Document:

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                                                                     EXHIBIT 4.2

                         REGISTRATION RIGHTS AGREEMENT

            This Registration Rights Agreement is made and entered into as of
November 20, 2001 (this "Agreement"), by and among Starbase Corporation, a
Delaware corporation (the "Company"), and the purchasers listed on Schedule 1
hereto (the "Purchasers").

            This Agreement is being entered into pursuant to the Convertible
Debenture and Warrant Purchase Agreement, dated as of the date hereof, by and
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 shall have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

            "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.

            "Blackout Period" shall have the meaning set forth in Section 3(n).

            "Board" shall have the meaning set forth in Section 3(n).

            "Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.

            "Commission" means the Securities and Exchange Commission.

            "Common Stock" means the Company's Common Stock, par value $.01 per
share.

            "Debentures" means the convertible debentures of the Company issued
to the Purchasers pursuant to the Purchase Agreement.

            "Effectiveness Date" means with respect to the Registration
Statement the earlier of (a) the 90th day following the Filing Date, and (b) the
date which is within five (5) days of the date on which the Commission informs
the Company that the Commission will (i) not review the Registration Statement
or (ii) that the Company may request the acceleration of the effectiveness of
the Registration Statement.

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

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            "Event" shall have the meaning set forth in Section 7(e).

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

            "Filing Date" means the earlier of the date the Registration
Statement is filed and the 30th day following the Tranche I Closing Date.

            "Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities including, including without
limitation, the Purchasers and their assignees.

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

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

            "Liquidated Damages" shall have the meaning set forth in Section
7(e).

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

            "Nasdaq" shall mean the NASDAQ National Market System.

            "Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.

            "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 the 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 the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.

            "Registrable Securities" means (i) the shares of Common Stock
issuable upon conversion of the Debentures and any interest accrued thereon (the
"Conversion Shares") and exercise of the Warrants (the "Warrant Shares"), and
upon any stock split, stock dividend, recapitalization or similar event with
respect to such Conversion Shares and Warrant Shares and (ii) any other dividend
or other distribution with respect to, conversion or exchange of, or in
replacement of, Registrable Securities; provided, however, that Registrable
Securities shall include (but not be limited to) a number of shares of Common
Stock equal to no less than 200% of the maximum number of shares of Common Stock
which would be issuable upon conversion of the Debentures and upon exercise of
the Warrants, assuming such conversion and exercise occurred on the Tranche II
Closing Date or the Filing Date, whichever date would result in the

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greater number of Registrable Securities. Notwithstanding anything herein
contained to the contrary, such registered shares of Common Stock shall be
allocated on a pro-rata basis among the Holders based on the total number of
Registrable Securities issued or issuable as of each date that a Registration
Statement, as amended, relating to the resale of the Registrable Securities is
declared effective by the Commission. Notwithstanding anything contained herein
to the contrary, if the actual number of shares of Common Stock issuable upon
conversion of the Debentures exceeds 200% of the number of shares of Common
Stock issuable upon conversion of the Debentures and exercise of the Warrants
based upon a computation as at the Tranche II Closing Date or the Filing Date,
the term "Registrable Securities" shall be deemed to include such additional
shares of Common Stock.

            "Registration Statement" means the registration statement and any
additional registration statements contemplated by Section 2, 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 in such registration
statement.

            "Rule 144" means Rule 144 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 effect as such Rule.

            "Rule 158" means Rule 158 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 effect as such Rule.

            "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 effect as such Rule.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Tranche I Closing Date" shall have the meaning set forth in the
Purchase Agreement.

            "Tranche II Closing Date" shall have the meaning set forth in the
Purchase Agreement.

        2. Registration. On or prior to the Filing Date the Company shall
prepare and file with the Commission a "shelf" Registration Statement covering
all Registrable Securities 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). The Company shall (i) not permit any
securities other than the Registrable Securities to be included in the
Registration Statement, (ii) use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as soon as possible
after the filing thereof, but in any event prior to the Effectiveness Date, and
to keep such Registration Statement continuously effective under the Securities
Act until such date

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as is the earlier of (x) the date when all Registrable Securities covered by
such Registration Statement have been sold or (y) the date on which the
Registrable Securities may be sold without any restriction pursuant to Rule
144(k) as determined by the counsel to the Company pursuant to a written opinion
letter, addressed to the Company's transfer agent to such effect (the
"Effectiveness Period"). If at any time and for any reason, an additional
Registration Statement is required to be filed because at such time the actual
number of shares of Common Stock into which the Debentures are convertible and
the Warrants are exercisable exceeds one hundred twenty-five percent (125%) of
the number of shares of Registrable Securities remaining under the Registration
Statement, the Company shall have twenty (20) Business Days to file such
additional Registration Statement, and the Company shall use its best efforts to
cause such additional Registration Statement to be declared effective by the
Commission as soon as possible, but in no event later than thirty (30) days
after filing. If at such time in the reasonable opinion of the Purchasers there
is not or will not be a sufficient number of Registrable Securities to be issued
upon conversion of the principal amount of the Debentures then outstanding, or
upon the exercise of the Warrants then outstanding, the Purchasers shall be
entitled to demand that the Company prepare and file an additional Registration
Statement.

        3. Registration Procedures.

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

            (a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith) in
accordance with the method or methods of distribution thereof as specified by
the Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall (i) furnish to the Holders
and their counsel, copies of all such documents proposed to be filed, which
documents (other than those incorporated by reference) will be subject to the
review of such Holders and such counsel, and (ii) at the request of any Holder
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 counsel to such Holders, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or their counsel shall reasonably object in writing within three (3)
Business Days of their receipt thereof.

            (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the 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

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Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the 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 the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.

            (c) Notify the Holders of Registrable Securities to be sold and
their counsel as promptly as possible (and, in the case of (i)(A) below, not
less than five (5) Business Days prior to such filing) and (if requested by any
such Person) confirm such notice in writing no later than one (1) Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the 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 and (C) with respect to the 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 the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) 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
purpose; and (vi) of the occurrence of any event that makes any statement made
in the 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 the Registration Statement, Prospectus or other
documents so that, in the case of the 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 the light of the circumstances under which they
were made, not misleading.

            (d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness of the
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.

            (e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-

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effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment.

            (f) Furnish to each Holder and their counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, 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 and their counsel, without
charge, as many copies of the Registration Statement, Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and 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.

            (h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders and
their counsel in connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable Securities for
offer and sale under the securities or blue sky laws of such jurisdictions
within the United States as any Holder requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.

            (i) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any Holder may request at least
two (2) Business Days prior to any sale of Registrable Securities.

            (j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the 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 the 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 the light of the circumstances under which they were made, not misleading.

            (k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on Nasdaq and any other
securities exchange, quotation

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system, market or over-the-counter bulletin board, if any, on which similar
securities issued by the Company are then listed as and when required pursuant
to the Purchase Agreement.

            (l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than forty-five (45) days after the end of
any twelve (12)-month period (or ninety (90) days after the end of any twelve
(12)-month period if such period is a fiscal year) commencing on the first day
of the first fiscal quarter of the Company after the effective date of the
Registration Statement, which statement shall conform to the requirements of
Rule 158.

            (m) Require each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who fails to furnish such information within a reasonable time
prior to the filing of each Registration Statement, supplemented Prospectus
and/or amended Registration Statement.

            If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.

            Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.

            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(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing 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.

            (n) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or

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disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement, then the Company may suspend effectiveness of
a registration statement and suspend the sale of Registrable Securities under a
Registration Statement for a period not to exceed twenty (20) consecutive days,
provided that the Company may not suspend its obligation under this Section 3(n)
for more than forty-five (45) days in the aggregate during any twelve (12) month
period (each, a "Blackout Period"); provided, however, that no such suspension
shall be permitted for consecutive twenty (20) day periods, arising out of the
same set of facts, circumstances or transactions.

            (o) Within two (2) business days after the Registration Statement
which includes the Registrable Securities is ordered effective by the
Commission, the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Holders whose Registrable Securities are included in such
Registration Statement) confirmation that the Registration Statement has been
declared effective by the Commission in the form attached hereto as Exhibit A.

        4. Registration 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
the Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation the following: (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with Nasdaq and each other securities exchange or market on which
Registrable Securities are required hereunder to be listed, (B) with respect to
filings required to be made with the Commission, and (C) in compliance with
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees of counsel for the Company and
counsel for the Holders, in the case of the counsel, to a maximum amount of
$5,000 (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, including, without limitation, the Company's independent public
accountants (including the expenses of any comfort letters or costs associated
with the delivery by independent public accountants of a comfort letter or
comfort letters). 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,

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the fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.

        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, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by
applicable law, from and against any and all claims, losses, damages,
liabilities, penalties, judgments, costs (including, without limitation, costs
of investigation) and expenses (including, without limitation, 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 the
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 the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that 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, which information was
reasonably relied on by the Company 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 the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 5(c) hereof) and shall survive the
transfer of the Registrable Securities by the Holders.

            (b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, the 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, and the
respective successors, assigns, estate and personal representatives of each of
the foregoing, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, arising solely out of or based solely upon any
untrue statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any 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 the light of the circumstances under which
they were made)

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not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in or omitted from any information so
furnished in writing by such Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus 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 the Registration Statement, such
Prospectus or such form of Prospectus Supplement. Notwithstanding anything to
the contrary contained herein, the Holder shall be liable under this Section
5(b) for only that amount as does not exceed the net proceeds to such Holder as
a result of the sale of Registrable Securities pursuant to such Registration
Statement.

            (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 promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party) in writing, and the
Indemnifying Party shall 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 proximately and materially
adversely 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; or (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 have been advised by counsel that a 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 such 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.

            All 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

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Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten (10) Business Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).

            (d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party because of a failure or refusal
of a governmental authority to enforce such indemnification in accordance with
its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, 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 Section 5(c), 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.
Notwithstanding anything to the contrary contained herein, the Holder shall be
liable or required to contribute under this Section 5(c) for only that amount as
does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.

            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.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

            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. Rule 144.

            As long as any Holder owns Debentures, Conversion Shares, Warrants
or Warrant Shares, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true
and complete copies of all such filings. As long as any Holder owns

                                       11
<PAGE>

Debentures, Conversion Shares, Warrants or Warrant Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will prepare and furnish to the Holders and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any Holder may reasonably request, all to the extent required
from time to time to enable such Person to sell Conversion Shares and Warrant
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including providing any legal opinions of counsel to the Company referred to in
the Purchase Agreement. Upon the request of any Holder, the Company shall
deliver to such Holder a written certification of a duly authorized officer as
to whether it has complied with such requirements.

