Document:

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/November] ___, 2005
Original Conversion Price (subject to adjustment herein): $0.40

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

                            7% CONVERTIBLE DEBENTURE
                        DUE [OCTOBER/NOVEMBER] ___, 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/November] ___, 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/November] ___, 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

                                       2
<PAGE>

          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.

          "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.

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<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.

          "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).

                                       4
<PAGE>

                  "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

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<PAGE>

          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").

     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.

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<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

                                       9
<PAGE>

               the Company (including,  without limitation, any other Debentures
               or  the  Warrants)  subject  to a  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.

          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

                                       10
<PAGE>

               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.

          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

                                       11
<PAGE>

               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.

          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

                                       12
<PAGE>

               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.

          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.

                                       14
<PAGE>

          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

                                       15
<PAGE>

               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.

          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

                                       16
<PAGE>

                    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.

                                       17
<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;

          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;

                                       18
<PAGE>

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;

               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

                                       19
<PAGE>

                    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;

               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);

                                       20
<PAGE>

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 15
                    consecutive Trading Days or 60 non-consecutive  Trading Days
                    during any 12 month period;  provided,  however, that in the
                    event   that  the   Company   is   negotiating   a   merger,
                    consolidation,  acquisition or sale of all or  substantially
                    all  of  its  assets  or a  similar  transaction  and in the
                    written opinion of counsel to the Company,  the Registration
                    Statement,  would  be  required  to be  amended  to  include
                    information  concerning  such  transactions  or the  parties
                    thereto  that  is  not  available  or may  not  be  publicly
                    disclosed  at the time,  the Company  shall be  permitted an
                    additional 10  consecutive  Trading Days during any 12 month
                    period relating to such an event; 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.

          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.  Upon the  occurrence and during the  continuation  of an
               Event of Default,  the interest rate of this  Debenture  shall be
               increased  to 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

                                       21
<PAGE>

               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.

          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.

                                       2
<PAGE>

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

          e)   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

                                       23
<PAGE>

               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.

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

                                       24
<PAGE>

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

                                       25
<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/November] ___, 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:

                                       26
<PAGE>

                                   Schedule 1

                               CONVERSION SCHEDULE

The 7% Convertible Debentures due on [October/November] ___, 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:

<TABLE>
<CAPTION>

=============================== ------------------------- ======================= ------------------------------

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

------------------------------- ------------------------- ----------------------- ------------------------------

------------------------------- ------------------------- ----------------------- ------------------------------

------------------------------- ------------------------- ----------------------- ------------------------------

------------------------------- ------------------------- ----------------------- ------------------------------

------------------------------- ------------------------- ----------------------- ------------------------------

------------------------------- ------------------------- ----------------------- ------------------------------

------------------------------- ------------------------- ----------------------- ------------------------------

------------------------------- ------------------------- ----------------------- ------------------------------

------------------------------- ------------------------- ----------------------- ------------------------------

=============================== ========================= ======================= ------------------------------

</TABLE>

                                       27REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement (this "Agreement") is made and
entered into as of October 25, 2005, among Intraop Medical Corporation, a Nevada
corporation (the "Company"), and the purchasers signatory hereto (each such
purchaser is a "Purchaser" and collectively, the "Purchasers").

               This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").

               The Company and the Purchasers hereby agree as follows:

        1. Definitions

               Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:

                     "Advice" shall have the meaning set forth in Section 6(d).

                  "Effectiveness Date" means, with respect to the initial
         Registration Statement required to be filed hereunder, the 120th
         calendar day following the date hereof and, with respect to any
         additional Registration Statements which may be required pursuant to
         Section 3(c), the 120th calendar day following the date on which the
         Company first knows, or reasonably should have known, that such
         additional Registration Statement is required hereunder; provided,
         however, in the event the Company is notified by the Commission that
         one of the above Registration Statements will not be reviewed or is no
         longer subject to further review and comments, the Effectiveness Date
         as to such Registration Statement shall be the fifth Trading Day
         following the date on which the Company is so notified if such date
         precedes the dates required above.

                  "Effectiveness Period" shall have the meaning set forth in
Section 2(a).

                  "Event" shall have the meaning set forth in Section 2(b).

                  "Event Date" shall have the meaning set forth in Section 2(b).

