THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,  AND THE RULES AND  REGULATIONS  PROMULGATED
THEREUNDER  (THE  "1933  ACT"),  AND MAY ONLY BE  OFFERED  OR SOLD  PURSUANT  TO
REGISTRATION  UNDER OR AN EXEMPTION FROM THE  REGISTRATION  REQUIREMENTS  OF THE
1933 ACT.

                  7.5% CONVERTIBLE DEBENTURE DUE AUGUST 8, 1998

$___________                                                      August 8, 1996

         FOR VALUE RECEIVED,  INTELECT COMMUNICATIONS SYSTEMS LIMITED, a Bermuda
company (the "Company"),  hereby promises to pay to the order of ______________,
a __________ corporation, or registered assigns (the "Holder") on August 8, 1998
(the "Maturity Date"), the principal amount of ____________  ($____________) and
to pay interest on the principal amount hereof,  in such amounts,  at such times
and on such terms and  conditions as are specified  herein.  This Debenture (the
"Debenture")  has been issued  pursuant to that certain  Convertible  Securities
Subscription  Agreement executed among the Holder, the Company and certain other
parties named therein, dated August 8, 1996 (the "Agreement").

ARTICLE 1.  INTEREST.

         The Company shall pay interest on the unpaid  principal  amount of this
Debenture  at the rate  equal to Seven and  One-Half  Percent  (7.5%)  per year,
compounded annually,  payable as set forth below, quarterly in arrears on August
8, November 8,  February 8 and May 8 of each year until the principal  hereof is
paid in full or has been converted.  Interest shall be payable, at the option of
the Company,  in cash or by issuing such number of  additional  common shares of
the  Company,  U.S.  $.01 par value  per  share  (the  "Common  Shares"),  as is
determined  by dividing the total  dollar  amount of interest due and payable by
the  average  current  market  price  of the  Common  Shares  for the  five  (5)
consecutive  trading  days  ending on the  second  day prior to the date of such
interest  payment in lieu of interest not paid in cash, and the issuance of such
additional  Common Shares shall  constitute  full payment of such interest.  All
Common Shares issued as interest in respect of the  Debentures  will be, when so
issued, duly authorized,  validly issued, fully paid and non-assessable and free
of all liens and charges.  Interest on this Debenture shall accrue from the most
recent date to which  interest  has been paid or, if no interest  has been paid,
from August 8, 1996.  Interest  shall be computed on the basis of a 360-day year
of twelve 30-day months.

ARTICLE 2.  METHOD OF PAYMENT.

         This  Debenture  must be  surrendered  to the  Company in order for the
Holder to receive payment of the principal amount hereof.  The Company shall pay
the  principal  of and  interest on this  Debenture  in United  States  dollars.
Interest and



                                       -1-





principal  payments  shall be subject to withholding  (if any) under  applicable
United States Federal Internal Revenue Service Regulations.

ARTICLE 3.  CONVERSION.

         SECTION 3.1.  CONVERSION PRIVILEGE

         (a) The Holder of this Debenture  shall have the right,  exercisable at
one or more times, at its option,  to convert all or a portion of this Debenture
into Common Shares at the times hereafter specified. The number of Common Shares
issuable  upon the  conversion  of this  Debenture is determined by dividing the
principal  amount hereof to be converted by the Conversion  Price (as defined in
paragraph  (b) of this Section 3.1 below) in effect on the  conversion  date and
rounding  the result to the nearest  1/100th of a share.  Upon  conversion,  all
accrued and unpaid interest will be paid to the Holder in cash or Common Shares,
as specified in Article 1 above.

