Document:

BP - x1-54935 - SLS International, Inc. Exhibit 10.2

Exhibit 10.2

LEASE AGREEMENT 

THIS LEASE AGREEMENT (the “Lease”) is made and entered into on February 10, 2006, and effective February 10, 2006, (the “Effective Date”) by and between FRS, LLC, a Missouri limited liability company (the “Landlord”), and SLS International, Inc., Delaware corporation (the “Tenant”).

W I T N E S S E T H:

1.

PREMISES.  Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord, as of the Effective Date, in accordance with the terms, provisions and conditions of this Lease, certain real property located at 1650 W. Jackson, Ozark, Christian County, Missouri (the “Land”), as generally depicted in the site sketch attached hereto as Exhibit “A” and as more particularly described in Exhibit “B”, both exhibits being attached hereto and made a part hereof by this reference, with all improvements thereon (the “Improvements”) (the Land and Improvements, and their replacements, if any, hereinafter collectively referred to as the “Premises”).

2.

LEASE TERM.  The term of the Lease (the “Lease Term”) shall be for a period of ten (10) years commencing on February 10, 2006 (the “Commencement Date”), and terminating on February 28, 2016.  As used in this Lease, the term “Lease Year” means a period of twelve (12) full, consecutive calendar months, commencing as of the Commencement Date.  Each succeeding Lease Year shall commence on the anniversary of the first Lease Year.  

3.

INTENTIONALLY OMITTED.    

4.

RENT.  During the Lease Term, Tenant agrees to pay to Landlord, without any prior demand therefore and without any deduction or setoff whatsoever, the following rent, which shall be due and payable in advance on the first day of each month during the Lease Term:

(a)

During the First through the Fifth Lease Years of the Lease Term, the sum of $450,000.00 per Lease Year, in equal monthly installments of $37,500.00.

(b)

During the Sixth through Tenth Lease Years of the Lease Term, the sum of $525,000.00 per Lease Year, in equal monthly installments of $43,750.00.

The rent shall be payable monthly, in advance, commencing as of the Commencement Date and on the first day of each and every month thereafter during the Lease Term.  Unless and until Tenant is notified in writing by Landlord, Tenant shall pay all rent and other amounts payable to Landlord under this Lease, by check or draft made payable to (i) Landlord, and mailed by Tenant to Landlord’s address shown on the signature page hereof, or (ii) to such other payee and/or address as the Landlord may hereafter furnish to Tenant in writing.  Rent for any fractional month shall be prorated based on the actual number of days in such fractional month, and for such proration purpose, all months shall be treated as a 30-day month.

 

5.

USE AND TITLE.  Tenant shall have the right to use the Premises (a) for use in Tenant’s audio component manufacturing operation, and (b) upon the written consent of Landlord which shall not be unreasonably withheld, for any other lawful purpose.  Tenant shall promptly comply with all valid regulations, orders, ordinances and laws of legally-constituted authorities applicable to the use and occupancy of the Premises.  Tenant shall not perform any act or carry on any practice which may injure the Premises or be a nuisance or menace.  Tenant shall have and hold quiet and peaceable use and possession of the Premises during the entire Lease Term.  Upon the expiration or termination of this Lease, the Premises (which includes any Leasehold Improvements and Alterations to the Premises as described and defined in Paragraph 8) as well as any replacements of Improvements shall remain the property of Landlord and shall be returned to Landlord in good repair and condition, ordinary wear and tear and casualty (as hereinafter provided for) excepted.

6.

COVENANT AGAINST LIENS.  Tenant shall keep the Premises free and clear of liens and encumbrances of any kind.  If, because of any act or omission of Tenant, any mechanic’s lien or other lien, charge or order for the payment of money shall be filed against Landlord or against the Premises or any portion thereof, Tenant shall, at its own cost and expense, cause the same to be discharged of record or bonded in a manner sufficient to allow a title insurer to insure against said claim within ninety (90) days after written notice from Landlord to Tenant of the filing thereof; and Tenant shall indemnify and hold harmless Landlord against and from all costs, liabilities, suits, penalties, claims and demands resulting therefrom, including reasonable fees of Landlord’s attorneys.

7.

MAINTENANCE, REPAIRS AND REPLACEMENTS.  Tenant, at its sole expense, shall keep and maintain the Premises (including, but not limited to, all heating, air conditioning, plumbing and electrical equipment, driveways and parking areas) in good repair and condition and shall make all repairs, replacements and renewals, whether structural or non-structural, foreseen or unforeseen, ordinary or extraordinary, which are necessary to put and maintain the Premises in such a state of good repair and condition.  All repairs, replacements and renewals required by this Paragraph 7 to be performed by Tenant shall be made promptly, as and when necessary, and shall be in quality and class at least equal to the original work.  Should Tenant, in an effort to maintain the Premises in a state of good repair and condition, provide any replacements to any Improvements constituting part of the Premises, said replacements shall be the Landlord’s property to be retained by Landlord at the expiration or termination of this Lease and shall become a part of the Improvements as that term is used in this Lease.  Tenant shall be responsible for all cleaning, landscaping, mowing, snow removal, and garbage and refuse removal expenses with respect to the Premises.  In addition, Tenant shall keep the Premises in a safe and sanitary condition as required by all applicable governmental laws, codes, and regulations.  It is understood that Tenant is not required to maintain the Premises in a condition equal to new, but Tenant shall keep and maintain the Premises in such a manner so as to minimize, as far as practicable, the effects of use, decay and weather.  Landlord shall not be required to maintain all or any part of the Premises.  If the Tenant defaults in making any repairs, replacements or renewals required by this Paragraph to the Premises, the Landlord may, but shall not be required to, make such repairs, replacements or renewals for the account of the Tenant, and the expense thereof shall constitute and be collectable as additional rent.  Nothing herein shall imply any duty on the part of Landlord, however, to effectuate any such repairs, 

replacements or renewals and the performance thereof by the Landlord shall not constitute a waiver of any default by Tenant.

8.

FIXTURES AND IMPROVEMENTS.  

Tenant may, at its own and sole cost and expense, and (i) after giving Landlord notice in writing of its intention to do so along with a copy of all architectural plans and specifications and related government permits and (ii) upon Landlord’s written consent thereto, make “Leasehold Improvements and Alterations” to the Premises.  Leasehold Improvements and Alterations are defined for use herein to include, but are not limited to, additions or modifications to the Improvements, the installation of additional pole and other sign structures, built-in fixtures, trade fixtures or other furniture, fixtures and equipment that are affixed to or made a part of the Premises.  Because said Leasehold Improvements and Alterations are, by definition, affixed to the Premises, they become a part of the Premises and become the property of Landlord.  Upon expiration or termination of this Lease, all Leasehold Improvements and Alterations shall remain with the Premises.  No such Leasehold Improvements and Alterations shall impair the structural integrity of the Premises.

In addition to Tenant’s right under this Lease to the use of the Premises, Tenant may, at its own and sole cost and expense, install “Tenant’s FFE”.  Tenant’s FFE is defined for use herein to include furniture, fixtures and equipment installed by Tenant (and not otherwise provided by Landlord as part of the Improvements being leased hereunder) which is not affixed to the Premises.  Tenant’s FFE specifically excludes (i) any replacements of the Improvements, as defined and provided for herein and (ii) any Leasehold Improvements and Alterations.  Upon expiration or termination of this Lease, Tenant shall retain all Tenant’s FFE.  

Tenant may, at its own and sole cost and expense, at any time before the expiration of thirty (30) days after the expiration or termination of this Lease, remove Tenant’s FFE; provided, however, that (i) such removal shall not impair the structural integrity of the Premises and (ii) if any such damage to the Premises results from such removal, Tenant shall repair such damage immediately at its own and sole cost and expense.

Any present or future lien or security interest of Landlord, whether arising by operation of law or otherwise, upon any of Tenant’s FFE now or hereafter located on the Premises, is hereby waived and relinquished by Landlord.  It is understood that Tenant may from time to time grant security interests in such property to third parties; and within ten (10) days after request and presentation by Tenant to Landlord of a Landlord Waiver or Consent form(s), subject to Landlord’s reasonable approval of such form(s) which shall be consistent with this paragraph, Landlord agrees to execute such form(s) in favor of any such third party holding such a security interest.

9.

SUBORDINATION, NONDISTURBANCE AND ATTORNMENT.  Upon request of Landlord, Tenant agrees to execute and deliver a written agreement subordinating this Lease and Tenant’s rights under this Lease to the lien of any real estate mortgage on the Premises (a “Real Estate Mortgage”) granted by Landlord to a mortgagee (a “Real Estate Mortgagee”); provided, however, that any such written agreement (an “SNDA”) shall provide (i) that so long as there is not outstanding a Tenant’s Default, the leasehold estate of the Tenant, its successors and assigns, created under this Lease and Tenant’s peaceful and quiet possession, use, and enjoyment of the Premises shall be undisturbed by any foreclosure of said Real Estate 

Mortgage, and (ii) Tenant shall attorn and recognize the Real Estate Mortgagee as landlord hereunder.  Such SNDA shall be subject to Tenant’s reasonable approval of such form(s), which shall be consistent with this paragraph.  

