Document:

EXHIBIT 10.6

                          SECURITIES PURCHASE AGREEMENT

         This Securities Purchase Agreement (this "Agreement") is dated as of
September 10, 2003, among Lifestream Technologies, Inc., a Nevada corporation
(the "Company"), and the purchasers identified on the signature pages hereto
(each, including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").

         WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and Rule 506 promulgated thereunder, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.

         NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:

                                    ARTICLE I
                                   DEFINITIONS

         1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:

                  "Affiliate" means any Person that, directly or indirectly
         through one or more intermediaries, controls or is controlled by or is
         under common control with a Person, as such terms are used in and
         construed under Rule 144 under the Securities Act.

                  "Capital Shares" means the Common Stock and any shares of any
         other class of common stock whether now or hereafter authorized, having
         the right to participate in the distribution of earnings and assets of
         the Company.

                  "Capital Shares Equivalents" means any securities, rights or
         obligations that are convertible into or exchangeable for or give any
         right to subscribe for or purchase, directly or indirectly, any Capital
         Shares of the Company or any warrants, options or other rights to
         subscribe for or purchase, directly or indirectly, Capital Shares or
         any such convertible or exchangeable securities.

                  "Closing" means the closing of the purchase and sale of the
         Securities pursuant to Section 2.1.

                  "Closing Date" means the Trading Day when all of the
         Transaction Documents have been executed and delivered by the
         applicable parties thereto, and all conditions precedent to the
         Purchasers' obligations to pay the Subscription Amount have been
         satisfied or waived.

<PAGE>

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means the common stock of the Company, par
         value $.001 per share, and any securities into which such common stock
         shall hereinafter have been reclassified into.

                  "Company Counsel" means Schneider Weinberger LLP.

                  "Debentures" means, the 8% Convertible Debentures due 36
         months from their date of issuance, issued by the Company to the
         Purchasers hereunder, in the form of Exhibit A.

                  "Disclosure Schedules" shall have the meaning ascribed to such
term in Section 3.1 hereof.

                  "Effective Date" means the date that the initial Registration
         Statement filed by the Company pursuant to the Registration Rights
         Agreement is first declared effective by the Commission.

                  "Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.

                  "Escrow Agreement" means the Escrow Agreement in substantially
         the form of Exhibit F hereto executed and delivered contemporaneously
         with this Agreement.

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

                  "FW" means Feldman Weinstein LLP with offices at 420 Lexington
         Avenue, Suite 2620, New York, New York 10170-0002.

                  "GAAP" shall have the meaning ascribed to such term in Section
3.1(h) hereof.

                  "Liens" shall have the meaning ascribed to such term in
Section 3.1(a) hereof.

                  "Losses" means any and all losses, claims, damages,
         liabilities, settlement costs and expenses, including without
         limitation costs of preparation and reasonable attorneys' fees.

                  "Material Adverse Effect" shall have the meaning assigned to
such term in Section 3.1(b) hereof.

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

                  "Principal Market" means initially the American Stock Exchange
         and shall also include the OTC Bulletin Board, New York Stock Exchange,
         the NASDAQ Small-Cap Market or the NASDAQ National Market, whichever is
         at the time the principal trading exchange or market for the Common
         Stock, based upon share volume.

                                       2
<PAGE>

                  "Proceeding" means an action, claim, suit, investigation or
         proceeding (including, without limitation, an investigation or partial
         proceeding, such as a deposition), whether commenced or threatened.

                  "Registration Statement" means the registration statement to
         be filed by the Company pursuant to the Registration Rights Agreement.

                  "Registration Rights Agreement" means the Registration Rights
         Agreement, dated the Closing Date, among the Company and the
         Purchasers, in the form of Exhibit B.

                  "Required Approvals" shall have the meaning ascribed to such
         term in Section 3.1(e) hereof.

                  "Required Minimum" means, as of any date, the maximum
         aggregate number of shares of Common Stock then issued or potentially
         issuable in the future pursuant to the Transaction Documents, including
         any Underlying Shares issuable upon exercise or conversion in full of
         all Warrants and Debentures, ignoring any conversion or exercise limits
         set forth therein, and assuming that the Set Price is at all times on
         and after the date of determination the lesser of the Set Price then in
         effect and 75% of the VWAP on the Trading Day immediately prior to the
         date of determination.

                  "Rule 144" means Rule 144 promulgated by the Commission
         pursuant to the Securities Act, as such Rule may be amended from time
         to time, or any similar rule or regulation hereafter adopted by the
         Commission having substantially the same effect as such Rule.

                  "SEC Reports" shall have the meaning ascribed to such term in
         Section 3.1(h) hereof.

                  "Securities" means the Debentures, the Warrants and the
         Underlying Shares.

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

                  "Set Price" shall have the meaning ascribed to such term in
         the Debentures.

                  "Shareholder Approval" means such approval as may be required
         by the applicable rules and regulations of the Principal Market (or any
         successor entity) from the shareholders of the Company with respect to
         the transactions contemplated by the Transaction Documents, including
         the issuance of all of the Underlying Shares and shares of Common Stock
         issuable upon exercise of the Warrants in excess of 19.9% of the
         Company's issued and outstanding Common Stock on the Closing Date.

                                       3
<PAGE>

                  "Subscription Amount" means, as to each Purchaser, the amount
         to be paid for Debentures purchased hereunder as specified below such
         Purchaser's name on the signature page of this Agreement and next to
         the heading "Subscription Amount", in United States Dollars and in
         immediately available funds.

                  "Subsidiary" means any subsidiary of the Company as set forth
         on Schedule 3.1(a) attached hereto.

                  "Trading Day" means any day during which the Principal Market
         shall be open for business.

                  "Transaction Documents" means this Agreement, the Debentures,
         the Warrants, the Registration Rights Agreement, the Escrow Agreement
         and any other documents or agreements executed in connection with the
         transactions contemplated hereunder.

                  "Underlying Shares" means the shares of Common Stock issuable
         upon conversion of the Debentures and upon exercise of the Warrants and
         issued and issuable in lieu of the cash payment of interest on the
         Debentures.

                  "Underlying Shares Registration Statement" or "Registration
         Statement" means a registration statement meeting the requirements set
         forth in the Registration Rights Agreement and covering the resale of
         the Underlying Shares by each Purchaser as provided for in the
         Registration Rights Agreement.

                  "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.

                  "Warrants" means collectively the Common Stock purchase
         warrants, in the form of Exhibit C delivered to the Purchasers at the
         Closing in accordance with Section 2.2 hereof.

                  "Warrant Shares" means the shares of Common Stock issuable
         upon exercise of the Warrants.

                                       4
<PAGE>

                                   ARTICLE II
                                PURCHASE AND SALE

         2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, the Company agrees to sell, and the Purchasers
agree to purchase in the aggregate, severally and not jointly, up to $3,250,000
principal amount of the Debentures. Upon satisfaction of the conditions set
forth in Section 2.2, the Closing shall occur at the offices of FW, or such
other location as the parties shall mutually agree.

         2.2 Conditions to Closing. Upon satisfaction or waiver by the party
sought to be benefited thereby of the conditions set forth in this Section 2.2,
the Closing shall occur.

                  (a) At or prior to the Closing, the Company shall deliver or
         cause to be delivered to the Escrow Agent for the benefit of each
         Purchaser:

                           (i) a Debenture with a principal amount equal to such
                  Purchaser's Subscription Amount, registered in the name of
                  such Purchaser;

                           (ii) a Warrant registered in the name of such
                  Purchaser to purchase up to a number of shares of Common Stock
                  equal to 50% of the shares underlying such Purchaser's
                  Debenture, with a term of 2 years and an exercise price equal
                  to $0.2144;

                           (iii) the legal opinion of Company Counsel, in the
                  form of Exhibit D attached hereto, addressed to the
                  Purchasers;

                           (iv) the Registration Rights Agreement duly executed
                  by the Company in the form of Exhibit B attached hereto;

                           (v) the written voting agreements of the officers and
                  directors of the Company to vote all Common Stock owned by
                  each of them as of the record date for the annual meeting of
                  shareholders of the Company in favor of increasing the
                  authorized number of shares of Common Stock to at least
                  250,000,000 which agreement shall be in the form of Exhibit F
                  attached hereto;

                           (vi) the Escrow Agreement; and

                           (vii) this Agreement, duly executed by the Company.

