Document:

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                                                                    Exhibit 4.10

NEITHER THIS 10% SENIOR CONVERTIBLE DEBENTURE NOR THE SECURITIES INTO WHICH IT
MAY BE CONVERTED HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND THEY MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND REGISTRATION OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION
IS NOT REQUIRED.

No. _____                                                     $______

                        10% SENIOR CONVERTIBLE DEBENTURE

     THIS 10% SENIOR CONVERTIBLE DEBENTURE (the "Debenture") is one of a duly
authorized issue of Debentures of Photoelectron Corporation, a corporation duly
organized and existing under the laws of the Commonwealth of Massachusetts (the
"Company"), designated as its 10% Senior Convertible Debentures in an aggregate
principal amount up to U.S. $10,000,000 (the "Debentures").

     FOR VALUE RECEIVED, the Company promises to pay to _________, the holder
hereof, or its order (the "Holder"), the principal sum of ________ Dollars (U.S.
$______) on May 1, 2005 (the "Maturity Date") and to pay interest on the
principal sum outstanding under this Debenture (the "Outstanding Principal
Amount"), at the rate of 10% per annum due and payable quarterly in arrears on
the first day of January, April, July and October of each year (each an
"Interest Payment Date"), with the first such payment due on _______. Accrual of
interest shall commence on the first business day to occur after the date hereof
and shall continue until payment in full of the principal sum has been made. The
interest so payable will be paid to the person in whose name this Debenture is
registered on the records of the Company regarding registration and transfers of
the Debentures (the "Debenture Register"). The principal of and interest on this
Debenture are payable in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts, at the address last appearing on the Debenture Register of the Company as
designated in writing by the Holder hereof from time to time, provided, however,
that, in lieu of paying such interest in coin or currency, the Company may, at
its option, pay interest on this Debenture for any Interest Payment Date by
adding the amount of such interest to the Outstanding Principal Amount due under
this Debenture ("PIK Interest") pursuant to a statement in the form of Exhibit 1
hereto ("PIK Statement") delivered by the Company to the Holder on or prior to
the applicable Interest Payment Date. If the cash interest due hereunder is not
paid to the Holder by the applicable Interest Payment Date, then the Holder
shall be entitled to the addition of PIK Interest hereunder and to the delivery
of a PIK Statement

                                       -1-

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with respect thereto. The Company will pay the Outstanding Principal Amount and
all accrued and unpaid interest due upon this Debenture on the Maturity Date, to
the Holder of this Debenture as of the tenth (10th) day prior to the Maturity
Date and addressed to such Holder at the last address appearing on the Debenture
Register.

     This Debenture is subject to the following additional provisions:

     1. Exchange. The Debentures are exchangeable for an equal aggregate
principal amount of Debentures of different denominations as requested by the
Holder surrendering the same. No service charge will be made for such
registration or transfer or exchange.

     2. Transfers. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the United States only in compliance with the Securities Act of
1933, as amended (the "Securities Act"), and applicable state securities laws
and in accordance with other applicable provisions hereof. Prior to due
presentment for transfer of this Debenture, the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
all other purposes, whether or not this Debenture be overdue, and the Company
shall not be affected by notice to the contrary.

     3. Definitions. For purposes hereof the following definitions shall apply:

          "Closing Date" shall mean the date of original issuance of the
     debenture.

          "Closing Date Market Price" shall mean $4.00, subject to adjustment
     from time to time as set forth in Paragraph 6 hereof.

          "Common Stock" shall mean the Common Stock of the Company.

          "Company" shall have the meaning set forth in the first introductory
     paragraph of this Debenture.

          "Conversion Notice" shall have the meaning set forth in Paragraph
     5(c).

          "Conversion Rate" shall have the meaning set forth in Paragraph 5(b).

          "Debenture" shall have the meaning set forth in the first introductory
     paragraph of this Debenture.

          "Debenture Register" shall have the meaning set forth in the second
     introductory paragraph of this Debenture.

                                       -2-

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          "Debentures" shall have the meaning set forth in the first
     introductory paragraph of this Debenture.

          "Events of Default" shall have the meaning set forth in Paragraph 13.

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as
     amended.

          "Exchange Act Reports " shall mean the Company's Annual Report on Form
     10-K sent to the Company's stockholders and all documents filed by the
     Company with the Securities and Exchange Commission pursuant to sections
     13(a), 13(c), 14 or 15(d) of the Exchange Act (excluding preliminary proxy
     statement filings).