Additionally, all SNDAs shall provide that in the event Tenant mortgages or assigns its interest in the Lease as collateral security or proposes to mortgage or assign its interest in the Lease as collateral security (any such leasehold mortgage or collateral lease assignment referred to herein as a “Leasehold Mortgage”) to a lender or any other party extending credit to the Tenant, and the holder of the Leasehold Mortgage (a “Leasehold Mortgagee”) requests that the Real Estate Mortgagee execute and deliver a non-disturbance agreement in favor of the Leasehold Mortgagee, wherein the Real Estate Mortgagee shall agree that, provided the Tenant is not in default under the terms and conditions of the Lease, (i) the Real Estate Mortgagee will not disturb the Leasehold Mortgage, and (ii) if Tenant is in default under the Lease, the Real Estate Mortgagee shall deliver to the Leasehold Mortgagee written notice of such default by Tenant and shall agree that the Leasehold Mortgagee shall have the right, but not the obligation, to cure any such default on behalf of the Tenant within thirty (30) days following receipt of such notice of default, then the Landlord shall take reasonable steps to have Real Estate Mortgagee execute and deliver such non-disturbance agreement in favor of the Leasehold Mortgagee.  Landlord, however, shall in no way be responsible or obligated for Real Estate Mortgagee’s refusal to deliver such an agreement.  

10.

PROPERTY TAXES.  All personal and real estate taxes (“Taxes”) lawfully assessed against or levied upon the Premises or Tenant’s FFE by any lawful taxing authority during the Lease Term (including any penalties and interest thereon) shall be paid by Tenant when due and before becoming delinquent, except that Tenant may, at its option, contest any such assessment (in its own or in Landlord’s name) or levy which Tenant believes to have been unlawfully or unfairly made; provided, however, that (a) Tenant shall indemnify and hold harmless Landlord from any loss or damage resulting from any such contest, and (b) Landlord agrees to provide Tenant with all reasonable assistance in such contest, including joining in and signing pleadings.  Any reduction of Taxes obtained shall be paid or attributable to Tenant.  In any instance in which the Lease Term includes only a portion of a tax year, Landlord shall be liable for that part of any Taxes attributable to the portion of such tax year which is not included in the Lease Term.  Landlord may, at its sole discretion, cause tax statements and notices from the various taxing authorities to be sent directly to Tenant.  Tenant shall furnish to Landlord annual proof of the payment of such taxes, if requested by Landlord.  In the event Tenant fails to pay such Taxes, Landlord may, but shall not be required to, pay the same for the Tenant’s account, and any amounts paid by Landlord therefore shall be deemed additional rent payable by Tenant upon demand by Landlord.

Taxes, as that term is used herein, shall include, among other things, all assessments for betterments and improvements that are levied or assessed by any lawful authority on the Premises, including, but not limited to, the widening of exterior roads, the installation of or hookup to sewer lines, sanitary and storm drainage systems and other utility lines and installations.  Landlord shall take the maximum benefit of any law allowing assessments to be paid in installments.  Taxes for any tax year shall mean such amounts as shall be finally determined to be taxes payable during such tax year less any abatements, refunds or rebates made thereof.

11.

INSURANCE.  All insurance required to be maintained under the provisions of this Lease shall be written by insurer(s) which are authorized to write insurance in the State of Missouri.  Such insurance required to be maintained by Tenant may be maintained under blanket policies covering other restaurants operated by Tenant.  All policies required to be maintained by Tenant shall contain a clause that the insurer will not change or cancel the insurance without first giving the Landlord ten (10) days prior written notice, and shall provide that Landlord’s interest shall not be invalidated by any acts, omissions or neglect of anyone other than Landlord.  Tenant shall cause the insurer(s) to furnish to Landlord certificate(s) evidencing any insurance required to be maintained by Tenant hereunder.  In the event Tenant fails to timely pay any premiums with respect to any insurance required to be maintained by Tenant, Landlord shall have the right, but not the obligation, to pay such premiums and obtain such insurance, and any amounts paid by Landlord therefore shall be deemed additional rent payable by Tenant upon demand.  Landlord and Tenant each hereby release each other from liability for damage to the property of the other to the extent of insurance maintained or required to be maintained under this Lease.  Landlord and Tenant shall use reasonable efforts to obtain waivers of subrogation rights by the insurer against Landlord or Tenant, as the case may be, with respect to all property insurance policies.

12.

LIABILITY INSURANCE.  At all times during the Lease Term, Tenant shall maintain in force and effect, at its own cost and expense, a policy or policies of Public Liability Insurance for the protection, indemnification and defense of Tenant and Landlord (with Landlord named as an additional insured) against claims, demands and causes of action arising out of or in connection with the use, maintenance, operation and occupancy of the Premises, which policy or policies shall have limits of not less than Two Million Dollars ($2,000,000) combined limits coverage per occurrence for bodily injury liability and property damage liability.  Upon Landlord’s request, Tenant shall name Landlord’s mortgagee as an additional insured under any policy of liability insurance.  To the extend Tenant maintains umbrella or other excess liability coverage, Landlord shall be named as an additional insured on all such insurance policies.

13.

FIRE AND EXTENDED COVERAGE INSURANCE.  At all times during the Lease Term, Tenant shall maintain in force and effect, at its own cost and expense, a policy or policies providing “All Risk” fire and extended coverage insurance on the Improvements (but not the parking lot).  The policy or policies may not provide for a deductible greater than Twenty Five Thousand Dollars ($25,000.00) without the prior written consent of Landlord.  Such policy or policies of insurance shall name Tenant as the insured and Landlord as an additional insured, and shall provide that all insurance proceeds attributable to the Improvements, which are to be applied as provided in Paragraph 15 hereof, are to be paid jointly to Landlord and Tenant in the event of fire or other casualty with respect to the Premises.  Upon Landlord’s request, Tenant shall name Landlord’s Real Estate Mortgagee as a mortgagee, subject to a standard loss payable clause, under such policy or policies, to the extent of its interest in the Improvements.  The limits of such insurance coverage shall be adjusted annually to reflect one hundred percent (100%) of the current actual replacement cost of the Improvements, or such other amount as the parties may agree.  Notwithstanding any provision contained herein to the contrary, any proceeds of insurance maintained by Tenant for damage to Tenant’s FFE shall be and remain the sole property of Tenant.  In addition, Tenant shall provide, at Tenant’s own cost and expense, a separate insurance policy (or add a rider to Tenant’s coverage) for the benefit of Landlord to provide loss of rental income in the event of fire or other casualty.

14.

INDEMNIFICATION. Tenant shall defend all actions against Landlord with respect to, and shall pay, protect, indemnify and save harmless the Landlord from and against, any and all liabilities, lawsuits, damages, costs, expenses (including reasonable attorneys’ fees and expenses), causes of action, claims, demands, or judgments of any nature (i) to which the Landlord is subject to because of the Landlord’s interest in the Premises, except for any such liabilities, losses, damages, costs, expenses, causes of action, suits, claims, demands or judgments arising by reason of the gross negligence or willful or wanton conduct of Landlord and/or any defects in Landlord’s title or any liens or encumbrances on the Premises created or suffered to come into existence by the Landlord, or (ii) arising from (1) injury to or death of any person, or damage to or loss of property, on the Premises or on adjoining sidewalks, streets or ways, or connected with the use, condition or occupancy of the Premises by Tenant, (2) Tenant’s violation of this Lease, or (3) any act or omission of Tenant or its agents, contractors, licensees, sub-licensees, invitees or employees.

15.

DESTRUCTION OF PREMISES.

(a)

If the Premises shall be destroyed or damaged by fire or other insured cause to the extent of more than thirty percent (30%) of the insured value of the Premises  in the reasonable opinion of Landlord, Landlord and Tenant shall each have the right to terminate this Lease by written notice to the other within thirty (30) days after the date of such fire or other insured cause, it being agreed, however, that to the extent Landlord shall elect to repair the Premises (Tenant being under no obligation to so repair such casualty), Tenant’s termination notice shall be deemed withdrawn and Landlord, at its sole risk, cost and expense, shall repair and restore the Premises as soon as practicable but in all events within one hundred eighty (180) days after the date of such damage. If Landlord fails substantially to repair and restore the Premises, as applicable, within said one hundred eighty (180) days of the date of such damage, Tenant shall have the right to terminate this Lease by providing Landlord with thirty (30) days prior written notice.  In no event shall Landlord be required to repair any damage or destruction in excess of insurance proceeds received therefor.

(b)

If the Premises shall be destroyed or damaged by fire or other insured cause to the extent of thirty percent (30%) or less of the insured value of the Premises in the reasonable opinion of Landlord, and if the Premises may be repaired and restored within one hundred twenty (120) days after the date of such damage, then Landlord, at its sole risk, cost and expense, shall repair and restore the same with reasonable promptness; provided, however, that in no event shall Landlord be required to repair any damage or destruction in excess of the insurance proceeds recovered therefore. Notwithstanding the extent of such damage, if, in the reasonable opinion of Landlord, such damage or destruction cannot be repaired and restored within one hundred twenty (120) days after the date of such damage, then each of Landlord or Tenant shall have the right to cancel and terminate this Lease and all rights and obligations of the parties hereunder, upon giving notice to the other within thirty (30) days after the date such damage or destruction shall have occurred.

(c)

In the event of any such damage or destruction and if this Lease shall not be canceled and terminated by reason of such damage, then all rent shall abate during the 

period beginning with the date of such fire or other insured cause and ending with the date when the Premises is again rendered tenantable.  In the event any such damage or destruction renders a portion but not all of the Premises untenantable then rent shall abate during the period beginning with the date of such fire or other insured cause and ending with the date when the untenantable portion of the Premises is again rendered tenantable by an amount bearing the same ratio to the total amount of rent for such period as the untenantable portion of the Premises bears to the entire Premises. 

16.

