Document:

Exhibit 4.2
                                                                     -----------

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY AND THE  SECURITIES  ISSUABLE  UPON  CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: August ___, 2005
Original Conversion Price (subject to adjustment herein): $0.40

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

                            7% CONVERTIBLE DEBENTURE
                              DUE AUGUST ___, 2008

     THIS 7%  CONVERTIBLE  DEBENTURE is one of a series of duly  authorized  and
issued 7%  Convertible  Debentures  of  Intraop  Medical  Corporation,  a Nevada
corporation,     having     a     principal     place     of     business     at
_____________________________  (the "Company"), designated as its 7% Convertible
Debenture,   due  August  ___,  2008  (this   debenture,   the  "Debenture"  and
collectively with the other such series of debentures, the "Debentures").

     FOR VALUE RECEIVED, the Company promises to pay to ________________________
or its  registered  assigns (the  "Holder"),  or shall have paid pursuant to the
terms hereunder,  the principal sum of  $_______________ by August ___, 2008, or
such  earlier  date as this  Debenture  is required or permitted to be repaid as
provided  hereunder (the "Maturity Date"),  and to pay interest to the Holder on
the  aggregate  unconverted  and  then  outstanding  principal  amount  of  this
Debenture in accordance with the provisions hereof. This Debenture is subject to
the following additional provisions:

     Section 1.  Definitions.  For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement,  and (b)
the following terms shall have the following meanings:

                                       1
<PAGE>

          "Alternate  Consideration" shall have the meaning set forth in
           Section 5(d).

          "Base  Conversion  Price"  shall have the meaning set forth in
           Section 5(b).

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

          "Buy-In" shall have the meaning set forth in Section 4(d)(v).

          "Change of Control  Transaction"  means the occurrence  after the date
     hereof of any of (i) an acquisition  after the date hereof by an individual
     or legal entity or "group" (as  described in Rule  13d-5(b)(1)  promulgated
     under the Exchange Act),  other than pursuant to the Transaction  Documents
     or the Regenmacher Transaction, of effective control (whether through legal
     or  beneficial  ownership of capital  stock of the Company,  by contract or
     otherwise) of in excess of 40% of the voting securities of the Company,  or
     (ii) the Company merges into or consolidates  with any other Person, or any
     Person  merges into or  consolidates  with the Company  and,  after  giving
     effect to such  transaction,  the  stockholders of the Company  immediately
     prior to such  transaction own less than 60% of the aggregate  voting power
     of the Company or the successor  entity of such  transaction,  or (iii) the
     Company sells or transfers its assets,  as an entirety or  substantially as
     an  entirety,  to  another  Person  and  the  stockholders  of the  Company
     immediately  prior to such  transaction  own less than 60% of the aggregate
     voting power of the acquiring  entity  immediately  after the  transaction,
     (iv) a  replacement  at one time or within a three year period of more than
     one-half of the members of the  Company's  board of directors  which is not
     approved by a majority of those individuals who are members of the board of
     directors  on the date hereof (or by those  individuals  who are serving as
     members of the board of directors on any date whose nomination to the board
     of  directors  was  approved  by a majority  of the members of the board of
     directors who are members on the date hereof),  or (v) the execution by the
     Company of an  agreement  to which the Company is a party or by which it is
     bound, providing for any of the events set forth above in (i) or (iv).

          "Closing  Price" means on any  particular  date (a) the last  reported
     closing  bid price per  share of Common  Stock on such date on the  Trading
     Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b) if
     there is no such  price on such  date,  then the  closing  bid price on the
     Trading  Market on the date  nearest  preceding  such date (as  reported by
     Bloomberg  L.P.  at 4:15 PM (New York time) for the  closing  bid price for
     regular  session  trading on such day),  or (c) if the Common  Stock is not
     then  listed or quoted on the  Trading  Market and if prices for the Common
     Stock are then reported in the "pink sheets"  published by the Pink Sheets,
     LLC (or a similar  organization  or agency  succeeding  to its functions of
     reporting prices),  the most recent bid price per share of the Common Stock
     so  reported,  or (d) if the shares of Common  Stock are not then  publicly
     traded the fair market value of a share of Common Stock as  determined by a
     qualified  independent appraiser selected in good faith by the Holders of a
     majority in interest of the outstanding principal amount of Debentures.

                                       2
<PAGE>

          "Common Stock" means the common stock,  par value $0.001 per share, of
     the  Company  and stock of any other  class of  securities  into which such
     securities may hereafter have been reclassified or changed into.

          "Conversion Date" shall have the meaning set forth in Section 4(a).

          "Conversion Price" shall have the meaning set forth in Section 4(b).

          "Conversion  Shares"  means the shares of Common Stock  issuable  upon
     conversion of this  Debenture or as payment of interest in accordance  with
     the terms.

          "Debenture Register" shall have the meaning set forth in Section 2(c).

          "Dilutive Issuance" shall have the meaning set forth in Section 5(b).

          "Dilutive Issuance Notice" shall have the meaning set forth in Section
     5(b).

          "Effectiveness  Period"  shall have the meaning  given to such term in
     the Registration Rights Agreement.

          "Equity Conditions" shall mean, during the period in question, (i) the
     Company shall have duly honored all conversions  and redemptions  scheduled
     to occur or occurring by virtue of one or more Notice of Conversions of the
     Holder, if any, (ii) all liquidated  damages and other amounts owing to the
     Holder in respect of this Debenture shall have been paid; (iii) there is an
     effective  Registration Statement pursuant to which the Holder is permitted
     to utilize the prospectus  thereunder to resell all of the shares  issuable
     pursuant to the Transaction  Documents (and the Company  believes,  in good
     faith,  that  such  effectiveness  will  continue   uninterrupted  for  the
     foreseeable future), (iv) the Common Stock is trading on the Trading Market
     and all of the shares issuable  pursuant to the  Transaction  Documents are
     listed for trading on a Trading Market (and the Company  believes,  in good
     faith,  that trading of the Common Stock on a Trading  Market will continue
     uninterrupted  for the  foreseeable  future),  (v) the daily dollar trading
     volume of the  Common  Stock on the  Trading  Market for each  Trading  Day
     during such period is at least $200,000,  (vi) there is a sufficient number
     of authorized but unissued and otherwise  unreserved shares of Common Stock
     for the issuance of all of the shares issuable  pursuant to the Transaction
     Documents, (vii) there is then existing no Event of Default or event which,
     with the passage of time or the giving of notice, would constitute an Event
     of  Default,  (viii) the  issuance  of the shares in question to the Holder
     would not violate the limitations set forth in Section 4(c)(ii) and (ix) no
     public  announcement  of a pending  or  proposed  Fundamental  Transaction,
     Change of Control Transaction or acquisition  transaction has occurred that
     has not been consummated.

                                       3
<PAGE>

          "Event of Default" shall have the meaning set forth in Section 8.

          "Exchange Act" means the Securities  Exchange Act of 1934, as amended,
     and the rules and regulations promulgated thereunder.

          "Forced Conversion" shall have the meaning set forth in Section 6(c).

          "Forced Conversion Notice" shall have the meaning set forth in Section
     6(c).

          "Forced  Conversion  Notice  Date" shall have the meaning set forth in
     Section 6(c).

          "Fundamental  Transaction" shall have the meaning set forth in Section
     5(d).

          "Interest  Conversion  Rate"  means the  lesser of (a) the  Conversion
     Price  and  (b)  90% of the  lesser  of (i)  the  average  of the 20  VWAPs
     immediately  prior  to the  applicable  Interest  Payment  Date or (ii) the
     average  of the 20 VWAPs  immediately  prior  to the  date  the  applicable
     interest  payment  shares are issued and  delivered  if after the  Interest
     Payment Date.

          "Interest  Conversion  Shares"  shall  have the  meaning  set forth in
     Section 2(a).

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

          "Interest  Payment  Date"  shall have the meaning set forth in Section
     2(a).

          "Interest  Share  Amount"  shall have the meaning set forth in Section
     2(a).

          "Late Fees" shall have the meaning set forth in Section 2(d).

          "Mandatory  Default Amount" shall equal the sum of (i) the greater of:
     (A) 130% of the principal amount of this Debenture to be prepaid,  plus all
     accrued and unpaid interest  thereon,  or (B) the principal  amount of this
     Debenture to be prepaid, plus all other accrued and unpaid interest hereon,
     divided  by the  Conversion  Price on (x) the date  the  Mandatory  Default
     Amount is demanded or otherwise due or (y) the date the  Mandatory  Default
     Amount is paid in full,  whichever is less,  multiplied  by the VWAP on (x)
     the date the Mandatory  Default  Amount is demanded or otherwise due or (y)
     the  date the  Mandatory  Default  Amount  is paid in  full,  whichever  is
     greater, and (ii) all other amounts, costs, expenses and liquidated damages
     due in respect of this Debenture.

          "New York Courts" shall have the meaning set forth in Section 9(d).

          "Notice of  Conversion"  shall have the  meaning  set forth in Section
     4(a).

                                       4
<PAGE>

          "Original Issue Date" shall mean the date of the first issuance of the
     Debentures  regardless  of the number of  transfers  of any  Debenture  and
     regardless  of the number of  instruments  which may be issued to  evidence
     such Debenture.

          "Permitted  Indebtedness"  shall mean the  individual  and  collective
     reference to the following:  (a) up to, in the aggregate during the term of
     this Debenture,  $2,000,000 of new Indebtedness,  (b) Indebtedness incurred
     in connection with the Purchase Agreement and the Regenmacher  Transaction,
     (c) up to  approximately  $974,614 of Indebtedness  existing on the date of
     the Purchase  Agreement as  described in Schedule  3.1(aa)  attached to the
     Purchase  Agreement,  and  (d) up to  $3,000,000  in  connection  with  the
     Company's  revolving  inventory and sales contract financing agreement with
     E.U. Capital.

          "Permitted Lien" shall mean the individual and collective reference to
     the  following:  (a) Liens for taxes,  assessments  and other  governmental
     charges  or levies not yet due or Liens for  taxes,  assessments  and other
     governmental  charges  or  levies  being  contested  in good  faith  and by
     appropriate  proceedings  for which  adequate  reserves  (in the good faith
     judgment  of the  management  of the  Company)  have  been  established  in
     accordance  with GAAP;  (b) Liens imposed by law which were incurred in the
     ordinary  course  of  business,  such  as  carriers',   warehousemen's  and
     mechanics'  Liens,  statutory  landlords'  Liens,  and other  similar Liens
     arising  in  the  ordinary  course  of  business,  and  (x)  which  do  not
     individually or in the aggregate  materially detract from the value of such
     property or assets or materially impair the use thereof in the operation of
     the business of the Company and its consolidated  Subsidiaries or (y) which
     are  being  contested  in good  faith  by  appropriate  proceedings,  which
     proceedings  have the effect of  preventing  the  forfeiture or sale of the
     property or asset subject to such Lien;  and (c) Liens on  Receivables  and
     the Company's  "inventory" (as such term is used in the Security Agreement)
     incurred  solely in connection with a Permitted  Indebtedness  under clause
     (a) of the definition of Permitted Indebtedness.

          "Person"  means  a  corporation,   an   association,   a  partnership,
     organization,   a  business,  an  individual,  a  government  or  political
     subdivision thereof or a governmental agency.

          "Purchase Agreement" means the Securities Purchase Agreement, dated as
     of August  ___,  2005,  to which the Company  and the  original  Holder are
     parties,  as  amended,  modified  or  supplemented  from  time  to  time in
     accordance with its terms.

          "Registration   Rights   Agreement"  means  the  Registration   Rights
     Agreement,  dated as of the date of the  Purchase  Agreement,  to which the
     Company  and the  original  Holder are  parties,  as  amended,  modified or
     supplemented from time to time in accordance with its terms.

                                       5
<PAGE>

          "Registration  Statement" means a registration  statement  meeting the
     requirements set forth in the Registration Rights Agreement, covering among
     other things the resale of the Conversion Shares and naming the Holder as a
     "selling stockholder" thereunder.

          "Securities Act" means the Securities Act of 1933, as amended, and the
     rules and regulations promulgated thereunder.

          "Subsidiary" shall have the meaning given to such term in the Purchase
     Agreement.

          "Threshold  Period"  shall  have the  meaning  given  to such  term in
     Section 6(c).

          "Trading  Day"  means a day on which the  Common  Stock is traded on a
     Trading Market.

          "Trading Market" means the following markets or exchanges on which the
     Common Stock is listed or quoted for trading on the date in  question:  the
     Nasdaq SmallCap  Market,  the American Stock  Exchange,  the New York Stock
     Exchange, the Nasdaq National Market or the OTC Bulletin Board.

          "Transaction  Documents"  shall  have  the  meaning  set  forth in the
     Purchase Agreement.

          "VWAP" shall have the meaning set forth in the Purchase Agreement.