        7. 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 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 Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof entered into and currently in effect,
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 is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as set forth in Schedule
7(b) hereto, neither the Company nor any of its subsidiaries has previously
entered into any agreement currently in effect granting any registration rights
with respect to any of its securities to any Person. Without limiting the
generality of the foregoing, without the written consent of the Holders of a
majority of the then outstanding Registrable Securities, the Company shall not
grant to any Person the right to request the Company to register any securities
of the Company under the Securities Act unless the rights so granted are subject
in all respects to the prior rights in full of the Holders set forth herein, and
are not otherwise in conflict with the provisions of this Agreement.

            (c) No Piggyback on Registrations. 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 Registration Statement, and except
as set forth in Schedule 7(b) hereto the Company shall not after the date hereof
enter into any agreement providing such right to any of its security holders,
unless the right so granted is subject in all respects to the prior rights in
full

                                       12
<PAGE>

of the Holders set forth herein, and is not otherwise in conflict with the
provisions of this Agreement.

            (d) Piggyback Registrations. If at any time when there is not an
effective Registration Statement covering any Registrable Securities, 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 its 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 stock option or other employee benefit plans, the Company shall
send to each holder of Registrable Securities written notice of such
determination and, if within thirty (30) days after receipt of such notice, any
such holder shall so request in writing (which request shall specify the
Registrable Securities intended to be disposed of by the Holders), the Company
will cause the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holder, to
the extent requisite to permit the disposition of the Registrable Securities so
to be registered, provided that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 7(d) for the
same period as the delay in registering such other securities. 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 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the managing
underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the managing underwriter should reasonably determine
that the inclusion of such Registrable Securities would materially adversely
affect the offering contemplated in such registration statement, and, based on
such determination, recommends inclusion in such registration statement of fewer
or none of the Registrable Securities of the Holders, then, as applicable (x)
the number of Registrable Securities of the Holders included in such
registration statement shall be reduced pro-rata among such Holders (based upon
the number of Registrable Securities requested to be included in the
registration), if the Company after consultation with the underwriter(s)
recommends the inclusion of fewer Registrable Securities, or (y) none of the
Registrable Securities of the Holders shall be included in such registration
statement, if the Company after consultation with the underwriter(s) recommends
the inclusion of none of such Registrable Securities; provided, however, that if
securities are being offered for the account of other persons or entities as
well as the Company, such reduction of the number of Registrable Securities
intended to be offered by the Holders shall not represent a greater fraction
than the fraction of similar reductions imposed on such other persons or
entities (other than the Company). Notwithstanding the foregoing, in

                                       13
<PAGE>

the event the Holders request piggyback rights with respect to the Registrable
Securities pursuant to this Section 7(d), and thereafter the Company determines
not to register or delay the registration of shares of Common Stock for its own
account or the account of others under this Section 7(d), the Company's
obligation to register the Registrable Securities on the Registration Statement
pursuant to Section 2 of this Agreement shall continue and remain in full force.

            (e) Failure to File Registration Statement and Other Events. The
Company and the Purchaser agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Period or
if certain other events occur. The Company and the Holders further agree that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or prior to the
Filing Date, or is not declared effective by the Commission on or prior to the
Effectiveness Date (or in the event an additional Registration Statement must be
filed because the actual number of shares of Common Stock into which the
Debentures are convertible and the Warrants are exercisable exceeds the number
of shares of Common Stock initially registered is not filed and declared
effective within the time periods set forth in Section 2 hereof), 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 (5)
Business 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) the Registration
Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective as to all Registrable Securities at any time prior to the
expiration of the Effectiveness Period, without being succeeded immediately by a
subsequent Registration Statement filed with and declared effective by the
Commission, or (iv) trading in the Common Stock shall be suspended or if the
Common Stock is delisted from Nasdaq for any reason for more than three (3)
Business Days in the aggregate, or (v) the conversion rights of the Holders are
suspended for any reason, including by the Company, or (vi) the Company breaches
in a material respect any covenant or other material term or condition to this
Agreement, the Purchase Agreement (other than a representation or warranty
contained therein) or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated hereby and
thereby, and such breach continues for a period of thirty days after written
notice thereof to the Company, or (vii) the Company has breached Section 3(n) of
this Agreement (any such failure or breach being referred to as an "Event"), the
Company shall pay as liquidated damages to each Holder for such failure and not
as a penalty (the "Liquidated Damages") at the option of the Holder in shares of
Common Stock, on the same terms as the Conversion Shares, or in cash, an amount
equal to two percent (2%) of the purchase price paid by the Purchaser for the
Debentures purchased pursuant to the Purchase Agreement for the initial thirty
(30) day period following the Event, and an amount equal to three percent (3%)
of the purchase price paid by the Purchaser for the Debentures purchased
pursuant to the Purchase Agreement, for every thirty (30) day period thereafter
until the applicable Event has been cured, which amount shall be pro rated for
any period less than thirty (30) days (the "Periodic Amount"). Payments to be
made pursuant to this Section 7(e) shall be due and payable immediately upon
demand at the option of the Holders in cash or as an accrual to the amount
outstanding under the Debentures. Subject to Section 7(k), the parties agree
that the Periodic Amount represents a reasonable estimate on the part of the

                                       14
<PAGE>

parties, as of the date of this Agreement, of the amount of damages that may be
incurred by the Holders if the Registration Statement is not filed on or prior
to the Filing Date or has not been declared effective by the Commission on or
prior to the Effectiveness Date and maintained in the manner contemplated herein
during the Effectiveness Period or if any other Event as described herein has
occurred.

            (f) Specific Enforcement, Consent to Jurisdiction.

                (i) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Registration Rights Agreement or the Purchase Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Registration
Rights Agreement or the Purchase Agreement and to enforce specifically the terms
and provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.

                (ii) Each of the Company and the Purchasers (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York and the courts of the State of New
York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement or the Purchase
Agreement and (ii) hereby waives, and agrees not to assert in any such suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Purchasers consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing in this Section 7(f) shall affect or limit any right to
serve process in any other manner permitted by law.

                (iii) Each of the Company and the Purchasers hereby agree that
the prevailing party in any suit, action or proceeding arising out of or
relating to this Agreement, the Purchase Agreement, the Debentures and the
Warrants, shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party.

            (g) Amendments and Waivers. 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 each of the Holders. 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 at least a
majority 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.

                                       15
<PAGE>

            (h) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., eastern
standard time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., eastern
standard time, on any date and earlier than 11:59 p.m., eastern time, on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to each Holder at its address set forth
under its name on Schedule A attached hereto, or with respect to the Company,
addressed to:

               Starbase Corporation
               4 Hutton Centre Drive
               Suite 800
               Santa Ana, CA 92707
               Telephone No.: (714) 445-4445
               Facsimile No.: (714) 445-4482
               Attention:  Chief Financial Officer

or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to any Holder shall be sent to the addresses
listed on Schedule 1 attached hereto, if applicable. Copies of notices to the
Company and to the Holders shall be sent to Jenkens & Gilchrist Parker Chapin
LLP, the Chrysler Building, 405 Lexington Avenue, New York, New York 10174,
Attention: Christopher S. Auguste, Esq., Facsimile No. (212) 704-6288.

            (i) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns.
The Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of each Holder. Each Holder may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.

            (j) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Debentures or Warrants or shares of Registrable Securities
if: (i) the Holder agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated

                                       16
<PAGE>

by clause (ii) of this Section, the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions of this Agreement, and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreement. In addition, each Holder shall have the
right to assign its rights hereunder to any other Person with the prior written
consent of the Company, which consent shall not be unreasonably withheld. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.

            (k) Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Agreement shall be cumulative
and in addition to all other remedies available under this Agreement, the
Purchase Agreement, the Debentures and the Warrants, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief). No remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a Holder's right to pursue actual damages for any failure by the
Company to comply with the terms of this Agreement. Amounts set forth or
provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by the Holder thereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Holders and that the remedy at law for any such breach may be inadequate.
Therefore the Company agrees that, in the event of any such breach or threatened
breach, the Holders shall be entitled, in addition to all other available rights
and remedies, to an injunction restraining any such breach or threatened breach,
without the necessity of showing economic loss and without any bond or other
security being required.

            (l) 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.

            (m) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of law thereof. This Agreement shall not be interpreted
or construed with any presumption against the party causing this Agreement to be
drafted.

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

            (o) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, 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
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

                                       17
<PAGE>

have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.

            (p) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

            (q) Shares Held by the Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage and shall not be counted as outstanding.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       18
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.

                                            STARBASE CORPORATION

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

                                            STONESTREET LIMITED PARTNERSHIP

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

                                            ALPHA CAPITAL AKTIENGESELLSCHAFT

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

                                            NILES HOLDINGS LIMITED

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

                                            BRISTOL INVESTMENT FUND, LTD.

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

<PAGE>

                                            SDS MERCHANT FUND

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

                                            MANCHESTER ASSET MANAGEMENT

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

                                            ELLIS ENTERPRISES, INC.

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

<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attn:  _____________

               Re:    Starbase Corporation

Ladies and Gentlemen:

        We are counsel to Starbase Corporation, a Delaware corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Convertible Debentures and Warrant Purchase Agreement (the "PURCHASE
AGREEMENT"), dated as of November 16, 2001, by and among the Company and the
purchasers named therein (the "PURCHASERS") pursuant to which the Company issued
to the Holders debentures (the "DEBENTURES") convertible into the Company's
Common Stock, par value $.01 per share (the "COMMON STOCK") and warrants (the
"WARRANTS") exercisable for shares of the Common Stock. Pursuant to the Purchase
Agreement, the Company has also entered into a Registration Rights Agreement
with the Purchasers (the "REGISTRATION RIGHTS AGREEMENT"), dated as of November
16, 2001, pursuant to which the Company agreed, among other things, to register
the Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the Debentures
and exercise of the Warrants, under the Securities Act of 1933, as amended (the
"SECURITIES ACT"). In connection with the Company's obligations under the
Registration Rights Agreement, on ________________, 200_, the Company filed a
Registration Statement on Form ___ (File No. 333-________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to
the resale of the Registrable Securities which names each of the present Holders
as a selling stockholder thereunder.

        In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the Securities Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no
knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and, accordingly,
the Registrable Securities are available for resale under the Securities Act in
the manner specified in, and pursuant to the terms of the Registration
Statement.