         (b) Less  than all of the  principal  amount of this  Debenture  may be
converted  into  Common  Shares if the portion  converted  is $10,000 or a whole
multiple  of  $10,000  and the  provisions  of this  Article 3 that apply to the
conversion of this  Debenture  also apply to the  conversion of a portion of it.
All or any portion of this  Debenture is  convertible at any time, and from time
to time as follows:  One-third (1/3) of the principal  balance of all Debentures
issued to Holder as  described  in Section 7.1  hereafter  shall be  convertible
beginning  sixty  (60) days  after  the date of the  original  issuance  of this
Debenture;  an  additional  one-third  (1/3) of the  principal  balance  of this
Debenture issued to the Holder shall be convertible  beginning 90 days after the
date of the original  issuance of this Debenture;  and the final one-third (1/3)
of the  principal  balance  of this  Debenture  issued  to the  Holder  shall be
convertible  beginning 120 days after the date of the original  issuance of this
Debenture. Subject to Articles 3.1(c) and 4 below, the Conversion Price (defined
below) shall be the lesser of (A) $11.0825 (the "Fixed Conversion Price") or (B)
the product of (i) the average  current  market price of the Common  Shares with
respect to the applicable  conversion date (the "Formula  Price")  multiplied by
(ii) eighty five percent (85%) (such  applicable  price being referred to as the
"Conversion Price").

         (c)  Notwithstanding  anything  contained  herein to the contrary,  the
Company shall not be obligated to issue more than an aggregate  number of Common
Shares to be calculated  by  multiplying  2,582,107  (being 20% of the Company's
outstanding Common Shares as of August 6, 1996) by a fraction,  the numerator of
which shall be the total dollar amount of the Debentures subscribed by each such
investor and the  denominator  of which shall be the total dollar  amount of the
Debentures  issued and  subscribed,  in respect  of the  Debentures,  subject to
adjustment  as provided in Article 4 (as so  adjusted,  the  "Maximum  Number of
Common  Shares").  In the event that,  upon  conversion of the  Debentures,  the
Company  would be required  to issue in excess of the  Maximum  Number of Common
Shares (a "Dilution  Event"),  the Company shall provide notice of such event to
the registered holder of this Debenture (a "Dilution  Notice").  Thereupon,  the
Company may, at its election and in its sole discretion, take any one or more of
the following actions:


                                       -2-






                  (i) As promptly as possible  following  the  provision  of the
Dilution Notice,  use its best efforts to obtain a waiver of any then applicable
Nasdaq National Market maintenance  requirements (the "Nasdaq Rule") which would
require  shareholder  approval for the issuance of Common Shares upon conversion
of the Debentures in excess of the Maximum Number of Common Shares.

                  (ii) As promptly as possible  following  the  provision of the
Dilution Notice,  the Company may use its best efforts (A) prepare and file with
the  Securities  and  Exchange  Commission a proxy  statement  and form of proxy
meeting the  requirements  of the Securities  Exchange Act of 1934 and the rules
and regulations promulgated  thereunder;  (B) call and hold a Special Meeting of
the Company's Shareholders for purposes of approving the issuance by the Company
of Common Shares in excess of the Maximum  Number of Common Shares (the "Special
Meeting");  and (c) use its best  efforts to solicit  from  shareholders  of the
Company  proxies  in  favor  of  such  issuance  (the   "Requisite   Shareholder
Approval").

                  (iii) As promptly as possible  following  the provision of the
Dilution Notice,  the Company may redeem out of funds legally available therefor
such aggregate  amount of the Debentures  (pro rata among the Holders  thereof),
for an amount equal to the product of (x) the principal amount of the Debentures
to be so  redeemed  multiplied  by 115% plus all  accrued  and  unpaid  interest
thereon,  until the number of Common  Shares  issuable  upon  conversion  of the
Debentures  is equal to the  Maximum  Number of  Common  Shares  (the  "Dilution
Redemption").

         In the event that the Company is  unsuccessful  in  obtaining  either a
waiver of the Nasdaq Rule or the Requisite Shareholder Approval or effecting the
Dilution Redemption and such failure continues for a period of 60 days following
of the date of the Dilution  Notice,  then such failure shall be a breach of the
Debentures entitling the Holder to be paid by the Company such Holder's pro rata
portion of the "Liquidity  Damage  Amount",  as liquidated  damages and not as a
penalty.  The Liquidity Damage Amount shall mean $500 for each $1 million of the
principal  amount of then  outstanding  Debentures  after  giving  effect to the
issuance of the Maximum  Number of Common Shares for each calendar day following
the 60th day after  the date of the  Dilution  Notice.  The  Liquidated  Damages
Amount shall be payable monthly in arrears on the last day of each month. In the
event  that the  Company is  unsuccessful  in  obtaining  either a waiver of the
Nasdaq Rule or the  Requisite  Shareholder  Approval or  effecting  the Dilution
Redemption  for a period of twelve months  following the Dilution  notice,  then
such failure shall  constitute an Event of Default (as defined in 6.1).  Subject
to the first two sentences of this paragraph,  the parties expressly acknowledge
and agree that neither the existence of a Dilution  Event nor any failure on the
part of the  Company  to: (A) obtain a waiver of the Nasdaq  Rule under  Section
3.1(c)(i),  (B) obtain the affirmative  vote of the requisite  percentage of the
Company's  Shareholders at the Special  Meeting under Section  3.1(c)(ii) or (C)
legally redeem certain of



