Document:

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                                                                    Exhibit 4.1

THE 6% SENIOR CONVERTIBLE DEBENTURE REPRESENTED BY THIS CERTIFICATE AND THE
SECURITIES INTO WHICH IT MAY BE CONVERTED HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS,
AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE,
SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE
SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDERS
OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.

NO. 1                                                                 $5,000,000

                        6% SENIOR CONVERTIBLE DEBENTURE

     THIS 6% SENIOR CONVERTIBLE DEBENTURE (the "DEBENTURE") is one of a duly
authorized issue of Debentures of Photoelectron Corporation, a corporation duly
incorporated under the laws of the Commonwealth of Massachusetts, and having its
principal address at 5 Forbes Road, Lexington, Massachusetts, 02421 (the
"COMPANY"), designated as its 6% Senior Convertible Debentures due May 1, 2005,
in an aggregate principal amount of $5,000,000 (the "DEBENTURES").

     FOR VALUE RECEIVED, the Company promises to pay to the order of PYC
Corporation, having an address at c/o Aegeus Shipping Co. Ltd., 17-19 Akti
Miaouli, Piraeus 185 35 Greece, or its registered assigns (the "HOLDER"), the
principal sum of Five Million United States Dollars (U.S. $5,000,000) (the
"PRINCIPAL AMOUNT") on May 1, 2005, subject to earlier payment as otherwise
provided herein or in the Registration Rights Agreement (as defined below) (the
"MATURITY DATE") and to pay interest on the Principal Amount outstanding under
this Debenture (the "OUTSTANDING PRINCIPAL AMOUNT"), at the rate of 6% per
annum, due and payable quarterly in arrears on the 1st day of March, June,
September and December of each year, commencing on March 1, 2002 (each an
"INTEREST PAYMENT DATE") and on the Maturity Date.  Interest shall be calculated
based on a 360 day year.  Interest shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
original issuance and shall continue until the following Interest Payment Date.
Except as otherwise provided herein, the interest so payable will be paid to the
person in whose name this Debenture is registered on the records of the Company
regarding registration and transfers of the Debentures (the "DEBENTURE
REGISTER") at the close of business on the record date for interest payable on
such Interest Payment Date.  The record date for any

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interest payment is the close of business on the date fifteen days prior to the
Interest Payment Date, unless such date shall not be a business day, in which
case on the next preceding business day. The Company shall be entitled to
withhold from all payments of interest on this Debenture any amounts required to
be withheld under the applicable provisions of the United States income tax laws
as evidenced by an opinion of counsel of the Company.

     In lieu of paying such interest in cash, the Company may, at its option,
pay interest on this Debenture on any Interest Payment Date by adding the amount
of such interest to the Outstanding Principal Amount due under this Debenture
("PIK INTEREST") pursuant to a statement in the form of Exhibit 1 hereto ("PIK
STATEMENT") delivered by the Company to the Holder on or prior to the applicable
Interest Payment Date.  If the cash interest due hereunder is not paid to the
Holder by the applicable Interest Payment Date, then the Holder shall be
entitled to the addition of PIK Interest hereunder.  In all such cases, the
Company shall deliver to the Holders a PIK Statement with respect thereto.
Except as otherwise provided herein, the Company will pay, in cash, the
Outstanding Principal Amount (including all PIK Interest added to such
Outstanding Principal Amount) and all accrued and unpaid interest (the
"OUTSTANDING AMOUNT") due upon this Debenture on the Maturity Date.

     This Debenture is subject to the following additional provisions:

     1.  Exchange.  The Debentures are exchangeable for an equal aggregate
principal amount of Debentures of different denominations as requested by the
Holder surrendering the same.  No fees will be charged for such exchange.
Notwithstanding the foregoing, the Company shall have no obligation to issue new
Debentures unless and until requested by the Holders thereof.

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

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

         "ACT" shall mean the United States Securities Act of 1933, as amended.

         "CLOSING DATE" shall mean the date of original issuance of the
Debentures (such date being December 17, 2001).

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         "COMMON STOCK" shall mean the Common Stock, $.01 par value per share,
of the Company.

         "COMPANY" shall have the meaning set forth in the first introductory
paragraph.

         "CONVERSION DEFICIENCY" shall have the meaning set forth in Paragraph
9(b).

         "CONVERSION NOTICE" shall have the meaning set forth in Paragraph 5(c).

         "CONVERSION PRICE" shall mean $3.25/1/, subject to adjustment from time
to time as set forth in Paragraphs 7 and 16 hereof.

         "DEBENTURE" shall have the meaning set forth in the first introductory
paragraph.

         "DEBENTURE REGISTER" shall have the meaning set forth in the second
introductory paragraph.

         "DEBENTURES" shall have the meaning set forth in the first introductory
paragraph.

         "DEBT ISSUANCE" shall have the meaning set forth in Paragraph 17(b)(i).

         "EVENTS OF DEFAULT" shall have the meaning set forth in Paragraph 15.

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

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

         "HOLDER" shall have the meaning set forth in the second introductory
paragraph.

         "HOLDER CONVERSION DATE" shall have the meaning set forth in Paragraph
5(c).

-------------------
/1/ Such amount approximately equals the average closing price per share for a
share of Common Stock as reported on the American Stock Exchange for the seven
(7) consecutive trading days immediately preceding the date of original issuance
of this Debenture.

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         "INTEREST PAYMENT DATE" shall have the meaning set forth in the second
introductory paragraph.

         "MATURITY DATE" shall have the meaning set forth in the second
introductory paragraph.

         "NOTICE OF ACCEPTANCE" shall have the meaning set forth in Paragraph
17(b)(ii).

         "OFFER" shall have the meaning set forth in Paragraph 17(b)(i).

         "OFFERED SECURITIES" shall have the meaning set forth in Paragraph
17(b)(i).

         "OUTSTANDING AMOUNT" shall have the meaning set forth in the third
introductory paragraph.

         "OUTSTANDING PRINCIPAL AMOUNT" shall have the meaning set forth in the
second introductory paragraph.

         "PIK INTEREST" shall have the meaning set forth in the third
introductory paragraph.

         "PIK STATEMENT" shall have the meaning set forth in the third
introductory paragraph.

         "PRINCIPAL AMOUNT" shall have the meaning set forth in the second
introductory paragraph.

         "PRO RATA SHARE" shall have the meaning set forth in Paragraph
17(b)(i).

         "REDEMPTION DATE" shall have the meaning set forth in Paragraph
6(a)(ii).

         "REDEMPTION DEBENTURES" shall have the meaning set forth in Paragraph
6(c).

         "REDEMPTION PRICE" shall have the meaning set forth in Paragraph 6(b).

         "REDEMPTION NOTICE" shall have the meaning set forth in Paragraph 6(a).

         "REFUSED SECURITIES" shall have the meaning set forth in Paragraph
17(b)(iii).

         "REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth in the
Subscription Agreement.

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         "RELEASEES" shall have the meaning set forth in Paragraph 27.

         "SUBSCRIPTION AGREEMENT" shall mean the agreement entered into by and
between the Company and the Holder for the purchase of Debentures.

         "UNDERLYING SHARES" shall mean the shares of Common Stock into which
this Debenture is convertible.

     There are also certain definitions which apply only for purposes of
Paragraph 16.  Those definitions are defined in such paragraph.  In addition,
other terms defined in the Subscription Agreement and not otherwise defined
herein shall have the same meanings herein as are set forth for such terms in
the Subscription Agreement.