CONDEMNATION.  During the Lease Term, if any part of the Premises is condemned or taken by eminent domain (or sold to the condemning authority under threat of condemnation), and the Premises are thereby rendered unsuitable or inadequate for the continuation of Tenant’s normal, full-scale business operations thereon as mutually determined by Tenant and Landlord, then the parties may agree to terminate this Lease as of the date of such occurrence.  The Landlord’s agreement to such termination shall not be unreasonably withheld.  The rent due hereunder shall be prorated as of the date of termination.  If such occurrence does not render the Premises unsuitable or inadequate for such purposes as mutually agreed upon by the parties, this Lease shall remain in full force and effect.  In the event that a part of the Premises shall be taken but the Lease is not terminated, the rent and additional charges payable by Tenant hereunder shall be reduced equitably from and after the date Tenant is deprived of possession or its rights are materially impaired as provided above, based on the nature, extent and impact of the taking.  With respect to the award attributable to the Premises made by the condemning authority (or purchase price of the Premises in lieu of such an award), Landlord shall be entitled to said award or purchase price and Landlord, at its cost and expense, shall, if this Lease shall not then be terminated as provided above, have the obligation to restore the Premises to a tenantable condition sufficient for the conduct by Tenant of its business therein (as same is presently conducted, subject to any reasonable adjustments thereto by reason of such condemnation).  

17.

DEFAULT.  

(a)

If (i) Tenant shall be declared bankrupt, be placed in receivership or take advantage of any law for the relief of debtors, or (ii) in the event of any failure of Tenant to pay any rental due hereunder for more than twenty (20) days after written notice of such non-payment shall have been given to Tenant, or (iii) in the event of any failure by Tenant to perform any other of the terms, conditions or covenants of this Lease to be observed or performed by Tenant for more than forty-five (45) days after written notice of such failure shall have been given to Tenant (unless such failure is of such a nature that it cannot be cured within such forty-five (45) day period, if Tenant shall not have promptly commenced the cure thereof within such forty-five (45) day period and thereafter proceeded with reasonable diligence and in good faith to remedy such failure), Tenant shall be in default hereunder (“Tenant’s Default”).  Upon the occurrence of Tenant’s Default, Landlord shall have the right and option to pursue all of its legal remedies including, without limitation, the right to terminate this Lease, to re-enter the Premises as agent of Tenant, and to evict Tenant and to remove Tenant’s possessions, all without being deemed guilty of any trespass and without prejudice to any claim by Landlord for damages for breach of this Lease or for arrears of rent or any other amounts due hereunder.  

(b)

If Tenant fails to perform any of its agreements contained in this Lease and such failure continues for thirty (30) days after notice thereof (except (i) in the case of insurance premiums due, (ii) where a shorter period is reasonably required, including emergencies, or (iii) where a longer period is reasonably required to complete such cure), Landlord may cure such failure on behalf of and at the expense of Tenant and do all necessary work, make all necessary payments, or otherwise take such other action at law or in equity as Landlord deems necessary, notwithstanding any other remedy herein provided.  Tenant agrees to pay Landlord any amounts so paid by Landlord within thirty (30) days after proof of payment together with interest (for purposes of this paragraph “interest” shall mean the prime rate as then published in The Wall Street Journal).  

18.

HOLDING OVER BY TENANT.  At the expiration of the Lease Term, the parties, by mutual agreement, may elect to continue the Lease Term from month to month, subject to the same terms and conditions as set forth herein; provided, however, that in the event of such extension of the Lease Term, the Lease Term as extended may be terminated by either party upon thirty (30) days written notice to the other party.   In the event Tenant or anyone else in the name of Tenant shall hold on to the whole or any part of the Premises after the expiration of this Lease, or after its forfeiture for any cause whatsoever, the Tenant shall pay one hundred twenty-five percent (125%) of the daily rent in effect as of the expiration of this Lease for every day of such holdover.  

19.

TENANT’S TRADEMARKS.  The use on the Premises by Tenant of any trademark, service mark or other identifying mark or symbol, whether owned by Tenant or such other party which allows Tenant to use such trademarks, on the Premises, shall not create in Landlord any rights to the use thereof; and Tenant expressly reserves the right of removal thereof from the Premises.  This right of removal shall survive the termination of the Lease Term, and following the expiration of the Lease Term the Landlord shall allow any owner of such trademarks to enter upon the Premises for the purpose of so removing the same.

20.

ENFORCEMENT.  In the event either party to this Lease obtains legal counsel and/or commences legal proceedings to enforce any right under this Lease or to obtain relief for the breach of any term, condition or covenant herein, the party ultimately prevailing (or substantially prevailing) in such proceedings shall be entitled to recover from the other party the reasonable costs and expenses of such proceedings, including reasonable attorney fees.  

21.

NOTICES.  Any notice given hereunder shall be in writing and may be delivered in person or be sent by certified or registered mail, postage prepaid, addressed to the party to receive same at the address of such party shown on the signature page hereof or such other address as such party may hereafter furnish to the other in writing.  Any notice mailed in accordance with the preceding sentence shall be deemed to have been served at the time it is received.

22.

MEMORANDUM OF LEASE.  At the request of either party, the parties shall execute and deliver a short form memorandum of this Lease for the purpose of recording the same in the real estate records of Christian County, Missouri.  

23.

ENVIRONMENTAL MATTERS.  

(a)

Prohibition Against Hazardous Substances.  During the Lease Term, Tenant shall not allow the violation of any Environmental Law with respect to the Premises or the storage, disposal, discharge, burial, incineration, or use of any Hazardous Substances on the Premises.  The Tenant shall indemnify and hold the Landlord harmless from and against all claims for or on account of or arising out of any violation of any Environmental Law by Tenant with respect to the Premises, or disposal of or release of any Hazardous Substance on the Premises by Tenant during the Lease Term.  Further, in the event of a violation by Tenant under this paragraph, the Landlord may elect to terminate this Lease by written notification to Tenant.

(b)

Definitions.  The following terms shall have the following meanings:

(i)

The term “Environmental Law” shall mean and be defined as any federal, state or local law, statute, ordinance, or regulation pertaining to the health, industrial hygiene or the environmental conditions on, under, or about the Premises, including without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), also known as the Super Fund Amendments and Authorization Act of 1986 (“SARA”).  

(ii)

The term “Hazardous Substance” shall mean and be defined herein as those substances included within the definitions of “hazardous substances”, “hazardous materials”, “toxic substances” or “solid waste” in CERCLA, RCRA, SARA and the Hazardous Materials Transportation Act, as amended, and in the regulations promulgated pursuant to such laws, together with such substances listed in the United States Department of Transportation Table or by the Environmental Protection Agency (or any successor agency) as hazardous substances, together with any other substances, materials, and waste which are or become regulated under applicable local, state or federal law, or which are classified as hazardous or toxic under federal, state or local law.  

24.

ADDITIONAL REPRESENTATIONS BY LANDLORD AND TENANT.  The parties hereby make the following representations to each other:

(a)

Representations by Landlord.  The Landlord hereby represents the following to the Tenant:

(i)

The Landlord is not aware of any boundary, survey or title questions or disputes with respect to the Premises;

(ii)

To Landlord’s knowledge, under local zoning laws and ordinances, the use by Tenant of the Premises is proper and does not violate such laws or ordinances;

(iii)

Landlord has the full right and lawful authority to enter into this Lease; Landlord has good and marketable title to the Premises; and the Premises are free and clear of all tenancies, easements, restrictions, conditions and reservations except those set forth in the Title Commitment (“Permitted Exceptions”); and 

(iv)  

There are no facts materially adverse to the use and development of the Premises which are known to Landlord and which Landlord has not disclosed to Tenant.  

(b)

Representations by Tenant.  The Tenant hereby represents the following to the Landlord:

(i)

Tenant is not aware of any boundary, survey or title questions or disputes with respect to the Premises;  

(ii)

To Tenant’s knowledge, under local zoning laws and ordinances, the use by Tenant of the Premises as a restaurant with a drive-thru window is proper and does not violate such laws or ordinances;

(iii)

Tenant has the full right and lawful authority to enter into this Lease; Tenant shall provide Landlord with a corporate resolution by it board of directors ratifying and authorizing this lease transaction; and

(iv)

There are no facts materially adverse to the use and development of the Premises which are known to Tenant and which Tenant has not disclosed to Landlord.

25.

ASSIGNMENT AND SUBLETTING.  Tenant shall not assign this Lease in whole or in part, or sublet all or any part of the Premises, without obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld (it being agreed by Landlord that a successor by merger or operation of law to Tenant shall not require any such consent from Landlord by reason of any assignment of this Lease to such successor).  Tenant shall remain liable on this Lease regardless of any assignment. Landlord may assign this Lease, and any security deposit, without the consent of Tenant.  In the event of any transfer of Landlord’s interest in this Lease, the transferor shall cease to be liable and shall be released from all liability for the performance or observance of any agreements or conditions on the part of Landlord to be performed or observed subsequent to the time of said transfer, provided that such transferee assumes in writing all of Landlord’s obligations hereunder.

26.

COMMISSIONS.  The parties hereby represent to each other that there are no commissions, fees, or finder’s fees due or owing to any broker or other person as a result of the transactions contemplated herein.

27.

UTILITIES.  Tenant covenants and agrees to pay for all water, gas, power, electricity, and all other utilities served to the Premises during the Lease Term.  During the Lease Term, Landlord shall, at Tenant’s request, grant to any utility company and/or Tenant such 

easements and rights of way, including, but not limited to, rights of ingress and egress and temporary construction easements, as may be reasonably required by such utility company to service the Premises.  At Landlord’s request, all such utilities shall be placed directly in the name of the Tenant.

28.

