Document:

EXHIBIT 4.1

                      ADVANCED PLANT PHARMACEUTICALS, INC.
                         2004 THIRD INCENTIVE STOCK PLAN

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      THIS ADVANCED PLANT PHARMACEUTICALS, INC. 2004 THIRD INCENTIVE STOCK PLAN
(the "PLAN") is designed to retain directors, executives and selected employees
and consultants and reward them for making major contributions to the success of
the Company. These objectives are accomplished by making long-term incentive
awards under the Plan thereby providing Participants with a proprietary interest
in the growth and performance of the Company.

1.    Definitions.

      (a)   "BOARD" - The Board of Directors of the Company.

      (b)   "CODE" - The Internal Revenue Code of 1986, as amended from time to
            time.

      (c)   "COMMITTEE" - The Compensation Committee of the Company's Board, or
            such other committee of the Board that is designated by the Board to
            administer the Plan, composed of not less than two members of the
            Board all of whom are disinterested persons, as contemplated by Rule
            16b-3 ("RULE 16B-3") promulgated under the Securities Exchange Act
            of 1934, as amended (the "EXCHANGE ACT").

      (d)   "COMPANY" - ADVANCED PLANT PHARMACEUTICALS, INC. and its
            subsidiaries including subsidiaries of subsidiaries.

      (e)   "EXCHANGE ACT" - The Securities Exchange Act of 1934, as amended
            from time to time.

      (f)   "FAIR MARKET VALUE" - The fair market value of the Company's issued
            and outstanding Stock as determined in good faith by the Board or
            Committee.

      (g)   "GRANT" - The grant of any form of stock option, stock award, or
            stock purchase offer, whether granted singly, in combination or in
            tandem, to a Participant pursuant to such terms, conditions and
            limitations as the Committee may establish in order to fulfill the
            objectives of the Plan.

      (h)   "GRANT AGREEMENT" - An agreement between the Company and a
            Participant that sets forth the terms, conditions and limitations
            applicable to a Grant.

      (i)   "OPTION" - Either an Incentive Stock Option, in accordance with
            Section 422 of Code, or a Nonstatutory Option, to purchase the
            Company's Stock that may be awarded to a Participant under the Plan.
            A Participant who receives an award of an Option shall be referred
            to as an "Optionee."

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      (j)   "PARTICIPANT" - A director, officer, employee or consultant of the
            Company to whom an Award has been made under the Plan.

      (k)   "RESTRICTED STOCK PURCHASE OFFER" - A Grant of the right to purchase
            a specified number of shares of Stock pursuant to a written
            agreement issued under the Plan.

      (l)   "SECURITIES ACT" - The Securities Act of 1933, as amended from time
            to time.

      (m)   "STOCK" - Authorized and issued or unissued shares of common stock
            of the Company.

      (n)   "STOCK AWARD" - A Grant made under the Plan in stock or denominated
            in units of stock for which the Participant is not obligated to pay
            additional consideration.

2.    Administration. The Plan shall be administered by the Board, provided
      however, that the Board may delegate such administration to the Committee.
      Subject to the provisions of the Plan, the Board and/or the Committee
      shall have authority to (a) grant, in its discretion, Incentive Stock
      Options in accordance with Section 422 of the Code, or Nonstatutory
      Options, Stock Awards or Restricted Stock Purchase Offers; (b) determine
      in good faith the fair market value of the Stock covered by any Grant; (c)
      determine which eligible persons shall receive Grants and the number of
      shares, restrictions, terms and conditions to be included in such Grants;
      (d) construe and interpret the Plan; (e) promulgate, amend and rescind
      rules and regulations relating to its administration, and correct defects,
      omissions and inconsistencies in the Plan or any Grant; (f) consistent
      with the Plan and with the consent of the Participant, as appropriate,
      amend any outstanding Grant or amend the exercise date or dates thereof;
      (g) determine the duration and purpose of leaves of absence which may be
      granted to Participants without constituting termination of their
      employment for the purpose of the Plan or any Grant; and (h) make all
      other determinations necessary or advisable for the Plan's administration.
      The interpretation and construction by the Board of any provisions of the
      Plan or selection of Participants shall be conclusive and final. No member
      of the Board or the Committee shall be liable for any action or
      determination made in good faith with respect to the Plan or any Grant
      made thereunder.

