------------------x
	
         

         

        Index No.

        AFFIDAVIT OF

        CONFESSION

        OF JUDGEMENT

         

         

         

STATE OF CALIFORNIA         ) SS.:

COUNTY OF LOS ANGELES  ) 

GARY RABIN, being
duly sworn, deposes and says that he is the Chief Executive Officer of Advanced Cell Technology, Inc. ("DEBTOR"),
a Delaware corporation, and is duly authorized to make this affidavit on its behalf.

DEBTOR,
with offices at PO Box 1700, Santa Monica, California 90406, hereby confesses judgment herein
and consents to the entry thereof against it in the Supreme Court, New York County, New York. 

This confession
of judgment is for a debt justly due to the Plaintiffs arising from the following facts:

DEBTOR, as
obligor, defaulted on obligations to Plaintiffs under (1) Section 1(c) of a Settlement Agreement and Mutual Release, a copy of
which is annexed hereto as Exhibit A, and/or (2) 8% Senior Secured Convertible Debentures, copies of which are annexed hereto as
Exhibit B. DEBTOR hereby confesses judgment in the amount of $12,775,000.00, plus interest thereon at 9% from the 31st day of December,
2012.

    	 

    	 

    

 

 

 

	 	DEBTOR 
	 	 
	 	By: ____________________________
	 	Gary Rabin
	 	Chief Executive Officer

 

Sworn to before me this 31st

day of December, 2012

 

_____________________________

Notary Public

 

 

 

 

    	 

    	 

    

Exhibit D

 

Form of Confession of Judgment

 

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK

	
        --------------------------------------------------------------x

        CAMOFI MASTER LDC and CAMZHN MASTER LDC,

        Plaintiffs,

         

        v.

        ADVANCED CELL TECHNOLOGY, INC.,

         

        Defendant.

        --------------------------------------------------------------x
	
         

         

        Index No.

        

        JUDGEMENT OF CONFESSION

 

	Amount confessed.	$ 12,775,000.00

Costs

	Costs by Statute	 	 	15.00	 
	Index Application	 	 	210.00	 
	Filing Fee	 	 	45.00	 
	Execution Fee	 	 	45.00	 
	 	 	 	 	 
	Cost Total	 	 	315.00	 
	 	 	 	 	 
	Judgment Total	 	 	$12,775,315.00, plus interest at 9% per annum	 

 

 

     

     

    

 

ATTORNEY'S AFFIRMATION

 

STATE OF NEW YORK, COUNTY OF NEW YORK

The undersigned, an attorney at law of
the State of New York, affirms that he is one of the attorneys of Richardson & Patel, LLP, attorneys for the plaintiffs herein
and states that the disbursements above specified are correct and true and have been or will necessarily be made or incurred herein
and are reasonable in amount and affirms this statement to be true under the penalties of perjury.

Dated: __________________, 20___

	 	____________________________
	 	David B. Gordon, Esq.

 

 

JUDGMENT entered the ____ day of ______________,
20___.

On filing the foregoing Affidavit of
Confession of Judgment made by the defendant herein, sworn to the 31st day of December, 2012.

NOW, ON MOTION OF Richardson & Patel,
LLP, attorneys for plaintiffs it is ADJUDGED that plaintiffs, CREDITORS, residing at 350 Madison Avenue, New York, New York 10017,
do recover of the defendant, DEBTOR, residing at PO Box 1700, Santa Monica, California 90406, the sum of $12,775,000.00 with interest
of $_________ making a total of $_____________; together with $315.00 costs and disbursements, amounting in all to the sum of $________________
; and that the plaintiffs have execution therefor.

 

	 	______________________________
	 	Clerk

  

 

    	 

    	 

    

Exhibit E

 

Stipulation of Dismissal

 

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK

_____________________________________________________________x

	
        CAMOFI MASTER LDC and CAMZHN MASTER LDC,

         

        Plaintiffs,

         

        – against –

         

        ADVANCED CELL TECHNOLOGY, INC.

         

        Defendant.