                  (b) At or prior to the Closing, each Purchaser shall deliver
         or cause to be delivered to the Escrow Agent the following:

                           (i) such Purchaser's Subscription Amount;

                                       5
<PAGE>

                           (ii) this Agreement, duly executed by such Purchaser;

                           (iii) the Escrow Agreement; and

                           (iv) the Registration Rights Agreement duly executed
                  by such Purchaser.

                  (c) All representations and warranties of the other party
         contained herein shall remain true and correct as of the Closing Date
         and all covenants of the other party shall have been performed if due
         prior to such date.

                  (d) There shall have been no Material Adverse Effect (as
         defined in Section 3.1(b)) with respect to the Company since the date
         hereof.

                  (e) From the date hereof to the Closing Date, trading in the
         Common Stock shall not have been suspended by the Commission (except
         for any suspension of trading of limited duration agreed to by the
         Company, which suspension shall be terminated prior to the Closing),
         and, at any time prior to the Closing Date, trading in securities
         generally as reported by Bloomberg Financial Markets shall not have
         been suspended or limited, or minimum prices shall not have been
         established on securities whose trades are reported by such service, or
         on the Principal Market, nor shall a banking moratorium have been
         declared either by the United States or New York State authorities, nor
         shall there have occurred any material outbreak or escalation of
         hostilities or other national or international calamity of such
         magnitude in its effect on, or any material adverse change in, any
         financial market which, in each case, in the reasonable judgment of the
         Purchasers, makes it impracticable or inadvisable to purchase the
         Debentures at the Closing.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (the "Disclosure Schedules") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.

                  (a) Subsidiaries. The Company has no direct or indirect
         subsidiaries. The Company owns, directly or indirectly, all of the
         capital stock or other equity interests of each Subsidiary free and
         clear of any lien, charge, security interest, encumbrance, right of
         first refusal or other restriction (collectively, "Liens"), and all the
         issued and outstanding shares of capital stock of each Subsidiary are
         validly issued and are fully paid, non-assessable and free of
         preemptive and similar rights. If the Company has no Subsidiaries, then
         references in the Transaction Documents to the Subsidiaries will be
         disregarded.

                                       6
<PAGE>

                  (b) Organization and Qualification. Each of the Company and
         the Subsidiaries is an entity duly incorporated or otherwise organized,
         validly existing and in good standing under the laws of the
         jurisdiction of its incorporation or organization (as applicable), with
         the requisite power and authority to own and use its properties and
         assets and to carry on its business as currently conducted. Neither the
         Company nor any Subsidiary is in violation of any of the provisions of
         its respective certificate or articles of incorporation, bylaws or
         other organizational or charter documents. Each of the Company and the
         Subsidiaries is duly qualified to do business and is in good standing
         as a foreign corporation or other entity 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: (i) adversely affect the legality, validity or
         enforceability of any Transaction Document, (ii) have or result in or
         be reasonably likely to have or result in a material adverse effect on
         the results of operations, assets, prospects, business or condition
         (financial or otherwise) of the Company and the Subsidiaries, taken as
         a whole, or (iii) adversely impair the Company's ability to perform
         fully on a timely basis its obligations under any of the Transaction
         Documents (any of (i), (ii) or (iii), a "Material Adverse Effect").

                  (c) Authorization; Enforcement. The Company has the requisite
         corporate power and authority to enter into and to consummate the
         transactions contemplated by each of the Transaction Documents and
         otherwise to carry out its obligations hereunder or thereunder. The
         execution and delivery of each of the Transaction Documents by the
         Company and the consummation by it of the transactions contemplated
         hereby or thereby have been duly authorized by all necessary action on
         the part of the Company and no further consent or action is required by
         the Company other than Required Approvals. Each of the Transaction
         Documents has been (or upon delivery will be) duly executed by the
         Company and, when delivered in accordance with the terms hereof, will
         constitute the valid and binding obligation of the Company enforceable
         against the Company in accordance with its terms, subject to applicable
         bankruptcy, insolvency, fraudulent conveyance, reorganization,
         moratorium and similar laws affecting creditors' rights and remedies
         generally and general principles of equity. Neither the Company nor any
         Subsidiary is in violation of any of the provisions of its respective
         certificate or articles of incorporation, by-laws or other
         organizational or charter documents.

                  (d) No Conflicts. The execution, delivery and performance of
         the Transaction Documents by the Company and the consummation by the
         Company of the transactions contemplated thereby do not and will not:
         (i) conflict with or violate any provision of the Company's or any
         Subsidiary's certificate or articles of incorporation, bylaws or other
         organizational or charter documents, or (ii) subject to obtaining the
         Required Approvals, 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 a Company or Subsidiary debt or otherwise) or other
         understanding to which the Company or any Subsidiary is a party or by

                                       7
<PAGE>

         which any property or asset of the Company or any Subsidiary is bound
         or affected, 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 Company or a
         Subsidiary is subject (including federal and state securities laws and
         regulations), or by which any property or asset of the Company or a
         Subsidiary is bound or affected; except in the case of each of clauses
         (ii) and (iii), such as could not, individually or in the aggregate,
         have or result in a Material Adverse Effect.

                  (e) Filings, Consents and Approvals. Neither the Company nor
         any Subsidiary is required to obtain any consent, waiver, authorization
         or order of, give any notice to, or make any filing or registration
         with, any court or other federal, state, local or other governmental
         authority or other Person in connection with the execution, delivery
         and performance by the Company of the Transaction Documents, other than
         (i) the filings required under Section 4.7, (ii) the filing with the
         Commission of the Underlying Shares Registration Statement, (iii) the
         notice and/or application(s) to each applicable Principal Market for
         the issuance and sale of the Debentures and Warrants and the listing of
         the Underlying Shares for trading thereon in the time and manner
         required thereby, and (iv) the filing of Form D with the Commission and
         applicable Blue Sky filings (collectively, the "Required Approvals").

                  (f) Issuance of the Securities. The Securities are duly
         authorized and, when issued and paid for in accordance with the
         applicable Transaction Documents, will be duly and validly issued,
         fully paid and non-assessable, free and clear of all Liens. The Company
         has reserved from its duly authorized capital stock a number of shares
         of Common Stock for issuance of the Underlying Shares at least equal to
         the Required Minimum on the date hereof. The Company has not, and to
         the knowledge of the Company, no Affiliate of the Company has sold,
         offered for sale or solicited offers to buy or otherwise negotiated in
         respect of any security (as defined in Section 2 of the Securities Act)
         that would be integrated with the offer or sale of the Securities in a
         manner that would require the registration under the Securities Act of
         the sale of the Securities to the Purchasers, or that would be
         integrated with the offer or sale of the Securities for purposes of the
         rules and regulations of any Principal Market.