3.    Eligibility.

      (a)   General: The persons who shall be eligible to receive Grants shall
            be directors, officers, employees or consultants to the Company. The
            term consultant shall mean any person, other than an employee, who
            is engaged by the Company to render services and is compensated for
            such services. An Optionee may hold more than one Option. Any
            issuance of a Grant to an officer or director of the Company
            subsequent to the first registration of any of the securities of the
            Company under the Exchange Act shall comply with the requirements of
            Rule 16b-3.

      (b)   Incentive Stock Options: Incentive Stock Options may only be issued
            to employees of the Company. Incentive Stock Options may be granted
            to officers or directors, provided they are also employees of the
            Company. Payment of a director's fee shall not be sufficient to
            constitute employment by the Company.

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                        The Company shall not grant an Incentive Stock Option
            under the Plan to any employee if such Grant would result in such
            employee holding the right to exercise for the first time in any one
            calendar year, under all Incentive Stock Options granted under the
            Plan or any other plan maintained by the Company, with respect to
            shares of Stock having an aggregate fair market value, determined as
            of the date of the Option is granted, in excess of $100,000. Should
            it be determined that an Incentive Stock Option granted under the
            Plan exceeds such maximum for any reason other than a failure in
            good faith to value the Stock subject to such option, the excess
            portion of such option shall be considered a Nonstatutory Option. To
            the extent the employee holds two (2) or more such Options which
            become exercisable for the first time in the same calendar year, the
            foregoing limitation on the exercisability of such Option as
            Incentive Stock Options under the Federal tax laws shall be applied
            on the basis of the order in which such Options are granted. If, for
            any reason, an entire Option does not qualify as an Incentive Stock
            Option by reason of exceeding such maximum, such Option shall be
            considered a Nonstatutory Option.

      (c)   Nonstatutory Option: The provisions of the foregoing Section 3(b)
            shall not apply to any Option designated as a "NONSTATUTORY OPTION"
            or which sets forth the intention of the parties that the Option be
            a Nonstatutory Option.

      (d)   Stock Awards and Restricted Stock Purchase Offers: The provisions of
            this Section 3 shall not apply to any Stock Award or Restricted
            Stock Purchase Offer under the Plan.

4.    Stock.

      (a)   Authorized Stock: Stock subject to Grants may be either unissued or
            reacquired Stock.

      (b)   Number of Shares: Subject to adjustment as provided in Section 5(i)
            of the Plan, the total number of shares of Stock which may be
            purchased or granted directly by Options, Stock Awards or Restricted
            Stock Purchase Offers, or purchased indirectly through exercise of
            Options granted under the Plan shall not exceed Fifteen Million
            (15,000,000). If any Grant shall for any reason terminate or expire,
            any shares allocated thereto but remaining unpurchased upon such
            expiration or termination shall again be available for Grants with
            respect thereto under the Plan as though no Grant had previously
            occurred with respect to such shares. Any shares of Stock issued
            pursuant to a Grant and repurchased pursuant to the terms thereof
            shall be available for future Grants as though not previously
            covered by a Grant.

      (c)   Reservation of Shares: The Company shall reserve and keep available
            at all times during the term of the Plan such number of shares as
            shall be sufficient to satisfy the requirements of the Plan. If,
            after reasonable efforts, which efforts shall not include the
            registration of the Plan or Grants under the Securities Act, the
            Company is unable to obtain authority from any applicable regulatory
            body, which authorization is deemed necessary by legal counsel for
            the Company for the lawful issuance of shares hereunder, the Company
            shall be relieved of any liability with respect to its failure to
            issue and sell the shares for which such requisite authority was so
            deemed necessary unless and until such authority is obtained.

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      (d)   Application of Funds: The proceeds received by the Company from the
            sale of Stock pursuant to the exercise of Options or rights under
            Stock Purchase Agreements will be used for general corporate
            purposes.

      (e)   No Obligation to Exercise: The issuance of a Grant shall impose no
            obligation upon the Participant to exercise any rights under such
            Grant.