SECURITY DEPOSIT.  Upon execution of this Lease, and in addition to payment of the first month's rent, Tenant shall pay to Landlord an additional sum equal to Four Hundred Fifty Thousand Dollars ($450,000.00), as a deposit to be held by Landlord in trust for the benefit of Landlord and Tenant (to the extent the deposit is ultimately refundable to Tenant) during the Term of this Lease as security for the payment of all rent and any additional charges due hereunder, and for the faithful performance by Tenant of all other obligations imposed upon Tenant under the terms of this Lease.  If Tenant fails to perform or defaults in the performance of any of the terms of this Lease, including, without limitation, payment of any rent, additional charges or other sums due Landlord, then Landlord may, at its option, and without prejudice to any other remedy which Landlord may have on account thereof, appropriate and apply the entire security deposit and any other monies of Tenant held by Landlord, or so much thereof as may be necessary to compensate Landlord toward the payment of any amounts then due from Tenant, or toward any loss, damage or expense sustained by Landlord resulting from such default on the part of Tenant, and in such event, Tenant shall forthwith, upon demand by Landlord, restore the security deposit to its original sum.  The use of the security deposit by Landlord, as outlined herein, shall not take serve to take the Tenant out of default under the Lease and shall not limit or restrict the legal or equitable remedies available to Landlord otherwise available under this Lease.  In the event Tenant shall fully and faithfully comply with all the terms, covenants and conditions of this Lease and promptly pay all Tenant payments as they fall due, the security deposit will be returned to Tenant promptly, but not more than thirty (30) days, after the expiration of the Term and after Tenant vacates the Premises, as required herein.  Landlord shall not be required to invest or otherwise retain the security deposit in any interest bearing account.  Interest earned on such security deposit, if any, shall remain with Landlord. 

29.

LEASEHOLD MORTGAGES.  Tenant may, with Landlord’s prior consent, execute and deliver Leasehold Mortgages to Leasehold Mortgagees (as those terms are defined in Paragraph 9 hereof).  No Leasehold Mortgage shall extend to or affect the fee, the reversionary interest, or the estate of Landlord in and to the Premises.  The remaining terms and conditions of this paragraph shall not be binding upon Landlord, unless (i) a complete copy of the Leasehold Mortgage is delivered to the Landlord, and (ii) the Leasehold Mortgagee gives Landlord a written notice containing the name and current address of the Leasehold Mortgagee.  If such notice is delivered to the Landlord before a Tenant’s Default, the Landlord agrees to give the Leasehold Mortgagee a copy of each notice of a Tenant’s Default at the same time that Landlord gives such notice to Tenant.  Such notice shall be deemed duly given to the Leasehold Mortgagee when mailed to the Leasehold Mortgagee at its last address furnished to Landlord.  Landlord shall accept performance by the Leasehold Mortgagee of any obligation of this Lease that Tenant is required to perform, with the same force and effect as if performed by Tenant, provided that at the time of such performance the Landlord is furnished with satisfactory evidence that the person or firm tendering such performance or payment has a claimed interest in the Premises pursuant to the Leasehold Mortgage.  The Leasehold Mortgagee shall have twenty (20) days after receipt of any such notice of default in which to cure any Tenant’s Default consisting of the non-payment of rent or additional rent under this Lease, and a reasonable time 

in which to cure any other Tenant’s Default.  The Leasehold Mortgagee shall also have such rights as set forth in Paragraph 9 hereof.

 

30.

ESTOPPEL CERTIFICATES.  During the Lease Term, either party (a “Requesting Party”) may request an estoppel certificate from the other party (the “Requested Party”), and, if so requested, the Requested Party shall so furnish the requested estoppel certificate to the Requesting Party.  The Requested Party agrees, within seven (7) days after written request by the Requesting Party, to execute, acknowledge and deliver to and in favor of (i) the Requesting Party or (ii) any proposed mortgagee of or lender to the Requesting Party, assignee or sublessee of the Lease or purchaser of the Premises (each, individually, hereinafter called the “Interested Party”), an estoppel certificate in the form customarily used by such Requesting Party or Interested Party, subject to the Requested Party’s reasonable approval of such form, stating, among other things, (i) whether this Lease is in full force and effect, (ii) whether this Lease has been  modified or amended and, if so, identifying and describing any such modification or amendment, (iii) the date to which rent or other charges have been paid, and (iv) whether the Requested Party knows of any default on the part of the Requesting Party or has any claim against the Requesting Party and, if so, specifying the nature of such default or claim.  The Requesting Party shall, at the request of the Requested Party, furnish to the Requested Party a certificate similar to the estoppel certificate requested by the Requesting Party.

31.

SURRENDER OF PREMISES.  At the expiration or earlier termination of this Lease, the Tenant shall surrender the Premises in as good condition as it was at the beginning of the Lease Term, ordinary wear and tear and casualty excepted.  On or before the expiration of the Lease Term or earlier termination of this Lease, Tenant shall cause any mortgages, liens and encumbrances (including any Leasehold Mortgage) created by, through or under Tenant to be fully discharged and released.

 

32.

EXECUTION.  This Lease is executed in multiple originals as of the Effective Date and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.  The paragraph captions used herein are for convenience only and shall not be deemed to have been included for any other purpose.

33.

GOVERNING LAW.  This Lease shall be construed and interpreted in accordance with and governed by the laws of the State of Missouri.

[Signatures to follow on the next page.]

IN WITNESS WHEREOF, the parties hereto have executed this Lease as the date first written above.

			
	                                                                            

	LANDLORD:

	  

	 	 	 
	 	FRS, LLC

	 
	 	 	 
	 	 	 
	 	By:                                                                            

	 
	 	Rick Gregg, Manager/Member

	 
	 	 	 
	 	Address:  P.O. Box 366

	 
	 	                Nixa, MO 65714

	 
	 	 	 
	 	 	 
	 	TENANT:

	 
	 	SLS INTERNATIONAL, INC.

	 
	 	 	 
	 	 	 
	 	By:                                                                            

	 
	 	 	 
	 	Name:                                                                        

	 
	 	 	 
	 	Title:                                                                         

	 
	 	Address:  1650 W. Jackson

	 
	 	                 Ozark, MO 65721

	 

LEASE AGREEMENT

EXHIBIT “A”

SITE SKETCH OF PREMISES

LEASE AGREEMENT

EXHIBIT “B”

LEGAL DESCRIPTION OF PREMISES

LEGAL DESCRIPTION:

BEGINNING AT A POINT APPROXIMATELY 134.00 FEET NORTH AND 804.00 FEET EAST OF THE SOUTHWEST CORNER OF THE NORTHWEST QUARTER (NW1/4) OF THE SOUTHWEST QUARTER (SW1/4) OF SECTION TWENTY-TWO (22), TOWNSHIP TWENTY-SEVEN (27), RANGE TWENTY-ONE (21), CHRISTIAN COUNTY, MISSOURI, SAID POINT BEING THE SAME AS THE SOUTHERLY RIGHT-OF-WAY LINE OF STATE HIGHWAY ROUTE 14, BEING 350.00 FEET SOUTHEASTERLY FROM STATION 1104+50 OF THE RELOCATED CENTERLINE OF SAID ROUTE 14; THENCE NORTH 20o54’56” EAST, 344.79 FEET (NORTH 20o35’36” EAST, 346.90 FEET-RECORD) TO A FOUND 5/8” REBAR, WHICH IS 85.00 FEET SOUTHEASTERLY FROM STATION 1106+75 OF SAID RELOCATED CENTERLINE OF ROUTE 14; THENCE NORTH 70o18’14” EAST (NORTH 70o17’57” EAST-RECORD) 155.00 FEET TO A POINT ON THE SOUTHERLY RIGHT-OF-WAY LINE OF SAID ROUTE 14, WHICH IS 85.0 FEET SOUTHEASTERLY FROM STATION 1108+30 OF THE SAID RELOCATED CENTERLINE OF ROUTE 14; THENCE ON A CURVE TO THE RIGHT, WHOSE RADIUS IS 2780.00 FEET, WHOSE CENTRAL ANGLE IS 2o02’06” (1o59’59”-RECORD) AN ARC DISTANCE OF 98.73 FEET (97.02 FEET-RECORD) TO A POINT ON THE SOUTHERLY RIGHT-OF-WAY LINE OF SAID ROUTE 14; WHICH IS 85.00 FEET SOUTHEASTERLY FROM STATION 1109+30 OF SAID RELOCATED CENTERLINE OF ROUTE 14; THENCE SOUTH 0o07’58” EAST (SOUTH 0o07’15” EAST-RECORD) 24.14 FEET TO A ROUND 1/2’ REBAR; THENCE NORTH 83o52’12” EAST (NORTH 83o54’00” EAST-RECORD) 11.47 FEET TO A SET P.K. NAIL; THENCE SOUTH 0o07’58” EAST, 130.66 FEET; THENCE SOUTH 89o52’02” WEST, 29.80 FEET; THENCE SOUTH 0o07’58” EAST 100.50 FEET; THENCE NORTH 89o52’02” EAST, 28.60 FEET; THENCE SOUTH 0o07’58” EAST, 136.00 FEET; THENCE SOUTH 89o52’02” WEST, 11.38 FEET; THENCE SOUTH 0o07’58” EAST, 101.76 FEET; THENCE NORTH 89o52’02” EAST, 28.42 FEET; THENCE SOUTH 0o07’58” EAST, 51.92 FEET; THENCE SOUTH 89o52’02” WEST, 0.86 FEET; THENCE SOUTH 0o07’58” EAST, 60.00 FEET; THENCE NORTH 89o52’02” EAST, 38.76 FEET; THENCE SOUTH 0o07’58” EAST, 26.63 FEET; THENCE SOUTH 7o56’00” EAST, 8.91 FEET; THENCE SOUTH 41o07’10” EAST, 10.84 FEET; THENCE SOUTH 0o04’31” WEST, 170.39 FEET TO A SET P.K. NAIL; THENCE SOUTH 89o58’48” EAST, 120.49 FEET TO A SET P.K. NAIL; THENCE SOUTH 0o12’22” WEST, 63.85 FEET TO A SET P.K. NAIL; THENCE SOUTH 89o59’08” WEST, 504.70 FEET TO A SET 5/8” REBAR; THENCE NORTH 34o26’30” WEST, 118.13 FEET TO A FOUND 5/8” REBAR; THENCE NORTH 2o06’52” EAST, 378.54 FEET (NORTH 2o07’12” EAST, 374.86 FEET-RECORD) TO THE POINT OF BEGINNING, IN CHRISTIAN COUNTY, MISSOURI, SUBJECT TO ANY PART THEREOF TAKEN, DEEDED OR USED FOR ROAD OR HIGHWAY PURPOSES.Exhibit 10.1

                             DISTRIBUTION AGREEMENT

                                     BETWEEN

                          LIFESTREAM TECHNOLOGIES, INC.