     4.  Maturity.  On the Maturity Date, the Outstanding Amount of this
         --------
Debenture shall be payable in cash.

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

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

         (b) Conversion Price for Converted Shares. Subject to Paragraph 5(a),
the Outstanding Amount of this Debenture that is converted into shares of Common
Stock shall be convertible into the number of shares of Common Stock calculated
by dividing the Outstanding Amount of this Debenture submitted for conversion by
the Conversion Price.

         (c) (i) Mechanics of Conversion. In order to convert this Debenture (in
whole or in part) into shares of Common Stock, the Holder shall surrender this
Debenture, by either overnight courier or two-day courier, to the Company, and
shall give written notice in the form of Exhibit 2 hereto (the "CONVERSION
NOTICE") by facsimile (with the original of such notice forwarded with the
foregoing courier) to the Company that the Holder elects to convert all or the
portion of the Outstanding Amount of this Debenture specified therein, which
such notice and election shall be irrevocable by the Holder; provided, however,
that the Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless this Debenture with
evidence of the principal amount hereof to be converted is delivered to the
Company as provided above, or the Holder notifies the Company that this
Debenture has been lost, stolen or destroyed and promptly executes an agreement
reasonably satisfactory to the Company to indemnify the Company from any loss
which may be incurred by it in connection with this Debenture. The date on which
a Conversion Notice is given (the "HOLDER CONVERSION DATE") shall be deemed to
be the date the Company received by facsimile the Conversion Notice, as
evidenced by a printed

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confirmation of receipt received by the Holder or confirmed by telephone
conference between the Holder and the Company.

     (ii)      Issuance of Certificates.  In the case of any Conversion Notice
given by the Holder to the Company, the Company shall use its best efforts to
cause the Company's transfer agent for the Common Stock to issue and deliver as
promptly as practicable and in no event later than five (5) business days after
delivery to the Company of the Debenture, or after receipt of such agreement and
indemnification, to such Holder or to its designee, a certificate or
certificates for the number of shares of Common Stock to which the Holder shall
be entitled, together with a Debenture for the principal amount not submitted
for conversion, if any.  The person or persons entitled to receive the shares of
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Holder Conversion
Date.

     6.  Redemption.
         ----------

          (a) Company Option To Redeem.  Any portion of this Debenture may be
redeemed at the Company's option expressed by a written notice (a "REDEMPTION
NOTICE") to the Holder; provided that:

               (i) the average closing bid price per share of Common Stock as
reported on the American Stock Exchange for the twenty (20) consecutive trading
days prior to the date of the Redemption Notice shall have been at least one
hundred seventy-five percent (175%) of the Conversion Price;

               (ii) the Redemption Notice delivered by the Company shall be
received by the Holder at least ten (10) trading days (but not more than thirty
(30) trading days) prior to the date of redemption (the "REDEMPTION DATE");

               (iii) at all times from and after the delivery of the Redemption
Notice, the Registration Statement contemplated by the Registration Rights
Agreement is effective for sale thereunder;

               (iv) on the date of the Redemption Notice, the Company shall have
deposited at least thirty percent (30%) of the Redemption Price in an escrow
account reasonably satisfactory to the Holder, and shall have notified the
Holder in writing that the Company shall have adequate liquidity to pay the
Redemption Price on the Redemption Date, and shall not be prohibited under the
terms of any financing or other agreements or applicable law from redeeming the
Debentures on the Redemption Date; and

               (v) no Conversion Deficiency, as defined in Paragraph 9(b), shall
have occurred prior to the Redemption Date.

          (b) Redemption Price.  The redemption price for the portion of this
Debenture being redeemed shall equal one hundred five percent (105%) of the

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Outstanding Principal Amount of this Debenture being so redeemed (the
"REDEMPTION PRICE"), along with any accrued but unpaid interest. The Redemption
Price shall be payable in cash in United States Dollars.

          (c) Mechanics of Redemption.  If less than all of the Outstanding
Amount of Debentures are to be redeemed at any time, selection of Debentures for
redemption will be made by the Company on a pro rata basis.  In the event the
Company shall be required or elects to redeem any part or all of the Outstanding
Amount of the Debentures, the Company shall send by either overnight courier or
two-day courier (with a copy sent by facsimile) confirmation of such
determination or obligation to the record Holders of the Debentures being
redeemed (the "REDEMPTION DEBENTURES"), which confirmation shall be included in
the Redemption Notice.  Such confirmation shall specify the Redemption Date,
which shall be at least 10 trading days (but not more than 30 trading days)
after receipt by the Holder of the Redemption Notice.  On the Redemption Date,
the Redemption Debentures shall be redeemed automatically without any further
action by the Holders of such Debentures and whether or not the Debentures are
surrendered to the Company; provided, that the Company shall be obligated to pay
the cash consideration due to a Holder of such Debentures upon redemption only
when such Debentures are either delivered to the principal office of the Company
or the Holder notifies the Company that such Debentures have been lost, stolen
or destroyed and executes an agreement reasonably satisfactory to the Company to
indemnify the Company from any loss which may be incurred by it in connection
with such Debenture.  Thereupon, there shall be promptly issued and delivered to
such Holder, within seven (7) business days after the Redemption Date and
delivery to the Company of such Debentures, or after receipt of such agreement
and indemnification, at the address of such Holder on the books of the Company,
payment in immediately available funds to the name as shown on the books of the
Company in the amount of the Redemption Price as calculated as set forth in
Paragraph 6(b).

     Notwithstanding anything to the contrary contained herein, the Holders'
rights of conversion pursuant to Paragraph 5 hereof shall not be limited in any
manner by the Company's rights of redemption pursuant to this Paragraph 6.

     7.  Stock Splits, Dividends, Reorganizations.
         ----------------------------------------

          (a) Adjustment for Subdivisions, Combinations, etc.  If the Company
shall subdivide its outstanding Common Stock by split-up, spin-off, or
otherwise, or combine its outstanding Common Stock, then the number of shares
issuable upon conversion of this Debenture and the Conversion Price in effect as
of the date of such subdivision, split-up, spin-off, or combination shall be
proportionally adjusted to give effect thereto.

          (b) Adjustment for Dividends and Distributions.  In the event the
Company at any time or from time to time after the Closing Date makes, or fixes
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in Common Stock (or rights to
acquire Common Stock), then

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and in each such event, provision shall be made so that the Holders of
Debentures shall receive upon conversion thereof pursuant to Paragraph 5 hereof,
in addition to the number of shares of Common Stock receivable thereupon, the
amount of such other securities of the Company to which a Holder on the relevant
record or payment date, as applicable, of the number of shares of Common Stock
so receivable upon conversion would have been entitled, plus any dividends or
other distributions which would have been received with respect to such
securities, had such Holder thereafter, during the period from the date of such
event to and including the Holder Conversion Date retained such securities,
subject to all other adjustments called for during such period under this
Paragraph 7 with respect to the rights of the Holders of the Debentures. For
purposes of this Paragraph 7(b), the number of shares of Common Stock so
receivable upon conversion shall be deemed to be that number which the Holder
would have received upon conversion of the entire Outstanding Amount hereof if
the Holder Conversion Date had been the day the Company set as the record date
for such dividend or distribution.

