Document:

Exhibit 10.6

                               SECURITY AGREEMENT

            SECURITY AGREEMENT, dated as of August 31, 2005 (this "Agreement"),
among Intraop Medical Corporation,  a Nevada corporation (the "Company") and all
of the Subsidiaries of the Company (such  subsidiaries,  the "Guarantors")  (the
Company and  Guarantors are  collectively  referred to as the "Debtors") and the
holder or holders of the Company's 10% Secured Convertible Debenture, due August
___, 2008, in the original  aggregate  principal amount of up to $2,000,000 (the
"Debenture") and Warrants,  signatory hereto,  their endorsees,  transferees and
assigns (collectively referred to as, the "Secured Parties").

                              W I T N E S S E T H:

            WHEREAS,  pursuant to the Purchase Agreement and the Debenture,  the
Secured  Parties  have  severally  agreed  to extend  the  loans to the  Company
evidenced by the Debenture;

            WHEREAS,  pursuant to a certain Subsidiary Guarantee dated as of the
date hereof (the  "Guaranty"),  the Guarantors have jointly and severally agreed
to guaranty and act as surety for payment of such loans; and

            WHEREAS,  in order to induce the Secured Parties to extend the loans
evidenced  by the  Debentures,  each Debtor has agreed to execute and deliver to
the Secured Parties this Agreement and to grant the Secured Parties,  pari passu
with each other Secured Party, a perfected security interest in certain property
of such Debtor to secure the prompt  payment,  performance and discharge in full
of all of the Company's  obligations  under the Debenture and the other Debtor's
obligations under the Guaranty.

            NOW, THEREFORE,  in consideration of the agreements herein contained
and for other good and valuable  consideration,  the receipt and  sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:

            1. Certain  Definitions.  As used in this  Agreement,  the following
terms shall have the  meanings  set forth in this  Section 1. Terms used but not
otherwise  defined in this  Agreement  that are  defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document",    "equipment",    "fixtures",   "general   intangibles",   "goods",
"instruments",  "inventory",  "investment property",  "letter-of-credit rights",
"proceeds" and  "supporting  obligations")  shall have the  respective  meanings
given such terms in Article 9 of the UCC.

                  (a)  "Collateral"  means the  collateral  in which the Secured
         Parties are granted a security  interest  by this  Agreement  and which
         shall include the following  personal property of the Debtors,  whether
         presently  owned or  existing  or  hereafter  acquired  or coming  into
         existence,  wherever situated, and all additions and accessions thereto
         and all  substitutions  and  replacements  thereof,  and all  proceeds,
         products and  accounts  thereof,  including,  without  limitation,  all
         proceeds from the sale or transfer of the  Collateral  and of insurance
         covering the same and of any tort claims in connection  therewith,  and
         all dividends,  interest, cash, notes,  securities,  equity interest or
         other property at any time and from time to time  acquired,  receivable
         or otherwise  distributed in respect of, or in exchange for, any or all
         of the Pledged Securities (as defined below):

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                           (i) All goods, including, without limitation, (A) all
                  machinery,   equipment,  computers,  motor  vehicles,  trucks,
                  tanks,  boats,  ships,  appliances,   furniture,  special  and
                  general tools, fixtures,  test and quality control devices and
                  other   equipment  of  every  kind  and  nature  and  wherever
                  situated,  together  with all documents of title and documents
                  representing  the same, all additions and accessions  thereto,
                  replacements therefor, all parts therefor, and all substitutes
                  for any of the  foregoing  and all other items used and useful
                  in   connection   with  any   Debtor's   businesses   and  all
                  improvements thereto; and (B) all inventory;

                           (ii) All Inventory and  Intellectual  Property of the
                  Debtor;

                           (iii)  All   contract   rights   and  other   general
                  intangibles,  including,  without limitation,  all partnership
                  interests,  membership  interests,  stock or other securities,
                  rights under any of the Organizational  Documents,  agreements
                  related to the Pledged Securities,  licenses, distribution and
                  other agreements,  computer software (whether "off-the-shelf",
                  licensed  from any third party or  developed  by any  Debtor),
                  computer  software  development  rights,  leases,  franchises,
                  customer lists, quality control procedures, grants and rights,
                  goodwill,  trademarks,  service  marks,  trade  styles,  trade
                  names, patents,  patent applications,  copyrights,  and income
                  tax refunds (collectively, the "General Intangibles");

                           (iii)  All  accounts  of  the  Debtor  including  all
                  insurance  proceeds,  and rights to refunds or indemnification
                  whatsoever owing, together with all instruments, all documents
                  of title representing any of the foregoing,  all rights in any
                  merchandising,  goods,  equipment,  motor  vehicles and trucks
                  which any of the same may  represent,  and all  right,  title,
                  security  and   guaranties   with  respect  to  each  account,
                  including any right of stoppage in transit;

                           (iv)   All   documents,    letter-of-credit   rights,
                  instruments and chattel paper;

                           (v) All commercial tort claims;

                           (vi) All deposit  accounts  and all cash  (whether or
                  not deposited in such deposit accounts);

                           (vii) All investment property;

                           (viii) All supporting obligations;

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                           (ix) All files, records,  books of account,  business
                  papers, and computer programs; and

                           (x) the products and proceeds of all of the foregoing
                  Collateral set forth in clauses (i)-(ix) above.

                           Without limiting the generality of the foregoing, the
                  "Collateral"  shall  include (i) all  investment  property and
                  general intangibles  respecting  ownership and/or other equity
                  interests in each Guarantor,  including,  without  limitation,
                  the shares of  capital  stock and the other  equity  interests
                  listed on Schedule H hereto (as the same may be modified  from
                  time to time  pursuant  to the  terms  hereof),  and any other
                  shares of capital  stock and/or other equity  interests of any
                  other direct or indirect  subsidiary of any Debtor obtained in
                  the future,  and, in each case, all certificates  representing
                  such shares and/or  equity  interests  and, in each case,  all
                  rights,  options,  warrants,  stock,  other securities  and/or
                  equity interests that may hereafter be received, receivable or
                  distributed  in  respect  of,  or  exchanged  for,  any of the
                  foregoing  and (ii)  1,600,000  shares of Common  Stock of the
                  Company (the "Pledged Company  Shares")  (800,000 to be issued
                  to each Secured Party  hereunder) and held by Secured  Parties
                  as security for the  Obligations  (all of the foregoing  being
                  referred to herein as the "Pledged Securities") and all rights
                  arising  under or in connection  with the Pledged  Securities,
                  including,  but not limited to, all  dividends,  interest  and
                  cash.

                           Notwithstanding  the foregoing,  nothing herein shall
                  be deemed to constitute  an assignment of any asset which,  in
                  the  event of an  assignment,  becomes  void by  operation  of
                  applicable  law  or  the  assignment  of  which  is  otherwise
                  prohibited by applicable  law (in each case to the extent that
                  such applicable law is not overridden by Sections 9-406, 9-407
                  and/or  9-408 of the UCC or  other  similar  applicable  law);
                  provided,  however, that to the extent permitted by applicable
                  law, this Agreement shall create a valid security  interest in
                  such asset and, to the extent  permitted  by  applicable  law,
                  this Agreement  shall create a valid security  interest in the
                  proceeds of such asset.

                  (b) "Intellectual  Property" means the collective reference to
         all  rights,   priorities  and  privileges   relating  to  intellectual
         property, whether arising under United States, multinational or foreign
         laws or otherwise,  including,  without limitation,  (i) all copyrights
         arising under the laws of the United  States,  any other country or any
         political  subdivision thereof,  whether registered or unregistered and
         whether  published or  unpublished,  all  registrations  and recordings
         thereof,  and all  applications  in  connection  therewith,  including,
         without limitation,  all registrations,  recordings and applications in
         the United  States  Copyright  Office,  (ii) all letters  patent of the
         United States, any other country or any political  subdivision thereof,
         all reissues and extensions  thereof,  and all applications for letters
         patent of the United  States or any other  country  and all  divisions,
         continuations and continuations-in-part  thereof, (iii) all trademarks,
         trade names, corporate names, company names, business names, fictitious
         business names,  trade dress,  service marks,  logos,  domain names and
         other  source or  business  identifiers,  and all

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         goodwill  associated  therewith,  now existing or hereafter  adopted or
         acquired,   all   registrations   and  recordings   thereof,   and  all
         applications  in  connection  therewith,  whether in the United  States
         Patent and Trademark  Office or in any similar  office or agency of the
         United States,  any State thereof or any other country or any political
         subdivision  thereof,  or otherwise,  and all common law rights related
         thereto,  (iv) all trade  secrets  arising under the laws of the United
         States, any other country or any political subdivision thereof, (v) all
         rights to obtain any reissues, renewals or extensions of the foregoing,
         (vi) all  licenses  for any of the  foregoing,  and (vii) all causes of
         action for infringement of the foregoing.

                  (c)  "Majority  in  Interest"  shall  mean,  at  any  time  of
         determination,  the  majority  in interest  (based on  then-outstanding
         principal  amounts of Debentures at the time of such  determination) of
         the Secured Parties.

                  (d)  "Necessary  Endorsement"  shall mean undated stock powers
         endorsed  in blank or  other  proper  instruments  of  assignment  duly
         executed and such other  instruments or documents as the Agent (as that
         term is defined below) may reasonably request.

                  (e) "Obligations" means all of the Debtors'  obligations under
         this Agreement,  the Purchase Agreement,  the Debentures,  the Guaranty
         and any  other  instruments,  agreements  or other  documents  executed
         and/or  delivered in connection  herewith or  therewith,  in each case,
         whether now or hereafter existing, voluntary or involuntary,  direct or
         indirect, absolute or contingent,  liquidated or unliquidated,  whether
         or not jointly owed with  others,  and whether or not from time to time
         decreased or extinguished and later increased, created or incurred, and
         all or any portion of such obligations or liabilities that are paid, to
         the  extent all or any part of such  payment  is  avoided or  recovered
         directly or indirectly from any of the Secured Parties as a preference,
         fraudulent  transfer or otherwise as such  obligations  may be amended,
         supplemented,  converted,  extended  or  modified  from  time to  time.
         Without   limiting  the   generality   of  the   foregoing,   the  term
         "Obligations" shall include, without limitation:  (i) principal of, and
         interest on the  Debentures and the loans  extended  pursuant  thereto;
         (ii)  any and all  other  fees,  indemnities,  costs,  obligations  and
         liabilities  of the  Debtors  from time to time under or in  connection
         with  this  Agreement,  the  Debentures,  the  Guaranty  and any  other
         instruments, agreements or other documents executed and/or delivered in
         connection herewith or therewith;  and (iii) all amounts (including but
         not limited to post-petition interest) in respect of the foregoing that
         would be  payable  but for the fact  that the  obligations  to pay such
         amounts are  unenforceable  or not  allowable due to the existence of a
         bankruptcy, reorganization or similar proceeding involving any Debtor.

                  (f)  "Organizational  Documents"  means  with  respect  to any
         Debtor,  the  documents by which such Debtor was  organized  (such as a
         certificate of  incorporation,  certificate  of limited  partnership or
         articles  of  organization,  and  including,  without  limitation,  any
         certificates  of  designation  for  preferred  stock or other  forms of
         preferred  equity) and which relate to the internal  governance of such
         Debtor  (such as  bylaws,  a  partnership  agreement  or an  operating,
         limited liability or members agreement).

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<PAGE>

                  (g) "UCC"  means the Uniform  Commercial  Code of the State of
         Nevada and or any other applicable law of any state or states which has
         jurisdiction  with respect to all, or any portion of, the Collateral or
         this Agreement, from time to time. It is the intent of the parties that
         defined terms in the UCC should be construed in their broadest sense so
         that the term  "Collateral"  will be construed  in its broadest  sense.
         Accordingly  if there are, from time to time,  changes to defined terms
         in the UCC that broaden the definitions,  they are incorporated  herein
         and if existing  definitions  in the UCC are  broader  than the amended
         definitions, the existing ones shall be controlling.

         2. Grant of  Perfected  Security  Interest.  As an  inducement  for the
Secured Parties to extend the loans as evidenced by the Debentures and to secure
the complete and timely payment,  performance and discharge in full, as the case
may be,  of all of the  Obligations,  each  Debtor  hereby  unconditionally  and
irrevocably pledges, grants and hypothecates to the Secured Parties a continuing
and  perfected  security  interest in and to, a lien upon and a right of set-off
against all of their respective right, title and interest of whatsoever kind and
nature in and to, the Collateral (the "Security Interest").

         3. Delivery of Certain  Collateral.  Contemporaneously  or prior to the
execution of this Agreement,  each Debtor shall deliver or cause to be delivered
to the Agent (a) any and all certificates and other instruments  representing or
evidencing the Pledged  Securities,  and (b) any and all  certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all  Necessary  Endorsements.  The Debtors are,  contemporaneously
with the execution hereof,  delivering to Agent, or have previously delivered to
Agent, a true and correct copy of each Organizational  Document governing any of
the Pledged Securities.

         4.  Representations,   Warranties,  Covenants  and  Agreements  of  the
Debtors.  Each Debtor represents and warrants to, and covenants and agrees with,
the Secured Parties as follows:

                  (a) Each  Debtor  has the  requisite  corporate,  partnership,
         limited  liability  company or other power and  authority to enter into
         this  Agreement and otherwise to carry out its  obligations  hereunder.
         The  execution,  delivery  and  performance  by  each  Debtor  of  this
         Agreement  and  the  filings   contemplated   therein  have  been  duly
         authorized  by all  necessary  action on the part of such Debtor and no
         further action is required by such Debtor. This Agreement has been duly
         executed by each Debtor.  This Agreement  constitutes the legal,  valid
         and binding obligation of each Debtor,  enforceable against each Debtor
         in  accordance  with its  terms  except as such  enforceability  may be
         limited  by  applicable  bankruptcy,  insolvency,   reorganization  and
         similar laws of general application relating to or affecting the rights
         and remedies of creditors and by general principles of equity.