                                       AND

                        POLYMER TECHNOLOGY SYSTEMS, INC.

<PAGE>

NOTE: PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED UNDER A CONFIDENTIAL TREATMENT
REQUEST FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED PORTIONS,
WHICH ARE SHOWN IN THIS DOCUMENT AS [ * ], HAVE BEEN FILED WITH THE COMMISSION
AS PART OF THE CONFIDENTIAL TREATMENT REQUEST.

                                TABLE OF CONTENTS

1.      TERMS..................................................................1
2.      SCOPE..................................................................1
3.      PRICING................................................................1
4.      PAYMENT TERMS..........................................................1
5.      PURCHASE ORDERS........................................................2
        5.1    Purchase Orders.................................................2
        5.2    Forecasts and Lead-times........................................2
6.      DELIVERY AND ACCEPTANCE................................................2
        6.1    Delivery........................................................2
        6.2    Acceptance......................................................2
7.      CHANGES................................................................3
8.      WARRANTY...............................................................3
        8.1    POLYMER Warranty................................................3
        8.2    RGA Procedure...................................................3
        8.3    Exclusions From Warranty........................................3
        8.4    Remedy..........................................................3
9.      INDEMNIFICATION AND LIMITATION OF LIABILITY............................4
        9.1    POLYMER'S Indemnification.......................................4
        9.2    LIFESTREAM's Indemnification....................................4
        9.3    Procedure.......................................................4
        9.4    Limitation of Liability.........................................5
10.     TERMINATION............................................................5
        10.1   Termination for Cause...........................................5
        10.2   Termination For Convenience.....................................5
        10.3   Termination by Operation of Law.................................5
        10.4   Consequences of Termination.....................................5
11.     QUALITY................................................................6
        11.1   Specifications..................................................6
        11.2   Content of Specifications.......................................6
        11.3   Quality of Material.............................................6
        11.4   Quality Specifications..........................................6
        11.5   Inspection of Facility..........................................6
12.     FORCE MAJEURE..........................................................6
        12.1   Force Majeure Event.............................................6
        12.2   Notice of Force Majeure Event...................................7
        12.3   Termination of Force Majeure Event..............................7
        12.4   Limitations.....................................................7
        12.5   Termination for Convenience.....................................7
13.     CONFIDENTIALITY........................................................7
        13.1   Definitions.....................................................7
        13.2   Nondisclosure/Non-Circumvent Covenants..........................8
14.     INSURANCE..............................................................9
15.     INTELLECTUAL PROPERTY..................................................9
16.     MISCELLANEOUS..........................................................9
        16.1   Integration Clause..............................................9

                                       ii
<PAGE>

        16.2   Regulatory.....................................................10
        16.3   Expansion of Agreement.........................................10
        16.4   Order of Precedence............................................10
        16.5   Assignment.....................................................10
        16.6   Notices........................................................10
        16.7   Disputes/Arbitration/Choice of Law.............................11
        16.8   Import/Export..................................................11
        16.9   Electronic Data Interchange....................................11

EXHIBITS
EXHIBIT A, PRICING............................................................13
EXHIBIT B, SPECIFICATIONS.....................................................14
EXHIBIT C, SHIPPING LABELING..................................................15
EXHIBIT D, THE QUALITY PLAN...................................................16

                                      iii

<PAGE>

                             DISTRIBUTION AGREEMENT

THIS AGREEMENT (the "Agreement") is effective as of December ____, 2005 (the
"Commencement Date"), by and between LIFESTREAM TECHNOLOGIES, INC., a Nevada
corporation, having its principal place of business at 570 S. Clearwater Loop,
Bldg. 1000, Ste. D, Post Falls, ID 83854 ("LIFESTREAM" or "Customer") and
POLYMER TECHNOLOGY SYSTEMS, INC., a corporation having its principal place of
business at 7736 Zionsville Rd., Indianapolis, IN 46268 ("POLYMER"), each
referred to herein as a Party or together as the Parties.

1.       TERMS

         The initial term of this Agreement shall commence on the Commencement
Date and shall continue through the third anniversary of the Commencement Date
unless sooner terminated by mutual agreement or in accordance with this
Agreement. Upon the expiration of the initial term, unless stated otherwise in
writing by one of the Parties at least 180 days prior to expiration, this
Agreement shall renew for an additional five (5) years. Notwithstanding the
foregoing, the term of this Agreement shall automatically extend to accommodate
any purchase order ("Order") accepted hereunder and outstanding upon any
termination date, but POLYMER shall have no obligation to accept new purchase
orders during such extension.

2.       SCOPE

         This Agreement shall initially address the supply of test strips for
Total Cholesterol and HDL Cholesterol by POLYMER to LIFESTREAM (the "Products").
Such Products shall be in the same configuration as test strips currently
manufactured by POLYMER. Subject to Polymer meeting specifications and otherwise
performing pursuant to this Agreement, LIFESTREAM shall purchase its
requirements for the Products solely from POLYMER. POLYMER shall not sell ROM
keys or MEMo chip(TM)s that function with LIFESTREAM's meters, nor shall
LIFESTREAM sell ROM keys or MEMo chips that function with POLYMER's meters.

3.       PRICING

         During the term, LIFESTREAM shall have the right to purchase from
POLYMER the products specified in Exhibit A (the "Products") as such Exhibit may
be amended from time to time, at the prices set forth in Exhibit A (the
"Prices"). Prices (a) are in U.S. Dollars, (b) are based on (i) the
configuration set forth in the specifications attached hereto as Exhibit B (the
"Specifications") and (ii) the projected volumes, minimum run rates and other
assumptions set forth in Exhibit A. The Prices shall remain fixed for the term
of this Agreement, unless an increase is required due to causes beyond the
control of POLYMER.

4.       PAYMENT TERMS

         [ * ]

                                             Lifestream _____
                                               Polymer _____

                                       1
<PAGE>

5.       PURCHASE ORDERS

         5.1      PURCHASE ORDERS

                  (a) LIFESTREAM will issue to POLYMER specific Orders for
         Product covered by this Agreement. Each Order shall be in the form of a
         written or electronic communication and shall contain the following
         information: (i) a description of the Product by part number; (ii) the
         quantity of the Product; (iii) the estimated delivery date or shipping
         schedule; (iv) the location to which the Product is to be shipped; and
         (v) transportation instructions. Each Order shall provide an order
         number for billing purposes, and may include other instructions as may
         be appropriate under the circumstances.

                  (b) All Orders shall be confirmed by POLYMER within five (5)
         business days of receipt. If POLYMER does not accept or reject the
         Order within the five-day period, the Order shall be deemed accepted.
         In the event POLYMER is unable to meet the delivery schedule set forth
         in a proposed Order, or finds the schedule to be unacceptable for some
         other reason, the parties shall negotiate in good faith to resolve the
         disputed matter(s). POLYMER shall not be deemed to have accepted the
         Order until such dispute is resolved and set forth in writing.

         5.2      Forecasts and Lead-times

                  Within thirty (30) days of the execution of this Agreement,
         LIFESTREAM shall provide a non-binding forecast of monthly purchases
         for the following twelve months. This forecast shall be updated at
         least quarterly throughout the Term. POLYMER's standard lead-time shall
         be eight (8) weeks from acceptance of an Order, provided the order is
         in conformity with the previous forecast provided by LIFESTREAM.

6.       DELIVERY AND ACCEPTANCE

         6.1      DELIVERY

                  All Product shipments will be from POLYMER'S facility of
         manufacture and freight collect. Title to and risk of loss or damage to
         the Product shall pass to LIFESTREAM upon POLYMER'S tender of the
         Product to LIFESTREAM's carrier. POLYMER shall use reasonable means to
         mark, pack, package, crate, transport, ship and store Product to ensure
         (a) delivery of the Product to its ultimate destination in a safe
         condition, (b) compliance with all requirements of the carrier and
         destination authorities, and (c) compliance with any reasonable special
         instructions of LIFESTREAM. POLYMER shall use reasonable efforts to
         deliver the Products on the agreed-upon delivery dates and shall use
         reasonable efforts to notify LIFESTREAM of any anticipated delays;
         provided, however, that POLYMER shall not be liable for any failure to
         meet LIFESTREAM delivery dates and/or any failure to give notice of
         anticipated delays.

         6.2      ACCEPTANCE

                  Acceptance of the Product shall occur no later than fifteen
         (15) days after the arrival of the shipment of Product and shall be
         based solely on whether the Product passes a mutually agreeable
         Acceptance Test Procedure or Inspection designed to demonstrate
         compliance with the Specifications, which may include a mutually agreed
         third party audit of the finished goods as part of the quality plan
         (Exhibit D). Product cannot be rejected based on criteria that were
         unknown to POLYMER or based on test procedures that POLYMER does not
         conduct. Product shall be deemed accepted if not rejected within this
         fifteen-day period. Once a Product is accepted, all Product returns
         shall be handled in accordance with Article 8 (Warranty). Prior to
         returning any rejected Product, LIFESTREAM shall obtain a Returned
         Goods Approval ("RGA") number from POLYMER, and shall return such
         Product in accordance with POLYMER'S instructions; LIFESTREAM shall
         specify the reason for such rejection in all RGA's. In the event a
         Product is rejected, POLYMER shall have a reasonable opportunity to
         cure any defect that led to such rejection.

