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                   SECURITIES PURCHASE AGREEMENT EXHIBIT #4.27

      THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, is entered into by and between SALIVA DIAGNOSTICS SYSTEMS,  INC., a
Delaware  corporation,  with  headquarters  located  at  2294  Nostrand  Avenue,
Brooklyn, NY 11210 (the "Company"), and  ____________________________,  and each
individual or entity (other than the Company)  named on a signature  page hereto
(as used  herein,  each such  signatory  is  referred  to as the  "Lender"  or a
"Lender")  (each agreement with a Lender being deemed a separate and independent
agreement  between  the  Company  and  such  Lender,  except  that  each  Lender
acknowledges  and consents to the rights granted to each other Lender [each,  an
"Other Lender"] under such agreement and the Transaction Agreements,  as defined
below, referred to therein).

                              W I T N E S S E T H:

      WHEREAS,  the Company and the Lender are  executing  and  delivering  this
Agreement in accordance  with and in reliance upon the exemption from securities
registration for offers and sales to accredited investors afforded,  inter alia,
by Rule 506 under  Regulation D  ("Regulation  D") as  promulgated by the United
States  Securities and Exchange  Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"), and/or Section 4(2) of the 1933 Act; and

      WHEREAS,  the Lender  wishes to lend funds to the Company,  subject to and
upon the terms and conditions of this Agreement and acceptance of this Agreement
by the  Company,  the  repayment  of which  will be  represented  by 9%  Secured
Convertible  Debentures  of the Company (the  "Convertible  Debentures"),  which
Convertible  Debentures will be convertible  into shares of Common Stock,  $.001
par value per share,  of the Company  (the "Common  Stock"),  upon the terms and
subject to the conditions of such Convertible Debentures;

      NOW THEREFORE,  in  consideration of the premises and the mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

      1.    AGREEMENT TO PURCHASE; PURCHASE PRICE.

      a.    Purchase.

      (i) Subject to the terms and  conditions  of this  Agreement and the other
Transaction Agreements, the undersigned hereby agrees to loan to the Company the
principal amount set forth on the Lender's signature page of this Agreement (the
"Purchase Price"),  out of the aggregate amount being loaned by all Lenders to a
maximum of $3,000,000.00 (the "Maximum Purchase Price").  The Lender understands
the Company may borrow an  aggregate  amount from all lenders  that is less than
the Maximum Purchase Price. Additionally, the Company may enter into Transaction
Agreements  with a  strategic  partner for an  investment  in the Company in the
amount of up to  $400,000.00  on  substantially  the same terms,  excepting  the
conversion  price.  The  obligation  to repay the loan from the Lender  shall be
evidenced by the Company's issuance of one or more Convertible Debentures to the
Lender  in such  principal  amount  (the  Convertible  Debentures  issued to the
Lender,  the  "Debentures").  Each  Debenture (i) shall provide for a conversion
price (the  "Conversion  Price") , and (ii) shall have the terms and  conditions
of, and be substantially in the form attached hereto as, Annex I. The loan to be
made  by the  Lender  and the  issuance  of the  Debentures  to the  Lender  are
sometimes  referred  to herein and in the other  Transaction  Agreements  as the
purchase and sale of the Debentures.

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      (ii) The  Purchase  Price to be paid by the  Lender  shall be equal to the
face amount of the  Debentures  being  purchased on the Closing Date (as defined
below) and shall be payable in United States Dollars.

      (iii) The actual total Purchase  Price of all Lenders,  which shall not be
more  than  the  Maximum  Purchase  Price,  is  hereinafter  referred  to as the
"Aggregate Purchase Price."

      b. Certain  Definitions.  As used herein,  each of the following terms has
the meaning set forth below, unless the context otherwise requires:

      (i)  "Affiliate"  means,  with respect to a specific Person referred to in
the relevant provision, another Person who or which controls or is controlled by
or is under common control with such specified Person.

      (ii) "Certificates"  means the Debentures duly executed by the Company and
issued on the Closing Date in the name of the Lender.

      (iii)  "Closing  Date" means the date of the closing of the  purchase  and
sale of the  Debentures,  as provided  herein;  provided,  however,  that at the
option of the Company and the Finder,  once subscriptions have been received and
accepted and the Purchase  Price for the Lenders whose  subscriptions  have been
accepted  have  been  received  in escrow as  provided  herein,  there may be an
Initial  Closing  Date  followed by one or more  additional  Closing  Dates,  as
provided in Section 6 hereof.

      (iv) "Closing  Price" means the closing bid price during  regular  trading
hours of the Common Stock (in U.S.  Dollars) on the Principal Trading Market, as
reported by the Reporting Service.

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      (v) "Company  Control  Person"  means each  director,  executive  officer,
promoter,  and such other  Persons  as may be deemed in  control of the  Company
pursuant  to Rule  405  under  the 1933  Act or  Section  20 of the 1934 Act (as
defined below).

      (vi)  "Conversion  Shares" means the shares of Common Stock  issuable upon
conversion of the Debentures  (including,  if relevant,  accrued interest on the
Debentures so converted).

      (vii)  "Effective  Date"  means  the  effective  date of the  Registration
Statement covering the Registrable Securities.

      (viii)  "Escrow  Agent"  means the escrow  agent  identified  in the Joint
Escrow   Instructions   attached   hereto  as  Annex  II  (the   "Joint   Escrow
Instructions").

      (ix) "Escrow Funds" means the Purchase Price delivered to the Escrow Agent
as contemplated by Sections 1(c) and (d) hereof.

      (x)  "Escrow  Property"  means  the  Escrow  Funds  and  the  Certificates
delivered to the Escrow Agent as contemplated by Section 1(c) hereof.

      (xi)  "Holder"  means the Person  holding the relevant  Securities  at the
relevant time.

      (xii) "Last Audited Date" means December 31, 2004.

      (xiii) "Material  Adverse Effect" means an event or combination of events,
which  individually  or in the  aggregate,  would  reasonably be expected to (w)
adversely affect the legality,  validity or  enforceability of the Securities or
any of the  Transaction  Agreements,  (x) have or result in a  material  adverse
effect on the results of operations,  assets, prospects, or condition (financial
or  otherwise)  of the Company and the it  subsidiaries,  taken as a whole,  (y)
adversely  impair the  Company's  ability to perform fully on a timely basis its
obligations  under  any  of  the  Transaction  Agreements  or  the  transactions
contemplated  thereby,  or (z) materially and adversely  affect the value of the
rights granted to the Lender in the Transaction Agreements.

      (xiv)  "Person"  means any living  person or any entity,  such as, but not
necessarily limited to, a corporation, partnership or trust.

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      (xv) "Principal Trading Market" means The Over the Counter Bulletin Board.

      (xvi)   "Registrable   Securities"  has  the  meaning  set  forth  in  the
Registration Rights Agreement.

      (xvii)  "Registration  Rights  Agreement"  means the  Registration  Rights
Agreement in the form annexed  hereto as Annex IV, as executed by the Lender and
the Company simultaneously with the execution of this Agreement.

      (xxviii)  "Registration  Statement"  has  the  meaning  set  forth  in the
Registration Rights Agreement.

      (xxix)  "Reporting  Service" means  Bloomberg LP or if that service is not
then reporting the relevant information regarding the Common Stock, a comparable
reporting  service  of  national  reputation  selected  by  the  Holders  of the
Debentures and reasonably acceptable to the Company.

      (xx) "Securities" means the Debentures and the Shares.

      (xxi) "Shares" means the shares of Common Stock representing any or all of
the Conversion Shares.

      (xxii) "State of Incorporation" means Delaware.

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

      (xxiv)  "Transaction  Agreements" means the Securities Purchase Agreement,
the  Debentures,  the Joint Escrow  Instructions,  and the  Registration  Rights
Agreement, and includes all ancillary documents referred to in those agreements.

      c. Form of Payment; Delivery of Certificates.