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                   (b) The Debtors  have no place of  business or offices  where
         their  respective  books of account  and  records  are kept (other than
         temporarily at the offices of its attorneys or  accountants)  or places
         where Collateral is stored or located,  except as set forth on Schedule
         A attached hereto. Except as specifically set forth on Schedule A, each
         Debtor is the record owner of the real property  where such  Collateral
         is  located,  and there exist no  mortgages  or other liens on any such
         real  property.  Except  as  disclosed  on  Schedule  A,  none  of such
         Collateral is in the possession of any consignee, bailee, warehouseman,
         agent or processor.

                  (c)  Except  set forth on  Schedule  B  attached  hereto,  the
         Debtors are the sole owner of the Collateral  (except for non-exclusive
         licenses  granted by any Debtor in the  ordinary  course of  business),
         free and clear of any liens, security interests,  encumbrances,  rights
         or claims,  and are fully  authorized  to grant the Security  Interest.
         There  is not on  file in any  governmental  or  regulatory  authority,
         agency or recording office an effective financing  statement,  security
         agreement,  license or transfer  or any notice of any of the  foregoing
         (other  than those that will be filed in favor of the  Secured  Parties
         pursuant  to  this   Agreement)   covering  or  affecting  any  of  the
         Collateral.  So long as this Agreement shall be in effect,  the Debtors
         shall not execute and shall not  knowingly  permit to be on file in any
         such office or agency any such financing statement or other document or
         instrument  (except to the  extent  filed or  recorded  in favor of the
         Secured Parties pursuant to the terms of this Agreement).

                  (d) No written claim has been received that any  Collateral or
         Debtor's use of any Collateral  violates the rights of any third party.
         There has been no adverse  decision to any Debtor's  claim of ownership
         rights in or exclusive rights to use the Collateral in any jurisdiction
         or to any Debtor's  right to keep and maintain such  Collateral in full
         force and  effect,  and there is no  proceeding  involving  said rights
         pending or, to the best knowledge of any Debtor,  threatened before any
         court, judicial body,  administrative or regulatory agency,  arbitrator
         or other governmental authority.

                  (e) Each  Debtor  shall at all  times  maintain  its  books of
         account and records  relating to the Collateral at its principal  place
         of business and its Collateral at the locations set forth on Schedule A
         attached  hereto and may not relocate such books of account and records
         or tangible  Collateral  unless it  delivers to the Secured  Parties at
         least 30 days  prior to such  relocation  (i)  written  notice  of such
         relocation  and the new  location  thereof  (which  must be within  the
         United States) and (ii) evidence that appropriate  financing statements
         under  the UCC and  other  necessary  documents  have  been  filed  and
         recorded  and other  steps  have been  taken to  perfect  the  Security
         Interest to create in favor of the Secured  Parties a valid,  perfected
         and continuing perfected lien in the Collateral.

                  (f) This Agreement  creates in favor of the Secured  Parties a
         valid,  security  interest in the Collateral,  securing the payment and
         performance of the  Obligations.  Upon making the filings  described in
         the immediately  following  paragraph,  all security  interests created
         hereunder in any  Collateral  which may be perfected by filing  Uniform
         Commercial  Code financing  statements  shall have been duly perfected.

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         Except  for  the  filing  of  the  Uniform  Commercial  Code  financing
         statements  referred to in the  immediately  following  paragraph,  the
         recordation of the Intellectual Property Security Agreement (as defined
         below) with respect to  copyrights  and copyright  applications  in the
         United  States  Copyright  Office  referred to in  paragraph  (m),  the
         execution and delivery of deposit account control agreements satisfying
         the requirements of Section 9-104(a)(2) of the UCC with respect to each
         deposit  account of the Debtors,  and the delivery of the  certificates
         and other instruments  provided in Section 3, no action is necessary to
         create,  perfect or protect the security  interests created  hereunder.
         Without limiting the generality of the foregoing, except for the filing
         of said financing  statements,  the  recordation  of said  Intellectual
         Property  Security  Agreement,  and the  execution and delivery of said
         deposit account control agreements, no consent of any third parties and
         no  authorization,  approval  or other  action  by, and no notice to or
         filing with, any governmental  authority or regulatory body is required
         for (i) the execution, delivery and performance of this Agreement, (ii)
         the creation or perfection of the Security  Interests created hereunder
         in the Collateral or (iii) the enforcement of the rights of the Secured
         Parties hereunder.

                   (g) Each Debtor hereby authorizes the Secured Parties, or any
         of them, to file one or more financing  statements  under the UCC, with
         respect to the Security  Interest  with the proper filing and recording
         agencies in any jurisdiction deemed proper by them.

                   (h) The execution, delivery and performance of this Agreement
         by the  Debtors  does  not (i)  violate  any of the  provisions  of any
         Organizational  Documents of any Debtor or any judgment,  decree, order
         or  award  of  any  court,  governmental  body  or  arbitrator  or  any
         applicable  law,  rule or  regulation  applicable to any Debtor or (ii)
         conflict with, or constitute a default (or an event that with notice or
         lapse of time or both would become a default)  under, or give to others
         any rights of  termination,  amendment,  acceleration  or  cancellation
         (with or  without  notice,  lapse of time or both) of,  any  agreement,
         credit facility, debt or other instrument (evidencing any Debtor's debt
         or otherwise) or other  understanding to which any Debtor is a party or
         by which any property or asset of any Debtor is bound or  affected.  No
         consent (including,  without limitation, from stockholders or creditors
         of any Debtor) is required for any Debtor to enter into and perform its
         obligations hereunder.

                   (i) The capital  stock and other equity  interests  listed on
         Schedule H hereto  represent  all of the capital stock and other equity
         interests of the Guarantors,  and represent all capital stock and other
         equity interests owned, directly or indirectly,  by the Company. All of
         the   Pledged   Securities   are   validly   issued,   fully  paid  and
         nonassessable, and the Company is the legal and beneficial owner of the
         Pledged  Securities,  free and clear of any lien,  security interest or
         other  encumbrance  except for the security  interests  created by this
         Agreement.

                  (j) The ownership and other equity  interests in  partnerships
         and limited  liability  companies (if any)  included in the  Collateral
         (the  "Pledged  Interests")  by their express terms do not provide that
         they are  securities  governed by Article 8 of the UCC and are not held
         in a securities account or by any financial intermediary.

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                  (k)  Unless the Agent (as  defined in Section  18) in its sole
         discretion,  consents in writing to a senior lien, each Debtor shall at
         all times  maintain  the  liens  and  Security  Interest  provided  for
         hereunder as valid and  perfected  liens and security  interests in the
         Collateral in favor of the Secured Parties until this Agreement and the
         Security Interest hereunder shall be terminated  pursuant to Section 11
         hereof; provided, however, the Agent (as defined in Section 18), in its
         sole  discretion,  consents  in writing to a senior  lien.  Each Debtor
         hereby  agrees to defend  the same  against  the  claims of any and all
         persons and  entities.  Each  Debtor  shall  safeguard  and protect all
         Collateral  for the account of the Secured  Parties.  At the request of
         the Secured  Parties,  each Debtor will sign and deliver to the Secured
         Parties  at any  time or  from  time  to  time  one or  more  financing
         statements  pursuant to the UCC in form reasonably  satisfactory to the
         Secured  Parties and will pay the cost of filing the same in all public
         offices  wherever filing is, or is deemed by the Secured Parties to be,
         necessary or desirable  to effect the rights and  obligations  provided
         for herein.  Without  limiting the  generality of the  foregoing,  each
         Debtor  shall  pay all  fees,  taxes and  other  amounts  necessary  to
         maintain the Collateral and the Security Interest  hereunder,  and each
         Debtor  shall  obtain and furnish to the Secured  Parties  from time to
         time, upon demand,  such releases and/or  subordinations  of claims and
         liens which may be required to maintain  the  priority of the  Security
         Interest hereunder.

                  (l) No Debtor will transfer,  pledge,  hypothecate,  encumber,
         license, sell or otherwise dispose of any of the Collateral (except for
         non-exclusive  licenses  granted by a Debtor in its ordinary  course of
         business and sales of  inventory by a Debtor in its ordinary  course of
         business) without the prior written consent of a Majority in Interest.

                  (m)  Each  Debtor  shall  keep  and  preserve  its  equipment,
         inventory and other tangible  Collateral in good condition,  repair and
         order and shall not operate or locate any such  Collateral (or cause to
         be operated or located) in any area excluded from insurance coverage.

                  (n) Each Debtor  shall  maintain  with  financially  sound and
         reputable  insurers,  insurance with respect to the Collateral  against
         loss or  damage of the kinds  and in the  amounts  customarily  insured
         against by entities of established reputation having similar properties
         similarly situated and in such amounts as are customarily carried under
         similar  circumstances  by other  such  entities  and  otherwise  as is
         prudent for  entities  engaged in similar  businesses  but in any event
         sufficient  to cover the full  replacement  cost  thereof.  Each Debtor
         shall cause each  insurance  policy  issued in  connection  herewith to
         provide,  and the insurer  issuing  such policy to certify to the Agent
         that (a) the Agent will be named as lender  loss  payee and  additional
         insured  under each such  insurance  policy;  (b) if such  insurance be
         proposed  to  be  cancelled  or  materially   changed  for  any  reason
         whatsoever,  such  insurer  will  promptly  notify  the  Agent and such
         cancellation  or change  shall not be  effective as to the Agent for at
         least  thirty  (30) days  after  receipt  by the Agent of such  notice,
         unless  the  effect of such  change is to extend or  increase  coverage

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         under  the  policy;  and (c) the  Agent  will  have the  right  (but no
         obligation)  at its  election  to remedy any  default in the payment of
         premiums  within  thirty  (30) days of notice  from the insurer of such
         default.  If no Event of Default (as defined in the  Debenture)  exists
         and if the  proceeds  arising  out of any claim or  series  of  related
         claims do not exceed  $100,000,  loss payments in each instance will be
         applied by the  applicable  Debtor to the repair and/or  replacement of
         property  with  respect  to which the loss was  incurred  to the extent
         reasonably  feasible,  and any loss  payments  or the  balance  thereof
         remaining,  to the  extent  not so  applied,  shall be  payable  to the
         applicable  Debtor,  provided,  however,  that payments received by any
         Debtor after an Event of Default  occurs and is continuing or in excess
         of $100,000 for any occurrence or series of related  occurrences  shall
         be paid to the Agent and, if received by such Debtor,  shall be held in
         trust  for and  immediately  paid over to the  Agent  unless  otherwise
         directed  in  writing  by the  Agent.  Copies of such  policies  or the
         related  certificates,  in each case,  naming the Agent as lender  loss
         payee and  additional  insured shall be delivered to the Agent at least
         annually and at the time any new policy of insurance is issued.

                  (o) Each  Debtor  shall,  within  ten (10)  days of  obtaining
         knowledge thereof,  advise the Secured Parties promptly,  in sufficient
         detail,  of  any  substantial  change  in  the  Collateral,  and of the
         occurrence of any event which would have a material  adverse  effect on
         the  value  of the  Collateral  or on  the  Secured  Parties'  security
         interest therein.

                   (p) Each  Debtor  shall  promptly  execute and deliver to the
         Secured Parties such further deeds,  mortgages,  assignments,  security
         agreements,  financing  statements  or  other  instruments,  documents,
         certificates and assurances and take such further action as the Secured
         Parties may from time to time  request  and may in its sole  discretion
         deem necessary to perfect,  protect or enforce its security interest in
         the  Collateral  including,  without  limitation,  if  applicable,  the
         execution and delivery of a separate security agreement with respect to
         each Debtor's  Intellectual Property  ("Intellectual  Property Security
         Agreement")  in which the Secured  Parties have been granted a security
         interest  hereunder,  substantially in a form acceptable to the Secured
         Parties, which Intellectual Property Security Agreement,  other than as
         stated  therein,  shall be subject  to all of the terms and  conditions
         hereof.

                  (q) Upon the reasonable  request of a Secured Party and during
         normal business hours, each Debtor shall permit the Secured Parties and
         their representatives and agents to inspect the Collateral at any time,
         and to make copies of records  pertaining  to the  Collateral as may be
         requested by a Secured Party from time to time.

                  (r) Each Debtor shall take all steps  reasonably  necessary to
         diligently pursue and seek to preserve, enforce and collect any rights,
         claims,  causes of action  and  accounts  receivable  in respect of the
         Collateral.

                  (s) Each Debtor shall promptly  notify the Secured  Parties in
         sufficient  detail upon becoming aware of any attachment,  garnishment,
         execution or other legal process  levied  against any Collateral and of
         any other  information  received  by such  Debtor  that may  materially
         affect the value of the Collateral, the Security Interest or the rights
         and remedies of the Secured Parties hereunder.

                                       9
<PAGE>

                  (t) All information  heretofore,  herein or hereafter supplied
         to the Secured  Parties by or on behalf of any Debtor  with  respect to
         the Collateral is accurate and complete in all material  respects as of
         the date furnished.

                  (u) The Debtors  shall at all times  preserve and keep in full
         force and effect their respective valid existence and good standing and
         any rights and franchises material to its business.

                  (v) No Debtor  will  change  its name,  type of  organization,
         jurisdiction of organization,  organizational identification number (if
         it has one), legal or corporate structure,  or identity, or add any new
         fictitious  name  unless it  provides  at least 30 days  prior  written
         notice to the  Secured  Parties of such change and, at the time of such
         written notification,  such Debtor provides any financing statements or
         fixture  filings  necessary  to  perfect  and  continue  perfected  the
         perfected security Interest granted and evidenced by this Agreement.

                  (w) No Debtor may consign any of its  Inventory or sell any of
         its Inventory on bill and hold,  sale or return,  sale on approval,  or
         other  conditional  terms of sale  without the consent of a Majority in
         Interest which shall not be unreasonably withheld, except to the extent
         such  consignment or sale does not exceed 15% of the total value of all
         of the Company's finished goods in Inventory.

