Exhibit 10.50

                SETTLEMENT AGREEMENT AND MUTUAL RELEASE OF CLAIMS

         This Settlement Agreement and Mutual Release of Claims ("Agreement"),
dated as of November 3, 2008 (the "Effective Date") is entered into between
C.D.S. Engineering, LLC, a limited liability company organized under the laws of
the State of California with a principal place of business at 40725 Encyclopedia
Circle, Fremont, CA 94538 ("CDS"), on behalf of itself, its representatives,
heirs, executors, administrators, trustees, predecessors (including, without
limitation, CDS Group Corporation, a Delaware corporation), successors,
affiliates (including, without limitation, C.D.S. Engineering, Inc., a
California corporation), subrogors, subrogees, lessees, lessors, grantees,
assignees, assignors, subsidiaries, agents, employees, servants, owners, alter
egos, attorneys, general partners, limited partners, and representatives on the
one hand, and Intraop Medical Corporation, a corporation organized under the
laws of the State of Delaware with a principal place of business at 570 Del Rey
Avenue, Sunnyvale, California, 94085 ("Intraop"), acting on behalf of itself,
its representatives, heirs, executors, administrators, trustees, predecessors,
successors, affiliates, subrogors, subrogees, lessees, lessors, grantees,
assignees, assignors, subsidiaries, parent corporations, agents, employees,
servants, officers, directors, members, shareholders, owners, alter egos,
attorneys, general partners, and limited partners, on the other hand. CDS and
Intraop are sometimes referred to hereinafter individually as a "Party," and
collectively, the "Parties".

WHEREAS:

     A. Intraop and CDS are parties to a Manufacturing  Services Agreement dated
September  5, 2002,  amended on  January 6, 2005,  further  amended on March 16,
2005, and further amended on April 28, 2005 (as amended, the "MSA"), under which
CDS agreed to manufacture for and sell to Intraop certain Products (as such term
is  defined  in the  MSA)  and  accessories  under  and  relating  to  Intraop's
proprietary  Mobetron trademark,  patents and associated  intellectual  property
rights, for which Intraop has granted CDS a limited manufacturing license.

     B.  Although  relating to the MSA, but to the extent they may be considered
separate  from the MSA,  Intraop  and CDS are also  parties to other  agreements
relating to  manufacturing  schedules  and sales prices for certain of Intraop's
Products, accessories and services, including without limitation a Memorandum of
Understanding  dated  January 5, 2005, as amended and restated on March 16, 2005
(as to any and all such  other  agreements  excluding  this  Agreement,  whether
written or oral, the "Other Agreements").

     C. In a letter to CDS dated  September  11,  2008,  Intraop  stated  claims
against  CDS based on a breach of one or more terms of the MSA and other  rights
under law and equity  (together  with any other  reserved  claims,  the "Intraop
Claims") including,  without limitation: i) incomplete Products and overpayments
amounting to $638,511.00 as of the date of such letter,  ii)  misrepresentations
of CDS relating to the foregoing,  iii) incorrect  charges and invoicing by CDS,
and iv) undelivered  Products for which Intraop has already submitted payment to
CDS (the "Intraop Property"). CDS disputes these claims.

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     D.  CDS  claims  that  it  holds  accounts  receivable  in  the  amount  of
$468,104.34  due and owing from Intraop under the MSA  (together  with any other
reserved  claims,  the "CDS Claims") which Intraop has disputed and continues to
dispute.

     E. The Parties wish to fully and finally  resolve their  respective  claims
and to terminate the MSA and the Other Agreements pursuant to this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Parties agree as follows:

     1.  Termination  of the  MSA.  The  MSA and  Other  Agreements  are  hereby
terminated by mutual agreement of the Parties,  without regard to section 8.4 of
the MSA. Other than as set forth in this Agreement, there shall be no continuing
obligations  under  the MSA or Other  Agreements  by  either  Party to the other
including any obligations arising from the provision of Products pursuant to the
MSA.