      (i) The Lender  shall pay the  Purchase  Price by  delivering  immediately
available  good funds in United States Dollars to the Escrow Agent no later than
the date prior to the Closing Date.

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      (ii) No later than the Closing Date, but in any event  promptly  following
payment by the Lender to the Escrow  Agent of the  Purchase  Price,  the Company
shall deliver the Certificates,  each duly executed on behalf of the Company and
issued in the name of the Lender, to the Escrow Agent.

      (iii) By signing  this  Agreement,  each of the  Lender  and the  Company,
subject  to  acceptance  by the  Escrow  Agent,  agrees  to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.

      d. Method of Payment.  Payment into escrow of the Purchase  Price shall be
made by wire transfer of funds to:

            Bank of New York
            350 Fifth Avenue
            New York, New York 10001

            ABA# 021000018
            For credit to the account of Krieger & Prager LLP
            Account No.:    630-0281050
            Re:      SVAD Transaction

      2.  LENDER  REPRESENTATIONS,  WARRANTIES,  ETC.;  ACCESS  TO  INFORMATION;
INDEPENDENT INVESTIGATION.

      The Lender  represents and warrants to, and covenants and agrees with, the
Company as follows:

      a.  Without  limiting  Lender's  right to sell the Shares  pursuant to the
Registration  Statement or otherwise to sell any of the Securities in compliance
with the 1933 Act, the Lender is purchasing the Securities and will be acquiring
the Shares for its own account for  investment  only and not with a view towards
the public  sale or  distribution  thereof and not with a view to or for sale in
connection with any distribution thereof.

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      b. The Lender is (i) an  "accredited  investor" as that term is defined in
Rule 501 of the General  Rules and  Regulations  under the 1933 Act by reason of
Rule 501(a)(3),  (ii) experienced in making investments of the kind described in
this Agreement and the related documents,  (iii) able, by reason of the business
and  financial  experience  of its  officers  (if an  entity)  and  professional
advisors (who are not  affiliated  with or compensated in any way by the Company
or any of its  Affiliates  or selling  agents),  to protect its own interests in
connection with the  transactions  described in this Agreement,  and the related
documents, and (iv) able to afford the loss of the entire Purchase Price.

      c. All  subsequent  offers and sales of the Securities by the Lender shall
be made pursuant to registration of the Shares under the 1933 Act or pursuant to
an exemption from registration.

      d. The Lender  understands  that the Securities are being offered and sold
to it in reliance on specific  exemptions from the registration  requirements of
the 1933 Act and state  securities laws and that the Company is relying upon the
truth and accuracy of, and the Lender's  compliance  with, the  representations,
warranties,  agreements,  acknowledgments  and  understandings of the Lender set
forth herein in order to determine the  availability  of such exemptions and the
eligibility of the Lender to acquire the Securities.

      e. The Lender  and its  advisors,  if any,  have been  furnished  with all
materials  relating to the business,  finances and operations of the Company and
materials  relating to the offer and sale of the Securities and the offer of the
Shares  which have been  requested by the Lender,  including  those set forth on
Annex V hereto.  The Lender and its  advisors,  if any,  have been  afforded the
opportunity  to ask  questions  of the Company and have  received  complete  and
satisfactory  answers to any such inquiries.  Without limiting the generality of
the foregoing,  the Lender has also had the  opportunity to obtain and to review
the Company's  filings on EDGAR listed on Annex VII hereto (the documents listed
on such Annex VII, to the extent available on EDGAR or otherwise provided to the
Lender  as  indicated  on said  Annex  VII,  collectively,  the  "Company's  SEC
Documents").

      f. The Lender understands that its investment in the Securities involves a
high degree of risk.

      g. The Lender hereby  represents  that, in connection with its purchase of
the  Securities,  it has not relied on any  statement or  representation  by the
Company or any of its rofficers, directors and employees or any of its attorneys
or agents, except as specifically set forth herein. .

      h. The Lender understands that no United States federal or state agency or
any  other  government  or  governmental  agency  has  passed  on  or  made  any
recommendation or endorsement of the Securities.

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      i. This Agreement and the other Transaction Agreements to which the Lender
is a party,  and the  transactions  contemplated  thereby,  have  been  duly and
validly authorized, executed and delivered on behalf of the Lender and are valid
and  binding  agreements  of the Lender  enforceable  in  accordance  with their
respective terms,  subject as to enforceability to general  principles of equity
and to bankruptcy,  insolvency,  moratorium and other similar laws affecting the
enforcement of creditors' rights generally.

      j. Except with respect to HB  Investments,  the Lender has taken no action
which  would  give rise to any claim by any  Person  for  brokerage  commission,
finder's fees or similar  payments by the Company  relating to this Agreement or
the transactions  contemplated hereby. The Company shall have no obligation with
respect to such fees or with respect to any claims made by or on behalf of other
Persons for fees of a type  contemplated  in this  paragraph  that may be due in
connection with the transactions contemplated hereby. The Lender shall indemnify
and hold  harmless  each of the Company,  its  employees,  officers,  directors,
agents,  and partners,  and their  respective  Affiliates,  from and against all
claims,  losses,   damages,  costs  (including  the  costs  of  preparation  and
attorney's  fees) and  expenses  suffered  in  respect  of any such  claimed  or
existing fees, as and when incurred.

      3. COMPANY  REPRESENTATIONS,  ETC. The Company  represents and warrants to
the Lender as of the date  hereof  and as of the  Closing  Date that,  except as
otherwise  provided in the Annex IV hereto or as disclosed in the  Company's SEC
Documents:

      a. Rights of Others  Affecting the  Transactions.  There are no preemptive
rights of any shareholder of the Company,  as such, to acquire the Debentures or
the  Shares.  No party  other than a Lender or an Other  Lender has a  currently
exercisable  right of first  refusal  which would be applicable to any or all of
the transactions contemplated by the Transaction Agreements.

      b. Status.  The Company is a corporation duly organized,  validly existing
and in good standing  under the laws of the State of  Incorporation  and has the
requisite  corporate power to own its properties and to carry on its business as
now being conducted.  The Company is duly qualified as a foreign  corporation to
do business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such  qualification  necessary,
other than those jurisdictions in which the failure to so qualify would not have
or result in a Material Adverse Effect. The Company has registered its stock and
is  obligated  to file  reports  pursuant to Section 12 or Section  15(d) of the
Securities  Exchange Act of 1934, as amended (the "1934 Act").  The Common Stock
is listed and quoted on the Principal  Trading Market.  The Company has received
no notice,  either oral or written, with respect to the continued eligibility of
the Common Stock for such listing and quotation on the Principal Trading Market,
and the Company has maintained all requirements on its part for the continuation
of such listing and quotation.