                  (x) No Debtor may relocate its chief executive office to a new
         location without providing 30 days prior written  notification  thereof
         to the  Secured  Parties  and so long as,  at the time of such  written
         notification,  such Debtor provides any financing statements or fixture
         filings  necessary  to perfect and  continue  perfected  the  perfected
         security Interest granted and evidenced by this Agreement.

                   (y) Each Debtor was  organized and remains  organized  solely
         under the laws of the state set forth next to such Debtor's name in the
         first  paragraph  of this  Agreement.  Schedule D attached  hereto sets
         forth each  Debtor's  organizational  identification  number or, if any
         Debtor does not have one, states that one does not exist.

                  (z) (i) The actual  name of each  Debtor is the name set forth
         in the preamble above; (ii) no Debtor has any trade names except as set
         forth on Schedule E attached hereto;  (iii) no Debtor has used any name
         other  than  that  stated  in the  preamble  hereto  or as set forth on
         Schedule E for the preceding five years;  and (iv) no entity has merged
         into any Debtor or been  acquired  by any  Debtor  within the past five
         years except as set forth on Schedule E.

                                       10
<PAGE>

                  (aa) At any  time and from  time to time  that any  Collateral
         consists of  instruments,  certificated  securities or other items that
         require  or permit  possession  by the  secured  party to  perfect  the
         security  interest created hereby,  the applicable Debtor shall deliver
         such Collateral to the Agent.

                  (bb) Each Debtor, in its capacity as issuer,  hereby agrees to
         comply with any and all orders and  instructions of Agent regarding the
         Pledged  Interests  consistent with the terms of this Agreement without
         the further  consent of any Debtor as contemplated by Section 8-106 (or
         any successor section) of the UCC. Further,  each Debtor agrees that it
         shall not enter  into a similar  agreement  (or one that  would  confer
         "control"  within  the  meaning of Article 8 of the UCC) with any other
         person or entity.

                  (cc) Each  Debtor  shall  cause  all  tangible  chattel  paper
         constituting  Collateral  to be  delivered  to the  Agent,  or, if such
         delivery is not possible,  then to cause such tangible chattel paper to
         contain a legend  noting  that it is subject to the  security  interest
         created by this Agreement.  To the extent that any Collateral  consists
         of electronic  chattel  paper,  the  applicable  Debtor shall cause the
         underlying  chattel paper to be "marked"  within the meaning of Section
         9-105 of the UCC (or successor section thereto).

                  (dd) If there is any  investment  property or deposit  account
         included as  Collateral  that can be perfected by "control"  through an
         account control  agreement,  the applicable  Debtor shall cause such an
         account  control  agreement,   in  form  and  substance  in  each  case
         satisfactory to the Secured  Parties,  to be entered into and delivered
         to the Secured Parties.

                  (ee)  To  the  extent   that  any   Collateral   consists   of
         letter-of-credit  rights,  the applicable Debtor shall cause the issuer
         of each underlying  letter of credit to consent to an assignment of the
         proceeds thereof to the Secured Parties.

                  (ff) To the extent that any Collateral is in the possession of
         any third  party,  the  applicable  Debtor  shall join with the Secured
         Parties in notifying such third party of the Secured Parties'  security
         interest in such Collateral and shall use its best efforts to obtain an
         acknowledgement and agreement from such third party with respect to the
         Collateral, in form and substance satisfactory to the Secured Parties.

                  (gg)  If any  Debtor  shall  at any  time  hold or  acquire  a
         commercial  tort claim,  such Debtor shall promptly  notify the Secured
         Parties in a writing signed by such Debtor of the  particulars  thereof
         and grant to the Secured  Parties in such  writing a security  interest
         therein  and in the  proceeds  thereof,  all  upon  the  terms  of this
         Agreement,  with such writing to be in form and substance  satisfactory
         to the Secured Parties.

                  (hh) Each Debtor shall  immediately  provide written notice to
         the  Secured  Parties  of any  and  all  accounts  which  arise  out of
         contracts with any governmental  authority and, to the extent necessary
         to perfect or continue the perfected status of the Security Interest in
         such  accounts and proceeds  thereof,  shall execute and deliver to the
         Secured Parties an assignment of claims for such accounts and cooperate
         with the Secured Parties in taking any other steps  required,  in their
         judgment,  under the  Federal  Assignment  of Claims Act or any similar
         federal,  state or local  statute or rule to perfect  or  continue  the
         perfected status of the Security Interest in such accounts and proceeds
         thereof.

                                       11
<PAGE>

                   (ii) Each Debtor shall cause each  subsidiary  of such Debtor
         to  immediately  become a party  hereto (an  "Additional  Debtor"),  by
         executing and delivering an Additional  Debtor Joinder in substantially
         the form of Annex A  attached  hereto and  comply  with the  provisions
         hereof applicable to the Debtors.  Concurrent therewith, the Additional
         Debtor shall deliver  replacement  schedules for, or supplements to all
         other Schedules to (or referred to in) this  Agreement,  as applicable,
         which  replacement  schedules  shall  supersede,  or supplements  shall
         modify,  the Schedules then in effect. The Additional Debtor shall also
         deliver  such  opinions  of  counsel,  authorizing  resolutions,   good
         standing   certificates,   incumbency   certificates,    organizational
         documents, financing statements and other information and documentation
         as the Secured  Parties may  reasonably  request.  Upon delivery of the
         foregoing to the Secured  Parties,  the Additional  Debtor shall be and
         become a party to this Agreement  with the same rights and  obligations
         as the Debtors, for all purposes hereof as fully and to the same extent
         as if it were an original  signatory hereto and shall be deemed to have
         made the representations,  warranties and covenants set forth herein as
         of the  date  of  execution  and  delivery  of such  Additional  Debtor
         Joinder,  and all references herein to the "Debtors" shall be deemed to
         include each Additional Debtor.

                  (jj) Each Debtor shall vote the Pledged  Securities  to comply
         with  the  covenants  and  agreements  set  forth  herein  and  in  the
         Debentures.

                  (kk) Each Debtor shall  register the pledge of the  applicable
         Pledged  Securities  on the books of such  Debtor.  Each  Debtor  shall
         notify each issuer of Pledged  Securities to register the pledge of the
         applicable Pledged Securities in the name of the Secured Parties on the
         books of such  issuer.  Further,  except with  respect to  certificated
         securities  delivered to the Agent, the applicable Debtor shall deliver
         to Agent an acknowledgement of pledge (which, where appropriate,  shall
         comply  with the  requirements  of the  relevant  UCC with  respect  to
         perfection  by  registration)  signed by the  issuer of the  applicable
         Pledged Securities,  which  acknowledgement  shall confirm that: (a) it
         has registered the pledge on its books and records; and (b) at any time
         directed by Agent during the continuation of an Event of Default,  such
         issuer will  transfer the record  ownership of such Pledged  Securities
         into the name of any designee of Agent,  will take such steps as may be
         necessary  to  effect  the  transfer,  and will  comply  with all other
         instructions  of Agent  regarding such Pledged  Securities  without the
         further consent of the applicable Debtor.

                  (ll) In the  event  that,  upon an  occurrence  of an Event of
         Default,  Agent  shall  sell all or any of the  Pledged  Securities  to
         another  party or parties  (herein  called the  "Transferee")  or shall
         purchase  or retain all or any of the Pledged  Securities,  each Debtor
         shall,  to  the  extent  applicable:   (i)  deliver  to  Agent  or  the

                                       12
<PAGE>

         Transferee, as the case may be, the articles of incorporation,  bylaws,
         minute books, stock certificate books,  corporate seals, deeds, leases,
         indentures,  agreements,  evidences of indebtedness,  books of account,
         financial records and all other Organizational Documents and records of
         the Debtors and their  direct and indirect  subsidiaries;  (ii) use its
         best  efforts to obtain  resignations  of the persons  then  serving as
         officers  and  directors  of the Debtors and their  direct and indirect
         subsidiaries, if so requested; and (iii) use its best efforts to obtain
         any approvals that are required by any  governmental or regulatory body
         in order to permit the sale of the Pledged Securities to the Transferee
         or the  purchase or retention  of the Pledged  Securities  by Agent and
         allow the  Transferee  or Agent to continue the business of the Debtors
         and their direct and indirect subsidiaries.

                  (mm) Without limiting the generality of the other  obligations
         of the Debtors  hereunder,  each Debtor shall  promptly (i) cause to be
         registered  at the United States  Copyright  Office all of its material
         copyrights,  (ii) cause the security interest  contemplated hereby with
         respect to all  Intellectual  Property  registered at the United States
         Copyright  Office or United States  Patent and  Trademark  Office to be
         duly recorded at the applicable office, and (iii) give the Agent notice
         whenever it acquires (whether  absolutely or by license) or creates any
         additional material Intellectual Property.

                   (nn) Each  Debtor  will  from time to time,  at the joint and
         several expense of the Debtors,  promptly  execute and deliver all such
         further instruments and documents,  and take all such further action as
         may be necessary or desirable, or as the Secured Parties may reasonably
         request,  in order to perfect and protect any security interest granted
         or purported to be granted  hereby or to enable the Secured  Parties to
         exercise  and enforce  their  rights and  remedies  hereunder  and with
         respect to any  Collateral  or to  otherwise  carry out the purposes of
         this Agreement.

                  (oo)  Schedule F  attached  hereto  lists all of the  patents,
         patent applications,  trademarks,  trademark  applications,  registered
         copyrights, and domain names owned by any of the Debtors as of the date
         hereof.  Schedule F lists all material  licenses in favor of any Debtor
         for the use of any patents, trademarks,  copyrights and domain names as
         of the date hereof.  All material patents and trademarks of the Debtors
         have been duly  recorded  at the United  States  Patent  and  Trademark
         Office  and all  material  copyrights  of the  Debtors  have  been duly
         recorded at the United States Copyright Office.

                  (pp) Except as set forth on Schedule G attached  hereto,  none
         of the account debtors or other persons or entities obligated on any of
         the  Collateral  is a  governmental  authority  covered by the  Federal
         Assignment of Claims Act or any similar federal, state or local statute
         or rule in respect of such Collateral.

         5. Effect of Pledge on Certain Rights. If any of the Collateral subject
to  this  Agreement   consists  of  nonvoting  equity  or  ownership   interests
(regardless of class,  designation,  preference or rights) that may be converted
into voting equity or ownership  interests upon the occurrence of certain events
(including,  without  limitation,  upon the  transfer of all or any of the other
stock or assets of the  issuer),  it is agreed that the pledge of such equity or
ownership  interests  pursuant to this  Agreement or the  enforcement  of any of
Agent's rights hereunder shall not be deemed to be the type of event which would

                                       13
<PAGE>

trigger  such   conversion   rights   notwithstanding   any  provisions  in  the
Organizational  Documents  or  agreements  to which any  Debtor is subject or to
which any  Debtor is party.  Unless  and until an Event of  Default  shall  have
occurred,  the  Company  shall be  entitled  to direct  the vote of the  Pledged
Company  Shares  and to give  consents,  waivers  or  ratifications  in  respect
thereof,  provided  that  no  vote  shall  be cast  or any  consent,  waiver  or
ratification given or any action taken which would violate,  constitute a breach
of, or be  inconsistent  with any of the terms of this  Agreement,  the Purchase
Agreement or any other Transaction  Document,  or which would have the effect of
impairing Secured Parties' interest, rights or remedies.

         6.  Defaults.  The following  events shall be "Events of Default" under
this Agreement:

                  (a) The  occurrence  of an Event of Default (as defined in the
Debenture) under the Debenture;

                  (b) Any  representation  or  warranty  of any  Debtor  in this
         Agreement  shall prove to have been  incorrect in any material  respect
         when made;

                  (c) The failure by any Debtor to observe or perform any of its
         obligations  hereunder for five (5) days after  delivery to such Debtor
         of notice of such  failure  by or on behalf of a Secured  Party  unless
         such  default is capable of cure but cannot be cured  within  such time
         frame and such  Debtor is using  best  efforts to cure same in a timely
         fashion; or

                  (d) If any provision of this  Agreement  shall at any time for
         any  reason  be  declared  to be null  and  void,  or the  validity  or
         enforceability   thereof  shall  be  contested  by  any  Debtor,  or  a
         proceeding  shall be  commenced by any Debtor,  or by any  governmental
         authority having jurisdiction over any Debtor, seeking to establish the
         invalidity or  unenforceability  thereof, or any Debtor shall deny that
         any Debtor has any  liability  or  obligation  purported  to be created
         under this Agreement.

         7. Duty To Hold In Trust.

                  (a) Upon the  occurrence  of any Event of  Default  and at any
         time  thereafter,  each  Debtor  shall,  upon  receipt of any  revenue,
         income,  dividend,  interest  or other  sums  subject  to the  Security
         Interest, whether payable pursuant to the Debenture or otherwise, or of
         any check, draft, note, trade acceptance or other instrument evidencing
         an  obligation  to pay any such  sum,  hold  the same in trust  for the
         Secured Parties and shall forthwith  endorse and transfer any such sums
         or instruments, or both, to the Secured Parties, pro-rata in proportion
         to  their  initial  purchases  of  Debentures  for  application  to the
         satisfaction  of  the   Obligations   (and  if  any  Debenture  is  not
         outstanding,  pro-rata in  proportion  to the initial  purchases of the
         remaining Debentures).

                                       14
<PAGE>

                  (b) If any Debtor  shall  become  entitled to receive or shall
         receive  any   securities  or  other   property   (including,   without
         limitation,  shares of Pledged  Securities or instruments  representing
         Pledged  Securities  acquired  after the date  hereof,  or any options,
         warrants, rights or other similar property or certificates representing
         a   dividend,    or   any   distribution   in   connection   with   any
         recapitalization, reclassification or increase or reduction of capital,
         or issued in connection with any  reorganization  of such Debtor or any
         of its direct or  indirect  subsidiaries)  in  respect  of the  Pledged
         Securities  (whether  as an  addition  to,  in  substitution  of, or in
         exchange for, such Pledged Securities or otherwise), such Debtor agrees
         to (i) accept the same as the agent of the Secured  Parties;  (ii) hold
         the same in trust  on  behalf  of and for the  benefit  of the  Secured
         Parties;  and (iii) to deliver any and all  certificates or instruments
         evidencing  the same to Agent on or before the close of business on the
         fifth business day following the receipt thereof by such Debtor, in the
         exact form received  together with the  Necessary  Endorsements,  to be
         held by Agent subject to the terms of this Agreement as Collateral.