5.    Terms and Conditions of Options. Options granted hereunder shall be
      evidenced by agreements between the Company and the respective Optionees,
      in such form and substance as the Board or Committee shall from time to
      time approve. The form of Incentive Stock Option Agreement attached hereto
      as Exhibit A and the three forms of a Nonstatutory Stock Option Agreement
      for employees, for directors and for consultants, attached hereto as
      Exhibit B-1, Exhibit B-2 and Exhibit B-3, respectively, shall be deemed to
      be approved by the Board. Option agreements need not be identical, and in
      each case may include such provisions as the Board or Committee may
      determine, but all such agreements shall be subject to and limited by the
      following terms and conditions:

      (a)   Number of Shares: Each Option shall state the number of shares to
            which it pertains.

      (b)   Exercise Price: Each Option shall state the exercise price, which
            shall be determined as follows:

            (i)   Any Incentive Stock Option granted to a person who at the time
                  the Option is granted owns (or is deemed to own pursuant to
                  Section 424(d) of the Code) stock possessing more than ten
                  percent (10%) of the total combined voting power or value of
                  all classes of stock of the Company ("TEN PERCENT HOLDER")
                  shall have an exercise price of no less than 110% of the Fair
                  Market Value of the Stock as of the date of grant; and

            (ii)  Incentive Stock Options granted to a person who at the time
                  the Option is granted is not a Ten Percent Holder shall have
                  an exercise price of no less than 100% of the Fair Market
                  Value of the Stock as of the date of grant.

                        For the purposes of this Section 5(b), the Fair Market
            Value shall be as determined by the Board in good faith, which
            determination shall be conclusive and binding; provided however,
            that if there is a public market for such Stock, the Fair Market
            Value per share shall be the average of the bid and asked prices (or
            the closing price if such stock is listed on the NASDAQ National
            Market System or Small Cap Issue Market) on the date of grant of the
            Option, or if listed on a stock exchange, the closing price on such
            exchange on such date of grant.

      (c)   Medium and Time of Payment: The exercise price shall become
            immediately due upon exercise of the Option and shall be paid in
            cash or check made payable to the Company. Should the Company's
            outstanding Stock be registered under Section 12(g) of the Exchange
            Act at the time the Option is exercised, then the exercise price may
            also be paid as follows:

            (i)   in shares of Stock held by the Optionee for the requisite
                  period necessary to avoid a charge to the Company's earnings
                  for financial reporting purposes and valued at Fair Market
                  Value on the exercise date, or

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            (ii)  through a special sale and remittance procedure pursuant to
                  which the Optionee shall concurrently provide irrevocable
                  written instructions (a) to a Company designated brokerage
                  firm to effect the immediate sale of the purchased shares and
                  remit to the Company, out of the sale proceeds available on
                  the settlement date, sufficient funds to cover the aggregate
                  exercise price payable for the purchased shares plus all
                  applicable Federal, state and local income and employment
                  taxes required to be withheld by the Company by reason of such
                  purchase and (b) to the Company to deliver the certificates
                  for the purchased shares directly to such brokerage firm in
                  order to complete the sale transaction.

                        At the discretion of the Board, exercisable either at
            the time of Option grant or of Option exercise, the exercise price
            may also be paid (i) by Optionee's delivery of a promissory note in
            form and substance satisfactory to the Company and permissible under
            the Securities Rules of the State of New York and bearing interest
            at a rate determined by the Board in its sole discretion, but in no
            event less than the minimum rate of interest required to avoid the
            imputation of compensation income to the Optionee under the Federal
            tax laws, or (ii) in such other form of consideration permitted by
            the New York corporations law as may be acceptable to the Board.

      (d)   Term and Exercise of Options: Any Option granted to an employee of
            the Company shall become exercisable over a period of no longer than
            five (5) years, and no less than twenty percent (20%) of the shares
            covered thereby shall become exercisable annually. No Option shall
            be exercisable, in whole or in part, prior to one (1) year from the
            date it is granted unless the Board shall specifically determine
            otherwise, as provided herein. In no event shall any Option be
            exercisable after the expiration of ten (10) years from the date it
            is granted, and no Incentive Stock Option granted to a Ten Percent
            Holder shall, by its terms, be exercisable after the expiration of
            five (5) years from the date of the Option. Unless otherwise
            specified by the Board or the Committee in the resolution
            authorizing such Option, the date of grant of an Option shall be
            deemed to be the date upon which the Board or the Committee
            authorizes the granting of such Option.