                                       -3-





the Debentures under Section  3.1(c)(iii),  as the case may be, shall constitute
an Event of  Default,  provided,  however,  that  failure to pay the  Liquidated
Damages  Amount  when due shall  constitute  an Event of  Default  in the manner
prescribed in Section 6.1 hereof.

         (d)  Subject  to the  provisions  of Section  3.1(c),  in the event any
Debenture remains  outstanding on the second anniversary of the date hereof, the
unconverted  portion of such  Debenture  will  automatically  be converted  into
Common Shares on such date in the manner set forth in this Section 3.1; provided
(i) an Event of Default  does not then exist  under  this  Debenture  and (ii) a
registration  statement  as  contemplated  by  Section  4 of  the  Agreement  is
effective  with  respect  to the sale by the  Holder of  shares of Common  Stock
issuable upon conversion of this Debenture.

         (e)
                  (i) At any  time  prior to the  receipt  by the  Company  of a
Notice of  Conversion,  if the current market price per share (as defined herein
in  Section  3.7) of the  Company's  Common  Shares is less than  $11.0825,  the
Company may redeem such portion of this  Debenture as shall have been  requested
to be converted  by paying  Holder the sum of: (A) the product of (x) the number
of Common  Shares  issuable upon  conversion  of the  principal  amount to be so
converted  multiplied  by (y) the current  market  price per share of the Common
Shares,  plus (B) all accrued and unpaid  interest on this Debenture (a "Section
3.1(e)  Redemption").  In the event that the Company desires to effect a Section
3.1(e)  Redemption,  the  Company  shall  provide  notice  of such  event to the
registered  holder of this Debenture (a "Section 3.1(e)  Notice"),  and any such
redemption  shall occur not later than seven calendar days following the date of
the Section 3.1(e) Notice (the "Section  3.1(e)  Redemption  Date). In the event
that the Company  fails to effect the Section  3.1(e)  Redemption on or prior to
the Section 3.1(e)  Redemption Date, the Section 3.1(e) Notice shall be null and
void,  and the  Company  shall  not be  entitled  to  effect  a  Section  3.1(e)
Redemption until 30 calendar days following the Section 3.1(e)  Redemption Date.
Notwithstanding  the  foregoing,  upon  receipt of a Notice of  Conversion,  the
Company's right to redeem the Debentures covered by such notice shall terminate.

                  (ii)  Notwithstanding  Section 3.1(e)(i),  the Company may, at
its option, redeem this Debenture, in whole or in part, at any time or from time
to time after the first  anniversary of the date hereof,  for an amount equal to
the product of (x) the principal amount so to be redeemed multiplied by (y) 125%
if such redemption takes place within eighteen (18) months of the date hereof or
(z) 120% if such redemption  takes place after such date,  plus, in either case,
all accrued and unpaid interest thereon.

                  (iii)  Any  notice of  exercise  of the  Company's  redemption
option  shall be delivered  in writing to Holder and shall be  irrevocable  when
delivered. The Company shall pay in full the applicable redemption amount within
seven (7) business days of the delivery of such  redemption  notice.  Until such
payment,  the Company shall comply with all terms,  conditions  and covenants of
this  debenture,  including  without  limitation,  timely payment of accrued and
unpaid interest.  If the Company fails to pay in full such applicable redemption
amount  within such seven (7)  business  day period,  the  Company's  redemption
notice  with  respect to such  redemption  shall be deemed  void and the Company
shall no longer be entitled to redeem the Debentures prior to

                                       -4-






their  maturity.  Subject  to the  foregoing,  Holder's  right to  convert  this
Debenture  (or such portion  hereof as the Company shall have elected to redeem)
shall be suspended  with respect to the pro rata portion of the Debentures to be
redeemed after delivery of the Section 3.1(e) Notice.