         8. Rights and Remedies Upon Default.

                  (a) Upon the  occurrence  of any Event of  Default  and at any
         time  thereafter,   the  Secured  Parties,  acting  through  any  agent
         appointed  by them for such  purpose,  shall have the right to exercise
         all of the remedies conferred  hereunder and under the Debentures,  and
         the Secured Parties shall have all the rights and remedies of a secured
         party under the UCC. Without limitation, the Secured Parties shall have
         the following rights and powers:

                           (i) The Secured  Parties shall have the right to take
                  possession of the  Collateral  and, for that  purpose,  enter,
                  with the aid and assistance of any person,  any premises where
                  the Collateral,  or any part thereof,  is or may be placed and
                  remove the same, and each Debtor shall assemble the Collateral
                  and make it available  to the Secured  Parties at places which
                  the Secured Parties shall reasonably  select,  whether at such
                  Debtor's  premises or  elsewhere,  and make  available  to the
                  Secured Parties, without rent, all of such Debtor's respective
                  premises and facilities for the purpose of the Secured Parties
                  taking  possession  of,  removing or putting the Collateral in
                  saleable or disposable form.

                           (ii) Upon notice to the Debtors by Agent,  all rights
                  of each  Debtor to  exercise  the voting and other  consensual
                  rights  which it would  otherwise  be entitled to exercise and
                  all  rights  of each  Debtor  to  receive  the  dividends  and
                  interest which it would otherwise be authorized to receive and
                  retain,  shall cease.  Upon such notice,  Agent shall have the
                  right  to  receive  any  interest,  cash  dividends  or  other
                  payments on the  Collateral  and,  at the option of Agent,  to
                  exercise  in  such  Agent's   discretion   all  voting  rights
                  pertaining  thereto.  Without  limiting the  generality of the
                  foregoing, Agent shall have the right (but not the obligation)
                  to exercise  all rights with respect to the  Collateral  as it
                  were the sole and absolute owner thereof,  including,  without
                  limitation,   to  vote  and/or  to   exchange,   at  its  sole
                  discretion,  any or all of the Collateral in connection with a
                  merger,  reorganization,  consolidation,  recapitalization  or
                  other  readjustment  concerning or involving the Collateral or
                  any Debtor or any of its direct or indirect subsidiaries.

                                       15
<PAGE>

                           (iii) The  Secured  Parties  shall  have the right to
                  operate the business of each Debtor using the  Collateral  and
                  shall  have the  right to  assign,  sell,  lease or  otherwise
                  dispose of and deliver all or any part of the  Collateral,  at
                  public or private  sale or  otherwise,  either with or without
                  special  conditions or stipulations,  for cash or on credit or
                  for future  delivery,  in such  parcel or parcels  and at such
                  time or times and at such place or places, and upon such terms
                  and  conditions as are  commercially  reasonable,  all without
                  (except as shall be required by applicable  statute and cannot
                  be  waived)  advertisement  or  demand  upon or  notice to any
                  Debtor or right of  redemption  of a Debtor,  which are hereby
                  expressly waived.  Upon each such sale,  lease,  assignment or
                  other transfer of Collateral,  the Secured Parties may, unless
                  prohibited by applicable law which cannot be waived,  purchase
                  all or any part of the  Collateral  being sold,  free from and
                  discharged  of all trusts,  claims,  right of  redemption  and
                  equities of any Debtor, which are hereby waived and released.

                           (iv) The  Secured  Parties  shall have the right (but
                  not the  obligation)  to notify any  account  debtors  and any
                  obligors  under  instruments  or  accounts  to  make  payments
                  directly  to the Secured  Parties and to enforce the  Debtors'
                  rights against such account debtors and obligors.

                           (v) The Secured  Parties  may (but are not  obligated
                  to) direct any financial  intermediary  or any other person or
                  entity holding any investment property to transfer the same to
                  the Secured Parties or their designee.

                           (vi) The Secured  Parties may (but are not  obligated
                  to) transfer any or all  Intellectual  Property  registered in
                  the  name  of any  Debtor  at the  United  States  Patent  and
                  Trademark  Office and/or Copyright Office into the name of the
                  Secured  Parties  or  any  designee  or any  purchaser  of any
                  Collateral.

                  (b) The Agent may comply with any applicable law in connection
         with a  disposition  of  Collateral  and  such  compliance  will not be
         considered  adversely to affect the  commercial  reasonableness  of any
         sale of the  Collateral.  The  Agent  may sell the  Collateral  without
         giving any warranties and may specifically disclaim such warranties. If
         the Agent sells any of the Collateral on credit,  the Debtors will only
         be credited with payments actually made by the purchaser.  In addition,
         each  Debtor  waives any and all rights  that it may have to a judicial
         hearing in advance of the  enforcement of any of the Agent's rights and
         remedies hereunder,  including, without limitation, its right following
         an Event of Default to take immediate  possession of the Collateral and
         to exercise its rights and remedies with respect thereto.

                                       16
<PAGE>

                  (c) For the purpose of enabling the Agent to further  exercise
         rights and  remedies  under this  Section 8 or  elsewhere  provided  by
         agreement or  applicable  law,  each Debtor hereby grants to the Agent,
         for the benefit of the Agent and the Secured  Parties,  an irrevocable,
         nonexclusive  license  (exercisable without payment of royalty or other
         compensation to such Debtor) to use, license or sublicense following an
         Event of Default,  any  Intellectual  Property  now owned or  hereafter
         acquired by such  Debtor,  and  wherever  the same may be located,  and
         including  in such  license  access  to all  media in which  any of the
         licensed  items may be recorded or stored and to all computer  software
         and programs used for the compilation or printout thereof.

         9.  Applications of Proceeds.  The proceeds of any such sale,  lease or
other  disposition of the Collateral  hereunder  shall be applied first,  to the
expenses of retaking,  holding,  storing,  processing  and  preparing  for sale,
selling, and the like (including,  without limitation, any taxes, fees and other
costs  incurred in connection  therewith) of the  Collateral,  to the reasonable
attorneys' fees and expenses  incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral,  and then to  satisfaction  of the  Obligations  pro rata  among the
Secured Parties (based on  then-outstanding  principal  amounts of Debentures at
the time of any such  determination),  and to the  payment of any other  amounts
required by  applicable  law,  after which the Secured  Parties shall pay to the
applicable  Debtor any surplus  proceeds.  If,  upon the sale,  license or other
disposition of the Collateral,  the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally  entitled,  the Debtors will be
liable for the deficiency,  together with interest  thereon,  at the rate of 10%
per annum or the lesser amount permitted by applicable law (the "Default Rate"),
and the  reasonable  fees of any  attorneys  employed by the Secured  Parties to
collect such deficiency.  To the extent permitted by applicable law, each Debtor
waives all claims,  damages and demands  against the Secured Parties arising out
of the repossession,  removal,  retention or sale of the Collateral,  unless due
solely to the gross  negligence or willful  misconduct of the Secured Parties as
determined  by a final  judgment  (not subject to further  appeal) of a court of
competent jurisdiction.

         10. Securities Law Provision.  Each Debtor recognizes that Agent may be
limited  in its  ability  to  effect a sale to the  public of all or part of the
Pledged  Securities by reason of certain  prohibitions  in the Securities Act of
1933, as amended, or other federal or state securities laws  (collectively,  the
"Securities  Laws"),  and may be  compelled  to resort to one or more sales to a
restricted  group of  purchasers  who may be  required  to agree to acquire  the
Pledged Securities for their own account,  for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged  Securities  were sold
to the public, and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time  necessary to register the Pledged  Securities
for sale to the public under the Securities  Laws.  Each Debtor shall  cooperate
with Agent in its attempt to satisfy any requirements  under the Securities Laws
(including,  without limitation,  registration thereunder if requested by Agent)
applicable to the sale of the Pledged Securities by Agent.

         11.  Costs and  Expenses.  Each  Debtor  agrees  to pay all  reasonable
out-of-pocket  fees,  costs and expenses  incurred in connection with any filing
required  hereunder,  including  without  limitation,  any financing  statements
pursuant  to  the  UCC,   continuation   statements,   partial  releases  and/or
termination   statements  related  thereto  or  any  expenses  of  any  searches
reasonably required by the Secured Parties. The Debtors shall also pay all other

                                       17
<PAGE>

claims and charges which in the reasonable  opinion of the Secured Parties might
prejudice,  imperil or otherwise affect the Collateral or the Security  Interest
therein.  The Debtors  will also,  upon demand,  pay to the Secured  Parties the
amount of any and all reasonable  expenses,  including the  reasonable  fees and
expenses of its counsel and of any experts and agents, which the Secured Parties
may incur in connection  with (i) the  enforcement of this  Agreement,  (ii) the
custody  or  preservation  of,  or  the  sale  of,  collection  from,  or  other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured  Parties under the  Debentures.  Until so paid,
any  fees  payable  hereunder  shall be added  to the  principal  amount  of the
Debentures and shall bear interest at the Default Rate.

         12.  Responsibility for Collateral.  The Debtors assume all liabilities
and responsibility in connection with all Collateral,  and the Obligations shall
in no way be affected or diminished by reason of the loss,  destruction,  damage
or theft of any of the Collateral or its unavailability for any reason.  Without
limiting the generality of the foregoing,  (a) neither the Agent nor any Secured
Party (i) has any duty  (either  before or after an Event of Default) to collect
any amounts in respect of the  Collateral or to preserve any rights  relating to
the Collateral,  or (ii) has any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) each Debtor shall remain obligated and liable under
each  contract  or  agreement  included  in the  Collateral  to be  observed  or
performed  by such Debtor  thereunder.  Neither the Agent nor any Secured  Party
shall have any  obligation or liability  under any such contract or agreement by
reason of or arising  out of this  Agreement  or the receipt by the Agent or any
Secured Party of any payment  relating to any of the  Collateral,  nor shall the
Agent or any  Secured  Party be  obligated  in any manner to perform  any of the
obligations  of any Debtor under or pursuant to any such  contract or agreement,
to make inquiry as to the nature or sufficiency  of any payment  received by the
Agent or any Secured Party in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or agreement, to present
or file any claim,  to take any action to enforce any  performance or to collect
the payment of any amounts which may have been assigned to the Agent or to which
the Agent or any Secured Party may be entitled at any time or times.

         13. Security Interest  Absolute.  All rights of the Secured Parties and
all obligations of the Debtors  hereunder,  shall be absolute and unconditional,
irrespective of: (a) any lack of validity or  enforceability  of this Agreement,
the Debentures or any agreement  entered into in connection  with the foregoing,
or any portion hereof or thereof; (b) any change in the time, manner or place of
payment  or  performance  of,  or in  any  other  term  of,  all  or  any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Debentures or any other  agreement  entered into in connection with the
foregoing; (c) any exchange,  release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure  from any other
collateral for, or any guaranty,  or any other  security,  for all or any of the
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection  with the  Collateral;  or (e) any  other  circumstance  which  might

                                       18
<PAGE>

otherwise  constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interest granted hereby.  Until the
Obligations  shall  have  been paid and  performed  in full,  the  rights of the
Secured  Parties  shall  continue  even if the  Obligations  are  barred for any
reason, including, without limitation, the running of the statute of limitations
or bankruptcy.  Each Debtor expressly  waives  presentment,  protest,  notice of
protest,  demand, notice of nonpayment and demand for performance.  In the event
that at any time any transfer of any  Collateral or any payment  received by the
Secured Parties hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable  preference or fraudulent  conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise  due to any party other than the Secured  Parties,  then,  in any such
event, each Debtor's  obligations  hereunder shall survive  cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or  cancellation  of this  Agreement,  but shall  remain a valid and binding
obligation  enforceable in accordance with the terms and provisions hereof. Each
Debtor  waives all right to require the Secured  Parties to proceed  against any
other person or entity or to apply any Collateral  which the Secured Parties may
hold at any time,  or to marshal  assets,  or to pursue any other  remedy.  Each
Debtor waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.

         14. Term of Agreement.  This Agreement and the Security  Interest shall
terminate  on the date on which  all  payments  under the  Debentures  have been
indefeasibly  paid  in  full  and  all  other  Obligations  have  been  paid  or
discharged;  provided, however, that all indemnities of the Debtors contained in
this Agreement (including, without limitation, Annex B hereto) shall survive and
remain  operative and in full force and effect  regardless of the termination of
this Agreement.

         15. Power of Attorney; Further Assurances.

                   (a) Each  Debtor  authorizes  the Secured  Parties,  and does
         hereby  make,  constitute  and appoint  the  Secured  Parties and their
         respective officers,  agents,  successors or assigns with full power of
         substitution,  as such Debtor's true and lawful attorney-in-fact,  with
         power, in the name of the various  Secured Parties or such Debtor,  to,
         after the occurrence and during the continuance of an Event of Default,
         (i) endorse any note, checks, drafts, money orders or other instruments
         of  payment  (including  payments  payable  under or in  respect of any
         policy of  insurance) in respect of the  Collateral  that may come into
         possession  of the  Secured  Parties;  (ii) to  sign  and  endorse  any
         financing  statement  pursuant  to the UCC or any  invoice,  freight or
         express bill,  bill of lading,  storage or warehouse  receipts,  drafts
         against debtors,  assignments,  verifications and notices in connection
         with accounts, and other documents relating to the Collateral; (iii) to
         pay or discharge taxes, liens, security interests or other encumbrances
         at any time levied or placed on or threatened  against the  Collateral;
         (iv) to demand,  collect,  receipt for, compromise,  settle and sue for
         monies  due  in  respect  of  the  Collateral;   (v)  to  transfer  any
         Intellectual  Property or provide licenses  respecting any Intellectual
         Property; and (vi) generally, at the option of the Secured Parties, and
         at the expense of the Debtors,  at any time,  or from time to time,  to
         execute and deliver any and all documents and instruments and to do all
         acts and things which the Secured  Parties  deem  necessary to protect,
         preserve and realize  upon the  Collateral  and the  Security  Interest

                                       19
<PAGE>

         granted therein in order to effect the intent of this Agreement and the
         Debentures  all as fully and  effectually as the Debtors might or could
         do;  and each  Debtor  hereby  ratifies  all that said  attorney  shall
         lawfully  do or  cause  to be done by  virtue  hereof.  This  power  of
         attorney is coupled with an interest and shall be  irrevocable  for the
         term of this Agreement and thereafter as long as any of the Obligations
         shall be outstanding.  The designation set forth herein shall be deemed
         to amend and supersede any inconsistent provision in the Organizational
         Documents  or other  documents  or  agreements  to which any  Debtor is
         subject  or to which  any  Debtor  is a  party.  Without  limiting  the
         generality  of the  foregoing,  after the  occurrence  and  during  the
         continuance of an Event of Default,  each Secured Party is specifically
         authorized to execute and file any  applications  for or instruments of
         transfer and assignment of any patents, trademarks, copyrights or other
         Intellectual  Property  with the United  States  Patent  and  Trademark
         Office and the United States Copyright Office.