         Section 2.        Interest.
         ---------         --------

          a) Payment of Interest in Cash or Kind. The Company shall pay interest
     to the Holder on the aggregate  unconverted and then outstanding  principal
     amount of this Debenture at the rate of 7% per annum,  payable quarterly on
     January 1, April 1, July 1 and October 1,  beginning on the first such date
     after  the  Original  Issue  Date,  on  each  Conversion  Date  (as to that
     principal  amount then being  converted)  and on the Maturity  Date (except
     that,  if any such date is not a Business  Day,  then such payment shall be
     due on the next  succeeding  Business  Day) (each such date,  an  "Interest
     Payment  Date"),  in  cash  or  shares  of  Common  Stock  at the  Interest
     Conversion Rate, or a combination thereof (the amount to be paid in shares,
     the "Interest Share Amount");  provided,  however, (i) payment in shares of
     Common Stock may only occur if during the 10 Trading Days immediately prior
     to the applicable  Interest Payment Date (the "Interest Notice Period") and
     through and  including  the date such shares of Common  Stock are issued to
     the  Holder all of the Equity  Conditions,  unless  waived by the Holder in
     writing,  have been met and the Company  shall have given the Holder notice
     in accordance with the notice  requirements set forth below,  (ii) the VWAP
     is equal to or greater than 115% of the then  applicable  Conversion  Price
     for  each  of the 10  Trading  Days  immediately  prior  to the  applicable
     Interest  Payment  Date and through and  including  the date such shares of
     Common Stock are issued to the Holder and (iii) as to such Interest Payment
     Date, prior to the such Interest Notice Period (but not more 5 Trading Days
     prior to the commencement of the Interest Notice Period), the Company shall
     have delivered to the Holder's  account with The Depository Trust Company a
     number of shares of Common Stock to be applied  against such Interest Share
     Amount equal to the quotient of (x) the  applicable  Interest  Share Amount
     divided  by  (y)  the  then  Conversion  Price  (the  "Interest  Conversion
     Shares").

                                       6
<PAGE>

          b) Company's  Election to Pay  Interest in Kind.  Subject to the terms
     and conditions  herein,  the decision whether to pay interest  hereunder in
     shares of Common Stock or cash shall be at the  discretion  of the Company.
     Prior to the  commencement of an Interest Notice Period,  the Company shall
     provide  the Holder with  written  notice of its  election to pay  interest
     hereunder on the applicable Interest Payment Date either in cash, shares of
     Common  Stock or a  combination  thereof  (the Company may indicate in such
     notice that the election  contained in such notice shall continue for later
     periods until  revised) and the Interest  Share Amount as to the applicable
     Interest  Payment Date.  During any Interest  Notice Period,  the Company's
     election (whether specific to an Interest Payment Date or continuous) shall
     be  irrevocable  as  to  such  Interest   Payment  Date.   Subject  to  the
     aforementioned  conditions,  failure to timely  provide such written notice
     shall be deemed an  election  by the  Company to pay the  interest  on such
     Interest Payment Date in cash. At any time the Company delivers a notice to
     the Holder of its election to pay the  interest in shares of Common  Stock,
     the  Company  shall  file a  prospectus  supplement  pursuant  to Rule  424
     disclosing  such election.  The aggregate  number of shares of Common Stock
     otherwise  issuable  to the  Holder on an  Interest  Payment  Date shall be
     reduced by the number of Interest  Conversion  Shares  previously issued to
     the Holder in connection with such Interest Payment Date.

          c) Interest Calculations. Interest shall be calculated on the basis of
     a 360-day year and shall accrue daily commencing on the Original Issue Date
     until payment in full of the principal  sum,  together with all accrued and
     unpaid interest and other amounts which may become due hereunder,  has been
     made.  Payment  of  interest  in  shares of Common  Stock  (other  than the
     Interest Conversion Shares issued prior to an Interest Notice Period) shall
     otherwise  occur pursuant to Section  4(d)(ii) and only for purposes of the
     payment of interest in shares,  the  Interest  Payment Date shall be deemed
     the  Conversion  Date.  Interest  shall cease to accrue with respect to any
     principal amount converted,  provided that the Company in fact delivers the
     Conversion  Shares  within the time period  required  by Section  4(d)(ii).
     Interest  hereunder will be paid to the Person in whose name this Debenture
     is  registered  on the records of the Company  regarding  registration  and
     transfers of this Debenture (the "Debenture Register"). Except as otherwise
     provided herein, if at any time the Company pays interest partially in cash
     and  partially in shares of Common Stock to the holders of the  Debentures,
     then such payment  shall be  distributed  ratably  among the holders of the
     Debentures  based on their (or their  predecessor's  initial  purchases  of
     Debentures pursuant to the Purchase Agreement.

                                       7
<PAGE>

          d) Late Fee.  All  overdue  accrued  and  unpaid  interest  to be paid
     hereunder  shall  entail a late fee at the rate of 18% per  annum  (or such
     lower maximum amount of interest  permitted to be charged under  applicable
     law) ("Late Fees") which will accrue daily,  from the date such interest is
     due hereunder  through and  including the date of payment.  Notwithstanding
     anything to the contrary  contained herein, if on any Interest Payment Date
     the Company has elected to pay  interest in Common Stock and is not able to
     pay accrued  interest in the form of Common Stock  because it does not then
     satisfy the  conditions  for payment in the form of Common  Stock set forth
     above,  then,  at the  option  of the  Holder,  the  Company,  in  lieu  of
     delivering  either  shares of Common  Stock  pursuant to this  Section 2 or
     paying the regularly scheduled cash interest payment, shall deliver, within
     three Trading Days of each applicable  Interest  Payment Date, an amount in
     cash equal to the product of the number of shares of Common Stock otherwise
     deliverable to the Holder in connection with the payment of interest due on
     such  Interest  Payment  Date  and  the  highest  VWAP  during  the  period
     commencing on the Interest Payment Date and ending on the Trading Day prior
     to the date such  payment is made.  If any Interest  Conversion  Shares are
     issued to the Holder in  connection  with an Interest  Payment Date and are
     not  applied  against an  Interest  Share  Amount,  then the  Holder  shall
     promptly return such excess shares to the Company.

          e) Prepayment.  Except as otherwise set forth in this  Debenture,  the
     Company  may  not  prepay  any  portion  of the  principal  amount  of this
     Debenture without the prior written consent of the Holder.

     Section 3. Registration of Transfers and Exchanges.

          a) Different  Denominations.  This  Debenture is  exchangeable  for an
     equal  aggregate  principal  amount of Debentures  of different  authorized
     denominations,  as requested by the Holder surrendering the same; provided,
     however,  the Company shall not be required to exchange this  Debenture for
     denominations  of less than the greater of $50,000 and the principal amount
     of this Debenture then outstanding. No service charge will be made for such
     registration of transfer or exchange.

          b) Investment Representations.  This Debenture has been issued subject
     to certain  investment  representations of the original Holder set forth in
     the  Purchase  Agreement  and  may be  transferred  or  exchanged  only  in
     compliance  with the Purchase  Agreement and  applicable  federal and state
     securities laws and regulations.

          c) Reliance on Debenture  Register.  Prior to due  presentment  to the
     Company for  transfer of this  Debenture,  the Company and any agent of the
     Company  may  treat  the  Person  in  whose  name  this  Debenture  is duly
     registered on the Debenture Register as the owner hereof for the purpose of
     receiving payment as herein provided and for all other purposes, whether or
     not this  Debenture is overdue,  and neither the Company nor any such agent
     shall be affected by notice to the contrary.

                                       8
<PAGE>

         Section 4.          Conversion.
         ----------          ----------

          a) Voluntary  Conversion.  At any time after the  Original  Issue Date
     until this  Debenture is no longer  outstanding,  this  Debenture  shall be
     convertible  into shares of Common  Stock at the option of the  Holder,  in
     whole  or in part at any  time  and  from  time  to  time  (subject  to the
     limitations  on conversion  set forth in Section 4(c)  hereof).  The Holder
     shall effect conversions by delivering to the Company the form of Notice of
     Conversion   attached  hereto  as  Annex  A  (a  "Notice  of  Conversion"),
     specifying  therein the principal  amount of this Debenture to be converted
     and the date on which such  conversion  is to be  effected  (a  "Conversion
     Date").  If no Conversion Date is specified in a Notice of Conversion,  the
     Conversion  Date  shall be the date  that  such  Notice  of  Conversion  is
     provided hereunder.  To effect conversions hereunder,  the Holder shall not
     be required to physically  surrender  this  Debenture to the Company unless
     the entire  principal  amount of this Debenture plus all accrued and unpaid
     interest  thereon has been so converted.  Conversions  hereunder shall have
     the effect of lowering the outstanding  principal  amount of this Debenture
     in an amount equal to the applicable conversion. The Holder and the Company
     shall maintain  records showing the principal amount converted and the date
     of such conversions.  The Company shall deliver any objection to any Notice
     of Conversion within 1 Business Day of receipt of such notice. In the event
     of any  dispute  or  discrepancy,  the  records  of  the  Holder  shall  be
     controlling and  determinative in the absence of manifest error. The Holder
     and any assignee,  by acceptance of this  Debenture,  acknowledge and agree
     that, by reason of the provisions of this paragraph,  following  conversion
     of a portion of this Debenture, the unpaid and unconverted principal amount
     of this Debenture may be less than the amount stated on the face hereof.

          b) Conversion  Price. The conversion price in effect on any Conversion
     Date shall be equal to $0.40 (subject to adjustment herein)(the "Conversion
     Price").

          c) Conversion Limitations.

             i.   RESERVED.

               ii.  Holder's  Restriction on  Conversion.  The Company shall not
          effect any conversion of this Debenture, and the Holder shall not have
          the right to  convert  any  portion  of this  Debenture,  pursuant  to
          Section 4(a) or  otherwise,  to the extent that after giving effect to
          such conversion,  the Holder (together with the Holder's  affiliates),
          as  set  forth  on  the  applicable   Notice  of   Conversion,   would
          beneficially  own in  excess  of 4.99% of the  number of shares of the
          Common  Stock  outstanding  immediately  after  giving  effect to such
          conversion.  For  purposes of the  foregoing  sentence,  the number of
          shares  of  Common  Stock  beneficially  owned by the  Holder  and its
          affiliates shall include the number of shares of Common Stock issuable
          upon   conversion  of  this   Debenture  with  respect  to  which  the
          determination  of such  sentence is being made,  but shall exclude the
          number of shares of Common  Stock  which  would be  issuable  upon (A)
          conversion of the  remaining,  nonconverted  portion of this Debenture
          beneficially  owned by the  Holder  or any of its  affiliates  and (B)
          exercise or conversion of the unexercised or  nonconverted  portion of
          any other securities of the Company  (including,  without  limitation,
          any other  Debentures  or the  Warrants)  subject to a  limitation  on
          conversion or exercise  analogous to the limitation  contained  herein
          beneficially owned by the Holder or any of its affiliates.

                                       9
<PAGE>

          Except as set forth in the  preceding  sentence,  for purposes of this
          Section  4(c)(ii),   beneficial   ownership  shall  be  calculated  in
          accordance  with Section 13(d) of the Exchange Act. To the extent that
          the limitation contained in this section applies, the determination of
          whether this Debenture is convertible (in relation to other securities
          owned by the  Holder)  and of which a  portion  of this  Debenture  is
          convertible  shall be in the sole discretion of such Holder. To ensure
          compliance  with  this  restriction,  the  Holder  will be  deemed  to
          represent to the Company each time it delivers a Notice of  Conversion
          that such Notice of Conversion has not violated the  restrictions  set
          forth in this  paragraph  and the Company  shall have no obligation to
          verify or confirm the accuracy of such determination.  For purposes of
          this Section 4(c)(ii), in determining the number of outstanding shares
          of Common  Stock,  the Holder  may rely on the  number of  outstanding
          shares of Common Stock as reflected in (x) the  Company's  most recent
          Form  10-QSB or Form  10-KSB,  as the case may be,  (y) a more  recent
          public  announcement  by the  Company  or (z) any other  notice by the
          Company or the  Company's  Transfer  Agent setting forth the number of
          shares of Common Stock  outstanding.  Upon the written or oral request
          of the Holder,  the Company  shall  within two  Trading  Days  confirm
          orally  and in  writing  to the  Holder the number of shares of Common
          Stock then outstanding.  In any case, the number of outstanding shares
          of  Common  Stock  shall be  determined  after  giving  effect  to the
          conversion or exercise of securities  of the Company,  including  this
          Debenture,  by the Holder or its affiliates since the date as of which
          such number of  outstanding  shares of Common Stock was reported.  The
          provisions  of this Section  4(c) may be waived by the Holder,  at the
          election  of the Holder,  upon not less than 61 days' prior  notice to
          the Company, and the provisions of this Section 4(c) shall continue to
          apply until such 61st day (or such later date,  as  determined  by the
          Holder, as may be specified in such notice of waiver).

          d) Mechanics of Conversion

               i.  Conversion  Shares  Issuable  Upon  Conversion  of  Principal
          Amount.  The  number  of  shares  of  Common  Stock  issuable  upon  a
          conversion  hereunder shall be determined by the quotient  obtained by
          dividing (x) the outstanding  principal amount of this Debenture to be
          converted by (y) the Conversion Price. i.

               ii. Delivery of Certificate Upon Conversion. Not later than three
          Trading Days after any  Conversion  Date,  the Company will deliver or
          cause to be delivered to the Holder (A) a certificate or  certificates
          representing the Conversion  Shares which shall be free of restrictive
          legends and  trading  restrictions  (other than those  required by the
          Purchase Agreement)  representing the number of shares of Common Stock
          being acquired upon the conversion of this  Debenture  (including,  if
          the Company has given  continuous  notice pursuant to Section 2(b) for
          payment of interest in shares of