         SECTION  3.2.  CONVERSION  PROCEDURE.  To convert this  Debenture  into
Common  Shares the Holder must (a)  complete  and sign the Notice of  Conversion
attached  hereto and (b)  surrender  the  Debenture  to the  Company.  Except as
otherwise  provided  herein,  the date  upon  which  the  Company  receives  the
completed Notice of Conversion (by recognized overnight courier,  hand-delivery,
facsimile or otherwise) is the conversion date,  provided that the Company shall
not be required to deliver a certificate  for Common Shares unless and until the
Company  receives the Debenture.  Within five (5) business days after receipt of
the Notice of  Conversion  as  aforesaid,  provided the Company has received the
Debenture  from the Holder,  the Company  shall  deliver a  certificate  without
restrictive legend (unless no effective  registration  statement relating to the
Shares is in place or no  exemption  from such  registration  is  available)  as
specified in the Agreement  for the number of full Common  Shares  issuable upon
the conversion and a check for any fraction of a share. The person in whose name
the certificate  representing Common Shares is to be registered shall be treated
as a shareholder of record on and after the conversion  date.  Upon  conversion,
unpaid interest on the converted  portion of the Debenture shall be paid in cash
or Common Shares by the Company.  If one person converts more than one Debenture
at the same time, the number of full shares  issuable upon the conversion  shall
be based on the total principal amount of Debentures  converted.  Upon surrender
of a Debenture  that is to be converted in part,  the Company shall issue to the
Holder a new Debenture equal in principal  amount to the unconverted  portion of
the Debenture surrendered.  Notwithstanding the foregoing,  the conversion right
of the Holder set forth herein shall be limited,  solely to the extent required,
from time to time,  such that in no instance  shall the maximum number of Common
Shares into which the Holder may convert this Debenture exceed, at any one time,
an amount equal to the remainder of (i) 4.99% of the then issued and outstanding
shares of Common Stock of the Company following such conversion,  minus (ii) the
number of shares of Common Stock of the Company then held by the Holder.

         SECTION  3.3.   FRACTIONAL  SHARES.  The  Company  shall  not  issue  a
fractional share of Common Stock upon the conversion of this Debenture. Instead,
the Company shall pay in lieu of any fractional  share the cash value thereof at
the then current  market price of the Common Shares as determined  under Section
3.7 below.

         SECTION  3.4.   TAXES  ON   CONVERSION.   The  Company  shall  pay  any
documentary,  stamp or similar  issue or transfer tax due on the issue of Common
Shares upon the conversion of this Debenture.  However, the Holder shall pay any
such tax which is due  because  such  shares are issued in a name other than its
name.

         SECTION 3.5. COMPANY TO RESERVE STOCK. The Company shall reserve out of
its authorized but unissued Common Shares enough Common Shares to permit the

                                                     
                                       -5-





conversion in full of this Debenture. All Common Shares which may be issued upon
the conversion hereof shall be fully paid and nonassessable.

         SECTION 3.6.  RESTRICTIONS  ON TRANSFER.  This Debenture and the Common
Shares issuable upon the conversion  hereof have not been  registered  under the
Securities Act of 1933, as amended (the "Act") and have been sold pursuant to an
exemption  under the Act. The Debenture may not be  transferred or resold except
pursuant to registration under or an exemption from the Act.

         SECTION 3.7.  CURRENT MARKET PRICE.

         (a) As used herein, the current market price per share of Common Shares
on any date is the average of the quoted bid prices of the Common Shares for the
five (5) consecutive  trading days ending on the second trading day prior to the
date in question.

         (b) As used in this  Section  3.7, the term quoted bid price shall mean
(i) the closing bid prices  thereof on any such trading date, as reported by the
Nasdaq  Stock  Market or (ii) in the event the Common  Shares is not reported on
such  system,  the fair market value of the Common  Stock as  determined  by the
Board of Directors of the Company in its good faith judgment.