          (c) Adjustment for Merger, Reorganization, etc.  In the event that at
any time, or from time to time after the Closing Date, the Common Stock issuable
upon conversion of the Debentures is changed into the same or a different number
of shares of any class or classes of stock, whether in connection with a merger
or consolidation, by recapitalization, reclassification, reorganization or
otherwise (other than a subdivision, combination of shares or stock dividend
provided for elsewhere in this Paragraph 7), then and in each such event each
Holder of Debentures shall have the right, for a period of thirty (30) days
following receipt of the Company's notice of such adjustment, to convert such
Debentures into the kind of securities receivable by a holder of Common Stock
upon such merger, recapitalization, reclassification or other change, all
subject to further adjustment as provided herein.

          (d) Certificate as to Adjustments.  Upon each occurrence of an
adjustment pursuant to this Paragraph 7, the Company at its expense shall
furnish to each Holder a certificate setting forth (i) in reasonable detail the
facts upon which such adjustment is based, and (ii) the number of shares of
Common Stock and the amount of other property or securities that after giving
effect thereto would be received by the Holder upon conversion of this
Debenture.

     8.  Fractional Shares.  No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder.  The
number of shares of Common Stock that are issuable upon any conversion shall be
rounded up or down to the nearest whole share.

     9.  Reservation of Stock Issuable Upon Conversion.
         ---------------------------------------------

          (a)  Reservation Requirement.  The Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue shares of its Common Stock upon
conversion of the Debentures.  In the event that the number of shares so
reserved (either in the aggregate or as to any

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Debenture) shall be insufficient for issuance upon conversion of the Debentures,
then, upon receipt by the Company of notice from any Holder, the Company shall
use its best efforts and all due diligence to increase the number of shares so
reserved to cure all such deficiencies (either in the aggregate or as to any
Debenture) and, if necessary, to obtain the approval by its shareholders
therefor, including the authorization of such additional number of shares of
Common Stock as may be required to issue such shares in excess of the number so
reserved (either in the aggregate or as to any Debenture) or in excess of such
limitation, as the case may be.

          (b) Conversion Deficiency.  If, upon receipt of a Conversion Notice,
the Company does not have a sufficient number of shares of Common Stock
available to satisfy the Company's obligations to issue Common Stock upon
conversion of all or any of the Debentures to be so converted (a "CONVERSION
DEFICIENCY"), any Holder of the Debentures shall have the right to demand from
the Company immediate redemption of any portion of the Debentures with respect
to which the Company does not have a sufficient number of shares available to
satisfy such conversion obligations, in cash at the Redemption Price pursuant to
Paragraph 6.  Within three business days of the occurrence of any Conversion
Deficiency, the Company shall notify each Holder in writing of such occurrence.
The Holder shall then have three business days from the receipt of such notice
to demand redemption pursuant to this Section 9(b).

     Within three business days of the receipt of written demand for redemption
from any Holder pursuant to this Paragraph 9(b), the Company shall notify each
such Holder whether the Company has adequate liquidity to redeem such portion of
the Debentures as required by the foregoing paragraph (and, if requested by such
Holder, will provide reasonable written support for its position with respect
thereto within ten business days of such request) and whether such redemption is
prohibited under the terms of any financing or other agreements or applicable
law.

     In the event that the Company notifies the Holder in writing that the
Company has adequate liquidity and is not otherwise restricted from redeeming
such portion of this Debenture, then the Company shall pay, in cash, to such
Holder within ten business days after which the Company received the Holder's
demand for redemption and on the last day of each 30-day period for which a
Conversion Deficiency is continuing, an additional amount equal to one percent
(1%) of the amount of such portion of the Debentures which such Holder does not
require the Company to redeem, for a maximum of three percent (3%) for such
Conversion Deficiency.

     In the event that the Company notifies the Holder in writing that the
Company does not have adequate liquidity to redeem such portion of the
Debentures or that the Company is otherwise restricted from redeeming such
portion of this Debenture, the Company shall pay, in cash, to such Holder within
ten business days after which the Company received the Holder's demand for
redemption and on the last day of each 30-day period for which a Conversion
Deficiency is continuing (or until the Company establishes to the reasonable
satisfaction of the Holder that the Company has adequate liquidity to redeem and
is not otherwise prohibited from redeeming such Holder's Debentures, in which
case the provisions of the foregoing paragraph shall govern), two

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percent (2%) of the amount of such portion of the Debentures which can not be
redeemed.

     10.  Other Covenants of the Company.
          ------------------------------

          (a) The Company shall not intentionally take any action which would be
reasonably likely to impair the contractual rights and privileges of the
Debentures set forth herein or of the Holders thereof.

          (b) The Company shall not redeem (other than pursuant to Paragraph 6,
9 and 11), retire, purchase or otherwise acquire, directly or indirectly,
Debentures held by any Holder unless the Company shall have offered to redeem,
retire, purchase or otherwise acquire, as the case may be, the same proportion
of the aggregate principal amount of Debentures held by each other Holder of
Debentures at the time outstanding upon the same terms and conditions and such
offer shall remain open for a period of at least thirty (30) business days.

          (c) Prior to any conversion pursuant to Paragraph 5, the Company will
qualify for listing on the American Stock Exchange, or any other exchange on
which the Common Stock is then listed, the Underlying Shares into which the
Debentures are convertible.

          (d)  The Company shall not transfer any of its assets or property to
any of its direct or indirect subsidiaries or affiliates unless such transfer is
being made in good faith for a proper business purpose.

     11.  Holders' Rights if Common Stock is Delisted or if Trading in Common
Stock is Suspended.  In the event that at any time on or after the date hereof,
trading in the shares of the Company's Common Stock is suspended on the American
Stock Exchange for a period of seven (7) consecutive trading days, other than as
a result of the suspension of trading in securities in general, or if such
shares of Common Stock are delisted and not relisted on the American Stock
Exchange, the New York Stock Exchange, the Nasdaq National Market or the Nasdaq
Small Cap Market within sixty (60) trading days thereafter, then, after an
additional thirty (30) days have elapsed, at a Holder's option, the Company
shall redeem such Holder's Debentures on a Redemption Date designated by such
Holder, and at the Redemption Price and in accordance with Paragraph 6 hereof.

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

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

     14.  Replacement Debentures.  In the event that the Holder notifies the
Company that its Debenture has been lost, stolen or destroyed, a replacement
Debenture identical in all respects to the original Debenture (except for
registration number and Outstanding Amount, if different than that shown on the
original Debenture) shall be issued to the Holder, provided that the Holder
executes and delivers to the Company an agreement reasonably satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection with
the Debenture and provided that the Company is provided a form of Debenture for
such replacement purposes.

     15.  Defaults.  If one or more of the following described "EVENTS OF
DEFAULT" shall occur:

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

          (b)  The Company shall fail to perform or observe any material
               covenant or agreement in this Debenture, the Subscription
               Agreement or the Registration Rights Agreement, or any other
               covenant, term, provision, condition, agreement or obligation of
               the Company under this Debenture, and such failure shall continue
               uncured for a period of fifteen (15) business days after notice
               from the Holder of such failure; or

          (c)  The Company shall fail to make payments of principal or interest
               when due, provided that, for purposes of this subsection 15(c),
               interest that is added to the Outstanding Principal Amount as PIK
               Interest shall be deemed to be paid when due under this Debenture
               or upon redemption of this Debenture, or fail to issue shares of
               Common Stock upon conversion of this Debenture (other than in
               accordance with Paragraph 9(b)) when due, and any such failure
               shall continue uncured for a period of five (5) days after the
               due date; or

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

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

          (f)  Any governmental agency or any court of competent jurisdiction
               shall assume custody or control of the whole or any substantial
               portion of the properties or assets of the Company and shall not
               be dismissed within sixty (60) days thereafter; or

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

then, or at any time thereafter prior to the date on which all continuing Events
of Default have been cured, and in each and every such case, unless such Event
of Default shall have been waived in writing by the Holder (which waiver shall
not be deemed to be a waiver of any subsequent default), at the option of the
Holder and in the Holder's sole discretion, the Holder may, by notice to the
Company declare this Debenture immediately due and payable, and the Holder may
immediately, and without expiration of any period of grace, enforce any and all
of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law.  In such event, the Debenture shall be redeemed at a
redemption price per Debenture equal to the Redemption Price provided in
Paragraph 6(b).

