EXHIBIT 10.7

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

                                            Date of Issuance: September 10, 2003

                                                                $_______________


                            8% CONVERTIBLE DEBENTURE
                             DUE SEPTEMBER 10, 2006

         THIS DEBENTURE is one of a series of duly authorized and issued 8%
Convertible Debentures of Lifestream Technologies, Inc., a Nevada corporation,
having a principal place of business at ___________________________ (the
"Company"), designated as its 8% Convertible Debenture, due September __, 2006
(the "Debentures").

         FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), the principal
sum of $_______________ on September 10, 2006 or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder (the
"Maturity Date"), and to pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Debenture at the rate of 8% per
annum, payable quarterly on March 31, June 30, September 30 and December 31,
beginning on the first such date after the Original Issue Date and on each
Conversion Date (as to that principal amount then being converted) and on the
Maturity Date (except that, if any such date is not a Business Day, then such
payment shall be due on the next succeeding Business Day) (each such date, an
"Interest Payment Date"), in cash or shares of Common Stock at the Interest
Conversion Rate, or a combination thereof; provided, however, payment in shares
of Common Stock may only occur if: (i) there is an effective Underlying Shares
Registration Statement pursuant to which the Holder is permitted to utilize the


<PAGE>

prospectus thereunder to resell all of the shares of Common Stock to be issued
in lieu of cash (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future), (ii) the
Common Stock is listed for trading on a Principal Market (and the Company
believes, in good faith, that trading of the Common Stock on a Principal Market
will continue uninterrupted for the foreseeable future), (iii) there is a
sufficient number of authorized but unissued and otherwise unreserved shares of
Common Stock for the issuance of all of the shares issuable pursuant to the
Transaction Documents, including the shares to be issued for interest in lieu of
cash and (iv) there is then existing no Event of Default or event which, with
the passage of time or the giving of notice, would constitute and Event of
Default, and (v) the issuance of such shares, when added to the shares issued or
issuable upon conversion of the Debentures in full and issued and issuable upon
exercise of the Warrants in full would not violate the limitations set forth in
Section 4(a)(ii). Subject to the terms and conditions herein, the decision
whether to pay interest hereunder in shares of Common Stock or cash shall be at
the discretion of the Company. Not less than 20 Trading Days prior to each
Interest Payment Date, the Company shall provide the Holder with written notice
of its election to pay interest hereunder either in cash or shares of Common
Stock (the Company may indicate in such notice that the election contained in
such notice shall continue for later periods until revised). Within 20 Trading
Days prior to an Interest Payment Date, the Company's election (whether specific
to an Interest Payment Date or continuous) shall be irrevocable as to such
Interest Payment Date. Subject to the aforementioned conditions, failure to
timely provide such written notice shall be deemed an election by the Company to
pay the interest on such Interest Payment Date in cash. Interest shall be
calculated on the basis of a 360-day year and shall accrue daily commencing on
the Original Issue Date until payment in full of the principal sum, together
with all accrued and unpaid interest and other amounts which may become due
hereunder, has been made. Payment of interest in shares of Common Stock shall
otherwise occur pursuant to Section 4(b) and only for purposes of the payment of
interest in shares, the Interest Payment Date shall be deemed the Conversion
Date. Interest shall cease to accrue with respect to any principal amount
converted, provided that the Company in fact delivers the Underlying Shares
within the time period required by Section 4(b)(i). Interest hereunder will be
paid to the Person in whose name this Debenture is registered on the records of
the Company regarding registration and transfers of Debentures (the "Debenture
Register"). Except as otherwise provided herein, if at anytime the Company pays
interest partially in cash and partially in shares of Common Stock, then such
payment shall be distributed ratably among the Holders based upon the principal
amount of Debentures held by each Holder. All overdue accrued and unpaid
interest to be paid hereunder shall entail a late fee at the rate of 18% per
annum (or such lower maximum amount of interest permitted to be charged under
applicable law) ("Late Fee") which will accrue daily, from the date such
interest is due hereunder through and including the date of payment.
Notwithstanding anything to the contrary contained herein, if on any Interest
Payment Date the Company has elected to pay interest in Common Stock and is not
able to pay accrued interest in the form of Common Stock because it does not
then satisfy the conditions for payment in the form of Common Stock set forth
above, then, at the option of the Holder, the Company, in lieu of delivering
either shares of Common Stock pursuant to this Section 4 or paying the regularly


                                       2
<PAGE>

scheduled cash interest payment, shall deliver, within three Trading Days of
each applicable Interest Payment Date, an amount in cash equal to the product of
the number of shares of Common Stock otherwise deliverable to the Holder in
connection with the payment of interest due such Interest Payment Date and the
highest VWAP during the period commencing on the Interest Payment Date and
ending on the Trading Day prior to the date such payment is made. THE COMPANY
MAY NOT PREPAY ANY PORTION OF THE PRINCIPAL AMOUNT OF THIS DEBENTURE WITHOUT THE
PRIOR WRITTEN CONSENT OF THE HOLDER.