                                             Lifestream _____
                                               Polymer _____

                                       2
<PAGE>

7.       CHANGES

         LIFESTREAM and POLYMER, upon mutual agreement, may make changes within
the general scope of this Agreement. Such changes may include, but are not
limited to, changes in (1) designs, procedures, Specifications, test
specifications, (2) methods of packaging and shipment, (3) quantities of Product
to be furnished, and/or (4) delivery schedule. If any such change causes either
an increase or decrease in POLYMER'S cost or the time required for performance
of any part of the work under this Agreement, the Prices and/or delivery
schedules shall be adjusted by mutual agreement in a manner that would
adequately compensate the parties for such change, and shall be set forth in a
written amendment, executed by both parties.

8.       WARRANTY

         8.1      POLYMER WARRANTY

                  POLYMER'S warranty period is equal to the expiration dating of
         the relevant chemistry, and is limited to correction of defects in
         POLYMER'S workmanship and performance. POLYMER shall, at its option and
         at its expense, replace or issue a credit for Product found defective
         during the warranty period.

         8.2      RGA PROCEDURE

                  POLYMER shall concur in advance on all Product to be returned
         for replacement. LIFESTREAM will obtain a Returned Goods Approval (RGA)
         number from POLYMER prior to return shipment. All returns shall state
         the specific reason for such return, and will be processed in
         accordance with POLYMER'S RGA Procedure, a copy of which is available
         from POLYMER upon request, and which includes a provision that POLYMER
         shall review and approve or deny any returns prior to shipment and such
         approval will not be unreasonably withheld. POLYMER shall pay all
         transportation costs for valid returns of Product to POLYMER and for
         the shipment of the repaired or replacement Products to LIFESTREAM, and
         shall bear all risk of loss or damage to such Products until tender to
         LIFESTREAM's carrier; LIFESTREAM shall pay these charges, plus a
         handling charge, for invalid or "no defect found" returns. Any replaced
         Product shall be warranted as set forth in this Article for a period
         equal to the remainder of the original warranty.

         8.3      EXCLUSIONS FROM WARRANTY

                  This warranty does not include Products that have defects or
         failures resulting from (a) LIFESTREAM's handling or packaging in
         LIFESTREAM's environment; and (b) accident, disaster, neglect, abuse,
         misuse, improper handling, storage, shipping, or installation,
         including improper handling.

         8.4      REMEDY

                  THE SOLE REMEDY UNDER THIS WARRANTY SHALL BE REPLACEMENT OR
         CREDIT FOR DEFECTIVE PARTS AS STATED ABOVE. THIS WARRANTY IS IN LIEU OF
         ANY OTHER WARRANTIES EITHER EXPRESS OR IMPLIED, INCLUDING
         MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

                                             Lifestream _____
                                               Polymer _____

                                       3
<PAGE>

9.       INDEMNIFICATION AND LIMITATION OF LIABILITY

         9.1      POLYMER'S INDEMNIFICATION

                  POLYMER shall indemnify, defend, and hold LIFESTREAM and
         LIFESTREAM affiliates, shareholders, directors, officers, employees,
         contractors, agents and other representatives (the
         "LIFESTREAM-Indemnified Parties") harmless from all Claims (i) based
         upon personal injury or death or injury to property to the extent any
         of the foregoing is proximately caused either by a defective Product,
         by the reckless or willful acts or omissions of POLYMER or its
         officers, employees, subcontractors or agents, and/or (ii) arising from
         or relating to any allegation that the Product has a design defect(s),
         and/or (iii) arising from any violation of regulations regarding the
         manufacture, distribution, marketing, or labeling of medical devices,
         and/or (iv) arising from or relating to any actual or alleged
         infringement or misappropriation of any patent, trademark, mask work,
         copyright, trade secret or any actual or alleged violation of any other
         intellectual property rights arising from or in connection with the
         Product, except to the extent that such infringement exists as a result
         of use by POLYMER of LIFESTREAM specifications. POLYMER shall have no
         obligation to indemnify the LIFESTREAM-Indemnified Parties to the
         extent such Claim results from actions or events described in Section
         8.3, Exclusions from Warranty, or would not exist except for compliance
         with specifications particular to LIFESTREAM.

         9.2      LIFESTREAM'S INDEMNIFICATION

                  LIFESTREAM shall indemnify, defend, and hold POLYMER and
         POLYMER'S affiliates, shareholders, directors, officers, employees,
         contractors, agents and other representatives (the "POLYMER-Indemnified
         Parties") harmless from all Claims (i) based upon personal injury or
         death or injury to property to the extent any of the foregoing is
         proximately caused either by a defective Product, by the negligent or
         willful acts or omissions of LIFESTREAM or its officers, employees,
         subcontractors or agents, and/or (ii) arising from or relating to any
         allegation that the Product has a design defect(s), and/or (iii)
         arising from any violation of regulations regarding the manufacture,
         distribution, marketing, or labeling of medical devices, and/or (iv)
         arising from or relating to any actual or alleged infringement or
         misappropriation of any patent, trademark, mask work, copyright, trade
         secret or any actual or alleged violation of any other intellectual
         property rights arising from or in connection with the Product, except
         to the extent that such infringement exists as a result of use by
         LIFESTREAM of POLYMER'S manufacturing processes.

         9.3      PROCEDURE

                  A Party entitled to indemnification pursuant to this Article
         (the "Indemnitee") shall promptly notify the other Party (the
         "Indemnitor") in writing of any Claims covered by this indemnity.
         Promptly after receipt of such notice, the Indemnitor shall assume the
         defense of such Claim with counsel reasonably satisfactory to the
         Indemnitee. If the Indemnitor fails, within a reasonable time after
         receipt of such notice, to assume the defense with counsel reasonably
         satisfactory to the Indemnitee or, if in the reasonable judgment of the
         Indemnitee, a direct or indirect conflict of interest exists between
         the parties with respect to the Claim, the Indemnitee shall have the
         right to undertake the defense, compromise and settlement of such Claim
         for the account and at the expense of the Indemnitor. Notwithstanding
         the foregoing, if the Indemnitee in its sole judgment so elects, the
         Indemnitee may also participate in the defense of such action by
         employing counsel at its expense, without waiving the Indemnitor's
         obligation to indemnify and defend. The Indemnitor shall not compromise
         any Claim or consent to the entry of any judgment without an
         unconditional release of all liability of the Indemnitee to each
         claimant or plaintiff.

                                             Lifestream _____
                                               Polymer _____

                                       4
<PAGE>

         9.4      LIMITATION OF LIABILITY

                  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
         INDIRECT, CONSEQUENTIAL, INCIDENTIAL, PUNITIVE OR SPECIAL DAMAGES, OR
         ANY DAMAGES WHATSOEVER RESULTING FROM LOSS OF USE, DATA OR PROFITS,
         EVEN IF SUCH OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
         DAMAGES; PROVIDED, HOWEVER, THAT THIS SECTION SHALL NOT PREVENT A PARTY
         FROM INCURRING THE LIABILITIES SET FORTH IN SECTION 9 (INDEMNIFICATION)
         OR SECTION 10 (TERMINATION). IN NO EVENT, SHALL POLYMER'S LIABILITY
         UNDER THIS AGREEMENT (WHETHER ASSERTED AS A TORT CLAIM OR CONTRACT
         CLAIM) EXCEED THE AMOUNTS PAID TO POLYMER HEREUNDER. IN NO EVENT WILL
         POLYMER BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS BY
         LIFESTREAM. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE
         OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

10.      TERMINATION

         10.1     TERMINATION FOR CAUSE

                  Either Party may terminate this Agreement or an Order
         hereunder for default if the other Party materially breaches this
         Agreement; provided, however, no right to terminate shall accrue until
         thirty (30) days after the defaulting Party is notified in writing of
         the Material Breach and has failed to cure or give adequate assurances
         of performance within the thirty (30)-day period after notice of a
         Material Breach. For the purposes of this Agreement, "Material Breach"
         shall be any act or omission by either Party that may materially
         threaten or destroy the value of this Agreement and/or give a basis for
         an action for breach of contract.

         10.2     TERMINATION FOR CONVENIENCE

                  Lifestream may terminate this Agreement hereunder for any
         reason upon one hundred eighty (180) days' prior written notice.
         Polymer may terminate this Agreement for any reason upon three hundred
         sixty (360) days' prior written notice.

         10.3     TERMINATION BY OPERATION OF LAW

                  This Agreement shall immediately terminate should either Party
         (a) become insolvent; (b) enter into or file a petition, arraignment or
         proceeding seeking on order for relief under the bankruptcy laws of its
         respective jurisdiction; (c) enter into a receivership of any of its
         assets, or (d) enter into a dissolution or liquidation of its assets or
         an assignment for the benefit of its creditors. If any of the foregoing
         (a) through (d) should occur to LIFESTREAM, POLYMER shall have the
         right, at its sole discretion, to discontinue shipment of any test
         strips on order by LIFESTREAM.

         10.4     CONSEQUENCES OF TERMINATION

                  A.       TERMINATION FOR REASONS OTHER THAN POLYMER'S MATERIAL
                           BREACH

                           In the event this Agreement or an Order hereunder is
                  terminated for any reason other than a Material Breach by
                  POLYMER (including, but not limited to, a force majeure),
                  LIFESTREAM shall pay POLYMER'S termination charges equal to
                  (1) the contract price for all finished Product existing at
                  the time of termination, and (2) the value of POLYMER'S
                  Product-related inventory.

                                             Lifestream _____
                                               Polymer _____

                                       5
<PAGE>

                  B.       TERMINATION RESULTING FROM POLYMER'S MATERIAL BREACH

                           In the event LIFESTREAM terminates this Agreement or
                  any Order hereunder as a result of a Material Breach by
                  POLYMER, LIFESTREAM shall pay POLYMER, termination charges
                  equal to the contract price for all finished Product existing
                  at the time of termination.

