Exhibit 4.7

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: October ___, 2005
Original Conversion Price (subject to adjustment herein): $0.40

                                                                $---------------


                            7% CONVERTIBLE DEBENTURE
                              DUE OCTOBER ___, 2008

            THIS 7% CONVERTIBLE  DEBENTURE is one of a series of duly authorized
and issued 7% Convertible  Debentures of Intraop Medical  Corporation,  a Nevada
corporation,  having  a  principal  place  of  business  at 570 Del Rey  Avenue,
Sunnyvale, CA 94085 (the "COMPANY"), designated as its 7% Convertible Debenture,
due October ___, 2008 (this debenture, the "DEBENTURE" and collectively with the
other such series of debentures, the "DEBENTURES").

         FOR   VALUE    RECEIVED,    the    Company    promises    to   pay   to
________________________ or its registered assigns (the "HOLDER"), or shall have
paid pursuant to the terms hereunder,  the principal sum of  $_______________ by
October  ___,  2008,  or such  earlier  date as this  Debenture  is  required or
permitted to be repaid as provided  hereunder (the "MATURITY DATE"),  and to pay
interest  to the  Holder  on the  aggregate  unconverted  and  then  outstanding
principal  amount of this Debenture in accordance  with the  provisions  hereof.
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 have the meanings given to such terms in the Purchase  Agreement,
and (b) the following terms shall have the following meanings:


                                       1
<PAGE>

                  "ALTERNATE  CONSIDERATION" shall have the meaning set forth in
         Section 5(d).

                  "BASE  CONVERSION  PRICE"  shall have the meaning set forth in
         Section 5(b).

                  "BUSINESS DAY" means any day except  Saturday,  Sunday and any
         day which shall be a federal  legal  holiday in the United  States or a
         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),  other  than  pursuant  to the
         Transaction  Documents,  of effective control (whether through legal or
         beneficial  ownership of capital  stock of the Company,  by contract or
         otherwise) of in excess of 40% 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  60%  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 60% 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).

                  "CLOSING  PRICE"  means  on any  particular  date (a) the last
         reported  closing  bid price per share of Common  Stock on such date on
         the Trading  Market (as reported by Bloomberg L.P. at 4:15 PM (New York
         time),  or (b) if there is no such price on such date, then the closing
         bid price on the Trading Market on the date nearest preceding such date
         (as  reported  by  Bloomberg  L.P.  at 4:15 PM (New York  time) for the
         closing bid price for regular  session  trading on such day), or (c) 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 (d) if the shares
         of Common Stock are not then publicly traded the fair market value of a
         share  of  Common  Stock  as  determined  by  a  qualified  independent
         appraiser  selected  in good  faith by the  Holders  of a  majority  in
         interest of the outstanding principal amount of Debentures.

                                       2
<PAGE>

                   "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  or as  payment  of  interest  in
         accordance with the terms.

                  "DEBENTURE  REGISTER"  shall  have the  meaning  set  forth in
         Section 2(c).

                  "DILUTIVE  ISSUANCE"  shall  have  the  meaning  set  forth in
         Section 5(b).

                  "DILUTIVE ISSUANCE NOTICE" shall have the meaning set forth in
         Section 5(b).

                  "EFFECTIVENESS  PERIOD"  shall have the meaning  given to such
         term in the Registration Rights Agreement.