                                       10
<PAGE>

          Common  Stock at least 20 Trading  Days prior to the date on which the
          Conversion Notice is delivered to the Company,  shares of Common Stock
          representing  the  payment of accrued  interest  otherwise  determined
          pursuant to Section 2(a) but assuming that the Interest Payment Period
          is the 20 Trading Days period  immediately  prior to the date on which
          the  Conversion  Notice is delivered to the Company and  excluding for
          such  issuance  the  condition  that  the  Company  deliver   Interest
          Conversion Shares as to such interest payment) and (B) a bank check in
          the amount of accrued and unpaid  interest (if the Company is required
          to pay accrued  interest in cash). The Company shall, if available and
          if allowed under  applicable  securities laws, use its best efforts to
          deliver any  certificate or  certificates  required to be delivered by
          the Company under this Section  electronically  through the Depository
          Trust  Corporation  or  another   established   clearing   corporation
          performing similar functions.

               iii.  Failure  to  Deliver  Certificates.  If in the  case of any
          Notice  of  Conversion  such   certificate  or  certificates  are  not
          delivered  to or as  directed  by the  applicable  Holder by the fifth
          Trading Day after a Conversion  Date,  the Holder shall be entitled by
          written  notice to the Company at any time on or before its receipt of
          such   certificate  or  certificates   thereafter,   to  rescind  such
          conversion,  in which event the Company shall  immediately  return the
          certificates  representing  the  principal  amount  of this  Debenture
          tendered for conversion.

               iv.  Obligation  Absolute;  Partial  Liquidated  Damages.  If the
          Company fails for any reason to deliver to the Holder such certificate
          or certificates  pursuant to Section 4(d)(ii) by the fifth Trading Day
          after the Conversion  Date,  the Company shall pay to such Holder,  in
          cash,  as liquidated  damages and not as a penalty,  for each $1000 of
          principal amount being  converted,  $10 per Trading Day (increasing to
          $20 per Trading Day after 5 Trading Days after such  damages  begin to
          accrue) for each  Trading Day after such fifth  Trading Day until such
          certificates  are  delivered.  The Company's  obligations to issue and
          deliver the  Conversion  Shares upon  conversion of this  Debenture in
          accordance  with the terms  hereof  are  absolute  and  unconditional,
          irrespective  of any action or  inaction  by the Holder to enforce the
          same, any waiver or consent with respect to any provision hereof,  the
          recovery of any  judgment  against any Person or any action to enforce
          the same,  or any  setoff,  counterclaim,  recoupment,  limitation  or
          termination,  or any  breach or  alleged  breach by the  Holder or any
          other  Person of any  obligation  to the Company or any  violation  or
          alleged  violation  of law by the  Holder  or any  other  person,  and
          irrespective  of any other  circumstance  which might  otherwise limit
          such  obligation of the Company to the Holder in  connection  with the
          issuance of such Conversion Shares;  provided,  however, such delivery
         shall not operate as a waiver by the Company of any

                                       11
<PAGE>

          such action the Company may have against the Holder.  In the event the
          Holder of this  Debenture  shall  elect to  convert  any or all of the
          outstanding  principal  amount  hereof,  the  Company  may not  refuse
          conversion based on any claim that the Holder or any one associated or
          affiliated  with the Holder has been engaged in any  violation of law,
          agreement or for any other reason, unless, an injunction from a court,
          on notice,  restraining and or enjoining  conversion of all or part of
          this  Debenture  shall have been sought and  obtained  and the Company
          posts a surety  bond for the  benefit  of the  Holder in the amount of
          150% of the principal amount of this Debenture  outstanding,  which is
          subject to the injunction, which bond shall remain in effect until the
          completion of  arbitration/litigation  of the dispute and the proceeds
          of which  shall be  payable  to such  Holder to the  extent it obtains
          judgment.  In the absence of an injunction  precluding  the same,  the
          Company shall issue Conversion Shares or, if applicable,  cash, upon a
          properly  noticed  conversion.  Nothing  herein shall limit a Holder's
          right to pursue actual damages or declare an Event of Default pursuant
          to Section 8 herein for the  Company's  failure to deliver  Conversion
          Shares within the period  specified  herein and such Holder shall have
          the right to pursue all  remedies  available to it at law or in equity
          including, without limitation, a decree of specific performance and/or
          injunctive  relief. The exercise of any such rights shall not prohibit
          the  Holder  from  seeking to enforce  damages  pursuant  to any other
          Section hereof or under applicable law.

               v.   Compensation   for  Buy-In  on  Failure  to  Timely  Deliver
          Certificates  Upon  Conversion.   In  addition  to  any  other  rights
          available  to the  Holder,  if the  Company  fails  for any  reason to
          deliver to the Holder such  certificate  or  certificates  pursuant to
          Section  4(d)(ii) by the fifth Trading Day after the Conversion  Date,
          and if after such fifth  Trading  Day the  Holder is  required  by its
          brokerage  firm  to  purchase  (in  an  open  market   transaction  or
          otherwise)  Common Stock to deliver in  satisfaction of a sale by such
          Holder of the Conversion Shares which the Holder anticipated receiving
          upon such  conversion (a "Buy-In"),  then the Company shall (A) pay in
          cash to the  Holder  (in  addition  to any  remedies  available  to or
          elected  by the  Holder)  the amount by which (x) the  Holder's  total
          purchase  price  (including  brokerage  commissions,  if any)  for the
          Common Stock so purchased exceeds (y) the product of (1) the aggregate
          number  of  shares  of  Common  Stock  that  such  Holder  anticipated
          receiving  from the  conversion at issue  multiplied by (2) the actual
          sale  price of the  Common  Stock  at the time of the sale  (including
          brokerage commissions, if any) giving rise to such purchase obligation
          and (B) at the option of the Holder,  either reissue (if  surrendered)
          this Debenture in a principal  amount equal to the principal amount of
          the attempted conversion or deliver to the Holder the number of shares
          of Common  Stock that would have been  issued had the  Company  timely
          complied with its delivery  requirements  under Section 4(d)(ii).  For
          example,  if the Holder purchases Common Stock having a total purchase
          price of  $11,000  to  cover a Buy-In  with  respect  to an  attempted
          conversion  of this  Debenture  with  respect to which the actual sale
          price of the  Conversion  Shares  at the  time of the sale  (including
          brokerage commissions, if any) giving rise to such purchase obligation
          was a total of $10,000 under clause (A) of the  immediately  preceding
          sentence,  the Company shall be required to pay the Holder $1,000. The
          Holder shall provide the Company written notice indicating the amounts
          payable  to the  Holder  in  respect  of the  Buy-In.  Notwithstanding
          anything  contained  herein to the contrary,  if a Holder requires the
          Company to make  payment  in  respect  of a Buy-In for the  failure to
          timely deliver  certificates  hereunder and the Company timely pays in
          full such  payment,  the  Company  shall not be  required  to pay such
          Holder  liquidated  damages under  Section  4(d)(iv) in respect of the
          certificates resulting in such Buy-In.

                                       12
<PAGE>

               vi.  Reservation of Shares Issuable Upon Conversion.  The Company
          covenants  that it will at all times reserve and keep available out of
          its  authorized  and  unissued  shares of Common  Stock solely for the
          purpose of issuance upon  conversion of this  Debenture and payment of
          interest  on  this  Debenture,  each as  herein  provided,  free  from
          preemptive  rights or any other actual  contingent  purchase rights of
          persons   other  than  the  Holder  (and  the  other  holders  of  the
          Debentures),  not less than such number of shares of the Common  Stock
          as  shall  (subject  to the  terms  and  conditions  set  forth in the
          Purchase  Agreement) be issuable  (taking into account the adjustments
          and  restrictions of Section 5) upon the conversion of the outstanding
          principal amount of this Debenture and payment of interest  hereunder.
          The Company covenants that all shares of Common Stock that shall be so
          issuable shall, upon issue, be duly and validly authorized, issued and
          fully paid,  nonassessable and, if the Registration  Statement is then
          effective  under the  Securities  Act,  registered  for public sale in
          accordance with such Registration Statement.

               vii. Fractional Shares.  Upon a conversion  hereunder the Company
          shall  not  be  required  to  issue  stock  certificates  representing
          fractions  of  shares  of the  Common  Stock,  but  may  if  otherwise
          permitted,  make a cash payment in respect of any final  fraction of a
          share based on the VWAP at such time. If the Company elects not, or is
          unable,  to make such a cash payment,  the Holder shall be entitled to
          receive,  in lieu of the final fraction of a share, one whole share of
          Common Stock.

               viii.  Transfer Taxes. The issuance of certificates for shares of
          the Common Stock on conversion of this Debenture shall be made without
          charge to the Holder hereof for any documentary stamp or similar taxes
          that may be  payable  in  respect  of the  issue or  delivery  of such
          certificate,  provided  that the Company  shall not be required to pay
          any tax that may be payable in respect of any transfer involved in the
          issuance and delivery of any such  certificate  upon  conversion  in a
          name other than that of the Holder of this  Debenture so converted and
          the  Company   shall  not  be  required  to  issue  or  deliver   such
          certificates  unless or until the  person or  persons  requesting  the
          issuance thereof shall have paid to the Company the amount of such tax
          or shall have established to the satisfaction of the Company that such
          tax has been paid.

                                       13
<PAGE>

          Section 5.   Certain Adjustments.

               a) Stock Dividends and Stock Splits. If the Company,  at any time
          while this  Debenture  is  outstanding:  (A) pays a stock  dividend or
          otherwise  makes a  distribution  or  distributions  on  shares of its
          Common  Stock or any  other  equity or  equity  equivalent  securities
          payable in shares of Common  Stock  (which,  for  avoidance  of doubt,
          shall not  include  any shares of Common  Stock  issued by the Company
          pursuant  to this  Debenture,  including  as  interest  thereon),  (B)
          subdivides  outstanding shares of Common Stock into a larger number of
          shares,  (C)  combines  (including  by way  of  reverse  stock  split)
          outstanding shares of Common Stock into a smaller number of shares, or
          (D)  issues by  reclassification  of shares  of the  Common  Stock any
          shares of capital  stock of the  Company,  then the  Conversion  Price
          shall be multiplied by a fraction of which the numerator  shall be the
          number of shares of Common Stock (excluding  treasury shares,  if any)
          outstanding immediately before such event and of which the denominator
          shall be the number of shares of Common Stock outstanding  immediately
          after such event.  Any adjustment  made pursuant to this Section shall
          become   effective   immediately   after  the  record   date  for  the
          determination  of  stockholders  entitled to receive such  dividend or
          distribution  and  shall  become  effective   immediately   after  the
          effective  date  in  the  case  of  a   subdivision,   combination  or
          re-classification.

               b)  Subsequent  Equity  Sales.  If the Company or any  Subsidiary
          thereof,   as  applicable,   at  any  time  while  this  Debenture  is
          outstanding, shall offer, sell, grant any option to purchase or offer,
          sell or grant  any  right to  reprice  its  securities,  or  otherwise
          dispose of or issue (or announce any offer,  sale, grant or any option
          to purchase or other  disposition)  any Common  Stock or Common  Stock
          Equivalents entitling any Person to acquire shares of Common Stock, at
          an effective price per share less than the then Conversion Price (such
          lower  price,   the  "Base   Conversion   Price"  and  such  issuances
          collectively,  a "Dilutive  Issuance"),  as adjusted hereunder (if the
          holder of the Common Stock or Common Stock Equivalents so issued shall
          at any time, whether by operation of purchase price adjustments, reset
          provisions,  floating  conversion,  exercise  or  exchange  prices  or
          otherwise,  or due to  warrants,  options or rights per share which is
          issued in connection with such issuance, be entitled to receive shares
          of Common Stock at an effective price per share which is less than the
          Conversion  Price,  such issuance shall be deemed to have occurred for
          less than the Conversion Price on such date of the Dilutive Issuance),
          then  the  Conversion  Price  shall  be  reduced  to  equal  the  Base
          Conversion  Price.  Such adjustment shall be made whenever such Common
          Stock or Common  Stock  Equivalents  are issued.  Notwithstanding  the
          foregoing,  no  adjustment  will be made  under this  Section  5(b) in
          respect of an Exempt Issuance.  The Company shall notify the Holder in
          writing,  no later than the Business Day following the issuance of any
          Common  Stock or Common  Stock  Equivalents  subject to this  section,
          indicating  therein the applicable  issuance  price,  or of applicable
          reset price, exchange price,  conversion price and other pricing terms
          (such  notice  the  "Dilutive  Issuance  Notice").   For  purposes  of
          clarification, whether or not the Company provides a Dilutive Issuance
          Notice  pursuant to this  Section  5(b),  upon the  occurrence  of any
          Dilutive Issuance, after the date of such Dilutive Issuance the Holder
          is entitled to receive a number of  Conversion  Shares  based upon the
          Base  Conversion  Price  regardless  of whether the Holder  accurately
          refers to the Base Conversion Price in the Notice of Conversion.