     2. No Remaining  Detention of Intraop Property.  CDS agrees that CDS has no
property interest in the Intraop Property described on Attachment A. CDS further
agrees that such Intraop Property has been fully paid by Intraop and is owned by
Intraop.  CDS  agrees  that as of the  Effective  Date,  it shall  provide  full
cooperation  and assistance to Intraop to allow Intraop to collect any remaining
Intraop Property in the possession of CDS. Intraop's tender of the First Payment
(as  defined  in  paragraph  4 hereof)  is made only upon  Intraop  taking  full
possession of all such Intraop Property.

     3. Delivery of Components/Database and History Documents. The Parties agree
that the items  described on  Attachment B represent  the total service stock in
CDS' possession, including excess and obsolete inventory, of Components (as such
term is defined in the MSA) under  Section 4.2 of the MSA. On and subject to the
terms and conditions of this  Agreement,  Intraop agrees to purchase and acquire
from CDS and CDS hereby sells, transfers, assigns and conveys such Components to
Intraop and CDS agrees that it shall provide full  cooperation and assistance to
Intraop to allow  Intraop to collect such  Components  from CDS' facility as and
when  reasonably  requested  by Intraop.  Set forth on  Attachment C are certain
electronic database materials and product and vendor history  documentation (the
"Documentation")  that were  utilized by CDS in the  production of the Products.
CDS agrees  that as of the  Effective  Date,  CDS shall:  (i) make its  facility
available to Intraop  personnel and provide its  reasonable  assistance to allow
Intraop the  opportunity  to package the  Components  for drayage and removal by
Intraop  through  transportation  arranged  by Intraop and (iv)  cooperate  with
Intraop personnel to transfer the Documentation (to the best of CDS' ability) to
Intraop personnel.

     4.  Payment.  Intraop has paid CDS the sum of twenty five  thousand  United
States Dollars ($25,000) (the "First  Payment"),  the receipt of which is hereby
acknowledged.  Intraop  shall pay to CDS a second  payment  of  Twenty  Thousand
United States  Dollars  ($20,000)  (the "Second  Payment") on or prior to thirty
(30) days following the Effective Date.  Thereafter,  Intraop shall pay to CDS a
third payment of Twenty  Thousand  United States  Dollars  ($20,000) (the "Third
Payment")  on or prior to thirty  (30)  days  following  the date of the  Second
Payment.  Thereafter,  Intraop  shall  pay to CDS a  fourth  payment  of  Twenty
Thousand United States Dollars  ($20,000) (the "Fourth  Payment") on or prior to
thirty (30) days  following the date of the Third Payment.  Thereafter,  Intraop
shall pay to CDS a fourth  payment of Fifteen  Thousand  United  States  Dollars
($15,000)  (the "Fifth  Payment") on or prior to thirty (30) days  following the
date of the Fourth Payment.  Collectively,  the foregoing  payments totaling one
hundred thousand United States Dollars  ($100,000) are herein referred to as the
"Settlement Payment," and such Settlement Payment, in whole and in part, is made
in consideration of the compromise between the Parties in this Agreement.

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     5.  Assumption  of Open  Purchase  Orders.  On and subject to the terms and
conditions  of this  Agreement,  CDS hereby  assigns all of its  interest in the
stand-alone open purchase orders listed on Attachment D ("Open Purchase Orders")
and Intraop agrees to assume and become  responsible  for any remaining  payment
obligation  for such Open Purchase  Orders.  CDS represents and warrants that no
other contractual  agreement was or remains in place with respect to the subject
matter of the Open Purchase  Orders other than as reflected in such  stand-alone
Open Purchase  Orders  themselves.  CDS shall respond to inquiries  from sellers
under such Open Purchase Orders to contact Intraop for delivery of any products,
materials and/or services under such Open Purchase Orders.