          16.  Adjustments to Conversion Price.

               a) Special Definitions. For purposes of this Section 16, the
                  following definitions shall apply:

                  i.   "Options" mean rights, options or warrants to subscribe
                       for, purchase or otherwise acquire either Common Stock or
                       Convertible Securities.

                                      -12-
<PAGE>

                 ii.   "Original Issue Date" shall mean December 17, 2001.

                iii.   "Convertible Securities" shall mean any evidences of
                       indebtedness, shares or other securities directly or
                       indirectly convertible into or exchangeable for Common
                       Stock.

                 iv.   "Additional Shares of Common Stock" shall mean all
                       shares of Common Stock issued (or, pursuant to Paragraph
                       16(c), deemed to be issued) by the Company after the
                       Original Issue Date, other than:

                       A. shares of Common Stock issued upon conversion of the
                          Debentures;

                       B. shares of Common Stock issued upon conversion of
                          the Company's 10% Senior Convertible Debentures and
                          all other Convertible Securities currently outstanding
                          or which the Company is currently contractually
                          obligated to issue;

                       C. shares of Common Stock issuable upon exercise of
                          stock options issued, or Common Stock otherwise
                          issuable, pursuant to the Company's 1989 Stock Option
                          Plan and 1996 Equity Incentive Plan, as such plans may
                          be amended, or other stock incentive plans of the
                          Company;

                       D. shares of Common Stock issued as a dividend or
                          distribution on the Common Stock;

                       E. any securities issued to vendors, suppliers,
                          customers, lenders, lessors, consultants or advisors,
                          in a transaction the primary purpose of which is not
                          to raise equity capital for the Company, on terms
                          approved by the Company's board of directors; and

                       F. any issuance of equity securities to or in
                          connection with a joint venture agreement, merger,
                          consolidation or acquisition agreement upon terms
                          approved by the Company's board of directors.

                 b) No Adjustment of Conversion Price. No adjustment in the
                    Conversion Price shall be made in respect of the issuance of
                    Additional Shares of Common Stock unless the consideration
                    per share for an Additional Share of Common Stock issued or
                    deemed to be issued by the Company is less than the
                    Conversion Price for

                                      -13-
<PAGE>

                    the Debentures in effect on the date of and immediately
                    prior to such issuance.

                 c) Deemed Issue of Additional Shares of Common Stock. If the
                    Company at any time or from time to time on or after the
                    Original Issue Date shall issue any Options or Convertible
                    Securities (other than Options or Convertible Securities
                    specifically excluded from the definition of Additional
                    Shares of Common Stock set forth above) or shall fix a
                    record date for the determination of holders of any class of
                    securities entitled to receive any such Options or
                    Convertible Securities (other than Options or Convertible
                    Securities specifically excluded from the definition of
                    Additional Shares of Common Stock set forth above), then the
                    maximum number of shares (as set forth in the instrument
                    relating thereto without regard to any provisions contained
                    therein for a subsequent adjustment of such number that
                    would result in an adjustment pursuant to clause (ii) below)
                    of Common Stock issuable upon the exercise of such Options
                    or, in the case of Convertible Securities and Options
                    therefor, upon the conversion or exchange of such
                    Convertible Securities, shall be deemed to be Additional
                    Shares of Common Stock issued as of the time of such issue
                    or, in case such a record date shall have been fixed, as of
                    the close of business on such record date, provided that in
                    any such case in which Additional Shares of Common Stock are
                    deemed to be issued:

                    i. no further adjustment in the applicable
                       Conversion Price shall be made upon the subsequent
                       issue of Convertible Securities or shares of
                       Common Stock upon the exercise of such Options or
                       conversion or exchange of such Convertible
                       Securities;

                   ii. if such Options or Convertible Securities by their
                       terms provide, with the passage of time or otherwise, for
                       any increase or decrease in the consideration payable to
                       the Company, or increase or decrease in the number of
                       shares of Common Stock issuable, upon the exercise,
                       conversion or exchange thereof, the applicable Conversion
                       Price computed upon the original issue thereof (or upon
                       the occurrence of a record date with respect thereto),
                       and any subsequent adjustments based thereon, shall, upon
                       any such increase or decrease becoming effective, be
                       recomputed to reflect such increase or decrease insofar
                       as it affects such Options or the rights of conversion or
                       exchange under such Convertible Securities.

                                      -14-
<PAGE>

                  iii. upon the expiration of any such Options or any
                       rights of conversion or exchange under such Convertible
                       Securities which shall not have been exercised, the
                       applicable Conversion Price, computed upon the original
                       issue thereof (or upon the occurrence of a record date
                       with respect thereto), and any subsequent adjustments
                       based thereon, shall, upon such expiration, be recomputed
                       as if:

                       A. in the case of Convertible Securities or Options
                          for Common Stock, the only Additional Shares of Common
                          Stock issued were shares of Common Stock, if any,
                          actually issued upon the exercise of such Options or
                          the conversion or exchange of such Convertible
                          Securities and the consideration received therefor was
                          the consideration actually received by the Company for
                          the issue of all such Options, whether or not
                          exercised, plus the consideration actually received by
                          the Company upon such exercise, or for the issue of
                          all such Convertible Securities which were actually
                          converted or exchanged, plus the additional
                          consideration, if any, actually received by the
                          Company upon such conversion or exchange, and

                       B. in the case of Options for Convertible Securities,
                          only the Convertible Securities, if any, actually
                          issued upon the exercise thereof were issued at the
                          time of issue of such Options, and the consideration
                          received by the Company for the Additional Shares of
                          Common Stock deemed to have been then issued was the
                          consideration actually received by the Company for the
                          issue of all such Options, whether or not exercised,
                          plus the consideration deemed to have been received by
                          the Company upon the issue of the Convertible
                          Securities with respect to which such Options were
                          actually exercised;

                       C. no readjustment pursuant to clause (A) or (B) above
                          shall have the effect of increasing any Conversion
                          Price to an amount which exceeds the lower of (i) the
                          Conversion Price on the original adjustment date, or
                          (ii) the Conversion Price that would have resulted
                          from any issuance of Additional Shares of Common Stock
                          between the original adjustment date and such
                          readjustment date; and

                                      -15-
<PAGE>

                       D. in the case of any Options which expire by their
                          terms not more than 30 days after the date of issue
                          thereof, no adjustment of the applicable Conversion
                          Price shall be made until the expiration or exercise
                          of all such Options, whereupon such adjustment shall
                          be made in the manner provided in clause (C) above.

              d) Adjustment of Conversion Price Upon Issuance of Additional
                 Shares of Common Stock. If and whenever the Company shall issue
                 or sell or is, in accordance with this Paragraph 16(c), deemed
                 to have issued or sold, any Additional Shares of Common Stock
                 without consideration or for a consideration per share less
                 than the Conversion Price in effect immediately prior to the
                 effectiveness of any change to such Conversion Price pursuant
                 to the terms of this Debenture on account of such issuance or
                 sale, then forthwith upon such issuance or sale, the Conversion
                 Price shall be reduced, concurrently with such issue, to an
                 amount equal to the consideration per share for such issuance
                 or sale.

