EXHIBIT 4.1

                          SECURITIES PURCHASE AGREEMENT

      SECURITIES  PURCHASE AGREEMENT (this  "AGREEMENT"),  dated as of September
23,  2004,  by and  among  Cyberlux  Corporation,  a  Nevada  corporation,  with
headquarters  located at 4625 Creekstone  Drive,  Suite 100,  Research  Triangle
Park, Durham,  North Carolina 27703 (the "COMPANY"),  and each of the purchasers
set forth on the signature pages hereto (the "BUYERS").

      WHEREAS:

      A. The Company and the Buyers are executing and delivering  this Agreement
in reliance  upon the exemption  from  securities  registration  afforded by the
rules and  regulations  as  promulgated  by the  United  States  Securities  and
Exchange  Commission  (the "SEC") under the  Securities  Act of 1933, as amended
(the "1933 Act");

      B. Buyers  desire to purchase  and the Company  desires to issue and sell,
upon the  terms  and  conditions  set forth in this  Agreement  (i) 10%  secured
convertible notes of the Company, in the form attached hereto as EXHIBIT "A", in
the  aggregate  principal  amount of One Million Five Hundred  Thousand  Dollars
($1,500,000)  (together with any note(s)  issued in replacement  thereof or as a
dividend  thereon or otherwise with respect thereto in accordance with the terms
thereof, the "NOTES"),  convertible into shares of common stock, par value $.001
per share,  of the Company (the "COMMON  STOCK"),  upon the terms and subject to
the limitations and conditions set forth in such Notes and (ii) warrants, in the
form  attached  hereto as EXHIBIT  "B", to purchase  2,250,000  shares of Common
Stock (the "WARRANTS").

      C. Each Buyer wishes to purchase,  upon the terms and conditions stated in
this Agreement,  such principal amount of Notes and number of Warrants as is set
forth immediately below its name on the signature pages hereto; and

      D. Contemporaneous with the execution and delivery of this Agreement,  the
parties hereto are executing and delivering a Registration Rights Agreement,  in
the form attached hereto as EXHIBIT "C" (the "REGISTRATION  RIGHTS  AGREEMENT"),
pursuant to which the Company has agreed to provide certain  registration rights
under the 1933 Act and the rules and  regulations  promulgated  thereunder,  and
applicable state securities laws.

      NOW  THEREFORE,  the  Company  and each of the Buyers  severally  (and not
jointly) hereby agree as follows:

      1. PURCHASE AND SALE OF NOTES AND WARRANTS.

            A. PURCHASE OF NOTES AND  WARRANTS.  On the Closing Date (as defined
below),  the Company shall issue and sell to each Buyer and each Buyer severally
agrees to purchase from the Company such principal amount of Notes and number of
Warrants as is set forth  immediately  below such Buyer's name on the  signature
pages hereto.

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            B. FORM OF PAYMENT. On the Closing Date (as defined below), (i) each
Buyer shall pay the  purchase  price for the Notes and the Warrants to be issued
and sold to it at the Closing (as defined below) (the "PURCHASE  Price") by wire
transfer of immediately  available funds to the Company,  in accordance with the
Company's  written  wiring  instructions,  against  delivery of the Notes in the
principal  amount equal to the  Purchase  Price and the number of Warrants as is
set forth immediately below such Buyer's name on the signature pages hereto, and
(ii) the Company  shall  deliver such Notes and Warrants duly executed on behalf
of the Company, to such Buyer, against delivery of such Purchase Price.

            C. CLOSING DATE.  Subject to the satisfaction (or written waiver) of
the conditions  thereto set forth in Section 6 and Section 7 below, the date and
time of the  issuance  and sale of the Notes and the  Warrants  pursuant to this
Agreement  (the "CLOSING  DATE") shall be 12:00 noon,  Eastern  Standard Time on
September 23, 2004, or such other mutually  agreed upon time. The closing of the
transactions  contemplated by this Agreement (the "CLOSING")  shall occur on the
Closing Date at such location as may be agreed to by the parties.

      2. BUYERS'  REPRESENTATIONS AND WARRANTIES.  Each Buyer severally (and not
jointly) represents and warrants to the Company solely as to such Buyer that:

            A.  INVESTMENT  PURPOSE.  As  of  the  date  hereof,  the  Buyer  is
purchasing the Notes and the shares of Common Stock issuable upon  conversion of
or  otherwise  pursuant  to  the  Notes  (including,  without  limitation,  such
additional  shares of Common  Stock,  if any, as are  issuable (i) on account of
interest on the Notes,  (ii) as a result of the events described in Sections 1.3
and 1.4(g) of the Notes and Section 2(c) of the Registration Rights Agreement or
(iii) in payment  of the  Standard  Liquidated  Damages  Amount  (as  defined in
Section  2(f) below)  pursuant to this  Agreement,  such shares of Common  Stock
being  collectively  referred  to herein  as the  "CONVERSION  SHARES")  and the
Warrants  and the shares of Common Stock  issuable  upon  exercise  thereof (the
"WARRANT  SHARES" and,  collectively  with the Notes,  Warrants  and  Conversion
Shares,  the  "SECURITIES")  for its own  account  and not with a  present  view
towards  the public  sale or  distribution  thereof,  except  pursuant  to sales
registered or exempted from registration under the 1933 Act; provided,  however,
that by making the representations  herein, the Buyer does not agree to hold any
of the  Securities for any minimum or other specific term and reserves the right
to dispose of the  Securities  at any time in  accordance  with or pursuant to a
registration statement or an exemption under the 1933 Act.

            B. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor"
as  that  term is  defined  in  Rule  501(a)  of  Regulation  D (an  "ACCREDITED
INVESTOR").

            C. RELIANCE ON EXEMPTIONS. The Buyer understands that the Securities
are being offered and sold to it in reliance upon specific  exemptions  from the
registration requirements of United States federal and state securities laws and
that the  Company is relying  upon the truth and  accuracy  of, and the  Buyer's
compliance with, the representations,  warranties,  agreements,  acknowledgments
and  understandings  of the  Buyer set forth  herein in order to  determine  the
availability  of such exemptions and the eligibility of the Buyer to acquire the
Securities.


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<PAGE>

            D. INFORMATION.  The Buyer and its advisors,  if any, have been, and
for so long as the Notes and Warrants  remain  outstanding  will continue to be,
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
which  have  been  requested  by the  Buyer or its  advisors.  The Buyer and its
advisors,  if any, have been,  and for so long as the Notes and Warrants  remain
outstanding  will continue to be,  afforded the  opportunity to ask questions of
the Company. Notwithstanding the foregoing, the Company has not disclosed to the
Buyer any material nonpublic  information and will not disclose such information
unless  such  information  is  disclosed  to the  public  prior  to or  promptly
following such disclosure to the Buyer. Neither such inquiries nor any other due
diligence   investigation   conducted  by  Buyer  or  any  of  its  advisors  or
representatives  shall  modify,  amend or  affect  Buyer's  right to rely on the
Company's representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities  involves a significant degree
of risk.

            E. GOVERNMENTAL  REVIEW. The Buyer understands that no United States
federal  or state  agency or any other  government  or  governmental  agency has
passed upon or made any recommendation or endorsement of the Securities.

            F.  TRANSFER OR RE-SALE.  The Buyer  understands  that (i) except as
provided  in the  Registration  Rights  Agreement,  the sale or  re-sale  of the
Securities  has not been and is not being  registered  under the 1933 Act or any
applicable  state  securities  laws,  and the  Securities may not be transferred
unless  (a) the  Securities  are  sold  pursuant  to an  effective  registration
statement  under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel that shall be in form,  substance and scope  customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred  may be sold or  transferred  pursuant to an exemption
from such registration,  which opinion shall be accepted by the Company, (c) the
Securities are sold or  transferred  to an  "affiliate"  (as defined in Rule 144
promulgated  under the 1933 Act (or a successor rule) ("RULE 144")) of the Buyer
who agrees to sell or otherwise  transfer the Securities only in accordance with
this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or (e) the  Securities  are sold  pursuant to Regulation S
under the 1933 Act (or a successor rule)  ("REGULATION  S"), and the Buyer shall
have  delivered  to the  Company an  opinion  of counsel  that shall be in form,
substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities
made in  reliance on Rule 144 may be made only in  accordance  with the terms of
said Rule and  further,  if said Rule is not  applicable,  any  re-sale  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 defined 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 (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state  securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to the
Registration  Rights Agreement).  Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.  In the
event that the Company  does not accept the  opinion of counsel  provided by the
Buyer with respect to the transfer of Securities  pursuant to an exemption  from
registration,  such as Rule 144 or  Regulation S, within three (3) business days
of delivery of the opinion to the  Company,  the Company  shall pay to the Buyer
liquidated  damages of three percent (3%) of the outstanding amount of the Notes
per month plus  accrued and unpaid  interest on the Notes,  prorated for partial
months,  in cash or shares at the option of the  Company  ("STANDARD  LIQUIDATED
DAMAGES  AMOUNT").  If the  Company  elects  to be pay the  Standard  Liquidated
Damages  Amount in shares of Common  Stock,  such shares  shall be issued at the
Conversion Price at the time of payment.