                  (g) Capitalization. The number of shares and type of all
         authorized, issued and outstanding capital stock of the Company is set
         forth in the Disclosure Schedules attached hereto. No securities of the
         Company are entitled to preemptive or similar rights, and no Person has
         any right of first refusal, preemptive right, right of participation,
         or any similar right to participate in the transactions contemplated by
         the Transaction Documents. Except as a result of the purchase and sale
         of the Securities, there are no outstanding options, warrants, script
         rights to subscribe to, calls or commitments of any character
         whatsoever relating to, or securities, rights or obligations
         convertible into or exchangeable for, or giving any Person any right to
         subscribe for or acquire, any shares of Common Stock, or contracts,
         commitments, understandings or arrangements by which the Company or any
         Subsidiary is or may become bound to issue additional shares of Common

                                       8
<PAGE>

         Stock, or securities or rights convertible or exchangeable into shares
         of Common Stock. The issuance and sale of the Securities will not
         obligate the Company to issue shares of Common Stock or other
         securities to any Person (other than the Purchasers) and will not
         result in a right of any holder of Company securities to adjust the
         exercise, conversion, exchange or reset price under such securities.

                  (h) SEC Reports; Financial Statements. The Company has filed
         all reports required to be filed by it under the Exchange Act,
         including pursuant to Section 13(a) or 15(d) thereof, for the two years
         preceding the date hereof (or such shorter period as the Company was
         required by law to file such material) (the foregoing materials being
         collectively referred to herein as the "SEC Reports") on a timely basis
         or has received a valid extension of such time of filing and has filed
         any such SEC Reports prior to the expiration of any such extension. The
         Company has identified and made available to the Purchasers a copy of
         all SEC Reports filed within the 10 days preceding the date hereof. As
         of their respective dates, the SEC Reports complied in all material
         respects with the requirements of the Securities Act and the Exchange
         Act and the rules and regulations of the Commission promulgated
         thereunder, and none of the SEC Reports, when filed, contained any
         untrue statement of a material fact or omitted to state a material fact
         required to be stated therein or necessary in order to make the
         statements therein, in light of the circumstances under which they were
         made, not misleading. The financial statements of the Company included
         in the SEC Reports comply in all material respects with applicable
         accounting requirements and the rules and regulations of the Commission
         with respect thereto as in effect at the time of filing. Such financial
         statements have been prepared in accordance with generally accepted
         accounting principles applied on a consistent basis during the periods
         involved ("GAAP"), except as may be otherwise specified in such
         financial statements or the notes thereto, and fairly present in all
         material respects the financial position of the Company and its
         consolidated subsidiaries as of and for the dates thereof and the
         results of operations and cash flows for the periods then ended,
         subject, in the case of unaudited statements, to normal, immaterial,
         year-end audit adjustments.

                  (i) Material Changes. Since the date of the latest audited
         financial statements included within the SEC Reports, except as
         specifically disclosed in the SEC Reports: (i) there has been no event,
         occurrence or development that has had or that could result in a
         Material Adverse Effect, (ii) the Company has not incurred any
         liabilities (contingent or otherwise) other than (A) trade payables and
         accrued expenses incurred in the ordinary course of business consistent
         with past practice and (B) liabilities not required to be reflected in
         the Company's financial statements pursuant to GAAP or required to be
         disclosed in filings made with the Commission, (iii) the Company has
         not altered its method of accounting or the identity of its auditors,
         (iv) the Company has not declared or made any dividend or distribution
         of cash or other property to its stockholders or purchased, redeemed or
         made any agreements to purchase or redeem any shares of its capital
         stock, and (v) the Company has not issued any equity securities to any
         officer, director or Affiliate, except pursuant to existing Company
         stock option or similar plans.

                                       9
<PAGE>

                  (j) Litigation. There is no action, suit, inquiry, notice of
         violation, proceeding or investigation pending or, to the knowledge of
         the Company, threatened against or affecting the Company, any
         Subsidiary or any of their respective properties before or by any
         court, arbitrator, governmental or administrative agency or regulatory
         authority (federal, state, county, local or foreign) (collectively, an
         "Action") which: (i) adversely affects or challenges the legality,
         validity or enforceability of any of the Transaction Documents or the
         Securities or (ii) could, if there were an unfavorable decision,
         individually or in the aggregate, have or reasonably be expected to
         result in a Material Adverse Effect. Neither the Company nor any
         Subsidiary, nor any director or officer thereof, is or has been the
         subject of any Action involving a claim of violation of or liability
         under federal or state securities laws or a claim of breach of
         fiduciary duty. The Company does not have pending before the Commission
         any request for confidential treatment of information. There has not
         been, and to the knowledge of the Company, there is not pending or
         contemplated, any investigation by the Commission involving the Company
         or any current or former director or officer of the Company. The
         Commission has not issued any stop order or other order suspending the
         effectiveness of any registration statement filed by the Company or any
         Subsidiary under the Exchange Act or the Securities Act.

                  (k) Compliance. Neither the Company nor any Subsidiary: (i) is
         in default under or in violation of (and no event has occurred that has
         not been waived that, with notice or lapse of time or both, would
         result in a default by the Company or any Subsidiary under), nor has
         the Company or any Subsidiary received notice of a claim that it is in
         default under or that it is in violation of, any indenture, loan or
         credit agreement or any other agreement or instrument to which it is a
         party or by which it or any of its properties is bound (whether or not
         such default or violation has been waived), (ii) is in violation of any
         order of any court, arbitrator or governmental body, or (iii) is or has
         been in violation of any statute, rule or regulation of any
         governmental authority, except in each case as could not, individually
         or in the aggregate, have or result in a Material Adverse Effect.

                  (l) Labor Relations. No material labor dispute exists or, to
         the knowledge of the Company, is imminent with respect to any of the
         employees of the Company.

                  (m) Regulatory Permits. The Company and the Subsidiaries
         possess all certificates, authorizations and permits issued by the
         appropriate federal, state, local or foreign regulatory authorities
         necessary to conduct their respective businesses as described in the
         SEC Reports, except where the failure to possess such permits could
         not, individually or in the aggregate, have or reasonably be expected
         to result in a Material Adverse Effect ("Material Permits"), and
         neither the Company nor any Subsidiary has received any notice of
         proceedings relating to the revocation or modification of any Material
         Permit.

                                       10
<PAGE>

                  (n) Title to Assets. The Company and the Subsidiaries have
         good and marketable title in fee simple to all real property owned by
         them that is material to the business of the Company and the
         Subsidiaries and good and marketable title in all personal property
         owned by them that is material to the business of the Company and the
         Subsidiaries, in each case free and clear of all Liens, except for
         Liens as do not materially affect the value of such property and do not
         materially interfere with the use made and proposed to be made of such
         property by the Company and the Subsidiaries. Any real property and
         facilities held under lease by the Company and the Subsidiaries are
         held under valid, subsisting and enforceable leases of which the
         Company and the Subsidiaries are in compliance.

                  (o) Patents and Trademarks. The Company and the Subsidiaries
         have, or have rights to use, all patents, patent applications,
         trademarks, trademark applications, service marks, trade names,
         copyrights, licenses and other similar rights necessary or material for
         use in connection with their respective businesses as described in the
         SEC Reports and which the failure to so have could have a Material
         Adverse Effect (collectively, the "Intellectual Property Rights").
         Neither the Company nor any Subsidiary has received a written notice
         that the Intellectual Property Rights used by the Company or any
         Subsidiary violates or infringes upon the rights of any Person. To the
         knowledge of the Company, all such Intellectual Property Rights are
         enforceable and there is no existing infringement by another Person of
         any of the Intellectual Property Rights.

                  (p) Insurance. The Company and the Subsidiaries are insured by
         insurers of recognized financial responsibility against such losses and
         risks and in such amounts as are prudent and customary in the
         businesses in which the Company and the Subsidiaries are engaged. To
         the best of Company's knowledge, such insurance contracts and policies
         are accurate and complete. Neither the Company nor any Subsidiary has
         any reason to believe it will not be able to renew its existing
         insurance coverage as and when such coverage expires or to obtain
         similar coverage from similar insurers as may be necessary to continue
         its business without a significant increase in cost.