                                                   Very truly yours,

                                                   STARBASE CORPORATION

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

cc:     [LIST NAMES OF PURCHASERS]

<PAGE>

                                   Schedule 1

Names and Addresses of Purchasers

Stonestreet Limited Partnership
c/o Canaccord Capital
320 Bay Street, Suite 1300
Toronto, Ontario M5H 4A6
Canada

Alpha Capital Aktiengesellschaft
Pradafant 7
Furstentums 9490, Vaduz
Liechtenstein

Niles Holdings Limited
55 Duke Street
P.O. Box 55
Grand Turks
Turks & Caicos, BWI

Bristol Investment Fund, Ltd.
Caledonian House
Jennett Street
George Town
Grand Cayman, Cayman Islands

SDS Merchant Fund
c/o SDS Capital Partners, LLC
1 Sound Shore Drive, Suite 202
Greenwich, CT 06830

Manchester Asset Management
Charlotte House
Charlotte Street
Nassau, Bahamas

Ellis Enterprises, Inc.
42 Waterloo Rd.
London, England

<PAGE>

Schedule 7(b)

        The Company has agreed to issued shares of Common Stock pursuant to
certain fee arrangements with SG Cowen & Co. and UBS Warburg, LLP. The Company
has agreed to grant SG Cowen & Co. and UBS Warburg, LLP registration rights with
respect to these shares of Common Stock.<PAGE>

                                                                     EXHIBIT 4.3

THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR
RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY
ACCEPTABLE TO THE MAKER) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO THE MAKER THAT THIS DEBENTURE MAY BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION
UNDER THE ACT AND SUCH STATE SECURITIES LAWS.

                              STARBASE CORPORATION

                              Convertible Debenture
                              due November 20, 2004

No. CD-___                                                           $__________
Dated:  November 21, 2001

        For value received, STARBASE CORPORATION, a Delaware corporation (the
"Maker"), hereby promises to pay to the order of ________________ (together with
its successors, representatives, and permitted assigns, the "Holder"), in
accordance with the terms hereinafter provided, the principal amount of
_________________________________ Dollars ($__________), together with interest
thereon. Concurrently with the issuance of this Debenture, the Company is
issuing separate debentures (the "Other Debentures") to separate investors (the
"Other Holders") pursuant to the Purchase Agreement (as defined in Section 1.1
hereof).

        All payments under or pursuant to this Debenture shall be made in United
States Dollars in immediately available funds to the Holder at the address of
the Holder first set forth above or at such other place as the Holder may
designate from time to time in writing to the Maker or by wire transfer of funds
to the Holder's account, instructions for which are attached hereto as Exhibit
A. The outstanding principal balance of this Debenture shall be due and payable
on November 20, 2004 (the "Maturity Date") or at such earlier time as provided
herein. This Debenture may not be redeemed or prepaid by the Maker; except,
pursuant to Sections 3.9 and 3.10 hereof.

                                    ARTICLE I

        Section 1.1 Purchase Agreement. This Debenture has been executed and
delivered pursuant to the Convertible Debenture and Warrant Purchase Agreement,
dated as of November 20, 2001 (the "Purchase Agreement"), by and among the Maker
and the purchasers listed therein

                                      -1-
<PAGE>

(the "Purchasers"). Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to such terms in the Purchase Agreement.

        Section 1.2 Interest. Beginning on the date hereof, the outstanding
principal balance of this Debenture shall bear interest, in arrears, at a rate
per annum equal to seven percent (7%), payable quarterly unless earlier
converted, redeemed or prepaid as provided herein. Interest shall be computed on
the basis of a 360-day year of twelve (12) 30-day months and shall accrue
commencing on the issuance date of this Debenture (the "Issuance Date"). The
interest shall be payable, at the option of the Maker, in cash or shares of the
Maker's common stock, par value $.01 per share (the "Common Stock"). The number
of shares of Common Stock to be issued as payment of accrued and unpaid interest
shall be determined by dividing the total amount of accrued and unpaid interest
to be converted into Common Stock by the Conversion Price (as defined in Section
3.4(a) hereof) then in effect. Furthermore, upon the occurrence of an Event of
Default (as defined in Section 2.1 hereof), then to the extent permitted by law,
the Maker will pay interest to the Holder, payable on demand, on the outstanding
principal balance of the Debenture from the date of the Event of Default until
payment in full at the rate of nine (9%) per annum.

        Section 1.3 Payment on Non-Business Days. Whenever any payment to be
made shall be due on a Saturday, Sunday or a public holiday under the laws of
the State of New York, such payment may be due on the next succeeding business
day and such next succeeding day shall be included in the calculation of the
amount of accrued interest payable on such date.

        Section 1.4 Transfer. This Debenture may be transferred or sold, subject
to the provisions of Section 4.5 of this Debenture, or pledged, hypothecated or
otherwise granted as security by the Holder.

        Section 1.5 Replacement. Upon receipt of a duly executed, notarized and
unsecured written affidavit from the Holder with respect to the loss, theft or
destruction of this Debenture (or any replacement hereof), and without requiring
an indemnity bond or other security, or, in the case of a mutilation of this
Debenture, upon surrender and cancellation of such Debenture, the Maker shall
issue a new Debenture, of like tenor and amount, in lieu of such lost, stolen,
destroyed or mutilated Debenture.

                                   ARTICLE II

                           EVENTS OF DEFAULT; REMEDIES

        Section 2.1 Events of Default. The occurrence of any of the following
events shall be an "Event of Default" under this Debenture:

        (a) the Maker shall fail to make the payment of any amount of principal
outstanding on the date such payment is due hereunder; or

        (b) the Maker shall fail to make any payment of interest for a period of
five (5) days after the date such interest is due; or

                                      -2-
<PAGE>

        (c) the failure of the Registration Statement (as defined in the
Registration Rights Agreement) to be declared effective by the Securities and
Exchange Commission ("SEC") on or prior to the date which is ninety (90) days
after the Filing Date (as defined in the Registration Rights Agreement); or

        (d) the Maker's notice to the Holder, including by way of public
announcement, at any time, of its inability to comply or its intention not to
comply with proper requests for conversion of this Debenture into shares of
Common Stock; or

        (e) the Maker shall fail to (i) timely deliver the shares of Common
Stock upon conversion of the Debenture or any interest accrued and unpaid, (ii)
timely file the Registration Statement or (iii) make the payment of any fees
and/or liquidated damages under this Debenture, the Purchase Agreement or the
Registration Rights Agreement, which failure in the case of items (i) and (iii)
of this Section 2.1(e) is not remedied within seven (7) business days after the
occurrence thereof; or

        (f) while the Registration Statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the
Holder for sale of the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of ten (10)
consecutive Trading Days or for an aggregate of thirty (30) days within a twelve
(12) month period, provided that the cause of such lapse or unavailability is
not due to factors solely within the control of Holder; or

        (g) default shall be made in the performance or observance of (i) any
covenant, condition or agreement contained in this Debenture (other than as set
forth in clause (e) of this Section 2.1) and such default is not fully cured
within seven (7) business days after the occurrence thereof or (ii) any material
covenant, condition or agreement contained in the Purchase Agreement or the
Registration Rights Agreement which is not covered by any other provisions of
this Section 2.1 and such default is not fully cured within seven (7) business
days after the occurrence thereof; or

        (h) any material representation or warranty made by the Maker herein or
in the Purchase Agreement or the Registration Rights Agreement shall prove to
have been false or incorrect or breached in a material respect on the date as of
which made; or

        (i) the Maker shall issue any debt securities which are not subordinate
to this Debenture on such terms as are acceptable to the Holders of a majority
of the outstanding principal amount of this Debenture and the other Debentures
purchased under the Purchase Agreement; or

        (j) the Maker shall (i) default in any payment of any amount or amounts
(x) of principal of or interest on any Indebtedness (other than the Indebtedness
hereunder) the aggregate principal amount of which Indebtedness is in excess of
$250,000 or (ii) default in the observance or performance of any other agreement
or condition relating to any Indebtedness the aggregate principal amount of
which Indebtedness is in excess of $250,000 or contained in any

                                      -3-
<PAGE>

instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders or beneficiary or
beneficiaries of such Indebtedness to cause with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity; or

        (k) the Maker shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property or assets, (ii) make a
general assignment for the benefit of its creditors, (iii) commence a voluntary
case under the United States Bankruptcy Code (as now or hereafter in effect) or
under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors'
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
or (vi) take any action under the laws of any jurisdiction (foreign or domestic)
analogous to any of the foregoing; or

        (l) a proceeding or case shall be commenced in respect of the Maker,
without its application or consent, in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, moratorium, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets in connection with the liquidation or dissolution
of the Company or (iii) similar relief in respect of it under any law providing
for the relief of debtors, and such proceeding or case described in clause (i),
(ii) or (iii) shall continue undismissed, or unstayed and in effect, for a
period of sixty (60) days or any order for relief shall be entered in an
involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic)
against the Maker or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to the
Maker and shall continue undismissed, or unstayed and in effect for a period of
sixty (60) days; or

        (m) an Event of Default under and as defined in the Other Debentures
shall have occurred and be continuing.

        Section 2.2 Remedies Upon An Event of Default. If an Event of Default
shall have occurred and shall be continuing, the Holder of this Debenture may at
any time at its option (a) declare the entire unpaid principal balance of this
Debenture, together with all interest accrued hereon, due and payable, and
thereupon, the same shall be accelerated and so due and payable, without
presentment, demand, protest, or notice, all of which are hereby expressly
unconditionally and irrevocably waived by the Maker; provided, however, that
upon the occurrence of an Event of Default described in (i) Sections 2.1 (j),
(k) or (l), the outstanding principal balance and accrued interest hereunder
shall be automatically due and payable and (ii) Sections 2.1 (c)-(i), demand the
prepayment of this Debenture pursuant to Section 3.10(a) hereof, (b) demand that
the principal amount of this Debenture then outstanding and all accrued and
unpaid interest thereon shall be converted into shares of Common Stock at a
Conversion Price calculated pursuant to Section 3.4 hereof assuming that the
date that the Event of Default occurs is the Conversion Date, or (c) exercise or
otherwise enforce any one or more of the Holder's

                                      -4-
<PAGE>

rights, powers, privileges, remedies and interests under this Debenture, the
Purchase Agreement, the Registration Rights Agreement or applicable law. No
course of delay on the part of the Holder shall operate as a waiver thereof or
otherwise prejudice the right of the Holder. No remedy conferred hereby shall be
exclusive of any other remedy referred to herein or now or hereafter available
at law, in equity, by statute or otherwise.