         This Debenture is subject to the following additional provisions:

         Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.

         Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement and
may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations. Prior to due
presentment to the Company for transfer of this Debenture, the Company and any
agent of the Company may treat the Person in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.

         Section 3. Events of Default.

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

                           i) any default in the payment of the principal of,
                  interest (including Late Fees) on, or liquidated damages in
                  respect of, any Debentures, free of any claim of
                  subordination, as and when the same shall become due and
                  payable (whether on a Conversion Date or the Maturity Date or
                  by acceleration or otherwise) which default is not cured, if
                  possible to cure, within 3 days of notice of such default sent
                  by the Holder;

                           ii) the Company shall fail to observe or perform any
                  other covenant, agreement or warranty contained in, or
                  otherwise commit any breach of any of the Transaction
                  Documents (other than a breach by the Company of its
                  obligations to deliver shares of Common Stock to the Holder
                  upon conversion or interest payment which breach is addressed
                  in clause (x) below) which is not cured, if possible to cure,
                  within 5 days of notice of such default sent by the Holder;



                                       3
<PAGE>

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

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

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

                                       4
<PAGE>

                           vi) the Company shall be a party to any Change of
                  Control Transaction , shall agree to sell or dispose of all or
                  in excess of 33% of its assets in one or more transactions
                  (whether or not such sale would constitute a Change of Control
                  Transaction) or shall redeem or repurchase more than a de
                  minimis number of its outstanding shares of Common Stock or
                  other equity securities of the Company (other than redemptions
                  of Underlying Shares and repurchases of shares of Common Stock
                  or other equity securities of departing officers and directors
                  of the Company; provided no repurchase shall exceed $100,000
                  for any officer or director);

                           vii) an Underlying Shares Registration Statement
                  shall not have been declared effective by the Commission on or
                  prior to the 150th calendar day after the Original Issue Date;

                           viii) if, during the Effectiveness Period (as defined
                  in the Registration Rights Agreement), the effectiveness of
                  the Underlying Shares Registration Statement lapses for any
                  reason or the Holder shall not be permitted to resell
                  Registrable Securities (as defined in the Registration Rights
                  Agreement) under the Underlying Shares Registration Statement,
                  in either case, for more than 15 consecutive Trading Days or
                  25 non-consecutive Trading Days during any 12 month period;
                  provided, however, that in the event that the Company is
                  negotiating a merger, consolidation, acquisition or sale of
                  all or substantially all of its assets or a similar
                  transaction and in the written opinion of counsel to the
                  Company, the Underlying Shares Registration Statement, would
                  be required to be amended to include information concerning
                  such transactions or the parties thereto that is not available
                  or may not be publicly disclosed at the time, the Company
                  shall be permitted an additional 10 consecutive Trading Days
                  (total in the aggregate to remain 25 non-consecutive Trading
                  Days) during any 12 month period relating to such an event;

                           ix) an Event (as defined in the Registration Rights
                  Agreement) shall not have been cured to the satisfaction of
                  the Holder prior to the expiration of thirty days from the
                  Event Date (as defined in the Registration Rights Agreement)
                  relating thereto (other than an Event resulting from a failure
                  of an Underlying Shares Registration Statement to be declared
                  effective by the Commission on or prior to the Effectiveness
                  Date (as defined in the Registration Rights Agreement), which
                  shall be covered by Section 3(a)(vii)); provided, however, the
                  Company's failure to file the Registration Statement on or
                  before October 27, 2003 shall not be deemed an Event of
                  Default hereunder if the Proxy relating to the increase in the
                  authorized number of shares outstanding required in the
                  Purchase Agreement receives a substantial review by the
                  Commission; provided, further, if the Registration Statement
                  is not filed on or before December 27, 2003, notwithstanding a
                  review, such event shall be deemed an Event of Default;

                                       5
<PAGE>

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

                           (xi) the Company shall fail for any reason to deliver
                  the payment in cash pursuant to a Buy-In (as defined herein)
                  within five days after notice thereof is delivered hereunder;
                  or

                           (xii) any Person shall breach the agreements
                  delivered to the initial Holders pursuant to Section 2.2(a)(v)
                  of the Purchase Agreement and the Company does not obtain
                  Shareholder Approval.


                  b) If any Event of Default occurs and is continuing, the full
         principal amount of this Debenture, together with interest and other
         amounts owing in respect thereof, to the date of acceleration shall
         become at the Holder's election, immediately due and payable in cash.
         The aggregate amount payable upon an Event of Default shall be equal to
         the Mandatory Prepayment Amount. Interest shall accrue on the Mandatory
         Prepayment Amount hereunder from the fifth (5th) day after such amount
         is due (being the date of an Event of Default) through the date of
         prepayment in full thereof in an amount equal to the Late Fee, to
         accrue daily from the date such payment is due hereunder through and
         including the date of payment. All Debentures for which the full
         prepayment price hereunder shall have been paid in accordance herewith
         shall promptly be surrendered to or as directed by the Company. The
         Holder need not provide and the Company hereby waives any presentment,
         demand, protest or other notice of any kind, and the Holder may
         immediately and without expiration of any grace period enforce any and
         all of its rights and remedies hereunder and all other remedies
         available to it under applicable law. Such declaration may be rescinded
         and annulled by Holder at any time prior to payment hereunder and the
         Holder shall have all rights as a Debenture holder until such time, if
         any, as the full payment under this Section shall have been received by
         it. No such rescission or annulment shall affect any subsequent Event
         of Default or impair any right consequent thereon.