              e) Determination of Consideration. For purposes of this
                 Paragraph 16, the consideration received by the Company for the
                 issue of any Additional Shares of Common Stock shall be
                 computed as follows:

                 i.    Cash and Property: Such consideration shall:

                       A. insofar as it consists of cash, be computed at the
                          aggregate amount of cash received by the Company
                          excluding amounts paid or payable for accrued interest
                          or accrued dividends and excluding any commissions or
                          expenses paid by the Company;

                       B. insofar as it consists of property other than cash,
                          be computed at the fair value thereof at the time of
                          such issue, as determined in good faith by the
                          Company's board of directors; provided, however, that
                          no value shall be attributed to any services performed
                          by any employee, officer or director of the Company;
                          and

                       C. if Additional Shares of Common Stock are issued
                          together with other shares or securities or other
                          assets of the Company for consideration which covers
                          both, be the proportion of such consideration so
                          received with respect to such Additional Shares

                                      -16-
<PAGE>

                          of Common Stock, computed as provided in clauses (A)
                          and (B) above, as determined in good faith by the
                          Company's board of directors.

                 ii.   Option and Convertible Securities. The consideration
                       per share received by the Company for Additional Shares
                       of Common Stock deemed to have been issued pursuant to
                       Section 16(c), relating to Options and Convertible
                       Securities, shall be determined by dividing

                       A. the total amount, if any, received or receivable by
                          the Company as consideration for the issue of such
                          Options or Convertible Securities, plus the minimum
                          aggregate amount of additional consideration (as set
                          forth in the instruments relating thereto, without
                          regard to any provision contained therein for a
                          subsequent adjustment of such consideration) payable
                          to the Company upon the exercise of such Option or the
                          conversion or exchange of such Convertible Securities,
                          or in the case of Options for Convertible Securities,
                          the exercise of such Options for Convertible
                          Securities and the conversion or exchange of such
                          Convertible Securities by

                       B. the maximum number of shares of Common Stock (as
                          set forth in the instruments relating thereto, without
                          regard to any provision contained therein for a
                          subsequent adjustment of such number) issuable upon
                          the exercise of such Options or the conversion or
                          exchange of such Convertible Securities.

              f) Notice of Adjustment. Upon the occurrence of each adjustment
                 or readjustment of the Conversion Price pursuant to this
                 Paragraph 16, the Company at its expense shall give written
                 notice thereof, addressed to each Holder at the last address
                 appearing on the Debenture Register, which notice shall state
                 the applicable Conversion Price resulting from such adjustment.
                 The Company shall, upon the written request at any time of any
                 Holder, furnish or cause to be furnished to such Holder a like
                 certificate setting forth (i) such adjustments and
                 readjustments to the Conversion Price, (ii) the applicable
                 Conversion Price at the time in effect and (iii) the number of
                 shares of Common Stock and the amount, if any, of other
                 property which at the time would be received upon the
                 conversion of the Debentures held by such Holder.

                                      -17-
<PAGE>

     17.  Other Indebtedness.
          ------------------

          (a) Additional Indebtedness.  After the Closing Date, the Company
shall have the option to incur up to $10,000,000 of additional indebtedness (i)
in one or more private placements of debentures to accredited investors only on
terms substantially identical to those of the Debentures or (ii) if less than
$10,000,000 of such debentures are sold in such private placements in the
aggregate, through a rights offering of convertible debentures to all Company
stockholders on terms comparable to those in the Debentures in an aggregate
amount not exceeding $10,000,000 minus the aggregate amount sold in such private
placements; provided, however, that if the Board of Directors of the Company
determines that a rights offering is not in the best interests of the Company
and its stockholders, it shall have the authority and discretion to obtain such
indebtedness financing on such other terms and conditions and by such other
means as it deems are in the best interests of the Company and its stockholders.

          (b)  Preemptive Rights.

               (i) After the Closing Date, the Company shall not issue, sell or
exchange, agree to issue, sell or exchange, or reserve or set aside for
issuance, sale or exchange, any debt security of the Company that by its terms
is convertible into or exchangeable for any equity security of the Company (a
"DEBT ISSUANCE"), unless in each case the Company shall have first offered to
sell to the Holder its Pro Rata Share (as defined hereinafter) of such
securities (the "OFFERED SECURITIES"), at a price and on such other terms as
shall have been specified by the Company in writing delivered to the Holder (the
"OFFER"), which offer by its terms shall remain open and irrevocable for a
period of twenty (20) days from the date it is delivered by the Company. For
purposes of this Section 17, "PRO RATA SHARE" shall mean such portion of the
Offered Securities as the aggregate number of shares of Common Stock then held
by the Holder bears to the total number of shares of Common Stock then
outstanding.

               (ii) The Holder shall have the right to purchase all or a portion
of its Pro Rata Share. Notice of the Holder's intention to accept, in whole or
in part, an Offer shall be evidenced in writing and delivered to the Company
prior to the end of the 20-day period of such Offer, setting forth such portion
of the Pro Rata Share it elects to purchase (the "NOTICE OF ACCEPTANCE").

               (iii) In the event that the Holder elects not to purchase all of
its Pro Rata Share, the Company shall have 120 days from the expiration of the
foregoing 20-day period to sell all or any part of the Pro Rata Share as to
which a Notice of Acceptance has not been given (the "REFUSED SECURITIES") to
any other person or persons, but only upon terms and conditions which are no
more favorable, in the aggregate, to such other person or persons or less
favorable to the Company than those set forth in the Offer. Upon the closing of
the sale to such other person or persons of the Refused Securities, which shall
include payment of the purchase price to the Company in

                                      -18-
<PAGE>

accordance with the terms of the Offer, the Holder shall purchase from the
Company, and the Company shall sell to the Holder, the portion of the Pro Rata
Share in respect of which a Notice of Acceptance was delivered to the Company
upon the terms specified in the Offer. The purchase by the Holder of its Pro
Rata Share is subject in all cases to the preparation, execution and delivery by
the Company and the Holder of a purchase agreement relating to the securities
satisfactory in form and substance to the Holder and its counsel.

               (iv) In each case, any portion of its Pro Rata Share not
purchased by the Holder or other person or persons in accordance with Section
17(b)(iii) may not be sold or otherwise disposed of until the securities are
again offered to the Holder under the procedures specified in Section 17(b)(i),
(ii) and (iii).

               (v) Notwithstanding the foregoing, the rights provided to the
Holder in this Section 17 shall not apply if the Debt Issuance is a rights
offering to stockholders of the Company. However, the Holder shall have the
opportunity to participate in the rights offering to the same extent as other
stockholders of the Company (after taking into account the purchase of this
Debenture) and shall also have the right to oversubscribe in the rights
offering, if oversubscription rights are offered in such offering.

               (vi) Notwithstanding anything herein to the contrary, the rights
provided to the original Holder hereof in this Section 17 may not be assigned or
transferred to a third party without the prior written consent of the Company.

          (c) Exceptions.

               (i) The provisions of Sections 17(a) and 17(b) shall terminate
when less than 50% of the Outstanding Principal Amount of the Debentures at the
Closing Date is outstanding.