                                   ARTICLE III

                CONVERSION; ANTIDILUTION; REDEMPTION; PREPAYMENT

        Section 3.1 Voluntary Conversion. At any time on or after the Closing
Date and up to three (3) years after the Closing Date; provided, however, that
such three (3) year period shall be extended (the "Extended Period") for (i) the
period of time commencing on the date any event with respect to Sections 2.1(c),
(d), (e), (f), and (g) shall occur and be continuing; (ii) those number of days
included in any Blackout Period (as defined in Section 3(n) of the Registration
Rights Agreement); and (iii) those number of days that the Registration
Statement was not in effect subsequent to the Effectiveness Date (as defined in
the Registration Rights Agreement), this Debenture shall be convertible (in
whole or in part), at the option of the Holder (the "Conversion Option"), into
such number of fully paid and non-assessable shares of Common Stock (the
"Conversion Rate") as is determined by dividing (x) that portion of the
outstanding principal balance under the Debenture as of such date that the
Holder elects to convert by (y) the Conversion Price (as hereinafter defined)
then in effect on the date on which the Holder faxes a notice of conversion (the
"Conversion Notice"), duly executed, to the Maker (facsimile number (714)
445-4482, Attn.: General Counsel) (the "Conversion Date"), provided, however,
that the Conversion Price shall be subject to adjustment as described in Section
3.8 below.

        Section 3.2 Mandatory Conversion. In the event that the Holder of the
Debenture has not converted this Debenture in full as of the third (3rd)
anniversary of the Closing Date and including any such applicable Extended
Period, the portion of the outstanding principal balance remaining under the
Debenture as of such date must be converted on such date into shares of Common
Stock at the Conversion Rate then in effect on such date.

        Section 3.3 Forced Conversion. The Maker shall have the option to force
the Holder and the Other Holders to convert the Debenture and the Other
Debentures in full, upon written notice via facsimile to the Holder and the
Other Holders (the "Forced Conversion Notice"), at the applicable Conversion
Price on a pro rata basis with the Other Debentures as of the date on which the
Forced Conversion Notice is transmitted to Holder (the "Forced Conversion Notice
Date"), upon the occurrence of the following events: (i) if after twelve (12)
months following the Effectiveness Date (as defined in the Registration Rights
Agreement) of the Registration Statement the Closing Bid Price for the Common
Stock exceeds five dollars ($5.00) for a period of ten (10) consecutive Trading
Days; (ii) the shares of Common Stock underlying the Debenture are registered;
and (iii) the Registration Statement shall have been continually effective,
without lapse, for a period of six (6) months. The delivery by the Holder and
the Other Holders of the original Debenture and the Other Debentures and the
delivery by Maker of a certificate or certificates representing the shares of
Common Stock being issued upon conversion shall be in accordance with, and
subject to Section 3.5 herein.

                                      -5-
<PAGE>

        Section 3.4 Conversion Price.

            (a) The term "Conversion Price" shall mean a price equal to the
lesser of (i) the Fixed Conversion Price (as hereinafter defined) and (ii) 80%
of the average of the five (5) lowest Closing Bid prices for the ten (10)
Trading Days ending on the Trading Day immediately prior to the Conversion Date,
except that if during any period (a "Black-out Period"), a Holder is unable to
trade any Common Stock issued or issuable upon conversion of the Debentures due
to the postponement of filing or delay or suspension of effectiveness of the
Registration Statement or because the Maker has otherwise informed such Holder
that an existing prospectus cannot be used at that time in the sale or transfer
of such Common Stock, such Holder shall have the option but not the obligation
on any Conversion Date within ten (10) Trading Days following the expiration of
the Black-out Period of using the Conversion Price applicable on such Conversion
Date or any Conversion Price selected by such Holder that would have been
applicable had such Conversion Date been at any earlier time during the
Black-out Period or within the ten (10) Trading Days thereafter.

            (b) The term "Fixed Conversion Price" shall mean a price equal to
the lesser of (i) $0.70 and (ii) the average of the Closing Bid Price for the
five (5) Trading Days ending on the Trading Day immediately prior to the Closing
Date.

            (c) The term "Closing Bid Price" means on any particular date (a)
the closing bid price of the Common Stock on such date on The Nasdaq National
Market, The Nasdaq Small-Cap Market, the OTC Bulletin Board, or other registered
national stock exchange on which the Common Stock is then listed or if there is
no such price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on The Nasdaq National Market, The Nasdaq Small-Cap
Market, or any registered national stock exchange, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by Nasdaq or
in the National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Common Stock is not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), then the average of the "Pink Sheet" quotes
for the relevant conversion period, as determined in good faith by the Holder,
or (d) if the Common Stock is not then publicly traded the fair market value of
a share of Common Stock as determined by an Independent Appraiser (as defined in
Section 4.13 hereof) selected in good faith by the Holders of a majority in
interest of the Debentures; provided, however, that the Maker, after receipt of
the determination by such Independent Appraiser, shall have the right to select
an additional Independent Appraiser, in which case, the fair market value shall
be equal to the average of the determinations by each such Independent
Appraiser; and provided, further that all determinations of the per share fair
market value based on the Closing Bid Price shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during such
period. The determination of fair market value by an Independent Appraiser shall
be based upon the fair market value of the Issuer determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding on
all parties. In determining the fair market value of any shares of Common Stock,
no consideration shall be given to any restrictions on transfer of the Common
Stock

                                      -6-
<PAGE>

imposed by agreement or by federal or state securities laws, or to the existence
or absence of, or any limitations on, voting rights.

        Section 3.5 Mechanics of Conversion.

        (a) Not later than three (3) Trading Days after any Conversion Date, the
Maker will (1) deliver to the applicable Holder that number of shares of Common
Stock being acquired upon the conversion of the Debenture at such Holder's
option by (A) express courier of a certificate or certificates which shall be
free of restrictive legends and trading restrictions (other than those required
by Section 5.1 of the Purchase Agreement) or (B) DWAC, in which case such Holder
shall provide its DWAC account information to the Maker, and (2) one or more
certificates representing the amount of Debentures not converted. The Holder may
only elect to receive the shares of Common Stock by DWAC in connection with a
sale of such shares of Common Stock by the Holder. Within three (3) Trading Days
of the Conversion Date, the Holder shall also deliver the original Conversion
Notice and the original Debenture to the Maker. If in the case of any Conversion
Notice the Maker does not deliver such certificate or certificates to or as
directed by the applicable Holder by the third Trading Day after the Conversion
Date (the "Delivery Date"), the Holder shall be entitled to Liquidated Damages
(as defined in Section 3.5(b) herein) in the amounts described in Sections
3.5(b) and (c) shall be payable through the date until receipt of such
certificate or certificates by the Holder.

        (b) The Maker understands that a delay in the delivery of the shares of
Common Stock upon conversion of the Debentures and failure to deliver
certificates representing the unconverted shares of the Debentures beyond the
Delivery Date could result in economic loss to the Holder. If the Maker fails to
deliver to the Holder such certificate or certificates pursuant to this Section
by the Delivery Date, the Maker shall pay to such Holder as liquidated damages
and not as a penalty ("Liquidated Damages"), at the option of the Holder, in
shares of Common Stock, to be issued upon the same terms as the Conversion
Shares, or in cash, an amount per Trading Day for each Trading Day until such
certificates are delivered, together with interest on such amount at a rate of
9% per annum, accruing until such amount and any accrued interest thereon is
paid in full, equal to (a) if the aggregate principal amount of the Debentures
requested to be converted is $50,000 or more, the greater of (i) $2,000, and
(ii) (A) 1% of the aggregate principal amount of the Debentures requested to be
converted for the first five (5) Trading Days after the Delivery Date and (B) 2%
of the aggregate principal amount of the Debentures requested to be converted
for each Trading Day thereafter; and (b) if the aggregate principal amount of
the Debentures requested to be converted is less than $50,000, (i) 1% of the
aggregate principal amount of the Debentures requested to be converted for the
first five (5) Trading Days after the Delivery Date and (ii) 2% of the aggregate
principal amount of the Debentures requested to be converted for each Trading
Day thereafter. Nothing herein shall limit a Holder's right to pursue actual
damages for the Maker's failure to deliver certificates representing shares of
Common Stock upon conversion within the period specified herein (including,
without limitation, damages relating to any purchase of shares of Common Stock
by such Holder to make delivery on a sale effected in anticipation of receiving
certificates representing shares of Common Stock upon conversion, such damages
to be in an amount equal to (A) the aggregate amount paid by such Holder for the
shares of Common Stock so purchased minus (B) the aggregate amount of net
proceeds, if any, received by such Holder from the sale of the shares of Common
Stock issued by the Maker pursuant to such conversion), and such Holder shall
have

                                      -7-
<PAGE>

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).
Notwithstanding anything to the contrary contained herein, the Holder shall be
entitled to withdraw a Conversion Notice, and upon such withdrawal the Maker
shall only be obligated to pay the Liquidated Damages accrued in accordance with
this Section 3.5(b) through the date the Conversion Notice is withdrawn.

        (c) In addition to any other rights available to the Holder, if the
Maker fails to deliver to the Holder of such certificate or certificates
pursuant to Section 3.5(a) by the Delivery Date and if after the Delivery Date
the Holder purchases (in an open market transaction or otherwise) shares of
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 Maker shall pay in cash to the Holder (in addition to any
remedies available to or elected by the Holder) the amount by which (A) the
Holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (B) the aggregate principal amount
of the Debentures for which such conversion was not timely honored, together
with interest thereon at a rate of 9% per annum, accruing until such amount and
any accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if the Holder purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of $10,000 aggregate principal
amount of the Debentures, the Maker shall be required to pay the Holder $1,000,
plus interest. The Holder shall provide the Maker written notice indicating the
amounts payable to the Holder in respect of the Buy-In.

        Section 3.6 Ownership Cap. Notwithstanding anything to the contrary set
forth in Section 3 of this Debenture, at no time may a holder of this Debenture
convert this Debenture if the number of shares of Common Stock to be issued
pursuant to such conversion would exceed, when aggregated with all other shares
of Common Stock owned by such holder at such time, the number of shares of
Common Stock which would result in such holder owning more than 9.99% of all of
the Common Stock outstanding at such time; provided, however, that upon a holder
of this Debenture providing the Company with 75 days notice (pursuant to Section
4.1 hereof) (the "Waiver Notice") that such holder would like to waive this
Section 3.6 with regard to any or all shares of Common Stock issuable upon
conversion of this Debenture, this Section 3.6 will be of no force or effect
with regard to all or a portion of the Debenture referenced in the Waiver
Notice.