                  (q) Transactions With Affiliates and Employees. Except as
         required to be set forth in the SEC Reports, none of the officers or
         directors of the Company and, to the knowledge of the Company, none of
         the employees of the Company is presently a party to any transaction
         with the Company or any Subsidiary (other than for services as
         employees, officers and directors), including any contract, agreement
         or other arrangement providing for the furnishing of services to or by,
         providing for rental of real or personal property to or from, or
         otherwise requiring payments to or from any officer, director or such
         employee or, to the knowledge of the Company, any entity in which any
         officer, director, or any such employee has a substantial interest or
         is an officer, director, trustee or partner.

                  (r) Internal Accounting Controls. The Company and the
         Subsidiaries maintain a system of internal accounting controls
         sufficient to provide reasonable assurance that (i) transactions are
         executed in accordance with management's general or specific
         authorizations, (ii) transactions are recorded as necessary to permit
         preparation of financial statements in conformity with GAAP and to
         maintain asset accountability, (iii) access to assets is permitted only

                                       11
<PAGE>

         in accordance with management's general or specific authorization, and
         (iv) the recorded accountability for assets is compared with the
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences. The Company has established disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-14 and
         15d-14) for the Company and designed such disclosures controls and
         procedures to ensure that material information relating to the Company,
         including its subsidiaries, is made known to the certifying officers by
         others within those entities, particularly during the period in which
         the Company's Form 10-K or 10-Q, as the case may be, is being prepared.
         The Company's certifying officers have evaluated the effectiveness of
         the Company's controls and procedures as of a date within 90 days prior
         to the filing date of the Form 10-Q for the quarter ended June 30, 2003
         (such date, the "Evaluation Date"). The Company presented in the Form
         10-Q for the quarter ended June 30, 2003 the conclusions of the
         certifying officers about the effectiveness of the disclosure controls
         and procedures based on their evaluations as of the Evaluation Date.
         Since the Evaluation Date, there have been no significant changes in
         the Company's internal controls (as such term is defined in Item 307(b)
         of Regulation S-K under the Exchange Act) or, the Company's knowledge,
         in other factors that could significantly affect the Company's internal
         controls.

                  (s) Solvency/Indebtedness. Based on the financial condition of
         the Company as of the Closing Date: (i) the fair saleable value of the
         Company's assets exceeds the amount that will be required to be paid on
         or in respect of the Company's existing debts and other liabilities
         (including known contingent liabilities) as they mature; (ii) the
         Company's assets do not constitute unreasonably small capital to carry
         on its business for the current fiscal year as now conducted and as
         proposed to be conducted including its capital needs taking into
         account the particular capital requirements of the business conducted
         by the Company, and projected capital requirements and capital
         availability thereof; and (iii) the current cash flow of the Company,
         together with the proceeds the Company would receive, were it to
         liquidate all of its assets, after taking into account all anticipated
         uses of the cash, would be sufficient to pay all amounts on or in
         respect of its debt when such amounts are required to be paid. The
         Company does not intend to incur debts beyond its ability to pay such
         debts as they mature (taking into account the timing and amounts of
         cash to be payable on or in respect of its debt). The Company has no
         knowledge of any facts or circumstances which lead it to believe that
         it will file for reorganization or liquidation under the bankruptcy or
         reorganization laws of any jurisdiction within one year from the
         Closing Date. The SEC Reports set forth as of the dates thereof all
         outstanding secured and unsecured Indebtedness of the Company or any
         Subsidiary, or for which the Company or any Subsidiary has commitments.
         For the purposes of this Agreement, "Indebtedness" shall mean (a) any
         liabilities 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, whether or not the same are or should be reflected in the
         Company's balance sheet or the notes thereto, except guaranties by
         endorsement of negotiable instruments for deposit or collection in the
         ordinary course of business, and (c) the present value of any lease
         payments in excess of $50,000 due under leases required to be
         capitalized in accordance with GAAP. Neither the Company nor any
         Subsidiary is in default with respect to any Indebtedness.

                                       12
<PAGE>

                  (t) Certain Fees. Except as set forth in Section 5.2, no
         brokerage or finder's fees or commissions are or will be payable by the
         Company to any broker, financial advisor or consultant, finder,
         placement agent, investment banker, bank or other Person with respect
         to the transactions contemplated by this Agreement, and the Company has
         not taken any action that would cause any Purchaser to be liable for
         any such fees or commissions. The Company agrees that the Purchasers
         shall have no obligation with respect to any fees or with respect to
         any claims made by or on behalf of any Person for fees of the type
         contemplated by this Section with the transactions contemplated by this
         Agreement.

                  (u) Private Placement. Assuming the accuracy of the
         representations and warranties of the Purchasers set forth in Sections
         3.2(b)-(f), the offer, issuance and sale of the Securities to the
         Purchasers as contemplated hereby are exempt from the registration
         requirements of the Securities Act. The issuance and sale of the
         Securities hereunder does not contravene the rules and regulations of
         the Principal Market, except that shareholder approval is required for
         the Company to issue in excess of 19,999,999 shares of Common Stock
         under the Transaction Documents.

                  (v) Listing and Maintenance Requirements. The Company has not,
         in the 12 months preceding the date hereof, received notice from any
         Principal Market on which the Common Stock is or has been listed or
         quoted to the effect that the Company is not in compliance with the
         listing or maintenance requirements of such Principal Market. The
         Company is, and has no reason to believe that it will not in the
         foreseeable future continue to be, in compliance with all such listing
         and maintenance requirements.

                  (w) Registration Rights. The Company has not granted or agreed
         to grant to any Person any rights (including "piggy-back" registration
         rights) to have any securities of the Company registered with the
         Commission or any other governmental authority that have not been
         satisfied.

                  (x) Application of Takeover Protections. The Company and its
         Board of Directors have taken all necessary action, if any, in order to
         render inapplicable any control share acquisition, business
         combination, poison pill (including any distribution under a rights
         agreement) or other similar anti-takeover provision under the Company's
         Certificate of Incorporation (or similar charter documents) or the laws
         of its state of incorporation that is or could become applicable to the
         Purchasers as a result of the Purchasers and the Company fulfilling
         their obligations or exercising their rights under the Transaction
         Documents, including without limitation as a result of the Company's
         issuance of the Securities and the Purchasers' ownership of the
         Securities.

                  (y) Seniority. As of the Closing Date, no indebtedness of the
         Company is senior to the Debentures in right of payment, whether with
         respect to interest or upon liquidation or dissolution, or otherwise,
         other than indebtedness secured by purchase money security interests
         (which is senior only as to underlying assets covered thereby) and
         capital lease obligations (which is senior only as to the property
         covered thereby).

                                       13
<PAGE>

                  (z) Disclosure. The Company confirms that neither it nor any
         other Person acting on its behalf has provided any of the Purchasers or
         their agents or counsel with any information that constitutes or might
         constitute material, nonpublic information. The Company understands and
         confirms that the Purchasers will rely on the foregoing representations
         in effecting transactions in securities of the Company. All disclosure
         provided to the Purchasers regarding the Company, its business and the
         transactions contemplated hereby, including the Schedules to this
         Agreement, furnished by or on behalf of the Company with respect to the
         representations and warranties made herein are true and correct with
         respect to such representations and warranties and do not contain any
         untrue statement of a material fact or omit to state any material fact
         necessary in order to make the statements made therein, in light of the
         circumstances under which they were made, not misleading. The Company
         acknowledges and agrees that no Purchaser makes or has made any
         representations or warranties with respect to the transactions
         contemplated hereby other than those specifically set forth in Section
         3.2 hereof.