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<PAGE>

            G. LEGENDS.  The Buyer  understands  that the Notes and the Warrants
and,  until such time as the  Conversion  Shares and  Warrant  Shares  have been
registered  under  the  1933  Act as  contemplated  by the  Registration  Rights
Agreement or otherwise  may be sold pursuant to Rule 144 or Regulation S without
any  restriction as to the number of securities as of a particular date that can
then be immediately  sold,  the Conversion  Shares and Warrant Shares may bear a
restrictive  legend in  substantially  the following  form (and a  stop-transfer
order may be placed against transfer of the certificates for such Securities):

               "The  securities  represented by this  certificate  have not been
               registered  under the  Securities  Act of 1933,  as amended.  The
               securities  may  not be  sold,  transferred  or  assigned  in the
               absence of an effective registration statement for the securities
               under said Act, or an opinion of counsel, in form,  substance and
               scope   customary   for   opinions   of  counsel  in   comparable
               transactions, that registration is not required under said Act or
               unless sold pursuant to Rule 144 or Regulation S under said Act."

      The legend set forth above shall be removed and the Company  shall issue a
certificate  without such legend to the holder of any Security  upon which it is
stamped,  if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective  registration  statement
filed  under  the  1933 Act or  otherwise  may be sold  pursuant  to Rule 144 or
Regulation  S without any  restriction  as to the number of  securities  as of a
particular  date that can then be immediately  sold, or (b) such holder provides
the Company with an opinion of counsel,  in form,  substance and scope customary
for opinions of counsel in comparable transactions,  to the effect that a public
sale or transfer of such  Security  may be made without  registration  under the
1933 Act,  which  opinion  shall be  accepted by the Company so that the sale or
transfer is effected or (c) such holder  provides  the Company  with  reasonable
assurances  that such Security can be sold pursuant to Rule 144 or Regulation S.
The Buyer  agrees  to sell all  Securities,  including  those  represented  by a
certificate(s)  from which the  legend  has been  removed,  in  compliance  with
applicable prospectus delivery requirements, if any.

            H. AUTHORIZATION;  ENFORCEMENT.  This Agreement and the Registration
Rights Agreement have been duly and validly authorized.  This Agreement has been
duly  executed  and  delivered  on  behalf  of the  Buyer,  and  this  Agreement
constitutes,  and upon  execution and delivery by the Buyer of the  Registration
Rights Agreement,  such agreement will constitute,  valid and binding agreements
of the Buyer enforceable in accordance with their terms.

            I. RESIDENCY.  The Buyer is a resident of the jurisdiction set forth
immediately below such Buyer's name on the signature pages hereto.


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<PAGE>


      3.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company represents
and warrants to each Buyer that:

            A.  ORGANIZATION  AND  QUALIFICATION.  The  Company  and each of its
Subsidiaries  (as defined  below),  if any,  is a  corporation  duly  organized,
validly  existing and in good  standing  under the laws of the  jurisdiction  in
which it is incorporated, with full power and authority (corporate and other) to
own,  lease,  use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted.  SCHEDULE 3(A) sets forth
a list of all of the  Subsidiaries of the Company and the  jurisdiction in which
each is incorporated. The Company and each of its Subsidiaries is duly qualified
as a  foreign  corporation  to do  business  and is in good  standing  in  every
jurisdiction  in which its  ownership  or use of  property  or the nature of the
business  conducted by it makes such  qualification  necessary  except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect.  "MATERIAL  ADVERSE  EFFECT"  means any material  adverse  effect on the
business, operations, assets, financial condition or prospects of the Company or
its Subsidiaries,  if any, taken as a whole, or on the transactions contemplated
hereby or by the  agreements  or  instruments  to be entered into in  connection
herewith.  "SUBSIDIARIES"  means any corporation or other organization,  whether
incorporated  or  unincorporated,   in  which  the  Company  owns,  directly  or
indirectly, any equity or other ownership interest.

            B.  AUTHORIZATION;  ENFORCEMENT.  (i) The Company has all  requisite
corporate  power and  authority  to enter into and perform this  Agreement,  the
Registration Rights Agreement,  the Notes and the Warrants and to consummate the
transactions  contemplated  hereby and thereby and to issue the  Securities,  in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement, the Notes and the Warrants by
the Company and the consummation by it of the transactions  contemplated  hereby
and thereby  (including  without  limitation,  the issuance of the Notes and the
Warrants and the issuance and reservation for issuance of the Conversion  Shares
and Warrant Shares issuable upon conversion or exercise  thereof) have been duly
authorized  by the  Company's  Board of  Directors  and no  further  consent  or
authorization  of the Company,  its Board of Directors,  or its  shareholders is
required,  (iii) this  Agreement  has been duly  executed  and  delivered by the
Company by its authorized representative,  and such authorized representative is
the true and official  representative  with authority to sign this Agreement and
the  other  documents  executed  in  connection  herewith  and bind the  Company
accordingly,  and  (iv)  this  Agreement  constitutes,  and upon  execution  and
delivery by the Company of the Registration Rights Agreement,  the Notes and the
Warrants,  each of such instruments will constitute,  a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.

                                       5
<PAGE>

            C.  CAPITALIZATION.  As of the date hereof,  the authorized  capital
stock of the Company  consists of (i)  100,000,000  shares of Common  Stock,  of
which  19,915,905  shares  are  issued and  outstanding,  14,000,000  shares are
reserved for issuance  pursuant to the Company's stock option plans,  36,384,178
shares are reserved for issuance  pursuant to  securities  (other than the Notes
and the Warrants)  exercisable  for, or  convertible  into or  exchangeable  for
shares of Common Stock and  25,435,102  shares are  reserved  for issuance  upon
conversion  of the Notes and the  Additional  Notes (as defined in Section 4(l))
and exercise of the Warrants and the Additional  Warrants (as defined in Section
4(l)) (subject to (x) the Stockholder  Approval (as defined in Section 4(n)) and
(y)  adjustment  pursuant to the  Company's  covenant  set forth in Section 4(h)
below);  and (ii)  5,000,000  shares of preferred  stock,  of which  800,170.861
shares are issued and  outstanding.  All of such  outstanding  shares of capital
stock are, or upon issuance will be, duly authorized, validly issued, fully paid
and  nonassessable.  No shares of capital  stock of the  Company  are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or  encumbrances  imposed  through the actions or failure to act of
the Company.  Except as disclosed in SCHEDULE  3(C), as of the effective date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character  whatsoever  relating to,
or  securities  or rights  convertible  into or  exchangeable  for any shares of
capital  stock of the Company or any of its  Subsidiaries,  or  arrangements  by
which the  Company or any of its  Subsidiaries  is or may become  bound to issue
additional  shares of capital  stock of the Company or any of its  Subsidiaries,
(ii) there are no agreements or  arrangements  under which the Company or any of
its  Subsidiaries  is  obligated  to  register  the  sale of any of its or their
securities  under the 1933 Act (except the  Registration  Rights  Agreement) and
(iii) there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Notes, the Warrants,  the
Conversion Shares or Warrant Shares. The Company has furnished to the Buyer true
and correct copies of the Company's  Articles of  Incorporation  as in effect on
the date hereof  ("ARTICLES OF  INCORPORATION"),  the Company's  By-laws,  as in
effect on the date  hereof  (the  "BY-LAWS"),  and the  terms of all  securities
convertible into or exercisable for Common Stock of the Company and the material
rights of the holders thereof in respect thereto.  The Company shall provide the
Buyer with a written update of this representation signed by the Company's Chief
Executive or Chief Financial  Officer on behalf of the Company as of the Closing
Date.

            D.  ISSUANCE  OF SHARES.  Subject to the  Stockholder  Approval  (as
defined in Section  4(n)),  the  Conversion  Shares and Warrant  Shares are duly
authorized  and reserved  for issuance  and,  upon  conversion  of the Notes and
exercise of the Warrants in  accordance  with their  respective  terms,  will be
validly issued,  fully paid and non-assessable,  and free from all taxes, liens,
claims  and  encumbrances  with  respect to the issue  thereof  and shall not be
subject to preemptive  rights or other  similar  rights of  shareholders  of the
Company and will not impose personal liability upon the holder thereof.