               (ii) Notwithstanding anything herein to the contrary, the
following shall be excluded from the provisions of Section 17:

                    a) the issuance of the Debentures and, in accordance with
                       Paragraph 14, any replacement Debentures;

                    b) the issuance of additional amounts of the Debentures and
                       the Company's 10% Senior Convertible Debentures in lieu
                       of the payment of interest thereon, in accordance with
                       the terms thereof in effect on the date hereof;

                    c) indebtedness that is subordinated in right of payment
                       to the Debentures; and

                    d) indebtedness incurred in the ordinary course of
                       business.

                                      -19-
<PAGE>

     18. Intentionally Omitted.

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

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

     21. Assignment, Etc.  Subject to any applicable law and the requirements
set forth in the legend set forth hereon, any Holder may, without notice,
transfer or assign this Debenture.  The Company agrees that, subject to
compliance with the applicable law, after receipt by the Company of written
notice of assignment from the Holder or from the Holder's assignee, all
principal, interest, and other amounts which are then due and thereafter become
due under this Debenture shall be paid to such assignee at the place of payment
designated in such notice.  This Debenture shall be binding upon the Company and
its successors and shall inure to the benefit of the Holder and its successors
and assigns.

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

     23. Miscellaneous.  Unless otherwise provided herein, any notice or other
communication to a party hereunder shall be deemed to have been duly given if
personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid with a copy in each case sent on the same day to the
party by facsimile, Federal Express or other overnight delivery service to said
party at its address set forth herein or such other address as either may
designate for itself in such notice to the other and communications shall be
deemed to have been received when delivered personally or, if sent by mail, when
actually received by the party to whom it is addressed.  Copies of all notices
to the Company shall be sent to Photoelectron Corporation, 5 Forbes Road,
Lexington, Massachusetts 02421, Attention: Timothy W. Baker, Facsimile No. (781)
861-0129, and to William Flannery, Esq., Corporate Counsel, 722 Grove Street,
Framingham, Massachusetts, 01701, Facsimile No. (508) 877-8211.  Whenever the
sense of this Debenture requires, words in the singular shall be deemed to
include the plural and words

                                      -20-
<PAGE>

in the plural shall be deemed to include the singular. Paragraph headings are
for convenience only and shall not affect the meaning of this document.

     24. Choice of Law and Venue:  Waiver of Jury Trial.  THIS DEBENTURE  SHALL
BE CONSTRUED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW THEREOF.  The Company hereby
(i) irrevocably submits to the exclusive jurisdiction of the United States
District Court for Massachusetts for the purposes of any suit, action or
proceeding arising out of or relating to this Debenture and (ii) 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.  The Company consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
the Company at the address in effect for notices to it under this Debenture and
agrees that such service shall constitute good and sufficient service of process
and notice thereof.  Nothing in this paragraph shall affect or limit any right
to serve process in any other manner permitted by law.

     25. Monthly Financial Information.  So long as at least 50% of the
Outstanding Principal Amount of this Debenture on the Closing Date is
outstanding, the Company shall deliver to the Holder, within thirty (30) days of
the end of each calendar month, an unaudited monthly report including a balance
sheet, a profit or loss statement and a statement of cash flows for and as of
the end of such month, in reasonable detail, prepared in accordance with
generally accepted accounting principles, with the exception that no notes need
be attached to such statements and year-end audit adjustments may not have been
made.

     26.  Release.  The Company hereby fully and unconditionally releases and
forever discharges the original Holder hereof, and each of its partners,
incorporators, officers, directors, employees, agents and controlling persons,
past, present or future (whether as individuals or in their corporate capacity)
(the "RELEASEES"), from any and all claims, causes of action, suits,
obligations, demands, debts, agreements, promises, liabilities, controversies,
costs, damages, expenses and attorneys' fees whatsoever (whether class,
derivative or individual in nature), whether based on any federal or state law
or right of action, at law or in equity or otherwise, foreseen or unforeseen,
matured or unmatured, known or unknown, accrued or not accrued, which the
Company may have against the Holder or the Releasees, arising from or relating
to this Debenture or the Principal Amount provided under this Debenture, or in
any way related to this financing of the Company by the Holder.

     27.  Indemnity.  The Company hereby agrees to indemnify and hold harmless
the original Holder hereof and its partners, incorporators, officers, directors,
employees, agents and controlling persons, from and against any and all loss,
damage or liability due to or arising out of any claims against such Holder
resulting from such Holder's purchase of this Debenture from the Company or in
any way related to this financing of the

                                      -21-
<PAGE>

Company by the Holder. The Company's agreement in this Section shall not apply
to amounts paid in settlement of any such loss, damage, or liability or action
if such settlement is effected without the consent of the Company (which consent
will not be unreasonably withheld).

                            [SIGNATURE PAGE FOLLOWS]

                                      -22-
<PAGE>

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

                              Dated:  December 17, 2001

                              PHOTOELECTRON CORPORATION

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

                                      -23-
<PAGE>

                                   EXHIBIT 1

                                 PIK STATEMENT
                                 -------------

Date:  ______________

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

Re:  6% Senior Convertible Debenture due May 1, 2005 ("Debenture") of
Photoelectron Corporation (the "Company") No. 1, in the face principal amount of
U.S.$5,000,000.

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

     Interest Payment Date:__________________

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

     PIK Interest:                           U.S.$_____________

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

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

                         PHOTOELECTRON CORPORATION

                         By:  ___________________________________
                         Print Name:
                         Print Title:

                                      -24-
<PAGE>

                                   EXHIBIT 2

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

                               CONVERSION NOTICE
                               -----------------
                                      FOR
                                      ---
                6% SENIOR CONVERTIBLE DEBENTURE DUE MAY 1, 2005
                -----------------------------------------------

The undersigned, as Holder of the 6% Senior Convertible Debenture due May 1,
2005 of Photoelectron Corporation ("Photoelectron"), No. 1, in the Outstanding
Principal Amount of U.S.$5,000,000 (the "Debenture"), hereby irrevocably elects
to convert U.S.$__________ of the Outstanding Principal Amount of the Debenture
(including all PIK Interest added to such Outstanding Principal Amount), and
U.S.$__________ of interest accrued but unpaid under the Debenture, into shares
of Common Stock, par value $.01 per share (the "Common Stock"), of Photoelectron
according to the conditions of the Debenture, as of the date written below.  The
undersigned hereby requests that share certificates for the Common Stock to be
issued to the undersigned pursuant to this Conversion Notice be issued in the
name of, and delivered to, the undersigned or its designee as indicated below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.  No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any.

Conversion Information:  NAME OF HOLDER:_____________________________

                         By:_____________________________________________
                         Print Name:
                         Print Title:

                         Print Address of Holder:

                         ________________________________________________
                         ________________________________________________

                         Issue Common Stock to:____________________________

                         at:______________________________________________

                         ________________________________________________

                         ________________________________________________
                         Date of Conversion

                                      -25-<PAGE>

                                                                     Exhibit 4.2

                         REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT ("Registration Rights Agreement") is
entered into as of December 17, 2001 between Photoelectron Corporation, a
Massachusetts corporation (the "Company"), and PYC Corporation (the
"Purchaser").