                  (aa) Tax Status. The Company and each of its Subsidiaries has
         made or filed all federal, state and foreign income and all other tax
         returns, reports and declarations required by any jurisdiction to which
         it is subject (unless and only to the extent that the Company and each
         of its Subsidiaries has set aside on its books provisions reasonably
         adequate for the payment of all unpaid and unreported taxes) and has
         paid all taxes and other governmental assessments and charges that are
         material in amount, shown or determined to be due on such returns,
         reports and declarations, except those being contested in good faith
         and has set aside on its books provisions reasonably adequate for the
         payment of all taxes for periods subsequent to the periods to which
         such returns, reports or declarations apply. There are no unpaid taxes
         in any material amount claimed to be due by the taxing authority of any
         jurisdiction, and the officers of the Company know of no basis for any
         such claim. The Company has not executed a waiver with respect to the
         statute of limitations relating to the assessment or collection of any
         foreign, federal, statue or local tax. None of the Company's tax
         returns is presently being audited by any taxing authority.

                  (bb) Acknowledgment Regarding Purchasers' Purchase of
         Securities. The Company acknowledges and agrees that the Purchasers are
         acting solely in the capacity of arm's length purchasers with respect
         to this Agreement and the transactions contemplated hereby. The Company
         further acknowledges that no Purchaser is acting as a financial advisor
         or fiduciary of the Company (or in any similar capacity) with respect
         to this Agreement and the transactions contemplated hereby and any
         statement made by any Purchaser or any of their respective
         representatives or agents in connection with this Agreement and the
         transactions contemplated hereby is not advice or a recommendation and
         is merely incidental to the Purchasers' purchase of the Securities. The
         Company further represents to each Purchaser that the Company's
         decision to enter into this Agreement has been based solely on the
         independent evaluation of the Company and its representatives.

                                       14
<PAGE>

                  (cc) No General Solicitation or Advertising in Regard to this
         Transaction. Neither the Company nor, to the knowledge of the Company,
         any of its directors or officers (i) has conducted or will conduct any
         general solicitation (as that term is used in Rule 502(c) of Regulation
         D) or general advertising with respect to the sale of the Debentures or
         the Warrants, or (ii) made any offers or sales of any security or
         solicited any offers to buy any security under any circumstances that
         would require registration of the Debentures, the Underlying Shares or
         the Warrants under the Securities Act or made any "directed selling
         efforts" as defined in Rule 902 of Regulation S.

                  (dd) No Disagreements with Accountants and Lawyers. There are
         no disagreements of any kind presently existing, or reasonably
         anticipated by the Company to arise, between the accountants and
         lawyers formerly or presently employed by the Company and the Company
         is current with respect to any fees owed to its accountants and
         lawyers.

                  (ee) Form S-3 Eligibility. The Company is eligible to register
         the resale of the Underlying Shares for resale by the Purchaser on Form
         S-3 promulgated under the Securities Act.

         3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:

                  (a) Organization; Authority. Such Purchaser is an entity duly
         organized, validly existing and in good standing under the laws of the
         jurisdiction of its organization with the requisite corporate or
         partnership power and authority to enter into and to consummate the
         transactions contemplated by the Transaction Documents and otherwise to
         carry out its obligations thereunder. The purchase by such Purchaser of
         the Securities hereunder has been duly authorized by all necessary
         action on the part of such Purchaser. Each of this Agreement, the
         Escrow Agreement and the Registration Rights Agreement has been duly
         executed by such Purchaser, and when delivered by such Purchaser in
         accordance with the terms hereof, will constitute the valid and legally
         binding obligation of such Purchaser, enforceable against it in
         accordance with its terms.

                  (b) Investment Intent. Such Purchaser is acquiring the
         Securities as principal for its own account for investment purposes
         only and not with a view to or for distributing or reselling such
         Securities or any part thereof, without prejudice, however, to such
         Purchaser's right, subject to the provisions of this Agreement, at all
         times to sell or otherwise dispose of all or any part of such
         Securities pursuant to an effective registration statement under the
         Securities Act or under an exemption from such registration and in
         compliance with applicable federal and state securities laws. Nothing
         contained herein shall be deemed a representation or warranty by such
         Purchaser to hold Securities for any period of time. Such Purchaser is

                                       15
<PAGE>

         acquiring the Securities hereunder in the ordinary course of its
         business. Such Purchaser does not have any agreement or understanding,
         directly or indirectly, with any Person to distribute any of the
         Securities.

                  (c) Purchaser Status. At the time such Purchaser was offered
         the Securities, it was, and at the date hereof it is, and on each date
         on which it exercises any Warrants or converts any Debentures it will
         be, an "accredited investor" as defined in Rule 501(a) under the
         Securities Act. Such Purchaser has not been formed solely for the
         purpose of acquiring the Securities. Such Purchaser is not a registered
         broker-dealer under Section 15 of the Exchange Act.

                  (d) Experience of such Purchaser. Such Purchaser, either alone
         or together with its representatives, has such knowledge,
         sophistication and experience in business and financial matters so as
         to be capable of evaluating the merits and risks of the prospective
         investment in the Securities, and has so evaluated the merits and risks
         of such investment. Such Purchaser is able to bear the economic risk of
         an investment in the Securities and, at the present time, is able to
         afford a complete loss of such investment.

                  (e) General Solicitation. Such Purchaser is not purchasing the
         Securities as a result of any advertisement, article, notice or other
         communication regarding the Securities published in any newspaper,
         magazine or similar media or broadcast over television or radio or
         presented at any seminar or any other general solicitation or general
         advertisement.

                                   ARTICLE IV
                         OTHER AGREEMENTS OF THE PARTIES

         4.1      Transfer Restrictions.

                  (a) The Securities may only be disposed of in compliance with
         state and federal securities laws. In connection with any transfer of
         Securities other than pursuant to an effective registration statement,
         to the Company or to an Affiliate of a Purchaser, the Company may
         require the transferor thereof to provide to the Company an opinion of
         counsel selected by the transferor and reasonably acceptable to the
         Company, the form and substance of which opinion shall be reasonably
         satisfactory to the Company, to the effect that such transfer does not
         require registration of such transferred Securities under the
         Securities Act. As a condition of transfer, any such transferee shall
         agree in writing to be bound by the terms of this Agreement and shall
         have the rights of a Purchaser under this Agreement and the
         Registration Rights Agreement.

                  (b) Each Purchaser agrees to the imprinting, so long as is
         required by this Section 4.1(b), of the following legend on any
         certificate evidencing Securities:

                                       16
<PAGE>

         [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
         SECURITIES ARE [EXERCISABLE] [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 REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH
         EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
         COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
         THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
         ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

                  The Company acknowledges and agrees that a Purchaser may from
         time to time pledge pursuant to a bona fide margin agreement or grant a
         security interest in some or all of the Securities and, if required
         under the terms of such arrangement, such Purchaser may transfer
         pledged or secured Securities to the pledgees or secured parties. If
         required by the Company's transfer agent in order to effect a pledge,
         the Company shall cause its counsel, at no cost to the Purchasers, to
         issue an opinion of counsel to the Company's transfer agent. Further,
         no notice shall be required of such pledge. At the appropriate
         Purchaser's expense, the Company will execute and deliver such
         reasonable documentation as a pledgee or secured party of Securities
         may reasonably request in connection with a pledge or transfer of the
         Securities, including the preparation and filing of any required
         prospectus supplement under Rule 424(b)(3) of the Securities Act or
         other applicable provision of the Securities Act to appropriately amend
         the list of Selling Stockholders thereunder.