            E.   ACKNOWLEDGMENT  OF  DILUTION.   The  Company   understands  and
acknowledges  the  potentially  dilutive  effect to the  Common  Stock  upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the Note
or  exercise  of  the  Warrants.  The  Company  further  acknowledges  that  its
obligation to issue Conversion  Shares and Warrant Shares upon conversion of the
Notes or exercise of the Warrants in accordance with this  Agreement,  the Notes
and the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership  interests of other shareholders of
the Company.


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<PAGE>

            F. NO CONFLICTS.  The  execution,  delivery and  performance of this
Agreement,  the Registration Rights Agreement, the Notes and the Warrants by the
Company and the  consummation  by the Company of the  transactions  contemplated
hereby and thereby (including,  without limitation, the issuance and reservation
for issuance of the Conversion  Shares and Warrant Shares) will not (i) conflict
with or result in a violation of any provision of the Articles of  Incorporation
or  By-laws  or (ii)  violate  or  conflict  with,  or result in a breach of any
provision of, or constitute a default (or an event which with notice or lapse of
time or both  could  become a  default)  under,  or give to others any rights of
termination,   amendment,   acceleration  or  cancellation  of,  any  agreement,
indenture,  patent,  patent license or instrument to which the Company or any of
its  Subsidiaries  is a party,  or (iii) result in a violation of any law, rule,
regulation,  order,  judgment or decree (including  federal and state securities
laws and  regulations and regulations of any  self-regulatory  organizations  to
which the Company or its  securities  are subject)  applicable to the Company or
any of its  Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected  (except for such conflicts,  defaults,
terminations,  amendments, accelerations,  cancellations and violations as would
not, individually or in the aggregate,  have a Material Adverse Effect). Neither
the Company  nor any of its  Subsidiaries  is in  violation  of its  Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its  Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action  that would give to others any rights of
termination,   amendment,   acceleration  or  cancellation  of,  any  agreement,
indenture or  instrument  to which the Company or any of its  Subsidiaries  is a
party  or by  which  any  property  or  assets  of  the  Company  or  any of its
Subsidiaries  is bound or affected,  except for possible  defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries,  if any, are not being conducted, and shall
not be conducted so long as a Buyer owns any of the Securities,  in violation of
any  law,  ordinance  or  regulation  of  any  governmental  entity.  Except  as
specifically  contemplated  by this Agreement and as required under the 1933 Act
and any applicable  state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court,  governmental agency, regulatory agency, self regulatory organization
or stock  market  or any  third  party in order for it to  execute,  deliver  or
perform any of its obligations  under this Agreement,  the  Registration  Rights
Agreement,  the Notes or the  Warrants in  accordance  with the terms  hereof or
thereof or to issue and sell the Notes and Warrants in accordance with the terms
hereof and to issue the Conversion  Shares upon  conversion of the Notes and the
Warrant  Shares upon exercise of the  Warrants.  Except as disclosed in SCHEDULE
3(F), all consents, authorizations,  orders, filings and registrations which the
Company is  required  to obtain  pursuant to the  preceding  sentence  have been
obtained  or  effected  on or prior to the date  hereof.  The  Company is not in
violation of the listing  requirements  of the  Over-the-Counter  Bulletin Board
(the "OTCBB") and does not reasonably  anticipate  that the Common Stock will be
delisted  by  the  OTCBB  in  the  foreseeable   future.  The  Company  and  its
Subsidiaries are unaware of any facts or circumstances  which might give rise to
any of the foregoing.


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<PAGE>

            G. SEC  DOCUMENTS;  FINANCIAL  STATEMENTS.  Except as  disclosed  in
SCHEDULE  3(G),  the Company has timely  filed all  reports,  schedules,  forms,
statements and other documents  required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "1934  ACT") (all of the  foregoing  filed prior to the date hereof and all
exhibits  included  therein and financial  statements and schedules  thereto and
documents  (other than  exhibits to such  documents)  incorporated  by reference
therein,  being  hereinafter  referred  to herein as the "SEC  DOCUMENTS").  The
Company  has  delivered  to each  Buyer  true  and  complete  copies  of the SEC
Documents,  except for such  exhibits and  incorporated  documents.  As of their
respective  dates, the SEC Documents  complied in all material respects with the
requirements  of the  1934  Act  and  the  rules  and  regulations  of  the  SEC
promulgated  thereunder  applicable  to the SEC  Documents,  and none of the SEC
Documents,  at the time they  were  filed  with the SEC,  contained  any  untrue
statement of a material  fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the  circumstances  under  which they were  made,  not  misleading.  None of the
statements  made in any such SEC  Documents  is,  or has  been,  required  to be
amended or updated under applicable law (except for such statements as have been
amended or updated in subsequent  filings  prior the date  hereof).  As of their
respective  dates,  the financial  statements of the Company included in the SEC
Documents  complied  as  to  form  in  all  material  respects  with  applicable
accounting  requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
United States generally accepted accounting  principles,  consistently  applied,
during the periods  involved  (except (i) as may be otherwise  indicated in such
financial  statements  or the notes  thereto,  or (ii) in the case of  unaudited
interim  statements,  to the extent  they may not  include  footnotes  or may be
condensed or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the  consolidated  results of their  operations  and
cash  flows  for the  periods  then  ended  (subject,  in the case of  unaudited
statements,  to normal year-end audit  adjustments).  Except as set forth in the
financial  statements of the Company included in the SEC Documents,  the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the  ordinary  course of business  subsequent  to December  31, 2003 and (ii)
obligations  under contracts and commitments  incurred in the ordinary course of
business and not required under generally accepted  accounting  principles to be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.

            H. ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 3(H),
since  December  31,  2003,  there has been no  material  adverse  change and no
material adverse development in the assets, liabilities,  business,  properties,
operations,  financial  condition,  results of  operations  or  prospects of the
Company or any of its Subsidiaries.

            I.  ABSENCE  OF  LITIGATION.   There  is  no  action,  suit,  claim,
proceeding,  inquiry  or  investigation  before or by any court,  public  board,
government  agency,  self-regulatory  organization  or body  pending  or, to the
knowledge  of the  Company  or any of its  Subsidiaries,  threatened  against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material  Adverse Effect.  SCHEDULE
3(I)  contains  a  complete  list and  summary  description  of any  pending  or
threatened   proceeding   against  or  affecting  the  Company  or  any  of  its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.


                                       8
<PAGE>

            J. PATENTS, COPYRIGHTS, ETC.

                  (I) The Company and each of its Subsidiaries owns or possesses
the requisite licenses or rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service  marks,  service  names,  trade  names  and  copyrights   ("INTELLECTUAL
PROPERTY")  necessary to enable it to conduct its business as now operated (and,
except  as set  forth in  SCHEDULE  3(J)  hereof,  to the best of the  Company's
knowledge,  as presently contemplated to be operated in the future); there is no
claim or action by any person  pertaining to, or proceeding  pending,  or to the
Company's knowledge threatened,  which challenges the right of the Company or of
a Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and,  except as set forth in SCHEDULE 3(J)
hereof, to the best of the Company's knowledge,  as presently contemplated to be
operated in the future); to the best of the Company's  knowledge,  the Company's
or its Subsidiaries'  current and intended  products,  services and processes do
not  infringe on any  Intellectual  Property or other rights held by any person;
and the Company is unaware of any facts or  circumstances  which might give rise
to any of the  foregoing.  The Company and each of its  Subsidiaries  have taken
reasonable  security measures to protect the secrecy,  confidentiality and value
of their Intellectual Property.

                  (II)  All of the  Company's  computer  software  and  computer
hardware,  and other  similar or related  items of  automated,  computerized  or
software systems that are used or relied on by the Company in the conduct of its
business or that were, or currently  are being,  sold or licensed by the Company
to customers (collectively,  "INFORMATION TECHNOLOGY"), are Year 2000 Compliant.
For  purposes of this  Agreement,  the term "YEAR 2000  Compliant"  means,  with
respect to the Company's Information Technology, that the Information Technology
is designed to be used prior to,  during and after the calendar  Year 2000,  and
the  Information  Technology  used during each such time period will  accurately
receive, provide and process date and time data (including,  but not limited to,
calculating,  comparing and sequencing) from, into and between the 20th and 21st
centuries,  including the years 1999 and 2000, and leap-year  calculations,  and
will not malfunction, cease to function, or provide invalid or incorrect results
as a result of the date or time  data,  to the  extent  that  other  information
technology,  used in  combination  with  the  Information  Technology,  properly
exchanges  date and time data with it. The Company has  delivered  to the Buyers
true and correct copies of all analyses,  reports,  studies and similar  written
information,  whether  prepared  by the  Company or another  party,  relating to
whether the Information Technology is Year 2000 Compliant, if any.