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      c. Authorized Shares. The authorized capital stock of the Company consists
of  50,000,000  shares of Common  Stock,  $.001  par value per  share,  of which
approximately  30,509,491  shares are  outstanding  as of the date  hereof.  All
issued and  outstanding  shares of Common  Stock have been duly  authorized  and
validly  issued and are fully paid.  The Company has  sufficient  authorized and
unissued  shares of Common  Stock as may be  necessary to effect the issuance of
the  Shares.  The  Shares  have been  duly  authorized  and,  when  issued  upon
conversion of, or as interest on, the  Debentures,  each in accordance  with its
respective terms, will be duly and validly issued, fully paid and non-assessable
and,  except  to the  extent,  if  any,  provided  by the  law of the  State  of
Incorporation,  will not subject the Holder  thereof to  personal  liability  by
reason of being such Holder.

      d. Transaction  Agreements and Stock. This Agreement and each of the other
Transaction  Agreements,  and the transactions  contemplated  thereby, have been
duly and  validly  authorized  by the  Company,  this  Agreement  has been  duly
executed and delivered by the Company and this  Agreement is, and the Debentures
and each of the other Transaction Agreements, when executed and delivered by the
Company,  will be, valid and binding  agreements of the Company  enforceable  in
accordance with their respective terms,  subject as to enforceability to general
principles  of  equity  and to  bankruptcy,  insolvency,  moratorium,  and other
similar laws affecting the enforcement of creditors' rights generally.

      e.  Non-contravention.  The execution  and delivery of this  Agreement and
each of the other  Transaction  Agreements  by the Company,  the issuance of the
Securities,  and the  consummation  by the  Company  of the  other  transactions
contemplated  by  this  Agreement,  the  Debentures  and the  other  Transaction
Agreements  do not and will  not  conflict  with or  result  in a breach  by the
Company of any of the terms or provisions  of, or constitute a default under (i)
the certificate of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or  instrument  to  which  the  Company  is a party or by which it or any of its
properties or assets are bound,  including any listing  agreement for the Common
Stock  except as herein  set  forth,  or (iii) to its  knowledge,  any  existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court,  United States federal or state  regulatory  body,  administrative
agency, or other  governmental body having  jurisdiction over the Company or any
of its properties or assets, except such conflict, breach or default which would
not have or result in a Material Adverse Effect.

      f.  Approvals.  No  authorization,  approval  or  consent  of  any  court,
governmental body,  regulatory agency,  self-regulatory  organization,  or stock
exchange or market or the shareholders of the Company is required to be obtained
by the  Company for the  issuance  and sale of the  Securities  to the Lender as
contemplated  by this  Agreement,  except  such  authorizations,  approvals  and
consents that have been obtained.

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      g. Filings.  None of the Company's  SEC Documents  contained,  at the time
they were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated  therein or necessary to make the statements
made  therein in light of the  circumstances  under  which  they were made,  not
misleading.  Since September 30, 2004 the Company has timely filed all requisite
forms, reports and exhibits thereto required to be filed by the Company with the
SEC.

      h. Absence of Certain Changes. Since the November 12, 2004, there has been
no material adverse change and no Material  Adverse Effect,  except as disclosed
in the Company's SEC Documents.  Since the Last Audited Date, except as provided
in the  Company's  SEC  Documents,  the Company  has not (i)  incurred or become
subject to any material liabilities  (absolute or contingent) except liabilities
incurred in the ordinary course of business consistent with past practices; (ii)
discharged or satisfied any material  lien or  encumbrance  or paid any material
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business  consistent  with past practices;  (iii)
declared  or made any  payment  or  distribution  of cash or other  property  to
shareholders  with respect to its capital  stock,  or purchased or redeemed,  or
made any agreements to purchase or redeem, any shares of its capital stock; (iv)
sold,  assigned or transferred any other tangible assets,  or canceled any debts
or  claims,  except in the  ordinary  course of  business  consistent  with past
practices;  (v) suffered any substantial losses or waived any rights of material
value,  whether or not in the ordinary course of business,  or suffered the loss
of any material amount of existing  business;  (vi) made any changes in employee
compensation,  except in the ordinary  course of business  consistent  with past
practices;  or (vii)  experienced any material problems with labor or management
in connection with the terms and conditions of their employment.

      i. Full  Disclosure.  There is no fact known to the  Company  (other  than
general economic conditions known to the public generally or as disclosed in the
Company's SEC  Documents)  that has not been  disclosed in writing to the Lender
that  would  reasonably  be  expected  to have or result in a  Material  Adverse
Effect.

      j.  Absence  of  Litigation.  Except as  disclosed  in the  Company's  SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any  court,  public  board or body  pending  or, to the  knowledge  of the
Company,   threatened  against  or  affecting  the  Company  before  or  by  any
governmental authority or nongovernmental department, commission, board, bureau,
agency or instrumentality or any other person,  wherein an unfavorable decision,
ruling or finding would have a Material  Adverse Effect or which would adversely
affect the  validity or  enforceability  of, or the  authority or ability of the
Company to perform its obligations under, any of the Transaction Agreements. The
Company  is not  aware of any  valid  basis  for any  such  claim  that  (either
individually  or in the aggregate with all other such events and  circumstances)
could  reasonably be expected to have a Material  Adverse  Effect.  There are no
outstanding or unsatisfied judgments,  orders,  decrees,  writs,  injunctions or
stipulations  to  which  the  Company  is a party  or by  which it or any of its
properties is bound, that involve the transaction  contemplated  herein or that,
alone or in the aggregate, could reasonably be expect to have a Material Adverse
Effect.

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      k.  Absence  of Events of  Default.  Except as set forth in  Section  3(e)
hereof,  no Event  of  Default  (or its  equivalent  term),  as  defined  in the
respective  agreement to which the Company is a party, and no event which,  with
the giving of notice or the  passage of time or both,  would  become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a Material Adverse Effect.

      l. Prior Issues.  During the twelve (12) months preceding the date hereof,
the Company has not issued any stock option  grants,  convertible  securities or
any shares of its Common Stock.

      m. No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations  other than those  disclosed in the  Transaction  Agreements  or the
Company's  SEC  Documents  or  those  incurred  in the  ordinary  course  of the
Company's  business since the Last Audited Date, or which individually or in the
aggregate,  do not or would  not have a  Material  Adverse  Effect.  No event or
circumstances  has  occurred  or  exists  with  respect  to the  Company  or its
properties, business, operations, condition (financial or otherwise), or results
of operations, which, under applicable law, rule or regulation,  requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly  announced or disclosed.  There are no proposals  currently
under  consideration or currently  anticipated to be under  consideration by the
Board of Directors or the executive officers of the Company which proposal would
(X) change the certificate of incorporation or other charter document or by-laws
of the  Company,  each as  currently  in  effect,  with or  without  shareholder
approval, which change would reduce or otherwise adversely affect the rights and
powers  of  the   shareholders   of  the  Common  Stock  or  (Y)  materially  or
substantially change the business,  assets or capital of the Company,  including
its interests in subsidiaries.

      n. No  Default.  Neither the  Company  nor any of its  subsidiaries  is in
default in the performance or observance of any material obligation,  agreement,
covenant or condition  contained in any material  indenture,  mortgage,  deed of
trust or other  material  instrument  or  agreement to which it is a party or by
which it or its property is bound.

      o. No Integrated  Offering.  Neither the Company nor any of its Affiliates
nor any person acting on its or their behalf has, directly or indirectly, at any
time since July 1, 2004,  made any offer or sales of any  security or  solicited
any offers to buy any security  under  circumstances  that would  eliminate  the
availability of the exemption from registration under Regulation D in connection
with the offer and sale of the Securities as contemplated hereby.

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      p.  Dilution.  The  number  of  Shares  issuable  upon  conversion  of the
Debentures  may have a dilutive  effect on the ownership  interests of the other
shareholders  (and  Persons  having  the  right to become  shareholders)  of the
Company.  The Company's  executive officers and directors have studied and fully
understand  the nature of the  Securities  being sold hereby and recognize  that
they have such a  potential  dilutive  effect.  The  board of  directors  of the
Company has concluded,  in its good faith business judgment,  that such issuance
is in the best interests of the Company. The Company  specifically  acknowledges
that its  obligation to issue the Shares upon  conversion  of the  Debentures is
binding  upon the  Company  and  enforceable  regardless  of the  dilution  such
issuance  may  have on the  ownership  interests  of other  shareholders  of the
Company,  and the Company will honor every Notice of  Conversion  (as defined in
the Debentures) relating to the conversion of the Debentures, unless the Company
is subject to an  injunction  (which  injunction  was not sought by the Company)
prohibiting the Company from doing so.

      q. Fees to Brokers,  Finders and Others.  Except for HB  Investments,  the
Company has taken no action which would give rise to any claim by any Person for
brokerage  commission,  finder's fees or similar  payments by Lender relating to
this Agreement or the  transactions  contemplated  hereby.  Lender shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type  contemplated  in this paragraph that
may be due in connection with the transactions  contemplated hereby. The Company
shall  indemnify  and hold  harmless each of Lender,  its  employees,  officers,
directors,  agents,  and partners,  and their  respective  Affiliates,  from and
against all claims,  losses,  damages, costs (including the costs of preparation
and  attorney's  fees) and  expenses  suffered in respect of any such claimed or
existing fees, as and when incurred.