          "Holder" shall have the meaning set forth in the second introductory
     paragraph of this Debenture.

          "Holder Conversion Date" shall have the meaning set forth in Paragraph
     5(c).

          "Interest Payment Date" shall have the meaning set forth in the second
     introductory paragraph of this Debenture.

          "Last Closing Date" shall mean the date of the last closing of the
     sale of the Debentures offered pursuant to the Company's Confidential
     Private Placement Memorandum dated May 1, 2000.

          "Maturity Date" shall have the meaning set forth in the second
     introductory paragraph of this Debenture.

          "Outstanding Principal Amount" shall have the meaning set forth in the
     second introductory paragraph of this Debenture.

          "Paragraph 4 Transaction" shall have the meaning set forth in
     Paragraph 4.

          "PIK Interest" shall have the meaning set forth in the second
     introductory paragraph of this Debenture.

          "PIK Statement" shall have the meaning set forth in the second
     introductory paragraph of this Debenture.

          "Registration Rights Agreement" shall have the meaning set forth in
     Paragraph 16.

          "Securities Act" shall have the meaning set forth in Paragraph 2.

                                       -3-

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          "Subscription Agreement" shall mean the Convertible Debenture
     Subscription Agreement dated as of ______ between the Company and _____ for
     the purchase of 10% Senior Convertible Debentures.

          "Underlying Shares" shall mean the shares of Common Stock into which
     this Debenture is convertible.

     4. Merger, Consolidation. If at any time there occurs any consolidation or
merger of the Company with or into any other corporation or other entity or
person (whether or not the Company is the surviving corporation) or any other
corporate reorganization or transaction or series of related transactions, in
any of which in excess of 50% of the Company's voting power is transferred (a
"Paragraph 4 Transaction"), then this Debenture, to the extent then outstanding
and notwithstanding anything in Paragraph 5(a) to the contrary, shall become
convertible into the same cash, property, or securities as the Holder would have
received if this Debenture had been converted pursuant to paragraph 5(a) hereof
immediately prior to the record date or the effective date, as applicable, of
such transaction.

     5. Conversion. This Debenture is subject to conversion as follows:

          (a) (i) Holder's Right to Convert. The Outstanding Principal Amount of
     this Debenture shall be convertible at any time, in whole or in part, at
     the option of the Holder hereof, into fully paid, validly issued and
     nonassessable shares of Common Stock.

              (ii) Accrued But Unpaid Interest. Notwithstanding anything in
          this Debenture to the contrary, the conversion of any part or all of
          the Outstanding Principal Amount of this Debenture shall include,
          without limitation, the conversion of all the accrued but unpaid
          interest on the Outstanding Principal Amount so converted.

          (b) Conversion Price for Converted Shares. Subject to Section 5(a),
     the Outstanding Principal Amount of this Debenture that is converted into
     shares of Common Stock shall be convertible into the number of shares of
     Common Stock which results from application of the following formula:

                                      P + I
                      -------------------------------------
                            Closing Date Market Price

         P = principal amount of this Debenture submitted for conversion

         I = accrued but unpaid interest on P as of the Holder Conversion Date

     The number of shares of Common Stock into which the Outstanding Principal
Amount of this Debenture, and interest accrued thereon, may be converted
pursuant to this paragraph is hereafter referred to the "Conversion Rate."

                                       -4-

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          (c) Mechanics of Conversion. In order to convert this Debenture (in
     whole or in part) into full shares of Common Stock, the Holder shall
     surrender this Debenture, duly endorsed, by either overnight courier or by
     hand, to the principal office of the Company, and shall give written notice
     in the form of Exhibit 2 hereto (the "Conversion Notice") by facsimile
     (with the original of such notice forwarded with the foregoing courier) to
     the Company at such office that the Holder elects to convert the principal
     amount specified therein, which such notice and election shall be
     irrevocable by the Holder; provided, however, that the Company shall not be
     obligated to issue certificates evidencing the shares of the Common Stock
     issuable upon such conversion unless either the Debenture evidencing the
     principal amount is delivered to the Company as provided above, or the
     Holder notifies the Company that such Debenture(s) have been lost, stolen
     or destroyed and promptly executes an agreement reasonably satisfactory to
     the Company to indemnify the Company from any loss incurred by its
     connection with such Debentures.