         Section 4. Conversion.

                  a)       i) Holder's Conversion Right. At any time after the
         Original Issue Date until this Debenture is no longer outstanding, this
         Debenture shall be convertible into shares of Common Stock at the
         option of the Holder, in whole or in part at any time and from time to
         time (subject to the limitations on conversion set forth in Section
         4(a)(ii) hereof). The Holder shall effect conversions by delivering to


                                       6
<PAGE>

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

                           ii) Conversion Limitations.

                                    (A) Notwithstanding anything herein to the
                           contrary, if the Company has not obtained Shareholder
                           Approval (as defined below), if required by the
                           applicable rules and regulations of the Principal
                           Market (or any successor entity), then the Company
                           may not issue upon conversion of the Debentures, in
                           the aggregate, in excess of (1) 19.999% of the number
                           of shares of Common Stock outstanding on the Trading
                           Day immediately preceding the Original Issue Date,
                           (2) less any shares of Common Stock issued as payment
                           of interest or upon exercise of the Warrants issued
                           Holders of the Debentures on the Original Issue Date
                           pursuant to the Purchase Agreement (such number of
                           shares, the "Issuable Maximum"). Each Holder shall be
                           entitled to a portion of the Issuable Maximum equal
                           to the quotient obtained by dividing (x) the
                           aggregate principal amount of the Debenture(s) issued
                           and sold to such Holder on the Original Issue Date by
                           (y) the aggregate principal amount of all Debentures
                           issued and sold by the Company on the Original Issue
                           Date. If any Holder shall no longer hold the
                           Debenture(s), then such Holder's remaining portion of
                           the Issuable Maximum shall be allocated pro-rata
                           among the remaining Holders. If on any Conversion
                           Date: (1) the applicable Set Price then in effect is


                                       7
<PAGE>

                           such that the shares issuable under this Debenture on
                           any Conversion Date together with the aggregate
                           number of shares of Common Stock previously issued
                           upon conversion and issuable upon conversion in full
                           of all then outstanding Debentures would otherwise
                           exceed the Issuable Maximum, and (2) the Company's
                           shareholders shall not have previously approved the
                           transactions contemplated by the Transaction
                           Documents, as may be required by the applicable rules
                           and regulations of the Principal Market (or any
                           successor entity), if any (the "Shareholder
                           Approval"), then the Company shall issue to the
                           Holder requesting a conversion a number of shares of
                           Common Stock equal to such Holder's pro-rata portion
                           (which shall be calculated pursuant to the terms
                           hereof) of the Issuable Maximum and, with respect to
                           the remainder of the aggregate principal amount of
                           the Debentures (including any accrued interest) then
                           held by such Holder for which a conversion in
                           accordance with the applicable conversion price would
                           result in an issuance of shares of Common Stock in
                           excess of such Holder's pro-rata portion (which shall
                           be calculated pursuant to the terms hereof) of the
                           Issuable Maximum (the "Excess Principal"), the
                           Company shall be prohibited from converting such
                           Excess Principal, and shall notify the Holder of the
                           reason therefor; provided, however, if after October
                           27, 2003 (December 27, 2003 in the event of a full
                           review by the Commission of the Proxy relating
                           thereto) Shareholder Approval shall not have been
                           obtained, at the election of the Holder, the Company
                           shall pay the Holder within 3 Trading Days of notice
                           from the Holder, in cash, the Mandatory Prepayment
                           Amount with respect to such Holder's pro-rata share
                           of the Excess Principal (less the 30% default premium
                           in the case of (i)(A) therein). This Debenture shall
                           thereafter be unconvertible until and unless
                           Shareholder Approval is subsequently obtained or is
                           otherwise not required, but this Debenture shall
                           otherwise remain in full force and effect. The
                           Company and the Holder understand and agree that
                           shares of Common Stock issued to and then held by the
                           Holder as a result of conversions of Debentures shall
                           not be entitled to cast votes on any resolution to
                           obtain Shareholder Approval pursuant hereto.