                                       14
<PAGE>

               c) Pro Rata Distributions. If the Company, at any time while this
          Debenture is  outstanding,  shall  distribute to all holders of Common
          Stock  (and not to the  holders  of the  Debenture)  evidences  of its
          indebtedness  or assets  (including cash and cash dividends) or rights
          or warrants to subscribe  for or purchase any  security,  then in each
          such case the Conversion  Price shall be adjusted by multiplying  such
          Conversion Price in effect  immediately prior to the record date fixed
          for   determination   of   stockholders   entitled  to  receive   such
          distribution by a fraction of which the denominator  shall be the VWAP
          determined  as of the record date  mentioned  above,  and of which the
          numerator  shall be such VWAP on such  record  date less the then fair
          market  value at such  record  date of the  portion of such  assets or
          evidence of indebtedness so distributed  applicable to one outstanding
          share of the Common Stock as  determined  by the Board of Directors in
          good faith.  In either case the  adjustments  shall be  described in a
          statement provided to the Holder of the portion of assets or evidences
          of indebtedness so distributed or such subscription  rights applicable
          to one share of Common Stock.  Such adjustment  shall be made whenever
          any such  distribution is made and shall become effective  immediately
          after the record date mentioned above.

               d) Fundamental Transaction.  If, at any time while this Debenture
          is outstanding, (A) the Company effects any merger or consolidation of
          the Company with or into another  Person,  (B) the Company effects any
          sale of all or  substantially  all of its assets in one or a series of
          related transactions,  (C) any tender offer or exchange offer (whether
          by the  Company or  another  Person) is  completed  pursuant  to which
          holders of Common  Stock are  permitted  to tender or  exchange  their
          shares for other  securities,  cash or  property,  or (D) the  Company
          effects any  reclassification  of the Common  Stock or any  compulsory
          share  exchange  pursuant  to which the  Common  Stock is  effectively
          converted into or exchanged for other securities, cash or property (in
          any such case, a "Fundamental Transaction"), then upon any subsequent

                                       15
<PAGE>

          conversion  of this  Debenture,  the  Holder  shall  have the right to
          receive,  for each Conversion Share that would have been issuable upon
          such   conversion   immediately   prior  to  the  occurrence  of  such
          Fundamental Transaction,  the same kind and amount of securities, cash
          or  property  as it would  have  been  entitled  to  receive  upon the
          occurrence of such Fundamental Transaction if it had been, immediately
          prior to such  Fundamental  Transaction,  the  holder  of one share of
          Common Stock (the "Alternate Consideration"). For purposes of any such
          conversion,  the  determination  of  the  Conversion  Price  shall  be
          appropriately adjusted to apply to such Alternate  Consideration based
          on the amount of  Alternate  Consideration  issuable in respect of one
          share of Common Stock in such Fundamental Transaction, and the Company
          shall apportion the Conversion Price among the Alternate Consideration
          in a reasonable  manner reflecting the relative value of any different
          components of the Alternate Consideration.  If holders of Common Stock
          are given any  choice as to the  securities,  cash or  property  to be
          received in a Fundamental Transaction,  then the Holder shall be given
          the same choice as to the Alternate Consideration it receives upon any
          conversion of this Debenture  following such Fundamental  Transaction.
          To the extent  necessary to effectuate the foregoing  provisions,  any
          successor  to the  Company  or  surviving  entity in such  Fundamental
          Transaction shall issue to the Holder a new debenture  consistent with
          the foregoing  provisions and evidencing the Holder's right to convert
          such  debenture  into  Alternate  Consideration.   The  terms  of  any
          agreement  pursuant  to which a  Fundamental  Transaction  is effected
          shall include terms  requiring any such successor or surviving  entity
          to comply with the  provisions of this paragraph (d) and insuring that
          this  Debenture (or any such  replacement  security) will be similarly
          adjusted upon any  subsequent  transaction  analogous to a Fundamental
          Transaction.

               e) Calculations.  All calculations  under this Section 5 shall be
          made to the  nearest  cent or the nearest  1/100th of a share,  as the
          case may be. For  purposes of this  Section 5, the number of shares of
          Common  Stock deemed to be issued and  outstanding  as of a given date
          shall be the sum of the  number of shares of Common  Stock  (excluding
          treasury shares, if any) issued and outstanding.

               f) Notice to the Holder.

                    i. Adjustment to Conversion  Price.  Whenever the Conversion
               Price is adjusted  pursuant to any of this Section 5, the Company
               shall  promptly  mail to each Holder a notice  setting  forth the
               Conversion  Price after such adjustment and setting forth a brief
               statement of the facts requiring such adjustment.  If the Company
               issues a variable rate security,  despite the prohibition thereon
               in the Purchase  Agreement,  the Company  shall be deemed to have
               issued  Common  Stock or Common Stock  Equivalents  at the lowest
               possible  conversion or exercise  price at which such  securities
               may be  converted  or  exercised  in the case of a Variable  Rate
               Transaction (as defined in the Purchase Agreement).

                    ii. Notice to Allow Conversion by Holder. If (A) the Company
               shall  declare  a  dividend  (or any other  distribution)  on the
               Common   Stock;   (B)  the  Company   shall   declare  a  special
               nonrecurring  cash  dividend  on or a  redemption  of the  Common
               Stock;  (C) the  Company  shall  authorize  the  granting  to all
               holders of the Common Stock  rights or warrants to subscribe  for
               or  purchase  any shares of capital  stock of any class or of any
               rights; (D) the approval of any stockholders of the Company shall
               be required in connection with any reclassification of the Common
               Stock,  any  consolidation  or merger to which the  Company  is a
               party,  any sale or transfer of all or  substantially  all of the
               assets of the Company,  of any compulsory  share exchange whereby
               the Common  Stock is  converted  into other  securities,  cash or
               property;  (E) the  Company  shall  authorize  the  voluntary  or
               involuntary dissolution, liquidation or winding up of the affairs
               of the Company; then, in each case, the Company shall cause to be
               filed at each  office or agency  maintained  for the  purpose  of
               conversion of this Debenture,

                                       16
<PAGE>

               and shall cause to be mailed to the Holder at its last  addresses
               as it shall appear upon the stock books of the Company,  at least
               20 calendar days prior to the applicable record or effective date
               hereinafter  specified,  a notice stating (x) the date on which a
               record  is  to  be  taken  for  the  purpose  of  such  dividend,
               distribution,  redemption,  rights or warrants, or if a record is
               not to be taken,  the date as of which the  holders of the Common
               Stock of record to be entitled to such  dividend,  distributions,
               redemption,  rights or warrants are to be  determined  or (y) the
               date on which such reclassification, consolidation, merger, sale,
               transfer or share  exchange is  expected to become  effective  or
               close,  and the date as of which it is expected  that  holders of
               the Common  Stock of record  shall be entitled to exchange  their
               shares of the Common Stock for securities, cash or other property
               deliverable upon such  reclassification,  consolidation,  merger,
               sale, transfer or share exchange;  provided,  that the failure to
               mail such notice or any defect therein or in the mailing  thereof
               shall not affect the validity of the corporate action required to
               be specified  in such  notice.  The Holder is entitled to convert
               this  Debenture  during the 20-day period  commencing the date of
               such notice to the effective  date of the event  triggering  such
               notice.

          Section 6.   Forced Conversion.
          ----------   ------------------

                   a) [RESERVED]
                   b) [RESERVED]

               c)  Forced  Conversion.  Notwithstanding  anything  herein to the
          contrary, if after the 11 month anniversary of the Original Issue Date
          each of the Closing Prices for any 30  consecutive  Trading Days (such
          period  commencing only after the 11 month anniversary of the Original
          Issue Date,  such  period the  "Threshold  Period"))  exceeds the then
          Conversion Price by 250%, the Company may, within 1 Trading Day of the
          end of any such  period,  deliver  a notice to the  Holder (a  "Forced
          Conversion Notice" and the date such notice is received by the Holder,
          the  "Forced   Conversion   Notice  Date")  to  cause  the  Holder  to
          immediately  convert  all or part of the  then  outstanding  principal
          amount of  Debentures  pursuant  to  Section 4. The  Company  may only
          effect a Forced  Conversion Notice if all of the Equity Conditions are
          met through the  applicable  Threshold  Period  until the later of the
          date of the applicable Forced Conversion and the date shares of Common
          Stock are actually  delivered to the  Holders.  Any Forced  Conversion
          shall be  applied  ratably  to all  Holders  based  on  their  initial
          purchases  of  Debentures  pursuant  to the  Purchase  Agreement.  For
          purposes of clarification, a Forced Conversion shall be subject to all
          of the provisions of Section 4,  including,  without  limitation,  the
          provision  requiring payment of liquidated  damages and limitations on
          conversions.

                                       17
<PAGE>

          Section  7.  Negative  Covenants.  So  long  as any  portion  of  this
     Debenture is  outstanding,  the Company will not and will not permit any of
     its  Subsidiaries  to  directly  or  indirectly:

               a) Except for  Permitted  Indebtedness,  other than  Indebtedness
          incurred in connection with the Regenmacher  Transaction,  enter into,
          create,  incur, assume,  guarantee or suffer to exist any indebtedness
          for  borrowed  money of any  kind,  including  but not  limited  to, a
          guarantee,  on or with  respect to any of its  property  or assets now
          owned or hereafter  acquired or any interest  therein or any income or
          profits therefrom;

               b) Except for  Permitted  Liens,  other than  Liens  incurred  in
          connection  with the  Regenmacher  Transaction,  enter  into,  create,
          incur,  assume or  suffer  to exist any liens of any kind,  on or with
          respect  to any of its  property  or  assets  now  owned or  hereafter
          acquired or any interest therein or any income or profits therefrom;

               c)  amend  its  certificate  of  incorporation,  bylaws  or other
          charter  documents so as to materially and adversely affect any rights
          of the Holder;

               d) other than with respect to the Conversion Shares to the extent
          permitted or required  under the  Transaction  Documents or other than
          repurchases  of,  up to,  in the  aggregate  among  all  shareholders,
          $130,000 of Common Stock from  dissenting  shareholders in the reverse
          merger, repay,  repurchase or offer to repay,  repurchase or otherwise
          acquire more than a de minimis number of shares of its Common Stock or
          Common Stock Equivalents;

               e) enter into any agreement with respect to any of the foregoing;
          or

               f) pay cash dividends or distributions  on any equity  securities
          of the Company.

          Section 8.  Events of Default.

               a) "Event of Default", wherever used herein, means any one of the
          following  events  (whatever  the  reason  and  whether  it  shall  be
          voluntary or  involuntary  or effected by operation of law or pursuant
          to any judgment,  decree or order of any court, or any order,  rule or
          regulation of any administrative or governmental body):

                    i. any default in the payment of (A) the principal amount of
               any  Debenture,  or (B)  interest  (including  Late  Fees) on, or
               liquidated damages in respect of, any Debenture,  as and when the
               same shall become due and payable  (whether on a Conversion  Date
               or the  Maturity  Date or by  acceleration  or  otherwise)  which
               default,  solely  in the  case of an  interest  payment  or other
               default  under clause (B) above,  is not cured,  within 5 Trading
               Days;

                                       18
<PAGE>

                    ii. the  Company  shall fail to observe or perform any other
               covenant or agreement  contained  in this  Debenture or any other
               Debenture  (other than a breach by the Company of its obligations
               to deliver  shares of Common Stock to the Holder upon  conversion
               which breach is addressed in clause (xi) below) which  failure is
               not cured,  if possible  to cure,  within the earlier to occur of
               (A) 15 Trading  Days  after  notice of such  default  sent by the
               Holder or by any other  Holder and (B) 20 Trading  Days after the
               Company shall become or should have become aware of such failure;

                    iii. a default or event of default  (subject to any grace or
               cure period provided for in the applicable agreement, document or
               instrument)   shall  occur  under  (A)  any  of  the  Transaction
               Documents,  or (B) any other material agreement,  lease, document
               or instrument to which the Company or any Subsidiary is bound and
               which default or event of default  could have a Material  Adverse
               Effect on the Company;

                    iv. any representation or warranty made herein, in any other
               Transaction  Documents  shall  be  untrue  or  incorrect  in  any
               material respect as of the date when made or deemed made;

                    v. (i) the Company or any of its Subsidiaries shall commence
               a case,  as debtor,  a case under any  applicable  bankruptcy  or
               insolvency  laws as now or hereafter  in effect or any  successor
               thereto,  or the Company or any  Subsidiary  commences  any other
               proceeding under any reorganization,  arrangement,  adjustment of
               debt, relief of debtors,  dissolution,  insolvency or liquidation
               or similar law of any  jurisdiction  whether now or  hereafter in
               effect relating to the Company or any Subsidiary  thereof or (ii)
               there is commenced a case  against the Company or any  Subsidiary
               thereof,  under any applicable  bankruptcy or insolvency laws, as
               now or hereafter in effect or any successor thereto which remains
               undismissed  for a period of 60 days; or (iii) the Company or any
               Subsidiary  thereof  is  adjudicated  by  a  court  of  competent
               jurisdiction  insolvent  or  bankrupt;  or any order of relief or
               other order approving any such case or proceeding is entered;  or
               (iv)  the  Company  or  any   Subsidiary   thereof   suffers  any
               appointment   of  any  custodian  or  the  like  for  it  or  any
               substantial part of its property which continues  undischarged or
               unstayed  for a period  of 60  days;  or (v) the  Company  or any
               Subsidiary  thereof makes a general assignment for the benefit of
               creditors;  or (vi) the Company shall fail to pay, or shall state
               that it is  unable to pay,  or shall be unable to pay,  its debts
               generally  as they  become  due;  or  (vii)  the  Company  or any
               Subsidiary  thereof shall call a meeting of its creditors  with a
               view to arranging a composition,  adjustment or  restructuring of
               its debts; or (viii) the Company or any Subsidiary  thereof shall
               by any act or failure to act  expressly  indicate its consent to,
               approval of or acquiescence in any of the foregoing;  or (ix) any
               corporate  or  other  action  is  taken  by  the  Company  or any
               Subsidiary  thereof  for  the  purpose  of  effecting  any of the
               foregoing;