     Upon receipt of such Conversion Notice, the Company shall immediately
verify the Holder's calculation of the Conversion Rate and shall use its best
efforts to issue and deliver within three business days after delivery to the
Company of such Debenture(s), or after receipt of such agreement and
indemnification, to such Holder of Debenture(s) at the address of the Holder, or
to its designee, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid, together with a
Debenture or Debentures for the principal amount of Debentures not submitted for
conversion. The date on which the Conversion Notice is given (the "Holder
Conversion Date") shall be deemed to be the date the Company received by
facsimile the Conversion Notice, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock on
such date.

     6. Stock Splits: Dividends, Adjustments, Reorganizations.

          (a) Adjustment for Stock Splits, Combinations, Dividends and
     Distributions. In the event the Company at any time or from time to time
     after the Closing Date combines the outstanding shares of its Common Stock
     into a smaller number of shares, then the number of shares of Common Stock
     issuable upon conversion of this Debenture shall be similarly adjusted. In
     the event the Company at any time or from time to time after the Closing
     Date makes, or fixes a record date for the determination of holders of
     Common Stock entitled to receive, a dividend or other distribution payable
     in securities of the Company (including, without limitation, rights to
     acquire Common Stock or such other securities), then and in each such event
     provision shall be made so that the Holders of Debentures shall receive
     upon conversion thereof pursuant to Paragraph 5 hereof, in addition to the
     number of shares of Common Stock receivable thereupon, the amount of such
     other securities of the Company to which a Holder on the relevant record or
     payment date, as applicable, of the number of shares of Common Stock so
     receivable upon conversion would have been entitled, plus any

                                       -5-

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     dividends or other distributions which would have been received with
     respect to such securities had such Holder thereafter, during the period
     from the date of such event to and including the Holder Conversion Date,
     retained such securities, subject to all other adjustments called for
     during such period under this Paragraph 6 with respect to the rights of the
     Holders of the Debentures. For purposes of this Paragraph 6(a), the number
     of shares of Common Stock so receivable upon conversion by the Holder shall
     be deemed to be that number which the Holder would have received upon
     conversion of the entire Outstanding Principal Amount hereof if the Holder
     Conversion Date had been the day preceding the date upon which the Company
     announced the making of such dividend or other distribution.

          (b) Adjustment for Reclassification, Exchange and Substitution. In the
     event that at any time or from time to time after the Closing Date, the
     Common Stock issuable upon the conversion of the Debentures is changed into
     the same or a different number of shares of any class or classes of stock,
     whether by recapitalization, reclassification or otherwise (other than a
     subdivision or combination of shares or stock dividend or reorganization
     provided for elsewhere in this Paragraph 6 or a merger or consolidation,
     provided for in Paragraph 4), then and in each such event each Holder of
     Debentures shall have the right thereafter to convert such Debenture into
     the kind of stock receivable upon such recapitalization, reclassification
     or other change by holders of shares of Common Stock all subject to further
     adjustment as provided herein. In such event, the formulas set forth herein
     for conversion and redemption shall be equitably adjusted to reflect such
     change in number of shares or, if shares of a new class of stock are
     issued, to reflect the market price of the class or classes of stock issued
     in connection with the above described transaction.

          (c) Reorganizations. If at any time or from time to time after the
     Closing Date there is a capital reorganization of the Common Stock (other
     than a recapitalization, subdivision, combination, reclassification or
     exchange of shares provided for elsewhere in this Paragraph 6) then, as a
     part of such reorganization, provision shall be made so that the Holders of
     the Debentures shall thereafter be entitled to receive upon conversion of
     the Debentures the number of shares of stock or other securities or
     property to which a holder of the number of shares of Common Stock
     deliverable upon conversion would have been entitled on such capital
     reorganization. In any such case, appropriate adjustment shall be made in
     the application of the provisions of this Paragraph 5 with respect to the
     rights of the Holders of the Debentures after the reorganization to the end
     that the provisions of this Paragraph 6 shall be applicable after that
     event and be as nearly equivalent as may be practicable, including, by way
     of illustration and not limitation, by equitably adjusting the formulae set
     forth herein for conversion and redemption to reflect the market price of
     the securities or property issued in connection with the above described
     transaction.

     7. Fractional Shares. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder. The
number

                                       -6-

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of shares of Common Stock that are issuable upon any conversion shall be rounded
up or down to the nearest whole share.

     8. Reservation of Stock Issuable Upon Conversion. The Company has reserved
and the Company shall continue to reserve and keep available at all times shares
of Common Stock for the purpose of enabling the Company to satisfy any
obligation to issue shares of its Common Stock upon conversion of the
Debentures. The number of shares so reserved may be reduced by the number of
shares actually delivered pursuant to conversion of Debentures (provided that,
in no event shall the number of shares so reserved be less than the maximum
number required to satisfy remaining conversion rights on the unconverted
Debentures) and the number of shares so reserved shall be increased to reflect
stock splits and stock dividends and distributions.