     6. Release of Claims between the CDS and Intraop.

          a. Except for claims arising out of the breach of this Agreement,  and
     upon its receipt of the full  Settlement  Payment,  CDS, for itself and its
     collective and respective agents, employees, officers, attorneys, sureties,
     insurers and other related entities,  including its predecessors (including
     without limitation,  CDS Group Corporation,  a Delaware  corporation),  and
     affiliates  (including,  without limitation,  C.D.S.  Engineering,  Inc., a
     California  corporation,  and as to all such  affiliates,  "CDS  Affiliated
     Parties"), does hereby release and forever discharge Intraop, its officers,
     employees,   attorneys,  sureties,  insurers  and  other  related  entities
     ("Intraop  Affiliated Parties") of and from any and all claims (monetary or
     otherwise),   debts,  liabilities,   liquidated  damages,  costs,  actions,
     judgments,  demands,  obligations,   contracts,  suits,  expenses,  losses,
     attorney's  fees,  damages  and  causes of  action  of any kind or  nature,
     including claims for indemnity or  contribution,  arising out of or related
     to the MSA or the Other  Agreements and the performance or  non-performance
     of the obligations of Intraop thereunder, directly or indirectly, which the
     CDS may now or  hereafter  have or claim to have  against  Intraop  and any
     Intraop Affiliated Party, including without limitation the CDS Claims. Upon
     its receipt of the full Settlement  Payment,  CDS, for itself and on behalf
     of the CDS Affiliated  Parties,  does hereby  acknowledge  that Intraop has
     performed all of its obligations,  including payment obligations,  pursuant
     to the MSA and Other  Agreements  and that CDS has been  fully paid for all
     services or property provided by CDS.

          b. Except for claims arising out of the breach of this Agreement,  and
     upon the receipt by CDS of the full Settlement Payment, Intraop, for and on
     behalf of itself and the Intraop  Affiliated  Parties,  does hereby release
     and forever  discharge CDS and the CDS  Affiliated  Parties of and from any
     and all claims  (monetary or  otherwise),  debts,  liabilities,  liquidated
     damages, costs, actions, judgments, demands, obligations, contracts, suits,
     expenses, losses, attorney's fees, damages and causes of action of any kind
     or nature,  including claims for indemnity or contribution,  arising out of
     or  related  to the MSA or the  Other  Agreements  and the  performance  or
     non-performance   of  the  obligations  of  CDS  thereunder,   directly  or
     indirectly,  which  Intraop  may now or  hereafter  have or  claim  to have
     against CDS, including without limitation the Intraop Claims.  Upon receipt
     by CDS of the full Settlement Payment, Intraop does hereby acknowledge that
     CDS has no remaining  obligations pursuant to the MSA and Other Agreements,
     including any obligations regarding latent defects or warranty obligations.

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     7.  Waiver of  California  Civil Code  section  1542.  In  addition  to the
specific and express  releases set forth herein,  each Party  acknowledges  that
there is a risk that,  subsequent  to the  execution of this  Agreement,  it may
incur, suffer or sustain injury, loss, damage, costs,  attorneys' fees, expenses
or any of these,  which are  directly  caused by or  connected  with the matters
referred to in paragraph 6, and which are unknown and  unanticipated at the time
this  Agreement  is  signed,  and  which  are not  presently  capable  of  being
ascertained.  Each  Party  further  acknowledges  that there is a risk that such
damages as are known may become  more  serious  than any of them now  expects or
anticipates.  Nevertheless, each Party acknowledges that this Agreement has been
negotiated  and  agreed  upon in light of those  risks  and each of them  hereby
expressly waives all rights each may have in any such unknown claims and assumes
the risks that the facts and law  pertaining  to this  dispute  may change or be
different  than it is now  known to each  said  Party,  except  as  specifically
otherwise  provided  in this  Agreement.  In doing  so,  each  Party has had the
benefit of counsel,  and has been advised of,  understands,  and  knowingly  and
specifically  waives their rights under California Civil Code Section 1542 which
provides as follows:

                  A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
                  DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
                  EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
                  MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

     8.  Cooperation.  The Parties will execute all such further and  additional
documents as shall be reasonable,  convenient, necessary, advisable, appropriate
or desirable, and shall take or cause to be taken such other acts and actions as
may be reasonably  requested by any Party, to more fully effectuate or otherwise
carry out the provisions of this Agreement.