      4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

      a. Transfer Restrictions.  The Lender acknowledges that (1) the Securities
have not been and are not being  registered under the provisions of the 1933 Act
and,  except as provided  in the  Registration  Rights  Agreement  or  otherwise
included in an effective  registration  statement,  the Shares have not been and
are not being registered  under the 1933 Act, and may not be transferred  unless
(A) subsequently registered thereunder or (B) the Lender shall have delivered to
the Company an opinion of counsel,  reasonably  satisfactory in form,  scope and
substance  to the  Company,  to the  effect  that the  Securities  to be sold or
transferred  may be sold or  transferred  pursuant  to an  exemption  from  such
registration;  (2) any  sale of the  Securities  made in  reliance  on Rule  144
promulgated  under the 1933 Act may be made only in accordance with the terms of
said  Rule and  further,  if said  Rule is not  applicable,  any  resale of such
Securities under  circumstances in which the seller,  or the Person through whom
the sale is made,  may be deemed to be an  underwriter,  as that term is used in
the 1933 Act, may require  compliance  with some other  exemption under the 1933
Act or the rules and  regulations  of the SEC  thereunder;  and (3)  neither the
Company nor any other Person is under any  obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.

<PAGE>
12

      b. Restrictive Legend. The Lender acknowledges and agrees that, until such
time as the Common Stock has been registered  under the 1933 Act as contemplated
by the  Registration  Rights  Agreement and sold in accordance with an effective
Registration  Statement  or  otherwise  in  accordance  with  another  effective
registration statement,  the certificates and other instruments representing any
of the  Securities  (including  the Shares) shall bear a  restrictive  legend in
substantially  the  following  form  (and a  stop-transfer  order  may be placed
against transfer of any such Securities):

      THESE  SECURITIES HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT
      OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
      BE  SOLD  OR  OFFERED  FOR  SALE  IN  THE  ABSENCE  OF AN  EFFECTIVE
      REGISTRATION  STATEMENT FOR THE  SECURITIES OR AN OPINION OF COUNSEL
      OR OTHER EVIDENCE  ACCEPTABLE TO THE COMPANY THAT SUCH  REGISTRATION
      IS NOT REQUIRED.

      c.  Filings.  The  Company  undertakes  and  agrees to make all  necessary
filings in  connection  with the sale of the  Securities to the Lender under any
United States laws and regulations applicable to the Company, or by any domestic
securities  exchange  or trading  market,  and to provide a copy  thereof to the
Lender promptly after such filing.

      d. Reporting  Status.  So long as the Lender  beneficially owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant  to  Section  13 or 15(d) of the 1934 Act,  shall  take all  reasonable
action under its control to ensure that adequate current public information with
respect to the Company,  as required in  accordance  with Rule  144(c)(2) of the
1933 Act, is publicly available, and shall not terminate its status as an issuer
required  to file  reports  under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.  The Company will take
all  reasonable  action under its control to maintain the continued  listing and
quotation and trading of its Common Stock (including,  without  limitation,  all
Registrable  Securities)  on the  Principal  Trading  Market or a listing on the
NASDAQ/Small Cap or National  Markets and, to the extent  applicable to it, will
comply in all material respects with the Company's  reporting,  filing and other
obligations  under the by-laws or rules of the Principal  Trading  Market and/or
the National  Association  of Securities  Dealers,  Inc., as the case may be, at
least  through the date which is thirty (30) days after the later of the date on
which all of the Debentures have been converted.

<PAGE>
13

      e. Use of Proceeds.  The Company will use the proceeds received  hereunder
(excluding amounts paid by the Company for legal fees,  finder's fees and escrow
fees in  connection  with  the sale of the  Securities)  for  general  corporate
purposes.

      f. Available  Shares.  The Company shall have at all times  authorized and
reserved for  issuance,  free from  preemptive  rights,  a number of shares (the
"Minimum  Available  Shares")  at least  equal to the sum of one  hundred  fifty
percent  (150%) of the  number of shares  of  Common  Stock  issuable  as may be
required to satisfy  the  conversion  rights of the  Holders of all  outstanding
Convertible  Debentures  (whether such  Convertible  Debentures  were originally
issued to the  Holder,  the Lender or to any other  Holder or  Lender).  For the
purposes  of  such  calculations,  the  Company  should  assume  that  all  such
Debentures were then convertible  without regard to any restrictions which might
limit any Lender's right to convert any of the Convertible Debentures.

      g. Publicity,  Filings,  Releases, Etc. Each of the parties agrees that it
will not disseminate any information  relating to the Transaction  Agreements or
the transactions  contemplated  thereby,  including  issuing any press releases,
holding  any  press   conferences  or  other  forums,   or  filing  any  reports
(collectively,  "Publicity"),  without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such  Publicity any statement or statements or other  material to
which the other party reasonably objects.  In furtherance of the foregoing,  the
Company will provide to the Lender drafts of the  applicable  text of any filing
intended to be made with the SEC which refers to the  Transaction  Agreements or
the transactions  contemplated  thereby as soon as practible (but at least three
(3)  business  days before such filing will be made and will not include in such
filing any statement or  statements  or other  material to which the other party
reasonably objects.  Notwithstanding  the foregoing,  each of the parties hereby
consents to the inclusion of the text of the  Transaction  Agreements in filings
made with the SEC (but any descriptive text  accompanying or part of such filing
shall be subject to the other provisions of this paragraph).

      5. TRANSFER AGENT INSTRUCTIONS.

      a. The Company  warrants that, with respect to the Securities,  other than
the stop transfer  instructions  to give effect to Section 4(a) hereof,  it will
give its transfer agent no instructions  inconsistent with instructions to issue
Common Stock from time to time upon conversion of the Debentures in such amounts
as specified from time to time by the Company to the transfer agent, bearing the
restrictive  legend  specified  in  Section  4(b) of  this  Agreement  prior  to
registration  of the Shares  under the 1933 Act,  registered  in the name of the
Lender or its nominee and in such denominations to be specified by the Lender in
connection with each conversion of the  Debentures.  Except as so provided,  the
Shares shall  otherwise be freely  transferable  on the books and records of the
Company as and to the extent  provided in this  Agreement  and the  Registration
Rights  Agreement.  Nothing in this Section shall affect in any way the Lender's
obligations  and agreement to comply with all  applicable  securities  laws upon
resale of the Securities.  If the Lender provides the Company with an opinion of
counsel reasonably  satisfactory to the Company that registration of a resale by
the Lender of any of the Securities in accordance  with clause (1)(B) of Section
4(a) of this  Agreement  is not required  under the 1933 Act, the Company  shall
(except as provided in clause (2) of Section 4(a) of this Agreement)  permit the
transfer of the Securities and, in the case of the Conversion  Shares,  promptly
instruct the  Company's  transfer  agent to issue one or more  certificates  for
Common Stock without legend in such name and in such  denominations as specified
by the Lender.