         

        _____________________________________________________x
	
        :

         

        :

         

        :

         

        :

         

        :

	
         

         

        Index No. 652816-2011

         

         

        STIPULATION OF DISMISSAL

 

 

 

 

 

Plaintiffs CAMOFI Master
LDC and CAMZHN Master LDC (“Plaintiffs”) and defendant Advanced Cell Technology, Inc. (“Defendant” and
collectively with Plaintiff, the “Parties”), through their respective undersigned counsel, pursuant to New York Civil
Practice Law and Rules 2104, hereby stipulate as follows:

 

WHEREAS, the Parties have
reached an agreement to settle their dispute in this action as reflected in the Settlement Agreement and Mutual Release dated December
31, 2012 (“Settlement Agreement”);

 

IT
IS HEREBY STIPULATED AND AGREED, by and among the Parties hereto, through their respective counsel, pursuant to New York
Civil Practice Law and Rules 2104, that this action is hereby voluntarily dismissed with prejudice;
and 

 

IT IS FURTHER STIPULATED
AND AGREED, by and among the Parties hereto, through their respective counsel, that this Court shall retain jurisdiction to enforce
the terms of the Settlement Agreement, including but not limited to, the hearing and determination of any application seeking the
issuance of a judgment as set forth therein.

 

    	 

    	 

    

 

	Dated:	January __, 2012

                                                                            New York, New York

 

 

	
        RICHARDSON & PATEL, LLP

         

         

        By:___________________________

        David Gordon

        750 Third Avenue, 9th
        Floor

        New York, New York 10017

        Tel: +1 646 755-7315

         

         

        Counsel for Plaintiffs
	 	
        SHEPPARD MULLIN RICHTER & HAMPTON LLP

         

         

        By:___________________________

        Daniel L. Brown

        Kathryn J. Hines

        30 Rockefeller Plaza

        New York, New York 10112

        Tel: +1 212 653-8700

         

        Counsel for DefendantExhibit 10.2

 

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: December 31, 2012

 

$4,732,781

 

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 1510 111th Street Ste # 202, Santa Monica, CA 90401 (the “Company”),
designated as its Amortizing Senior Secured Convertible Debentures due June 30, 2015 (the “Debentures”).

 

FOR VALUE RECEIVED, the Company promises to
pay to CAMOFI Master LDC or its registered assigns (the “Holder”), or shall have paid pursuant to the terms
hereunder, the principal sum of $4,732,781 by June 30, 2015, 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 Settlement Agreement, and (b) the following terms shall have the following
meanings:

 

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

 

“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(b).

 

“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 Quarterly Redemption Amount.

 

“Deferred Redemption Date”
means the date the Holder requests the Deferred Redemption.

 

“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 are listed for trading on a Trading Market (and 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 upon the conversion of the Debenture, (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) 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 1,000,000 shares.

 

    	2

    	 

    

“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.

 

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

 

“Interest Payment Date”
shall have the meaning set forth in Section 2(a).

 

“Late Fee” shall
have the meaning set forth in Section 2(c).

 

“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.

 

“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).

 

“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.

 

    	3

    	 

    

“Permitted Indebtedness”
shall mean 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 Original Issue Date and may only be secured by the assets so acquired or leased
thereafter. Notwithstanding anything to the contrary, the Company shall be entitled to incur debt whether through financing or
through a bank loan in the aggregate amount of up to ten million dollars ($10,000,000) (the “Financing Debt”)
so long as 25% of the net cash proceeds received by the Company upon issuance of such Financing Debt (other than purchase money
indebtedness incurred in connection with the acquisition of capital assets so long as such indebtedness is only secured by the
assets so purchased and is not in an amount in excess of the amount of the assets so purchased) shall be used to repay the Debentures
and such debt will deemed Permitted Indebtedness for purposes of this Debenture.

 

“Permitted Lien”
shall 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 Indebtedness provided that such liens are
not secured by assets of the Company or its Subsidiaries other than the assets so acquired or leased, except with respect to Financing
Debt, in which case such Liens may not be senior to any Liens securing this Debenture; (c) statutory Liens of landlords or equipment
lessors against any property of the Company or its Subsidiaries existing as of the Original Issue Date 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.

 

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

 

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

 

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

 

“Quarterly Redemption Amount”
shall mean, as to a Quarterly Redemption, $473,278.

 

    	4

    	 

    

“Quarterly Redemption Date”
means each of March 31, June 30, September 30 and December 31, commencing on March 31, 2013 and ending upon the full redemption
of this Debenture.

 

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

 

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

 

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

 

“Registration Rights Agreement”
means the Registration Rights Agreement, dated as of the Original Issue Date, 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.

 

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

 

“Subsidiary” means
any subsidiary of the Company as set forth on Schedule H of the Security Agreement and shall, where applicable, include
any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

“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.

 

“VWAP” means, for
any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date)
on the primary Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based
on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP function; (b) if the Common Stock is not then
listed or quoted on the Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published
by the Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent
bid price per share of the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common
Stock as determined by a nationally recognized-independent appraiser selected in good faith by Holder.

 

Section 2.       Interest.