     9.   Representations   and   Warranties   of  CDS.  All  of  the  following
representations   and  warranties   made  by  CDS  on  behalf  of  itself,   its
representatives,   heirs,  executors,  administrators,   trustees,  predecessors
(including,  without limitation, CDS Group Corporation, a Delaware corporation),
successors, affiliates (including, without limitation, C.D.S. Engineering, Inc.,
a California corporation),  subrogors,  subrogees,  lessees, lessors,  grantees,
assignees, assignors,  subsidiaries,  agents, employees, servants, owners, alter
egos, attorneys,  general partners,  limited partners, and representatives,  are
deemed to be continuing  warranties and  representations,  and shall survive the
execution and delivery of this Agreement.  Such  representations  and warranties
and each of them form a  principal  inducement  for Intraop  entering  into this
Agreement, and are as follows:

          a. This  Agreement  has been duly executed and delivered by CDS and is
     the  valid  and  binding  agreement  of  CDS,  enforceable  against  CDS in
     accordance with its terms.  Specifically,  this Agreement has been or shall
     be  approved  by any and all  corporate  boards  of  directors,  management
     boards, shareholders, members, partners or principals of CDS whose approval
     is required to affect this  Agreement and bind CDS to the  obligations  set
     forth  herein.  CDS has the  ability  to enter into this  Agreement  and to
     consummate the transactions provided for herein. The person whose signature
     is set  forth  below  for  CDS:  (i) has full  authority  to  execute  this
     Agreement  on behalf  of CDS;  and (ii) such  person is acting  within  the
     course and scope of such authority in executing this Agreement;

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          b. No other  person is  required  to  consent to CDS's  execution  and
     delivery of this Agreement;

          c. The execution and delivery of this Agreement will not result in the
     breach of any contract, agreement, commitment,  indenture, mortgage, pledge
     agreement,  note, bond,  license,  or other instrument or any obligation to
     which CDS is now a party,  or by which any of the  properties  or assets of
     CDS may be bound or affected,  or constitute a violation by CDS of any law,
     rule or regulation,  of any administrative  agency or governmental body, or
     any order, writ, injunction or decree of any court,  administrative agency,
     or governmental body;

          d.  None  of the  representations  or  warranties  of CDS  under  this
     Agreement contains or will contain any untrue statement of a material fact,
     or omits or will omit any fact necessary to make the  statements  herein or
     therein not misleading;

          e. CDS is the sole legal and beneficial  owner of the claims  released
     pursuant  to  paragraphs  6 and 7, and no other  person or  entity  has any
     ownership or equitable interest therein. CDS has not heretofore assigned or
     transferred  or purported  to assign or transfer,  to any person or entity,
     any claims released by CDS in this Agreement;

          f. As to matters  relating to its  financial  condition  including any
     effect  thereon  relating  to this  Agreement:  A)  there  are no  cases or
     proceedings  pending under the United States  Bankruptcy  Code or any other
     similar state or federal  insolvency,  reorganization  or receivership laws
     involving any of CDS or of the CDS  Affiliated  Parties;  B) none of CDS or
     any of the CDS  Affiliated  Parties has any reason to seek relief under the
     United  States  Bankruptcy  Code or any  other  similar  state  or  federal
     insolvency, reorganization, receivership or similar laws; C) none of CDS or
     any of the CDS Affiliated  Parties has any present intention to seek relief
     in the future under the United States  Bankruptcy Code or any other similar
     state or federal insolvency, reorganization,  receivership or similar laws;
     D)  none of CDS or any of the  CDS  Affiliated  Parties  is  insolvent,  as
     defined in the United States  Bankruptcy  Code or any  applicable  state or
     federal statute,  nor will any of CDS or any of the CDS Affiliated  Parties
     be rendered  insolvent by the execution,  delivery and  performance of this
     Agreement; E) upon the performance of the obligations under this Agreement,
     each of CDS and any of the CDS  Affiliated  Parties will have the financial
     wherewithal to pay its debts as and when they become due; F) none of CDS or
     any of the CDS  Affiliated  Parties  intends to, nor believes that it will,
     incur  debts  beyond its ability to pay such debts as they  mature;  and G)
     none of CDS or any of the CDS  Affiliated  Parties  has now nor  will  have
     unreasonably  small capital to conduct its business  after the execution of
     this Agreement and the performance of its obligations under this Agreement;

          g. CDS has good and marketable title to the Components as described in
     Attachment  B,  free  and  clear  of any and all  mortgage,  pledge,  lien,
     encumbrance,  charge or other  security  interest  (as to any, a  "Security
     Interest"), or any restriction on transfer; and

          h.  Neither  CDS  nor  any  CDS  Affiliated  Party,  nor  any  of  its
     subcontractors,   vendors,   suppliers,   service   providers,   creditors,
     guarantors,  lenders,  bondholders,   equityholders,  directors,  officers,
     employees,  representatives,  agents or any other  third  party with claims
     against CDS or any CDS Affiliated  Party, has any Security  Interest or any
     claim  affecting  the Intraop  Property  described  in  Attachment A or any
     restriction on transfer thereof.