<PAGE>
14

      b. In lieu of delivering  physical  certificates  representing  the Common
Stock  issuable  upon  conversion,  provided  the  Company's  transfer  agent is
participating in the Depository Trust Company ("DTC") Fast Automated  Securities
Transfer  program,  upon  request  of the  Holder  and its  compliance  with the
provisions contained in this paragraph,  so long as the certificates therefor do
not bear a legend  and the  Holder  thereof  is not  obligated  to  return  such
certificate  for the  placement of a legend  thereon,  the Company shall use its
best efforts to cause its transfer agent to  electronically  transmit the Common
Stock  issuable  upon  conversion  to the  Holder by  crediting  the  account of
Holder's Prime Broker with DTC through its Deposit  Withdrawal  Agent Commission
system.

      c.  The  holder  of any  Debentures  shall be  entitled  to  exercise  its
conversion  privilege  with  respect  to  the  Debentures   notwithstanding  the
commencement of any case under 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code").
In the event the  Company is a debtor  under the  Bankruptcy  Code,  the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C.  ss.362 in respect of such holder's  conversion  privilege.  The
Company hereby waives, to the fullest extent permitted,  any rights to relief it
may have under 11 U.S.C.  ss.362 in respect of the conversion of the Debentures.
The  Company  agrees,  without  cost or  expense to such  holder,  to take or to
consent to any and all action reasonably necessary to effectuate relief under 11
U.S.C. ss.362.

      d. The Company  will  authorize  its  transfer  agent to give  information
relating to the Company  directly to the Lender or the Lender's  representatives
upon the  request of the Lender or any such  representative,  to the extent such
information  relates  to (i) the  status of shares  of  Common  Stock  issued or
claimed to be issued to the Lender in connection with a Notice of Conversion, or
(ii) the number of outstanding  shares of Common Stock of all shareholders as of
a current or other specified date. On the Closing Date, the Company will provide
the Lender with a copy of the authorization so given to the transfer agent.

<PAGE>
15

      6. CLOSING DATE.

      a. The Closing Date shall occur on the date which is the first Trading Day
after each of the conditions  contemplated by Sections 7 and 8 hereof shall have
either been satisfied or been waived by the party in whose favor such conditions
run; provided, however, that, at the option of the Company, the Closing Date may
be deferred to allow for additional  subscriptions  (up to the Maximum  Purchase
Price) to be included in the  transactions  effected  on the  Closing  Date.  If
additional  subscriptions  and the related Purchase Price are received after the
Closing Date, one or more additional Closing Dates may be held by the Company.

      b. Each closing of the purchase and issuance of Debentures  shall occur on
the  Closing  Date at the  offices of the  Escrow  Agent and shall take place no
later  than 3:00  P.M.,  New York  time,  on such day or such  other  time as is
mutually agreed upon by the Company and the Finder.

      c.  Notwithstanding  anything to the contrary contained herein, the Escrow
Agent will be  authorized  to release  the Escrow  Funds to the  Company  and to
others  and to  release  the other  Escrow  Property  on the  Closing  Date upon
satisfaction  of the  conditions  set forth in  Sections  7 and 8 hereof  and as
provided in the Joint Escrow Instructions.

      7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

      The  Lender  understands  that  the  Company's   obligation  to  sell  the
Debentures  and the  Warrants to the Lender  pursuant to this  Agreement  on the
relevant Closing Date is conditioned upon: a. The execution and delivery of this
Agreement,  the Registration Rights Agreement,  and an Investor Questionnaire in
the form of Annex VIII attached hereto, by the Lender;

      b.  Delivery by the Lender to the Escrow Agent of good funds as payment in
full of an amount equal to the Purchase  Price for the  Securities in accordance
with this Agreement;

      c. The accuracy on such Closing Date of the representations and warranties
of the Lender contained in this Agreement, each as if made on such date, and the
performance by the Lender on or before such date of all covenants and agreements
of the Lender required to be performed on or before such date; and

<PAGE>
16

      d. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions  contemplated  hereby,  or requiring any consent or
approval which shall not have been obtained.

      8. CONDITIONS TO THE LENDER'S OBLIGATION TO PURCHASE.

      The Company  understands  that the  Lender's  obligation  to purchase  the
Debentures on the relevant Closing Date is conditioned upon:

      a. The execution and delivery of this Agreement and the other  Transaction
Agreements by the Company;

      b.  Delivery by the  Company to the Escrow  Agent of the  Certificates  in
accordance with this Agreement;

      c. The  accuracy  in all  material  respects on such  Closing  Date of the
representations and warranties of the Company contained in this Agreement,  each
as if made on such date,  and the  performance  by the Company on or before such
date of all covenants and agreements of the Company  required to be performed on
or before such date;

      d. On such Closing Date, the  Registration  Rights  Agreement  shall be in
full force and effect and the Company shall not be in default thereunder;

      e. On such  Closing  Date,  the Lender  shall have  received an opinion of
counsel for the Company, dated the Initial Closing Date (provided, however, that
such counsel shall advise the Escrow Agent in writing after the Initial  Closing
Date if the opinion  issued on the Initial  Closing  Date would not be issued on
any  subsequent   Closing  Date),  in  form,  scope  and  substance   reasonably
satisfactory to the Lender,  substantially  to the effect set forth in Annex III
attached hereto;

      f. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions  contemplated  hereby,  or requiring any consent or
approval which shall not have been obtained; and

      g. From and after the date hereof to and including such Closing Date, each
of the following conditions will remain in effect: (i) the trading of the Common
Stock  shall  not have been  suspended  by the SEC or on the  Principal  Trading
Market;  (ii) trading in securities  generally on the Principal  Trading  Market
shall not have been  suspended or limited;  (iii),  no minimum prices shall been
established  for securities  traded on the Principal  Trading  Market;  and (iv)
there shall not have been any material  adverse  change in any financial  market
that,  in the  reasonable  judgment of the  Lender,  makes it  impracticable  or
inadvisable to purchase the Debentures.

<PAGE>
17

      9. INDEMNIFICATION.

      a. The  Company  agrees to  indemnify  and hold  harmless  Lender  and its
officers, directors,  employees, and agents, and each Lender Control Person from
and  against any  losses,  claims,  damages,  liabilities  or expenses  incurred
(collectively,  "Damages"),  joint or several, and any action in respect thereof
to which Lender, its partners, Affiliates,  officers, directors,  employees, and
duly authorized  agents,  and any such Lender Control Person becomes subject to,
resulting from, arising out of or relating to any  misrepresentation,  breach of
warranty or nonfulfillment of or failure to perform any covenant or agreement on
the part of Company  contained in this Agreement,  as such Damages are incurred,
except to the extent such Damages  result  primarily  from  Lender's  failure to
perform any covenant or agreement contained in this Agreement or Lender's or its
officers,  directors,  employees,  agents or Lender Control Persons  negligence,
recklessness or bad faith in performing its obligations under this Agreement.

      b. All claims for  indemnification  by any  Indemnified  Party (as defined
below) under this Section 9 shall be asserted and resolved as follows:

      (i) In the  event  any claim or  demand  in  respect  of which any  Person
claiming  indemnification under any provision of this Section 9 (an "Indemnified
Party") might seek indemnity under Section 9(a) is asserted against or sought to
be collected from such  Indemnified  Party by a Person other than a party hereto
or an Affiliate  thereof (a "Third Party Claim"),  the  Indemnified  Party shall
deliver a written  notification,  enclosing a copy of all papers served, if any,
and  specifying  the nature of and basis for such Third  Party Claim and for the
Indemnified Party's claim for  indemnification  that is being asserted under any
provision  of this  Section 9 against  any Person  (the  "Indemnifying  Party"),
together with the amount or, if not then reasonably ascertainable, the estimated
amount,  determined in good faith,  of such Third Party Claim (a "Claim Notice")
with reasonable  promptness to the Indemnifying  Party. If the Indemnified Party
fails  to  provide  the  Claim  Notice  with  reasonable  promptness  after  the
Indemnified  Party receives notice of such Third Party Claim,  the  Indemnifying
Party shall not be obligated to indemnify the Indemnified  Party with respect to
such Third Party Claim to the extent that the  Indemnifying  Party's  ability to
defend  has been  prejudiced  by such  failure  of the  Indemnified  Party.  The
Indemnifying  Party shall notify the  Indemnified  Party as soon as  practicable
within the period  ending thirty (30)  calendar  days  following  receipt by the
Indemnifying  Party of either a Claim Notice or an Indemnity  Notice (as defined
below) (the  "Dispute  Period")  whether the  Indemnifying  Party  disputes  its
liability  or the amount of its  liability to the  Indemnified  Party under this
Section 9 and  whether  the  Indemnifying  Party  desires,  at its sole cost and
expense,  to defend the  Indemnified  Party against such Third Party Claim.  The
following provisions shall also apply.