            K. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any
of its  Subsidiaries  is  subject  to any  charter,  corporate  or  other  legal
restriction,  or any judgment,  decree,  order,  rule or regulation which in the
judgment of the  Company's  officers  has or is expected in the future to have a
Material  Adverse Effect.  Neither the Company nor any of its  Subsidiaries is a
party to any  contract  or  agreement  which in the  judgment  of the  Company's
officers has or is expected to have a Material Adverse Effect.

            L. TAX STATUS. Except as set forth on SCHEDULE 3(L), the Company and
each of its Subsidiaries has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject  (unless and only to the extent that the Company and each
of its Subsidiaries has set aside on its books  provisions  reasonably  adequate
for the payment of all unpaid and  unreported  taxes) and has paid all taxes and
other governmental assessments and charges that are material in amount, shown or
determined to be due on such  returns,  reports and  declarations,  except those
being  contested  in good  faith  and  has set  aside  on its  books  provisions
reasonably  adequate for the payment of all taxes for periods  subsequent to the
periods  to which such  returns,  reports or  declarations  apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction,  and the officers of the Company know of no basis for any such
claim.  The  Company has not  executed a waiver  with  respect to the statute of
limitations  relating to the  assessment or collection of any foreign,  federal,
state or local tax.  Except as set forth on SCHEDULE 3(L), none of the Company's
tax returns is presently being audited by any taxing authority.


                                       9
<PAGE>

            M. CERTAIN  TRANSACTIONS.  Except as set forth on SCHEDULE  3(M) and
except for arm's length transactions pursuant to which the Company or any of its
Subsidiaries  makes  payments in the ordinary  course of business  upon terms no
less  favorable  than the Company or any of its  Subsidiaries  could obtain from
third  parties and other than the grant of stock  options  disclosed on SCHEDULE
3(C), none of the officers,  directors, or employees of the Company is presently
a party to any transaction  with the Company or any of its  Subsidiaries  (other
than for services as employees, officers and directors), including any contract,
agreement or other  arrangement  providing for the  furnishing of services to or
by,  providing for rental of real or personal  property to or from, or otherwise
requiring payments to or from any officer,  director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer,  director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

            N. DISCLOSURE. All information relating to or concerning the Company
or any of its  Subsidiaries  set forth in this  Agreement  and  provided  to the
Buyers  pursuant to Section  2(d) hereof and  otherwise in  connection  with the
transactions  contemplated  hereby is true and correct in all material  respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein,  in light of the circumstances under
which they were made, not misleading.  No event or circumstance  has occurred or
exists with  respect to the Company or any of its  Subsidiaries  or its or their
business,  properties,  prospects,  operations or financial  conditions,  which,
under  applicable  law,  rule  or  regulation,  requires  public  disclosure  or
announcement  by the  Company but which has not been so  publicly  announced  or
disclosed  (assuming for this purpose that the Company's reports filed under the
1934 Act are being incorporated into an effective  registration  statement filed
by the Company under the 1933 Act).

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


                                       10
<PAGE>

            P. NO  INTEGRATED  OFFERING.  Neither  the  Company,  nor any of its
affiliates,  nor any  person  acting on its or their  behalf,  has  directly  or
indirectly  made any offers or sales in any security or solicited  any offers to
buy any security under  circumstances that would require  registration under the
1933 Act of the issuance of the  Securities  to the Buyers.  The issuance of the
Securities to the Buyers will not be integrated  with any other  issuance of the
Company's  securities (past,  current or future) for purposes of any shareholder
approval provisions applicable to the Company or its securities.

            Q. NO BROKERS. The Company has taken no action which would give rise
to any  claim by any  person  for  brokerage  commissions,  transaction  fees or
similar  payments  relating to this Agreement or the  transactions  contemplated
hereby.

            R. PERMITS;  COMPLIANCE. The Company and each of its Subsidiaries is
in possession of all  franchises,  grants,  authorizations,  licenses,  permits,
easements, variances, exemptions,  consents, certificates,  approvals and orders
necessary to own,  lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "COMPANY PERMITS"), and there is
no action  pending or, to the  knowledge  of the Company,  threatened  regarding
suspension or  cancellation of any of the Company  Permits.  Neither the Company
nor any of its  Subsidiaries is in conflict with, or in default or violation of,
any of  the  Company  Permits,  except  for  any  such  conflicts,  defaults  or
violations  which,  individually  or in the  aggregate,  would not reasonably be
expected to have a Material Adverse Effect. Since December 31, 2003, neither the
Company nor any of its Subsidiaries  has received any notification  with respect
to possible  conflicts,  defaults or violations of applicable  laws,  except for
notices relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.

            S. ENVIRONMENTAL MATTERS.

                  (I) Except as set forth in  SCHEDULE  3(S),  there are, to the
Company's  knowledge,  with respect to the Company or any of its Subsidiaries or
any predecessor of the Company,  no past or present  violations of Environmental
Laws (as defined below), releases of any material into the environment, actions,
activities,   circumstances,   conditions,  events,  incidents,  or  contractual
obligations which may give rise to any common law environmental liability or any
liability  under the  Comprehensive  Environmental  Response,  Compensation  and
Liability  Act of 1980 or similar  federal,  state,  local or  foreign  laws and
neither the Company nor any of its  Subsidiaries  has  received  any notice with
respect to any of the foregoing,  nor is any action pending or, to the Company's
knowledge,  threatened  in  connection  with  any of  the  foregoing.  The  term
"ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment  (including,  without
limitation,  ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions,  discharges,
releases or threatened releases of chemicals,  pollutants contaminants, or toxic
or hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all  authorizations,  codes,  decrees,  demands  or  demand  letters,
injunctions,  judgments,  licenses,  notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.


                                       11
<PAGE>

                  (II)  Other  than  those  that  are or  were  stored,  used or
disposed of in  compliance  with  applicable  law, no  Hazardous  Materials  are
contained on or about any real property  currently owned,  leased or used by the
Company or any of its Subsidiaries,  and no Hazardous Materials were released on
or about any real property  previously  owned,  leased or used by the Company or
any of its Subsidiaries during the period the property was owned, leased or used
by the Company or any of its  Subsidiaries,  except in the normal  course of the
Company's or any of its Subsidiaries' business.

                  (III)  Except  as set  forth in  SCHEDULE  3(S),  there are no
underground storage tanks on or under any real property owned, leased or used by
the  Company  or  any of its  Subsidiaries  that  are  not  in  compliance  with
applicable law.

            T. TITLE TO PROPERTY. The Company and its Subsidiaries have good and
marketable  title in fee  simple to all real  property  and good and  marketable
title to all personal  property  owned by them which is material to the business
of the Company and its  Subsidiaries,  in each case free and clear of all liens,
encumbrances  and defects  except such as are described in SCHEDULE 3(T) or such
as would not have a Material  Adverse  Effect.  Any real property and facilities
held under  lease by the  Company  and its  Subsidiaries  are held by them under
valid,  subsisting and enforceable leases with such exceptions as would not have
a Material Adverse Effect.

            U. INSURANCE.  Except as set forth on SCHEDULE 3(U), the Company and
each of its  Subsidiaries  are  insured  by  insurers  of  recognized  financial
responsibility  against such losses and risks and in such amounts as  management
of the Company  believes to be prudent and customary in the  businesses in which
the Company and its Subsidiaries  are engaged.  Neither the Company nor any such
Subsidiary  has any  reason  to  believe  that it will not be able to renew  its
existing  insurance  coverage  as and when such  coverage  expires  or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not have a Material  Adverse  Effect.  The Company
has  provided  to Buyer true and  correct  copies of all  policies  relating  to
directors' and officers' liability coverage,  errors and omissions coverage, and
commercial general liability coverage.