     9. Corporate Obligation. Except as otherwise provided herein, no recourse
under or upon any obligation, covenant or agreement contained in this Debenture,
or for any claim based thereon or otherwise in respect thereof, shall be had
against any promoter, subscriber to shares for amounts in excess of the
subscription, incorporator, stockholder, officer, or director, as such, past,
present, or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation or through any
trustee, receiver, or any other person, whether by virtue of any constitution,
statute, or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Debenture is solely a
corporate obligation of the Company and that any and all such personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every such promoter, subscriber
(for amounts in excess of the subscription), incorporator, stockholder, officer,
or director, as such, are hereby expressly waived and released by every Holder
hereof by the acceptance of this Debenture and as a part of the consideration
for the issue hereof.

     10. Obligations Absolute. No provision of this Debenture, other than
conversion as provided herein, shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place and rate, and in the manner,
herein prescribed.

     11. Waivers of Demand, Etc. The Company hereby expressly waives demand and
presentment for payment, notice of nonpayment, protest, notice of protest,
notice of dishonor, notice of intent to accelerate, prior notice of bringing of
suit and diligence in taking any action to collect amounts called for hereunder
and will be directly and primarily liable for the payments of all sums owing and
to be owing hereon, regardless of and without any notice (except as required by
law), diligence, act or omission as or with respect to the collection of any
amount called for hereunder.

     12. Replacement Debentures. In the event that any Holder notifies the
Company that its Debenture(s) have been lost, stolen or destroyed, replacement
Debenture(s) identical in all respects to the original Debenture(s) (except for
registration number and Outstanding Principal Amount, if different than that
shown on the original

                                       -7-

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Debenture(s)) shall be issued to the Holder, provided that the Holder executes
and delivers to the Company an agreement reasonably satisfactory to the Company
to indemnify the Company from any loss incurred by it in connection with such
Debenture(s).

     13. Defaults. If one or more of the following described "Events of Default"
shall occur:

     (a)  The Company shall default in the payment of (i) interest on this
          Debenture, and such default shall continue for five (5) business days
          after the due date thereof, or (ii) the principal of this Debenture;
          or

     (b)  Any of the representations or warranties made by the Company herein,
          in the Subscription Agreement, or in any certificate or financial or
          other written statements of the Company heretofore or hereafter
          furnished by or on behalf of the Company in connection with the
          execution and delivery of this Debenture or the Subscription Agreement
          shall be false or (when taken together with other information
          furnished by or on behalf of the Company, including Exchange Act
          Reports) misleading in any material respect at the time made; or

     (c)  The Company shall fail to perform or observe any material covenant or
          agreement in the Subscription Agreement, or any other covenant, term,
          provision, condition, agreement or obligation of the Company under
          this Debenture and such failure shall continue uncured for a period of
          ten (10) business days after notice from the Holder of such failure;
          or

     (d)  The Company shall (1) admit in writing its inability to pay its debts
          generally as they mature; (2) make a general assignment for the
          benefit of creditors or commence proceedings for its dissolution; or
          (3) apply for or consent to the appointment of a trustee, liquidator
          or receiver for it or for a substantial part of its property or
          business; or

     (e)  A trustee, liquidator or receiver shall be appointed for the Company
          or for a substantial part of its property or business without its
          consent and shall not be discharged within sixty (60) days after such
          appointment; or

     (f)  Any governmental agency or any court of competent jurisdiction at the
          instance of any governmental agency shall assume custody or control of
          the whole or any substantial portion of the properties or

                                       -8-

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          assets of the Company and shall not be dismissed within sixty (60)
          days thereafter; or

     (g)  Bankruptcy, reorganization, insolvency or liquidation proceedings or
          other proceedings, or relief under any bankruptcy law or any law for
          the relief of debt shall be instituted by or against the Company and,
          if instituted against the Company, shall not be dismissed within sixty
          (60) days after such institution or the Company shall by any action or
          answer approve of, consent to, or acquiesce in any such proceedings or
          admit to any material allegations of, or default in answering a
          petition filed in, any such proceeding;

then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may, by notice to the
Company declare the Outstanding Principal Amount of this Debenture and all
accrued and unpaid interest thereon immediately due and payable, and the Holder
may immediately, and without expiration of any period of grace, enforce any and
all of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law.