        Section 3.7 Exchange Cap. Notwithstanding anything to the contrary set
forth in Section 3 of this Debenture and as long as the Common Stock is listed
on Nasdaq, the Maker shall not be obligated to issue any shares of Common Stock
upon conversion of this Debenture and any shares of Common Stock upon exercise
of the Warrants, if the issuance of such shares of Common Stock would exceed
________________ (the "Exchange Cap"). The Exchange Cap equals 19.999% of the
number of shares of Common Stock outstanding on the date immediately prior to
the Closing Date. If the conversion of all or a portion of this Debenture and
the other Debentures issued to the other Purchasers pursuant to the Purchase
Agreement, together with shares of Common Stock issued upon exercise of the
Warrants, would result in the issuance of shares of Common Stock which in the
aggregate will equal or exceed 15% of the number of shares of Common Stock
issued and outstanding on the date immediately prior to the Closing Date, the
Maker must (i) immediately seek from Nasdaq a waiver from the applicable rules
or

                                      -8-
<PAGE>

regulations of Nasdaq for issuances of Common Stock in excess of the Exchange
Cap, or (ii) within thirty (30) days from the date the Maker determined and
notified Holders that future conversion of the Debenture or exercise of the
Warrants would result in the issuance of shares of Common Stock in excess of the
Exchange Cap, file a proxy statement in order to seek approval of the
stockholders of the Maker as required by the applicable rules or regulations of
Nasdaq for issuances of Common Stock in excess of the Exchange Cap. Until such
approval or waiver is obtained no Holder shall be issued, upon conversion of the
Debenture, shares of Common Stock in an amount greater than the product of (i)
the Exchange Cap amount multiplied by (ii) a fraction, the numerator of which is
the amount of the Debenture purchased by the Holder, and the denominator of
which is the aggregate amount of the Debenture and the Other Debentures
purchased by the Holder and the Other Holders, jointly, upon conversion of all
of the Debenture and the Other Debentures (the "Cap Allocation Amount"). In the
event the Holder shall convert the Debenture into a number of shares of Common
Stock which, in the aggregate is less than the Cap Allocation Amount for the
Holder, then the difference between the Cap Allocation Amount and the number of
shares of Common Stock actually issued to the Holder shall be allocated to the
Cap Allocation Amount of the Other Holders of the Other Debentures on a pro rata
basis in proportion to the amounts of the Other Debentures then held by the
Other Holders. If the Maker obtains the approval of stockholders as required
under the rules and regulations of Nasdaq, the Maker shall be obligated to issue
upon conversion of this Debenture and the Other Debentures and exercise of the
Warrants, in the aggregate, shares of Common Stock in excess of the Exchange
Cap. If the Maker does not obtain the waiver of Nasdaq or the approval of
stockholders as required under the rules or regulations of Nasdaq or fails to
call the stockholder's meeting with the time herein, the Holder shall have the
right, at the Holder's option, to require the Maker to prepay, subject to the
terms of section 3.9 (a) below, all or a portion of this Debenture which the
Maker is unable to convert (the "Mandatory Redemption") , at a cash price equal
to the applicable Redemption Price set forth in section 3.9(b) (the "Mandatory
Redemption Price").

        Section 3.8   Adjustment of Conversion Price.

        (a) The Fixed Conversion Price shall be subject to adjustment from time
to time as follows:

            (i) Adjustments for Stock Splits and Combinations. If the Maker
shall at any time or from time to time after the Issuance Date, effect a stock
split of the outstanding Common Stock, the applicable Fixed Conversion Price in
effect immediately prior to the stock split shall be proportionately decreased.
If the Maker shall at any time or from time to time after the Issuance Date,
combine the outstanding shares of Common Stock, the applicable Fixed Conversion
Price in effect immediately prior to the combination shall be proportionately
increased. Any adjustments under this Section 3.8(a)(i) shall be effective at
the close of business on the date the stock split or combination occurs.

            (ii) Adjustments for Certain Dividends and Distributions. If the
Maker shall at any time or from time to time after the Issuance Date, make or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock, then, and in each event, the applicable Fixed Conversion Price in effect
immediately prior to such event shall be decreased as of the time of such
issuance

                                      -9-
<PAGE>

or, in the event such record date shall have been fixed, as of the close of
business on such record date, by multiplying, as applicable, the applicable
Fixed Conversion Price then in effect by a fraction:

                (1) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date; and

                (2) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution.

            (iii) Adjustment for Other Dividends and Distributions. If the Maker
shall at any time or from time to time after the Issuance Date, make or issue or
set a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in other than shares of Common
Stock, then, and in each event, an appropriate revision to the applicable Fixed
Conversion Price shall be made and provision shall be made (by adjustments of
the Conversion Price or otherwise) so that the holders of the Debentures shall
receive upon conversions thereof, in addition to the number of shares of Common
Stock receivable thereon, the number of securities of the Maker which they would
have received had their Debentures been converted into Common Stock on the date
of such event and had thereafter, during the period from the date of such event
to and including the Conversion Date, retained such securities (together with
any distributions payable thereon during such period), giving application to all
adjustments called for during such period under this Section 3.8(a)(iii) with
respect to the rights of the holders of the Debentures.

            (iv) Adjustments for Reclassification, Exchange or Substitution. If
the Common Stock issuable upon conversion of the Debentures at any time or from
time to time after the Issuance Date shall be changed to the same or different
number of shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends provided for in Sections 3.8(a)(i),
(ii) and (iii), or a reorganization, merger, consolidation, or sale of assets
provided for in Section 3.8(a)(v)), then, and in each event, an appropriate
revision to the Fixed Conversion Price shall be made and provisions shall be
made (by adjustments of the Conversion Price or otherwise) so that the holder of
each of the Debentures shall have the right thereafter to convert such Debenture
into the kind and amount of shares of stock and other securities receivable upon
reclassification, exchange, substitution or other change, by holders of the
number of shares of Common Stock into which such Debenture might have been
converted immediately prior to such reclassification, exchange, substitution or
other change, all subject to further adjustment as provided herein.

            (v) Adjustments for Reorganization, Merger, Consolidation or Sales
of Assets. If at any time or from time to time after the Issuance Date there
shall be a capital reorganization of the Maker (other than by way of a stock
split or combination of shares or stock dividends or distributions provided for
in Section 3.8(a)(i), (ii) and (iii), or a reclassification, exchange or
substitution of shares provided for in Section 3.8(a)(iv)), or a merger or

                                      -10-
<PAGE>

consolidation of the Maker with or into another corporation, or the sale of all
or substantially all of the Maker's properties or assets to any other person (an
"Organic Change"), then as a part of such Organic Change an appropriate revision
to the Fixed Conversion Price shall be made and provision shall be made (by
adjustments of the Conversion Price or otherwise) so that the holder of each
Debenture shall have the right thereafter to convert such Debenture into the
kind and amount of shares of stock and other securities or property of the Maker
or any successor corporation resulting from Organic Change. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 3.8(a)(v) with respect to the rights of the holders of the
Debentures after the Organic Change to the end that the provisions of this
Section 3.8(a)(v) (including any adjustment in the applicable Conversion Price
then in effect and the number of shares of stock or other securities deliverable
upon conversion of the Debentures) shall be applied after that event in as
nearly an equivalent manner as may be practicable.

            (vi) Adjustments for Issuance of Additional Shares of Common Stock.
If the Maker, at any time after the Issuance Date, shall issue any additional
shares of Common Stock (otherwise than as provided in the foregoing subsections
(i) through (v) of this Section 3.8) (the "Additional Shares of Common Stock"),
at a price per share less than the applicable Fixed Conversion Price then in
effect or without consideration, then the applicable Fixed Conversion Price upon
each such issuance shall be adjusted to that price (rounded to the nearest cent)
determined by multiplying the applicable Fixed Conversion Price then in effect
by a fraction:

                (1) the numerator of which shall be equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to the issuance
of such Additional Shares of Common Stock plus (B) the number of shares of
Common Stock (rounded to the nearest whole share) which the aggregate
consideration for the total number of such Additional Shares of Common Stock so
issued would purchase at a price per share equal to the applicable Fixed
Conversion Price then in effect, and

                (2) the denominator of which shall be equal to the number of
shares of Common Stock outstanding immediately after the issuance of such
Additional Shares of Common Stock.

The provisions of this subsection (vi) shall not apply: (A) under any of the
circumstances for which an adjustment is provided in subsections (i), (ii),
(iii), (iv) or (v) of this Section 3.8(a); (B) to the issuance of any shares of
Common Stock upon conversion of the Debentures; (C) to the issuance of any
shares of Common Stock upon exercise of the Warrants issued pursuant to the
Purchase Agreement; (D) to the issuance of any shares of Common Stock upon
exercise of stock options granted under the Maker's stock option plan or options
granted under employment agreements; (E) to the exchange of shares of Common
Stock of the Maker for assets; (F) to the issuance of any shares of Common Stock
in connection with a public firm commitment underwritten offering at market; (G)
to the issuance of shares of Common Stock pursuant to fee arrangements with SG
Cowen & Co. and UBS Warburg, LLP, so long as the registration statement
registering such shares of Common Stock is not declared effective within thirty
(30) days of the Effectiveness Date of the Registration Rights Agreement; and
(H) to the sale of shares of Common Stock, the proceeds of which are used to
exercise the Maker's redemption rights as set forth in Section 3.9 hereof. No
adjustment of the applicable Fixed Conversion Price shall be made under this
subsection (a)(vi) upon the issuance of any Additional Shares of

                                      -11-
<PAGE>

Common Stock which are issued pursuant to any Common Stock Equivalent (as
defined below) if upon the issuance of such Common Stock Equivalent (x) any
adjustment shall have been made pursuant to subsection (vii) of this Section
3.8(a) or (y) no adjustment was required pursuant to subsection (vii) of this
Section 3.8(a). No adjustment of the applicable Fixed Conversion Price shall be
made under this subsection (vi) in an amount less than $.01 per share, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment, if any, which together with
any adjustments so carried forward shall amount to $.01 per share or more;
provided that upon any adjustment of the applicable Fixed Conversion Price as a
result of any dividend or distribution payable in Common Stock or Convertible
Securities (as defined below) or the reclassification, subdivision or
combination of Common Stock into a greater or smaller number of shares, the
foregoing figure of $.01 per share (or such figure as last adjusted) shall be
adjusted (to the nearest one-half cent) in proportion to the adjustment in the
applicable Fixed Conversion Price.