                  "Filing Date" means, with respect to the initial Registration
         Statement required hereunder, November __, 2005 and, with respect to
         any additional Registration Statements which may be required pursuant
         to Section 3(c), the 30th day following the date on which the Company
         first knows, or reasonably should have known that such additional
         Registration Statement is required hereunder.

                                       1
<PAGE>

                  "Holder" or "Holders" means the holder or holders, as the case
         may be, from time to time of Registrable Securities.

                  "Indemnified Party" shall have the meaning set forth in
Section 5(c).

                  "Indemnifying Party" shall have the meaning set forth in
Section 5(c).

                  "Losses" shall have the meaning set forth in Section 5(a).

                  "Plan of Distribution" shall have the meaning set forth in
Section 2(a).

                  "Proceeding" means an action, claim, suit, investigation or
         proceeding (including, without limitation, an investigation or partial
         proceeding, such as a deposition), whether commenced or threatened.

                  "Prospectus" means the prospectus included in a Registration
         Statement (including, without limitation, a prospectus that includes
         any information previously omitted from a prospectus filed as part of
         an effective registration statement in reliance upon Rule 430A
         promulgated under the Securities Act), as amended or supplemented by
         any prospectus supplement, with respect to the terms of the offering of
         any portion of the Registrable Securities covered by a Registration
         Statement, and all other amendments and supplements to the Prospectus,
         including post-effective amendments, and all material incorporated by
         reference or deemed to be incorporated by reference in such Prospectus.

                  "Registrable Securities" means (i) all of the shares of Common
         Stock issuable upon conversion in full of the Debentures, (ii) all
         shares issuable as interest on the Debentures assuming all permissible
         interest payments are made in shares of Common Stock and the Debentures
         are held until maturity, (iii) all Warrant Shares, (iv) any securities
         issued or issuable upon any stock split, dividend or other
         distribution, recapitalization or similar event with respect to the
         foregoing, (v) any additional shares issuable in connection with any
         anti-dilution provisions in the Debentures or the Warrants (in each
         case, without giving effect to any limitations on conversion set forth
         in the Debenture or limitations on exercise set forth in the Warrant),
         (vi) shares issuable in lieu of cash payments of liquidated damages
         pursuant to Section 2(b) and (vii) shares issuable upon conversion of
         the 7% convertible debentures and/or warrants to purchase common stock
         issued on August 31, 2005.

                  "Registration Statement" means the registration statements
         required to be filed hereunder and any additional registration
         statements contemplated by Section 3(c), including (in each case) the
         Prospectus, amendments and supplements to such registration statement
         or Prospectus, including pre- and post-effective amendments, all
         exhibits thereto, and all material incorporated by reference or deemed
         to be incorporated by reference in such registration statement.

                   "Rule 415" means Rule 415 promulgated by the Commission
         pursuant to the Securities Act, as such Rule may be amended from time
         to time, or any similar rule or regulation hereafter adopted by the
         Commission having substantially the same purpose and effect as such
         Rule.

                                       2
<PAGE>

                  "Rule 424" means Rule 424 promulgated by the Commission
         pursuant to the Securities Act, as such Rule may be amended from time
         to time, or any similar rule or regulation hereafter adopted by the
         Commission having substantially the same purpose and effect as such
         Rule.

                  "Selling Shareholder Questionnaire" shall have the meaning set
forth in Section 3(a).

        2.        Shelf Registration

               (a) On or prior to each Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering the
resale of 130% of the Registrable Securities on such Filing Date for an offering
to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith) and
shall contain (unless otherwise directed by the Holders) substantially the "Plan
of Distribution" attached hereto as Annex A. Subject to the terms of this
Agreement, the Company shall use its best efforts to cause a Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep such Registration
Statement continuously effective under the Securities Act until all Registrable
Securities covered by such Registration Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144(k) as determined by the counsel
to the Company pursuant to a written opinion letter to such effect, addressed
and acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period"). The Company shall telephonically request effectiveness
of a Registration Statement as of 5:00 pm Eastern Time on a Trading Day. The
Company shall immediately notify the Holders via facsimile of the effectiveness
of a Registration Statement on the same Trading Day that the Company
telephonically confirms effectiveness with the Commission, which shall be the
date requested for effectiveness of a Registration Statement. The Company shall,
by 9:30 am Eastern Time on the Trading Day after the Effective Date (as defined
in the Purchase Agreement), file a Form 424(b)(5) with the Commission. Failure
to so notify the Holder within 1 Trading Day of such notification shall be
deemed an Event under Section 2(b).