11.      QUALITY

         11.1     SPECIFICATIONS

                  Product shall be manufactured by POLYMER in accordance with
         the Specifications set forth in Exhibit B. Neither Party shall make any
         change to the Specifications, or to the Products (including, without
         limitation, changes in form, fit, function, design, appearance or place
         of manufacture of the Products or changes which would affect the
         reliability of any of the Products) unless such change is made with the
         written consent of both parties. Notwithstanding the foregoing, POLYMER
         shall be permitted to make changes in its manufacturing processes at
         any time, so long as such changes do not affect the form, fit or
         function of the Products.

         11.2     CONTENT OF SPECIFICATIONS

                  The Specifications shall include, but shall not be limited to,
         performance and appearance specifications for the Product.

         11.3     QUALITY OF MATERIAL

                  POLYMER shall use in its production of Products such material
         of a type, quality, and grade suitable to LIFESTREAM performance and
         appearance standards.

         11.4     QUALITY SPECIFICATIONS

                  POLYMER shall comply with the quality specifications set forth
         in its Quality Manual, which is incorporated by reference herein, a
         copy of which is available from POLYMER upon request.

         11.5     INSPECTION OF FACILITY

                  Upon reasonable advance written notice, within 30 days of
         execution of this Agreement, and within 30 days of a shipment of
         Products agreed by POLYMER to be defective, LIFESTREAM may inspect
         facilities during POLYMER's regular business hours, provided, that,
         such inspection does not unduly affect POLYMER's operations. LIFESTREAM
         and its representatives shall observe all security and handling
         measures of POLYMER while on POLYMER's premises. LIFESTREAM and its
         representatives acknowledge that their presence on POLYMER's property
         is at their sole risk.

12.      FORCE MAJEURE

         12.1     FORCE MAJEURE EVENT

                  For purposes of this Agreement, a "Force Majeure Event" shall
         mean the (i) occurrence of unforeseen circumstances beyond a Party's
         control and without such Party's negligence or intentional misconduct,
         including, but not limited to, any act by any governmental authority,
         act of war, natural disaster, strike, boycott, embargo, shortage, riot,
         lockout, labor dispute, civil commotion, and (ii) failure of a Vendor
         to timely deliver a Component to POLYMER.

                                             Lifestream _____
                                               Polymer _____

                                       6
<PAGE>

         12.2     NOTICE OF FORCE MAJEURE EVENT

                  Neither Party shall be responsible for any failure to perform
         due to a Force Majeure Event, provided, that, such Party gives notice
         to the other Party of the Force Majeure Event as soon as reasonably
         practicable, but not later than five (5) days after the date on which
         such Party knew or should reasonably have known of the commencement of
         the Force Majeure Event, specifying the nature and particulars thereof
         and the expected duration thereof; provided, however, that the failure
         of a Party to give notice of a Force Majeure Event shall not prevent
         such Party from relying on this Section except to the extent that the
         other Party has been prejudiced thereby.

         12.3     TERMINATION OF FORCE MAJEURE EVENT

                  The Party claiming a Force Majeure Event shall use reasonable
         efforts to mitigate the effect of any such Force Majeure Event and to
         cooperate to develop and implement a plan of remedial and reasonable
         alternative measures to remove the Force Majeure Event; provided,
         however, that neither Party shall be required under this provision to
         settle any strike or other labor dispute on terms it considers to be
         unfavorable to it. Upon the cessation of the Force Majeure Event, the
         Party affected thereby shall immediately notify the other Party of such
         fact, and use its commercially reasonable efforts to resume normal
         performance of its obligations under the Agreement as soon as possible.

         12.4     LIMITATIONS

                  Notwithstanding that a Force Majeure Event otherwise exists,
         the provisions of this Article shall not excuse (i) any obligation of
         either Party, including the obligation to pay money in a timely manner
         for Product actually delivered or other liabilities actually incurred,
         that arose before the occurrence of the Force Majeure Event causing the
         suspension of performance; or (ii) any late delivery of Product,
         equipment, materials, supplies, tools, or other items caused solely by
         negligent acts or omissions on the part of such Party.

         12.5     TERMINATION FOR CONVENIENCE

                  In the event a Party fails to perform any of its obligations
         for reasons defined in this Section 12 for a cumulative period of
         ninety (90) days or more from the date of such notification to the
         other Party then the other Party at its option may extend the
         corresponding delivery period for the length of the delay, or terminate
         this Agreement for Convenience in accordance with Paragraph 10.2.

13.      CONFIDENTIALITY

         13.1     DEFINITIONS

         For the purpose of this Agreement:

                  (a) "Confidential Information" means information (in any form
         or media) regarding a Party's customers, prospective customers
         (including lists of customers and prospective customers), methods of
         operation, engineering methods and processes (including any information
         which may be obtained by a Party by reverse engineering, decompiling,
         decoding or examining any software or hardware provided by the other
         Party under this Agreement), programs and databases, patents and
         designs, billing rates, billing procedures, vendors and suppliers,
         business methods, finances, management, or any other business
         information relating to such Party (whether constituting a trade secret
         or proprietary or otherwise), which has value to such Party and is
         treated by such Party as being confidential. Confidential Information
         in documentary or other tangible form will be clearly and conspicuously
         marked as `Confidential' or some similar marking. Verbal disclosures
         must be identified as confidential at the time of disclosure and must
         be confirmed in writing as confidential within thirty (30) days of the
         initial disclosure.

                                             Lifestream _____
                                               Polymer _____

                                       7
<PAGE>

                  Confidential Information does not include information that (i)
         is known to the other Party prior to receipt from the disclosing Party
         hereunder, which knowledge shall be evidenced by written records, (ii)
         is independently developed as evidenced by written records, (iii) is or
         becomes in the public domain through no breach of this Agreement, or
         (iv) is received from a third Party without breach of any obligation of
         confidentiality; and, provided further, that Confidential Information
         does not include any information provided by LIFESTREAM to POLYMER
         regarding the manufacturing process.

                  (b) "Person" shall mean and include any individual,
         partnership, association, corporation, trust, unincorporated
         organization, limited liability company or any other business entity or
         enterprise.

                  (c) "Representative" shall mean a Party's employees, agents,
         or representatives, including, without limitation, financial advisors,
         lawyers, accountants, experts, and consultants.

         13.2     NONDISCLOSURE/NON-CIRCUMVENT COVENANTS

                  (a) In connection with this Agreement, each Party (the
         "Disclosing Party") may furnish to the other Party (the "Receiving
         Party") or its Representatives certain Confidential Information. During
         the Term of this Agreement, and for a period of three (3) years from
         the Termination Date of this Agreement, the Receiving Party (a) shall
         maintain as confidential all Confidential Information heretofore or
         hereafter disclosed to it by the Disclosing Party, (b) shall not,
         directly or indirectly, disclose any such Confidential Information to
         any Person other than those Representatives of the Receiving Party
         whose duties justify the need to know such Confidential Information and
         then only after each Representative has agreed to be bound by this
         Confidentiality Agreement and clearly understands his or her obligation
         to protect the confidentiality of such Confidential Information and to
         restrict the use of such Confidential Information, and (c) shall treat
         such Confidential Information with the same degree of care as it treats
         its own Confidential Information (but in no case with less than a
         reasonable degree of care).

                  (b) The disclosure of any Confidential Information is solely
         for the purpose of enabling each Party to perform under this Agreement,
         and the Receiving Party shall not use any Confidential Information
         disclosed by the Disclosing Party for any other purpose.

                  (c) Except as otherwise set forth in this Agreement, all
         Confidential Information supplied by the Disclosing Party shall remain
         the property of the Disclosing Party, and will be promptly returned by
         the Receiving Party upon receipt of written request therefore.

                  (d) If the Receiving Party or its Representative is requested
         or becomes legally compelled to disclose any of the Confidential
         Information, it will provide the Disclosing Party with prompt written
         notice. If a protective order or other remedy is not obtained, then
         only that part of the Confidential Information that is legally required
         to be furnished will be furnished, and best efforts will be made to
         obtain reliable assurances of confidentiality.

         13.3     Disclosure of this Agreement

                  Disclosure of the existence and/or nature of this Agreement
         shall only be made by mutual consent of the Parties, and such consent
         shall not be unreasonably denied.

                                             Lifestream _____
                                               Polymer _____

                                       8
<PAGE>

14.      INSURANCE

         POLYMER agrees to maintain, during the term of this Agreement, (a)
workers' compensation insurance as prescribed by the law of the country/state in
which POLYMER'S services are performed; (b) employer's liability insurance with
limits of at least $500,000 per occurrence; (c) comprehensive automobile
liability insurance, if the use of motor vehicles is required, with limits of at
least $1,000,000 for bodily injury and property damage for each occurrence; (d)
comprehensive general liability insurance, including POLYMER'S contractual
liability and broad form property damage, with limits of at least $1,000,000
combined single limit for personal injury and property damage for each
occurrence; and (e) comprehensive general liability insurance endorsed to
include products liability and completed operations coverage in the amount of
$1,000,000 for each occurrence. POLYMER shall furnish to LIFESTREAM certificates
or evidence of the foregoing insurance indicating the amount and nature of such
coverage and the expiration date of each policy. Each Party agrees that it, its
insurer(s) and anyone claiming by, through, under or in its behalf shall have no
claim, right of action or right of subrogation against the other Party and the
other Party's affiliates, directors, officers, employees and customers based on
any loss or liability insured against under the insurance required by this
Agreement.