                  "EQUITY CONDITIONS" shall mean, during the period in question,
         (i) the Company shall have duly honored all conversions and redemptions
         scheduled  to occur or  occurring  by virtue  of one or more  Notice of
         Conversions  of the Holder,  if any,  (ii) all  liquidated  damages and
         other  amounts owing to the Holder in respect of this  Debenture  shall
         have been paid;  (iii)  there is an  effective  Registration  Statement
         pursuant to which the Holder is  permitted  to utilize  the  prospectus
         thereunder  to  resell  all  of the  shares  issuable  pursuant  to the
         Transaction  Documents (and the Company  believes,  in good faith, that
         such  effectiveness  will continue  uninterrupted  for the  foreseeable
         future), (iv) the Common Stock is trading on the Trading Market and all
         of the shares issuable pursuant to the Transaction Documents are listed
         for  trading on a Trading  Market (and the  Company  believes,  in good
         faith,  that  trading  of the  Common  Stock on a Trading  Market  will
         continue  uninterrupted  for the  foreseeable  future),  (v) the  daily
         dollar  trading  volume of the Common  Stock on the Trading  Market for
         each Trading Day during such period is at least $200,000, (vi) there is
         a sufficient number of authorized but unissued and otherwise unreserved
         shares of Common Stock for the  issuance of all of the shares  issuable
         pursuant to the Transaction Documents,  (vii) there is then existing no
         Event of Default or event which, with the passage of time or the giving
         of notice, would constitute an Event of Default, (viii) the issuance of
         the shares in question to the Holder would not violate the  limitations
         set forth in  Section  4(c)(ii)  and (ix) no public  announcement  of a
         pending  or  proposed  Fundamental   Transaction,   Change  of  Control
         Transaction or acquisition  transaction  has occurred that has not been
         consummated.

                                       3
<PAGE>

                  "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.

                            "FORCED CONVERSION" shall have the meaning set forth
         in Section 6(c).

                   "FORCED  CONVERSION  NOTICE" shall have the meaning set forth
         in Section 6(c).

                  "FORCED  CONVERSION  NOTICE  DATE"  shall have the meaning set
         forth in Section 6(c).

                  "FUNDAMENTAL  TRANSACTION" shall have the meaning set forth in
         Section 5(d).

                  "INTEREST  CONVERSION  RATE"  means  the  lesser  of  (a)  the
         Conversion Price and (b) 90% of the lesser of (i) the average of the 20
         VWAPs immediately prior to the applicable Interest Payment Date or (ii)
         the  average  of  the 20  VWAPs  immediately  prior  to  the  date  the
         applicable  interest  payment  shares are issued and delivered if after
         the Interest Payment Date.

                  "INTEREST  CONVERSION SHARES" shall have the meaning set forth
         in Section 2(a).

                  "INTEREST  NOTICE  PERIOD" shall have the meaning set forth in
         Section 2(a).

                  "INTEREST  PAYMENT  DATE"  shall have the meaning set forth in
         Section 2(a).

                  "INTEREST  SHARE  AMOUNT"  shall have the meaning set forth in
         Section 2(a).

                  "LATE FEES" shall have the meaning set forth in Section 2(d).

                  "MANDATORY  DEFAULT  AMOUNT"  shall  equal  the sum of (i) the
         greater of: (A) 130% of the  principal  amount of this  Debenture to be
         prepaid,  plus all  accrued  and unpaid  interest  thereon,  or (B) the
         principal  amount  of this  Debenture  to be  prepaid,  plus all  other
         accrued and unpaid interest hereon,  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 VWAP 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.

                                       4
<PAGE>

                   "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).

                  "ORIGINAL  ISSUE  DATE"  shall  mean  the  date  of the  first
         issuance of the Debentures regardless of the number of transfers of any
         Debenture  and  regardless  of the number of  instruments  which may be
         issued to evidence such Debenture.

                  "PERMITTED   INDEBTEDNESS"   shall  mean  the  individual  and
         collective  reference  to the  following:  (a) up to, in the  aggregate
         during the term of this Debenture,  $2,000,000 of new Indebtedness, (a)
         an  aggregate   principal   amount  of  $2,500,000  in  7%  convertible
         debentures  and an  aggregate  principal  amount of  $2,000,000  in 10%
         senior secured  debentures  issued on August 31, 2005,(c)  Indebtedness
         incurred  in  connection  with  the  Purchase  Agreement,   (d)  up  to
         approximately  $974,614  of  Indebtedness  existing  on the date of the
         Purchase  Agreement as described  in SCHEDULE  3.1(AA)  attached to the
         Purchase  Agreement,  and (d) up to $3,000,000  in connection  with the
         Company's  revolving  inventory and sales contract financing  agreement
         with E.U. Capital.