 

a)                 
Payment of Interest in Cash. The Company shall pay interest to the Holder on the aggregate and then outstanding principal
amount of this Debenture at the rate of 8% per annum from the Original Issue Date, payable monthly in arrears beginning on January
31, 2013 and on each monthly anniversary date thereafter and on the Maturity Date (except that, if any such date is not a Business
Day, then such payment shall be due on the next succeeding Business Day) (each such date, an “Interest Payment Date”).

 

b)                 
Interest Calculations. Interest shall be calculated on the basis of a 360-day year and shall accrue daily commencing
on the Original Issue Date until payment in full of the principal sum, together with all accrued and unpaid interest and other
amounts which may become due hereunder, has been made. Interest hereunder will be paid to the Person in whose name this Debenture
is registered on the records of the Company regarding registration and transfers of Debenture (the “Debenture Register”).

 

    	5

    	 

    

 

 

c)                 
Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at the rate
of 12% per annum (or such lower maximum amount of interest permitted to be charged under applicable law) (“Late Fee”)
which will accrue daily, from the date such interest is due hereunder through and including the date of payment.

 

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)         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.

 

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 80% of the VWAP of the 10 consecutive
Trading Days prior to the Conversion Date (subject to adjustment herein) (the “Conversion Price”).

 

    	6

    	 

    

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 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), 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 the limitation contained in this Section 4(c)
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), 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-Q or Form 10-K,
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) 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) 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) 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.

 

    	7

    	 

    

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 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
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 anyone 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.

 

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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
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 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 registered for public sale.

 

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.

 

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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.

 

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
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.

 

    	10

    	 

    

c)       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.

 

d)       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 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.

 

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e)       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.

 

f)       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. .

 

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.

 

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 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, the Holder has received
proper notice from the Company that any such Equity Condition has not been met 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.

 

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b)       Quarterly
Redemption.

 

i.       On
each Quarterly Redemption Date, the Company shall redeem the Quarterly Redemption Amount, the sum of all liquidated damages and
any other amounts then owing to the Holder in respect of this Debenture (the “Quarterly Redemption”). The Quarterly
Redemption Amount due on each Quarterly Redemption Date shall be paid in cash; provided, however, as to any Quarterly
Redemption and upon 20 Trading Days’ prior written irrevocable notice (the “Quarterly Redemption Notice”
and the 20 Trading Day period immediately following the Quarterly Redemption Notice, the “Quarterly Redemption Period”),
in lieu of a cash redemption payment the Company may elect to pay all or part of a Quarterly Redemption Amount in Conversion Shares
(such dollar amount to be paid on a Quarterly Redemption Date in Conversion Shares, the “Quarterly Redemption Share Amount”)
based on a conversion price equal to the lesser of (i) the then Conversion Price (for the period ending on or prior to the Quarterly
Redemption Date) and (ii) 80% of the average of the 10 closing prices immediately prior to the applicable Quarterly 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 Quarterly
Redemption Date, the “Quarterly Conversion Price” and such period, the “Quarterly Conversion Period”);
provided, further, that the Company may not pay the Quarterly Redemption Amount in Conversion Shares unless, (y)
from the date the Holder receives the duly delivered Quarterly Redemption Notice through and until the date such Quarterly Redemption
is paid in full, the Equity Conditions, unless waived in writing by the Holder, have been satisfied and (z) as to such Quarterly
Redemption, prior to such Quarterly Redemption Period (but not more than 5 Trading Days prior to the commencement of the Quarterly
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 Quarterly Redemption Share Amount equal to the quotient of (x) the applicable
Quarterly Redemption Share Amount divided by (y) the lesser of (1) the then Conversion Price and (2) the Quarterly Conversion Price
assuming for such purposes that the Quarterly Conversion Period ends 5 Trading Days prior to the actual Quarterly 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 Quarterly Redemption at any time prior to the date that the Quarterly Redemption Amount and
all amounts owing thereon are due and paid in full.  Any principal amount of this Debenture converted during the applicable
Quarterly Redemption Period until the date the Quarterly Redemption Amount is paid in full shall be applied to the principal amount
subject to the Quarterly Redemption Amount payable in cash and then to the Quarterly Redemption Share Amount.  Any principal
amount of this Debenture converted during the applicable Quarterly Redemption Period in excess of the Quarterly 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 Quarterly Redemption Amount,
the Pre-Redemption Conversion Shares, if any were issued in connection with such Quarterly 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. 