                                       19
<PAGE>

                    vi. the Company or any  Subsidiary  shall  default in any of
               its  obligations  under any mortgage,  credit  agreement or other
               facility,  indenture  agreement,  factoring  agreement  or  other
               instrument under which there may be issued, or by which there may
               be secured or evidenced any  indebtedness  for borrowed  money or
               money due under any long term leasing or factoring arrangement of
               the  Company  in  an  amount  exceeding  $150,000,  whether  such
               indebtedness  now exists or shall  hereafter  be created and such
               default  shall  result  in such  indebtedness  becoming  or being
               declared  due and  payable  prior  to the  date on which it would
               otherwise become due and payable;

                    vii. the Common Stock shall not be eligible for quotation on
               or quoted for trading on a Trading  Market and shall not again be
               eligible for and quoted or listed for trading thereon within five
               Trading Days;

                    viii.  the Company shall be a party to any Change of Control
               Transaction  or Fundamental  Transaction,  shall agree to sell or
               dispose  of all or in excess of 33% of its  assets in one or more
               transactions  (whether or not such sale would constitute a Change
               of Control Transaction) or shall redeem or repurchase more than a
               de minimis  number of its  outstanding  shares of Common Stock or
               other equity securities of the Company (other than redemptions of
               Conversion  Shares and  repurchases  of shares of Common Stock or
               other equity  securities  of departing  officers and directors of
               the Company; provided such repurchases shall not exceed $130,000,
               in the aggregate,  for all officers and directors during the term
               of this Debenture);

                    ix. a  Registration  Statement  shall not have been declared
               effective by the Commission on or prior to the 180th calendar day
               after the Closing Date;

                    x. any breach by the Company or any  creditor of the Company
               with respect to the payoffs,  satisfactions and/or conversions of
               indebtedness  referred to in Section  2.3(b)(vii) of the Purchase
               Agreement,  including any claim by any such pre-Closing  creditor
               related to such prior indebtedness;

                    xi. if, during the  Effectiveness  Period (as defined in the
               Registration   Rights   Agreement),   the  effectiveness  of  the
               Registration  Statement lapses for any reason or the Holder shall
               not be permitted to resell Registrable  Securities (as defined in
               the  Registration   Rights   Agreement)  under  the  Registration
               Statement,  in either case, for more than 60 consecutive  Trading
               Days or 90  non-consecutive  Trading  Days  during  any 12  month
               period;  provided,  however,  that in the event --------  -------
               that  the  Company  is   negotiating  a  merger,   consolidation,
               acquisition or sale of all or substantially  all of its assets or
               a similar  transaction  and in the written  opinion of counsel to
               the Company, the Registration Statement,  would be required to be
               amended to include  information  concerning such  transactions or
               the parties  thereto that is not available or may not be publicly
               disclosed  at  the  time,  the  Company  shall  be  permitted  an
               additional 10 consecutive Trading Days during any 12 month period
               relating to such an event; and

                                       20
<PAGE>

                    xii.  the  Company  shall  fail for any  reason  to  deliver
               certificates to a Holder prior to the seventh Trading Day after a
               Conversion Date or any Forced  Conversion Date pursuant to and in
               accordance  with Section 4(d) or the Company shall provide notice
               to the Holder,  including by way of public  announcement,  at any
               time,   of  its   intention  not  to  comply  with  requests  for
               conversions  of any  Debentures  in  accordance  with  the  terms
               hereof.

               b)  Remedies  Upon  Event of  Default.  If any  Event of  Default
          occurs,  the full principal  amount of this  Debenture,  together with
          interest and other  amounts owing in respect  thereof,  to the date of
          acceleration shall become, at the Holder's  election,  immediately due
          and payable in cash.  The  aggregate  amount  payable upon an Event of
          Default shall be equal to the Mandatory  Default Amount.  Commencing 5
          days after the  occurrence of any Event of Default that results in the
          eventual  acceleration  of this  Debenture,  the interest rate on this
          Debenture  shall  accrue at the rate of 18% per  annum,  or such lower
          maximum  amount of interest  permitted to be charged under  applicable
          law. Upon the payment in full of the Mandatory  Default Amount on this
          entire Debenture the Holder shall promptly surrender this Debenture to
          or as  directed  by the  Company.  The Holder need not provide and the
          Company hereby waives any presentment, demand, protest or other notice
          of any kind, and the Holder may immediately and without  expiration of
          any  grace  period  enforce  any and all of its  rights  and  remedies
          hereunder and all other remedies available to it under applicable law.
          Such  declaration  may be rescinded and annulled by Holder at any time
          prior to payment  hereunder  and the Holder shall have all rights as a
          Debenture  holder until such time,  if any, as the full payment  under
          this Section  shall have been  received by it. No such  rescission  or
          annulment  shall affect any subsequent  Event of Default or impair any
          right consequent thereon.

          Section 9. Miscellaneous.

               a)  Notices.  Any and all  notices  or  other  communications  or
          deliveries to be provided by the Holder hereunder,  including, without
          limitation,  any  Notice  of  Conversion,  shall  be  in  writing  and
          delivered  personally,  by facsimile,  sent by a nationally recognized
          overnight  courier service,  addressed to the Company,  at the address
          set forth above, facsimile number 408.986.0222,  Attn: Donald A. Goer,
          CEO,  or such other  address or  facsimile  number as the  Company may
          specify  for such  purposes  by  notice  to the  Holder  delivered  in
          accordance   with  this   Section.   Any  and  all  notices  or  other
          communications  or deliveries to be provided by the Company  hereunder
          shall be in writing and delivered personally,  by facsimile, sent by a
          nationally  recognized  overnight  courier  service  addressed to each
          Holder at the  facsimile  telephone  number or address of such  Holder
          appearing  on  the  books  of the  Company,  or if no  such  facsimile
          telephone  number  or  address  appears,  at the  principal  place  of
          business  of  the  Holder.

                                       21
<PAGE>

          Any notice or other  communication  or deliveries  hereunder  shall be
          deemed  given  and  effective  on the  earliest  of (i)  the  date  of
          transmission,  if  such  notice  or  communication  is  delivered  via
          facsimile at the facsimile  telephone number specified in this Section
          prior to 5:30 p.m. (New York City time),  (ii) the date after the date
          of  transmission,  if such notice or  communication  is delivered  via
          facsimile at the facsimile  telephone number specified in this Section
          later than 5:30 p.m. (New York City time) on any date and earlier than
          11:59  p.m.  (New  York City  time) on such  date,  (iii)  the  second
          Business  Day  following  the date of mailing,  if sent by  nationally
          recognized  overnight courier service,  or (iv) upon actual receipt by
          the party to whom such notice is required to be given.

               b) Absolute  Obligation.  Except as expressly provided herein, no
          provision of this  Debenture  shall alter or impair the  obligation of
          the Company, which is absolute and unconditional, to pay the principal
          of, interest and liquidated damages (if any) on, this Debenture at the
          time, place, and rate, and in the coin or currency, herein prescribed.
          This  Debenture  is a direct  debt  obligation  of the  Company.  This
          Debenture ranks pari passu with all other  Debentures now or hereafter
          issued under the terms set forth herein.  This  Debenture is expressly
          subordinated  in right of payment of principal (but, in the absence of
          an Event of Default under the Regenmacher  Debenture,  not in right of
          payment  of  interest)  to  the  Company's   prior  repayment  of  the
          Regenmacher Debenture.

               c) Lost  or  Mutilated  Debenture.  If this  Debenture  shall  be
          mutilated,  lost,  stolen or destroyed,  the Company shall execute and
          deliver,  in exchange and substitution for and upon  cancellation of a
          mutilated  Debenture,  or in  lieu of or in  substitution  for a lost,
          stolen or  destroyed  Debenture,  a new  Debenture  for the  principal
          amount of this Debenture so mutilated,  lost,  stolen or destroyed but
          only upon receipt of evidence of such loss,  theft or  destruction  of
          such  Debenture,  and of  the  ownership  hereof,  and  indemnity,  if
          requested, all reasonably satisfactory to the Company.

               d) Governing  Law. All  questions  concerning  the  construction,
          validity,  enforcement and  interpretation  of this Debenture shall be
          governed by and construed and enforced in accordance with the internal
          laws of the State of New York,  without  regard to the  principles  of
          conflicts of law thereof. Each party agrees that all legal proceedings
          concerning  the  interpretations,   enforcement  and  defense  of  the
          transactions contemplated by any of the Transaction Documents (whether
          brought   against  a  party  hereto  or  its  respective   affiliates,
          directors,  officers,  shareholders,  employees  or  agents)  shall be
          commenced in the state and federal  courts  sitting in the City of New
          York, Borough of Manhattan (the "New York Courts").  Each party hereto
          hereby  irrevocably  submits to the exclusive  jurisdiction of the New
          York  Courts  for the  adjudication  of any  dispute  hereunder  or in
          connection  herewith or with any  transaction  contemplated  hereby or
          discussed herein  (including with respect to the enforcement of any of
          the Transaction Documents),  and hereby irrevocably waives, and agrees
          not to assert in any suit, action or proceeding,  any claim that it is
          not personally  subject to the jurisdiction of any such court, or such
          New  York  Courts  are  improper  or   inconvenient   venue  for  such
          proceeding.

                                       22
<PAGE>

          Each party hereby  irrevocably  waives personal service of process and
          consents  to  process  being  served  in  any  such  suit,  action  or
          proceeding by mailing a copy thereof via  registered or certified mail
          or overnight delivery (with evidence of delivery) to such party at the
          address in effect for  notices to it under this  Debenture  and agrees
          that such service  shall  constitute  good and  sufficient  service of
          process and notice thereof.  Nothing  contained herein shall be deemed
          to limit in any way any right to serve process in any manner permitted
          by law. Each party hereto hereby  irrevocably  waives,  to the fullest
          extent permitted by applicable law, any and all right to trial by jury
          in any legal  proceeding  arising out of or relating to this Debenture
          or  the  transactions  contemplated  hereby.  If  either  party  shall
          commence an action or  proceeding  to enforce any  provisions  of this
          Debenture,  then the  prevailing  party in such  action or  proceeding
          shall be  reimbursed  by the other  party for its  attorneys  fees and
          other costs and expenses incurred with the investigation,  preparation
          and prosecution of such action or proceeding.

               e) Waiver. Any waiver by the Company or the Holder of a breach of
          any provision of this  Debenture  shall not operate as or be construed
          to be a waiver of any other breach of such  provision or of any breach
          of any other provision of this  Debenture.  The failure of the Company
          or the  Holder to insist  upon  strict  adherence  to any term of this
          Debenture on one or more occasions shall not be considered a waiver or
          deprive  that  party of the right  thereafter  to insist  upon  strict
          adherence to that term or any other term of this Debenture. Any waiver
          must be in writing.

               f)  Severability.  If any provision of this Debenture is invalid,
          illegal or  unenforceable,  the balance of this Debenture shall remain
          in  effect,  and if any  provision  is  inapplicable  to any person or
          circumstance,  it shall  nevertheless  remain  applicable to all other
          persons and  circumstances.  If it shall be found that any interest or
          other amount deemed  interest due hereunder  violates  applicable laws
          governing  usury,  the applicable rate of interest due hereunder shall
          automatically  be  lowered  to equal  the  maximum  permitted  rate of
          interest. The Company covenants (to the extent that it may lawfully do
          so) that it shall not at any time insist upon, plead, or in any manner
          whatsoever  claim or take the  benefit  or  advantage  of,  any  stay,
          extension  or usury law or other law which  would  prohibit or forgive
          the  Company  from paying all or any  portion of the  principal  of or
          interest on this Debenture as contemplated  herein,  wherever enacted,
          now or at any time  hereafter  in  force,  or  which  may  affect  the
          covenants or the  performance of this  indenture,  and the Company (to
          the extent it may lawfully do so) hereby expressly waives all benefits
          or  advantage  of any such law,  and  covenants  that it will not,  by
          resort to any such law, hinder,  delay or impeded the execution of any
          power  herein  granted to the  Holder,  but will suffer and permit the
          execution of every such as though no such law has been enacted.

               g) Next  Business Day.  Whenever any payment or other  obligation
          hereunder  shall  be due on a day  other  than a  Business  Day,  such
          payment shall be made on the next succeeding Business Day.

                                       23
<PAGE>

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

               i) Assumption.  Any successor to the Company or surviving  entity
          in a  Fundamental  Transaction  shall (i) assume in writing all of the
          obligations  of  the  Company  under  this  Debenture  and  the  other
          Transaction  Documents  pursuant  to  written  agreements  in form and
          substance  satisfactory  to  the  Holder  (such  approval  not  to  be
          unreasonably   withheld   or  delayed)   prior  to  such   Fundamental
          Transaction  and (ii) to issue to the Holder a new  debenture  of such
          successor  entity  evidenced  by a  written  instrument  substantially
          similar in form and substance to this  Debenture,  including,  without
          limitation,  having a principal  amount and interest rate equal to the
          principal amounts and the interest rates of the Debentures held by the
          Holder and having similar ranking to this Debenture,  and satisfactory
          to the Holder (any such  approval not to be  unreasonably  withheld or
          delayed).  The  provisions of this Section 9(i) shall apply  similarly
          and  equally  to  successive  Fundamental  Transactions  and  shall be
          applied without regard to any limitations of this Debenture.

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

                                       24
<PAGE>

     IN WITNESS  WHEREOF,  the  Company  has caused  this  Debenture  to be duly
executed by a duly authorized officer as of the date first above indicated.