                  "PERMITTED  LIEN"  shall mean the  individual  and  collective
         reference to the following:  (a) Liens for taxes, assessments and other
         governmental  charges  or  levies  not  yet  due or  Liens  for  taxes,
         assessments and other governmental charges or levies being contested in
         good faith and by appropriate  proceedings for which adequate  reserves
         (in the good faith judgment of the management of the Company) have been
         established  in  accordance  with GAAP;  (b) Liens imposed by law which
         were  incurred in the ordinary  course of business,  such as carriers',
         warehousemen's  and mechanics' Liens,  statutory  landlords' Liens, and
         other similar Liens arising in the ordinary course of business, and (x)
         which do not individually or in the aggregate  materially  detract from
         the  value of such  property  or assets or  materially  impair  the use
         thereof  in the  operation  of the  business  of the  Company  and  its
         consolidated  Subsidiaries  or (y) which are  being  contested  in good
         faith by appropriate proceedings,  which proceedings have the effect of
         preventing  the  forfeiture or sale of the property or asset subject to
         such Lien; and (c) Liens on Receivables  and the Company's  "inventory"
         (as such term is used in the  Security  Agreement)  incurred  solely in
         connection  with  a  Permitted  Indebtedness  under  clause  (a) of the
         definition of Permitted Indebtedness.

                  "PERSON" means a corporation,  an association,  a partnership,
         organization,  a business,  an  individual,  a government  or political
         subdivision thereof or a governmental agency.

                  "PURCHASE  AGREEMENT" means the Securities Purchase Agreement,
         dated as of October 25,  2005,  to which the  Company and the  original
         Holder are parties,  as amended,  modified or supplemented from time to
         time in accordance with its terms.

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

                                       5
<PAGE>

                  "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"  shall have the meaning given to such term in the
         Purchase Agreement.

                   "THRESHOLD  PERIOD" shall have the meaning given to such term
         in Section 6(c).

                  "TRADING  DAY" means a day on which the Common Stock is traded
         on a Trading Market.

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

                  "TRANSACTION  DOCUMENTS"  shall have the  meaning set forth in
         the Purchase Agreement.

                  "VWAP"  shall  have the  meaning  set  forth  in the  Purchase
         Agreement.

         SECTION 2. INTEREST.


                  a) PAYMENT OF INTEREST IN CASH OR KIND.  The Company shall pay
         interest  to  the  Holder  on  the  aggregate   unconverted   and  then
         outstanding  principal  amount of this  Debenture at the rate of 7% per
         annum,  payable  quarterly on January 1, April 1, July 1 and October 1,
         beginning on the first such date after the Original Issue Date, on each
         Conversion Date (as to that principal  amount then being converted) 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"), in cash or shares of
         Common Stock at the Interest  Conversion Rate, or a combination thereof
         (the  amount  to be paid  in  shares,  the  "INTEREST  SHARE  AMOUNT");
         PROVIDED, HOWEVER, (i) payment in shares of Common Stock may only occur
         if during  the 10  Trading  Days  immediately  prior to the  applicable
         Interest  Payment Date (the "INTEREST  NOTICE  PERIOD") and through and
         including the date such shares of Common Stock are issued to the Holder
         all of the Equity  Conditions,  unless waived by the Holder in writing,
         have been met and the  Company  shall have  given the Holder  notice in
         accordance with the notice  requirements set forth below, (ii) the VWAP
         is equal to or  greater  than  115% of the then  applicable  Conversion
         Price  for  each  of the  10  Trading  Days  immediately  prior  to the
         applicable  Interest  Payment Date and through and  including  the date
         such  shares of Common  Stock are  issued to the Holder and (iii) as to
         such Interest  Payment Date,  prior to the such Interest  Notice Period
         (but not more 5 Trading Days prior to the  commencement of the Interest
         Notice  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  Interest  Share Amount equal to the
         quotient of (x) the applicable Interest Share Amount divided by (y) the
         then Conversion Price (the "INTEREST CONVERSION SHARES").