                   (b) On a continuing  basis,  each Debtor will make,  execute,
         acknowledge,  deliver,  file and  record,  as the case may be, with the
         proper filing and recording  agencies in any  jurisdiction,  including,
         without limitation,  the jurisdictions indicated on Schedule C attached
         hereto,  all  such  instruments,  and  take  all  such  action  as  may
         reasonably be deemed necessary or advisable, or as reasonably requested
         by the  Secured  Parties,  to perfect  the  Security  Interest  granted
         hereunder  and  otherwise  to carry out the intent and purposes of this
         Agreement,  or for assuring and  confirming to the Secured  Parties the
         grant  or  perfection  of a  perfected  security  interest  in all  the
         Collateral under the UCC.

                   (c) Each  Debtor  hereby  irrevocably  appoints  the  Secured
         Parties as such Debtor's  attorney-in-fact,  with full authority in the
         place and instead of such Debtor and in the name of such  Debtor,  from
         time to time in the Secured Parties' discretion, to take any action and
         to execute any instrument  which the Secured Parties may deem necessary
         or advisable to accomplish  the purposes of this  Agreement,  including
         the  filing,  in its  sole  discretion,  of one or  more  financing  or
         continuation statements and amendments thereto,  relative to any of the
         Collateral without the signature of such Debtor where permitted by law,
         which  financing  statements may (but need not) describe the Collateral
         as "all assets" or "all personal property" or words of like import, and
         ratifies all such actions taken by the Secured  Parties.  This power of
         attorney is coupled with an interest and shall be  irrevocable  for the
         term of this Agreement and thereafter as long as any of the Obligations
         shall be outstanding.

         16. Notices.  All notices,  requests,  demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Debentures).

         17.  Other  Security.  To the extent  that the  Obligations  are now or
hereafter  secured by property  other than the  Collateral or by the  guarantee,
endorsement or property of any other person, firm,  corporation or other entity,
then the  Secured  Parties  shall have the  right,  in its sole  discretion,  to
pursue,  relinquish,  subordinate,  modify or take any other action with respect
thereto,  without in any way modifying or affecting any of the Secured  Parties'
rights and remedies hereunder.

                                       20
<PAGE>

         18.   Appointment  of  Agent.   The  Secured   Parties  hereby  appoint
Regenmacher  Holdings,  Ltd. to act as their  agent  ("Agent")  for  purposes of
exercising  any and all rights and  remedies of the Secured  Parties  hereunder.
Such  appointment  shall  continue  until  revoked in  writing by a Majority  in
Interest,  at which  time a  Majority  in  Interest  shall  appoint a new Agent;
provided,  that  Regenmacher  Holdings,  Ltd. may not be removed as Agent unless
Regenmacher  Holdings,  Ltd. shall then hold less than $100,000 principal amount
of Debentures;  provided further that such removal may occur only if each of the
other Secured Parties shall then hold not less than $100,000 principal amount of
Debentures. The Agent shall have the rights, responsibilities and immunities set
forth in Annex B hereto.

         19. Miscellaneous.

                  (a) No course of dealing  between  the Debtors and the Secured
         Parties, nor any failure to exercise,  nor any delay in exercising,  on
         the  part  of the  Secured  Parties,  any  right,  power  or  privilege
         hereunder or under the  Debentures  shall operate as a waiver  thereof;
         nor shall  any  single  or  partial  exercise  of any  right,  power or
         privilege  hereunder  or  thereunder  preclude  any  other  or  further
         exercise  thereof  or  the  exercise  of  any  other  right,  power  or
         privilege.

                  (b) All of the rights and remedies of the Secured Parties with
         respect  to  the  Collateral,  whether  established  hereby  or by  the
         Debentures or by any other  agreements,  instruments or documents or by
         law shall be cumulative and may be exercised singly or concurrently.

                  (c) This  Agreement  constitutes  the entire  agreement of the
         parties  with respect to the subject  matter  hereof and is intended to
         supersede all prior  negotiations,  understandings  and agreements with
         respect thereto. Except as specifically set forth in this Agreement, no
         provision  of this  Agreement  may be modified  or amended  except by a
         written agreement  specifically  referring to this Agreement and signed
         by the parties hereto.

                  (d) In the event any provision of this Agreement is held to be
         invalid,  prohibited  or  unenforceable  in any  jurisdiction  for  any
         reason,  unless such  provision  is narrowed by judicial  construction,
         this Agreement shall, as to such jurisdiction,  be construed as if such
         invalid,  prohibited or unenforceable  provision had been more narrowly
         drawn  so as  not  to be  invalid,  prohibited  or  unenforceable.  If,
         notwithstanding the foregoing,  any provision of this Agreement is held
         to be invalid,  prohibited or unenforceable in any  jurisdiction,  such
         provision, as to such jurisdiction,  shall be ineffective to the extent
         of   such   invalidity,   prohibition   or   unenforceability   without
         invalidating  the  remaining  portion  of such  provision  or the other
         provisions  of this  Agreement  and without  affecting  the validity or
         enforceability  of  such  provision  or the  other  provisions  of this
         Agreement in any other jurisdiction.

                  (e) No waiver of any breach or default or any right under this
         Agreement shall be considered valid unless in writing and signed by the
         party giving such  waiver,  and no such waiver shall be deemed a waiver
         of any  subsequent  breach or default or right,  whether of the same or
         similar nature or otherwise.

                                       21
<PAGE>

                  (f) This  Agreement  shall be  binding  upon and  inure to the
         benefit of each party hereto and its successors and assigns.

                  (g) Each party shall take such further  action and execute and
         deliver such further  documents as may be necessary or  appropriate  in
         order to carry out the provisions and purposes of this Agreement.

                  (h)  All  questions  concerning  the  construction,  validity,
         enforcement and  interpretation  of this Agreement 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  Debtor  agrees  that  all  proceedings  concerning  the
         interpretations,   enforcement   and   defense   of  the   transactions
         contemplated  by this  Agreement  and the  Debenture  (whether  brought
         against  a  party  hereto  or  its  respective  affiliates,  directors,
         officers,  shareholders,  partners, members, employees or agents) shall
         be commenced exclusively in the state and federal courts sitting in the
         City of New York, Borough of Manhattan.  Each Debtor hereby irrevocably
         submits to the exclusive  jurisdiction  of the state and federal courts
         sitting  in  the  City  of New  York,  Borough  of  Manhattan  for  the
         adjudication of any dispute hereunder or in connection herewith or with
         any transaction  contemplated  hereby or discussed  herein,  and hereby
         irrevocably  waives,  and agrees not to assert in any  proceeding,  any
         claim that it is not personally subject to the jurisdiction of any such
         court,  that such  proceeding  is improper.  Each party  hereto  hereby
         irrevocably  waives personal service of process and consents to process
         being  served in any such  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 Agreement 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 Agreement or the transactions  contemplated hereby. If
         any party shall commence a proceeding to enforce any provisions of this
         Agreement,  then  the  prevailing  party  in such  proceeding  shall be
         reimbursed by the other party for its  reasonable  attorney's  fees and
         other costs and expenses incurred with the  investigation,  preparation
         and prosecution of such proceeding.

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

                                       22
<PAGE>

                  (j) All Debtors  shall jointly and severally be liable for the
         obligations of each Debtor to the Secured Parties hereunder.

                  (k) Each Debtor shall  indemnify,  reimburse and hold harmless
         the  Secured   Parties   and  their   respective   partners,   members,
         shareholders,  officers, directors, employees and agents (collectively,
         "Indemnitees")   from  and  against   any  and  all   losses,   claims,
         liabilities, damages, penalties, suits, costs and expenses, of any kind
         or nature,  (including fees relating to the cost of  investigating  and
         defending  any of the  foregoing)  imposed on,  incurred by or asserted
         against  such  Indemnitee  in any way  related  to or  arising  from or
         alleged to arise from this Agreement or the Collateral, except any such
         losses,  claims,  liabilities,  damages,  penalties,  suits,  costs and
         expenses which result from the gross  negligence or willful  misconduct
         of the Indemnitee as determined by a final, nonappealable decision of a
         court of competent jurisdiction.  This indemnification  provision is in
         addition  to,  and not in  limitation  of,  any  other  indemnification
         provision in the  Debentures,  the Purchase  Agreement (as such term is
         defined in the Debentures) or any other agreement,  instrument or other
         document executed or delivered in connection herewith or therewith.

                  (l) Nothing in this  Agreement  shall be  construed to subject
         Agent or any Secured  Party to  liability as a partner in any Debtor or
         any if its direct or indirect  subsidiaries that is a partnership or as
         a member in any  Debtor or any of its direct or  indirect  subsidiaries
         that is a limited  liability  company,  nor shall  Agent or any Secured
         Party be deemed to have assumed any  obligations  under any partnership
         agreement or limited liability company agreement, as applicable, of any
         such Debtor or any if its direct or indirect subsidiaries or otherwise,
         unless  and  until any such  Secured  Party  exercises  its right to be
         substituted  for such  Debtor as a partner  or member,  as  applicable,
         pursuant hereto.

                  (m) To the extent that the grant of the  security  interest in
         the  Collateral  and the  enforcement  of the terms hereof  require the
         consent, approval or action of any partner or member, as applicable, of
         any  Debtor  or any  direct or  indirect  subsidiary  of any  Debtor or
         compliance with any provisions of any of the Organizational  Documents,
         the Debtors  hereby  grant such consent and approval and waive any such
         noncompliance with the terms of said documents.

                            [SIGNATURE PAGES FOLLOW]

                                       23
<PAGE>

            IN WITNESS  WHEREOF,  the parties  hereto have caused this  Security
Agreement to be duly executed on the day and year first above written.

                                           INTRAOP MEDICAL CORPORATION

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

                                           Intraop Medical Services, Inc.

                                           By: /s/Donald A. Goer
                                               -----------------
                                               Name: Donald A. Goer
                                               Title: President

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       24
<PAGE>

             [SIGNATURE PAGE OF HOLDERS TO IOPM SECURITY AGREEMENT]

Name of Investing Entity: Regenmacher Holdings, Ltd.
Signature of Authorized Signatory of Investing Entity: /s/ Jonathan P. Knight
Name of Authorized Signatory: Jonathan P. Knight
Title of Authorized Signatory: President of Investment Manager

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       25
<PAGE>

             [SIGNATURE PAGE OF HOLDERS TO IOPM SECURITY AGREEMENT]

Name of Investing Entity: ABS SOS-Plus Partners, Ltd.
Signature of Authorized Signatory of Investing Entity: /s/ Jonathan P. Knight
Name of Authorized Signatory: Jonathan P. Knight
Title of Authorized Signatory: President/Director

                                       26

<PAGE>

                                     ANNEX A
                                       to
                                    SECURITY
                                    AGREEMENT

                        FORM OF ADDITIONAL DEBTOR JOINDER

                  Security Agreement dated as of August ____ , 2005 made by
                                 Intraop Medical Corporation
              and its subsidiaries party thereto from time to time, as Debtors
                    to and in favor of
               the Secured Parties identified therein (the "Security Agreement")

         Reference  is  made  to  the  Security   Agreement  as  defined  above;
capitalized  terms used herein and not otherwise  defined  herein shall have the
meanings given to such terms in, or by reference in, the Security Agreement.

         The  undersigned  hereby agrees that upon  delivery of this  Additional
Debtor Joinder to the Secured Parties referred to above,  the undersigned  shall
(a) be an  Additional  Debtor  under the  Security  Agreement,  (b) have all the
rights and obligations of the Debtors under the Security  Agreement as fully and
to the same extent as if the undersigned was an original  signatory  thereto and
(c) be deemed  to have  made the  representations  and  warranties  set forth in
Section ___ therein as of the date of execution and delivery of this  Additional
Debtor  Joinder.   WITHOUT  LIMITING  THE  GENERALITY  OF  THE  FOREGOING,   THE
UNDERSIGNED  SPECIFICALLY  GRANTS TO THE SECURED PARTIES A SECURITY  INTEREST IN
THE  COLLATERAL  AS  MORE  FULLY  SET  FORTH  IN  THE  SECURITY   AGREEMENT  AND
ACKNOWLEDGES  AND  AGREES  TO THE  WAIVER  OF JURY  TRIAL  PROVISIONS  SET FORTH
THEREIN.

         Attached hereto are supplemental  and/or  replacement  Schedules to the
Security Agreement, as applicable.

         An executed  copy of this  Joinder  shall be  delivered  to the Secured
Parties,  and the Secured Parties may rely on the matters set forth herein on or
after the date hereof. This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.

<PAGE>

         IN WITNESS  WHEREOF,  the  undersigned  has caused  this  Joinder to be
executed in the name and on behalf of the undersigned.