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     10.  Representations  and  Warranties  of  Intraop.  All of  the  following
representations  and  warranties  made by  Intraop  on  behalf  of  itself,  its
representatives,  heirs,  executors,  administrators,   trustees,  predecessors,
successors,   affiliates,  subrogors,  subrogees,  lessees,  lessors,  grantees,
assignees, assignors,  subsidiaries,  agents, employees, servants, owners, alter
egos, attorneys,  general partners,  limited partners, and representatives,  are
deemed to be continuing  warranties and  representations,  and shall survive the
execution and delivery of this Agreement.  Such  representations  and warranties
and  each  of them  form a  principal  inducement  for CDS  entering  into  this
Agreement, and are as follows:

          a. This  Agreement has been duly executed and delivered by Intraop and
     is the valid and binding agreement of Intraop,  enforceable against Intraop
     in  accordance  with its terms.  Specifically,  this  Agreement has been or
     shall be approved by any and all corporate boards of directors,  management
     boards,  shareholders,  members,  partners or  principals  of Intraop whose
     approval  is  required to affect  this  Agreement  and bind  Intraop to the
     obligations  set forth  herein.  Intraop has the ability to enter into this
     Agreement  and to  consummate  the  transactions  provided for herein.  The
     person  whose  signature  is set  forth  below  for  Intraop:  (i) has full
     authority  to execute this  Agreement  on behalf of Intraop;  and (ii) such
     person is acting within the course and scope of such authority in executing
     this Agreement;

          b. No other person is required to consent to Intraop's  execution  and
     delivery of this Agreement;

          c. The execution and delivery of this Agreement will not result in the
     breach of any contract, agreement, commitment,  indenture, mortgage, pledge
     agreement,  note, bond,  license,  or other instrument or any obligation to
     which Intraop is now a party,  or by which any of the  properties or assets
     of Intraop may be bound or affected,  or  constitute a violation by Intraop
     of  any  law,  rule  or  regulation,   of  any  administrative   agency  or
     governmental body, or any order,  writ,  injunction or decree of any court,
     administrative agency, or governmental body;

          d. None of the  representations  or  warranties  of Intraop under this
     Agreement contains or will contain any untrue statement of a material fact,
     or omits or will omit any fact necessary to make the  statements  herein or
     therein not misleading;

          e.  Intraop  is the sole  legal  and  beneficial  owner of the  claims
     released  pursuant to paragraphs 6 and 7, and no other person or entity has
     any ownership or equitable  interest  therein.  Intraop has not  heretofore
     assigned or transferred  or purported to assign or transfer,  to any person
     or entity, any claims released by Intraop in this Agreement; and

          f. As to matters  relating to its  financial  condition  including any
     effect  thereon  relating  to this  Agreement:  A)  there  are no  cases or
     proceedings  pending under the United States  Bankruptcy  Code or any other
     similar state or federal  insolvency,  reorganization  or receivership laws
     involving Intraop; B) Intraop has no reason to seek relief under the United
     States  Bankruptcy  Code or any other similar state or federal  insolvency,
     reorganization,  receivership  or similar  laws;  C) Intraop has no present
     intention to seek relief in the future under the United  States  Bankruptcy
     Code or any other  similar  state or  federal  insolvency,  reorganization,
     receivership  or similar laws; D) Intraop is not  insolvent,  as defined in
     the  United  States  Bankruptcy  Code or any  applicable  state or  federal
     statute, nor will Intraop be rendered insolvent by the execution,  delivery
     and  performance  of  this  Agreement;  E)  upon  the  performance  of  the
     obligations   under  this  Agreement,   Intraop  will  have  the  financial
     wherewithal  to pay its  debts as and when  they  become  due;  F)  Intraop
     neither  intends to, nor  believes  that it will,  incur  debts  beyond its
     ability to pay such debts as they  mature;  and G) Intraop  neither has now
     nor will have unreasonably  small capital to conduct its business after the
     execution of this Agreement and the  performance of its  obligations  under
     this Agreement.