            V.  INTERNAL  ACCOUNTING  CONTROLS.  The  Company  and  each  of its
Subsidiaries  maintain a system of internal accounting controls  sufficient,  in
the  judgment  of the  Company's  board  of  directors,  to  provide  reasonable
assurance that (i)  transactions  are executed in accordance  with  management's
general or specific authorizations,  (ii) transactions are recorded as necessary
to permit  preparation  of financial  statements  in conformity  with  generally
accepted  accounting  principles  and to maintain  asset  accountability,  (iii)
access to assets is permitted only in accordance  with  management's  general or
specific  authorization  and (iv) the  recorded  accountability  for  assets  is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

            W. FOREIGN CORRUPT  PRACTICES.  Neither the Company,  nor any of its
Subsidiaries,  nor any director, officer, agent, employee or other person acting
on behalf of the  Company or any  Subsidiary  has,  in the course of his actions
for, or on behalf of, the  Company,  used any  corporate  funds for any unlawful
contribution,  gift,  entertainment  or  other  unlawful  expenses  relating  to
political activity;  made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended, or made any bribe, rebate,  payoff,  influence payment,  kickback or
other  unlawful  payment  to any  foreign or  domestic  government  official  or
employee.


                                       12
<PAGE>

            X. SOLVENCY.  The Company  (after giving effect to the  transactions
contemplated by this Agreement) is solvent (i.e.,  its assets have a fair market
value in excess of the amount  required to pay its probable  liabilities  on its
existing  debts as they become  absolute and matured) and  currently the Company
has no  information  that would lead it to reasonably  conclude that the Company
would  not,  after  giving  effect  to  the  transaction  contemplated  by  this
Agreement, have the ability to, nor does it intend to take any action that would
impair its  ability to, pay its debts from time to time  incurred in  connection
therewith as such debts mature.  The Company did not receive a qualified opinion
from its  auditors  with respect to its most recent  fiscal year end and,  after
giving  effect to the  transactions  contemplated  by this  Agreement,  does not
anticipate or know of any basis upon which its auditors  might issue a qualified
opinion in respect of its current fiscal year.

            Y. NO INVESTMENT COMPANY.  The Company is not, and upon the issuance
and sale of the  Securities as  contemplated  by this  Agreement  will not be an
"investment  company" required to be registered under the Investment Company Act
of  1940  (an  "INVESTMENT  COMPANY").  The  Company  is  not  controlled  by an
Investment Company.

            Z. BREACH OF REPRESENTATIONS  AND WARRANTIES BY THE COMPANY.  If the
Company  breaches any of the  representations  or  warranties  set forth in this
Section  3, and in  addition  to any  other  remedies  available  to the  Buyers
pursuant  to this  Agreement,  the Company  shall pay to the Buyer the  Standard
Liquidated  Damages Amount in cash or in shares of Common Stock at the option of
the  Company,  until  such  breach is cured.  If the  Company  elects to pay the
Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.

      4. COVENANTS.

            A. BEST EFFORTS. The parties shall use their best efforts to satisfy
timely each of the conditions described in Section 6 and 7 of this Agreement.

            B. FORM D; BLUE SKY LAWS.  The Company  agrees to file a Form D with
respect to the Securities as required  under  Regulation D and to provide a copy
thereof to each Buyer  promptly  after such  filing.  The Company  shall,  on or
before the  Closing  Date,  take such  action as the  Company  shall  reasonably
determine is necessary to qualify the  Securities  for sale to the Buyers at the
applicable  closing  pursuant to this Agreement under  applicable  securities or
"blue sky" laws of the states of the  United  States (or to obtain an  exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to the Closing Date.


                                       13
<PAGE>

            C. REPORTING STATUS;  ELIGIBILITY TO USE FORM S-3, SB-2 OR FORM S-1.
The Company's  Common Stock is  registered  under Section 12(g) of the 1934 Act.
The Company  represents and warrants that it meets the  requirements for the use
of Form S-3 (or if the Company is not eligible for the use of Form S-3 as of the
Filing Date (as defined in the Registration  Rights Agreement),  the Company may
use the  form of  registration  for  which  it is  eligible  at that  time)  for
registration of the sale by the Buyer of the Registrable  Securities (as defined
in the Registration  Rights  Agreement).  So long as the Buyer beneficially owns
any of the Securities,  the Company shall timely file all reports required to be
filed with the SEC pursuant to the 1934 Act, and the Company 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  further  agrees to file all  reports  required  to be filed by the
Company with the SEC in a timely manner so as to become eligible, and thereafter
to maintain its eligibility,  for the use of Form S-3. The Company shall issue a
press release  describing the materials  terms of the  transaction  contemplated
hereby as soon as  practicable  following  the Closing Date but in no event more
than two (2) business  days of the Closing  Date,  which press  release shall be
subject  to prior  review by the  Buyers.  The  Company  agrees  that such press
release shall not disclose the name of the Buyers unless expressly  consented to
in writing by the Buyers or unless required by applicable law or regulation, and
then only to the extent of such requirement.

            D. USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Notes and the Warrants in the manner set forth in SCHEDULE  4(D) attached
hereto and made a part hereof and shall not,  directly or  indirectly,  use such
proceeds for any loan to or  investment in any other  corporation,  partnership,
enterprise  or other person  (except in connection  with its currently  existing
direct or indirect Subsidiaries)

            E. FUTURE OFFERINGS.  Subject to the exceptions described below, the
Company will not, without the prior written consent of a majority-in-interest of
the Buyers,  not to be  unreasonably  withheld,  negotiate or contract  with any
party to obtain  additional  equity financing  (including debt financing with an
equity  component)  that involves (A) the issuance of Common Stock at a discount
to the market  price of the Common  Stock on the date of issuance  (taking  into
account the value of any  warrants or options to acquire  Common Stock issued in
connection  therewith) or (B) the issuance of  convertible  securities  that are
convertible  into an  indeterminate  number of shares of Common Stock or (C) the
issuance of warrants during the period (the "LOCK-UP  PERIOD")  beginning on the
Closing Date and ending on the later of (i) two hundred  seventy (270) days from
the  Closing  Date and (ii) one  hundred  eighty  (180)  days  from the date the
Registration  Statement  (as defined in the  Registration  Rights  Agreement) is
declared effective (plus any days in which sales cannot be made thereunder).  In
addition,  subject to the  exceptions  described  below,  the  Company  will not
conduct any equity financing  (including debt with an equity component) ("FUTURE
OFFERINGS")  during the period  beginning on the Closing Date and ending two (2)
years after the end of the Lock-up  Period unless it shall have first  delivered
to each Buyer,  at least twenty (20)  business days prior to the closing of such
Future  Offering,  written  notice  describing  the  proposed  Future  Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection  therewith,  and providing each Buyer an option
during the fifteen (15) day period following delivery of such notice to purchase
its pro rata share (based on the ratio that the  aggregate  principal  amount of
Notes purchased by it hereunder bears to the aggregate principal amount of Notes
purchased  hereunder) of the securities  being offered in the Future Offering on
the same terms as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding  sentence are collectively  referred to as
the "CAPITAL RAISING  LIMITATIONS").  In the event the terms and conditions of a
proposed Future Offering are amended in any respect after delivery of the notice
to the Buyers concerning the proposed Future Offering, the Company shall deliver
a new notice to each Buyer  describing  the amended terms and  conditions of the
proposed Future Offering and each Buyer  thereafter  shall have an option during
the fifteen  (15) day period  following  delivery of such new notice to purchase
its pro  rata  share  of the  securities  being  offered  on the  same  terms as
contemplated  by such  proposed  Future  Offering,  as  amended.  The  foregoing
sentence shall apply to successive amendments to the terms and conditions of any
proposed Future Offering. The Capital Raising Limitations shall not apply to any
transaction   involving  (i)  issuances  of  securities  in  a  firm  commitment
underwritten  public offering  (excluding a continuous offering pursuant to Rule
415 under the 1933 Act) or (ii) issuances of securities as  consideration  for a
merger, consolidation or purchase of assets, or in connection with any strategic
partnership  or joint  venture  (the  primary  purpose  of which is not to raise
equity  capital),  or in connection  with the  disposition  or  acquisition of a
business,  product or license by the Company.  The Capital  Raising  Limitations
also shall not apply to the issuance of  securities  upon exercise or conversion
of the Company's options,  warrants or other convertible  securities outstanding
as of the date hereof or to the grant of additional options or warrants,  or the
issuance of additional securities,  under any Company stock option or restricted
stock plan approved by the shareholders of the Company.