ARTICLE 4.  RECAPITALIZATIONS, MERGERS, ETC.

         4.1  RECAPITALIZATIONS   GENERALLY.  In  case  the  Company  shall  (i)
subdivide its  outstanding  Common  Shares  (including by means of a dividend or
distribution  on the Common Shares payable in Common  Shares),  (ii) combine its
outstanding  Common  Shares into a smaller  number of shares,  or (iii) issue by
capital  reorganization  or  reclassification  of its Common Shares or otherwise
(other than a subdivision or combination of its shares  provided for above, or a
reorganization,  merger,  consolidation or sale of assets provided for elsewhere
in this  Article  4) any  shares  of  capital  stock of the  Company,  the Fixed
Conversion  Price and the Maximum Number of Common Shares in effect  immediately
prior to such  action,  shall be adjusted  so that the Holder of this  Debenture
thereafter surrendered for conversion shall be entitled to receive the number of
shares of  capital  stock of the  Company  which  such  holder  would have owned
immediately  following such action had this Debenture been converted immediately
prior  thereto.  An  adjustment  made pursuant to this  subsection  shall become
effective  retroactively  immediately  after the effective date in the case of a
subdivision, combination or reclassification.

         4.2 CERTAIN OTHER RECAPITALIZATIONS.  In case the Company shall, during
the five consecutive  trading-day period applicable (pursuant to Section 3.7(a))
in determining  the current market price per share of Common Shares with respect
to any conversion date, (i) subdivide its outstanding  Common Shares  (including
by means of a dividend or  distribution  on the Common Shares  payable in Common
Shares),  (ii) combine its  outstanding  Common Shares into a smaller  number of
shares or,  (iii) issue by capital  reorganization  or  reclassification  of its
Common  Shares or otherwise  (other than a  subdivision  or  combination  of its
shares provided for above, or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in

                                       -6-




this Article 4) any shares of capital stock of the Company,  then,  for purposes
of calculating the Formula Price applicable to such conversion,  the closing bid
price for the Company's Common Shares as reported by the Nasdaq Stock Market for
any day prior to such action  which falls  within such five  trading-day  period
applicable  to such  conversion  shall be adjusted  to a price per share  giving
effect to such action.

         4.3 MERGERS.  Until the  Debentures  are paid in full or have converted
into Common Shares, the Company shall not consolidate or merge into, or transfer
all or  substantially  all of its assets  to, any  person,  unless  such  person
assumes the  obligations  of the Company under this  Debenture  and  immediately
after such  transaction no Event of Default exists.  Any reference herein to the
Company  shall  refer  to  such  surviving  or  transferee  corporation  and the
obligations of the Company shall terminate upon such assumption.  If the Company
merges or  consolidates  with another  corporation  or sells or transfers all or
substantially  all of its assets to another person and the holders of the Common
Shares are entitled to receive stock, securities or property in respect of or in
exchange for Common Shares,  then as a condition of such merger,  consolidation,
sale or transfer,  either (i) the Company and any such  successor,  purchaser or
transferee  shall amend this  Debenture  to provide  that it may  thereafter  be
converted  on the terms and subject to the  conditions  set forth above into the
kind and amount of stock,  securities or property  receivable  upon such merger,
consolidation,  sale or  transfer  by a holder of the number of shares of Common
Stock into which this  Debenture  might have been converted  immediately  before
such merger, consolidation,  sale or transfer, or (ii) if the Company is not the
surviving entity in such merger,  consolidation,  sale or transfer,  the Company
shall  give the  Holder at least 30 days prior  written  notice of the  expected
closing date of such  transaction,  and if any portion of this Debenture has not
been  converted  into Common  Stock at the  election of the Holder prior to such
closing,  then the  remaining  principal  amount of this  Debenture  may, at the
option of the Purchaser, be converted into shares of Common Stock at the closing
of such transaction.  In any such case,  appropriate adjustment shall be made in
the  application  of the provisions of this Article 4 with respect to the rights
of the Holder after such merger, consolidation, sale or transfer to the end that
the provisions of this Article 4 (including  adjustment of the Conversion  Price
then in effect  and the  number  of  shares  issuable  upon  conversion  of this
Debenture) shall be applicable after that event as nearly equivalently as may be
practicable.  Except as otherwise provided herein, the Conversion Price shall be
the same as the applicable Conversion Price defined in Section 3 above.