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     11. Indemnity. Each Party hereto does hereby agree to defend, indemnify and
hold  harmless  the other  Party from and  against  any and all costs,  damages,
claims,  liabilities or expenses (including reasonable attorneys' fees), arising
from or resulting from any breach of the Party's representations,  warranties or
covenants under this Agreement.

     12. Costs and Expenses.  Each party shall bear its own fees,  costs and any
other expenses  (including  attorney's fees or consultant's fees) relating to or
incurred in connection  with this  Agreement or the  negotiations  leading up to
this Agreement.

     13. No Admission of Liability.  This  Agreement  does not  constitute,  nor
shall it be construed  as, an admission by either Party of the truth or validity
of any real or potential  claims,  or any  defenses,  asserted or which could be
asserted by either of the Parties.

     14. Successors and Assigns.  This Agreement and the obligations  undertaken
herein shall be binding  upon and shall inure to the benefit of the  successors,
or assigns, or each of the Parties hereto, including their respective Affiliated
Parties,  and  each  of  them,  and  all  other  persons,  firms,  corporations,
associations, partnerships, or other entities whenever the context so permits.

     15. Reinstatement of Intraop Claims.  Subject to applicable law, should any
form of state or federal  insolvency or bankruptcy  proceedings be instituted at
any time  involving  CDS or any of the CDS  Affiliated  Parties,  as a result of
which, Intraop is compelled to disgorge all or a portion of the Intraop Property
and/or  Components  described  respectively in Attachments A and B, then in that
event,  the release set forth in paragraphs 6 and 7 of this  Agreement  shall be
void ab initio,  and Intraop  shall be entitled to assert the full amount of any
and all Intraop  Claims which it may have against CDS,  increased by any portion
of the Settlement  Payment  actually paid to CDS under this  Agreement,  in such
state or federal proceedings. In the event the foregoing sentence is adjudicated
to be invalid, void or unenforceable for any reason whatsoever,  Intraop and CDS
agree that,  notwithstanding any provision of this Agreement to the contrary, at
the option of Intraop,  its rights,  obligations and interests existing prior to
the date of this Agreement, including without limitation relating to the Intraop
Claims, shall be reinstated to the extent that a court of competent jurisdiction
shall determine that (1) the transfer of any of the Intraop  Property and/or the
Components, described respectively in Attachments A and B hereto, was a voidable
preferential  transfer or a fraudulent transfer or a fraudulent conveyance under
state or federal law or (2) for any other  reason,  such  transfer is rescinded,
deemed to be  rescinded or an amount is  determined  to be payable by Intraop by
virtue thereof to CDS or its representatives,  successors,  bankruptcy estate or
federal or state receiver. For avoidance of doubt, the invalidation, declaration
of fraudulent  conveyance or preferential  transfer,  set aside,  requirement of
return or repayment to a trustee,  receiver,  debtor-in-possession  or any other
party under any bankruptcy law, state or federal, common law or equitable cause,
relating to the Intraop  Property and/or  Components  described in Attachments A
and B  respectively,  shall be a material  breach of this  Agreement  by CDS, in
which case Intraop shall have no  obligation  to make any  remaining  Settlement
Payment,  and Intraop  shall have a right to pursue its  remedies  under law and
equity for any and all Intraop Claims  reinstated  hereunder,  together with any
portion of the  Settlement  Payment  already paid, as provided in this paragraph
15.

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     16.  Injunctive  Relief.  Because any breach or  threatened  breach of this
Agreement by either Party would result in  continuing  material and  irreparable
harm to the other Party,  and because it would be  impossible  to establish  the
full monetary value of such damage, either Party shall be entitled to injunctive
relief in its discretion,  in the event of a breach or threatened breach of this
Agreement by the other Party or any member thereof.  Injunctive  relief shall be
in addition to any other remedy that may be available to either Party.

     17. Choice of Law. This  Agreement is made and entered into in the State of
California, and this Agreement and all rights, remedies, or obligations provided
for herein,  shall be construed and enforced in accordance  with the laws of the
State of California, without reference to the choice of law principles thereof.