                              W I T N E S S E T H:

     WHEREAS, pursuant to the Subscription Agreement, dated as of December 17,
2001 (collectively, the "Subscription Agreement"), by and between the Company
and the Purchaser, the Company has agreed to sell and the Purchaser has agreed
to purchase the Company's 6% Senior Convertible Debentures (the "Debentures")
convertible into shares of the Company's Common Stock, $.01 par value ("Common
Stock") (such shares of Common Stock issuable upon conversion of the Debentures
being collectively referred to herein as the "Shares");

     WHEREAS, pursuant to the terms of, and in partial consideration for, the
Purchaser's agreement to enter into the Subscription Agreement, the Company has
agreed to provide the Purchaser with the registration rights contained herein
with respect to the Shares;

     NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Subscription Agreement and
this Registration Rights Agreement, the Company and the Purchaser agree as
follows:

     1.  Certain Definitions.   As used in this Agreement, the following terms
shall have the following respective meanings.  Other terms used herein which are
defined in the Subscription Agreements and the Debentures shall have the same
meanings herein as they do in such other documents.

     "Commission" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.

     "Registrable Securities" shall mean Shares issued or issuable to the
Purchaser or any Holder upon conversion of the Debentures or upon any stock
split, stock dividend, recapitalization or similar event with respect to such
Shares.

     "Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with the Holders' exercise of their registration rights
under this Agreement, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel for the Company, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the Company).

                                       1
<PAGE>

     "Selling Expenses" shall mean all underwriting discounts and selling
commissions, if any, applicable to the sale of Registrable Securities.

     "Holder" shall include the Purchaser and any transferee of Debentures or
Registrable Securities which have not been sold to the public to whom the
registration rights conferred by this Agreement have been transferred in
compliance with Section 11 of this Agreement.

     "Registration Statement" shall have the meaning set forth in Section 2
herein.

     "Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.

     "Securities Act" shall mean the Securities Act of 1933, as amended.

     2.  The Registration Requirements.  The Company shall use its best efforts
to file within ninety (90) days after the Closing Date (as defined in the
Debentures), and use its best efforts to cause to become effective under the
Securities Act, a registration statement on Form S-3 or, if Form S-3 is not then
available, another appropriate form covering the resale of the Shares (the
"Registration Statement").

     3.  Exercise of Rights.  The Holders shall act with respect to their rights
under this Agreement according to the vote of a majority-in-interest of the
Shares voting together as a single class on an as-converted basis.

     4.  Expenses of Registration.  All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Agreement shall be borne by the Company, and all Selling Expenses relating to
the sale of any Registrable Securities shall be borne by the Holder selling such
Registrable Securities.

     5.  Registration Procedures.  In the case of the registration effected by
the Company pursuant to this Agreement, the Company will keep the Holders
advised in writing as to initiation of the registration and as to the completion
thereof.  At its expense, the Company will use its best efforts to:

     a)  Keep the Registration Statement effective at all times until such time
         as all of the shares of Common Stock issuable upon conversion of the
         Debentures (i) have been distributed to the public pursuant to the
         Registration Statement, (ii) have been distributed to the public
         pursuant to Rule 144 promulgated under the Securities Act or (iii) are
         saleable pursuant to Rule 144(k) promulgated under the Securities Act;
         and

     b)  Furnish such number of copies of the Registration Statement, the
         prospectus used in connection with such registration statement and
         other documents incident thereto as any Holder from time to time may
         reasonably request.

                                       2
<PAGE>

     In the event that the Company shall fail to keep such Registration
Statement effective for any period of fifteen (15) consecutive days at any time
after the initial effectiveness of such Registration Statement and before the
end of the period described in paragraph 5(a) above, the then outstanding
principal of each Debenture and all accrued and unpaid interest thereon will
become immediately due and payable at the option of the Holder thereof.

     6.   Suspension of Use of Registration Statement.  Each Holder agrees that,
upon receipt of any notice from the Company (A) of the happening of any event
which makes any statements made in the Registration Statement or related
prospectus(es) filed pursuant to this Registration Rights Agreement, or any
document incorporated or deemed to be incorporated therein by reference, untrue
in any material respect or which requires the making of any changes in such
Registration Statement or prospectus(es) so that, in the case of such
Registration Statement or prospectus(es), it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstance under which they were made, not misleading or (B) that, in the
judgment of the Company's board of directors, it is advisable to suspend use of
the prospectus(es) for a discrete period of time due to pending corporate
developments which are or may be material to the Company but have not been
disclosed in the Registration Statement or in relevant public filings with the
SEC, or (C) that the SEC has issued a stop order suspending the effectiveness of
the Registration Statement, such Holder will forthwith discontinue disposition
of such Shares covered by such Registration Statement or prospectus(es) until it
is advised in writing by the Company that use of the applicable prospectus may
be resumed, and has received copies of any additional or supplemented filings
that are incorporated or deemed to be incorporated by reference in such
prospectus(es).  The Company shall use all reasonable best efforts to insure
that the use of the prospectus(es) may be resumed as soon as practicable, and in
any event shall not be entitled to require any Holder to suspend use of the
prospectus(es) for more than thirty (30) consecutive days on any one occasion,
more than forty-five (45) consecutive days in the aggregate on two occasions
which are not at least ninety (90) days apart or more than an aggregate of sixty
(60) days in any twelve month period.

     7.  Indemnification.

     a)  Company Indemnity. The Company will indemnify the Holders, each of
         their officers, directors and partners, and each person controlling a
         Holder within the meaning of Section 15 of the Securities Act and the
         rules and regulations thereunder, against all claims, losses, damages
         and liabilities (or actions in respect thereof) arising out of or based
         on any untrue statement (or alleged untrue statement) of a material
         fact contained in any registration statement, prospectus, offering
         circular or other document (including any amendment or supplement
         thereto or document incorporated by reference therein) relating to the
         Registrable Securities, or arising out of or based on any omission (or
         alleged omission) to state therein a material fact required to be
         stated therein

                                       3
<PAGE>

         or necessary to make the statements therein not misleading, or arising
         out of or based on any violation by the Company of the Securities Act
         or any state securities law or in either case, any rule or regulation
         thereunder, applicable to the Company and relating to action or
         inaction required of the Company in connection with the Registrable
         Securities, and will reimburse the Holders, each of their officers,
         directors and partners, and each person controlling such Holder, for
         any legal and any other expenses reasonably incurred in connection with
         investigating and defending any such claim, loss, damage, liability or
         action, provided that the Company will not be liable in any such case
         to the extent that any such claim, loss, damage, liability or expense
         arises out of or is based on any untrue statement or omission (or
         alleged untrue statement or omission) based upon written information
         furnished to the Company by such Holder and stated to be specifically
         for use therein. The indemnity agreement contained in this Section 7(a)
         shall not apply to amounts paid in settlement of any such loss, claim,
         damage, liability or action if such settlement is effected without the
         consent of the Company (which consent will not be unreasonably
         withheld).

     b)  Holder Indemnity. Each Holder (each, in such capacity, the
         "Indemnifying Holder") will, if Registrable Securities held by it are
         included in the securities registered under the Registration Statement,
         indemnify the Company, each of its directors, officers, partners, each
         person who controls the Company within the meaning of Section 15 of the
         Securities Act and the rules and regulations thereunder, each other
         Holder (if any), and each of their officers, directors and partners,
         and each person controlling such other Holders against all claims,
         losses, damages and liabilities (or actions in respect thereof) arising
         out of or based on any untrue statement (or alleged untrue statement)
         of a material fact contained in any registration statement, prospectus,
         offering circular or other document (including any amendment or
         supplement thereto or document incorporated by reference therein)
         relating to the Registrable Securities, or arising out of or based on
         any omission (or alleged omission) to state therein a material fact
         required to be stated therein or necessary to make the statement
         therein not misleading, and will reimburse the Company and such other
         Holders and their directors, officers and partners, or control persons
         for any legal or any other expenses reasonably incurred in connection
         with investigating or defending any such claim, loss, damage, liability
         or action, in each case to the extent, but only to the extent, that
         such untrue statement (or alleged untrue statement) or omission (or
         alleged omission) is made in such registration statement, prospectus,
         offering circular or other document in reliance upon and in conformity
         with written information furnished to the Company by the Indemnifying
         Holder and stated to be specifically for use therein; provided,
         however, that the obligations of the Indemnifying Holder shall not
         apply to amounts paid in settlement of any such claims, losses, damages
         or liabilities if such settlement is effected without the consent of
         the Indemnifying Holder (which consent shall not be unreasonably
         withheld).