                                    (B) The Holder shall not have the right to
                           convert any portion of this Debenture, pursuant to
                           Section 4(a)(i), Section 5b) or otherwise, to the
                           extent that after giving effect to such conversion,
                           the Holder (together with the Holder's affiliates),
                           as set forth on the applicable Notice of Conversion,
                           would beneficially own in excess of 4.99% of the
                           number of shares of the Common Stock outstanding
                           immediately after giving effect to such conversion.
                           For purposes of the foregoing sentence, the number of
                           shares of Common Stock beneficially owned by the
                           Holder and its affiliates shall include the number of
                           shares of Common Stock issuable upon conversion of
                           this Debenture with respect to which the
                           determination of such sentence is being made, but


                                       8
<PAGE>

                           shall exclude the number of shares of Common Stock
                           which would be issuable upon (A) conversion of the
                           remaining, nonconverted portion of this Debenture
                           beneficially owned by the Holder or any of its
                           affiliates and (B) exercise or conversion of the
                           unexercised or nonconverted portion of any other
                           securities of the Company (including, without
                           limitation, any other Debentures or the Warrants)
                           subject to a limitation on conversion or exercise
                           analogous to the limitation contained herein
                           beneficially owned by the Holder or any of its
                           affiliates. Except as set forth in the preceding
                           sentence, for purposes of this Section 4(a)(ii),
                           beneficial ownership shall be calculated in
                           accordance with Section 13(d) of the Exchange Act. To
                           the extent that the limitation contained in this
                           section applies, the determination of whether this
                           Debenture is convertible (in relation to other
                           securities owned by the Holder) and of which a
                           portion of this Debenture is convertible shall be in
                           the sole discretion of such Holder. To ensure
                           compliance with this restriction, the Holder will be
                           deemed to represent to the Company each time it
                           delivers a Notice of Conversion that such Notice of
                           Conversion has not violated the restrictions set
                           forth in this paragraph and the Company shall have no
                           obligation to verify or confirm the accuracy of such
                           determination. For purposes of this Section 4(a)(ii),
                           in determining the number of outstanding shares of
                           Common Stock, the Holder may rely on the number of
                           outstanding shares of Common Stock as reflected in
                           (x) the Company's most recent Form 10-Q or Form 10-K,
                           as the case may be, (y) a more recent public
                           announcement by the Company or (z) any other notice
                           by the Company or the Company's Transfer Agent
                           setting forth the number of shares of Common Stock
                           outstanding. Upon the written or oral request of the
                           Holder, the Company shall within two Trading Days
                           confirm orally and in writing to the Holder the
                           number of shares of Common Stock then outstanding. In
                           any case, the number of outstanding shares of Common
                           Stock shall be determined after giving effect to the
                           conversion or exercise of securities of the Company,
                           including this Debenture, by the Holder or its
                           affiliates since the date as of which such number of
                           outstanding shares of Common Stock was reported. The
                           provisions of this Section 4(a)(ii) may be waived by
                           the Holder upon, at the election of the Holder, not
                           less than 61 days' prior notice to the Company, and
                           the provisions of this Section 4(a)i) shall continue
                           to apply until such 61st day (or such later date, as
                           determined by the Holder, as may be specified in such
                           notice of waiver).

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

                                       9
<PAGE>

                           iv) Forced Conversion. Notwithstanding anything
                  herein to the contrary, if after the Effective Date each of
                  the VWAPs for any 15 consecutive Trading Days (such 15 Trading
                  Day period commencing only after the Effective Date) exceeds
                  then Set Price by more than 250%, the Company may, within 2
                  Trading Days of any such period, deliver a notice to the
                  Holder (a "Forced Conversion Notice" and the date such notice
                  is received by the Holder, the "Forced Conversion Notice
                  Date") to cause the Holder to immediately convert all or part
                  (and if part, pro-rata in proportion to each Holders initial
                  purchase of the Debentures) of the then outstanding principal
                  amount of Debentures pursuant to Section 4(a)(i). The Company
                  may only effect a Forced Conversion Notice if each of the
                  following shall be true: (i) the Company shall have duly
                  honored all conversions occurring by virtue of one or more
                  Conversion Notices prior to the Forced Conversion Date, (ii)
                  there is an effective Underlying Shares Registration Statement
                  pursuant to which the Holder is permitted to utilize the
                  prospectus thereunder to resell all of the Underlying Shares
                  issued to the Holder and all of the Underlying Shares as are
                  issuable to the Holder upon conversion in full of this
                  Debenture subject to the Forced Conversion Notice (and the
                  Company believes, in good faith, that such effectiveness will
                  continue uninterrupted for the foreseeable future), (iii) the
                  Common Stock is listed for trading on a Principal Market (and
                  the Company believes, in good faith, that trading of the
                  Common Stock on a Principal Market will continue uninterrupted
                  for the foreseeable future), (iv) all liquidated damages and
                  other amounts owing in respect of the Debentures and
                  Underlying Shares shall have been paid or will, concurrently
                  with the issuance of the Underlying Shares, be paid in cash;
                  (v) there is a sufficient number of authorized but unissued
                  and otherwise unreserved shares of Common Stock for the
                  issuance of all the Underlying Shares as are issuable to the
                  Holder upon conversion in full of the Debentures subject to
                  the Forced Conversion Notice; (vi) no Event of Default nor any
                  event that with the passage of time would constitute an Event
                  of Default has occurred and is continuing; (vii) such issuance
                  would be permitted in full without violating the limitations
                  set forth in clauses (A) or (B) of Section 4(a)(ii) and (viii)
                  no public announcement of a pending or proposed Change of
                  Control Transaction or Fundamental Transaction has occurred
                  that has not been consummated.