                           INTRAOP MEDICAL CORPORATION

                                          By:___________________________________
                                             Name:
                                             Title:

                                       25
<PAGE>

                                     ANNEX A

                              NOTICE OF CONVERSION

     The  undersigned   hereby  elects  to  convert  principal  under  the  7  %
Convertible Debenture of Intraop Medical Corporation,  a Nevada corporation (the
"Company"),  due on August ___,  2008,  into shares of common  stock,  par value
$0.001  per  share  (the  "Common  Stock"),  of  the  Company  according  to the
conditions  hereof,  as of the date written below. If shares are to be issued in
the name of a person other than the  undersigned,  the undersigned  will pay all
transfer  taxes  payable with respect  thereto and is  delivering  herewith such
certificates  and opinions as reasonably  requested by the Company in accordance
therewith.  No fee will be charged to the holder for any conversion,  except for
such transfer taxes, if any.

     By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company  that its  ownership of the Common Stock does not exceed
the amounts  determined  in  accordance  with Section 13(d) of the Exchange Act,
specified under Section 4 of this Debenture.

     The undersigned agrees to comply with the prospectus delivery  requirements
under the  applicable  securities  laws in  connection  with any transfer of the
aforesaid shares of Common Stock.

Conversion calculations:
                               Date to Effect Conversion:

                               Principal Amount of Debenture to be Converted:

                               Payment of Interest in Common Stock __ yes  __ no
                               If yes, $_____ of Interest Accrued on Account of
                               Conversion at Issue.

                               Number of shares of Common Stock to
                               be issued:

                               Signature:

                               Name:

                               Address:

                                       26
<PAGE>

                                   Schedule 1

                               CONVERSION SCHEDULE

The 7%  Convertible  Debentures  due  on  August  ___,  2008,  in the  aggregate
principal  amount of  $____________  issued by Intraop  Medical  Corporation,  a
Nevada  corporation.  This Conversion  Schedule reflects  conversions made under
Section 4 of the above referenced Debenture.

                                     Dated:

================================================================================

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

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

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

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

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

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

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

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

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

================================================================================

                                       27EXHIBIT 4.3

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY  AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THIS
SECURITY  MAY BE PLEDGED IN  CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT WITH A
REGISTERED  BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL  INSTITUTION THAT IS AN
"ACCREDITED  INVESTOR"  AS DEFINED IN RULE 501(a)  UNDER THE  SECURITIES  ACT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

                          COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                           INTRAOP MEDICAL CORPORATION

     THIS COMMON STOCK  PURCHASE  WARRANT (the  "Warrant")  certifies  that, for
value received,  _____________ (the "Holder"),  is entitled,  upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after the date hereof (the "Initial  Exercise Date") and on or
prior to the close of  business  on the five  year  anniversary  of the  Initial
Exercise Date (the "Termination Date") but not thereafter,  to subscribe for and
purchase from Intraop Medical Corporation, a Nevada corporation (the "Company"),
up to ______ shares (the "Warrant Shares") of Common Stock, par value $0.001 per
share, of the Company (the "Common  Stock").  The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise Price, as defined
in Section 2(b).

     Section 1.  Definitions.  Capitalized  terms used and not otherwise defined
herein shall have the meanings  set forth in that  certain  Securities  Purchase
Agreement (the "Purchase Agreement"),  dated August ___, 2005, among the Company
and the purchasers signatory thereto.

     Section 2. Exercise.

          a) Exercise of Warrant. Exercise of the purchase rights represented by
     this Warrant may be made,  in whole or in part,  at any time or times on or
     after the Initial  Exercise Date and on or before the  Termination  Date by
     delivery to the Company of a duly executed  facsimile copy of the Notice of

                                       1
<PAGE>

     Exercise Form annexed hereto (or such other office or agency of the Company
     as it may  designate by notice in writing to the  registered  Holder at the
     address of such Holder  appearing on the books of the  Company);  provided,
     however,  within 5 Trading  Days of the date said  Notice  of  Exercise  is
     delivered to the Company, the Holder shall have surrendered this Warrant to
     the Company and the Company  shall have  received  payment of the aggregate
     Exercise  Price  of the  shares  thereby  purchased  by  wire  transfer  or
     cashier's check drawn on a United States bank.

          b) Exercise  Price.  The exercise price of the Common Stock under this
     Warrant  shall be $0.40,  subject to  adjustment  hereunder  (the " Initial
     Exercise Price"); provided,  however, prior to the earlier of (i) the later
     of (A) the Effective  Date and (B) the 9 month  anniversary  of the Initial
     Exercise  Date and (ii) the one year  anniversary  of the Initial  Exercise
     Date (such date,  the "Reset  Date"),  if the average of the Closing Prices
     for the 30  consecutive  Trading Days  immediately  prior to the Reset Date
     (the  "Reset  Price")  is less  than the then  Conversion  Price,  then the
     Initial Exercise Price shall be adjusted to equal the greater of (i) $0.40,
     subject  to  adjustment  for  reverse  and  forward  stock  splits,   stock
     dividends,  stock combinations and other similar transactions of the Common
     Stock  that  occur  after  the date of this  Agreement,  and (ii) the Reset
     Price,  subject to further  adjustment  hereunder (the  "Exercise  Price").
     [Regenmacher  Transaction  Only -  Notwithstanding  anything  herein to the
     contrary,  if an Event of Default occurs under any Debentures  then held by
     the  Holder  or  the  Security   Agreement,   the   Exercise   Price  shall
     automatically  and without  any  further  action by any party be reduced to
     equal $0.01.]

          c) Cashless  Exercise.  If at any time after one year from the date of
     issuance  of this  Warrant  there is no  effective  Registration  Statement
     registering,  or no current  prospectus  available  for,  the resale of the
     Warrant  Shares by the Holder,  then this  Warrant may also be exercised at
     such time by means of a "cashless  exercise"  in which the Holder  shall be
     entitled to receive a certificate for the number of Warrant Shares equal to
     the quotient obtained by dividing [(A-B) (X)] by (A), where:

          (A)  = the VWAP on the Trading Day  immediately  preceding the date of
               such election;

          (B)  = the Exercise Price of this Warrant, as adjusted; and

          (X)  = the number of Warrant  Shares  issuable  upon  exercise of this
               Warrant in accordance  with the terms of this Warrant by means of
               a cash exercise rather than a cashless exercise.

          Notwithstanding  anything  herein to the contrary,  on the Termination
     Date, this Warrant shall be automatically  exercised via cashless  exercise
     pursuant to this Section 2(c).

          d) Exercise  Limitations;  Holder's  Restrictions.  A Holder shall not
     have the right to exercise any portion of this Warrant, pursuant to Section
     2(c) or otherwise,  to the extent that after giving effect to such issuance
     after exercise,  such Holder (together with such Holder's  affiliates),  as

                                       2
<PAGE>

     set forth on the applicable Notice of Exercise,  would  beneficially own in
     excess of 4.99% of the  number of shares of the  Common  Stock  outstanding
     immediately  after  giving  effect to such  issuance.  For  purposes of the
     foregoing sentence, the number of shares of Common Stock beneficially owned
     by such  Holder and its  affiliates  shall  include the number of shares of
     Common Stock  issuable  upon exercise of this Warrant with respect to which
     the  determination  of such  sentence is being made,  but shall exclude the
     number of shares of Common Stock which would be issuable  upon (A) exercise
     of the remaining,  nonexercised  portion of this Warrant beneficially owned
     by such Holder or any of its  affiliates  and (B) exercise or conversion of
     the  unexercised  or  nonconverted  portion of any other  securities of the
     Company (including,  without limitation,  any other Debentures or Warrants)
     subject  to a  limitation  on  conversion  or  exercise  analogous  to  the
     limitation contained herein beneficially owned by such Holder or any of its
     affiliates.  Except as set forth in the preceding sentence, for purposes of
     this Section 2(d),  beneficial  ownership shall be calculated in accordance
     with Section 13(d) of the Exchange Act, it being  acknowledged  by a Holder
     that the Company is not  representing to such Holder that such  calculation
     is in compliance  with Section 13(d) of the Exchange Act and such Holder is
     solely  responsible  for any  schedules  required to be filed in accordance
     therewith. To the extent that the limitation contained in this Section 2(d)
     applies,  the  determination  of whether  this Warrant is  exercisable  (in
     relation to other  securities  owned by such Holder) and of which a portion
     of this Warrant is exercisable shall be in the sole discretion of a Holder,
     and the  submission  of a Notice  of  Exercise  shall be  deemed to be each
     Holder's  determination of whether this Warrant is exercisable (in relation
     to other  securities  owned by such  Holder)  and of which  portion of this
     Warrant is exercisable,  in each case subject to such aggregate  percentage
     limitation,  and the Company  shall have no obligation to verify or confirm
     the accuracy of such  determination.  For purposes of this Section 2(d), in
     determining the number of outstanding  shares of Common Stock, a Holder may
     rely on the number of  outstanding  shares of Common  Stock as reflected in
     (x) the Company's  most recent Form 10-QSB or Form 10-KSB,  as the case may
     be, (y) a more recent public  announcement  by the Company or (z) any other
     notice by the Company or the  Company's  Transfer  Agent  setting forth the
     number of shares of Common  Stock  outstanding.  Upon the  written  or oral
     request of a Holder,  the Company  shall  within two Trading  Days  confirm
     orally and in writing to such  Holder the number of shares of Common  Stock
     then outstanding.  In any case, the number of outstanding  shares of Common
     Stock shall be determined after giving effect to the conversion or exercise
     of securities of the Company, including this Warrant, by such Holder or its
     affiliates since the date as of which such number of outstanding  shares of
     Common  Stock was  reported.  The  provisions  of this  Section 2(d) may be
     waived by such Holder,  at the election of such Holder,  upon not less than
     61 days' prior notice to the Company,  and the  provisions  of this Section
     2(d) shall  continue to apply  until such 61st day (or such later date,  as
     determined by such Holder, as may be specified in such notice of waiver).

          e) Mechanics of Exercise.

               i.  Authorization of Warrant Shares.  The Company  covenants that
          all  Warrant  Shares  which may be  issued  upon the  exercise  of the
          purchase rights represented by this Warrant will, upon exercise of the

                                       3
<PAGE>

          purchase  rights  represented  by this  Warrant,  be duly  authorized,
          validly issued,  fully paid and nonassessable and free from all taxes,
          liens and charges in respect of the issue thereof (other than taxes in
          respect of any transfer occurring contemporaneously with such issue).

               ii.  Delivery of  Certificates  Upon Exercise.  Certificates  for
          shares purchased  hereunder shall be transmitted by the transfer agent
          of the Company to the Holder by crediting  the account of the Holder's
          prime broker with the  Depository  Trust  Company  through its Deposit
          Withdrawal  Agent  Commission  ("DWAC")  system  if the  Company  is a
          participant in such system,  and otherwise by physical delivery to the
          address  specified  by the Holder in the Notice of  Exercise  within 3
          Trading  Days  from the  delivery  to the  Company  of the  Notice  of
          Exercise Form,  surrender of this Warrant and payment of the aggregate
          Exercise Price as set forth above  ("Warrant  Share  Delivery  Date").
          This  Warrant  shall be deemed to have been  exercised on the date the
          Exercise Price is received by the Company. The Warrant Shares shall be
          deemed  to have  been  issued,  and  Holder  or any  other  person  so
          designated to be named therein shall be deemed to have become a holder
          of record of such shares for all purposes,  as of the date the Warrant
          has been exercised by payment to the Company of the Exercise Price and
          all taxes  required  to be paid by the  Holder,  if any,  pursuant  to
          Section  2(e)(vii)  prior to the  issuance of such  shares,  have been
          paid.

               iii.  Delivery of New  Warrants  Upon  Exercise.  If this Warrant
          shall have been exercised in part,  the Company shall,  at the time of
          delivery  of the  certificate  or  certificates  representing  Warrant
          Shares,  deliver  to Holder a new  Warrant  evidencing  the  rights of
          Holder to purchase the  unpurchased  Warrant Shares called for by this
          Warrant,  which new Warrant  shall in all other  respects be identical
          with this Warrant.

               iv. Rescission Rights. If the Company fails to cause its transfer
          agent  to  transmit  to  the  Holder  a  certificate  or  certificates
          representing  the Warrant Shares pursuant to this Section  2(e)(iv) by
          the second Trading Day following the Warrant Share Delivery Date, then
          the Holder will have the right to rescind such exercise.

               v.   Compensation   for  Buy-In  on  Failure  to  Timely  Deliver
          Certificates Upon Exercise.  In addition to any other rights available
          to the Holder,  if the Company  fails to cause its  transfer  agent to
          transmit to the Holder a certificate or certificates  representing the
          Warrant Shares pursuant to an exercise on or before the second Trading
          Day following the Warrant Share  Delivery Date, and if after such date
          the Holder is required  by its broker to  purchase  (in an open market
          transaction  or  otherwise)  shares  of  Common  Stock to  deliver  in
          satisfaction  of a sale by the Holder of the Warrant  Shares which the
          Holder anticipated receiving upon such exercise (a "Buy-In"), then the