                                       14
<PAGE>

            F. EXPENSES.  At the Closing, the Company shall reimburse Buyers for
expenses  incurred  by them in  connection  with the  negotiation,  preparation,
execution,  delivery and performance of this Agreement and the other  agreements
to  be  executed  in  connection  herewith  ("Documents"),   including,  without
limitation,  attorneys' and consultants' fees and expenses, transfer agent fees,
fees  for  stock  quotation  services,   fees  relating  to  any  amendments  or
modifications  of the  Documents or any consents or waivers of provisions in the
Documents,  fees for the  preparation  of opinions of counsel,  escrow fees, and
costs of  restructuring  the  transactions  contemplated by the Documents.  When
possible,  the Company must pay these fees directly,  otherwise the Company must
make immediate payment for reimbursement to the Buyers for all fees and expenses
immediately  upon written notice by the Buyer or the submission of an invoice by
the Buyer If the Company  fails to reimburse  the Buyer in full within three (3)
business days of the written  notice or submission of invoice by the Buyer,  the
Company  shall pay  interest on the total amount of fees to be  reimbursed  at a
rate of 15% per annum.

            G. FINANCIAL  INFORMATION.  The Company agrees to send the following
reports to each Buyer until such Buyer transfers,  assigns,  or sells all of the
Securities:  (i) within  ten (10) days after the filing  with the SEC, a copy of
its Annual  Report on Form 10-KSB its  Quarterly  Reports on Form 10-QSB and any
Current  Reports on Form 8-K; (ii) within one (1) day after  release,  copies of
all press releases issued by the Company or any of its  Subsidiaries;  and (iii)
contemporaneously with the making available or giving to the shareholders of the
Company,  copies of any notices or other information the Company makes available
or gives to such shareholders.


                                       15
<PAGE>

            H.   AUTHORIZATION  AND  RESERVATION  OF  SHARES.   Subject  to  the
Stockholder  Approval  (as defined in Section  4(n)),  the Company  shall at all
times have  authorized,  and reserved for the purpose of issuance,  a sufficient
number of shares of Common Stock to provide for the full  conversion or exercise
of the outstanding  Notes and Warrants and issuance of the Conversion Shares and
Warrant Shares in connection  therewith  (based on the  Conversion  Price of the
Notes or  Exercise  Price of the  Warrants  in effect  from time to time) and as
otherwise  required  by the Notes.  The  Company  shall not reduce the number of
shares of Common  Stock  reserved  for  issuance  upon  conversion  of Notes and
exercise of the  Warrants  without  the  consent of each  Buyer.  Subject to the
Stockholder  Approval,  the Company  shall at all times  maintain  the number of
shares of Common Stock so reserved for issuance at an amount ("RESERVED AMOUNT")
equal to no less than two (2) times the number  that is then  actually  issuable
upon full conversion of the Notes and Additional  Notes and upon exercise of the
Warrants and the Additional Warrants (based on the Conversion Price of the Notes
or the Exercise  Price of the  Warrants in effect from time to time).  If at any
time the number of shares of Common Stock  authorized  and reserved for issuance
("AUTHORIZED  AND RESERVED  SHARES") is below the Reserved  Amount,  the Company
will  promptly take all  corporate  action  necessary to authorize and reserve a
sufficient number of shares,  including,  without limitation,  calling a special
meeting of  shareholders  to authorize  additional  shares to meet the Company's
obligations  under this Section 4(h), in the case of an  insufficient  number of
authorized shares, obtain shareholder approval of an increase in such authorized
number of shares, and voting the management shares of the Company in favor of an
increase  in the  authorized  shares of the Company to ensure that the number of
authorized  shares is  sufficient  to meet the Reserved  Amount.  If the Company
fails to obtain such shareholder  approval within thirty (30) days following the
date on which the number of Reserved  Amount exceeds the Authorized and Reserved
Shares,  the Company shall pay to the Borrower the Standard  Liquidated  Damages
Amount,  in cash or in shares of Common Stock at the option of the Buyer. If the
Buyer  elects to be paid the  Standard  Liquidated  Damages  Amount in shares of
Common Stock, such shares shall be issued at the Conversion Price at the time of
payment.  In order to ensure that the Company has authorized a sufficient amount
of shares to meet the Reserved Amount at all times,  the Company must deliver to
the Buyer at the end of every month a list  detailing (1) the current  amount of
shares  authorized by the Company and reserved for the Buyer;  and (2) amount of
shares  issuable upon  conversion of the Notes and upon exercise of the Warrants
and as payment of  interest  accrued on the Notes for one year.  If the  Company
fails to provide  such list  within  five (5)  business  days of the end of each
month, the Company shall pay the Standard  Liquidated Damages Amount, in cash or
in  shares  of  Common  Stock at the  option  of the  Buyer,  until  the list is
delivered. If the Buyer elects to be paid the Standard Liquidated Damages Amount
in shares of Common Stock,  such shares shall be issued at the Conversion  Price
at the time of payment.

            I.  LISTING.  The Company shall  promptly  secure the listing of the
Conversion Shares and Warrant Shares upon each national  securities  exchange or
automated  quotation  system, if any, upon which shares of Common Stock are then
listed  (subject to official  notice of issuance) and, so long as any Buyer owns
any of the  Securities,  shall  maintain,  so long as any other shares of Common
Stock  shall be so listed,  such  listing of all  Conversion  Shares and Warrant
Shares from time to time  issuable  upon  conversion of the Notes or exercise of
the Warrants.  The Company will obtain and, so long as any Buyer owns any of the
Securities, maintain the listing and trading of its Common Stock on the OTCBB or
any equivalent replacement exchange, the Nasdaq National Market ("NASDAQ"),  the
Nasdaq  SmallCap  Market  ("NASDAQ  SMALLCAP"),  the  New  York  Stock  Exchange
("NYSE"),  or the  American  Stock  Exchange  ("AMEX")  and will  comply  in all
respects with the Company's  reporting,  filing and other  obligations under the
bylaws or rules of the National  Association of Securities  Dealers ("NASD") and
such exchanges, as applicable.  The Company shall promptly provide to each Buyer
copies of any  notices it  receives  from the OTCBB and any other  exchanges  or
quotation  systems  on which  the  Common  Stock is then  listed  regarding  the
continued  eligibility  of the Common  Stock for listing on such  exchanges  and
quotation systems.


                                       16
<PAGE>

            J. CORPORATE  EXISTENCE.  So long as a Buyer  beneficially  owns any
Notes or Warrants,  the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's  assets,  except in the event
of a  merger  or  consolidation  or  sale  of  all or  substantially  all of the
Company's  assets,  where the surviving or successor  entity in such transaction
(i) assumes the Company's  obligations  hereunder and under the  agreements  and
instruments  entered into in connection  herewith and (ii) is a publicly  traded
corporation  whose  Common  Stock is listed for  trading  on the OTCBB,  Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.

            K. NO INTEGRATION. The Company shall not make any offers or sales of
any security (other than the Securities) under  circumstances that would require
registration  of the Securities  being offered or sold hereunder  under the 1933
Act or cause the  offering of the  Securities  to be  integrated  with any other
offering  of  securities  by the  Company  for the  purpose  of any  stockholder
approval provision applicable to the Company or its securities.

            L.  SUBSEQUENT  INVESTMENT.  The Company and the Buyers  agree that,
upon  the  filing  by the  Company  of the  Registration  Statement  to be filed
pursuant to the Registration  Rights  Agreement (the "FILING DATE"),  the Buyers
shall purchase  additional Notes (the "FILING NOTES") in the aggregate principal
amount of Five Hundred Thousand Dollars ($500,000) and additional  warrants (the
"FILING  WARRANTS") to purchase an aggregate of 750,000  shares of Common Stock,
for an aggregate  purchase price of Five Hundred  Thousand  Dollars  ($500,000),
with the closing of such  purchase  to occur  within five (5) days of the Filing
Date;  provided,  however,  that the  obligation  of each Buyer to purchase  the
Filing  Notes and the Filing  Warrants  is subject  to the  satisfaction,  at or
before the closing of such  purchase and sale,  of the  conditions  set forth in
Section 7. The Company and the Buyers further agree that,  upon the  declaration
of  effectiveness  of the  Registration  Statement  to be filed  pursuant to the
Registration  Rights Agreement (the "EFFECTIVE DATE"), the Buyers shall purchase
additional notes (the  "EFFECTIVENESS  NOTES" and,  collectively with the Filing
Notes, the "ADDITIONAL NOTES") in the aggregate principal amount of Five Hundred
Thousand  Dollars  ($500,000)  and  additional   warrants  (the   "EFFECTIVENESS
WARRANTS" and, collectively with the Filing Warrants, the "ADDITIONAL WARRANTS")
to purchase an aggregate  of 750,000  shares of Common  Stock,  for an aggregate
purchase price of Five Hundred Thousand Dollars ($500,000),  with the closing of
such  purchase to occur within five (5) days of the  Effective  Date;  provided,
however,  that the obligation of each Buyer to purchase the Additional Notes and
the Additional Warrants is subject to the satisfaction, at or before the closing
of such  purchase  and sale,  of the  conditions  set forth in  Section  7; and,
provided,  further,  that there shall not have been a Material Adverse Effect as
of such effective  date.  The terms of the  Additional  Notes and the Additional
Warrants shall be identical to the terms of the Notes and Warrants,  as the case
may be, to be issued on the  Closing  Date.  The  Common  Stock  underlying  the
Additional Notes and the Additional Warrants shall be Registrable Securities (as
defined in the  Registration  Rights  Agreement)  and shall be  included  in the
Registration   Statement  to  be  filed  pursuant  to  the  Registration  Rights
Agreement.