                  (b)      i) Not later than three Trading Days after any
         Conversion Date, the Company will deliver to the Holder a certificate
         or certificates representing the Underlying Shares which shall be free
         of restrictive legends and trading restrictions (other than those
         required by the Purchase Agreement) representing the number of shares
         of Common Stock being acquired upon the conversion of Debentures
         (including, if so timely elected by the Company, shares of Common Stock
         representing the payment of accrued interest) and (B) a bank check in
         the amount of accrued and unpaid interest (if the Company is required
         to pay accrued interest in cash). The Company shall, if available and
         if allowed under applicable securities laws, use its best efforts to
         deliver any certificate or certificates required to be delivered by the
         Company under this Section electronically through the Depository Trust


                                       10
<PAGE>

         Corporation or another established clearing corporation performing
         similar functions. If in the case of any Notice of Conversion such
         certificate or certificates are not delivered to or as directed by the
         applicable Holder by the fifth Trading Day after a Conversion Date, the
         Holder shall be entitled by written notice to the Company at any time
         on or before its receipt of such certificate or certificates
         thereafter, to rescind such conversion, in which event the Company
         shall immediately return the certificates representing the principal
         amount of Debentures tendered for conversion.

                           ii) If the Company fails for any reason to deliver to
                  the Holder such certificate or certificates pursuant to
                  Section 4(b)(i) by the third Trading Day after the Conversion
                  Date, the Company shall pay to such Holder, in cash, as
                  liquidated damages and not as a penalty, for each $5,000 of
                  principal amount being converted, $50 per Trading Day
                  (increasing to $100 per Trading Day after 3 Trading Days after
                  such damages begin to accrue and increasing to $200 per
                  Trading Day 6 Trading Days after such after such damages begin
                  to accrue) for each Trading Day after such third Trading Day
                  until such certificates are delivered. The Company's
                  obligations to issue and deliver the Underlying Shares upon
                  conversion of this Debenture in accordance with the terms
                  hereof are absolute and unconditional, irrespective of any
                  action or inaction by the Holder to enforce the same, any
                  waiver or consent with respect to any provision hereof, the
                  recovery of any judgment against any Person or any action to
                  enforce the same, or any setoff, counterclaim, recoupment,
                  limitation or termination, or any breach or alleged breach by
                  the Holder or any other Person of any obligation to the
                  Company or any violation or alleged violation of law by the
                  Holder or any other person, and irrespective of any other
                  circumstance which might otherwise limit such obligation of
                  the Company to the Holder in connection with the issuance of
                  such Underlying Shares; provided, however, such delivery shall
                  not operate as a waiver by the Company of any such action the
                  Company may have against the Holder. In the event a Holder of
                  this Debenture shall elect to convert any or all of the
                  outstanding principal amount hereof, the Company may not
                  refuse conversion based on any claim that the Holder or any
                  one associated or affiliated with the Holder of has been
                  engaged in any violation of law, agreement or for any other
                  reason, unless, an injunction from a court, on notice,
                  restraining and or enjoining conversion of all or part of this
                  Debenture shall have been sought and obtained and the Company
                  posts a surety bond for the benefit of the Holder in the
                  amount of 150% of the principal amount of this Debenture
                  outstanding, which is subject to the injunction, which bond
                  shall remain in effect until the completion of
                  arbitration/litigation of the dispute and the proceeds of
                  which shall be payable to such Holder to


                                       11
<PAGE>

         the extent it obtains judgment. In the absence of an injunction
         precluding the same, the Company shall issue Conversion Shares or, if
         applicable, cash, upon a properly noticed conversion. Nothing herein
         shall limit a Holder's right to pursue actual damages or declare an
         Event of Default pursuant to Section 3 herein for the Company's failure
         to deliver Conversion Shares within the period specified herein and
         such Holder shall have the right to pursue all remedies available to it
         at law or in equity including, without limitation, a decree of specific
         performance and/or injunctive relief. The exercise of any such rights
         shall not prohibit the Holders from seeking to enforce damages pursuant
         to any other Section hereof or under applicable law.

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

                                       12
<PAGE>

                  (c)      i) The conversion price in effect on any
                  Conversion Date shall be equal to $0.13 (subject to adjustment
                  herein)(the "Set Price").