                  (c) Certificates evidencing Underlying Shares shall not
         contain any legend (including the legend set forth in Section 4.1(b)
         hereof): (i) while a registration statement (including the Underlying
         Shares Registration Statement) covering the resale of such security is
         effective under the Securities Act, or (ii) following any sale of such
         Underlying Shares pursuant to Rule 144, or (iii) if such Underlying
         Shares are eligible for sale under Rule 144(k), or (iv) if such legend
         is not required under applicable requirements of the Securities Act
         (including judicial interpretations and pronouncements issued by the
         staff of the Commission); provided, however, in connection with the
         issuance of the Underlying Shares, each Purchaser, severally and not

                                       17
<PAGE>

         jointly with the other Purchasers, hereby agrees to adhere to and abide
         by all prospectus delivery requirements under the Securities Act and
         rules and regulations of the Commission. If all or any portion of a
         Debenture or Warrant is converted or exercised (as applicable) at a
         time when there is an effective registration statement to cover the
         resale of the Underlying Shares, or if such Underlying Shares may be
         sold under Rule 144(k) or if such legend is not otherwise required
         under applicable requirements of the Securities Act (including judicial
         interpretations thereof) then such Underlying Shares shall be issued
         free of all legends. The Company agrees that following the Effective
         Date or at such time as such legend is no longer required under this
         Section 4.1(c), it will, no later than three Trading Days following the
         delivery by a Purchaser to the Company or the Company's transfer agent
         of a certificate representing Underlying Shares issued with a
         restrictive legend (such third Trading Day, the "Legend Removal Date",
         deliver or cause to be delivered to such Purchaser a certificate
         representing such shares that is free from all restrictive and other
         legends. The Company may not make any notation on its records or give
         instructions to any transfer agent of the Company that enlarge the
         restrictions on transfer set forth in this Section.

                  (d) In addition to such Purchaser's other available remedies,
         the Company shall pay to a Purchaser, in cash, as liquidated damages
         and not as a penalty, for each $5,000 of Underlying Shares (based on
         the VWAP of the Common Stock on the date such Securities are submitted
         to the Company's transfer agent) delivered for removal of the
         restrictive legend and subject to this Section 4.1(c), $50 per Trading
         Day (increasing to $100 per Trading Day 3 Trading Days after such
         damages have begun to accrue) for each Trading Day after the Legend
         Removal Date until such certificate is delivered without a legend.

         4.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.

         4.3 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.

                                       18
<PAGE>

         4.4 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Principal Market.

         4.5      Reservation and Listing of Securities.

                  (a) The Company shall maintain a reserve from its duly
         authorized shares of Common Stock for issuance pursuant to the
         Transaction Documents in such amount as may be required to fulfill its
         obligations in full under the Transaction Documents.

                  (b) If, on any date, the number of authorized but unissued
         (and otherwise unreserved) shares of Common Stock is less than the
         Required Minimum on such date, then the Board of Directors of the
         Company shall use commercially reasonable efforts to amend the
         Company's certificate or articles of incorporation to increase the
         number of authorized but unissued shares of Common Stock to at least
         the Required Minimum at such time, as soon as possible and in any event
         not later than the 75th day after such date; provided, however, in any
         event the Company shall have increased the authorized number of shares
         of Common Stock to at least 250,000,000 on or before October 27, 2003
         (December 27, 2003 in the event of a full review by the Commission of
         the Proxy relating thereto).

                  (c) The Company shall, if applicable: (i) in the time and
         manner required by the Principal Market, prepare and file with such
         Principal Market an additional shares listing application covering a
         number of shares of Common Stock at least equal to the Required Minimum
         on the date of such application, (ii) take all steps necessary to cause
         such shares of Common Stock to be approved for listing on the Principal
         Market as soon as possible thereafter, (iii) provide to the Purchasers
         evidence of such listing, and (iv) maintain the listing of such Common
         Stock on any date at least equal to the Required Minimum on such date
         on such Principal Market or another Principal Market. In addition, the
         Company shall hold a special meeting of shareholders (which may also be
         at the annual meeting of shareholders) at the earliest practical date,
         but in no event later than October 27, 2003 (December 27, 2003 in the
         event of a full review by the Commission of the Proxy relating
         thereto), for the purpose of obtaining Shareholder Approval, with the
         recommendation of the Company's Board of Directors that such proposal
         be approved, and the Company shall solicit proxies from its
         shareholders in connection therewith in the same manner as all other
         management proposals in such proxy statement.

                  (d) Until the later of (i) 1 year following the Closing Date
         and (ii) the date that all Purchasers hold less than 20% of the
         principal amount of their respective Debentures initially purchased
         hereunder, the Company shall not undertake a reverse or forward stock
         split or reclassification of the Common Stock without the prior written
         consent of the Purchasers holding a majority in interest of the
         Debentures.

                                       19
<PAGE>

         4.6 Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the
Debentures set forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.

         4.7 Securities Laws Disclosure; Publicity. The Company shall, by 8:30
a.m. Eastern time on the Trading Day following the Closing Date, issue a press
release or file a Current Report on Form 8-K reasonably acceptable to each
Purchaser disclosing all material terms of the transactions contemplated hereby.
The Company and the Purchasers shall consult with each other in issuing any
press releases with respect to the transactions contemplated hereby.
Notwithstanding the foregoing, other than in any registration statement filed
pursuant to the Registration Rights Agreement and filings related thereto, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Principal Market, without the prior written consent of such Purchaser, except
to the extent such disclosure is required by law or Principal Market
regulations, in which case the Company shall provide each Purchaser with prior
notice of such disclosure.

         4.8 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.

         4.9 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables, capital lease obligations, and accrued expenses in the ordinary course
of the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.

         4.10 Reimbursement. If any Purchaser becomes involved in any capacity
in any Proceeding by or against any Person who is a stockholder of the Company,
solely as a result of such Purchaser's acquisition of the Securities under this
Agreement and without causation by any other activity, obligation, condition or
liability on the part of, or pertaining to such Purchaser and not to the
purchase of Securities pursuant to this Agreement, the Company will reimburse
such Purchaser, to the extent such reimbursement is not provided for in Section
4.11, for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations (and limitations thereon) of the Company under this paragraph shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any Affiliates of the Purchasers
who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal

                                       20
<PAGE>

representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement except to the extent any covenant or warranty owing to the
Company is breached.

         4.11 Indemnification of Purchasers. Subject to the provisions of this
Section 4.11, each party (the "Indemnifying Party") will indemnify and hold the
other parties and their directors, officers, shareholders, partners, employees
and agents (each, an "Indemnified Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Indemnified Party may
suffer or incur as a result of or relating to any breach of any of the
representations, warranties, covenants or agreements made by the Indemnifying
Party in this Agreement or in the other Transaction Documents. If any action
shall be brought against any Indemnified Party in respect of which indemnity may
be sought pursuant to this Agreement, such Indemnified Party shall promptly
notify the Indemnifying Party in writing, and the Indemnifying Party shall have
the right to assume the defense thereof with counsel of its own choosing. Any
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party except to the extent
that (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, (ii) the Indemnifying Party has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of such separate counsel, a
material conflict on any material issue between the position of the Indemnifying
Party and the position of such Indemnified Party. The Indemnifying Party will
not be liable to any Indemnified Party under this Agreement (i) for any
settlement by an Indemnified Party effected without the Indemnifying Party's
prior written consent, which shall not be unreasonably withheld or delayed; or
(ii) to the extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Indemnified Party's breach of any of the
representations, warranties, covenants or agreements made by the Purchasers in
this Agreement or in the other Transaction Documents. In no event shall the
liability of any Purchaser hereunder be greater in amount than the dollar amount
of the net proceeds received by such Purchaser upon the sale of the Securities.

         4.12 Shareholders Rights Plan. In the event that a shareholders rights
plan is adopted by the Company, no claim will be made or enforced by the Company
or any other Person that any Purchaser is an "Acquiring Person" under the plan
or in any way could be deemed to trigger the provisions of such plan by virtue
of receiving Securities under the Transaction Documents.