                                                     [Name of Additional Debtor]

                                                     By:
                                                     Name:
                                                     Title:

                                                     Address:

Dated:

<PAGE>

                                    [ANNEX B
                                       to
                                    SECURITY
                                    AGREEMENT

                                    THE AGENT

                  1.  Appointment.  The Secured Parties (all  capitalized  terms
         used  herein  and not  otherwise  defined  shall  have  the  respective
         meanings  provided in the  Security  Agreement to which this Annex B is
         attached (the "Agreement")), by their acceptance of the benefits of the
         Agreement,  hereby  designate  __________ (the "Agent") as the Agent to
         act as specified herein and in the Agreement.  Each Secured Party shall
         be deemed irrevocably to authorize the Agent to take such action on its
         behalf under the provisions of the Agreement and any other  Transaction
         Document  (as such term is defined in the  Debentures)  and to exercise
         such powers and to perform such duties  hereunder and thereunder as are
         specifically  delegated to or required of the Agent by the terms hereof
         and thereof and such other powers as are reasonably incidental thereto.
         The Agent may  perform  any of its duties  hereunder  by or through its
         agents or employees.

                  2.  Nature  of  Duties.  The  Agent  shall  have no  duties or
         responsibilities  except those  expressly  set forth in the  Agreement.
         Neither  the  Agent  nor any of its  partners,  members,  shareholders,
         officers, directors, employees or agents shall be liable for any action
         taken or omitted by it as such under the  Agreement  or hereunder or in
         connection herewith or therewith, be responsible for the consequence of
         any oversight or error of judgment or answerable  for any loss,  unless
         caused solely by its or their gross  negligence  or willful  conduct as
         determined  by a final  judgment  (not subject to further  appeal) of a
         court of  competent  jurisdiction.  The  duties of the  Agent  shall be
         mechanical and  administrative  in nature;  the Agent shall not have by
         reason of the Agreement or any other  Transaction  Document a fiduciary
         relationship in respect of any Debtor or any Secured Party; and nothing
         in the  Agreement  or any  other  Transaction  Document,  expressed  or
         implied,  is intended to or shall be so construed as to impose upon the
         Agent  any  obligations  in  respect  of the  Agreement  or  any  other
         Transaction Document except as expressly set forth herein and therein.

                  3. Lack of  Reliance on the Agent.  Independently  and without
         reliance  upon the Agent,  each Secured  Party,  to the extent it deems
         appropriate,   has  made  and  shall  continue  to  make  (i)  its  own
         independent investigation of the financial condition and affairs of the
         Debtors and its  subsidiaries  in connection  with such Secured Party's
         investment  in  the  Debtors,  the  creation  and  continuance  of  the
         Obligations,   the   transactions   contemplated   by  the  Transaction
         Documents,  and the taking or not  taking of any  action in  connection
         therewith,  and (ii) its own appraisal of the  creditworthiness  of the
         Debtors,  and of the value of the Collateral from time to time, and the
         Agent shall have no duty or  responsibility,  either  initially or on a
         continuing basis, to provide any Secured Party with any credit,  market
         or other  information  with respect  thereto,  whether  coming into its
         possession  before any Obligations are incurred or at any time or times
         thereafter.  The Agent shall not be  responsible  to the Debtors or any

<PAGE>

         Secured    Party   for   any   recitals,    statements,    information,
         representations or warranties herein or in any document, certificate or
         other writing delivered in connection  herewith,  or for the execution,
         effectiveness,   genuineness,  validity,  enforceability,   perfection,
         collectibility,  priority or  sufficiency of the Agreement or any other
         Transaction  Document, or for the financial condition of the Debtors or
         the value of any of the Collateral,  or be required to make any inquiry
         concerning  either the  performance  or observance of any of the terms,
         provisions  or  conditions  of the  Agreement or any other  Transaction
         Document,  or the financial  condition of the Debtors,  or the value of
         any of the  Collateral,  or the existence or possible  existence of any
         default or Event of Default under the Agreement,  the Debentures or any
         of the other Transaction Documents.

                  4. Certain Rights of the Agent. The Agent shall have the right
         to take any action with respect to the Collateral,  on behalf of all of
         the Secured Parties.  To the extent practical,  the Agent shall request
         instructions  from the Secured Parties with respect to any material act
         or action  (including  failure to act) in connection with the Agreement
         or any other  Transaction  Document,  and shall be  entitled  to act or
         refrain  from acting in  accordance  with the  instructions  of Secured
         Parties holding a majority in principal amount of Debentures  (based on
         then-outstanding  principal  amounts of  Debentures  at the time of any
         such determination);  if such instructions are not provided despite the
         Agent's request  therefor,  the Agent shall be entitled to refrain from
         such act or taking such action,  and if such action is taken,  shall be
         entitled to  appropriate  indemnification  from the Secured  Parties in
         respect of actions  to be taken by the Agent;  and the Agent  shall not
         incur  liability  to any  person or entity by reason of so  refraining.
         Without  limiting the  foregoing,  (a) no Secured  Party shall have any
         right of action  whatsoever  against the Agent as a result of the Agent
         acting or refraining from acting hereunder in accordance with the terms
         of the  Agreement or any other  Transaction  Document,  and the Debtors
         shall have no right to question or challenge  the  authority of, or the
         instructions  given to, the Agent pursuant to the foregoing and (b) the
         Agent shall not be required to take any action which the Agent believes
         (i) could reasonably be expected to expose it to personal  liability or
         (ii) is  contrary  to this  Agreement,  the  Transaction  Documents  or
         applicable law.

                  5. Reliance. The Agent shall be entitled to rely, and shall be
         fully  protected  in relying,  upon any  writing,  resolution,  notice,
         statement,   certificate,   telex,   teletype  or  telecopier  message,
         cablegram,  radiogram,  order or other  document or  telephone  message
         signed,  sent or made by the proper person or entity, and, with respect
         to  all  legal  matters  pertaining  to the  Agreement  and  the  other
         Transaction Documents and its duties thereunder, upon advice of counsel
         selected by it and upon all other matters  pertaining to this Agreement
         and the other  Transaction  Documents and its duties  thereunder,  upon
         advice of other experts selected by it.

<PAGE>

                  6.  Indemnification.  To the  extent  that  the  Agent  is not
         reimbursed  and  indemnified by the Debtors,  the Secured  Parties will
         jointly and severally  reimburse and indemnify the Agent, in proportion
         to  their  initially   purchased   respective   principal   amounts  of
         Debentures,  from and  against  any and all  liabilities,  obligations,
         losses, damages, penalties,  actions, judgments, suits, costs, expenses
         or disbursements of any kind or nature  whatsoever which may be imposed
         on, incurred by or asserted  against the Agent in performing its duties
         hereunder or under the Agreement or any other Transaction  Document, or
         in any way  relating  to or arising out of the  Agreement  or any other
         Transaction  Document  except for those  determined by a final judgment
         (not subject to further appeal) of a court of competent jurisdiction to
         have resulted  solely from the Agent's own gross  negligence or willful
         misconduct.  Prior to taking any action  hereunder as Agent,  the Agent
         may require each Secured Party to deposit with it sufficient sums as it
         determines  in good faith is  necessary  to protect the Agent for costs
         and expenses associated with taking such action.

                  7. Resignation by the Agent.

                  (a) The  Agent  may  resign  from the  performance  of all its
         functions  and duties  under the  Agreement  and the other  Transaction
         Documents  at any time by  giving 30 days'  prior  written  notice  (as
         provided in the Agreement) to the Debtors and the Secured Parties. Such
         resignation shall take effect upon the appointment of a successor Agent
         pursuant to clauses (b) and (c) below.

                  (b) Upon any such notice of resignation,  the Secured Parties,
         acting by a Majority  in  Interest,  shall  appoint a  successor  Agent
         hereunder.

                  (c) If a  successor  Agent  shall not have  been so  appointed
         within said  30-day  period,  the Agent shall then  appoint a successor
         Agent who shall serve as Agent until such time,  if any, as the Secured
         Parties  appoint a successor  Agent as provided  above.  If a successor
         Agent has not been appointed  within such 30-day period,  the Agent may
         petition  any court of competent  jurisdiction  or may  interplead  the
         Debtors and the Secured  Parties in a proceeding for the appointment of
         a  successor  Agent,  and all  fees,  including,  but not  limited  to,
         extraordinary  fees  associated  with the  filing of  interpleader  and
         expenses  associated  therewith,  shall be  payable  by the  Debtors on
         demand.

                  8. Rights  with  respect to  Collateral.  Each  Secured  Party
         agrees with all other  Secured  Parties and the Agent (i) that it shall
         not, and shall not attempt to,  exercise any rights with respect to its
         security  interest  in the  Collateral,  whether  pursuant to any other
         agreement or otherwise (other than pursuant to this Agreement), or take
         or institute  any action  against the Agent or any of the other Secured
         Parties in respect of the  Collateral  or its rights  hereunder  (other
         than any such action  arising  from the breach of this  Agreement)  and
         (ii) that such  Secured  Party has no other  rights with respect to the
         Collateral  other  than as set  forth in this  Agreement  and the other
         Transaction Documents.EXHIBIT 10.7

                              SUBSIDIARY GUARANTEE

     SUBSIDIARY GUARANTEE, dated as of August 31, 2005 (this "Guarantee"),  made
by each of the  signatories  hereto  (together  with any other  entity  that may
become a party hereto as provided herein,  (the  "Guarantors"),  in favor of the
purchasers  signatory (the  "Purchasers")  to that certain  Securities  Purchase
Agreement,  dated as of the date hereof, between Intraop Medical Corporation,  a
Nevada corporation (the "Company") and the Purchasers.

                              W I T N E S S E T H:

     WHEREAS,  pursuant to that certain Securities Purchase Agreement,  dated as
of the date hereof, by and between the Company and the Purchasers (the "Purchase
Agreement"), the Company has agreed to sell and issue to the Purchasers, and the
Purchasers  have agreed to purchase  from the Company the  Company's  Debentures
(the "Debentures"), subject to the terms and conditions set forth therein; and

     WHEREAS,  each Guarantor will directly benefit from the extension of credit
to the Company represented by the issuance of the Debentures; and

     NOW,  THEREFORE,  in  consideration  of  the  premises  and to  induce  the
Purchasers  to  enter  into  the  Purchase   Agreement  and  to  carry  out  the
transactions  contemplated  thereby,  each  Guarantor  hereby  agrees  with  the
Purchasers as follows:

     1.  Definitions.  Unless  otherwise  defined  herein,  terms defined in the
Purchase  Agreement and used herein shall have the meanings given to them in the
Purchase  Agreement.  The words "hereof," "herein," "hereto" and "hereunder" and
words  of  similar  import  when  used in this  Guarantee  shall  refer  to this
Guarantee as a whole and not to any particular provision of this Guarantee,  and
Section  and  Schedule   references  are  to  this  Guarantee  unless  otherwise
specified.  The  meanings  given  to  terms  defined  herein  shall  be  equally
applicable  to both the singular and plural forms of such terms.  The  following
terms shall have the following meanings:

          "Debt" shall mean (a) any  liabilities  of the  Guarantor for borrowed
     money or amounts  owed in excess of  $50,000  (other  than  trade  accounts
     payable  incurred in the ordinary course of business),  (b) all guaranties,
     endorsements and other contingent obligations in respect of indebtedness of
     others,  whether  or  not  the  same  are or  should  be  reflected  in the
     Guarantor's  balance  sheet (or the notes  thereto),  except  guaranties by
     endorsement of negotiable  instruments for deposit or collection or similar
     transactions in the ordinary course of business;  and (c) the present value
     of any lease  payments  by the  Guarantor  in excess of  $25,000  due under
     leases required to be capitalized in accordance with GAAP.

                                       1
<PAGE>

          "Guarantee"  means  this  Subsidiary  Guarantee,  as the  same  may be
     amended, supplemented or otherwise modified from time to time.

          "Obligations"  means the collective  reference to all  obligations and
     undertakings  of the Company of  whatever  nature,  monetary or  otherwise,
     under the Debentures,  the Purchase Agreement,  the Security Agreement, the
     Warrants,  the Registration  Rights Agreement or any other future agreement
     or obligations  undertaken by the Company to the Purchasers,  together with
     all  reasonable  attorneys'  fees,  disbursements  and all other  costs and
     expenses of  collection  incurred by  Purchasers  in enforcing  any of such
     Obligations and/or this Guarantee.

          "Permitted Debt" shall mean the individual and collective reference to
     the following:  (a)  Indebtedness  incurred in connection with the Purchase
     Agreement and the Convertible Debenture Financing,  (b) up to approximately
     $974,614  Indebtedness  existing on the date of the  Purchase  Agreement as
     described in Schedule 3.1(aa) attached to the Purchase Agreement and (c) 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;  and (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.

     2.  Guarantee.

          (a)  Guarantee.

               (i)  The    Guarantors    hereby,    jointly    and    severally,
                    unconditionally and irrevocably, guarantee to the Purchasers
                    and their respective successors,  indorsees, transferees and
                    assigns,  the prompt and complete payment and performance by
                    the Company  when due  (whether at the stated  maturity,  by
                    acceleration or otherwise) of the Obligations.

                                       2
<PAGE>

               (ii) Anything herein or in any other Transaction  Document to the
                    contrary  notwithstanding,  the  maximum  liability  of each
                    Guarantor   hereunder   and  under  the  other   Transaction
                    Documents  shall in no event  exceed the amount which can be
                    guaranteed by such Guarantor  under  applicable  federal and
                    state laws,  including  laws  relating to the  insolvency of
                    debtors, fraudulent conveyance or transfer or laws affecting
                    the rights of creditors  generally  (after  giving effect to
                    the right of contribution established in Section 2(b)).

               (iii) Each Guarantor  agrees that the Obligations may at any time
                    and from time to time exceed the amount of the  liability of
                    such  Guarantor  hereunder  without  impairing the guarantee
                    contained  in this  Section 2 or  affecting  the  rights and
                    remedies of the Purchasers hereunder.