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

                           iii) If the Company or any subsidiary thereof, as
                  applicable, at any time while Debentures are outstanding,
                  shall offer, sell, grant any option to purchase or offer, sell
                  or grant any right to reprice its securities, or otherwise
                  dispose of or issue (or announce any offer, sale, grant or any
                  option to purchase or other disposition) any Common Stock or
                  any equity or equity equivalent securities (including any
                  equity, debt or other instrument that is at any time over the
                  life thereof convertible into or exchangeable for Common
                  Stock) (collectively, "Common Stock Equivalents") entitling
                  any Person to acquire shares of Common Stock ("Dilutive
                  Issuance"), at an effective price per share less than the then
                  Set Price (if the holder of the Common Stock or Common Stock
                  Equivalent so issued shall at any time, whether by operation
                  of purchase price adjustments, reset provisions, floating
                  conversion, exercise or exchange prices or otherwise, or due
                  to warrants, options or rights per share which is issued in
                  connection with such issuance, be entitled to receive shares
                  of Common Stock at an effective price per share which is less
                  than the Set Price, such issuance shall be deemed to have
                  occurred for less than the Set Price), then, the Set Price
                  shall be adjusted (downward only) for such conversions as
                  Holders shall indicate in its Notice of Conversions to equal
                  the effective conversion, exchange or purchase price for such
                  Common Stock or Common Stock Equivalents (including any reset
                  provisions thereof) in such Dilutive Issuance. Such adjustment
                  shall be made whenever such Common Stock or Common Stock
                  Equivalents are issued. The Company shall notify the Holder in
                  writing, no later than the business day following the issuance
                  of any Common Stock or Common Stock Equivalent subject to this
                  section, indicating therein the applicable issuance price, or
                  of applicable reset price, exchange price, conversion price
                  and other pricing terms.

                                       13
<PAGE>

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

                           v) All calculations under this Section 4 shall be
                  made to the nearest cent or the nearest 1/100th of a share, as
                  the case may be. For purposes of this Section 4, the number of
                  shares of Common Stock outstanding as of a given date shall be
                  the sum of the number of shares of Common Stock (excluding
                  treasury shares, if any) outstanding.

                           vi) Whenever the Set Price is adjusted pursuant to
                  any of Section 4(c)(ii) - (v), the Company shall promptly mail
                  to each Holder a notice setting forth the Set Price after such
                  adjustment and setting forth a brief statement of the facts
                  requiring such adjustment. If the Company issues a variable
                  rate security, despite the prohibition thereon in the Purchase
                  Agreement, the Company shall be deemed to have issued Capital
                  Shares or Capital Shares Equivalents at the lowest possible
                  conversion or exercise price at which such securities may be
                  converted or exercised in the case of a Variable Rate
                  Transaction (as defined in the Purchase Agreement), or the
                  lowest possible adjustment price in the case of an MFN
                  Transaction (as defined in the Purchase Agreement).

                           vii) If (A) the Company shall declare a dividend (or
                  any other distribution) on the Common Stock; (B) the Company
                  shall declare a special nonrecurring cash dividend on or a
                  redemption of the Common Stock; (C) the Company shall
                  authorize the granting to all holders of the Common Stock
                  rights or warrants to subscribe for or purchase any shares of
                  capital stock of any class or of any rights; (D) the approval


                                       14
<PAGE>

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

                           viii) If, at any time while this Debenture is
                  outstanding, (A) the Company effects any merger or
                  consolidation of the Company with or into another Person, (B)
                  the Company effects any sale of all or substantially all of
                  its assets in one or a series of related transactions, (C) any
                  tender offer or exchange offer (whether by the Company or
                  another Person) is completed pursuant to which holders of
                  Common Stock are permitted to tender or exchange their shares
                  for other securities, cash or property, or (D) the Company
                  effects any reclassification of the Common Stock or any
                  compulsory share exchange pursuant to which the Common Stock
                  is effectively converted into or exchanged for other
                  securities, cash or property (in any such case, a "Fundamental
                  Transaction"), then upon any subsequent conversion of this
                  Debenture, the Holder shall have the right to receive, for
                  each Underlying Share that would have been issuable upon such
                  conversion absent such Fundamental Transaction, the same kind
                  and amount of securities, cash or property as it would have
                  been entitled to receive upon the occurrence of such
                  Fundamental Transaction if it had been, immediately prior to
                  such Fundamental Transaction, the holder of one share of
                  Common Stock (the "Alternate Consideration"). For purposes of
                  any such conversion, the determination of the Set Price shall


                                       15
<PAGE>

                  be appropriately adjusted to apply to such Alternate
                  Consideration based on the amount of Alternate Consideration
                  issuable in respect of one share of Common Stock in such
                  Fundamental Transaction, and the Company shall apportion the
                  Set Price among the Alternate Consideration in a reasonable
                  manner reflecting the relative value of any different
                  components of the Alternate Consideration. If holders of
                  Common Stock are given any choice as to the securities, cash
                  or property to be received in a Fundamental Transaction, then
                  the Holder shall be given the same choice as to the Alternate
                  Consideration it receives upon any conversion of this
                  Debenture following such Fundamental Transaction. To the
                  extent necessary to effectuate the foregoing provisions, any
                  successor to the Company or surviving entity in such
                  Fundamental Transaction shall issue to the Holder a new
                  debenture consistent with the foregoing provisions and
                  evidencing the Holder's right to convert such debenture into
                  Alternate Consideration. The terms of any agreement pursuant
                  to which a Fundamental Transaction is effected shall include
                  terms requiring any such successor or surviving entity to
                  comply with the provisions of this paragraph (c) and insuring
                  that this Debenture (or any such replacement security) will be
                  similarly adjusted upon any subsequent transaction analogous
                  to a Fundamental Transaction. If any Fundamental Transaction
                  constitutes or results in a Change of Control Transaction,
                  then at the request of the Holder delivered before the 90th
                  day after such Fundamental Transaction, the Company (or any
                  such successor or surviving entity) will purchase the
                  Debenture from the Holder for a purchase price, payable in
                  cash within five Trading Days after such request (or, if
                  later, on the effective date of the Fundamental Transaction),
                  equal to the 100% of the remaining unconverted principal
                  amount of this Debenture on the date of such request, plus all
                  accrued and unpaid interest thereon, plus all other accrued
                  and unpaid amounts due hereunder.