                                       6
<PAGE>

                  b) COMPANY'S  ELECTION TO PAY INTEREST IN KIND. Subject to the
         terms and  conditions  herein,  the  decision  whether to pay  interest
         hereunder in shares of Common Stock or cash shall be at the  discretion
         of the Company. Prior to the commencement of an Interest Notice Period,
         the  Company  shall  provide  the  Holder  with  written  notice of its
         election to pay interest  hereunder on the applicable  Interest Payment
         Date either in cash,  shares of Common Stock or a  combination  thereof
         (the Company may indicate in such notice that the election contained in
         such notice shall  continue for later  periods  until  revised) and the
         Interest  Share  Amount as to the  applicable  Interest  Payment  Date.
         During any Interest  Notice  Period,  the Company's  election  (whether
         specific  to  an  Interest   Payment  Date  or  continuous)   shall  be
         irrevocable  as  to  such  Interest   Payment  Date.   Subject  to  the
         aforementioned  conditions,  failure  to timely  provide  such  written
         notice  shall be deemed an election by the Company to pay the  interest
         on such Interest Payment Date in cash. At any time the Company delivers
         a notice to the Holder of its election to pay the interest in shares of
         Common Stock, the Company shall file a prospectus  supplement  pursuant
         to Rule 424 disclosing such election. The aggregate number of shares of
         Common Stock  otherwise  issuable to the Holder on an Interest  Payment
         Date  shall be  reduced by the  number of  Interest  Conversion  Shares
         previously  issued to the  Holder  in  connection  with  such  Interest
         Payment Date.

                  c) 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. Payment of interest in shares
         of Common Stock (other than the Interest Conversion Shares issued prior
         to an Interest Notice Period) shall otherwise occur pursuant to Section
         4(d)(ii)  and only for  purposes  of the payment of interest in shares,
         the Interest Payment Date shall be deemed the Conversion Date. Interest
         shall cease to accrue with respect to any principal  amount  converted,
         provided that the Company in fact delivers the Conversion Shares within
         the time period required by Section 4(d)(ii).  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 this
         Debenture  (the  "DEBENTURE  REGISTER").  Except as otherwise  provided
         herein, if at any time the Company pays interest  partially in cash and
         partially in shares of Common  Stock to the holders of the  Debentures,
         then such payment shall be distributed ratably among the holders of the
         Debentures based on their (or their predecessor's  initial purchases of
         Debentures pursuant to the Purchase Agreement.

                                       7
<PAGE>

                  d) LATE FEE.  All overdue  accrued  and unpaid  interest to be
         paid hereunder shall entail a late fee at the rate of 18% per annum (or
         such lower  maximum  amount of interest  permitted to be charged  under
         applicable  law) ("LATE FEES") which will accrue  daily,  from the date
         such  interest  is due  hereunder  through  and  including  the date of
         payment.  Notwithstanding anything to the contrary contained herein, if
         on any Interest Payment Date the Company has elected to pay interest in
         Common  Stock and is not able to pay  accrued  interest  in the form of
         Common  Stock  because  it does not then  satisfy  the  conditions  for
         payment  in the form of  Common  Stock set forth  above,  then,  at the
         option of the Holder, the Company,  in lieu of delivering either shares
         of Common  Stock  pursuant  to this  Section 2 or paying the  regularly
         scheduled cash interest  payment,  shall deliver,  within three Trading
         Days of each applicable  Interest Payment Date, an amount in cash equal
         to the  product  of the  number of shares  of  Common  Stock  otherwise
         deliverable  to the Holder in  connection  with the payment of interest
         due on such  Interest  Payment  Date and the  highest  VWAP  during the
         period  commencing  on the  Interest  Payment  Date and  ending  on the
         Trading  Day prior to the date such  payment is made.  If any  Interest
         Conversion  Shares  are  issued  to the  Holder in  connection  with an
         Interest  Payment  Date and are not applied  against an Interest  Share
         Amount, then the Holder shall promptly return such excess shares to the
         Company.

                  e)   PREPAYMENT.   Except  as  otherwise  set  forth  in  this
         Debenture,  the  Company  may not prepay any  portion of the  principal
         amount of this  Debenture  without  the prior  written  consent  of the
         Holder.

         SECTION 3. REGISTRATION OF TRANSFERS AND EXCHANGES.

                  a) DIFFERENT DENOMINATIONS. This Debenture is exchangeable for
         an  equal  aggregate   principal  amount  of  Debentures  of  different
         authorized  denominations,  as requested by the Holder surrendering the
         same; PROVIDED,  HOWEVER, the Company shall not be required to exchange
         this  Debenture for  denominations  of less than the greater of $50,000
         and the principal amount of this Debenture then outstanding. No service
         charge will be made for such registration of transfer or exchange.