         4.13 Future Financings. From the date hereof until 120 days after the
Effective Date, other than as contemplated by this Agreement, neither the
Company nor any Subsidiary shall issue or sell any Capital Shares or Capital
Shares Equivalents. Notwithstanding anything herein to the contrary, the 120 day

                                       21
<PAGE>

period set forth in this Section 4.13 shall be extended for the number of
Trading Days during such period in which (y) trading in the Common Stock is
suspended by any Principal Market, or (z) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Underlying Shares. Notwithstanding anything to the contrary herein, this Section
4.13 shall not apply to the following (a) the granting or issuance of shares of
Common Stock or options to employees, officers and directors of the Company
pursuant to any stock option plan or employee incentive plan or agreement 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) the exercise of a
Debenture or any other security issued by the Company in connection with the
offer and sale of this Company's securities pursuant to this Agreement, or (c)
the exercise of or conversion of any Capital Shares Equivalents issued and
outstanding on the date hereof, provided that such securities have not been
amended since the date hereof, or (d) the issuance of Capital Shares or Capital
Shares Equivalents in connection with acquisitions, strategic investments or
strategic partnering arrangements, the primary purpose of which is not to raise
capital. Additionally, in additional to the limitations set forth herein, from
the date hereof until such time as there are no longer any Debentures, the
Company shall be prohibited from effecting or enter into an agreement to effect
any Subsequent Financing involving a "Variable Rate Transaction" or an "MFN
Transaction" (each as defined below). The term "Variable Rate Transaction" shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or (B)
with a conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock. The
term "MFN Transaction" shall mean a transaction in which the Company issues or
sells any securities in a capital raising transaction or series of related
transactions which grants to an investor the right to receive additional shares
based upon future transactions of the Company on terms more favorable than those
granted to the such investor in such offering. In addition, unless Shareholder
Approval has been obtained and deemed effective in accordance with Section
4.5(c), the Company shall not make any issuance whatsoever of Capital Shares or
Capital Shares Equivalents which would cause any adjustment of the Set Price
(other than pursuant to Section 4(c)(ii) of the Debentures) to the extent the
holders of Debentures would not be permitted, pursuant to Section 4(a)(ii)(B) of
the Debenture, to convert their respective outstanding Debentures and exercise
their respective Warrants in full.

         4.14 Participation in Future Financing. From the date hereof until the
first anniversary of the date hereof, the Company shall not effect a financing
of its Capital Shares or Capital Shares Equivalents (a "Subsequent Financing")
unless (i) the Company delivers to each Purchaser a written notice at least 5
Trading Days prior to the closing of such Subsequent Financing (the "Subsequent
Financing Notice") of its intention to effect such Subsequent Financing, which

                                       22
<PAGE>

Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Financing is proposed to be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (ii) such Purchaser shall not have notified the Company by
6:30 p.m. (New York City time) on the fifth (5th) Trading Day after its receipt
of the Subsequent Financing Notice of its willingness to provide (or to cause
its designee to provide), subject to completion of mutually acceptable
documentation, all or part of such financing to the Company on the same terms
set forth in the Subsequent Financing Notice. If one or more Purchasers shall
fail to so notify the Company of their willingness to participate in the
Subsequent Financing, the Company may effect the remaining portion of such
Subsequent Financing on the terms and to the Persons set forth in the Subsequent
Financing Notice; provided that the Company must provide the Purchasers with a
second Subsequent Financing Notice, and the Purchasers will again have the right
of first refusal set forth above in this Section 4.14, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within
60 Trading Days after the date of the initial Subsequent Financing Notice with
the Person identified in the Subsequent Financing Notice. In the event the
Company receives responses to Subsequent Financing Notices from Purchasers
seeking to purchase more than the financing sought by the Company in the
Subsequent Financing such Purchasers shall have the right to purchase their Pro
Rata Portion (as defined below) of such Subsequent Financing. "Pro Rata Portion"
is the ratio of (x) the principal amount of Debentures purchased by a Purchaser
and (y) the sum of the aggregate principal amount of Debentures issued
hereunder. If any Purchaser no longer holds any Debentures, then the Pro Rata
Portions shall be re-allocated among the remaining Purchasers. Notwithstanding
anything to the contrary herein, this Section 4.14 shall not apply to the
following (a) the granting of options to employees, officers and directors of
the Company pursuant to any stock option plan duly adopted 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, or (b) the exercise of the Debenture or any other security issued by
the Company in connection with the offer and sale of this Company's securities
pursuant to this Agreement, or (c) the exercise of or conversion of any Capital
Shares Equivalents issued and outstanding on the Original Issue Date, provided
such securities have not been amended since the date hereof, or (d) the issuance
of Capital Shares or Capital Shares Equivalents in connection with acquisitions,
strategic investments or strategic partnering arrangements, the primary purpose
of which is not to raise capital or subsequent exercise of any such Capital
Shares Equivalents.

                                    ARTICLE V
                                  MISCELLANEOUS

         5.1 Termination. This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before September 26, 2003; provided that no such termination will affect the
right of any party to sue for any breach by the other party (or parties).

                                       23
<PAGE>

         5.2 Fees and Expenses. At the Closing, the Company has agreed to
reimburse Palisades Master Fund, LP ("Palisades") up to $15,000 for its legal
fees and expenses. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
any Securities.

         5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

         5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature page attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day and an electronic confirmation of delivery is
received by the sender, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) three Trading Days
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such notices and communications are
those set forth on the signature pages hereof, or such other address as may be
designated in writing hereafter, in the same manner, by such Person.

         5.5 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.

         5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

         5.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.

                                       24
<PAGE>

         5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Sections 4.11 and 4.12.

         5.9 Governing Law; Venue; Waiver of Jury Trial. 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 party 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 (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, that such suit, action or proceeding is 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
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 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. The parties hereby waive all
rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of this Agreement, 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.

         5.10 Survival. The representations and warranties shall survive the
Closing for the applicable statue of limitations.

         5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

         5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

                                       25
<PAGE>

         5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant, the Purchaser shall be required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.

         5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

         5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

         5.16 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

         5.17 Usury. To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the

                                       26
<PAGE>

nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date forward, unless such
application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser's election.

         5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Palisades. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.

         5.19 Liquidated Damages. The Company's obligations to pay any
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
liquidated damages and other amounts have been paid notwithstanding the fact
that the instrument or security pursuant to which such liquidated damages or
other amounts are due and payable shall have been canceled.

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

                                       27
<PAGE>

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

                                            LIFESTREAM TECHNOLOGIES, INC.

                                            By:_______________________________
                                            Name:
                                            Title:

                                            Address for Notice:

                                            Attn:
                                            Tel:
                                            Fax:

With a copy to:

                                            Attn:
                                            Tel:
                                            Fax:

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       28
<PAGE>

                           PURCHASER'S SIGNATURE PAGE

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

PALISADES MASTER FUND L.P.                           Address for Notice:
By: PEF ADVISORS, LLC, its authorized agent          C/o PEF Advisors, LLC
                                                     200 Mansell Court East
By: ____________________________________             Ste. 550
         Name:                                       Roswell Ga  30076
         Title:                                      Attn: Paul T. Mannion, Jr.