               (b) If: (i) a Registration Statement is not filed on or prior to
its Filing Date (if the Company files a Registration Statement without affording
the Holders the opportunity to review and comment on the same as required by
Section 3(a), the Company shall not be deemed to have satisfied this clause
(i)), or (ii) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration Statement
will not be "reviewed," or not subject to further review, or (iii) prior to its
Effectiveness Date, the Company fails to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission in respect of

                                       3
<PAGE>

such Registration Statement within 10 calendar days after the receipt of
comments by or notice from the Commission that such amendment is required in
order for a Registration Statement to be declared effective, or (iv) a
Registration Statement filed or required to be filed hereunder is not declared
effective by the Commission by its Effectiveness Date, or (v) after the
Effectiveness Date, a Registration Statement ceases for any reason to remain
continuously effective as to all Registrable Securities for which it is required
to be effective, or the Holders are not permitted to utilize the Prospectus
therein to resell such Registrable Securities for 10 consecutive calendar days
but no more than an aggregate of 15 calendar days during any 12-month period
(which need not be consecutive Trading Days) (any such failure or breach being
referred to as an "Event", and for purposes of clause (i) or (iv) the date on
which such Event occurs, or for purposes of clause (ii) the date on which such
five Trading Day period is exceeded, or for purposes of clause (iii) the date
which such 10 calendar day period is exceeded, or for purposes of clause (v) the
date on which such 10 or 15 calendar day period, as applicable, is exceeded
being referred to as "Event Date"), then in addition to any other rights the
Holders may have hereunder or under applicable law, on each such Event Date and
on each monthly anniversary of each such Event Date (if the applicable Event
shall not have been cured by such date) until the applicable Event is cured, the
Company shall pay to each Holder an amount in cash, as partial liquidated
damages and not as a penalty, equal to 2.0% of the aggregate purchase price paid
by such Holder pursuant to the Purchase Agreement for any Registrable Securities
then held by such Holder. If the Company fails to pay any partial liquidated
damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum (or
such lesser maximum amount that is permitted to be paid by applicable law) to
the Holder, accruing daily from the date such partial liquidated damages are due
until such amounts, plus all such interest thereon, are paid in full. The
partial liquidated damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of an Event.

        3. Registration Procedures.

               In connection with the Company's registration obligations
hereunder, the Company shall:

               (a) Not less than five Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to each
Holder copies of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference) will be
subject to the review of such Holders, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file a Registration Statement or any such
Prospectus or any amendments or supplements thereto to which the Holders of a
majority of the Registrable Securities shall reasonably object in good faith,
provided that, the Company is notified of such objection in writing no later
than 5 Trading Days after the Holders have been so furnished copies of such
documents. Each Holder agrees to furnish to the Company a completed
Questionnaire in the form attached to this Agreement as Annex B (a "Selling
Shareholder Questionnaire") not less than two Trading Days prior to the Filing
Date or by the end of the fourth Trading Day following the date on which such
Holder receives draft materials in accordance with this Section.

                                       4
<PAGE>

               (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep a
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement
(subject to the terms of this Agreement), and as so supplemented or amended to
be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible
to any comments received from the Commission with respect to a Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to a Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by a
Registration Statement during the applicable period in accordance (subject to
the terms of this Agreement) with the intended methods of disposition by the
Holders thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented.

               (c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 90% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file as soon as
reasonably practicable but in any case prior to the applicable Filing Date, an
additional Registration Statement covering the resale by the Holders of not less
than 130% of the number of such Registrable Securities.