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

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


                                       8
<PAGE>

         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
         plus all accrued  and unpaid  interest  thereon has been so  converted.
         Conversions hereunder shall have the effect of lowering the outstanding
         principal amount of this Debenture in an amount equal to the applicable
         conversion.  The Holder and the Company shall maintain  records showing
         the principal  amount converted and the date of such  conversions.  The
         Company shall deliver any objection to any Notice of Conversion  within
         1 Business Day of receipt of such  notice.  In the event of any dispute
         or  discrepancy,  the records of the Holder  shall be  controlling  and
         determinative  in the  absence of  manifest  error.  The Holder and any
         assignee, by acceptance of this Debenture,  acknowledge and agree that,
         by reason of the provisions of this paragraph,  following conversion of
         a portion  of this  Debenture,  the unpaid  and  unconverted  principal
         amount of this Debenture may be less than the amount stated on the face
         hereof.

                  b) CONVERSION  PRICE.  The  conversion  price in effect on any
         Conversion  Date  shall  be  equal  to  $0.40  (subject  to  adjustment
         herein)(the "CONVERSION PRICE").


                  c) CONVERSION LIMITATIONS.

                  i. RESERVED.

                  ii. 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, pursuant to Section
         4(a) or  otherwise,  to the  extent  that after  giving  effect to such
         conversion, the Holder (together with the Holder's affiliates),  as set
         forth on the applicable Notice of Conversion, would beneficially own in
         excess of 4.99% of the number of shares of the Common Stock outstanding
         immediately after giving effect to such conversion. 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 the  determination of such sentence is being made, but
         shall  exclude  the  number of shares of Common  Stock  which  would be
         issuable upon (A) conversion of the remaining,  nonconverted portion of
         this  Debenture  beneficially  owned  by  the  Holder  or  any  of  its
         affiliates  and  (B)  exercise  or  conversion  of the  unexercised  or
         nonconverted portion of any other securities of the Company (including,
         without limitation,  any other Debentures or the Warrants) subject to a


                                       9
<PAGE>

         limitation  on  conversion  or  exercise  analogous  to the  limitation
         contained  herein  beneficially  owned  by  the  Holder  or  any of its
         affiliates. Except as set forth in the preceding sentence, for purposes
         of this Section 4(c)(ii),  beneficial  ownership shall be calculated in
         accordance  with Section  13(d) of the Exchange Act. To the extent that
         the limitation  contained in this section applies, the determination of
         whether this Debenture is convertible (in relation to other  securities
         owned  by the  Holder)  and of which a  portion  of this  Debenture  is
         convertible  shall be in the sole discretion of such Holder.  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.  For purposes of
         this Section 4(c)(ii),  in determining the number of outstanding shares
         of Common  Stock,  the  Holder  may rely on the  number of  outstanding
         shares of Common Stock as reflected  in (x) the  Company's  most recent
         Form  10-QSB  or Form  10-KSB,  as the case may be,  (y) a more  recent
         public  announcement  by the  Company  or (z) any  other  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 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,  and
         the  provisions of this Section 4(c) shall continue to apply until such
         61st day (or such later date, as  determined  by the Holder,  as may be
         specified in such notice of waiver).

                  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. i.

                  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)  a  certificate   or
         certificates  representing the Conversion Shares which shall be free of
         restrictive legends and trading restrictions (other than those required
         by the Purchase Agreement)  representing the number of shares of Common
         Stock being acquired upon the conversion of this Debenture  (including,
         if the Company has given continuous notice pursuant to Section 2(b) for
         payment of interest in shares of Common  Stock at least 20 Trading Days
         prior to the date on which the  Conversion  Notice is  delivered to the
         Company,  shares of Common  Stock  representing  the payment of accrued
         interest  otherwise  determined  pursuant to Section  2(a) but assuming
         that  the  Interest  Payment  Period  is the  20  Trading  Days  period
         immediately  prior  to the  date on  which  the  Conversion  Notice  is
         delivered to the Company and  excluding for such issuance the condition
         that the Company deliver Interest Conversion Shares as to such interest
         payment)  and (B) a bank  check in the  amount of  accrued  and  unpaid
         interest (if the Company is required to pay accrued  interest in cash).
         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.