                                       17
<PAGE>

            M. KEY MAN  INSURANCE.  The  Company  shall use its best  efforts to
apply for, on or before five (5)  business  days from the date  hereof,  key man
life insurance on Donald Evans, Mark Schmidt and John Ringo.

            N. STOCKHOLDER APPROVAL. The Company shall file a proxy statement or
information  statement  with the SEC no later  than  October 6, 2004 and use its
best  efforts to obtain,  on or before  November 5, 2004 such  approvals  of the
Company's  stockholders  as may be required to issue all of the shares of Common
Stock issuable upon conversion or exercise of, or otherwise with respect to, the
Debentures  and the Warrants in  accordance  with Nevada law and any  applicable
rules or  regulations  of the OTCBB and Nasdaq,  either  through a reverse stock
split of the Common Stock or an increase in authorized capital (the "STOCKHOLDER
APPROVAL").  The  Company  shall  furnish  to each  Buyer and its legal  counsel
promptly  (but in no event less than two (2)  business  days) before the same is
filed with the SEC, one copy of the proxy statement or information statement and
any  amendment  thereto,  and shall  deliver to each Buyer  promptly each letter
written by or on behalf of the  Company to the SEC or the staff of the SEC,  and
each item of  correspondence  from the SEC or the staff of the SEC, in each case
relating  to such proxy  statement  or  information  statement  (other  than any
portion  thereof  which  contains  information  for which the Company has sought
confidential  treatment).  The Company will  promptly (but in no event more than
five (5) business  days)  respond to any and all comments  received from the SEC
(which  comments shall  promptly be made  available to each Buyer).  The Company
shall comply with the filing and disclosure requirements of Section 14 under the
1934 Act in connection with the Stockholder Approval. The Company represents and
warrants that its Board of Directors has approved the proposal  contemplated  by
this Section 4(n) and shall  indicate  such  approval in the proxy  statement or
information statement used in connection with the Stockholder Approval.

            O. BREACH OF COVENANTS. If the Company breaches any of the covenants
set forth in this Section 4, and in addition to any other remedies  available to
the Buyers pursuant to this  Agreement,  the Company shall pay to the Buyers the
Standard  Liquidated Damages Amount, in cash or in shares of Common Stock at the
option of the Company,  until such breach is cured. If the Company elects to pay
the Standard Liquidated Damages Amount in shares, such shares shall be issued at
the Conversion Price at the time of payment.

                                       18
<PAGE>

      5.  TRANSFER  AGENT  INSTRUCTIONS.  The Company  shall  issue  irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee,  for the  Conversion  Shares and Warrant Shares in
such  amounts as  specified  from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in accordance with the terms
thereof (the "IRREVOCABLE TRANSFER AGENT  Instructions").  Prior to registration
of the  Conversion  Shares and Warrant  Shares under the 1933 Act or the date on
which the Conversion  Shares and Warrant Shares may be sold pursuant to Rule 144
without any  restriction as to the number of Securities as of a particular  date
that  can  then be  immediately  sold,  all  such  certificates  shall  bear the
restrictive  legend  specified  in Section 2(g) of this  Agreement.  The Company
warrants  that  no  instruction  other  than  the  Irrevocable   Transfer  Agent
Instructions  referred to in this Section 5, and stop transfer  instructions  to
give  effect to Section  2(f) hereof (in the case of the  Conversion  Shares and
Warrant  Shares,  prior to  registration  of the  Conversion  Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately  sold),  will
be given by the  Company to its  transfer  agent and that the  Securities  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 Buyer's  obligations  and
agreement  set  forth in  Section  2(g)  hereof to  comply  with all  applicable
prospectus delivery requirements,  if any, upon re-sale of the Securities.  If a
Buyer provides the Company with (i) an opinion of counsel in form, substance and
scope  customary for opinions in comparable  transactions,  to the effect that a
public sale or  transfer of such  Securities  may be made  without  registration
under  the 1933 Act and such  sale or  transfer  is  effected  or (ii) the Buyer
provides reasonable  assurances that the Securities can be sold pursuant to Rule
144, the Company shall permit the transfer,  and, in the case of the  Conversion
Shares and Warrant Shares,  promptly instruct its transfer agent to issue one or
more  certificates,  free  from  restrictive  legend,  in such  name and in such
denominations as specified by such Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyers, by
vitiating  the  intent  and  purpose of the  transactions  contemplated  hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 may be inadequate and agrees, in the event of a
breach or  threatened  breach by the Company of the  provisions of this Section,
that the Buyers shall be entitled,  in addition to all other available remedies,
to an  injunction  restraining  any breach  and  requiring  immediate  transfer,
without the  necessity  of showing  economic  loss and without any bond or other
security being required.

      6.  CONDITIONS TO THE COMPANY'S  OBLIGATION TO SELL. The obligation of the
Company  hereunder  to issue and sell the Notes and  Warrants  to a Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date of each of
the following  conditions  thereto,  provided that these  conditions are for the
Company's  sole benefit and may be waived by the Company at any time in its sole
discretion:

            A. The  applicable  Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.

            B. The  applicable  Buyer shall have delivered the Purchase Price in
accordance with Section 1(b) above.

            C. The  representations and warranties of the applicable Buyer shall
be true and correct in all material  respects as of the date when made and as of
the Closing  Date as though made at that time  (except for  representations  and
warranties  that speak as of a specific  date),  and the applicable  Buyer shall
have  performed,  satisfied  and  complied  in all  material  respects  with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied  with by the  applicable  Buyer at or prior to the Closing
Date.

            D.  No  litigation,  statute,  rule,  regulation,  executive  order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by or in any court or governmental  authority of competent jurisdiction
or  any   self-regulatory   organization   having  authority  over  the  matters
contemplated  hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.


                                       19
<PAGE>

      7.  CONDITIONS TO EACH BUYER'S  OBLIGATION TO PURCHASE.  The obligation of
each Buyer  hereunder  to  purchase  the Notes and  Warrants  at the  Closing is
subject  to the  satisfaction,  at or  before  the  Closing  Date of each of the
following  conditions,  provided that these conditions are for such Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:

            A.  The  Company  shall  have   executed  this   Agreement  and  the
Registration Rights Agreement, and delivered the same to the Buyer.

            B. The  Company  shall have  delivered  to such Buyer duly  executed
Notes (in such  denominations  as the  Buyer  shall  request)  and  Warrants  in
accordance with Section 1(b) above.

            C.  The  Irrevocable  Transfer  Agent  Instructions,   in  form  and
substance satisfactory to a majority-in-interest  of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.

            D. The  representations  and warranties of the Company shall be true
and  correct  in all  material  respects  as of the date when made and as of the
Closing  Date as  though  made at such  time  (except  for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate  or  certificates,  executed by the chief  executive
officer of the Company,  dated as of the Closing Date,  to the foregoing  effect
and as to such  other  matters  as may be  reasonably  requested  by such  Buyer
including,  but not  limited  to  certificates  with  respect  to the  Company's
Articles of Incorporation,  By-laws and Board of Directors' resolutions relating
to the transactions contemplated hereby.

            E.  No  litigation,  statute,  rule,  regulation,  executive  order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by or in any court or governmental  authority of competent jurisdiction
or  any   self-regulatory   organization   having  authority  over  the  matters
contemplated  hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

            F. No event shall have occurred  which could  reasonably be expected
to have a Material Adverse Effect on the Company.

            G.  The  Conversion  Shares  and  Warrant  Shares  shall  have  been
authorized  for  quotation  on the OTCBB and trading in the Common  Stock on the
OTCBB shall not have been suspended by the SEC or the OTCBB.  H. The Buyer shall
have received an opinion of the Company's counsel, dated as of the Closing Date,
in form,  scope  and  substance  reasonably  satisfactory  to the  Buyer  and in
substantially the same form as EXHIBIT "D" attached hereto.

            I. The Buyer shall have received an officer's  certificate described
in Section 3(c) above, dated as of the Closing Date.