               (d) Notify the Holders of Registrable Securities to be sold
(which notice shall, pursuant to clauses (ii) through (vi) hereof, be
accompanied by an instruction to suspend the use of the Prospectus until the
requisite changes have been made) as promptly as reasonably possible (and, in
the case of (i)(A) below, not less than five Trading Days prior to such filing)
and (if requested by any such Person) confirm such notice in writing no later
than one Trading Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a Registration Statement is
proposed to be filed; (B) when the Commission notifies the Company whether there
will be a "review" of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement (the Company shall provide
true and complete copies thereof and all written responses thereto to each of
the Holders); and (C) with respect to a Registration Statement or any post-
effective amendment, when the same has become effective; (ii) of any request by
the Commission or any other Federal or state governmental authority for
amendments or supplements to a Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such

                                       5
<PAGE>

purpose; (v) of the occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in a Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to a
Registration Statement, Prospectus or other documents so that, in the case of a
Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
(vi) the occurrence or existence of any pending corporate development with
respect to the Company that the Company believes may be material and that, in
the determination of the Company, makes it not in the best interest of the
Company to allow continued availability of a Registration Statement or
Prospectus; provided that any and all of such information shall remain
confidential to each Holder until such information otherwise becomes public,
unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder's agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.

               (e) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

               (f) Furnish to each Holder, without charge, at least one
conformed copy of each such Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference to the extent requested by such
Person, and all exhibits to the extent requested by such Person (including those
previously furnished or incorporated by reference) promptly after the filing of
such documents with the Commission.

               (g) Promptly deliver to each Holder, without charge, as many
copies of the Prospectus or Prospectuses (including each form of prospectus) and
each amendment or supplement thereto as such Persons may reasonably request in
connection with resales by the Holder of Registrable Securities. Subject to the
terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto, except after
the giving on any notice pursuant to Section 3(d).

               (h) If NASDR Rule 2710 requires any broker-dealer to make a
filing prior to executing a sale by a Holder, the Company shall (i) make an
Issuer Filing with the NASDR, Inc. Corporate Financing Department pursuant to
NASDR Rule 2710(b)(10)(A)(i), (ii) respond within five Trading Days to any
comments received from NASDR in connection therewith, (iii) and pay the filing
fee required in connection therewith.

                                       6
<PAGE>

               (i) Prior to any resale of Registrable Securities by a Holder,
use its commercially reasonable efforts to register or qualify or cooperate with
the selling Holders in connection with the registration or qualification (or
exemption from the Registration or qualification) of such Registrable Securities
for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of
the Registrable Securities covered by each Registration Statement; provided,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so subject or file a
general consent to service of process in any such jurisdiction.

               (j) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such Holders may request.

               (k) Upon the occurrence of any event contemplated by this Section
3, as promptly as reasonably possible under the circumstances taking into
account the Company's good faith assessment of any adverse consequences to the
Company and its stockholders of the premature disclosure of such event, prepare
a supplement or amendment, including a post-effective amendment, to a
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither a Registration
Statement nor such Prospectus will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. If the Company notifies the Holders in accordance
with clauses (ii) through (vi) of Section 3(d) above to suspend the use of any
Prospectus until the requisite changes to such Prospectus have been made, then
the Holders shall suspend use of such Prospectus. The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as promptly as
is practicable. The Company shall be entitled to exercise its right under this
Section 3(k) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial liquidated damages pursuant to
Section 2(b), for a period not to exceed 90 days (which need not be consecutive
days) in any 12 month period.

               (l) Comply with all applicable rules and regulations of the
Commission.

               (m) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if required by the Commission, the person
thereof that has voting and dispositive control over the Shares. During any
periods that the Company is unable to meet its obligations hereunder with
respect to the registration of the Registrable Securities solely because any
Holder fails to furnish such information within three Trading Days of the
Company's request, any liquidated damages that are accruing at such time as to
such Holder and its Affiliates only shall be tolled and any Event that may
otherwise occur solely because of such delay shall be suspended as to such
Holder and its Affiliates only, until such information is delivered to the
Company.

                                       7
<PAGE>

        4. Registration Expenses; Underwriter Status; Confidentiality.

               (a) Fees and Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, (B) in compliance with applicable state securities or Blue
Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holders) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect
to any filing that may be required to be made by any broker through which a
Holder intends to make sales of Registrable Securities with NASD Regulation,
Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving no more
than a customary brokerage commission in connection with such sale, (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the holders of a majority of
the Registrable Securities included in a Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.

               (b) Status as Underwriter. To the extent any Purchaser is deemed,
alleged or reasonably believes may be deemed or alleged, to be an underwriter,
at the reasonable request of any Purchaser, the Company shall furnish to such
Purchaser, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as a Purchaser may reasonably request
(i) a letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the Purchasers, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is, at the time requested, customarily given by
counsel to an issuer in an underwritten public offering, addressed to the
Purchasers.