                                       10
<PAGE>

                  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 fifth  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 fifth Trading Day
         after the  Conversion  Date,  the Company shall pay to such 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 fifth  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 any one  associated  or  affiliated  with the Holder has been
         engaged in any  violation of law,  agreement  or for any other  reason,
         unless,  an  injunction  from a court,  on notice,  restraining  and or
         enjoining  conversion of all or part of this Debenture  shall have been
         sought and obtained and the Company posts a surety bond for the benefit
         of the  Holder in the  amount of 150% of the  principal  amount of this
         Debenture outstanding,  which is subject to the injunction,  which bond
         shall remain in effect until the  completion of  arbitration/litigation
         of the  dispute  and the  proceeds  of which  shall be  payable to such
         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 a 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 such  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.

                                       11
<PAGE>

                  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 fifth  Trading  Day after the  Conversion  Date,  and if after such
         fifth  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 such  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 such 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 a 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
         such Holder liquidated damages under Section 4(d)(iv) in respect of the
         certificates resulting in such Buy-In.


                                       12
<PAGE>

                  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 and payment
         of  interest  on this  Debenture,  each as herein  provided,  free from
         preemptive  rights or any other actual  contingent  purchase  rights of
         persons   other  than  the  Holder  (and  the  other   holders  of  the
         Debentures), not less than such number of shares of the Common Stock as
         shall  (subject to the terms and  conditions  set forth in the Purchase
         Agreement)  be  issuable  (taking  into  account  the  adjustments  and
         restrictions  of  Section  5) upon the  conversion  of the  outstanding
         principal  amount of this Debenture and payment of interest  hereunder.
         The Company  covenants that all shares of Common Stock that shall be so
         issuable shall, upon issue, be duly and validly authorized,  issued and
         fully paid,  nonassessable  and, if the Registration  Statement is then
         effective  under the  Securities  Act,  registered  for public  sale in
         accordance with such Registration Statement.

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

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

                                       13
<PAGE>

         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,   including  as  interest  thereon),   (B)  subdivides
         outstanding  shares of Common Stock into a larger number of shares, (C)
         combines  (including by way of reverse stock split)  outstanding shares
         of Common  Stock  into a smaller  number of  shares,  or (D)  issues by
         reclassification  of shares of the  Common  Stock any shares of capital
         stock of the Company,  then the Conversion Price shall be multiplied by
         a  fraction  of which the  numerator  shall be the  number of shares of
         Common  Stock   (excluding   treasury   shares,   if  any)  outstanding
         immediately before such event and of which the denominator shall be the
         number of shares of Common  Stock  outstanding  immediately  after such
         event.  Any  adjustment  made  pursuant to this  Section  shall  become
         effective  immediately  after the record date for the  determination of
         stockholders  entitled to receive  such  dividend or  distribution  and
         shall become effective immediately after the effective date in the case
         of a subdivision, combination or re-classification.

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

                                       14


                  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 VWAP determined as
         of the record date mentioned above, and of which the numerator shall be
         such VWAP 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.


                                       15
<PAGE>

                  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.  If the Company issues a variable rate
         security,  despite the prohibition  thereon in the Purchase  Agreement,
         the Company shall be deemed to have issued Common Stock or Common Stock
         Equivalents  at the lowest  possible  conversion  or exercise  price at
         which such  securities  may be  converted or exercised in the case of a
         Variable Rate Transaction (as defined in the Purchase Agreement).

                  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.


                                       16
<PAGE>

         SECTION 6. FORCED CONVERSION.

                  a) [RESERVED]
                  b) [RESERVED]