15.      INTELLECTUAL PROPERTY

         15.1     Nothing herein shall be deemed to grant to LIFESTREAM any
         rights to any Intellectual Property (Intellectual Property includes,
         but is not limited to, any letters patent, patent applications, trade
         secrets, manufacturing processes, product concepts, regulatory
         dossiers, designs, software, vendor lists, or know-how, any where in
         the world) other than the non-exclusive, limited license to market and
         sell Product(s) manufactured solely by POLYMER during the Term of this
         Agreement. Nothing herein shall be deemed to grant to POLYMER any
         rights to any LIFESTREAM Intellectual Property other than the
         non-exclusive, limited license that may be required to design and
         manufacture Product(s) contemplated herein during the Term of this
         Agreement.

         15.2     Any Intellectual Property that is invented solely by a
         Party hereto shall be the property of that Party. Any Intellectual
         Property that arises from or is related to the design, functionality,
         manufacture, or testing of Products that is invented jointly, as
         defined by the laws of the United States of America, by POLYMER and
         LIFESTREAM shall be jointly owned. The Parties shall cooperate in all
         matters relating to the filing and prosecution of any corresponding
         patent applications. POLYMER shall cooperate fully in providing
         information, including information relating to its Intellectual
         Property, which is required in submissions to regulatory authorities
         for Product(s) marketing approval(s).

         15.3     Each sales unit of strips shall bear the PTS Panels
         Trademark, as well as be marked with POLYMER patent numbers as
         appropriate to preserve POLYMER's patent rights, including, but not
         limited to, the right to obtain damages. POLYMER shall provide
         LIFESTREAM with such appropriate patent numbers.

16.      MISCELLANEOUS

         16.1     INTEGRATION CLAUSE

                  This Agreement (including the Exhibits and Schedules to this
         Agreement) constitutes the entire agreement of the parties, superseding
         all previous Agreements covering the subject matter. This Agreement
         shall not be changed or modified except by written Agreement,
         specifically amending, modifying and changing this Agreement, signed by
         authorized executive officers of POLYMER and LIFESTREAM.

                                             Lifestream _____
                                               Polymer _____

                                       9
<PAGE>

         16.2     REGULATORY

                  LIFESTREAM will be responsible for all regulatory affairs
         related to its sales and distribution of the Product(s) within the
         markets in which they are involved in the distribution of the Products,
         including, but not limited to, clearance by Food and Drug
         Administration for meters and other ancillary devices, compliance with
         all Federal Trade Commission regulations, and compliance with Federal,
         State and Local tax laws, and POLYMER will assist and supply all
         necessary information in their possession requested by LIFESTREAM to be
         in compliance related to the sales and distribution of the LIFESTREAM
         product(s). Notwithstanding the foregoing, POLYMER shall remain the
         manufacturer of Products for regulatory purposes, and shall maintain
         and be sole owner all 510(k) clearances on same. LIFESTREAM shall be a
         distributor only.

         16.3     EXPANSION OF AGREEMENT

                  The Parties agree to negotiate in good faith the expansion or
         supplementation of this Agreement to include final packaging of
         LIFESTREAM's Test Strips by POLYMER, as well as the supply of the
         following by LIFESTREAM to POLYMER:

a. Combination Blood Pressure Monitor/Lipid Tester for professional uses
worldwide. b. Cholesterol Mouse for professional uses worldwide.

         16.4     ORDER OF PRECEDENCE

                  All quotations, Orders, acknowledgments and invoices issued
         pursuant to this Agreement are issued for convenience of the Parties
         only and shall be subject to the provisions of this Agreement and the
         Exhibits hereto. When interpreting this Agreement, precedence shall be
         given to the respective parts in the following descending order: (a)
         this Agreement; (b) Schedules and Exhibits to this Agreement; and (c)
         if Orders are used to release product, those portions of the Order that
         are not pre-printed and which are accepted by POLYMER. The Parties
         acknowledge that the preprinted provisions on the reverse side of any
         such quotation, Purchase Order, acknowledgment or invoice and all terms
         other than the specific terms of LIFESTREAM's Purchase Order set forth
         in Section 5.1(a)(i)-(v) shall be deemed deleted and of no effect
         whatsoever. No modification to this Agreement, the Exhibits or any
         Order shall be valid without the prior written consent of the Purchase
         Agreement Coordinators of POLYMER and LIFESTREAM. Until modified by
         them in writing, the Purchase Agreement Coordinators for each Party
         shall be their respective Chief Executive Officer.

         16.5     ASSIGNMENT

                  Neither this Agreement nor any rights or obligations hereunder
         shall be transferred or assigned by either Party without the written
         consent of the other Party, which consent shall not be unreasonably
         withheld or delayed.

         16.6     NOTICES

                  Wherever one Party is required or permitted or required to
         give written notice to the other under this Agreement, such notice will
         be given by hand, by certified U.S. mail, return receipt requested, by
         overnight courier, or by fax and addressed as follows:

                                             Lifestream _____
                                               Polymer _____

                                       10
<PAGE>

<TABLE>
<CAPTION>

<S>     <C>                                                   <C>
         IF TO LIFESTREAM:                                    WITH A COPY TO:

         Lifestream Technologies, Inc.                        Elsaesser Jarzabek Anderson Marks & Elliott
         570 S. Clearwater Loop                               123 S. Third St., Post Office Box 1049
         Building 1000, Suite D                               Sandpoint, ID  83864
         Post Falls, ID  83854                                Attention:  Ford Elsaesser
         Attention: Chief Financial Officer

         IF TO POLYMER:                                       WITH A COPY TO:

         Polymer Technology Systems, Inc.                     Sommer Barnard, PC
         Attn: Robert Huffstodt                               One Indiana Square, Ste 3500
         7736 Zionsville Road                                 Indianapolis, IN 46204
         Indianapolis, IN  46268                              Attn: Regina M. Sharrow
</TABLE>

         Hand-delivered and faxed notices shall be effective upon receipt;
         notice via U.S. mail shall be effective three days from deposit with
         the U.S. Postal Service; notice via overnight courier shall be
         effective the day after such notice is deposited with the overnight
         carrier service. Either Party may designate a different notice address
         from time to time upon giving ten (10) days' prior written notice
         thereof to the other Party.

         16.7     DISPUTES/ARBITRATION/CHOICE OF LAW

                  The parties shall attempt to resolve any disputes between them
         arising out of this Agreement through good faith negotiations. If an
         amicable agreement cannot be achieved through such negotiations, or the
         dispute requires urgent settlement, the dispute will be submitted to
         binding arbitration by either party. Arbitration shall take place in
         the State of Indiana in accordance with the rules and regulations of
         the Rules of the American Arbitration Assocation then in force and
         effect. The case shall be presented to an arbitrator chosen from a list
         supplied by the American Arbitration Association acceptable to both
         parties. Any arbitration award shall be deemed to be final and binding
         upon the parties and neither party shall seek recourse to a law court
         or other authorities to appeal or request the revision of the award.
         The arbitration expenses (excluding legal fees) shall be borne by the
         losing party.

                  This Agreement shall be construed in accordance with the
         substantive laws of the State of Indiana (excluding its conflicts of
         laws principles).

         16.8     IMPORT/EXPORT

                  Unless otherwise agreed, LIFESTREAM shall be the exporter of
         record for any Products and/or Product documentation exported from the
         country, and shall comply with all applicable country of manufacture
         export control statutes and regulations.

         16.9     ELECTRONIC DATA INTERCHANGE

                  The parties agree that transmission of data by electronic data
         interchange ("EDI") will not occur until a separate agreement governing
         such transmissions is executed. Upon execution, such EDI agreement will
         become an attachment to this Agreement.

                                             Lifestream _____
                                               Polymer _____

                                       11
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
effective as of the date on page one, by their officers, duly authorized.

POLYMER TECHNOLOGY SYSTEMS, INC.            LIFESTREAM TECHNOLOGIES, INC.

By: ________________________________        By:  ______________________________
                  Signature                                   Signature

____________________________________        ___________________________________
                  Typed Name                                  Typed Name

____________________________________        ___________________________________
                  Title                                       Title

____________________________________        ___________________________________
                  Date                                        Date

                                       12
<PAGE>

                                    EXHIBIT A

                                     PRICING

The Parties agree to the pricing and other terms as set forth in this Exhibit A,
which supersedes any previous communications between the Parties. Both Parties
agree that continuous cost reductions will be carried out using their respective
commercially reasonable efforts under the terms of this agreement.

         [ * ]

                                             Lifestream _____
                                               Polymer _____

                                       13
<PAGE>

                                    EXHIBIT B

                                 SPECIFICATIONS

PACKAGING

Strips packaged in bulk, sealed in dessicated foil bags, vials or canisters.

PERFORMANCE (DATA REQUESTED BY LIFESTREAM)

o        Performance
o        CV, fingerstick, controls, venous blood
o        Range
o        Bias
o        Correlation to POLYMER's standard reference methods
o        Qualified for plasma, controls, fingerstick, venous?
o        Sample size range and impact on performance
o        Post Production Clinical A/K Accuracy audit
o        Sample of a Declaration of Conformance and Certificate of Analysis
o        POLYMER package insert data

                                             Lifestream _____
                                               Polymer _____

                                       14
<PAGE>

                                    EXHIBIT C

                                SHIPPING LABELING

Each shipment of finished goods for the product shall have the following shipper
/ Bill of Lading information and contents:

SHIPPING ADDRESS:

Lifestream Technologies, Inc
570 S. Clearwater Loop
Building 1000, Suite D
Post Falls, Idaho, USA 83854

FDA device establishment: 3023826
208-457-9409

ON THE SHIPPING CONTAINER AND ON THE BILL OF LADING:

Product Code: 75 CHH Clinical Chemistry

EACH SHIPMENT TO CONTAIN:

Certificate of Analysis

                                             Lifestream _____
                                               Polymer _____

                                       15
<PAGE>

                                    EXHIBIT D

                                THE QUALITY PLAN

         [ * ]

                                             Lifestream _____
                                               Polymer _____

                                       16

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}]]