                        Each Option shall be exercisable to the nearest whole
            share, in installments or otherwise, as the respective Option
            agreements may provide. During the lifetime of an Optionee, the
            Option shall be exercisable only by the Optionee and shall not be
            assignable or transferable by the Optionee, and no other person
            shall acquire any rights therein. To the extent not exercised,
            installments (if more than one) shall accumulate, but shall be
            exercisable, in whole or in part, only during the period for
            exercise as stated in the Option agreement, whether or not other
            installments are then exercisable.

      (e)   Termination of Status as Employee, Consultant or Director: If
            Optionee's status as an employee shall terminate for any reason
            other than Optionee's disability or death, then Optionee (or if the
            Optionee shall die after such termination, but prior to exercise,
            Optionee's personal representative or the person entitled to succeed
            to the Option) shall have the right to exercise the portions of any
            of Optionee's Incentive Stock Options which were exercisable as of
            the date of such termination, in whole or in part, not less than 30
            days nor more than three (3) months after such termination (or, in
            the event of "termination for good cause" as that term is defined in
            New York case law related thereto, or by the terms of the Plan or
            the Option Agreement or an employment agreement, the Option shall
            automatically terminate as of the termination of employment as to
            all shares covered by the Option).

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                        With respect to Nonstatutory Options granted to
            employees, directors or consultants, the Board may specify such
            period for exercise, not less than 30 days (except that in the case
            of "termination for cause" or removal of a director, the Option
            shall automatically terminate as of the termination of employment or
            services as to shares covered by the Option, following termination
            of employment or services as the Board deems reasonable and
            appropriate. The Option may be exercised only with respect to
            installments that the Optionee could have exercised at the date of
            termination of employment or services. Nothing contained herein or
            in any Option granted pursuant hereto shall be construed to affect
            or restrict in any way the right of the Company to terminate the
            employment or services of an Optionee with or without cause.

      (f)   Disability of Optionee: If an Optionee is disabled (within the
            meaning of Section 22(e)(3) of the Code) at the time of termination,
            the three (3) month period set forth in Section 5(e) shall be a
            period, as determined by the Board and set forth in the Option, of
            not less than six months nor more than one year after such
            termination.

      (g)   Death of Optionee: If an Optionee dies while employed by, engaged as
            a consultant to, or serving as a Director of the Company, the
            portion of such Optionee's Option which was exercisable at the date
            of death may be exercised, in whole or in part, by the estate of the
            decedent or by a person succeeding to the right to exercise such
            Option at any time within (i) a period, as determined by the Board
            and set forth in the Option, of not less than six (6) months nor
            more than one (1) year after Optionee's death, which period shall
            not be more, in the case of a Nonstatutory Option, than the period
            for exercise following termination of employment or services, or
            (ii) during the remaining term of the Option, whichever is the
            lesser. The Option may be so exercised only with respect to
            installments exercisable at the time of Optionee's death and not
            previously exercised by the Optionee.

      (h)   Nontransferability of Option: No Option shall be transferable by the
            Optionee, except by will or by the laws of descent and distribution.

      (i)   Recapitalization: Subject to any required action of shareholders,
            the number of shares of Stock covered by each outstanding Option,
            and the exercise price per share thereof set forth in each such
            Option, shall be proportionately adjusted for any increase or
            decrease in the number of issued shares of Stock of the Company
            resulting from a stock split, stock dividend, combination,
            subdivision or reclassification of shares, or the payment of a stock
            dividend, or any other increase or decrease in the number of such
            shares affected without receipt of consideration by the Company;
            provided, however, the conversion of any convertible securities of
            the Company shall not be deemed to have been "effected without
            receipt of consideration" by the Company.