                                       4
<PAGE>

          Company  shall (1) pay in cash to the  Holder  the amount by which (x)
          the Holder's total purchase price (including brokerage commissions, if
          any) for the  shares  of Common  Stock so  purchased  exceeds  (y) the
          amount  obtained by multiplying  (A) the number of Warrant Shares that
          the Company was required to deliver to the Holder in  connection  with
          the  exercise  at issue  times (B) the  price at which the sell  order
          giving rise to such purchase  obligation was executed,  and (2) at the
          option of the Holder,  either reinstate the portion of the Warrant and
          equivalent  number of Warrant  Shares for which such  exercise was not
          honored or deliver to the Holder the number of shares of Common  Stock
          that would have been issued had the Company  timely  complied with its
          exercise  and delivery  obligations  hereunder.  For  example,  if the
          Holder purchases Common Stock having a total purchase price of $11,000
          to cover a Buy-In with respect to an  attempted  exercise of shares of
          Common Stock with an aggregate sale price giving rise to such purchase
          obligation of $10,000,  under clause (1) of the immediately  preceding
          sentence the Company shall be required to pay the Holder  $1,000.  The
          Holder shall provide the Company written notice indicating the amounts
          payable  to the  Holder  in  respect  of  the  Buy-In,  together  with
          applicable  confirmations and other evidence  reasonably  requested by
          the Company. Nothing herein shall limit a Holder's right to pursue any
          other  remedies  available  to it  hereunder,  at  law  or  in  equity
          including, without limitation, a decree of specific performance and/or
          injunctive  relief  with  respect to the  Company's  failure to timely
          deliver certificates representing shares of Common Stock upon exercise
          of the Warrant as required pursuant to the terms hereof.

               vi. No Fractional  Shares or Scrip. No fractional shares or scrip
          representing  fractional  shares  shall be issued upon the exercise of
          this  Warrant.  As to any  fraction  of a  share  which  Holder  would
          otherwise  be  entitled to purchase  upon such  exercise,  the Company
          shall pay a cash  adjustment  in respect of such final  fraction in an
          amount equal to such fraction multiplied by the Exercise Price.

               vii.  Charges,  Taxes and Expenses.  Issuance of certificates for
          Warrant  Shares  shall be made  without  charge to the  Holder for any
          issue or transfer  tax or other  incidental  expense in respect of the
          issuance of such certificate, all of which taxes and expenses shall be
          paid by the Company, and such certificates shall be issued in the name
          of the  Holder  or in such  name or  names as may be  directed  by the
          Holder; provided,  however, that in the event certificates for Warrant
          Shares are to be issued in a name  other than the name of the  Holder,
          this Warrant when surrendered for exercise shall be accompanied by the
          Assignment Form attached  hereto duly executed by the Holder;  and the
          Company  may  require,  as a condition  thereto,  the payment of a sum
          sufficient to reimburse it for any transfer tax incidental thereto.

                                       5
<PAGE>

               viii.   Closing  of  Books.   The  Company  will  not  close  its
          stockholder  books or records in any manner which  prevents the timely
          exercise of this Warrant, pursuant to the terms hereof.

     Section 3. Certain Adjustments.

          a) Stock Dividends and Splits. If the Company,  at any time while this
     Warrant is  outstanding:  (A) pays a stock  dividend  or  otherwise  make a
     distribution  or  distributions  on shares of its Common Stock or any other
     equity or equity  equivalent  securities  payable in shares of Common Stock
     (which,  for  avoidance  of doubt,  shall not  include any shares of Common
     Stock  issued by the Company  pursuant  to this  Warrant),  (B)  subdivides
     outstanding  shares of Common  Stock into a larger  number of  shares,  (C)
     combines  (including by way of reverse stock split)  outstanding  shares of
     Common  Stock  into  a  smaller   number  of  shares,   or  (D)  issues  by
     reclassification  of shares of the Common Stock any shares of capital stock
     of the Company, then in each case the Exercise Price shall be multiplied by
     a fraction of which the  numerator  shall be the number of shares of Common
     Stock (excluding  treasury shares, if any) outstanding  immediately  before
     such  event and of which the  denominator  shall be the number of shares of
     Common  Stock  outstanding  immediately  after such event and the number of
     shares  issuable  upon  exercise of this Warrant  shall be  proportionately
     adjusted.  Any  adjustment  made pursuant to this Section 3(a) shall become
     effective  immediately  after  the  record  date for the  determination  of
     stockholders  entitled to receive such dividend or  distribution  and shall
     become  effective  immediately  after the  effective  date in the case of a
     subdivision, combination or re-classification.

          b) Subsequent Equity Sales. If the Company or any Subsidiary  thereof,
     as applicable, at any time while this Warrant is outstanding,  shall offer,
     sell,  grant any option to  purchase  or offer,  sell or grant any right to
     reprice its securities,  or otherwise  dispose of or issue (or announce any
     offer,  sale,  grant or any option to  purchase or other  disposition)  any
     Common Stock or Common Stock  Equivalents  entitling  any Person to acquire
     shares of Common Stock,  at an effective price per share less than the then
     Exercise Price (such lower price, the "Base Share Price" and such issuances
     collectively,  a "Dilutive Issuance"), as adjusted hereunder (if the holder
     of the Common  Stock or Common  Stock  Equivalents  so issued  shall at any
     time, whether by operation of purchase price adjustments, reset provisions,
     floating  conversion,  exercise or exchange prices or otherwise,  or due to
     warrants,  options or rights per share which is issued in  connection  with
     such  issuance,  be  entitled  to  receive  shares  of  Common  Stock at an
     effective  price per  share  which is less than the  Exercise  Price,  such
     issuance  shall be deemed to have occurred for less than the Exercise Price
     on such date of the Dilutive  Issuance),  then, the Exercise Price shall be
     reduced  and only  reduced to equal the Base Share  Price and the number of
     Warrant  Shares  issuable  hereunder  shall  be  increased  such  that  the
     aggregate Exercise Price payable  hereunder,  after taking into account the
     decrease in the Exercise  Price,  shall be equal to the aggregate  Exercise
     Price prior to such adjustment. Such adjustment shall be made whenever such
     Common Stock or Common Stock  Equivalents are issued.  Notwithstanding  the
     foregoing,  no adjustments shall be made, paid or issued under this Section
     3(b) in respect of an Exempt Issuance.  The Company shall notify the Holder
     in writing,  no later than the third  Trading Day following the issuance of
     any Common  Stock or Common  Stock  Equivalents  subject  to this  section,

                                       6
<PAGE>

     indicating  therein the applicable  issuance price, or of applicable  reset
     price,  exchange  price,  conversion  price and other  pricing  terms (such
     notice the  "Dilutive  Issuance  Notice").  For purposes of  clarification,
     whether or not the Company provides a Dilutive  Issuance Notice pursuant to
     this Section 3(b), upon the occurrence of any Dilutive Issuance,  after the
     date of such  Dilutive  Issuance the Holder is entitled to receive a number
     of Warrant Shares based upon the Base Share Price regardless of whether the
     Holder accurately refers to the Base Share Price in the Notice of Exercise.

          c) Pro Rata  Distributions.  If the Company,  at any time prior to the
     Termination  Date, shall distribute to all holders of Common Stock (and not
     to  Holders  of the  Warrants)  evidences  of its  indebtedness  or  assets
     (including  cash and cash dividends) or rights or warrants to subscribe for
     or  purchase  any  security  other than the Common  Stock  (which  shall be
     subject to Section  3(b)),  then in each such case the Exercise Price shall
     be adjusted by multiplying the Exercise Price in effect  immediately  prior
     to the record  date fixed for  determination  of  stockholders  entitled to
     receive such  distribution by a fraction of which the denominator  shall be
     the average of the 10 VWAPs  immediately prior to the record date mentioned
     above,  and of which the  numerator  shall be such  average of the VWAPs on
     such record  date less the then per share fair market  value at such record
     date  of the  portion  of  such  assets  or  evidence  of  indebtedness  so
     distributed  applicable  to one  outstanding  share of the Common  Stock as
     determined  by the Board of  Directors  in good  faith.  In either case the
     adjustments shall be described in a statement provided to the Holder of the
     portion of assets or  evidences  of  indebtedness  so  distributed  or such
     subscription   rights  applicable  to  one  share  of  Common  Stock.  Such
     adjustment  shall be made whenever any such  distribution is made and shall
     become effective immediately after the record date mentioned above.

          d)  Fundamental  Transaction.  If, at any time while  this  Warrant is
     outstanding,  (A) the Company  effects any merger or  consolidation  of the
     Company with or into another  Person,  (B) the Company  effects any sale of
     all or  substantially  all of its  assets  in one or a  series  of  related
     transactions,  (C) any  tender  offer or  exchange  offer  (whether  by the
     Company or another Person) is completed pursuant to which holders of Common
     Stock  are  permitted  to  tender  or  exchange   their  shares  for  other
     securities,   cash  or   property,   or  (D)  the   Company   effects   any
     reclassification  of the  Common  Stock or any  compulsory  share  exchange
     pursuant  to which  the  Common  Stock  is  effectively  converted  into or
     exchanged  for other  securities,  cash or  property  (in any such case,  a
     "Fundamental  Transaction"),  then,  upon any  subsequent  exercise of this
     Warrant, the Holder shall have the right to receive, for each Warrant Share
     that would have been issuable upon such exercise  immediately  prior to the
     occurrence of such  Fundamental  Transaction,  at the option of the Holder,
     (a) upon exercise of this Warrant,  the number of shares of Common Stock of
     the  successor or  acquiring  corporation  or of the Company,  if it is the
     surviving  corporation,  and any additional  consideration  (the "Alternate
     Consideration")  receivable  upon or as a  result  of such  reorganization,
     reclassification,  merger,  consolidation  or  disposition  of  assets by a
     Holder of the number of shares of Common  Stock for which  this  Warrant is
     exercisable  immediately  prior  to such  event  or (b) if the  Company  is
     acquired  in an all  cash  transaction,  cash  equal  to the  value of this
     Warrant as determined in accordance with the  Black-Scholes  option pricing
     formula.  For  purposes  of any such  exercise,  the  determination  of the

                                       7
<PAGE>

     Exercise Price shall be  appropriately  adjusted to apply to such Alternate
     Consideration  based on the amount of Alternate  Consideration  issuable in
     respect of one share of Common Stock in such Fundamental  Transaction,  and
     the  Company  shall  apportion  the  Exercise  Price  among  the  Alternate
     Consideration in a reasonable  manner  reflecting the relative value of any
     different components of the Alternate  Consideration.  If holders of Common
     Stock are given any choice as to the  securities,  cash or  property  to be
     received in a Fundamental  Transaction,  then the Holder shall be given the
     same choice as to the Alternate Consideration it receives upon any exercise
     of this  Warrant  following  such  Fundamental  Transaction.  To the extent
     necessary to  effectuate  the  foregoing  provisions,  any successor to the
     Company or surviving entity in such Fundamental  Transaction shall issue to
     the Holder a new  warrant  consistent  with the  foregoing  provisions  and
     evidencing  the Holder's  right to exercise  such  warrant  into  Alternate
     Consideration.  The terms of any agreement  pursuant to which a Fundamental
     Transaction is effected shall include terms requiring any such successor or
     surviving  entity to comply with the  provisions  of this  Section 3(d) and
     insuring  that this  Warrant  (or any such  replacement  security)  will be
     similarly  adjusted  upon  any  subsequent   transaction   analogous  to  a
     Fundamental Transaction.

          e) Calculations.  All calculations  under this Section 3 shall be made
     to the nearest cent or the nearest  1/100th of a share, as the case may be.
     For purposes of this Section 3, the number of shares of Common Stock deemed
     to be issued  and  outstanding  as of a given  date shall be the sum of the
     number of shares of Common Stock (excluding treasury shares, if any) issued
     and outstanding.

          f) Voluntary Adjustment By Company. The Company may at any time during
     the term of this  Warrant  reduce the then  current  Exercise  Price to any
     amount  and for any  period  of time  deemed  appropriate  by the  Board of
     Directors of the Company.

          g) Notice to Holders.

               i. Adjustment to Exercise  Price.  Whenever the Exercise Price is
          adjusted  pursuant to this Section 3, the Company shall  promptly mail
          to each Holder a notice  setting  forth the Exercise  Price after such
          adjustment and setting forth a brief  statement of the facts requiring
          such  adjustment.  If the  Company  issues a variable  rate  security,
          despite the prohibition thereon in the Purchase Agreement, the Company
          shall  be  deemed  to  have  issued   Common  Stock  or  Common  Stock
          Equivalents  at the lowest  possible  conversion or exercise  price at
          which such  securities  may be converted or exercised in the case of a
          Variable Rate Transaction (as defined in the Purchase Agreement).

               ii. Notice to Allow Exercise by Holder.  If (A) the Company shall
          declare a dividend (or any other  distribution)  on the Common  Stock;
          (B) the Company shall declare a special  nonrecurring cash dividend on
          or a redemption of the Common Stock;  (C) the Company shall  authorize
          the  granting to all holders of the Common Stock rights or warrants to

                                       8
<PAGE>

          subscribe  for or purchase any shares of capital stock of any class or
          of any rights;  (D) the  approval of any  stockholders  of the Company
          shall be  required  in  connection  with any  reclassification  of the
          Common Stock,  any  consolidation  or merger to which the Company is a
          party, any sale or transfer of all or substantially  all of the assets
          of the Company,  of any compulsory  share exchange  whereby the Common
          Stock is converted into other  securities,  cash or property;  (E) the
          Company  shall  authorize the  voluntary or  involuntary  dissolution,
          liquidation or winding up of the affairs of the Company; then, in each
          case,  the Company  shall cause to be mailed to the Holder at its last
          address as it shall  appear upon the Warrant  Register of the Company,
          at least 20 calendar days prior to the applicable  record or effective
          date hereinafter  specified,  a notice stating (x) the date on which a
          record is to be taken for the purpose of such dividend,  distribution,
          redemption, rights or warrants, or if a record is not to be taken, the
          date as of which  the  holders  of the  Common  Stock of  record to be
          entitled  to  such  dividend,  distributions,  redemption,  rights  or
          warrants  are  to  be  determined  or  (y)  the  date  on  which  such
          reclassification,  consolidation,  merger,  sale,  transfer  or  share
          exchange is expected to become  effective or close, and the date as of
          which it is expected  that holders of the Common Stock of record shall
          be  entitled  to  exchange  their  shares  of  the  Common  Stock  for
          securities,   cash   or   other   property   deliverable   upon   such
          reclassification,  consolidation,  merger,  sale,  transfer  or  share
          exchange; provided, that the failure to mail such notice or any defect
          therein or in the mailing thereof shall not affect the validity of the
          corporate  action required to be specified in such notice.  The Holder
          is  entitled  to  exercise  this  Warrant  during  the  20-day  period
          commencing  on the date of such  notice to the  effective  date of the
          event triggering such notice.