            (vii) Issuance of Common Stock Equivalents. If the Maker, at any
time after the Issuance Date, shall issue any securities convertible into or
exchangeable for, directly or indirectly, Common Stock ("Convertible
Securities"), other than this Debenture or Holder's Warrant, or any rights or
warrants or options to purchase any such Common Stock or Convertible Securities,
shall be issued or sold (collectively, the "Common Stock Equivalents") and the
price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent shall be less than the
applicable Fixed Conversion Price then in effect, or if, after any such issuance
of Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall be less than the applicable Fixed Conversion Price in effect
at the time of such amendment, then the applicable Fixed Conversion Price upon
each such issuance or amendment shall be adjusted as provided in the first
sentence of subsection (vi) of this Section 3.8(a) on the basis that (1) the
maximum number of Additional Shares of Common Stock issuable pursuant to all
such Common Stock Equivalents shall be deemed to have been issued (whether or
not such Common Stock Equivalents are actually then exercisable, convertible or
exchangeable in whole or in part) as of the earlier of (A) the date on which the
Maker shall enter into a firm contract for the issuance of such Common Stock
Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent,
and (2) the aggregate consideration for such maximum number of Additional Shares
of Common Stock shall be deemed to be the minimum consideration received or
receivable by the Maker for the issuance of such Additional Shares of Common
Stock pursuant to such Common Stock Equivalent. No adjustment of the applicable
Fixed Conversion Price shall be made under this subsection (vii) upon the
issuance of any Convertible Security which is issued pursuant to the exercise of
any warrants or other subscription or purchase rights therefor, if any
adjustment shall previously have been made to the exercise price of such
warrants then in effect upon the issuance of such warrants or other rights
pursuant to this subsection (vii). If no adjustment is required under this
subsection (vii) upon issuance of any Common Stock Equivalent or once an
adjustment is made under this subsection (vii) based upon the Closing Bid Price
in effect on the date of such adjustment, no further adjustment shall be made
under this subsection (vii) based solely upon a change in the Closing Bid Price
after such date.

            (viii) Consideration for Stock. In case any shares of Common Stock
or any Common Stock Equivalents shall be issued or sold:

                                      -12-
<PAGE>

                (1) in connection with any merger or consolidation in which the
Maker is the surviving corporation (other than any consolidation or merger in
which the previously outstanding shares of Common Stock of the Maker shall be
changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefore shall be, deemed to be the
fair value, as determined reasonably and in good faith by the Board of Directors
of the Maker, of such portion of the assets and business of the nonsurviving
corporation as such Board may determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or warrants or options, as the case
may be; or

                (2) in the event of any consolidation or merger of the Maker in
which the Maker is not the surviving corporation or in which the previously
outstanding shares of Common Stock of the Maker shall be changed into or
exchanged for the stock or other securities of another corporation, or in the
event of any sale of all or substantially all of the assets of the Maker for
stock or other securities of any corporation, the Maker shall be deemed to have
issued a number of shares of its Common Stock for stock or securities or other
property of the other corporation computed on the basis of the actual exchange
ratio on which the transaction was predicated, and for a consideration equal to
the fair market value on the date of such transaction of all such stock or
securities or other property of the other corporation. If any such calculation
results in adjustment of the applicable Fixed Conversion Price, or the number of
shares of Common Stock issuable upon conversion of the Debentures, the
determination of the applicable Fixed Conversion Price or the number of shares
of Common Stock issuable upon conversion of the Debentures immediately prior to
such merger, consolidation or sale, shall be made after giving effect to such
adjustment of the number of shares of Common Stock issuable upon conversion of
the Debentures.

            (b) Record Date. In case the Maker shall take record of the holders
of its Common Stock for the purpose of entitling them to subscribe for or
purchase Common Stock or Convertible Securities, then the date of the issue or
sale of the shares of Common Stock shall be deemed to be such record date.

            (c) Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Maker shall not be required to make any adjustment of the
number of shares of Common Stock issuable upon conversion of the Debentures upon
the grant after the Issuance Date of, or the exercise after the Issuance Date
of, options or warrants or rights to purchase shares of Common Stock under the
Maker's existing stock option plan or options granted under employment
agreements.

            (d) No Impairment. The Maker shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Maker, but will at all
times in good faith, assist in the carrying out of all the provisions of this
Section 3.8 and in the taking of all such actions as may be necessary or
appropriate in order to protect the conversion rights of the Holder against
impairment. In the event a Holder shall elect to convert any Debentures as
provided herein, the Maker cannot refuse conversion based on any claim that such
Holder or any one associated or affiliated with such Holder has been engaged in
any violation of law, violation of an agreement to which such Holder is a party
or for any reason

                                      -13-
<PAGE>

whatsoever, unless, an injunction from a court, on notice, restraining and or
adjoining conversion of all or of said Debentures shall have issued and the
Maker posts a surety bond for the benefit of such Holder in an amount equal to
130% of the amount of the Debentures the Holder has elected to convert, 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 in the
event it obtains judgment.

            (e) Certificates as to Adjustments. Upon occurrence of each
adjustment or readjustment of the Fixed Conversion Price or number of shares of
Common Stock issuable upon conversion of this Debenture pursuant to this Section
3.8, the Maker at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder a
certificate setting forth such adjustment and readjustment, showing in detail
the facts upon which such adjustment or readjustment is based. The Maker shall,
upon written request of the Holder, at any time, furnish or cause to be
furnished to such holder a like certificate setting forth such adjustments and
readjustments, the applicable Fixed Conversion Price in effect at the time, and
the number of shares of Common Stock and the amount, if any, of other securities
or property which at the time would be received upon the conversion of this
Debenture. Notwithstanding the foregoing, the Maker shall not be obligated to
deliver a certificate unless such certificate would reflect an increase or
decrease of at least one percent (1%) of such adjusted amount.

            (f) Issue Taxes. The Maker shall pay any and all issue and other
taxes, excluding federal, state or local income taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of this
Debenture pursuant thereto; provided, however, that the Maker shall not be
obligated to pay any transfer taxes resulting from any transfer requested by any
holder in connection with any such conversion.

            (g) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of this Debenture. In lieu of any fractional shares to
which the Holder would otherwise be entitled, the Maker shall pay cash equal to
the product of such fraction multiplied by the average of the Closing Bid Prices
of the Common Stock for the five (5) consecutive Trading Days immediately
preceding the Conversion Date.

            (h) Reservation of Common Stock. The Maker shall at all times when
this Debenture shall be outstanding, reserve and keep available out of its
authorized but unissued Common Stock, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of this Debenture
and all interest accrued thereon; provided that the number of shares of Common
Stock so reserved shall at no time be less than 200% of the number of shares of
Common Stock for which this Debenture and all interest accrued thereon are at
any time convertible. The Maker shall, from time to time in accordance with the
Delaware General Corporation Law, as amended, increase the authorized number of
shares of Common Stock if at any time the unissued number of authorized shares
shall not be sufficient to satisfy the Maker's obligations under this Section
3.8(h).

            (i) Regulatory Compliance. If any shares of Common Stock to be
reserved for the purpose of conversion of this Debenture or any interest accrued
thereon require registration or listing with or approval of any governmental
authority, stock exchange or other regulatory body under any federal or state
law or regulation or otherwise before such shares may

                                      -14-
<PAGE>

be validly issued or delivered upon conversion, the Maker shall, at its sole
cost and expense, in good faith and as expeditiously as possible, endeavor to
secure such registration, listing or approval, as the case may be.

        Section 3.9 Redemption.

        (a) The Maker may, at its option, redeem all or any portion of the
outstanding principal amount of this Debenture and the Other Debentures, and pay
the accrued and unpaid interest thereon upon five (5) business days prior
written notice to the Holder and the Other Holders (the "Redemption Notice") at
the redemption price set forth in subparagraph (b) below. The Maker may not
deliver a Redemption Notice to the Holder and the Other Holders unless the Maker
has good and clear funds for a minimum of the amount it intends to redeem in a
bank account controlled by the Maker; provided that, if the redemption is
expected to be made contemporaneously with the closing of a public offering of
the Maker then the Maker may not have good and clear funds in a bank account at
the time of the Redemption Notice Date, and accordingly, the Maker may not send
the Redemption Notice earlier than one (1) Trading Day prior to the date the
public offering is priced. The Redemption Notice shall state the date of
redemption (the "Redemption Date"), the Redemption Price (as hereinafter
defined), the amount of the Debenture and the Other Debentures to be redeemed,
the amount of accrued and unpaid interest through the Redemption Date and shall
call upon the Holder and the Other Holders to surrender to the Maker on the
Redemption Date at the place designated in the Redemption Notice the redeemed
Debenture and Other Debentures. The Redemption Date shall be no more than five
(5) Trading Days after the date on which the Holder is notified of the Maker's
intent to redeem the Debenture (the "Redemption Notice Date"). If the Maker
fails to pay the Redemption Price by the sixth Trading Day following the
Redemption Notice Date or in the case of a public offering, the closing of the
public offering, the redemption will be declared null and void and the Maker
shall lose its right to deliver a Redemption Notice to the Holder in the future.
On or after the Redemption Date, the Holder and the Other Holders shall
surrender the Debenture and the Other Debentures called for redemption to the
Maker at the place designated in the Redemption Notice and shall thereupon be
entitled to receive payment of their pro rata share of the applicable Redemption
Price. Subject to the notice requirement of the immediately following sentence,
the Holder and the Other Holders shall be entitled to convert up to a maximum of
fifty percent (50%) of the amount of the Debenture and the Other Debentures,
respectively, called for redemption. If the Holder and the Other Holders elect
to convert the Debenture and the Other Debentures, respectively, after receipt
of the Redemption Notice, the Maker must receive such Conversion Notice within
one (1) business day from the time the Redemption Notice is received by the
Holder and the Other Holders.

        (b) Subject to the terms of Section 3.9(a) above, the Maker shall have
the option to redeem all or a portion of the Debentures at a cash price equal
to:

            (i) 105% of the principal amount of the Debenture outstanding plus
any accrued but unpaid interest, and/or Liquidated Damages outstanding as of the
Redemption Date, if the redemption occurs within 60 days from the Closing Date;

                                      -15-
<PAGE>

            (ii) 110% of the principal amount of the Debenture outstanding plus
any accrued but unpaid interest, and/or Liquidated Damages outstanding as of the
Redemption Date, if the redemption occurs between 61 and 120 days from the
Closing Date;

            (iii) 115% of the principal amount of the Debenture outstanding plus
any accrued but unpaid interest, and/or Liquidated Damages outstanding as of the
Redemption Date, if the redemption occurs between 121 and 180 days from the
Closing Date;

            (iv) 120% of the principal amount of the Debenture outstanding plus
any accrued but unpaid interest, and/or Liquidated Damages outstanding as of the
Redemption Date, if the redemption occurs 181 or more days after the Closing
Date.