<PAGE>
18

            (x) If the Indemnifying  Party notifies the Indemnified  Party
            within the Dispute Period that the Indemnifying  Party desires
            to defend  the  Indemnified  Party  with  respect to the Third
            Party  Claim   pursuant  to  this  Section   9(b),   then  the
            Indemnifying  Party  shall  have  the  right to  defend,  with
            counsel  reasonably  satisfactory to the Indemnified Party, at
            the sole cost and  expense  of the  Indemnifying  Party,  such
            Third  Party  Claim  by  all  appropriate  proceedings,  which
            proceedings  shall be vigorously and diligently  prosecuted by
            the  Indemnifying  Party  to a  final  conclusion  or  will be
            settled at the discretion of the Indemnifying  Party (but only
            with the consent of the  Indemnified  Party in the case of any
            settlement that provides for any relief other than the payment
            of  monetary  damages  or that  provides  for the  payment  of
            monetary  damages as to which the Indemnified  Party shall not
            be  indemnified  in  full  pursuant  to  Section  9(a)).   The
            Indemnifying Party shall have full control of such defense and
            proceedings,  including any compromise or settlement  thereof;
            provided, however, that the Indemnified Party may, at the sole
            cost and expense of the  Indemnified  Party, at any time prior
            to the Indemnifying Party's delivery of the notice referred to
            in the  first  sentence  of this  subparagraph  (x),  file any
            motion,  answer or other  pleadings  or take any other  action
            that the Indemnified Party reasonably believes to be necessary
            or appropriate  protect its interests;  and provided  further,
            that if requested by the  Indemnifying  Party, the Indemnified
            Party will,  at the sole cost and expense of the  Indemnifying
            Party,  provide  reasonable  cooperation  to the  Indemnifying
            Party  in   contesting   any  Third   Party   Claim  that  the
            Indemnifying  Party elects to contest.  The Indemnified  Party
            may participate in, but not control, any defense or settlement
            of any Third Party Claim controlled by the Indemnifying  Party
            pursuant to this  subparagraph  (x), and except as provided in
            the preceding  sentence,  the Indemnified Party shall bear its
            own costs and  expenses  with  respect to such  participation.
            Notwithstanding the foregoing,  the Indemnified Party may take
            over the control of the defense or settlement of a Third Party
            Claim  at any  time if it  irrevocably  waives  its  right  to
            indemnity  under Section 9(a) with respect to such Third Party
            Claim.

            (y) If the Indemnifying  Party fails to notify the Indemnified
            Party within the Dispute  Period that the  Indemnifying  Party
            desires to defend the Third  Party  Claim  pursuant to Section
            9(b), or if the Indemnifying Party gives such notice but fails
            to prosecute  vigorously  and  diligently  or settle the Third
            Party Claim,  or if the  Indemnifying  Party fails to give any
            notice  whatsoever   within  the  Dispute  Period,   then  the
            Indemnified  Party shall have the right to defend, at the sole
            cost and expense of the  Indemnifying  Party,  the Third Party
            Claim by all appropriate proceedings,  which proceedings shall
            be prosecuted by the Indemnified  Party in a reasonable manner
            and in good faith or will be settled at the  discretion of the
            Indemnified Party (with the consent of the Indemnifying Party,
            which  consent  will  not  be  unreasonably   withheld).   The
            Indemnified  Party will have full  control of such defense and
            proceedings,  including any compromise or settlement  thereof;
            provided, however, that if requested by the Indemnified Party,
            the  Indemnifying  Party will, at the sole cost and expense of
            the Indemnifying Party, provide reasonable  cooperation to the
            Indemnified  Party and its  counsel  in  contesting  any Third
            Party  Claim  which  the  Indemnified   Party  is  contesting.
            Notwithstanding the foregoing  provisions of this subparagraph
            (y), if the  Indemnifying  Party has notified the  Indemnified
            Party within the Dispute  Period that the  Indemnifying  Party
            disputes  its   liability  or  the  amount  of  its  liability
            hereunder to the Indemnified  Party with respect to such Third
            Party  Claim and if such  dispute is  resolved in favor of the
            Indemnifying  Party in the manner provided in  subparagraph(z)
            below, the Indemnifying Party will not be required to bear the
            costs and expenses of the Indemnified Party's defense pursuant
            to  this  subparagraph  (y)  or of  the  Indemnifying  Party's
            participation  therein at the Indemnified Party's request, and
            the Indemnified  Party shall reimburse the Indemnifying  Party
            in full for all reasonable costs and expenses  incurred by the
            Indemnifying  Party in connection  with such  litigation.  The
            Indemnifying  Party may participate  in, but not control,  any
            defense or  settlement  controlled  by the  Indemnified  Party
            pursuant to this subparagraph (y), and the Indemnifying  Party
            shall  bear its own costs and  expenses  with  respect to such
            participation.

<PAGE>
                                    19

            (z) If the Indemnifying  Party notifies the Indemnified  Party
            that it does not  dispute its  liability  or the amount of its
            liability to the  Indemnified  Party with respect to the Third
            Party  Claim  under  Section  9(a)  or  fails  to  notify  the
            Indemnified  Party  within  the  Dispute  Period  whether  the
            Indemnifying Party disputes its liability or the amount of its
            liability to the Indemnified  Party with respect to such Third
            Party  Claim,  the  amount of Damages  specified  in the Claim
            Notice  shall  be  conclusively  deemed  a  liability  of  the
            Indemnifying  Party under  Section  9(a) and the  Indemnifying
            Party shall pay the amount of such Damages to the  Indemnified
            Party on demand. If the Indemnifying Party has timely disputed
            its liability or the amount of its  liability  with respect to
            such claim, the Indemnifying  Party and the Indemnified  Party
            shall  proceed in good faith to negotiate a resolution of such
            dispute;  provided,  however,  that  it  the  dispute  is  not
            resolved  within thirty (30) days after the Claim Notice,  the
            Indemnifying  Party shall be enlisted to institute  such legal
            action as it deems appropriate.

      (ii) In the event any Indemnified  Party should have a claim under Section
9(a) against the  Indemnifying  Party that does not involve a Third Party Claim,
the  Indemnified  Party  shall  deliver  a written  notification  of a claim for
indemnity  under Section 9(a) specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably ascertainable, the estimated
amount,  determined in good faith,  of such claim (an  "Indemnity  Notice") with
reasonable  promptness to the Indemnifying Party. The failure by any Indemnified
Party  to give the  Indemnity  Notice  shall  not  impair  such  party's  rights
hereunder except to the extent that the Indemnifying  Party demonstrates that it
has been irreparably  prejudiced thereby. If the Indemnifying Party notifies the
Indemnified  Party that it does not dispute the claim or the amount of the claim
described  in such  Indemnity  Notice or fails to notify the  Indemnified  Party
within the Dispute Period whether the  Indemnifying  Party disputes the claim or
the  amount of the claim  described  in such  Indemnity  Notice,  the  amount of
Damages  specified  in the  Indemnity  Notice  will  be  conclusively  deemed  a
liability of the  Indemnifying  Party under  Section  9(a) and the  Indemnifying
Party shall pay the amount of such Damages to the  Indemnified  Party on demand.
If the Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall  proceed in good faith to  negotiate a resolution  of such  dispute;
provided,  however,  that it the dispute is not resolved within thirty (30) days
after the Claim Notice,  the  Indemnifying  Party shall be enlisted to institute
such legal action as it deems appropriate.