     14. Savings Clause. In case any provision of this Debenture is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby.

     15. Entire Agreement. This Debenture and the agreements referred to in this
Debenture constitute the full and entire understanding and agreement between the
Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Company and a
majority-in-interest of the Holders.

     16. Assignment, Etc. The Holder may, subject to compliance with the
Subscription Agreement, without notice, transfer or assign this Debenture or any
interest herein and may mortgage, encumber or transfer any of its rights or
interest in and to this Debenture or any part hereof and, without limitation,
each assignee, transferee and mortgagee (which may include any affiliate of the
Holder) shall have the right to transfer or assign its interest; provided,
however, that (i) each such assignee, transferee and mortgagee shall be an
accredited investor as that term is defined in Rule 501 of Registration D under
the Securities Act and each such assignment, transfer, mortgagee or other
encumbrance shall comply with Regulation D under the Securities Act as though
such transaction has been a part of the original offer and sale of the
Debentures by the Company and Regulation D was applicable thereto, or (ii) the
holder will furnish the Company with an opinion of counsel to the effect that
such assignment, transfer, mortgage or other encumbrance is otherwise exempt
from the registration requirements

                                       -9-

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under the Securities Act. Each such assignee, transferee and mortgagee shall
have all of the rights and obligations of the Holder under this Debenture. The
Company agrees that, subject to compliance with the Subscription Agreement,
after receipt by the Company of written notice of assignment from the Holder or
from the Holders' assignee, all principal, interest, and other amounts which are
then due and thereafter become due under this Debenture shall be paid to such
assignee at the place of payment designated in such notice. This Debenture shall
be binding upon the Company and its successors and shall inure to the benefit of
the Holder and its successors and assigns.

     17. No Waiver. No failure on the part of the Holder to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.

     18. Miscellaneous. Unless otherwise provided, any notice under this
Agreement shall be given in writing and shall be deemed effectively given: (a)
upon personal delivery to the party to be notified; (b) upon confirmation of
receipt by fax by the party to be notified; (c) one business day after deposit
with a reputable overnight courier, prepaid for overnight delivery and addressed
as set forth in (d); or (d) three days after deposit with the United States Post
Office, postage prepaid, certified with return receipt requested and addressed
to the party to be notified at the address indicated for such party on the
signature page, or at such other address as such party may designate by ten
days' advance written notice to the other parties given in the foregoing manner.
Whenever the sense of this Debenture requires, words in the singular shall be
deemed to include the plural and words in the plural shall be deemed to include
the singular. Paragraph headings are for convenience only and shall not affect
the meaning of this document.

     19. Choice of Law and Venue: Waiver of Jury Trial. This Debenture shall be
construed under the laws of the Commonwealth of Massachusetts, without regard to
its principles of conflicts of law or choice of law. The Company hereby agrees
that all actions or proceedings arising directly or indirectly from or in
connection with this Debenture shall, at the Holder's sole option, be litigated
only in the United States District Court for the District of Massachusetts
located in Boston, Massachusetts, or in the Superior Court located in Middlesex
County, Massachusetts. The Company consents to the jurisdiction and venue of the
foregoing courts and consents that any process or notice of motion or other
application to either of said courts or a judge thereof may be served inside or
outside the Commonwealth of Massachusetts by certified mail, return receipt
requested, directed to the Company at the address indicated on the signature
page, or at such other address as the Company may designate by ten days' advance
written notice to the Holder given in accordance with Paragraph 18 (and service
so made shall be deemed complete five (5) days after the same has been posted as
aforesaid) or by personal service or in such other manner as may be permissible
under the rules of said courts.

                                       -10-

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     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.

                            Dated:          ,
                                  ------- --  -----

                            PHOTOELECTRON CORPORATION

                         By:
                             --------------------------
                             Name: Timothy W. Baker
                             Title:  Chief Financial Officer and Treasurer
                             Address:  5 Forbes Road,
                                       Lexington, MA 02421

                                       -11-

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                                    EXHIBIT 1

                                  PIK STATEMENT

Date:
     -----------------------

To:  [Name of Holder of Debenture] ("Holder")

Re: 10% Senior Convertible Debenture ("Debenture") of Photoelectron Corporation
(the "Company") No. __________, in the face principal amount of U.S.$_________.