                                       8
<PAGE>

To the extent any Purchaser is deemed, alleged or reasonably believes may be
deemed or alleged, to be an underwriter, the Company shall make available for
inspection by (i) any Purchaser, (ii) legal counsel and (iii) one firm of
accountants or other agents retained by the Purchasers (collectively, the
"Inspectors"), all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the "Records"),
as shall be reasonably deemed necessary by each Inspector, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector shall
agree to hold in strict confidence and shall not make any disclosure (except to
a Purchaser) or use of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the Securities Act, (b) the release of
such Records is ordered pursuant to a final, non-appealable subpoena or order
from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Purchaser agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential. Nothing herein (or in any other confidentiality agreement
between the Company and any Purchaser) shall be deemed to limit the Purchasers'
ability to sell Registrable Securities in a manner which is otherwise consistent
with applicable laws and regulations.

               (c) Confidentiality. The Company shall hold in confidence and not
make any disclosure of information concerning a Purchaser provided to the
Company unless (i) disclosure of such information is necessary to comply with
federal or state securities laws or applicable rules and regulations of Nasdaq
or any other relevant market or exchange, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this Agreement or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning a Purchaser is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Purchaser and allow such Purchaser, at
the Purchaser's expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.

               (d) Earnings Statement. The Company shall make generally
available to its security holders as soon as practical, but not later than
ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with, and in the manner provided by, the provisions
of Rule 158 under the Securities Act) covering a twelve-month period beginning
not later than the first day of the Company's fiscal quarter next following the
effective date of a Registration Statement.

                                       9
<PAGE>

        5. Indemnification

               (a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorneys' fees) and expenses (collectively, "Losses"),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in a Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in a Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (it being understood that
the Holder has approved Annex A hereto for this purpose) or (ii) in the case of
an occurrence of an event of the type specified in Section 3(d)(ii)-(vi), the
use by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 6(d).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding arising from or in connection with the transactions
contemplated by this Agreement of which the Company is aware.

               (b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based solely upon: (x) such Holder's
failure to comply with the prospectus delivery requirements of the Securities
Act or (y) any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, any Prospectus, or any form of prospectus, or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue statement
or omission is contained in any information so furnished in writing by such
Holder to the Company specifically for inclusion in such Registration Statement
or such Prospectus or (ii) to the extent that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in

                                       10
<PAGE>

writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration Statement
(it being understood that the Holder has approved Annex A hereto for this
purpose), such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (2) in the case of an occurrence of an event of the type
specified in Section 3(d)(ii)-(vi), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder
of the Advice contemplated in Section 6(d). In no event shall the liability of
any selling Holder hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

               (c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have prejudiced the Indemnifying Party.

               An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall reasonably believe that a material conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of one
separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.

                                       11
<PAGE>

               Subject to the terms of this Agreement, all reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Trading Days of written notice
thereof to the Indemnifying Party; provided, that the Indemnified Party shall
promptly reimburse the Indemnifying Party for that portion of such fees and
expenses applicable to such actions for which such Indemnified Party is not
entitled to indemnification hereunder, determined based upon the relative faults
of the parties.

               (d) Contribution. If the indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party or insufficient to hold an
Indemnified Party harmless for any Losses, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in this Agreement,
any reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.

               The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, except in the case of fraud by
such Holder.

               The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.

        6. Miscellaneous

               (a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each

                                       12
<PAGE>

Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

               (b) No Piggyback on Registrations. Except as set forth on
Schedule 6(b) attached hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the initial Registration Statement other than the
Registrable Securities. No Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company. The
Company shall not file any other registration statements until the initial
Registration Statement required hereunder is declared effective by the
Commission, provided that this Section 6(b) shall not prohibit the Company from
filing amendments to registration statements already filed.

               (c) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
a Registration Statement.

               (d) Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Section
3(d), such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement, or
until it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company will use its best efforts to ensure that the use of the Prospectus may
be resumed as promptly as it practicable. The Company agrees and acknowledges
that any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the
provisions of Section 2(b).

               (e) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice of
such determination and, if within fifteen days after the date of such notice,
any such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Holder requests to be registered; provided, however, that, the Company shall not
be required to register any Registrable Securities pursuant to this Section 6(e)
that are eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act or that are the subject of a then effective Registration
Statement.