<PAGE>
20

      c. The indemnity  agreements  contained herein shall be in addition to (i)
any cause of action or  similar  rights of the  indemnified  party  against  the
indemnifying  party or others,  and (ii) any liabilities the indemnifying  party
may be subject to.

      10. JURY TRIAL WAIVER.  The Company and the Lender hereby waive a trial by
jury in any action,  proceeding or counterclaim brought by either of the Parties
hereto  against the other in respect of any matter  arising out or in connection
with the Transaction Agreements.

      11. GOVERNING LAW: MISCELLANEOUS.

      a. This Agreement  shall be governed by and interpreted in accordance with
the laws of the State of New York for  contracts to be wholly  performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws.  Each of the parties  consents  to the  exclusive  jurisdiction  of the
federal courts whose districts encompass any part of the City of New York or the
state  courts  of the  State  of New  York  sitting  in the  City of New York in
connection  with any dispute  arising  under this  Agreement or any of the other
Transaction  Agreements  and hereby waives,  to the maximum extent  permitted by
law, any objection,  including any objection based on forum non  conveniens,  to
the  bringing  of any  such  proceeding  in such  jurisdictions.  To the  extent
determined  by such  court,  the  Company  shall  reimburse  the  Lender for any
reasonable legal fees and disbursements incurred by the Lender in enforcement of
or protection of any of its rights under any of the Transaction Agreements.

      b.  Failure  of any  party to  exercise  any right or  remedy  under  this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

<PAGE>
21

      c. This  Agreement  shall inure to the benefit of and be binding  upon the
successors and assigns of each of the parties hereto.

      d.  All  pronouns  and any  variations  thereof  refer  to the  masculine,
feminine or neuter, singular or plural, as the context may require.

      e. A facsimile  transmission  of this signed  Agreement shall be legal and
binding on all parties hereto.

      f. This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original.

      g. The headings of this  Agreement  are for  convenience  of reference and
shall not form part of, or affect the interpretation of, this Agreement.

      h. If any provision of this Agreement shall be invalid or unenforceable in
any  jurisdiction,  such  invalidity  or  unenforceability  shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

      i. This  Agreement may be amended only by an instrument in writing  signed
by the party to be charged with enforcement thereof.

      k. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.

      12. NOTICES.  Any notice required or permitted hereunder shall be given in
writing  (unless  otherwise  specified  herein) and shall be deemed  effectively
given on the earliest of

            (a) the date delivered, if delivered by personal delivery as against
      written receipt therefor or by confirmed facsimile transmission,

            (b) the seventh business day after deposit,  postage prepaid, in the
      United States Postal Service by registered or certified mail, or

<PAGE>
22

            (c)  the  third   business   day  after   mailing  by   domestic  or
      international express courier, with delivery costs and fees prepaid,

in each case,  addressed to each of the other parties thereunto  entitled at the
following  addresses (or at such other  addresses as such party may designate by
ten (10)  days'  advance  written  notice  similarly  given to each of the other
parties hereto):

Company:       SALIVA DIAGNOSTIC SYSTEMS, INC.
               at its address at the head of this Agreement
               Attn: Leo Ehrlich
               Telephone No.: (718) 552-3599
               Telecopier No.: (718) 228-2522

               with a copy to:

               Krieger & Prager LLP, Esqs.
               39 Broadway
               Suite 1440
               New York, NY 10006
               Attn: Samuel M. Krieger, Esq.
               Telephone No.: (212) 363-2900
               Telecopier No.  (212) 363-2999

Lender:        At the address set forth on the signature page of this Agreement.

<PAGE>
23

               with a copy to:

Escrow Agent:  Krieger & Prager LLP
               39 Broadway
               Suite 1440
               New York, NY 10006
               Attn: Samuel Krieger, Esq.
               New York, New York 10016
               Telephone No.: (212) 363-2900
               Telecopier No.  (212) 363-2999

      13.  SURVIVAL OF  REPRESENTATIONS  AND  WARRANTIES.  The Company's and the
Lender's  representations  and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the  Certificates and the payment
of the  Purchase  Price,  and shall  inure to the  benefit of the Lender and the
Company and their respective successors and assigns.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]

<PAGE>
24

      IN WITNESS  WHEREOF,  this  Agreement has been duly executed by the Lender
(if an entity, by one of its officers  thereunto duly authorized) as of the date
set forth below.

PURCHASE PRICE:   $ _______________________

                             SIGNATURES FOR LENDERS

      IN  WITNESS  WHEREOF,  the  undersigned   represents  that  the  foregoing
statements are true and correct and that it has caused this Securities  Purchase
Agreement to be duly executed on its behalf this day of January , 2005.

------------------------------                    -------------------------
Name of Lender                                                (Address)
                                                  --------------------------
By:______________________________
  (Signature of Authorized Person)

Name and Title: _________________________

-----------------------------------
Jurisdiction of Incorporation or Organization

As of the date set forth below,  the  undersigned  hereby accepts this Agreement
and  represents  that the foregoing  statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.

SALIVA DIAGNOSTIC SYSTEMS, INC.

By: __________________________

Title: ________________________

Date:________________________  , 2005June
        21,
        2005

      Merriman
        Curhan Ford & Co.

      600
        California Street, Suite 9th
        Floor

      San
        Francisco, California 94108

      

      Dear
        Sirs:

      

      The
        undersigned is a holder of shares of common stock, and/or options, warrants,
        or
        other rights to acquire common stock, of National Lampoon, Inc., a Delaware
        corporation (the “Company”). The undersigned understands that Merriman Curhan
        Ford & Co. (the “Underwriter”) proposes to enter into an Underwriting
        Agreement (the “Underwriting Agreement”) providing for the public offering (the
“Public Offering”) of the Company’s common stock (the “Offered Common Stock”) by
        the Underwriter and any other underwriters that may participate in the Public
        Offering pursuant to a registration statement to be filed with the Securities
        and Exchange Commission (the “SEC”) (such registration statement, as may be
        amended, is referred to herein as the “Registration Statement”). To induce the
        Underwriter and any other underwriters that may participate in the Public
        Offering to continue their efforts in connection with the Public Offering,
        the
        undersigned hereby agrees as follows: 

      

      (i) Except
        as
        set forth in subsections (v) and (vi) below, during the period commencing
        on the
        date hereof and ending on the date which is six (6) months from the date
        the
        Registration Statement is first declared effective (such period herein referred
        to as the “Lock-Up Period”), the undersigned will not, directly or indirectly,
        through an “affiliate” or “associate” (as such terms are defined in the General
        Rules and Regulations under the Securities Act of 1933, as amended (the
“Securities Act”)), a family member or otherwise, offer, sell, pledge,
        hypothecate, grant an option for sale, or otherwise dispose of, or transfer
        or
        grant any rights with respect thereto in any manner (either privately or
        publicly pursuant to Rule 144 of the General Rules and Regulations under
        the
        Securities Act, or otherwise) any shares of common stock of the Company or
        any
        other securities of the Company, including but not limited to any securities
        convertible or exchangeable into shares of common stock of the Company or
        options, warrants or other rights to acquire common stock of the Company
        directly or indirectly owned or controlled by the undersigned on the date
        hereof
        or hereafter acquired by the undersigned pursuant to a stock split, stock
        dividend, recapitalization or similar transaction or otherwise acquired by
        the
        undersigned in a private transaction (the “Securities”), or enter into any swap
        or any other agreement or any transaction that transfers, in whole or in
        part,
        directly or indirectly, the economic consequence of ownership of the Securities,
        whether any such swap or transaction is to be settled by delivery of common
        stock or other securities, in cash or otherwise, during the Lock-Up Period,
        without the Underwriter’s prior written consent; provided,
        however,
        that
        (a) such Securities may be sold or otherwise transferred in a private
        transaction during the Lock-Up Period so long as the acquirer of the Securities,
        by written agreement with the Underwriter entered into at the time of
        acquisition and delivered to the Underwriter prior to the consummation of
        such
        acquisition, agrees to be bound by the restrictions set forth in this letter
        agreement and (b) the undersigned may transfer any or all of the Securities
        either during his lifetime or upon death, by gift, will or intestacy, to
        his
        immediate family or to a trust or limited partnership, the beneficiaries
        or
        members of which are exclusively the undersigned and/or a member or members
        of
        his immediate family; provided,
        however,
        that it
        shall be a condition to such transfer that the transferee execute a written
        agreement that the transferee is receiving and holding the Securities subject
        to
        the provisions of this letter agreement, and there shall be no further transfer
        of such Securities except in accordance with this letter agreement. For purposes
        hereof, “immediate family” shall mean a spouse, lineal descendant, father,
        mother, brother or sister of the undersigned.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        Merriman
          Curhan Ford & Co.