        Section 3.10 Prepayment.

            (a) Prepayment Upon an Event of Default. Notwithstanding anything to
the contrary contained herein, upon the occurrence of an Event of Default
described in Sections 2.1(c)-(i) hereof, the Holder shall have the right, at
such Holder's option, to require the Maker to prepay all or a portion of this
Debenture at a price equal to the Major Transaction Prepayment Price (as defined
in Section 3.10(b) below) applicable at the time of such request. Nothing in
this Section 3.10(a) shall limit the Holder's rights under Section 2.2 hereof.

            (b) Prepayment Option Upon Major Transaction. In addition to all
other rights of the Holder of the Debenture contained herein, simultaneous with
the occurrence of a Major Transaction (as defined below), the Holder shall have
the right, at such Holder's option, to require the Maker to prepay all or a
portion of such Holder's Debentures at a price equal to the greater of (i) 120%
of the aggregate principal amount of the Debentures and (ii) the product of (A)
the Conversion Rate and (B) the Closing Bid Price of the Common Stock on the
Trading Day immediately preceding such Major Transaction ("Major Transaction
Prepayment Price").

            (c) "Major Transaction." A "Major Transaction" shall be deemed to
have occurred at such time as any of the following events:

                (i) the consolidation, merger or other business combination of
the Maker with or into another Person (as defined in Section 4.13 hereof) (other
than (A) pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of the Maker or (B) a consolidation,
merger or other business combination in which holders of the Maker's voting
power immediately prior to the transaction continue after the transaction to
hold, directly or indirectly, the voting power of the surviving entity or
entities necessary to elect a majority of the members of the board of directors
(or their equivalent if other than a corporation) of such entity or entities).

                (ii) the sale or transfer of all or substantially all of the
Maker's assets; or

                                      -16-
<PAGE>

                (iii) consummation of a purchase, tender or exchange offer made
to the holders of more than 30% of the outstanding shares of Common Stock.

            (d) Mechanics of Prepayment at Option of Holder Upon Major
Transaction. No sooner than fifteen (15) days nor later than ten (10) days prior
to the consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Maker shall deliver written notice
thereof via facsimile and overnight courier ("Notice of Major Transaction") to
each holder of the Debentures. At any time after receipt of a Notice of Major
Transaction (or, in the event a Notice of Major Transaction is not delivered at
least ten (10) days prior to a Major Transaction, at any time within ten (10)
days prior to a Major Transaction), any holder of the Debenture then outstanding
may require the Maker to prepay, effective immediately prior to the consummation
of such Major Transaction, all of the holder's Debentures then outstanding by
delivering written notice thereof via facsimile and overnight courier ("Notice
of Prepayment at Option of Holder Upon Major Transaction") to the Maker, which
Notice of Prepayment at Option of Holder Upon Major Transaction shall indicate
(i) the amount of the Debenture that such holder is electing to have prepaid and
(ii) the applicable Major Transaction Prepayment Price, as calculated pursuant
to Section 3.10(b) above.

            (e) Payment of Major Transaction Prepayment Price. Upon the Maker's
receipt of a Notice(s) of Prepayment at Option of Holder Upon Major Transaction
from the Holder of the Debentures, the Maker shall immediately notify the Holder
of the Debentures by facsimile of the Maker's receipt of such Notice(s) of
Prepayment at Option of Holder Upon Major Transaction and the Holder shall
promptly submit to the Maker such Holder's certificates representing the
Debentures which such Holder has elected to have prepaid. The Maker shall
deliver the applicable Major Transaction Prepayment Price immediately prior to
the consummation of the Major Transaction in the case of a prepayment pursuant
to Section 3.10(d); provided that the Holder's certificates representing the
Debentures shall have been so delivered to the Maker; provided further that if
the Maker is unable to prepay all of the Debentures to be prepaid, the Maker
shall prepay an amount from each Holder of the Debentures being prepaid equal to
such Holder's pro-rata amount (based on the number of Debentures held by such
holder relative to the number of Debentures outstanding) of all Debentures being
prepaid. If the Maker shall fail to prepay all of the Debentures submitted for
prepayment (other than pursuant to a dispute as to the arithmetic calculation of
the Major Transaction Prepayment Price), in addition to any remedy such holder
of the Debentures may have under this Debenture and the Purchase Agreement, the
Major Transaction Prepayment Price payable in respect of such Debentures not
prepaid shall bear interest at the rate of 2% per month (prorated for partial
months) until paid in full. Until the Maker pays such unpaid Major Transaction
Prepayment Price in full to a holder of the Debentures submitted for prepayment,
such holder shall have the option (the "Void Optional Prepayment Option") to, in
lieu of prepayment, require the Maker to promptly return to such holder(s) all
of the Debentures that were submitted for prepayment by such holder(s) under
this Section 3.10 and for which the Major Transaction Prepayment Price has not
been paid, by sending written notice thereof to the Maker via facsimile (the
"Void Optional Prepayment Notice"). Upon the Maker's receipt of such Void
Optional Prepayment Notice(s) and prior to payment of the full Major Transaction
Prepayment Price to such Holder, (i) the Notice(s) of Prepayment at Option of
Holder Upon Major Transaction, as the case may be, shall be null and void with
respect to those Debentures submitted for prepayment and for which the Major
Transaction Prepayment Price has not been paid, (ii) the Maker shall immediately
return any

                                      -17-
<PAGE>

Debentures submitted to the Maker by the Holder for prepayment under this
Section 3.10(e) and for which the Major Transaction Prepayment Price has not
been paid and (iii) the Conversion Price of such returned Debentures shall be
adjusted to the lesser of (A) the Conversion Price as in effect on the date on
which the Void Optional Prepayment Notice(s) is delivered to the Maker and (B)
the lowest Closing Bid Price during the period beginning on the date on which
the Notice(s) of Prepayment of Option of Holder Upon Major Transaction is
delivered to the Maker and ending on the date on which the Void Optional
Prepayment Notice(s) is delivered to the Maker; provided that no adjustment
shall be made if such adjustment would result in an increase of the Conversion
Price then in effect. The Holder's delivery of a Void Optional Prepayment Notice
and exercise of the Holders rights following such notice shall not effect the
Maker's obligations to make any payments which have accrued prior to the date of
such notice. Payments provided for in this Section 3.10 shall have priority to
payments to other stockholders in connection with a Major Transaction.

            (f) Prepayment Option. At the sole option of the Holder, the Holder
may grant the Maker the option to prepay all or any portion of the outstanding
principal amount of this Debenture together with all accrued and unpaid interest
thereon within ten (10) days of the Holder granting the option to the Maker. If
the Maker elects to exercise the prepayment option, the Maker shall upon five
(5) days prior written notice to the Holder (the "Maker's Prepayment Notice")
prepay all or a portion of the outstanding Debentures equal to 115% of the
aggregate principal amount of the Debentures plus any accrued but unpaid
interest (the "Maker's Prepayment Price"); provided, however, that if the Holder
has delivered a Conversion Notice to the Maker or delivers a Conversion Notice
after receipt of the Maker's Prepayment Notice, the Debentures designated to be
converted may not be prepaid by the Maker; provided further that if during the
period between delivery of the Maker's Prepayment Notice and the Maker's
Prepayment Date (as defined below), the Holder shall become entitled to deliver
a Notice of Prepayment at Option of Holder Upon Major Transaction, then the such
rights of the Holder shall take precedence over the previously delivered Maker
Prepayment Notice. The Maker's Prepayment Notice shall state the date of
prepayment which date shall be the sixth (6th) day after the Maker has delivered
the Maker's Prepayment Notice (the "Maker's Prepayment Date"), the Maker's
Prepayment Price and the amount of Debentures to be prepaid by the Maker. The
Maker shall not send a Maker's Prepayment Notice unless it has good and clear
funds for a minimum of the amount Maker intends to prepay in a bank account
controlled by the Maker. The Maker shall deliver the Maker's Prepayment Price to
the Holder within five (5) business days after the Maker has delivered the
Maker's Prepayment Notice, provided, that if the Holder(s) delivers a Conversion
Notice before the Maker's Prepayment Date, then the portion of the Maker's
Prepayment Price which would be paid to prepay the Debentures covered by such
Conversion Notice shall be returned to the Maker upon delivery of the Common
Stock issuable in connection with such Conversion Notice to the Holder(s). On
the Maker's Prepayment Date, the Maker shall pay the Maker's Prepayment Price,
subject to any adjustment pursuant to the immediately preceding sentence, to the
Holder(s) on a pro rata basis, provided, however, that upon receipt by Maker of
the certificates representing the Debentures to be prepaid pursuant to this
Section 3.10(f), the Maker shall, on the next business day following the date of
receipt by the Maker of such certificates representing the Debentures, pay the
Maker's Prepayment Price to the Holder(s) on a pro rata basis. If the Maker
fails to pay the Maker's Prepayment Price by the sixth (6th) business day after
the Maker has delivered the Maker's Prepayment Notice, the prepayment

                                      -18-
<PAGE>

will be declared null and void and the Maker shall lose its right to serve a
Maker 's Prepayment Notice pursuant to this Section 3.10(f) in the future.

        Section 3.11 Inability to Fully Convert.

            (a) Holder's Option if Maker Cannot Fully Convert. If, upon the
Maker's receipt of a Conversion Notice, the Maker cannot issue shares of Common
Stock registered for resale under the Registration Statement for any reason,
including, without limitation, because the Maker (w) does not have a sufficient
number of shares of Common Stock authorized and available, (x) is otherwise
prohibited by applicable law or by the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Maker or any of its securities from issuing all of
the Common Stock which is to be issued to the Holder pursuant to a Conversion
Notice or (y) fails to have a sufficient number of shares of Common Stock
registered for resale under the Registration Statement, then the Maker shall
issue as many shares of Common Stock as it is able to issue in accordance with
the Holder's Conversion Notice and, with respect to the unconverted portion of
the Debenture, the Holder, solely at Holder's option, can elect to:

                (i) require the Maker to prepay that portion of the Debenture
for which the Maker is unable to issue Common Stock in accordance with the
Holder's Conversion Notice (the "Mandatory Prepayment") at a price per share
equal to the sum of (A) 120% of the aggregate principal amount of the Debenture
as of such Conversion Date, and (B) any accrued, but unpaid interest thereon
(the "Mandatory Prepayment Price");

                (ii) if the Maker's inability to fully convert is pursuant to
Section 3.11(a)(y) above, require the Maker to issue restricted shares of Common
Stock equal to one hundred twenty percent (120%) of the number of shares of
Common Stock the Maker is unable to deliver in accordance with such holder's
Conversion Notice;

                (iii) void its Conversion Notice and retain or have returned, as
the case may be, the Debenture that was to be converted pursuant to the
Conversion Notice (provided that the Holder's voiding its Conversion Notice
shall not effect the Maker's obligations to make any payments which have accrued
prior to the date of such notice).