     In lieu of paying interest on the above-referenced Debenture in coin or
currency, the Company hereby elects to pay interest on the Debenture, for the
Interest Payment Date indicated below, by having the amount of such interest
added to the Outstanding Principal Amount due under the Debenture. The Company
hereby certifies to the Holder, its successors and assigns that the Outstanding
Principal Amount due under the Debenture after delivery of this PIK Statement
equals the amount indicated below. Capitalized terms used in this PIK Statement
and not otherwise defined shall have the meaning ascribed thereto in the
Debenture.

         Interest Payment Date:__________________

         Outstanding Principal Amount prior
         to issuance of this PIK Statement:               U.S.$_____________

         PIK Interest:                                    U.S.$_____________

         Outstanding Principal Amount after
         issuance of this PIK Statement:                  U.S.$_____________

     IN WITNESS WHEREOF, this PIK Statement has been duly executed and delivered
on the date first written above.

                                     PHOTOELECTRON CORPORATION

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

                                       -12-

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                                    EXHIBIT 2

                      (To Be Executed by Registered Holder
                         in order to Convert Debenture)
                                CONVERSION NOTICE
                                       FOR
                        10% SENIOR CONVERTIBLE DEBENTURE

The undersigned, as Holder of the 10% Senior Convertible Debenture Due May 1,
2005 of Photoelectron Corporation (the "Company"), No. ______, in the
outstanding principal amount of U.S.$_____________ (the "Debenture"), hereby
irrevocably elects to convert U.S.$__________ of the outstanding principal
amount of the Debenture together with all accrued but unpaid interest under the
Debenture into shares of Common Stock of the Company (the "Common Stock"),
according to the conditions of the Debenture, as of the date written below. The
undersigned hereby requests that share certificates for the Common Stock to be
issued to the undersigned pursuant to this Conversion Notice be issued in the
name of, and delivered to, the undersigned. No fee will be charged to the Holder
for any conversion.

Conversion Information:    NAME OF HOLDER:
                                          ---------------------------

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

                           Print Address of Holder:

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

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

                           ------------------------------------------
                           Date of Conversion

                           ------------------------------------------
                           Application Conversion Rate

                                       -13-<PAGE>

                                                                   Exhibit 10.4

                                        February 6, 2002

Lawrence M. Smith, President
Beverly National Corporation
240 Cabot Street
Beverly, MA 01915

Dear Larry:

     Reference is made to your Employment Agreement dated May 31, 1991, as
amended December 22, 1998, between us (the "Agreement").

     This letter will confirm our understanding that the terms of the Agreement
are amended to provide that:

     1. A new paragraph (c) is hereby added to Section 3 of the Agreement to
read as follows:

     "(c)  Repurchase of Shares. The Company shall repurchase from the Employee
           --------------------
     22,500 shares of the Employee's stock in the Company on or prior to June
     30, 2002. The price to be paid for the shares shall be the market price for
     such shares at the time the Employee tenders the stock to the Company. The
     shares shall be held by the Company as treasury stock."

     2. A new paragraph (e) is herby added to Section 8 of the Agreement to read
as follows:

     "(e)  Payment Upon Retirement. Upon the Employee's retirement, the Company
           -----------------------
     shall pay the Employee a lump sum bonus in such amount as shall result in
     the Employee being paid, after all standard deductions are taken from such
     bonus, an amount equal to the Employee's gross W-2 wages for 2001. As used
     in this Section, "standard deductions" shall mean such deductions normally
     made from the Employee's compensation, including, but not limited to
     withholding for federal and state tax, FICA, and Medicare. As used in this
     Section, "gross W-2 wages" shall mean the Employee's total W-2
     compensation, including amounts paid under any salary reduction agreements
     for plans under Sections 401(k), or 125 or 129

<PAGE>

                                       2

     of the Internal Revenue Code of 1986, as amended. In the event the Employee
     retires on or prior to January 2, 2003, the Company will pay the bonus to
     the Employee on January 2, 2003. In the event the Employee retires after
     January 2, 2003, the Company will pay the Employee on the effective date of
     his retirement."

     3. In addition to the benefits on Exhibit A, you shall be entitled to
purchase from the Corporation the automobile presently provided to you for one
dollar ($1.00) upon the date of your retirement as President of Beverly National
Corporation and Beverly National Bank.

     All other provisions of the Agreement remain in full force and effect.

     Please sign below to indicate your concurrence with the foregoing.

                                      Sincerely,

                                      BEVERLY NATIONAL CORPORATION

                                      By: /s/  Alice B. Griffin
                                          ----------------------------------

AGREED:

/s/  Lawrence M. Smith
---------------------------
Lawrence M. Smith

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