                                       13
<PAGE>

               (f) Amendments and Waivers; Additional Purchasers. The provisions
of this Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and Holders of at least 75% of the then outstanding
Registrable Securities. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of all of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence. Notwithstanding the foregoing, additional purchasers under
the Purchase Agreement may become parties to this Agreement by executing a
counterpart signature page hereto, without any further consent of the Purchasers
and, upon execution of this Agreement, such additional purchasers shall be
deemed "Purchasers" for all purposes hereunder.

               (g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be delivered as
set forth in the Purchase Agreement.

               (h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
the Holders of at least 75% of the then-outstanding Registrable Securities. Each
Holder may assign their respective rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.

               (i) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 6(i),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.

               (j) Execution and Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

               (k) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be determined
with the provisions of the Purchase Agreement.

                                       14
<PAGE>

               (l) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.

               (m) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

               (n) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

               (o) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be
joined as an additional party in any proceeding for such purpose.

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

                                       15
<PAGE>

               IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.

                                        INTRAOP MEDICAL CORPORATION

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

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       16
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO IOPM RRA]

Name of Holder:  Dolphin Offshore Partners, L.P.
Signature of Authorized Signatory of Holder:   /s/ Peter E. Salas
                                              -------------------------
Name of Authorized Signatory:     Peter E. Salas
Title of Authorized Signatory:    General Partner

                           [SIGNATURE PAGES CONTINUE]

                                       17
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO IOPM RRA]

Name of Holder:  Alpha Capital AG
Signature of Authorized Signatory of Holder:    /s/ Konrad Ackerman
                                               ------------------------
Name of Authorized Signatory:     Konrad Ackerman
Title of Authorized Signatory:    Director

                           [SIGNATURE PAGES CONTINUE]

                                       18
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO IOPM RRA]

Name of Holder:  Crestview Capital Master, LLC
Signature of Authorized Signatory of Holder:    /s/ Stewart R. Flink
                                               ---------------------------------
Name of Authorized Signatory:     Stewart R. Flink
Title of Authorized Signatory:    Managing Member

                           [SIGNATURE PAGES CONTINUE]

                                       19
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO IOPM RRA]

Name of Holder:  Magnetar Capital Master Fund Ltd.
Signature of Authorized Signatory of Holder:  By:  Magnetar Financial LLC,
                                                   Its:  Investment Manager,
                                              By:  /s/ Paul Smith
                                                   -----------------------------
Name of Authorized Signatory:     Paul Smith
Title of Authorized Signatory:    General Counsel, Magnetar Financial LLC

                           [SIGNATURE PAGES CONTINUE]

                                       20
<PAGE>

                              Plan of Distribution

         Each Selling Stockholder (the "Selling Stockholders") of the common
stock ("Common Stock") of Intraop Medical Corporation, a Nevada corporation (the
"Company") and any of their pledgees, assignees and successors-in-interest may,
from time to time, sell any or all of their shares of Common Stock on the
Trading Market or any other stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:

          o    ordinary  brokerage  transactions  and  transactions in which the
               broker-dealer solicits purchasers;

          o    block trades in which the broker-dealer  will attempt to sell the
               shares  as agent but may  position  and  resell a portion  of the
               block as principal to facilitate the transaction;

          o    purchases  by a  broker-dealer  as  principal  and  resale by the
               broker-dealer for its account;

          o    an  exchange  distribution  in  accordance  with the rules of the
               applicable exchange;

          o    privately negotiated transactions;

          o    settlement of short sales  entered into after the effective  date
               of the registration statement of which this prospectus is a part;

          o    broker-dealers may agree with the Selling  Stockholders to sell a
               specified number of such shares at a stipulated price per share;

          o    a combination of any such methods of sale;

          o    through the  writing or  settlement  of options or other  hedging
               transactions,  whether through an options  exchange or otherwise;
               or

          o    any other method permitted pursuant to applicable law.

         The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.

         Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

                                       21
<PAGE>

         In connection with the sale of the Common Stock or interests therein,
the Selling Stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the Common Stock short and deliver these
securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

         The Selling Stockholders and any broker~dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker~dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling Stockholder has
informed the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).

         The Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares. The Company has agreed
to indemnify the Selling Stockholders against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.