            (b) Mechanics of Fulfilling Holder's Election. The Maker shall
immediately send via facsimile to the Holder, upon receipt of a facsimile copy
of a Conversion Notice from the Holder which cannot be fully satisfied as
described in Section 3.11(a) above, a notice of the Maker's inability to fully
satisfy the Conversion Notice (the "Inability to Fully Convert Notice"). Such
Inability to Fully Convert Notice shall indicate (i) the reason why the Maker is
unable to fully satisfy such holder's Conversion Notice, (ii) the amount of the
Debenture which cannot be converted and (iii) the applicable Mandatory
Prepayment Price. The Holder shall notify the Maker of its election pursuant to
Section 3.11(a) above by delivering written notice via facsimile to the Maker
("Notice in Response to Inability to Convert").

            (c) Payment of Mandatory Prepayment Price. If the Holder shall elect
to have its shares prepaid pursuant to Section 3.11(a)(i) above, the Maker shall
pay the Mandatory Prepayment Price in cash to the Holder within five (5) days of
the Maker's receipt of the Holder's

                                      -19-
<PAGE>

Notice in Response to Inability to Convert, provided that prior to the Maker's
receipt of the Holder's Notice in Response to Inability to Convert the Maker has
not delivered a notice to the Holder stating, to the satisfaction of the Holder,
that the event or condition resulting in the Mandatory Prepayment has been cured
and all Conversion Shares issuable to the Holder can and will be delivered to
the Holder in accordance with the terms of this Debenture. If the Maker shall
fail to pay the applicable Mandatory Prepayment Price to the Holder on a timely
basis as described in this Section 3.11(c) (other than pursuant to a dispute as
to the determination of the arithmetic calculation of the Mandatory Prepayment
Price), in addition to any remedy the Holder may have under this Debenture and
the Purchase Agreement, such unpaid amount shall bear interest at the rate of 2%
per month (prorated for partial months) until paid in full. Until the full
Mandatory Prepayment Price is paid in full to the Holder, the Holder may (i)
void the Mandatory Prepayment with respect to that portion of the Debenture for
which the full Mandatory Prepayment Price has not been paid, (ii) receive back
such Debenture, and (iii) require that the Conversion Price of such returned
Debenture be adjusted to the lesser of (A) the Conversion Price as in effect on
the date on which the Holder voided the Mandatory Prepayment and (B) the lowest
Closing Bid Price during the period beginning on the Conversion Date and ending
on the date the Holder voided the Mandatory Prepayment.

        Section 3.12 No Rights as Shareholder. Nothing contained in this
Debenture shall be construed as conferring upon the Holder, prior to the
conversion of this Debenture, the right to vote or to receive dividends or to
consent or to receive notice as a shareholder in respect of any meeting of
shareholders for the election of directors of the Maker or of any other matter,
or any other rights as a shareholder of the Maker.

        Section 3.13 Other Debentures. This Debenture is one of the Debentures
referred to in the Purchase Agreement. Any and all conversions, payments,
prepayments or redemptions of this Debenture at the option of the Maker shall be
made on a pro rata basis with the Other Debentures. The Maker shall promptly
notify the Holder of this Debenture of any notices sent or received, or any
actions taken with respect to the Other Debentures.

                                   ARTICLE IV

                                  MISCELLANEOUS

        Section 4.1 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated in the
Purchase Agreement (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The Maker will give written notice to the Holder at least twenty (20) days prior
to the date on which the Maker closes its books or takes a record (x) with
respect to any dividend or distribution upon the Common Stock, (y) with respect
to any pro rata subscription offer to holders of Common Stock or (z) for
determining rights to vote with respect

                                      -20-
<PAGE>

to any Organic Change, dissolution, liquidation or winding-up and in no event
shall such notice be provided to such holder prior to such information being
made known to the public. The Maker will also give written notice to the Holder
at least twenty (20) days prior to the date on which any Organic Change,
dissolution, liquidation or winding-up will take place and in no event shall
such notice be provided to the Holder prior to such information being made known
to the public.

        Section 4.2 Governing Law. This Debenture shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions. This Debenture shall not be
interpreted or construed with any presumption against the party causing this
Debenture to be drafted.

        Section 4.3 Headings. Article and section headings in this Debenture are
included herein for purposes of convenience of reference only and shall not
constitute a part of this Debenture for any other purpose.

        Section 4.4 Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Debenture shall be cumulative
and in addition to all other remedies available under this Debenture, at law or
in equity (including, without limitation, a decree of specific performance
and/or other injunctive relief), no remedy contained herein shall be deemed a
waiver of compliance with the provisions giving rise to such remedy and nothing
herein shall limit a holder's right to pursue actual damages for any failure by
the Maker to comply with the terms of this Debenture. Amounts set forth or
provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by the holder thereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Maker (or the performance thereof). The Maker acknowledges
that a breach by it of its obligations hereunder will cause irreparable and
material harm to the Holder and that the remedy at law for any such breach may
be inadequate. Therefore the Maker agrees that, in the event of any such breach
or threatened breach, the Holder shall be entitled, in addition to all other
available rights and remedies, at law or in equity, to seek and obtain such
equitable relief, including but not limited to an injunction restraining any
such breach or threatened breach, without the necessity of showing economic loss
and without any bond or other security being required.

        Section 4.5 Enforcement Expenses. The Maker agrees to pay all costs and
expenses of enforcement of this Debenture, including, without limitation,
reasonable attorneys' fees and expenses.

        Section 4.6 Binding Effect. The obligations of the Maker and the Holder
set forth herein shall be binding upon the successors and assigns of each such
party, whether or not such successors or assigns are permitted by the terms
hereof.

        Section 4.7 Amendments. This Debenture may not be modified or amended in
any manner except in writing executed by the Maker and the Holder.

        Section 4.8 Compliance with Securities Laws. The Holder of this
Debenture acknowledges that this Debenture is being acquired solely for the
Holder's own account and not

                                      -21-
<PAGE>

as a nominee for any other party, and for investment, and that the Holder shall
not offer, sell or otherwise dispose of this Debenture. This Debenture and any
Debenture issued in substitution or replacement therefore shall be stamped or
imprinted with a legend in substantially the following form:

        " THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
        1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND
        MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
        SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL
        (WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE MAKER) IN THE FORM,
        SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS
        DEBENTURE MAY BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED
        OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE
        SECURITIES LAWS."

        Section 4.9 Consent to Jurisdiction. Each of the Maker and the Holder
(i) hereby irrevocably submits to the exclusive jurisdiction of the United
States District Court sitting in the Southern District of New York and the
courts of the State of New York located in New York county for the purposes of
any suit, action or proceeding arising out of or relating to this Debenture and
(ii) hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Each of
the Maker and the Holder consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under the Purchase Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 4.9 shall affect or limit any right to serve
process in any other manner permitted by law. Each of the Maker and the Holders
hereby agree that the prevailing party in any suit, action or proceeding arising
out of or relating to the Debenture and the Other Debentures, the Purchase
Agreement, the Registration Rights Agreement and the Warrants, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party.

        Section 4.10 Parties in Interest. This Debenture shall be binding upon,
inure to the benefit of and be enforceable by the Maker, the Holder and their
respective successors and permitted assigns.

        Section 4.11 Failure or Indulgence Not Waiver. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

        Section 4.12 Maker Waivers. Except as otherwise specifically provided
herein, the Maker and all others that may become liable for all or any part of
the obligations evidenced by this Debenture, hereby waive presentment, demand,
notice of nonpayment, protest and all other

                                      -22-
<PAGE>

demands' and notices in connection with the delivery, acceptance, performance
and enforcement of this Debenture, and do hereby consent to any number of
renewals of extensions of the time or payment hereof and agree that any such
renewals or extensions may be made without notice to any such persons and
without affecting their liability herein and do further consent to the release
of any person liable hereon, all without affecting the liability of the other
persons, firms or Maker liable for the payment of this Debenture, AND DO HEREBY
WAIVE TRIAL BY JURY.

        (a) No delay or omission on the part of the Holder in exercising its
rights under this Debenture, or course of conduct relating hereto, shall operate
as a waiver of such rights or any other right of the Holder, nor shall any
waiver by the Holder of any such right or rights on any one occasion be deemed a
waiver of the same right or rights on any future occasion.

        (b) THE MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS DEBENTURE
IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE
LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO
USE.

        Section 4.13 Definitions. For the purposes hereof, the following terms
shall have the following meanings:

        "Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Maker) that is regularly engaged in the business of appraising
the Capital Stock or assets of corporations or other entities as going concerns,
and which is not affiliated with either the Maker or the Holder of the
Debenture.

        "Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.

        "Trading Day" " means (a) a day on which the Common Stock is traded on
The Nasdaq National Market, The Nasdaq Small-Cap Market, or other registered
national stock exchange on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on The Nasdaq National Market, The Nasdaq Small-Cap
Market, or any registered national stock exchange, a day on which the Common
Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day
on which the Common Stock is quoted in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, however, that in
the event that the Common Stock is not listed or quoted as set forth in (a), (b)
and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday 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.

                                      -23-
<PAGE>

                              STARBASE CORPORATION

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

                                      -24-
<PAGE>

                                    EXHIBIT A

                               WIRE INSTRUCTIONS.

Payee:
      ---------------------------------------------------------
Bank:
     ----------------------------------------------------------
Address:
        -------------------------------------------------------

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

Bank No.:
         ------------------------------------------------------
Account No.:
            ---------------------------------------------------
Account Name:
             --------------------------------------------------

                                      -25-
<PAGE>

                                     FORM OF

                              NOTICE OF CONVERSION

   (To be Executed by the Registered Holder in order to Convert the Debenture)

The undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Debenture No. ___ into shares of Common Stock of
STARBASE CORPORATION (the "Maker") according to the conditions hereof, as of the
date written below.

Date of Conversion*
                   -------------------------------------------------------------
Applicable Conversion Price *
                             ---------------------------------------------------
Signature
         -----------------------------------------------------------------------
         [Name]

Address:
        ------------------------------------------------------------------------

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

* This original Notice of Conversion must be received by the Maker by the third
business date following the Conversion Date, and, if such conversion represents
the remaining principal balance of the Debenture, the original Debenture.

                                      -26-

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