                  c) FORCED CONVERSION.  Notwithstanding  anything herein to the
         contrary,  if after the 11 month anniversary of the Original Issue Date
         each of the Closing  Prices for any 30  consecutive  Trading Days (such
         period  commencing only after the 11 month  anniversary of the Original
         Issue  Date,  such  period the  "THRESHOLD  PERIOD"))  exceeds the then
         Conversion  Price by 250%, the Company may, within 1 Trading Day of the
         end of any such  period,  deliver  a notice to the  Holder  (a  "FORCED
         CONVERSION  Notice" and the date such notice is received by the Holder,
         the "FORCED CONVERSION NOTICE DATE") to cause the Holder to immediately
         convert  all or  part  of the  then  outstanding  principal  amount  of
         Debentures  pursuant to Section 4. The Company may only effect a Forced
         Conversion  Notice if all of the Equity  Conditions are met through the
         applicable  Threshold  Period  until  the  later  of  the  date  of the
         applicable  Forced  Conversion  and the date shares of Common Stock are
         actually  delivered  to the  Holders.  Any Forced  Conversion  shall be
         applied  ratably to all Holders  based on their  initial  purchases  of
         Debentures  pursuant  to  the  Purchase  Agreement.   For  purposes  of
         clarification,  a  Forced  Conversion  shall be  subject  to all of the
         provisions of Section 4, including,  without limitation,  the provision
         requiring payment of liquidated damages and limitations on conversions.

         SECTION 7. NEGATIVE COVENANTS. So long as any portion of this Debenture
is outstanding, the Company will not and will not permit any of its Subsidiaries
to directly or  indirectly:

                  a) Except for Permitted Indebtedness,  other than Indebtedness
         incurred in connection  with the Regenmacher  Transaction,  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;

                                       17
<PAGE>

                  b) Except for Permitted  Liens,  other than Liens  incurred in
         connection with the Regenmacher Transaction, 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 so as to materially and adversely  affect any rights
         of the Holder;

                  d) other  than with  respect to the  Conversion  Shares to the
         extent  permitted or required under the Transaction  Documents or other
         than  repurchases of, up to, in the aggregate  among all  shareholders,
         $130,000 of Common Stock from  dissenting  shareholders  in the reverse
         merger,  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  agreement  with  respect  to  any of the
         foregoing; or

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

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) interest (including Late Fees) on, 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 an
         interest payment or other default under clause (B) above, is not cured,
         within 5 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) 15 Trading Days
         after  notice of such default sent by the Holder or by any other Holder
         and (B) 20 Trading  Days after the Company  shall become or should have
         become aware of such failure;


                                       18
<PAGE>

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

                  iv. any  representation  or warranty made herein, in any other
         Transaction  Documents  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;

                  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;


                                       19
<PAGE>

                  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  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  $130,000,  in the  aggregate,  for all
         officers and directors during the term of this Debenture);

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

                  x. any breach by the  Company or any  creditor  of the Company
         with  respect  to the  payoffs,  satisfactions  and/or  conversions  of
         indebtedness  referred  to  in  Section  2.3(b)(vii)  of  the  Purchase
         Agreement, including any claim by any such pre-Closing creditor related
         to such prior indebtedness;

                  xi. 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 60  consecutive  Trading Days or 90  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; and

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



                                       20
<PAGE>





                  b)  REMEDIES  UPON EVENT OF  DEFAULT.  If any Event of Default
         occurs,  the full  principal  amount of this  Debenture,  together with
         interest and 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,  sent by a nationally  recognized  overnight
         courier  service,  addressed to the  Company,  at the address set forth
         above,  facsimile number  408.636.0222,  Attn:  Donald A. Goer, 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 such Holder appearing on the books of the Company,
         or if no such facsimile  telephone  number or address  appears,  at the
         principal  place  of  business  of the  Holder.  Any  notice  or  other
         communication  or  deliveries  hereunder  shall  be  deemed  given  and
         effective  on the  earliest  of (i) the date of  transmission,  if such
         notice or  communication  is delivered  via  facsimile at the facsimile
         telephone number specified in this Section prior to 5:30 p.m. (New York
         City  time),  (ii) the date  after  the date of  transmission,  if such
         notice or  communication  is delivered  via  facsimile at the facsimile
         telephone  number  specified in this Section  later than 5:30 p.m. (New
         York City time) on any date and earlier than 11:59 p.m.  (New York City
         time) on such date, (iii) the second Business Day following the date of
         mailing, if sent by nationally recognized overnight courier service, or
         (iv) upon  actual  receipt by the party to whom such notice is required
         to be given.

                  b) ABSOLUTE  OBLIGATION.  Except as expressly provided herein,
         no provision of this Debenture  shall alter or impair the obligation of
         the Company, which is absolute and unconditional,  to pay the principal
         of, interest 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.  This  Debenture is expressly
         subordinated  in right of payment of principal  (but, in the absence of
         an Event of Default under the  Regenmacher  Debenture,  not in right of
         payment  of  interest)  to  the  Company's   prior   repayment  of  the
         Regenmacher Debenture.