     Section 4. Transfer of Warrant.

          a)   Transferability.   Subject  to  compliance  with  any  applicable
     securities  laws and the  conditions  set forth in  Sections  5(a) and 4(d)
     hereof and to the provisions of Section 4.1 of the Purchase Agreement, this
     Warrant and all rights hereunder are transferable, in whole or in part (but
     if in part, in denominations of not less than the greater of 100,000 shares
     (subject to reverse and forward  stock  splits and the like) and the number
     of unexercised Warrant Shares hereunder,  upon surrender of this Warrant at
     the principal office of the Company,  together with a written assignment of
     this Warrant substantially in the form attached hereto duly executed by the
     Holder or its agent or attorney  and funds  sufficient  to pay any transfer
     taxes payable upon the making of such transfer. Upon such surrender and, if
     required, such payment, the Company shall execute and deliver a new Warrant
     or  Warrants  in  the  name  of  the  assignee  or  assignees  and  in  the
     denomination or  denominations  specified in such instrument of assignment,
     and shall  issue to the  assignor a new Warrant  evidencing  the portion of
     this Warrant not so assigned, and this Warrant shall promptly be cancelled.
     A Warrant,  if properly assigned,  may be exercised by a new holder for the
     purchase of Warrant Shares without having a new Warrant issued.

                                       9
<PAGE>

          b) New  Warrants.  This Warrant may be divided or combined  with other
     Warrants upon  presentation  hereof at the aforesaid office of the Company,
     together with a written notice  specifying the names and  denominations  in
     which new Warrants  are to be issued,  signed by the Holder or its agent or
     attorney. Subject to compliance with Section 4(a), as to any transfer which
     may be involved in such division or combination,  the Company shall execute
     and  deliver a new  Warrant or  Warrants  in  exchange  for the  Warrant or
     Warrants to be divided or combined in accordance with such notice.

          c) Warrant  Register.  The Company shall  register this Warrant,  upon
     records to be  maintained  by the Company for that  purpose  (the  "Warrant
     Register"),  in the name of the record Holder hereof from time to time. The
     Company  may deem and treat the  registered  Holder of this  Warrant as the
     absolute  owner  hereof  for the  purpose  of any  exercise  hereof  or any
     distribution  to the  Holder,  and for all other  purposes,  absent  actual
     notice to the contrary.

          d) Transfer  Restrictions.  If, at the time of the  surrender  of this
     Warrant in connection  with any transfer of this  Warrant,  the transfer of
     this Warrant shall not be registered pursuant to an effective  registration
     statement under the Securities Act and under applicable state securities or
     blue sky laws,  the Company may require,  as a condition  of allowing  such
     transfer (i) that the Holder or transferee of this Warrant, as the case may
     be,  furnish to the  Company a written  opinion of counsel  (which  opinion
     shall be in form,  substance and scope customary for opinions of counsel in
     comparable  transactions)  to the  effect  that such  transfer  may be made
     without  registration  under the Securities Act and under  applicable state
     securities or blue sky laws, (ii) that the holder or transferee execute and
     deliver  to  the  Company  an  investment  letter  in  form  and  substance
     acceptable to the Company and (iii) that the  transferee be an  "accredited
     investor" as defined in Rule 501(a)(1),  (a)(2),  (a)(3), (a)(7), or (a)(8)
     promulgated under the Securities Act or a qualified  institutional buyer as
     defined in Rule 144A(a) under the Securities Act.

     Section 5. Miscellaneous.

          a) Title to  Warrant.  Prior to the  Termination  Date and  subject to
     compliance with applicable laws and Section 4 of this Warrant, this Warrant
     and all rights  hereunder  are  transferable,  in whole or in part,  at the
     office  or  agency  of the  Company  by the  Holder  in  person  or by duly
     authorized  attorney,  upon  surrender  of this Warrant  together  with the
     Assignment Form annexed hereto properly endorsed. The transferee shall sign
     an investment letter in form and substance  reasonably  satisfactory to the
     Company.

          b) No Rights as  Shareholder  Until  Exercise.  This  Warrant does not
     entitle the Holder to any voting rights or other rights as a shareholder of
     the  Company  prior to the  exercise  hereof.  Upon the  surrender  of this
     Warrant and the payment of the aggregate  Exercise  Price (or by means of a
     cashless exercise),  the Warrant Shares so purchased shall be and be deemed
     to be issued to such  Holder as the record  owner of such  shares as of the
     close of business on the later of the date of such surrender or payment.

          c) Loss,  Theft,  Destruction  or Mutilation  of Warrant.  The Company
     covenants  that  upon  receipt  by  the  Company  of  evidence   reasonably
     satisfactory  to it of the loss,  theft,  destruction or mutilation of this

                                       10
<PAGE>

     Warrant or any stock  certificate  relating to the Warrant  Shares,  and in
     case of loss,  theft or  destruction,  of indemnity or security  reasonably
     satisfactory  to it (which,  in the case of the Warrant,  shall not include
     the posting of any bond but may include the execution of an indemnification
     agreement),  and upon surrender and  cancellation  of such Warrant or stock
     certificate,  if mutilated, the Company will make and deliver a new Warrant
     or stock  certificate of like tenor and dated as of such  cancellation,  in
     lieu of such Warrant or stock certificate.

          d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for
     the taking of any action or the expiration of any right required or granted
     herein shall be a Saturday, Sunday or a legal holiday, then such action may
     be taken or such right may be  exercised on the next  succeeding  day not a
     Saturday, Sunday or legal holiday.

          e) Authorized Shares.

               The  Company  covenants  that  during the  period the  Warrant is
          outstanding,  it will reserve from its authorized and unissued  Common
          Stock a sufficient number of shares to provide for the issuance of the
          Warrant  Shares upon the  exercise of any  purchase  rights under this
          Warrant.  The  Company  further  covenants  that its  issuance of this
          Warrant  shall  constitute  full  authority  to its  officers  who are
          charged with the duty of executing  stock  certificates to execute and
          issue the  necessary  certificates  for the  Warrant  Shares  upon the
          exercise of the purchase  rights under this Warrant.  The Company will
          take all such  reasonable  action as may be  necessary  to assure that
          such Warrant Shares may be issued as provided herein without violation
          of any  applicable law or regulation,  or of any  requirements  of the
          Trading Market upon which the Common Stock may be listed.

               Except and to the extent as waived or consented to by the Holder,
          the Company shall not by any action,  including,  without  limitation,
          amending   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 of this Warrant,  but will at all times in good faith assist
          in the  carrying  out of all such  terms and in the taking of all such
          actions as may be  necessary or  appropriate  to protect the rights of
          Holder  as set  forth  in this  Warrant  against  impairment.  Without
          limiting the  generality  of the  foregoing,  the Company will (a) not
          increase the par value of any Warrant  Shares above the amount payable
          therefor upon such exercise  immediately prior to such increase in par
          value,  (b) take all such action as may be necessary or appropriate in
          order that the Company  may  validly and legally  issue fully paid and
          nonassessable  Warrant  Shares upon the exercise of this Warrant,  and
          (c)  use   commercially   reasonable   efforts   to  obtain  all  such
          authorizations, exemptions or consents from any public regulatory body
          having jurisdiction  thereof as may be necessary to enable the Company
          to perform its obligations under this Warrant.

                                       11
<PAGE>

               Before  taking any action which would result in an  adjustment in
          the number of Warrant  Shares for which this Warrant is exercisable or
          in  the   Exercise   Price,   the  Company   shall   obtain  all  such
          authorizations or exemptions  thereof,  or consents thereto, as may be
          necessary   from  any  public   regulatory   body  or  bodies   having
          jurisdiction thereof.

          f) Jurisdiction. All questions concerning the construction,  validity,
     enforcement  and  interpretation  of this Warrant  shall be  determined  in
     accordance with the provisions of the Purchase Agreement.

          g)  Restrictions.  The Holder  acknowledges  that the  Warrant  Shares
     acquired upon the exercise of this Warrant,  if not  registered,  will have
     restrictions upon resale imposed by state and federal securities laws.

          h)  Nonwaiver  and  Expenses.  No  course of  dealing  or any delay or
     failure to exercise any right hereunder on the part of Holder shall operate
     as a waiver of such right or otherwise prejudice Holder's rights, powers or
     remedies,  notwithstanding  the fact that all rights hereunder terminate on
     the  Termination  Date. If the Company  willfully  and  knowingly  fails to
     comply with any  provision of this  Warrant,  which results in any material
     damages to the  Holder,  the Company  shall pay to Holder  such  amounts as
     shall be  sufficient  to cover any costs and  expenses  including,  but not
     limited  to,  reasonable  attorneys'  fees,  including  those of  appellate
     proceedings,  incurred by Holder in  collecting  any  amounts due  pursuant
     hereto or in  otherwise  enforcing  any of its  rights,  powers or remedies
     hereunder.

          i)  Notices.  Any  notice,  request  or  other  document  required  or
     permitted to be given or  delivered  to the Holder by the Company  shall be
     delivered  in  accordance  with  the  notice  provisions  of  the  Purchase
     Agreement.

          j) Limitation of Liability. No provision hereof, in the absence of any
     affirmative  action by Holder to exercise this Warrant or purchase  Warrant
     Shares,  and no  enumeration  herein of the rights or privileges of Holder,
     shall give rise to any  liability of Holder for the  purchase  price of any
     Common Stock or as a stockholder of the Company,  whether such liability is
     asserted by the Company or by creditors of the Company.

          k)  Remedies.  Holder,  in addition to being  entitled to exercise all
     rights granted by law, including  recovery of damages,  will be entitled to
     specific  performance of its rights under this Warrant.  The Company agrees
     that  monetary  damages  would not be  adequate  compensation  for any loss
     incurred by reason of a breach by it of the  provisions of this Warrant and
     hereby  agrees to waive the defense in any action for specific  performance
     that a remedy at law would be adequate.

          l) Successors and Assigns. Subject to applicable securities laws, this
     Warrant and the rights and obligations  evidenced hereby shall inure to the
     benefit  of and be  binding  upon the  successors  of the  Company  and the
     successors and permitted assigns of Holder.  The provisions of this Warrant
     are intended to be for the benefit of all Holders from time to time of this
     Warrant  and shall be  enforceable  by any such Holder or holder of Warrant
     Shares.

                                       12
<PAGE>

          m)  Amendment.  This  Warrant  may  be  modified  or  amended  or  the
     provisions  hereof  waived with the written  consent of the Company and the
     Holder.

          n)  Severability.  Wherever  possible,  each provision of this Warrant
     shall be  interpreted  in such  manner as to be  effective  and valid under
     applicable law, but if any provision of this Warrant shall be prohibited by
     or invalid under applicable law, such provision shall be ineffective to the
     extent  of  such  prohibition  or  invalidity,   without  invalidating  the
     remainder of such provisions or the remaining provisions of this Warrant.

          o) Headings. The headings used in this Warrant are for the convenience
     of reference only and shall not, for any purpose,  be deemed a part of this
     Warrant.

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

                                       13
<PAGE>

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

Dated:  August __, 2005

                                           INTRAOP MEDICAL CORPORATION

                                           By:__________________________________
                                              Name:
                                              Title:

                                       14
<PAGE>

                               NOTICE OF EXERCISE

TO:    INTRAOP MEDICAL CORPORATION

     (1) The undersigned  hereby elects to purchase  ________  Warrant Shares of
the Company  pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.

     (2) Payment shall take the form of (check applicable box):

          [ ]  in lawful money of the United States; or

          [ ]  the  cancellation  of  such  number  of  Warrant  Shares  as is
               necessary, in accordance with the formula set forth in subsection
               2(c), to exercise this Warrant with respect to the maximum number
               of Warrant Shares  purchasable  pursuant to the cashless exercise
               procedure set forth in subsection 2(c).

     (3) Please issue a certificate or  certificates  representing  said Warrant
Shares in the name of the  undersigned  or in such  other  name as is  specified
below:

               __________________________________

The Warrant Shares shall be delivered to the following:

               __________________________________

               __________________________________

               __________________________________

     (4) Accredited  Investor.  The  undersigned is an "accredited  investor" as
defined  in  Regulation  D  promulgated  under the  Securities  Act of 1933,  as
amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

     FOR VALUE RECEIVED,  the foregoing Warrant and all rights evidenced thereby
are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

                                          Dated:  ______________, _______

                       Holder's Signature: _______________________________

                       Holder's Address:   _______________________________

                                           _______________________________

Signature Guaranteed:  ___________________________________________

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]