ARTICLE 5.  REPORTS.

         The Company  will mail to the Holder  hereof at its address as shown on
the  Register a copy of any annual,  quarterly  or current  report that it files
with the  Securities and Exchange  Commission  promptly after the filing thereof
and a copy of any annual,  quarterly or other report or proxy  statement that it
gives to its shareholders generally at the time such report or statement is sent
to shareholders.



                                       -7-
                                                      


ARTICLE 6.  DEFAULTS AND REMEDIES.

         SECTION 6.1. EVENTS OF DEFAULT. An "Event of Default" occurs if (a) the
Company does not make the payment of the  principal of this  Debenture  when the
same becomes due and payable at maturity, upon redemption or otherwise,  (b) the
Company does not make a payment of interest or  Liquidated  Damages  Amount when
such interest becomes due and payable and such default continues for a period of
seven (7) days  thereafter,  (c) the Company  fails to issue Common  Shares upon
conversion,  within the time period  specified  in Section  3.2, (d) the Company
fails to comply  with any of its other  agreements  in this  Debenture  and such
failure  continues for the period and after the notice  specified below, (e) the
Company's  Common  Shares  cease  to be  quoted  on any of the  New  York  Stock
Exchange,  American Stock  Exchange,  the Nasdaq National Market or Nasdaq Small
Cap for a period in excess of 60 calendar days,  (f) any of the  representations
or warranties made by the Company herein, in the Agreement, or in any historical
financial statements  heretofore furnished by the Company in connection with the
execution  and  delivery of this  Debenture or the  Agreement  shall be false or
misleading in any material respect as of the date made (it being understood that
this  Section  6.1(f)  shall not  apply to any  financial  projections  or other
forward-looking  information),  (g) the Company  shall default on the payment of
any debts in excess of $250,000  beyond any  applicable  grace  period,  (h) any
judgments, levies or attachments shall be rendered against the Company or any of
its assets or properties  in an aggregate  amount in excess of $250,000 and such
judgments,  levies or  attachments  shall not be  dismissed,  stayed,  bonded or
discharged  within  thirty  (30) days of the date of entry  thereof,  or (i) the
Company  pursuant to or within the meaning of any Bankruptcy Law (as hereinafter
defined): (i) commences a voluntary case; (ii) consents to the entry of an order
for relief against it in an involuntary  case; (iii) consents to the appointment
of a Custodian (as hereinafter defined) of it or for all or substantially all of
its property;  (iv) makes a general assignment for the benefit of its creditors;
or (v) a court of  competent  jurisdiction  enters an order or decree  under any
Bankruptcy  Law that:  (A) is for relief  against the Company in an  involuntary
case; (B) appoints a Custodian of the Company or for all or substantially all of
its  property or (C) orders the  liquidation  of the  Company,  and the order or
decree remains  unstayed and in effect for 60 days. As used in this Section 6.1,
the term  "Bankruptcy  Law"  means  Title 11 of the  United  States  Code or any
similar Federal or State law for the relief of debtors or such other  applicable
laws. The term "Custodian" means any receiver, trustee, assignee,  liquidator or
similar official under any Bankruptcy Law.

         SECTION  6.2.  ACCELERATION.  If an  Event  of  Default  occurs  and is
continuing, the Holder hereof by notice to the Company may declare the principal
of and  accrued  interest on this  Debenture  to be due and  payable.  Upon such
declaration,  the  principal  and  interest  hereof  shall  be due  and  payable
immediately without presentment,  demand,  protest or notice of any kind, all of
which  are  hereby  expressly  waived,  anything  herein or in any note or other
instruments  contained  to the  contrary  notwithstanding,  and the  Holder  may
immediately,  and without expiration of any period of grace, enforce any and all
of the Holder's rights or remedies afforded by law. The Company expressly waives
demand and presentment  for payment,  notice of nonpayment,  protest,  notice of
protest,  notice of dishonor,  notice of  acceleration  or intent to accelerate,
bringing of suit and diligence in taking any action to collect

                                       -8-




amounts called for hereunder and shall be directly and primarily  liable for the
payment of all sums owing and to be owing hereon,  regardless of and without any
notice,  diligence,  act or omission as or with respect to the collection of any
amount called for hereunder.