                           (ix) Notwithstanding the foregoing, no adjustment
                  will be made under this paragraph (c) in respect of (A) the
                  granting or issuance of shares of capital stock or of options
                  to employees, officers, directors and consultants of the
                  Company pursuant to any stock option plan agreement or
                  arrangement duly adopted or approved by a majority of the
                  non-employee members of the Board of Directors of the Company
                  or a majority of the members of a committee of non-employee
                  directors established for such purpose, (B) upon the exercise
                  of this Debenture or any other Debenture of this series or of
                  any other series or security issued by the Company in
                  connection with the offer and sale of this Company's
                  securities pursuant to the Purchase Agreement, or (C) upon the
                  exercise of or conversion of any Capital Shares Equivalents,
                  rights, options or warrants issued and outstanding on the
                  Original Issue Date, provided such securities have not been
                  amended since the date of the Purchase Agreement except as a
                  result of the Purchase Agreement, or (D) issuance of
                  securities in connection with acquisitions, strategic
                  investments, or strategic partnering arrangements, the primary
                  purpose of which is not to raise capital.

                                       16
<PAGE>

                  (d) The Company covenants that it will at all times reserve
         and keep available out of its authorized and unissued shares of Common
         Stock solely for the purpose of issuance upon conversion of the
         Debentures and payment of interest on the Debenture, each as herein
         provided, free from preemptive rights or any other actual contingent
         purchase rights of persons other than the Holders, not less than such
         number of shares of the Common Stock as shall (subject to any
         additional requirements of the Company as to reservation of such shares
         set forth in the Purchase Agreement) be issuable (taking into account
         the adjustments and restrictions of Section 4(b)) upon the conversion
         of the outstanding principal amount of the Debentures and payment of
         interest hereunder. The Company covenants that all shares of Common
         Stock that shall be so issuable shall, upon issue, be duly and validly
         authorized, issued and fully paid, nonassessable and, if the Underlying
         Shares Registration Statement is then effective under the Securities
         Act, registered for public sale in accordance with such Underlying
         Shares Registration Statement.

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

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

                  (g) Any and all notices or other communications or deliveries
         to be provided by the Holders hereunder, including, without limitation,
         any Notice of Conversion, shall be in writing and delivered personally,
         by facsimile, sent by a nationally recognized overnight courier
         service, addressed to the Company, at the address set forth above,
         facsimile number (____) ___-_______, ATTN: _____________ or such other
         address or facsimile number as the Company may specify for such
         purposes by notice to the Holders delivered in accordance with this
         Section. Any and all notices or other communications or deliveries to
         be provided by the Company hereunder shall be in writing and delivered
         personally, by facsimile, sent by a nationally recognized overnight


                                       17
<PAGE>

         courier service addressed to each Holder at the facsimile telephone
         number or address of such Holder appearing on the books of the Company,
         or if no such facsimile telephone number or address appears, at the
         principal place of business of the Holder. Any notice or other
         communication or deliveries hereunder shall be deemed given and
         effective on the earliest of (i) the date of transmission, if such
         notice or communication is delivered via facsimile at the facsimile
         telephone number specified in this Section prior to 5:30 p.m. (New York
         City time), (ii) the date after the date of transmission, if such
         notice or communication is delivered via facsimile at the facsimile
         telephone number specified in this Section later than 5:30 p.m. (New
         York City time) on any date and earlier than 11:59 p.m. (New York City
         time) on such date, (iii) the second Business Day following the date of
         mailing, if sent by nationally recognized overnight courier service, or
         (iv) upon actual receipt by the party to whom such notice is required
         to be given.

         Section 5. Definitions. For the purposes hereof, in addition to the
terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise
defined herein have the meanings given to such terms in the Purchase Agreement,
and (b) the following terms shall have the following meanings:

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

                  "Change of Control Transaction" means the occurrence after the
         date hereof of any of (i) an acquisition after the date hereof by an
         individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
         promulgated under the Exchange Act) of effective control (whether
         through legal or beneficial ownership of capital stock of the Company,
         by contract or otherwise) of in excess of 33% of the voting securities
         of the Company, or (ii) a replacement at one time or within a three
         year period of more than one-half of the members of the Company's board
         of directors which is not approved by a majority of those individuals
         who are members of the board of directors on the date hereof (or by
         those individuals who are serving as members of the board of directors
         on any date whose nomination to the board of directors was approved by
         a majority of the members of the board of directors who are members on
         the date hereof), or (iii) the execution by the Company of an agreement
         to which the Company is a party or by which it is bound, providing for
         any of the events set forth above in (i) or (ii).