     18.  Integration.  This  Agreement  contains the entire  understanding  and
agreement  between the Parties  hereto with  respect to the matters  referred to
herein. No other  representations,  covenants,  undertakings,  or other prior or
contemporaneous  agreement, oral or written,  respecting such matters, which are
not  specifically  incorporated  herein,  shall be deemed in any way to exist or
bind either of the Parties hereto.

     19.  Modification.  This  Agreement  shall  not be  modified  by  any  oral
representation  made  before  or after  the  execution  of this  Agreement.  All
modifications must be in writing and signed by the Parties, and each of them.

     20. No  Representations  --  Independent  Advice from Counsel.  The Parties
hereto,  and  each  of  them,   acknowledge  that  this  Agreement  is  executed
voluntarily by each of them,  without any duress or undue  influence on the part
of or on behalf of any of them. Each Party hereto further  acknowledges  that it
has been  represented in the  negotiations  for, and in the  performance of, the
Agreement by counsel of its own choice that each has read the  Agreement and had
it fully explained to each by such counsel,  and that each is fully aware of the
contents of the Agreement and its legal effect. Each of the undersigned has read
the foregoing  agreement and has consulted with its  attorney(s)  concerning its
contents and consequences.

     21. Joint  Preparation of this  Agreement.  The drafting and negotiating of
this  Agreement  has been  participated  in by each of the Parties  and/or their
counsel,  and for all  purposes,  this  Agreement  was  drafted  jointly by both
Parties.

     22. Attorney's Fees. If any legal action or other legal proceeding relating
to this Agreement or any of the  transactions  contemplated by this Agreement or
the  enforcement  of  any  provision  of  any of  this  Agreement  or any of the
transactions contemplated by this Agreement is brought against any Party hereto,
the prevailing  party shall be entitled to recover  reasonable  attorneys' fees,
costs and disbursements (in addition to any other relief to which the prevailing
party may be entitled).

                                  Page 8 of 9

<PAGE>

     23.   Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of which shall be deemed an original if fully  executed,  as
shall  photocopies of any such  counterparts,  and all of which shall constitute
one and the same  instrument.  Facsimile  copies of signatures to this Agreement
shall be deemed an original signature.

     24.  Waiver.  No  breach  of any  portion,  provision  or any  part of this
Agreement can be waived  unless it is done in writing.  Waiver of any one breach
shall not be  deemed  to be a waiver  of any  other  breach of the same or other
portion, provisions, or part of this Agreement.

     25. Severability. If one or more provisions of this Agreement are held by a
court of competent  jurisdiction to be  unenforceable  under applicable law, the
court shall modify the  unenforceable  term(s) to the least extent  necessary to
render the  term(s)  enforceable.  In the event the court is unable to so modify
the unenforceable term(s), the Parties agree to renegotiate such provision(s) in
good faith so as to become  enforceable  while  hewing as closely as possible to
the  original  intent.  In the event that the  Parties  cannot  reach a mutually
agreeable and  enforceable  replacement  for such  provision(s),  then each such
provision or part thereof  shall be severed from the  remaining  provisions  and
parts of this Agreement and shall not affect the validity or  enforceability  of
such remaining provisions or parts of this Agreement.

     26. Captions/Headings. The titles, captions, and headings contained in this
Agreement are inserted only as a matter of convenience and for reference, and in
no way define,  limit,  extend,  or describe the scope of this  Agreement or the
intent of any portion, provision, or part of this Agreement.

     27.   Notices.   All   notices,   requests,   claims,   demands  and  other
communications  hereunder  shall be in writing  and shall be given (and shall be
deemed  to have been  duly  given  upon  receipt)  by  delivery  in  person,  by
facsimile,  by overnight  delivery using a  nationally-recognized  courier or by
certified mail, to each other Party at the addresses first set forth above.

     IN WITNESS  WHEREOF,  CDS AND INTRAOP have  executed  this  Settlement  and
Mutual Release Agreement, effective as of the date first above written.



INTRAOP MEDICAL CORPORATION               C.D.S. ENGINEERING, LLC



By:        /s/ J.K. Hullett               By:       /s/ Victor Smith
         ----------------------                ---------------------------

Title:       CFO                          By:       President
         ----------------------                ---------------------------

                                  Page 9 of 9