ARTICLE 7.  REGISTERED DEBENTURES.

         SECTION 7.1.  SERIES.  This  Debenture  is one of a numbered  series of
Debentures  issued to the Holder and certain  other  parties and  designated  as
"7.5% Convertible Debentures Dated August 8, 1998". Such Debentures are referred
to herein collectively as the "Debentures."

         SECTION 7.2. RECORD OWNERSHIP. The Company shall maintain a register of
the holders of the Debentures (the "Register") showing their names and addresses
and the  serial  numbers  and  principal  amounts  of  Debentures  issued  to or
transferred  of record by them from time to time. The Register may be maintained
in electronic,  magnetic or other  computerized  form. The Company may treat the
person  named as the Holder of this  Debenture in the Register as the sole owner
of this  Debenture.  The  Holder of this  Debenture  is the  person  exclusively
entitled  to  receive   payments  of   interest  on  this   Debenture,   receive
notifications  with respect to this Debenture,  convert it into Common Stock and
otherwise exercise all of the rights and powers as the absolute owner hereof.

         SECTION 7.3. REGISTRATION OF TRANSFER.  Transfers of this Debenture may
be registered on the books of the Company  maintained for such purpose  pursuant
to Section 7.2 above (i.e.,  the Register).  Transfers  shall be registered when
this  Debenture  is  presented  to the Company  with a request to  register  the
transfer  hereof and the Debenture is duly endorsed by the  appropriate  person,
reasonable assurances are given that the endorsements are genuine and effective,
and the Company has received  evidence  satisfactory to it that such transfer is
rightful and in  compliance  with all  applicable  laws,  including tax laws and
State and Federal securities laws. When this Debenture is presented for transfer
and duly transferred hereunder, it shall be canceled and a new Debenture showing
the name of the  transferee as the record holder thereof shall be issued in lieu
hereof.  When this  Debenture  is  presented  to the Company  with a  reasonable
request to  exchange it for an equal  principal  amount of  Debentures  of other
denominations,  the  Company  shall make such  exchange  and shall  cancel  this
Debenture and issue in lieu thereof  Debentures  having a total principal amount
equal to this Debenture in the denominations requested by the Holder.

         SECTION 7.4. WORN AND LOST DEBENTURES.  If this Debenture becomes worn,
defaced or mutilated but is still  substantially  intact and  recognizable,  the
Company  or its  agent  may  issue a new  Debenture  in  lieu  hereof  upon  its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost,  destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original  Debenture if the Holder so requests by written  notice to
the Company actually
                                                     
                                       -9-





received  by the  Company  before it is  notified  that the  Debenture  has been
acquired by a bona fide purchaser and the Holder has delivered to the Company an
indemnity  bond in such amount and issued by such  surety as the  Company  deems
satisfactory  together  with an affidavit of the Holder  setting forth the facts
concerning such loss,  destruction or wrongful taking and such other information
in such form with such proof or verification as the Company may request.

ARTICLE 8.  NOTICES.

         Any notice  which is  required  or  convenient  under the terms of this
Debenture  shall be duly given if it is in writing and  delivered in person,  by
telecopy, by recognized overnight courier or mailed by first class mail, postage
prepaid and directed to the Holder of the Debenture at its address as it appears
on the Register or if to the Company to its  principal  executive  offices.  The
time when such notice is sent shall be the time of the giving of the notice.

         All notices to Holders are to be mailed to each holder at such  address
as is listed for such Holder on the signature pages to the Agreement:

         All notices to the Company are to be mailed to:

         Intelect Communications Systems Limited
         Reid House 31 Church Street
         Hamilton, Bermuda
         Attn:  Chief Executive Officer
         Telephone:  441/295-8639
         Fax:  441/292-5560

ARTICLE 9.  TIMES.