               (iv) The  guarantee  contained  in this Section 2 shall remain in
                    full  force and  effect  until all the  Obligations  and the
                    obligations of each Guarantor under the guarantee  contained
                    in this  Section 2 shall have been  satisfied  by payment in
                    full.

               (v)  No payment made by the Company,  any of the Guarantors,  any
                    other guarantor or any other Person or received or collected
                    by the Purchasers  from the Company,  any of the Guarantors,
                    any other  guarantor  or any  other  Person by virtue of any
                    action or  proceeding  or any  set-off or  appropriation  or
                    application at any time or from time to time in reduction of
                    or in payment of the Obligations  shall be deemed to modify,
                    reduce,  release or  otherwise  affect the  liability of any
                    Guarantor  hereunder which shall,  notwithstanding  any such
                    payment  (other than any payment  made by such  Guarantor in
                    respect  of the  Obligations  or  any  payment  received  or
                    collected   from   such   Guarantor   in   respect   of  the
                    Obligations),  remain liable for the  Obligations  up to the
                    maximum  liability  of such  Guarantor  hereunder  until the
                    Obligations are paid in full.

               (vi) Notwithstanding  anything to the contrary in this Agreement,
                    with respect to any defaulted  non-monetary  Obligations the
                    specific  performance  of  which  by the  Guarantors  is not
                    reasonably  possible  (e.g.  the  issuance of the  Company's
                    Common  Stock),  the  Guarantors  shall  only be liable  for
                    making  the  Purchasers  whole on a  monetary  basis for the
                    Company's  failure to perform such Obligations in accordance
                    with the Transaction Documents.

                                       3
<PAGE>

          (b) Right of  Contribution.  Each Guarantor  hereby agrees that to the
     extent that a Guarantor shall have paid more than its  proportionate  share
     of any payment made hereunder, such Guarantor shall be entitled to seek and
     receive  contribution from and against any other Guarantor  hereunder which
     has not paid its  proportionate  share of such  payment.  Each  Guarantor's
     right of  contribution  shall be  subject  to the terms and  conditions  of
     Section 2(c). The provisions of this Section 2(b) shall in no respect limit
     the obligations  and  liabilities of any Guarantor to the  Purchasers,  and
     each  Guarantor  shall remain liable to the  Purchasers for the full amount
     guaranteed by such Guarantor hereunder.

          (c) No Subrogation.  Notwithstanding any payment made by any Guarantor
     hereunder or any set-off or  application  of funds of any  Guarantor by the
     Purchasers,  no Guarantor  shall be entitled to be subrogated to any of the
     rights of the Purchasers  against the Company or any other Guarantor or any
     collateral  security or guarantee or right of offset held by the Purchasers
     for the  payment of the  Obligations,  nor shall any  Guarantor  seek or be
     entitled to seek any contribution or reimbursement  from the Company or any
     other  Guarantor in respect of payments made by such  Guarantor  hereunder,
     until all amounts owing to the  Purchasers by the Company on account of the
     Obligations  are paid in full. If any amount shall be paid to any Guarantor
     on  account  of  such  subrogation  rights  at  any  time  when  all of the
     Obligations  shall not have been paid in full, such amount shall be held by
     such Guarantor in trust for the Purchasers,  segregated from other funds of
     such Guarantor,  and shall,  forthwith upon receipt by such  Guarantor,  be
     turned over to the  Purchasers in the exact form received by such Guarantor
     (duly indorsed by such  Guarantor to the  Purchasers,  if required),  to be
     applied  against the  Obligations,  whether  matured or unmatured,  in such
     order as the Purchasers may determine.

          (d) Amendments,  Etc. With Respect to the Obligations.  Each Guarantor
     shall  remain  obligated  hereunder   notwithstanding   that,  without  any
     reservation  of rights  against  any  Guarantor  and  without  notice to or
     further  assent by any  Guarantor,  any  demand  for  payment of any of the
     Obligations  made by the  Purchasers may be rescinded by the Purchasers and
     any of the Obligations continued, and the Obligations,  or the liability of
     any other Person upon or for any part thereof,  or any collateral  security
     or guarantee  therefor or right of offset with respect  thereto,  may, from
     time to time, in whole or in part, be renewed, extended, amended, modified,
     accelerated,   compromised,   waived,   surrendered   or  released  by  the
     Purchasers,  and the Purchase Agreement and the other Transaction Documents
     and any other documents executed and delivered in connection  therewith may
     be amended,  modified,  supplemented or terminated, in whole or in part, as
     the  Purchasers  may deem  advisable  from time to time, and any collateral
     security,  guarantee or right of offset at any time held by the  Purchasers
     for  the  payment  of the  Obligations  may  be  sold,  exchanged,  waived,
     surrendered  or  released.  The  Purchasers  shall  have no  obligation  to
     protect,  secure,  perfect  or insure  any Lien at any time held by them as
     security for the Obligations or for the guarantee contained in this Section
     2 or any property subject thereto.

                                       4
<PAGE>

          (e) Guarantee  Absolute and  Unconditional.  Each Guarantor waives any
     and all notice of the creation, renewal, extension or accrual of any of the
     Obligations  and notice of or proof of reliance by the Purchasers  upon the
     guarantee  contained  in this  Section  2 or  acceptance  of the  guarantee
     contained  in this  Section  2; the  Obligations,  and any of  them,  shall
     conclusively  be deemed to have been created,  contracted  or incurred,  or
     renewed,  extended,  amended  or waived,  in  reliance  upon the  guarantee
     contained in this  Section 2; and all dealings  between the Company and any
     of the Guarantors,  on the one hand, and the Purchasers, on the other hand,
     likewise shall be conclusively  presumed to have been had or consummated in
     reliance  upon the  guarantee  contained in this Section 2. Each  Guarantor
     waives to the extent  permitted  by law  diligence,  presentment,  protest,
     demand for  payment  and notice of  default  or  nonpayment  to or upon the
     Company or any of the  Guarantors  with  respect to the  Obligations.  Each
     Guarantor  understands  and agrees  that the  guarantee  contained  in this
     Section 2 shall be construed as a  continuing,  absolute and  unconditional
     guarantee of payment  without regard to (a) the validity or  enforceability
     of the Purchase  Agreement or any other  Transaction  Document,  any of the
     Obligations or any other collateral security therefor or guarantee or right
     of offset with respect thereto at any time or from time to time held by the
     Purchasers,  (b) any defense, set-off or counterclaim (other than a defense
     of payment or performance  or fraud or misconduct by Purchasers)  which may
     at any time be  available  to or be  asserted  by the  Company or any other
     Person against the  Purchasers,  or (c) any other  circumstance  whatsoever
     (with or without  notice to or knowledge of the Company or such  Guarantor)
     which  constitutes,  or might be construed to  constitute,  an equitable or
     legal  discharge of the Company for the  Obligations,  or of such Guarantor
     under the  guarantee  contained in this Section 2, in  bankruptcy or in any
     other instance.  When making any demand hereunder or otherwise pursuing its
     rights and remedies  hereunder  against any Guarantor,  the Purchasers may,
     but shall be under no obligation  to, make a similar demand on or otherwise
     pursue such rights and remedies as they may have  against the Company,  any
     other  Guarantor or any other Person or against any collateral  security or
     guarantee for the Obligations or any right of offset with respect  thereto,
     and any failure by the  Purchasers to make any such demand,  to pursue such
     other rights or remedies or to collect any payments  from the Company,  any
     other  Guarantor or any other Person or to realize upon any such collateral
     security  or  guarantee  or to  exercise  any such right of offset,  or any
     release of the Company, any other Guarantor or any other Person or any such
     collateral  security,  guarantee or right of offset,  shall not relieve any
     Guarantor of any obligation or liability hereunder, and shall not impair or
     affect the rights and remedies,  whether express, implied or available as a
     matter of law, of the Purchasers  against any  Guarantor.  For the purposes
     hereof,  "demand"  shall include the  commencement  and  continuance of any
     legal proceedings.

                                       5
<PAGE>

          (f)  Reinstatement.  The  guarantee  contained in this Section 2 shall
     continue to be effective,  or be reinstated,  as the case may be, if at any
     time payment,  or any part thereof,  of any of the Obligations is rescinded
     or must  otherwise  be  restored or  returned  by the  Purchasers  upon the
     insolvency, bankruptcy,  dissolution,  liquidation or reorganization of the
     Company or any  Guarantor,  or upon or as a result of the  appointment of a
     receiver,  intervenor or conservator of, or trustee or similar officer for,
     the Company or any Guarantor or any  substantial  part of its property,  or
     otherwise, all as though such payments had not been made.

          (g) Payments. Each Guarantor hereby guarantees that payments hereunder
     will be paid to the  Purchasers  without  set-off or  counterclaim  in U.S.
     dollars at the address set forth or referred to in the Purchase Agreement.

     3.  Representations  and  Warranties.   Each  Guarantor  hereby  makes  the
following representations and warranties to Purchasers as of the date hereof:

          (a)  Organization and  Qualification.  The Guarantor is a corporation,
     duly incorporated,  validly existing and in good standing under the laws of
     the  applicable  jurisdiction  set forth on Schedule 1, with the  requisite
     corporate  power and authority to own and use its properties and assets and
     to carry on its  business as  currently  conducted.  The  Guarantor  has no
     subsidiaries  other  than  those  identified  as  such  on  the  Disclosure
     Schedules to the Purchase Agreement.  The Guarantor is duly qualified to do
     business  and  is  in  good  standing  as a  foreign  corporation  in  each
     jurisdiction  in which the nature of the  business  conducted  or  property
     owned by it makes such qualification necessary, except where the failure to
     be so  qualified  or in good  standing,  as the  case  may be,  could  not,
     individually  or in the  aggregate,  (x)  adversely  affect  the  legality,
     validity or enforceability of any of this Guaranty in any material respect,
     (y) have a material  adverse effect on the results of  operations,  assets,
     prospects,  or financial condition of the Guarantor or (z) adversely impair
     in any  material  respect  the  Guarantor's  ability to perform  fully on a
     timely  basis its  obligations  under this  Guaranty (a  "Material  Adverse
     Effect").

          (b)  Authorization;  Enforcement.  The  Guarantor  has  the  requisite
     corporate  power  and  authority  to  enter  into  and  to  consummate  the
     transactions  contemplated by this Guaranty, and otherwise to carry out its
     obligations  hereunder.  The execution and delivery of this Guaranty by the
     Guarantor  and  the  consummation  by it of the  transactions  contemplated
     hereby have been duly authorized by all requisite  corporate  action on the
     part of the  Guarantor.  This Guaranty has been duly executed and delivered
     by the Guarantor and  constitutes  the valid and binding  obligation of the
     Guarantor  enforceable  against the Guarantor in accordance with its terms,
     except as such  enforceability  may be  limited by  applicable  bankruptcy,
     insolvency,   reorganization,   moratorium,  liquidation  or  similar  laws
     relating to, or affecting  generally the enforcement of,  creditors' rights
     and remedies or by other equitable principles of general application.

                                       6
<PAGE>

          (c) No Conflicts.  The  execution,  delivery and  performance  of this
     Guaranty by the  Guarantor  and the  consummation  by the  Guarantor of the
     transactions  contemplated thereby do not and will not (i) conflict with or
     violate any provision of its  Certificate  of  Incorporation  or By-laws or
     (ii) conflict with,  constitute a default (or an event which with notice or
     lapse of time or both would become a default)  under, or give to others any
     rights of termination,  amendment,  acceleration  or  cancellation  of, any
     agreement,  indenture or instrument  to which the Guarantor is a party,  or
     (iii) result in a violation of any law, rule, regulation,  order, judgment,
     injunction,  decree  or other  restriction  of any  court  or  governmental
     authority to which the  Guarantor is subject  (including  Federal and state
     securities  laws and  regulations),  or by which any  material  property or
     asset of the Guarantor is bound or affected,  except in the case of each of
     clauses (ii) and (iii), such conflicts, defaults, terminations, amendments,
     accelerations,  cancellations and violations as could not,  individually or
     in the aggregate, have or result in a Material Adverse Effect. The business
     of the Guarantor is not being conducted in violation of any law,  ordinance
     or regulation of any governmental  authority,  except for violations which,
     individually or in the aggregate, do not have a Material Adverse Effect.

          (d) Consents and  Approvals.  The  Guarantor is not required to obtain
     any  consent,  waiver,  authorization  or order of,  or make any  filing or
     registration  with, any court or other federal,  state,  local,  foreign or
     other  governmental  authority  or  other  person  in  connection  with the
     execution,  delivery and  performance  by the  Guarantor of this  Guaranty.
     Neither the Company nor any  Subsidiary  is in default  with respect to any
     Debt.

          (e) Purchase  Agreement.  The  representations  and  warranties of the
     Company  set  forth  in the  Purchase  Agreement  as  they  relate  to such
     Guarantor,  each of which is hereby incorporated  herein by reference,  are
     true and correct as of each time such representations are deemed to be made
     pursuant to such Purchase  Agreement,  and the Purchasers shall be entitled
     to rely on each of them as if they were fully set forth  herein,  provided,
     that  each  reference  in each  such  representation  and  warranty  to the
     Company's knowledge shall, for the purposes of this Section 3, be deemed to
     be a reference to such Guarantor's knowledge.

          (f) Foreign Law. Each Guarantor has consulted with appropriate foreign
     legal  counsel with respect to any of the above  representations  for which
     non-U.S.  law  is  applicable.  Such  foreign  counsel  have  advised  each
     applicable  Guarantor  that such counsel  knows of no reason why any of the
     above representations would not be true and accurate.  Such foreign counsel
     were provided with copies of this Subsidiary  Guarantee and the Transaction
     Documents prior to rendering their advice.

                                       7
<PAGE>

     4.  Covenants.

          (a) Each Guarantor covenants and agrees with the Purchasers that, from
     and after the date of this Guarantee until the Obligations  shall have been
     paid in full, such Guarantor shall take,  and/or shall refrain from taking,
     as the case may be, each  commercially  reasonable action that is necessary
     to be taken or not  taken,  as the case may be, so that no Event of Default
     is caused by the failure to take such action or to refrain from taking such
     action by such Guarantor.