 

 

 

    	13

    	 

    

 

 

ii.       Notwithstanding
anything to the contrary in Section 6(b)(i), the Holder shall have the right to defer up to 3 Quarterly Redemptions in any 12 month
period until a future date determined at the Holder’s sole discretion (each a “Deferred Redemption”).
Such Deferred Redemption shall be payable pursuant to the procedures for payment under a Quarterly Redemption in Section 6(b)(i)
on the Deferred Redemption Date. The Holder may convert, pursuant to 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.  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 applied to the principal amount subject to the Deferred Redemption Amount payable
in cash.  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.  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, if required, file a prospectus supplement pursuant to Rule 424 disclosing such election.

 

c)       Mandatory
Redemption. The Company shall be required to redeem the Debentures at 100% of the principal amount thereof plus accrued interest
to the date of redemption with 25% of the net cash proceeds received by the Company from the sale of Financing Debt. Such redemption
shall be on the date of closing of the sale of the Financing Debt.

 

d)       Redemption
Procedure.  The payment of cash pursuant to the Quarterly Redemption, an Optional Redemption or a Deferred Redemption,
shall be made on the Quarterly Redemption Date, the Optional Redemption Date or the Deferred Redemption Date, as applicable. 
If any portion of the cash payment for a Quarterly 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 Quarterly 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 Quarterly 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. 
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 or email delivery of a Notice of Conversion to the Company.

 

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Section 7.       Negative
Covenants. So long as any portion of this Debenture is outstanding, unless the Holder of the Debentures gives 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 certificate of incorporation, bylaws or other charter documents (the “Charter Documents”) so as to materially
and adversely affect any rights of the Holder; provided, that the Company shall be entitled to amend the Charter Documents without
the prior written consent of the Holder (i) in connection with a merger transaction or reorganization or (ii) to change the authorized
number of capital stock in connection with a financing transaction, a recapitalization, stock-split, reverse stock-split or similar
transaction;

 

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;

 

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 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;

 

g)       transfer,
pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral (except for sales, licenses, and dispositions
granted or made by the Company or its Subsidiaries in its ordinary course of business); or

 

h)       enter
into any agreement with respect to any of the foregoing; provided, that the Company shall be entitled to agree to any of the actions
otherwise prohibited by Section 7(g) in connection with any sale of the Company or substantially all of its assets, or a merger
or consolidation or other Change of Control Transaction so long as it otherwise complies with the terms of this Debenture applicable
to any such transaction or, in the case of any such transaction which results in an Event of Default, so long as the Debenture
is paid in full in accordance with the terms of the Debenture prior to or simultaneously with the consummation of such transaction.

 

    	15

    	 

    

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) 30 Trading
Days after notice of such default sent by the Holder or by any other Holder and (B) 45 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 the Settlement Agreement;

 

iv.       any
representation or warranty made herein, in the Settlement Agreement, 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 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;

 

    	16

    	 

    

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 (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.       the
Company shall fail for any reason to deliver certificates to the Holder prior to the third Trading Day after a 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;

 

x.       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 $150,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of 45 calendar days;

 

xi.       the
Security Agreement shall no longer (a) provide the Holders with a first priority security interest on the Company’s assets
to the extent required under the Security Agreement or (b) be in full force and effect, and such failure under clause (a) or (b)
shall continue for 30 calendar days;

 

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

 

xiii.       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.

 

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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 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 or email, sent by a nationally recognized
overnight courier service, addressed to the Company, at the address set forth above, email address: grabin@advancedcell.com Attn:
Gary Rabin, Chairman and CEO 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.

 

    	18

    	 

    

Within thirty (30) days of obtaining
knowledge thereof, the Company shall advise the Holder 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 Company’s
or its Subsidiaries security interest therein. The Company shall promptly notify the Holder 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 the Company that may materially affect the value of the Collateral, the security interest or the rights and remedies
of the Holders under the Security Agreement.

 

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.

 

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

 

    	19

    	 

    

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, the Settlement Agreement and the Security Agreement 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)       The
Company shall at all times keep in full force and effect their respective valid existence and good standing and any rights and
franchises material to its businesses.

 

k)       Secured
Obligation.  The obligations of the Company under this Debenture are secured by all assets of the Company and each Subsidiary
pursuant to the Security Agreement, dated as of the date hereof, between the Company, the Subsidiaries of the Company and the Secured
Parties (as defined therein).

 

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

 

 

 

    	20-

    	 

    

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: Gary Rabin
	 	 	Title: Chief Executive Officer

 

 

 

 

 

 

 

 

 

[Senior Secured Convertible Debenture Signature
Page - CAMOFI Master LDC]

 

 

    	 

    	 

    

 

 

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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