         Where this Debenture authorizes or requires the payment of money or the
performance  of a condition  or  obligation  on a Saturday or Sunday or a public
holiday,  or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday,  such payment may be made or condition or  obligation  performed on the
next  succeeding  business day, and if the period ends at a specified hour, such
payment may be made or condition  performed,  at or before the same hour of such
next  succeeding  business  day,  with the same  force and  effect as if made or
performed in accordance with the terms of this Debenture. Where time is extended
by virtue of the  provisions  of this Article 9, such extended time shall not be
included in the computation of interest.

ARTICLE 10.  RULES OF CONSTRUCTION.

         In this Debenture,  unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular,  and
words of the masculine gender include the feminine and the neuter,  and when the
sense so  indicates,  words of the neuter  gender may refer to any  gender.  The
numbers and

                                      -10-






titles of sections  contained in this Debenture are inserted for  convenience of
reference  only,  and they neither form a part of this Debenture nor are they to
be  used  in the  construction  or  interpretation  hereof.  Wherever,  in  this
Debenture,  a  determination  of  the  Company  is  required  or  allowed,  such
determination  shall be made by a  majority  of the  Board of  Directors  of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.


ARTICLE 11.  NATURE OF OBLIGATION; RANK.

         No provision of this Debenture  shall alter or impair the obligation of
the Company,  which is absolute and unconditional,  to pay the principal of, and
interest on, this  Debenture at the time,  place,  and rate,  and in the coin or
currency,  herein  prescribed.  This  Debenture and all other  Debentures now or
hereafter  issued of similar terms are direct  obligations of the Company.  This
Debenture ranks equally with all other  Debentures now or hereafter issued under
the terms set forth herein.


ARTICLE 12.  GOVERNING LAW.

         The validity,  terms,  performance  and  enforcement  of this Debenture
shall be governed and construed by the provisions  hereof and in accordance with
the laws of Bermuda.


         IN WITNESS WHEREOF,  the Company has duly executed this Debenture as of
the date first written above.

                                            INTELECT COMMUNICATIONS SYSTEMS
                                            LIMITED



                                            By:_____________________________
                                            Name:___________________________
                                            Title:__________________________

[Corporate Seal]



                                      -11-
                                                       





                              NOTICE OF CONVERSION

         [To be completed and signed only upon conversion of Debenture]

         The  undersigned,  the  Holder of this  Debenture,  hereby  irrevocably
elects to exercise  the right to convert it into common  shares,  par value $.01
per share, of Intelect Communications Systems Limited as follows:

[Complete if less                           Dollars ($        )*
than all of                         ------------------------------------------  
principal amount                    ($10,000 or integral multiples of $10,000)
is to be converted]

[Signature must be                  ------------------------------------------
guaranteed if                       (Name of Holder of shares if different than
registered holder                    registered Holder of Debenture)
of stock differs
from registered                     ------------------------------------------
Holder of                           (Address of Holder if different than address
Debenture]                          of registered Holder of Debenture)


                                    ------------------------------------------
                                    (Social Security or EIN of Holder of shares
                                    if different than Holder of Debenture)

         *If the principal  amount of the Debenture to be converted is less than
         the entire principal amount thereof, a new Debenture for the balance of
         the principal  amount shall be returned to the Holder of the Debenture.
         All notices to be transmitted by hand delivery,  facsimile or overnight
         courier.


Date:________              Sign:    ------------------------------------------
                                    (Signature must conform in all respects to
                                    name of Holder shown on face of this
                                    Debenture)




                                      -12-






                               ASSIGNMENT OF NOTE

        The undersigned hereby sell(s) and assign(s) and transfer(s) unto

        -----------------------------------------------------------------
                  (name, address and SSN or EIN of assignee)

                                                            Dollars ($    )
    -----------------------------------------------------------------------
   (principal amount of Debenture, $10,000 or integral multiples of $10,000)

of principal amount of this Debenture together with all accrued interest hereon.


Date:______________              Sign:
                                      -----------------------------------------
                                     (Signature must conform in all respects to
                                      name of Holder shown on face of Debenture)




                                      -13-