        June
          21,
          2005

        Page
          2

      

       

      (ii) Except
        with respect to the undersigned’s participation in the public offering as set
        forth in subsection (vi) below, if at any time during the six (6) month period
        commencing on the date that the Registration Statement is first declared
        effective, the undersigned proposes to sell any Securities, including pursuant
        to subsection (v) below, including publicly under Rule 144 or otherwise,
        the
        undersigned shall sell such Securities through the Underwriter, so long as
        the
        price and terms of execution offered by such Underwriter are at least as
        favorable as may be obtained from other brokerage firms, and provided further
        that the Underwriter notify the undersigned within three (3) business days
        of
        the proposed transaction of the price and terms of execution for such proposed
        transaction.

      

      (iii) During
        the Lock-up Period, the undersigned agrees not to make any demand for, exercise
        any right, or file (or participate in the filing of) a registration statement
        with respect to the registration of any Securities without the prior written
        consent of the Underwriter.

      

      (iv) The
        undersigned agrees to furnish such information as may be required (whether
        orally or in writing) and otherwise to cooperate under the securities or
        blue
        sky laws of such states as the Underwriter may designate or any regulatory
        or
        other authority (including the American Stock Exchange) as a condition to
        registration of the Public Offering in such state, if requested by the
        Underwriter.

      

      (v) During
        each 90 day period of the six (6) month period following the date that the
        Registration Statement is first declared effective, the undersigned shall
        be
        entitled to sell up to 39,334 shares of the Company’s common stock. In the event
        that the number of outstanding shares of the Company’s common stock is changed
        by a stock dividend, recapitalization, stock split, reverse stock split,
        subdivision, combination, reclassification or similar change in the capital
        structure of the Company without consideration, then the number of shares
        of
        common stock that the undersigned may sell during any 90 day period shall
        be
        proportionately adjusted, subject to any required action by the Company’s Board
        of Directors or its stockholders and compliance with applicable securities
        laws.
        If not exercised during a 90 day period, the right to sell as to that 90
        day
        period shall expire and the undersigned shall not be entitled to include
        such
        shares in sales made during subsequent 90 day periods.

      

      (vi) The
        undersigned shall be entitled to include up to a total of 400,000 shares
        of
        common stock in the Public Offering and to sell such shares through the
        Underwriter (the “Selling Security Holder’s Shares”). The undersigned has
        notified the Underwriter of his intent to include 200,000 of the Selling
        Security Holder’s Shares in the Public Offering. The undersigned shall enter
        into such customary agreements (including the Underwriting Agreement) and
        deliver such other documents as may be reasonably required by the Underwriter
        and/or the Company in connection with such offering of the Selling Security
        Holder’s Shares.

      
 

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        Merriman
          Curhan Ford & Co.

        June
          21,
          2005

        Page
          3

         

      

      This
        letter agreement shall terminate in the event (a) the Public Offering does
        not
        close on or before October 31, 2005 or (b) the gross proceeds received by
        the
        Company upon the closing of the Public Offering do not equal at least $8
        million.

      

      Subject
        to the foregoing, the undersigned hereby agrees to the placement of a legend
        on
        the certificates representing the Securities to indicate the restrictions
        on
        resale of the Securities imposed by this agreement and/or the entry of stop
        transfer orders with the transfer agent and the registrar of the Company’s
        securities against the transfer of the Securities except in compliance with
        this
        letter agreement. In the case of any Securities for which the undersigned
        is the
        beneficial but not the record holder, the undersigned agrees to cause the
        record
        holder to authorize the Company to cause the transfer agent to decline to
        transfer and/or to note stop transfer restrictions on its books and records
        with
        respect to such Securities.

      

      To
        the
        extent that the undersigned has any rights with respect to the registration
        of
        any Securities pursuant to any agreement with the Company, and to the extent
        that such agreement and the rights conferred thereunder may be inconsistent
        with
        the terms of this letter agreement, the undersigned agrees that the terms
        herein
        shall govern.

      

      The
        undersigned hereby represents and warrants that the undersigned has full
        power
        and authority to enter into this letter agreement. To the best of the
        undersigned’s knowledge, all of the Securities held by him are listed on the
        attached Annex I. All authority herein conferred or agreed to be conferred
        shall
        survive the death or incapacity of the undersigned and any obligations of
        the
        undersigned shall be binding upon the heirs, personal representatives,
        successors, and assigns of the undersigned.

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        Merriman
          Curhan Ford & Co.

        June
          21,
          2005

        Page
          4

      

      Any
        right
        of the undersigned to sell any portion of the Securities, as discussed in
        subsection (v) above, is subject at all times to compliance with all applicable
        state and federal securities laws, rules and regulations.

      

      This
        letter agreement represents the entire understanding between the parties
        with
        respect to the subject matter hereof, and supersedes all prior agreements,
        negotiations, understandings, letters of intent, representations, statements
        and
        writings between the parties relating thereto. No modification, alteration,
        waiver or change in any of the terms of this letter agreement shall be valid
        or
        binding upon the parties hereto unless made in writing and duly executed
        on
        behalf of the party to be charged therewith.

      

      The
        undersigned understands that the Underwriter and any other underwriters that
        may
        participate in the Public Offering are relying upon this letter agreement
        in
        proceeding toward consummation of the Public Offering.

      

      Any
        Public Offering will only be made pursuant to an Underwriting Agreement,
        the
        terms of which are subject to negotiation between the Company and the
        Underwriter. If this agreement is acceptable to the Underwriter, please sign
        the
        form of acceptance below and deliver one of the counterparts hereof to me,
        such
        counterparts to constitute one and the same agreement. This will become a
        binding agreement between us upon execution by each of the parties
        hereto.

      

      Very
        truly yours,

      

      

      

      /s/
        James P. Jimirro   

      (Signature)

      

      James
        P. Jimirro   

      (Print
        Name)

      

      AGREED
        to
        and ACCEPTED this _____ day of 

      June
        2005

      

      MERRIMAN
        CURHAN FORD & CO.

      

      

      

      By:_______________________________      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        
          Merriman
            Curhan Ford & Co.

          June
            21,
            2005

          Page
            5

        

      

       

      Annex
        1

       

       

      List
        of Securities Beneficially Held By James P. Jimirro

       

      Common
        Stock

      

      450,668
        shares of common stock

      

      Options
        Granted from the J2 Communications Amended and Restated 1999 Stock Option,
        Deferred Stock and Restricted Stock Plan

      

      Options
        to purchase a total of 1,560,374 shares of common stock

      

      Series
        B Convertible Preferred Stock

      

      None

      

      Series
        C Convertible Preferred Stock

      

      None

      

      Warrants

      

      None

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