                                       4
<PAGE>

     c)  Procedure. Each party entitled to indemnification under this Article
         (the "Indemnified Party") shall give notice to the party required to
         provide indemnification (the "Indemnifying Party") promptly after such
         Indemnified Party has actual knowledge of any claim as to which
         indemnity may be sought, and shall permit the Indemnifying Party to
         assume the defense of any such claim in any litigation resulting
         therefrom, provided that counsel for the Indemnifying Party, who shall
         conduct the defense of such claim or any litigation resulting
         therefrom, shall be approved by the Indemnified Party (whose approval
         shall not be unreasonably withheld), and the Indemnified Party may
         participate in such defense at such party's expense, provided further
         that the failure of any Indemnified Party to give notice as provided
         herein shall not relieve the Indemnifying Party of its obligations
         under this Article except to the extent that the Indemnifying Party is
         actually prejudiced by such failure to provide notice and provided
         further that the Indemnified Party may employ no more than one separate
         counsel at the Indemnifying Party's expense if in the reasonable
         judgment of the Indemnified Party, based upon the written advice of the
         Indemnified Party's counsel, a copy of which is provided to the
         Indemnifying Party, representation of both parties' interests by the
         same counsel would be inappropriate due to actual conflicts of
         interest. No Indemnifying Party, in the defense of any such claim or
         litigation, shall, except with the consent of each Indemnified Party,
         consent to entry of any judgment or enter into any settlement which
         does not include as an unconditional term thereof the giving by the
         claimant or plaintiff to such Indemnified Party of a release from all
         liability in respect to such claim or litigation. Each Indemnified
         Party shall furnish such information regarding itself or the claim in
         question as an Indemnifying Party may reasonably request in writing and
         as shall be reasonably required in connection with the defense of such
         claim and litigation resulting therefrom.

     8.  Contribution.   If the indemnification provided for in Section 7 from
the Indemnifying Party is unavailable to an Indemnified Party thereunder in
respect of any losses, claims, damages, liabilities or expenses referred to in
Section 7, then the 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, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations.  The relative fault of such Indemnifying
Party and Indemnified Parties 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 to state a material
fact, has been made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action.  The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to

                                       5
<PAGE>

the limitations set forth in Section 7, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.

     The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8, no Holder shall be required to
contribute any amount in excess of the amount of the total net proceeds received
by such Holder from sales of the Registrable Securities sold by such Holder
pursuant to the offering that gave rise to such losses, claims, damages,
liabilities or expenses.  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.

     If indemnification is available under Section 7, the Indemnifying Parties
shall indemnify each Indemnified Party to the full extent provided in Section 7
without regard to the relative fault of said Indemnifying Party or Indemnified
Party or any other equitable consideration provided for in this Section 8.

     9.  Survival.  The indemnity and contribution agreements contained in
Sections 7 and 8 shall remain operative and in full force and effect regardless
of (i) any termination of the Subscription Agreement, (ii) any investigation
made by or on behalf of any Indemnified Party or by or on behalf of the
Indemnifying Party and (iii) the consummation of the sale or successive resales
of the Registrable Securities.

     10.  Information to be Furnished By Holder.  Each Holder shall furnish to
the Company, within 20 business days of the Company's request therefor, such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Registration Rights Agreement.

     11.  Transfer of Assignment of Registration Rights.  The rights, granted to
each Holder by the Company under this Registration Rights Agreement, to cause
the Company to register Registrable Securities may be transferred or assigned to
a transferee or assignee of not less than $100,000 in principal amount of
Debentures, provided that the Company is given written notice by such Holder at
the time of or within a reasonable time after said transfer or assignment,
stating the name and address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being transferred
or assigned; and provided further that the transferee or assignee of such rights
agrees to be bound by this Registration Rights Agreement.

     12.  Miscellaneous.

      a)  Entire Agreement. This Registration Rights Agreement contains the
          entire understanding and agreement of the parties with respect to the
          subject matter

                                       6
<PAGE>

hereof and supersedes all prior agreements and understandings, oral or written,
with respect to such matters.

      b)  Amendments and Waivers. No provision of this Registration Rights
          Agreement may be waived or amended except in a written instrument
          signed, in the case of an amendment, by the Company and Holders then
          holding at least a majority of the Shares (on an as-converted basis),
          or, in the case of a waiver, by (i) the Company, if the Company is the
          party against whom enforcement of such waiver is sought, or (ii) the
          Holders then holding at least a majority of the Shares (on an as-
          converted basis), if the Holders are the party against whom
          enforcement of such waiver is sought.

      c)  Notices. Any notice or other communication given or permitted under
          this Agreement shall be in writing and shall be deemed to have been
          duly given if personally delivered or sent by certified mail, return
          receipt requested, postage prepaid, by facsimile, by Federal Express
          or by other such expedited means, (a) if to a Purchaser, at its
          address set forth on Schedule 1 hereto, (b) if to the Company, at its
          address set forth on the signature page hereto, (c) if, to a Holder
          other than the Purchasers, at the address thereof furnished by like
          notice to the Company, or (d) to any such addressee at such other
          address or addresses as shall be so furnished to the other parties
          hereto by like notice.

      d)  Gender of Terms. All terms used herein shall be deemed to include the
          feminine and the neuter, and the singular and the plural, as the
          context required.

      e)  Governing Law; Consent to Jurisdiction. This Registration Rights
          Agreement and the validity and performance of the terms hereof shall
          be governed by and construed in accordance with the internal
          substantive laws of the Commonwealth of Massachusetts without regard
          to principles of conflicts of law or choice of law. The parties hereto
          hereby consent to, and waive any objection to the exercise of,
          personal jurisdiction in the Commonwealth of Massachusetts with
          respect to any action or proceeding arising out of this Registration
          Rights Agreement.

      f)  Title. The titles used in this Registration Rights Agreement are used
          for convenience only and are not to be considered in construing or
          interpreting this Agreement.

                                       7
<PAGE>

  IN WITNESS WHEREOF, the parties hereto have cause this Registration Rights
Agreement to be duly executed as of the date first above written.

                                  PURCHASER:

                                  PYC Corporation

                                  By:  /s/ Peter Constantine Nomikos
                                       -----------------------------
                                       Name:  Peter Constantine Nomikos
                                       Title: President

                                  Address for Notice:

                                  c/o Aegeus Shipping Co. Ltd.
                                  17-19 Akti Miaouli
                                  Piraeus 185 35 Greece

                                  PHOTOELECTRON CORPORATION

                                  By: /s/ Timothy W. Baker
                                      ---------------------
                                      Name:  Timothy W. Baker
                                      Title: Executive Vice President,
                                             Chief Financial Officer and
                                             Treasurer

                                  Address for Notice:

                                  5 Forbes Road
                                  Lexington, MA 02421
                                  Attn:  Timothy W. Baker

                                       8

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