                                       20
<PAGE>

      8. GOVERNING LAW; MISCELLANEOUS.

            A. GOVERNING LAW. THIS AGREEMENT SHALL BE ENFORCED,  GOVERNED BY AND
CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK  APPLICABLE  TO
AGREEMENTS MADE AND TO BE PERFORMED  ENTIRELY WITHIN SUCH STATE,  WITHOUT REGARD
TO THE  PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE  JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW  YORK  WITH  RESPECT  TO ANY  DISPUTE  ARISING  UNDER  THIS  AGREEMENT,  THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS  CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
THAT  SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY  OTHER  MANNER   PERMITTED  BY  LAW.   BOTH  PARTIES   AGREE  THAT  A  FINAL
NON-APPEALABLE  JUDGMENT IN ANY SUCH SUIT OR PROCEEDING  SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER  JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL  MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE  ARISING  UNDER
THIS  AGREEMENT  SHALL  BE  RESPONSIBLE  FOR ALL FEES  AND  EXPENSES,  INCLUDING
ATTORNEYS'  FEES,  INCURRED  BY THE  PREVAILING  PARTY IN  CONNECTION  WITH SUCH
DISPUTE.

            B.  COUNTERPARTS;  SIGNATURES  BY FACSIMILE.  This  Agreement may be
executed in one or more counterparts,  each of which shall be deemed an original
but all of which shall  constitute  one and the same  agreement and shall become
effective when  counterparts have been signed by each party and delivered to the
other party.  This Agreement,  once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.

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

            D.  SEVERABILITY.  In the event that any provision of this Agreement
is invalid or  unenforceable  under any applicable  statute or rule of law, then
such  provision  shall be deemed  inoperative to the extent that it may conflict
therewith  and shall be deemed  modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.

            E. ENTIRE AGREEMENT;  AMENDMENTS. This Agreement and the instruments
referenced  herein contain the entire  understanding of the parties with respect
to the matters covered herein and therein and, except as specifically  set forth
herein or therein,  neither the Company nor the Buyer makes any  representation,
warranty,  covenant or undertaking with respect to such matters. No provision of
this  Agreement  may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.


                                       21
<PAGE>

            F. NOTICES.  Any notices required or permitted to be given under the
terms of this  Agreement  shall be sent by certified or registered  mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight  delivery  service) or by facsimile  and shall be effective  five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery  service)  or by  facsimile,  in each case  addressed  to a party.  The
addresses for such communications shall be:

            If to the Company:

                                    Cyberlux Corporation
                                    4625 Creekstone Drive, Suite 100
                                    Research Triangle Park
                                    Durham, North Carolina 27703
                                    Attention:  Donald F. Evans
                                    Telephone:  919-474-9700
                                    Facsimile:   919-474-9712

                                            and

                                    Cyberlux Corporation
                                    241 Lamplighter Lane
                                    Marietta, Georgia 30067
                                    Attention:  John W. Ringo, Esq.
                                    Telephone:  770-952-1904
                                    Facsimile:  770-952-0894

            With a copy to:

                                    Sichenzia Ross Friedman Ference LLP
                                    1065 Avenue of the Americas
                                    New York, New York 10018
                                    Attention:  Gregory Sichenzia, Esq.
                                    Telephone:  212-930-9700
                                    Facsimile:   212-930-9725

      If to a Buyer:  To the address set forth  immediately  below such  Buyer's
name on the signature pages hereto.


                                       22
<PAGE>

            With copy to:

                                    Ballard Spahr Andrews & Ingersoll, LLP
                                    1735 Market Street
                                    51st Floor
                                    Philadelphia, Pennsylvania  19103
                                    Attention:  Gerald J. Guarcini, Esq.
                                    Telephone:  215-864-8625
                                    Facsimile:  215-864-8999
                                    Email:  guarcini@ballardspahr.com

      Each  party  shall  provide  notice  to the other  party of any  change in
address.

            G. SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and
inure to the benefit of the parties and their  successors  and assigns.  Neither
the  Company  nor any  Buyer  shall  assign  this  Agreement  or any  rights  or
obligations   hereunder   without  the  prior  written  consent  of  the  other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights  hereunder  to  any  person  that  purchases   Securities  in  a  private
transaction from a Buyer or to any of its  "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.

            H. THIRD PARTY  BENEFICIARIES.  This  Agreement  is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

            I. SURVIVAL.  The  representations and warranties of the Company and
the  agreements  and covenants set forth in Sections 3, 4, 5 and 8 shall survive
the closing hereunder  notwithstanding any due diligence investigation conducted
by or on behalf of the Buyers. The Company agrees to indemnify and hold harmless
each of the Buyers and all their officers,  directors,  employees and agents for
loss or damage arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and covenants set forth
in Sections 3 and 4 hereof or any of its  covenants and  obligations  under this
Agreement  or  the  Registration  Rights  Agreement,  including  advancement  of
expenses as they are incurred.

            J.  PUBLICITY.  The  Company  and each of the Buyers  shall have the
right to  review a  reasonable  period  of time  before  issuance  of any  press
releases,  SEC,  OTCBB or NASD  filings,  or any other  public  statements  with
respect to the transactions  contemplated hereby;  provided,  however,  that the
Company shall be entitled,  without the prior approval of each of the Buyers, to
make any press release or SEC,  OTCBB (or other  applicable  trading  market) or
NASD filings with respect to such  transactions as is required by applicable law
and  regulations  (although each of the Buyers shall be consulted by the Company
in  connection  with any such press  release  prior to its  release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).


                                       23
<PAGE>

            K. FURTHER ASSURANCES.  Each party shall do and perform, or cause to
be done and performed,  all such further acts and things,  and shall execute and
deliver all such other agreements,  certificates,  instruments and documents, as
the other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

            L. NO STRICT CONSTRUCTION.  The language used in this Agreement will
be deemed to be the  language  chosen by the  parties  to express  their  mutual
intent, and no rules of strict construction will be applied against any party.

            M.  REMEDIES.  The Company  acknowledges  that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the  transaction  contemplated  hereby.  Accordingly,  the
Company  acknowledges  that the  remedy at law for a breach  of its  obligations
under this Agreement will be inadequate and agrees,  in the event of a breach or
threatened  breach by the Company of the provisions of this Agreement,  that the
Buyers shall be entitled,  in addition to all other available remedies at law or
in equity, and in addition to the penalties  assessable herein, to an injunction
or  injunctions  restraining,  preventing or curing any breach of this Agreement
and to  enforce  specifically  the  terms and  provisions  hereof,  without  the
necessity of showing  economic loss and without any bond or other security being
required.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       24
<PAGE>


      IN WITNESS  WHEREOF,  the  undersigned  Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.


CYBERLUX CORPORATION

/s/ DONALD F. EVANS
--------------------------------
Donald F. Evans
Chief Executive Officer


AJW PARTNERS, LLC
By:  SMS Group, LLC

/s/ COREY S. RIBOTSKY
--------------------------------
Corey S. Ribotsky
Manager


RESIDENCE:  Delaware

ADDRESS:    1044 Northern Boulevard
            Suite 302
            Roslyn, New York  11576
            Facsimile:  (516) 739-7115
            Telephone:  (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                   $ 80,000
         Number of Warrants:                                     120,000
         Aggregate Purchase Price:                              $ 80,000


                                       25
<PAGE>


AJW OFFSHORE, LTD.
By:  First Street Manager II, LLC

/s/ COREY S. RIBOTSKY
--------------------------------
Corey S. Ribotsky
Manager


RESIDENCE: Cayman Islands

ADDRESS:   AJW Offshore, Ltd.
           P.O. Box 32021 SMB
           Grand Cayman, Cayman Island, B.W.I.


AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                   $185,000
         Number of Warrants:                                     227,500
         Aggregate Purchase Price:                              $185,000



                                       26
<PAGE>


AJW QUALIFIED PARTNERS, LLC
By:  AJW Manager, LLC

/s/ COREY S. RIBOTSKY
--------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:   New York

ADDRESS:     1044 Northern Boulevard
             Suite 302
             Roslyn, New York  11576
             Facsimile:  (516) 739-7115
             Telephone:  (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                   $220,000
         Number of Warrants:                                     330,000
         Aggregate Purchase Price:                              $220,000



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<PAGE>



NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By:  First Street Manager II, LLP

/s/ COREY S. RIBOTSKY
--------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:  New York

ADDRESS:    1044 Northern Boulevard
            Suite 302
            Roslyn, New York  11576
            Facsimile: (516) 739-7115
            Telephone: (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                   $15,000
         Number of Warrants:                                     22,500
         Aggregate Purchase Price:                              $15,000



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