                                       21
<PAGE>

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

                  d) GOVERNING LAW. All questions  concerning the  construction,
         validity,  enforcement  and  interpretation  of this Debenture shall be
         governed by and construed and enforced in accordance  with the internal
         laws of the State of New York,  without  regard  to the  principles  of
         conflicts of law thereof.  Each party agrees that all legal proceedings
         concerning  the   interpretations,   enforcement  and  defense  of  the
         transactions  contemplated by any of the Transaction Documents (whether
         brought against a party hereto or its respective affiliates, directors,
         officers, shareholders,  employees or agents) shall be commenced in the
         state and federal  courts  sitting in the City of New York,  Borough of
         Manhattan (the "NEW YORK COURTS").  Each party hereto  ----------------
         hereby  irrevocably  submits to the exclusive  jurisdiction  of the New
         York  Courts  for  the  adjudication  of any  dispute  hereunder  or in
         connection  herewith  or with any  transaction  contemplated  hereby or
         discussed  herein  (including with respect to the enforcement of any of
         the Transaction  Documents),  and hereby irrevocably waives, and agrees
         not to assert in any suit,  action or proceeding,  any claim that it is
         not personally  subject to the  jurisdiction of any such court, or such
         New York Courts are improper or inconvenient venue for such proceeding.
         Each party hereby  irrevocably  waives personal  service of process and
         consents to process being served in any such suit, action or proceeding
         by mailing a copy thereof via registered or certified mail or overnight
         delivery  (with  evidence of  delivery) to such party at the address in
         effect  for  notices to it under this  Debenture  and agrees  that such
         service shall  constitute  good and  sufficient  service of process and
         notice thereof.  Nothing  contained  herein shall be deemed to limit in
         any way any right to serve process in any manner permitted by law. Each
         party hereto hereby irrevocably waives, to the fullest extent permitted
         by  applicable  law,  any and all  right to trial by jury in any  legal
         proceeding  arising  out  of or  relating  to  this  Debenture  or  the
         transactions  contemplated  hereby.  If either party shall  commence an
         action or proceeding to enforce any provisions of this Debenture,  then
         the prevailing  party in such action or proceeding  shall be reimbursed
         by the other party for its attorneys  fees and other costs and expenses
         incurred with the  investigation,  preparation  and prosecution of such
         action or proceeding.

                                       22
<PAGE>

                  e) WAIVER. 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.  Any waiver
         must be in writing.

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

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

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

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

                          ***************************
                                       23
<PAGE>

27
20143207.1
         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.


                        INTRAOP MEDICAL CORPORATION


                        By:          Donald A. Goer
                        ----------------------------------------------------
                             Name:   Donald A. Goer
                             Title:  Chief Executive Officer and President


                                       24

<PAGE>



                                     ANNEX A

                              NOTICE OF CONVERSION


         The  undersigned  hereby  elects  to  convert  principal  under the 7 %
Convertible Debenture of Intraop Medical Corporation,  a Nevada corporation (the
"COMPANY"),  due on October ___,  2008,  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:

                          Payment of Interest in Common Stock __ yes __ no
                          If yes, $_____ of Interest Accrued on
                          Account of Conversion at Issue.

                          Number of shares of Common Stock to
                          be issued:


                          Signature:

                          Name:

                          Address:

                                       25
<PAGE>




                                   SCHEDULE 1

                               CONVERSION SCHEDULE

The 7%  Convertible  Debentures  due on  October  ___,  2008,  in the  aggregate
principal  amount of  $____________  issued by Intraop  Medical  Corporation,  a
Nevada  corporation.  This Conversion  Schedule reflects  conversions made under
Section 4 of the above referenced Debenture.

                                                       Dated:

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                                       Aggregate
                                       Principal
                                       Amount
                                       Remaining
                                       Subsequent to
Date of Conversion                     to Conversion
(or for first entry,    Amount of      (or original
Original Issue Date)    Conversion     Principal Amount     Company Attest
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