          (b) So long as any of the Obligations are outstanding,  each Guarantor
     will not directly or indirectly on or after the date of this Guarantee:

               i. Other  than  Permitted  Debt,  except  with the prior  written
          consent of the Agent (as  defined in the  Security  Agreement),  enter
          into, create,  incur,  assume or suffer to exist any Debt 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
          that  is  senior  to,  or  pari  passu  with,  in  any  respect,  such
          Guarantor's obligations hereunder;

               ii. Other than Permitted Liens, 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  that is senior to, in any
          respect, such Guarantor's obligations hereunder;

               iii.  amend its  certificate  of  incorporation,  bylaws or other
          charter  documents so as to adversely  affect any rights of the Holder
          hereunder;

               iv. 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;

               v. enter into any agreement with respect to any of the foregoing;
          or

               vi. pay cash dividends on any equity securities of the Company.

                                       8
<PAGE>

     5.  Miscellaneous.

          (a)  Amendments  in Writing.  None of the terms or  provisions of this
     Guarantee may be waived, amended, supplemented or otherwise modified except
     in writing by the Purchasers.

          (b)  Notices.  All  notices,  requests  and  demands  to or  upon  the
     Purchasers  or any  Guarantor  hereunder  shall be  effected  in the manner
     provided  for in the  Purchase  Agreement;  provided  that any such notice,
     request  or  demand to or upon any  Guarantor  shall be  addressed  to such
     Guarantor at its notice address set forth on Schedule 5(b).

          (c)  No  Waiver  By  Course  Of  Conduct;   Cumulative  Remedies.  The
     Purchasers shall not by any act (except by a written instrument pursuant to
     Section 5(a)), delay,  indulgence,  omission or otherwise be deemed to have
     waived any right or remedy  hereunder or to have  acquiesced in any default
     under  the  Transaction  Documents  or  Event of  Default.  No  failure  to
     exercise, nor any delay in exercising,  on the part of the Purchasers,  any
     right, power or privilege  hereunder shall operate as a waiver thereof.  No
     single or partial exercise of any right, power or privilege hereunder shall
     preclude any other or further exercise thereof or the exercise of any other
     right,  power or  privilege.  A waiver  by the  Purchasers  of any right or
     remedy hereunder on any one occasion shall not be construed as a bar to any
     right or remedy which the  Purchasers  would  otherwise  have on any future
     occasion.  The rights and remedies herein  provided are cumulative,  may be
     exercised  singly or concurrently and are not exclusive of any other rights
     or remedies provided by law.

          (d) Enforcement Expenses; Indemnification.

               (i)  Each  Guarantor  agrees to pay, or reimburse the  Purchasers
                    for,  all its  costs and  expenses  incurred  in  collecting
                    against  such  Guarantor  under the  guarantee  contained in
                    Section 2 or otherwise  enforcing or  preserving  any rights
                    under this Guarantee and the other Transaction  Documents to
                    which  such  Guarantor  is  a  party,   including,   without
                    limitation, the reasonable fees and disbursements of counsel
                    to the Purchasers.

               (ii) Each  Guarantor  agrees to pay,  and to save the  Purchasers
                    harmless from, any and all  liabilities  with respect to, or
                    resulting  from any  delay  in  paying,  any and all  stamp,
                    excise,  sales  or  other  taxes  which  may be  payable  or
                    determined  to be  payable  in  connection  with  any of the
                    transactions contemplated by this Guarantee.

               (iii) Each  Guarantor  agrees to pay, and to save the  Purchasers
                    harmless from, any and all liabilities, obligations, losses,
                    damages,   penalties,   actions,  judgments,  suits,  costs,
                    expenses or disbursements  of any kind or nature  whatsoever
                    with  respect  to  the  execution,  delivery,   enforcement,
                    performance  and  administration  of this  Guarantee  to the
                    extent the  Company  would be  required to do so pursuant to
                    the Purchase Agreement.

                                       9
<PAGE>

               (iv) The  agreements in this Section  shall survive  repayment of
                    the  Obligations  and all other  amounts  payable  under the
                    Purchase Agreement and the other Transaction Documents.

          (e) Successor and Assigns.  This  Guarantee  shall be binding upon the
     successors  and assigns of each Guarantor and shall inure to the benefit of
     the Purchasers and their respective  successors and assigns;  provided that
     no  Guarantor  may  assign,  transfer  or  delegate  any of its  rights  or
     obligations  under this Guarantee  without the prior written consent of the
     Purchasers.

          (f)  Set-Off.   Each  Guarantor  hereby  irrevocably   authorizes  the
     Purchasers  at any  time and from  time to time  while an Event of  Default
     under  any  of  the  Transaction  Documents  shall  have  occurred  and  be
     continuing,  without notice to such Guarantor or any other  Guarantor,  any
     such  notice  being  expressly  waived by each  Guarantor,  to set-off  and
     appropriate and apply any and all deposits, credits, Debt or claims, in any
     currency, in each case whether direct or indirect,  absolute or contingent,
     matured or unmatured, at any time held or owing by the Purchasers to or for
     the credit or the account of such  Guarantor,  or any part  thereof in such
     amounts  as  the  Purchasers  may  elect,  against  and on  account  of the
     obligations and  liabilities of such Guarantor to the Purchasers  hereunder
     and claims of every nature and  description of the Purchasers  against such
     Guarantor, in any currency,  whether arising hereunder,  under the Purchase
     Agreement,  any other Transaction Document or otherwise,  as the Purchasers
     may elect,  whether or not the Purchasers  have made any demand for payment
     and although such obligations,  liabilities and claims may be contingent or
     unmatured.  The Purchasers shall notify such Guarantor promptly of any such
     set-off and the application made by the Purchasers of the proceeds thereof,
     provided that the failure to give such notice shall not affect the validity
     of such set-off and  application.  The rights of the Purchasers  under this
     Section  are in addition to other  rights and  remedies(including,  without
     limitation, other rights of set-off) which the Purchasers may have.

          (g) Counterparts. This Guarantee may be executed by one or more of the
     parties to this Guarantee on any number of separate counterparts (including
     by telecopy),  and all of said counterparts  taken together shall be deemed
     to constitute one and the same instrument.

          (h) Severability.  Any provision of this Guarantee which is prohibited
     or  unenforceable in any jurisdiction  shall, as to such  jurisdiction,  be
     ineffective to the extent of such prohibition or  unenforceability  without
     invalidating the remaining  provisions  hereof, and any such prohibition or
     unenforceability  in  any  jurisdiction  shall  not  invalidate  or  render
     unenforceable such provision in any other jurisdiction.

                                       10
<PAGE>

          (i) Section Headings.  The Section headings used in this Guarantee are
     for  convenience of reference  only and are not to affect the  construction
     hereof or be taken into consideration in the interpretation hereof.

          (j) Integration.  This Guarantee and the other  Transaction  Documents
     represent the agreement of the Guarantors  and the Purchasers  with respect
     to the  subject  matter  hereof  and  thereof,  and there are no  promises,
     undertakings,  representations or warranties by the Purchasers  relative to
     subject  matter  hereof and thereof not  expressly set forth or referred to
     herein or in the other Transaction Documents.

          (k) Governing Law. THIS GUARANTEE  SHALL BE GOVERNED BY, AND CONSTRUED
     AND  INTERPRETED  IN  ACCORDANCE  WITH,  THE LAW OF THE  STATE  OF NEW YORK
     WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS.

          (l)  Submission  to  Jurisdictional;  Waiver.  Each  Guarantor  hereby
     irrevocably and unconditionally:

               (i)  submits for itself and its  property in any legal  action or
                    proceeding   relating  to  this   Guarantee  and  the  other
                    Transaction  Documents  to  which  it  is a  party,  or  for
                    recognition  and  enforcement  of any  judgment  in  respect
                    thereof,  to the non-exclusive  general  jurisdiction of the
                    Courts of the State of New York, located in New York County,
                    New York, the courts of the United States of America for the
                    Southern District of New York, and appellate courts from any
                    thereof;

               (ii) consents that any such action or  proceeding  may be brought
                    in such courts and waives any  objection  that it may now or
                    hereafter have to the venue of any such action or proceeding
                    in any such  court or that  such  action or  proceeding  was
                    brought in an inconvenient  court and agrees not to plead or
                    claim the same;

               (iii) agrees  that  service  of  process  in any such  action  or
                    proceeding  may be  effected  by  mailing a copy  thereof by
                    registered or certified mail (or any  substantially  similar
                    form of mail),  postage  prepaid,  to such  Guarantor at its
                    address  referred to in the  Purchase  Agreement  or at such
                    other  address  of which  the  Purchasers  shall  have  been
                    notified pursuant thereto;

                                       11
<PAGE>

               (iv) agrees that nothing  herein shall affect the right to effect
                    service of process in any other  manner  permitted by law or
                    shall limit the right to sue in any other jurisdiction; and

               (v)  waives,  to the maximum  extent not  prohibited  by law, any
                    right it may have to claim or recover in any legal action or
                    proceeding   referred  to  in  this   Section  any  special,
                    exemplary, punitive or consequential damages.

          (m) Acknowledgements. Each Guarantor hereby acknowledges that:

               (i)  it has been advised by counsel in the negotiation, execution
                    and  delivery of this  Guarantee  and the other  Transaction
                    Documents to which it is a party;

               (ii) the Purchasers have no fiduciary  relationship  with or duty
                    to any Guarantor  arising out of or in connection  with this
                    Guarantee or any of the other Transaction Documents, and the
                    relationship  between the  Guarantors,  on the one hand, and
                    the Purchasers, on the other hand, in connection herewith or
                    therewith is solely that of debtor and creditor; and

               (iii) no  joint  venture  is  created  hereby  or  by  the  other
                    Transaction  Documents or otherwise  exists by virtue of the
                    transactions  contemplated  hereby among the  Guarantors and
                    the Purchasers.

          (n)  Additional  Guarantors.  The  Company  shall  cause  each  of its
     subsidiaries  formed or  acquired  on or  subsequent  to the date hereof to
     become a Guarantor  for all purposes of this  Guarantee  by  executing  and
     delivering an Assumption Agreement in the form of Annex 1 hereto.

          (o) Release of Guarantors. Subject to Section 2.6, each Guarantor will
     be released from all liability hereunder concurrently with the repayment in
     full of all amounts owed under the Purchase  Agreement,  the Debentures and
     the other Transaction Documents.

          (p) Seniority.  The  Obligations  of each of the Guarantors  hereunder
     rank senior in priority to any other Debt of such Guarantor.

          (q) Waiver of Jury Trial.  EACH  GUARANTOR  AND, BY  ACCEPTANCE OF THE
     BENEFITS HEREOF,  THE PURCHASERS,  HEREBY  IRREVOCABLY AND  UNCONDITIONALLY
     WAIVE  TRIAL BY JURY IN ANY LEGAL  ACTION OR  PROCEEDING  RELATING  TO THIS
     GUARANTEE AND FOR ANY COUNTERCLAIM THEREIN.

                                       12
<PAGE>

     IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be
duly executed and delivered as of the date first above written.

                                           INTRAOP MEDICAL SERVICES, INC.

                                           By: /s/ Donald A. Goer
                                              -------------------
                                              Name: Donald A. Goer
                                              Title: President

                                       13
<PAGE>

                                   SCHEDULE 1

                                   GUARANTORS

     The  following  are  the  names,   notice  addresses  and  jurisdiction  of
organization of each Guarantor.

                                                                  COMPANY
                                           JURISDICTION OF        OWNED BY
                                           INCORPORATION          PERCENTAGE
                                           -------------          ----------

----------

                                       14
<PAGE>

                                   Annex 1 to

                              SUBSIDIARY GUARANTEE

ASSUMPTION    AGREEMENT,    dated    as   of   ____   __,    ______    made   by
______________________________,  a  ______________  corporation (the "Additional
Guarantor"),  in favor of the  Purchasers  pursuant  to the  Purchase  Agreement
referred  to below.  All  capitalized  terms not defined  herein  shall have the
meaning ascribed to them in such Purchase Agreement.

                              W I T N E S S E T H :

     WHEREAS, Intraop Medical Corporation,  a Nevada corporation (the "Company")
and the Purchasers have entered into a Securities Purchase  Agreement,  dated as
of August ___, 2005 (as amended, supplemented or otherwise modified from time to
time, the "Purchase Agreement");

     WHEREAS,  in connection  with the Purchase  Agreement,  the Company and its
Subsidiaries  (other  than  the  Additional  Guarantor)  have  entered  into the
Subsidiary Guarantee, dated as of August ____, 2005 (as amended, supplemented or
otherwise  modified  from  time  to  time,  the  "Guarantee")  in  favor  of the
Purchasers;

     WHEREAS, the Purchase Agreement requires the Additional Guarantor to become
a party to the Guarantee; and

     WHEREAS,  the  Additional  Guarantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee;

                          NOW, THEREFORE, IT IS AGREED:

     1. Guarantee.  By executing and delivering this Assumption  Agreement,  the
Additional  Guarantor,  as provided  in Section  5.14 of the  Guarantee,  hereby
becomes a party to the Guarantee as a Guarantor  thereunder  with the same force
and effect as if originally  named therein as a Guarantor and,  without limiting
the generality of the foregoing,  hereby  expressly  assumes all obligations and
liabilities of a Guarantor  thereunder.  The  information set forth in Annex 1-A
hereto  is  hereby  added to the  information  set  forth in  Schedule  1 to the
Guarantee.  The Additional Guarantor hereby represents and warrants that each of
the  representations  and warranties  contained in Section 3 of the Guarantee is
true and  correct  on and as the date  hereof  as to such  Additional  Guarantor
(after giving effect to this Assumption  Agreement) as if made on and as of such
date.

     2.  Governing  Law.  THIS  ASSUMPTION  AGREEMENT  SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

                                       15
<PAGE>

     IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to
be duly executed and delivered as of the date first above written.

                                           [ADDITIONAL GUARANTOR]

                                           By:__________________________________
                                               Name:
                                               Title:

                                       16

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