Subscription Amount:  $750,000
Warrant Shares: 2,884,615

With a copy to:
(which shall not constitute notice)                  Feldman Weinstein LLP
                                                     420 Lexington Avenue
                                                     New York, New York 10170
                                                     Attn:  Robert F. Charron
                                                     Tel:  (212) 869-7000
                                                     Fax:  (212) 401-4741

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       29
<PAGE>

                           PURCHASER'S SIGNATURE PAGE

CRESCENT INTERNATIONAL LTD.            Address for Notice:
                                       c/o GreenLight (Switzerland) SA
                                       84, Avenue Louis-Casai
                                       CH 1216 Cointrin, Geneva
By: ____________________________       Switzerland
      Name:                            Attention: Mel Craw / Maxi Brezzi
      Title:                           Tel.: + 41 22 791 7170 / +41 22 791 7256
                                       Fax : +41 22 929 5394

Subscription Amount: $800,000
Warrant Shares: 3,076,923

                           [SIGNATURE PAGE CONTINUED]

                                       30
<PAGE>

                     PURCHASER'S SIGNATURE PAGE (CONT. . . )

ALPHA CAPITAL AG                            Address for Notice:
                                            Lettstrasse 32
                                            Furstentum 9490
By:  __________________________             Vaduz, Liechtenstein
        Name:                               Fax: 011-423 232 3196
        Title:                              Attn: Director

Subscription Amount:  $500,000
Warrant Shares: 1,923,077

                           [SIGNATURE PAGE CONTINUED]

                                       31
<PAGE>

                     PURCHASER'S SIGNATURE PAGE (CONT. . . )

ELLIS INTERNATIONAL LTD                   Address for Notice:
                                          53rd Street, Urbanization Obarrio
By:  __________________________           Attn: Swiss Tower, 16th Floor, Panama
       Name:                              Republic of Panama
       Title:                             Tel:  917-748-3501

Subscription Amount: $150,000
Warrant Shares: 576,923

                           [SIGNATURE PAGE CONTINUED]

                                       32
<PAGE>

                     PURCHASER'S SIGNATURE PAGE (CONT. . . )

BRISTOL INVESTMENT FUND, LTD.               Address for Notice:
                                            c/o Bristol DLP, LLC
                                            6363 Sunset Boulevard, 5th Floor
                                            Hollywood, California 90028
By:_________________________                Attn:  Amy Wang, Esq.
       Name:                                Fax:  (323) 468-8307
       Title:

Subscription Amount: $450,000
Warrant Shares: 1,730,769

                           [SIGNATURE PAGE CONTINUED]

                                       33
<PAGE>

                     PURCHASER'S SIGNATURE PAGE (CONT. . . )

CONGREGATION MISHKAN SHOLOM

By:  _________________________
         Name:
         Title:

Address for Notice:

Subscription Amount: $100,000
Warrant Shares: 384,615

                           [SIGNATURE PAGE CONTINUED]

                                       34
<PAGE>

                     PURCHASER'S SIGNATURE PAGE (CONT. . . )

GRYPHON MASTER FUND, LP

By:  ___________________________
         Name:
         Title:

Subscription Amount: $500,000
Warrant Shares: 1,923,077

Address for Notice:
500 Crescent Court, Suite #270
Dallas, Texas 75201
Tel: (214) 871-6783
Fax: (214) 871-6909
Attn: Ryan Wolters

                           [SIGNATURE PAGE CONTINUED]

                                       35
<PAGE>

                     PURCHASER'S SIGNATURE PAGE (CONT. . . )

LUCRATIVE INVESTMENTS                       Address for Notice:

By:  __________________________
        Name:                               Fax:
        Title:                              Attn:

Subscription Amount:  $50,000
Warrant Shares: 192,308

                                       36
<PAGE>

                             DISCLOSURE SCHEDULE FOR
                          SECURITIES PURCHASE AGREEMENT

         REPRESENTATIONS AND WARRANTIES MADE BY LIFESTREAM TECHNOLOGIES, INC. As
of September 10, 2003

Section 3.1

                  (a) Subsidiaries. The Company has two wholly owned
                  subsidiaries, Lifestream Diagnostics, Inc., and Secured
                  Interactive Technologies, Inc.

                  (b) Organization and Qualification. - No disclosures required.

                  (c) Authorization; Enforcement. - No disclosures required

                  (d) No Conflicts. - No disclosures required

                  (e) Filings, Consents and Approvals. - The issuance is subject
                  to approval by the American Stock Exchange.

                  (f) Issuance of the Securities. - See (g)

                  (g) Capitalization. The Company currently has 99,894,590
                  common shares issued and outstanding and no preferred shares
                  issued and outstanding. The Company is authorized to issue up
                  to 100,000,000 shares of common shares and 15,000,000 shares
                  of preferred shares. As described in the Company's most
                  recently filed 10Q-SB for March 31, 2003 and the accompanying
                  June 30, 2002 10-K, the Company has issued convertible notes,
                  warrants and contractual commitments that could result in the
                  issuance of additional shares of the Company's Common Stock.
                  The Company is requesting from its stockholder's, pursuant to
                  a special stockholder's meeting scheduled for October 8, 2003,
                  an increase in its authorized capital structure to
                  250,000,0000 shares of common stock.

                  (h) SEC Reports; Financial Statements. - No disclosures
                  required

                  (i) Material Changes. Since the release of the Company's March
                  31, 2003 Third Quarter 10Q-SB no material changes have
                  occurred that have not already been released to the public.
                  Specifically, the Company announced on June 30, 2003 its
                  request to seek an exemption from the American Stock Exchange
                  Rules.

                                       37
<PAGE>

                  (j) Litigation. The Company is past due in payments to several
                  leasing companies and vendors. The Company is currently in
                  negotiations with all debtors. The total dollar amount in
                  negotiation does not exceed $100,000. Our wholly owned
                  subsidiary, Lifestream Diagnostics, Inc., is the plaintiff in
                  patent infringement litigation, Civil Action No.
                  CV00-300-N-MHW, against Polymer Technology Systems, Inc., et
                  al, currently pending in the United States District Court for
                  the District of Idaho. The patent-in-suit is Thakore, U.S.
                  Patent No. 3,135,716 (see "Item 1. Business - Our Intellectual
                  Property Rights" in our Annual Report on Form 10-KSB for the
                  fiscal year ended June 30, 2002, for further details).

                  (k) Compliance. - No disclosures required

                  (l) Labor Relations. - No disclosures required

                  (m) Regulatory Permits. - No disclosures required

                  (n) Title to Assets. The Company does not own any real estate.
                  On May 1, 2003 the Company converted an existing operating
                  loan into a two-year fully secured term note with Capital
                  South Financial Services. The term note is fully secured by
                  the Company's Account Receivables, Inventory, property and
                  Equipment and Intellectual Property.

                  (o) Patents and Trademarks. - No disclosures required

                  (p) Insurance. - No disclosures required

                  (q) Transactions With Affiliates and Employees. - All
                  transactions with affiliates and employees are accurately
                  described in the Company's most recently filed 10-QSB and in
                  the June 30, 2002 10-KSB.

                  (r) Internal Accounting Controls. - No disclosures required

                  (s) Solvency/Indebtedness. The Company is not in default on
                  any material contracts or debt obligations. The Company's
                  Auditors are expected to issue a going concern qualification
                  on the Company's June 30, 2003 audit.

                  (t) Certain Fees. - No disclosures required

                  (u) Private Placement. The Company is requesting from its
                  stockholder's, pursuant to a special stockholder's meeting to
                  be held in October 2003, to approve this financing
                  transaction.

                  (v) Listing and Maintenance Requirements. See (i).

                  (w) Registration Rights. The Company will include up to
                  1,000,000 shares of common stock on the Form S-3 to be issued
                  to three consultants in lieu of cash payments.

                                       38
<PAGE>

                  (x) Application of Takeover Protections. - No disclosures
                  required

                  (y) Seniority. As of the Closing Date the Company has issued
                  senior securities to Capital South Financial Services (see
                  (n)) and RAB Capital.

                  (z) Disclosure. - No disclosures required

                  (aa) Tax Status. - No disclosures required

                  (bb) Acknowledgment Regarding Purchasers' Purchase of
                  Securities. - No disclosures required

                  (CC) NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
                  TRANSACTION. - No disclosures required

                  (dd) No Disagreements with Accountants and Lawyers. - No
                  disclosures required

                  (ee) Form S-3 Eligibility. - No disclosures required

                                       39EXHIBIT 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>

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

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

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

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

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

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

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

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

=============================== ========================= ======================= ------------------------------
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}]]