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means the common stock, $.001 par value per
         share, of the Company and stock of any other class into which such
         shares may hereafter have been reclassified or changed.

                                       18
<PAGE>

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

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

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

                  "Late Fees" shall have the meaning set forth in the second
         paragraph to this Debenture.

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

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

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

                  "Purchase Agreement" means the Securities Purchase Agreement,
         dated as of September 10, 2003, to which the Company and the original
         Holder are parties, as amended, modified or supplemented from time to
         time in accordance with its terms.

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

                                       19
<PAGE>

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

                  "Set Price" shall have the meaning set forth in Section
         4(c)(i).

                  "Trading Day" means (a) a day on which the shares of Common
         Stock are traded on a Principal Market on which the shares of Common
         Stock are then listed or quoted, or (b) if the shares of Common Stock
         are not quoted on a Principal Market, a day on which the shares of
         Common Stock are quoted in the over-the-counter market as reported by
         the National Quotation Bureau Incorporated (or any similar organization
         or agency succeeding its functions of reporting prices); provided, that
         in the event that the shares of Common Stock are not listed or quoted
         as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a
         Business Day.

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

                  "Underlying Shares" means the shares of Common Stock issuable
         upon conversion of Debentures or as payment of interest in accordance
         with the terms hereof.

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

                  "VWAP" means, for any date, the price determined by the first
         of the following clauses that applies: (a) if the Common Stock is then
         listed or quoted on a Trading Market, the daily volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the Trading Market on which the Common Stock is then listed or
         quoted as reported by Bloomberg Financial L.P. (based on a trading day
         from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the
         Common Stock is not then listed or quoted on a Trading Market and if
         prices for the Common Stock are then quoted on the OTC Bulletin Board,
         the volume weighted average price of the Common Stock for such date (or
         the nearest preceding date) on the OTC Bulletin Board; (c) if the
         Common Stock is not then listed or quoted on the OTC Bulletin Board and
         if prices for the Common Stock are then reported in the "Pink Sheets"
         published by the National Quotation Bureau Incorporated (or a similar
         organization or agency succeeding to its functions of reporting
         prices), the most recent bid price per share of the Common Stock so
         reported; or (d) in all other cases, the fair market value of a share
         of Common Stock as determined by an independent appraiser selected in
         good faith by the Purchasers and reasonably acceptable to the Company.

                                       20
<PAGE>

         Section 6. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, interest and liquidated damages (if
any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct debt obligation of the
Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. As long as this Debenture is
outstanding, the Company shall not and shall cause it subsidiaries not to,
without the consent of the Holder, (a) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holder; (b) repay, repurchase or offer to repay, repurchase or otherwise acquire
more than a de minimis number of shares of its Common Stock or other equity
securities other than as to the Underlying Shares to the extent permitted or
required under the Transaction Documents or as otherwise permitted by the
Transaction Documents; or (c) enter into any agreement with respect to any of
the foregoing.

         Section 7. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed Debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.

         Section 8. So long as any portion of this Debenture is outstanding, the
Company will not and will not permit any of its subsidiaries to, directly or
indirectly, enter into, create, incur, assume or suffer to exist any
indebtedness 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 in any respect to the Company's obligations under the
Debentures without the prior consent of the Holder, which consent shall not be
unreasonably withheld.

         Section 9. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such


                                       21
<PAGE>

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

         Section 10. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.

         Section 11. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Debentures as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.

         Section 12. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.


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

                                       22
<PAGE>

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

                                    LIFESTREAM TECHNOLOGIES, INC.


                                    By:_________________________________________
                                       Name:
                                       Title:



                                       23
<PAGE>

                                     ANNEX A

                              NOTICE OF CONVERSION


The undersigned hereby elects to convert principal under the 8% Convertible
Debenture of Lifestream Technologies, Inc. (the "Company"), due on September 10,
2006, into shares of common stock, $.001 par value per share (the "Common
Stock"), of the Company according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.

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

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

Conversion calculations:
                        Date to Effect Conversion:

                        Principal Amount of Debentures to be Converted:

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

                        Number of shares of Common Stock to
                        be issued:


                        Signature:

                        Name:

                        Address:



<PAGE>

                                   SCHEDULE 1

                               CONVERSION SCHEDULE

8% Convertible Debentures due on September 10, 2006, in the aggregate principal
amount of $____________ issued by Lifestream Technologies, Inc. This Conversion
Schedule reflects conversions made under Section 4 of the above referenced
Debenture.

                                             Dated:
<TABLE>
<CAPTION>


=============================== ------------------------- ======================= ------------------------------

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


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</TABLE>