         Because Selling Stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
Each Selling Stockholder has advised us that they have not entered into any
written or oral agreements, understandings or arrangements with any underwriter
or broker-dealer regarding the sale of the resale shares. There is no
underwriter or coordinating broker acting in connection with the proposed sale
of the resale shares by the Selling Stockholders.

         We agreed to keep this prospectus effective until the earlier of (i)
the date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

                                       22
<PAGE>

         Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to the Common Stock for the
applicable restricted period, as defined in Regulation M, prior to the
commencement of the distribution. In addition, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the Common Stock by the Selling Stockholders or
any other person. We will make copies of this prospectus available to the
Selling Stockholders and have informed them of the need to deliver a copy of
this prospectus to each purchaser at or prior to the time of the sale.

                                       23
<PAGE>

                                                                         Annex B

                           INTRAOP MEDICAL CORPORATION

                 Selling Securityholder Notice and Questionnaire

         The undersigned beneficial owner of common stock, par value $0.001 per
share (the "Common Stock"), of Intraop Medical Corporation, a Nevada corporation
(the "Company"), (the "Registrable Securities") understands that the Company has
filed or intends to file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of
October 25, 2005 (the "Registration Rights Agreement"), among the Company and
the Purchasers named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

         Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.

                                     NOTICE

         The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.

                                       24
<PAGE>

The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:

                                  QUESTIONNAIRE

1.       Name.

         (a)      Full Legal Name of Selling Securityholder

                  --------------------------------------------------------------

         (b)      Full Legal Name of Registered Holder (if not the same as (a)
                  above) through which Registrable Securities Listed in Item 3
                  below are held:

                  --------------------------------------------------------------

         (c)      Full Legal Name of Natural Control Person (which means a
                  natural person who directly or indirectly alone or with others
                  has power to vote or dispose of the securities covered by the
                  questionnaire):

                  --------------------------------------------------------------

2.  Address for Notices to Selling Securityholder:

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Telephone:
          ----------------------------------------------------------------------
Fax:
          ----------------------------------------------------------------------
Contact Person:
                ----------------------------------------------------------------

3.  Beneficial Ownership of Registrable Securities:

         (a) Type and Principal Amount of Registrable Securities beneficially
owned:

                  --------------------------------------------------------------
                  --------------------------------------------------------------
                  --------------------------------------------------------------

                                       25
<PAGE>

4.  Broker-Dealer Status:

         (a)      Are you a broker-dealer?

                                            Yes      No

         (b)      If "yes" to Section 4(a), did you receive your Registrable
                  Securities as compensation for investment banking services to
                  the Company.

                                            Yes      No

         Note:    If no, the Commission's staff has indicated that you should be
                  identified as an underwriter in the Registration Statement.

         (c)      Are you an affiliate of a broker-dealer?

                                            Yes      No

         (d)      If you are an affiliate of a broker-dealer, do you certify
                  that you bought the Registrable Securities in the ordinary
                  course of business, and at the time of the purchase of the
                  Registrable Securities to be resold, you had no agreements or
                  understandings, directly or indirectly, with any person to
                  distribute the Registrable Securities?

                                            Yes      No

         Note:    If no, the Commission's staff has indicated that you should be
                  identified as an underwriter in the Registration Statement.

5. Beneficial Ownership of Other Securities of the Company Owned by the Selling
Securityholder.

         Except as set forth below in this Item 5, the undersigned is not the
         beneficial or registered owner of any securities of the Company other
         than the Registrable Securities listed above in Item 3.

         (a) Type and Amount of Other Securities beneficially owned by the
Selling Securityholder:

                  --------------------------------------------------------------
                  --------------------------------------------------------------

                                       26
<PAGE>

6.  Relationships with the Company:

         Except as set forth below, neither the undersigned nor any of its
         affiliates, officers, directors or principal equity holders (owners of
         5% of more of the equity securities of the undersigned) has held any
         position or office or has had any other material relationship with the
         Company (or its predecessors or affiliates) during the past three
         years.

         State any exceptions here:

         -----------------------------------------------------------------------
         -----------------------------------------------------------------------

         The undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Registration Statement
remains effective.

         By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus and any amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration Statement and
the related prospectus.

         IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.

Dated:                                  Beneficial Owner:
       --------------------                              -----------------------

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

                                       27

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