                        In the event of a proposed dissolution or liquidation of
            the Company, a merger or consolidation in which the Company is not
            the surviving entity, or a sale of all or substantially all of the
            assets or capital stock of the Company (collectively, a
            "Reorganization"), unless otherwise provided by the Board, this
            Option shall terminate immediately prior to such date as is
            determined by the Board, which date shall be no later than the
            consummation of such Reorganization. In such event, if the entity
            which shall be the surviving entity does not tender to Optionee an
            offer, for which it has no obligation to do so, to substitute for
            any unexercised Option a stock option or capital stock of such
            surviving of such surviving entity, as applicable, which on an
            equitable basis shall provide the Optionee with substantially the
            same economic benefit as such unexercised Option, then the Board may
            grant to such Optionee, in its sole and absolute discretion and
            without obligation, the right for a period commencing thirty (30)
            days prior to and ending immediately prior to the date determined by
            the Board pursuant hereto for termination of the Option or during
            the remaining term of the Option, whichever is the lesser, to
            exercise any unexpired Option or Options without regard to the
            installment provisions of Paragraph 6(d) of the Plan; provided, that
            any such right granted shall be granted to all Optionees not
            receiving an offer to receive substitute options on a consistent
            basis, and provided further, that any such exercise shall be subject
            to the consummation of such Reorganization.

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                        Subject to any required action of shareholders, if the
            Company shall be the surviving entity in any merger or
            consolidation, each outstanding Option thereafter shall pertain to
            and apply to the securities to which a holder of shares of Stock
            equal to the shares subject to the Option would have been entitled
            by reason of such merger or consolidation.

                        In the event of a change in the Stock of the Company as
            presently constituted, which is limited to a change of all of its
            authorized shares without par value into the same number of shares
            with a par value, the shares resulting from any such change shall be
            deemed to be the Stock within the meaning of the Plan.

                        To the extent that the foregoing adjustments relate to
            stock or securities of the Company, such adjustments shall be made
            by the Board, whose determination in that respect shall be final,
            binding and conclusive. Except as expressly provided in this Section
            5(i), the Optionee shall have no rights by reason of any subdivision
            or consolidation of shares of stock of any class or the payment of
            any stock dividend or any other increase or decrease in the number
            of shares of stock of any class, and the number or price of shares
            of Stock subject to any Option shall not be affected by, and no
            adjustment shall be made by reason of, any dissolution, liquidation,
            merger, consolidation or sale of assets or capital stock, or any
            issue by the Company of shares of stock of any class or securities
            convertible into shares of stock of any class.

                        The Grant of an Option pursuant to the Plan shall not
            affect in any way the right or power of the Company to make any
            adjustments, reclassifications, reorganizations or changes in its
            capital or business structure or to merge, consolidate, dissolve, or
            liquidate or to sell or transfer all or any part of its business or
            assets.

      (j)   Rights as a Shareholder: An Optionee shall have no rights as a
            shareholder with respect to any shares covered by an Option until
            the effective date of the issuance of the shares following exercise
            of such Option by Optionee. No adjustment shall be made for
            dividends (ordinary or extraordinary, whether in cash, securities or
            other property) or distributions or other rights for which the
            record date is prior to the date such stock certificate is issued,
            except as expressly provided in Section 5(i) hereof.

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      (k)   Modification, Acceleration, Extension, and Renewal of Options:
            Subject to the terms and conditions and within the limitations of
            the Plan, the Board may modify an Option, or, once an Option is
            exercisable, accelerate the rate at which it may be exercised, and
            may extend or renew outstanding Options granted under the Plan or
            accept the surrender of outstanding Options (to the extent not
            theretofore exercised) and authorize the granting of new Options in
            substitution for such Options, provided such action is permissible
            under Section 422 of the Code and the New York Securities Rules.
            Notwithstanding the provisions of this Section 5(k), however, no
            modification of an Option shall, without the consent of the
            Optionee, alter to the Optionee's detriment or impair any rights or
            obligations under any Option theretofore granted under the Plan.

      (l)   Exercise Before Exercise Date: At the discretion of the Board, the
            Option may, but need not, include a provision whereby the Optionee
            may elect to exercise all or any portion of the Option prior to the
            stated exercise date of the Option or any installment thereof. Any
            shares so purchased prior to the stated exercise date shall be
            subject to repurchase by the Company upon termination of Optionee's
            employment as contemplated by Section 5(n) hereof prior to the
            exercise date stated in the Option and such other restrictions and
            conditions as the Board or Committee may deem advisable.

      (m)   Other Provisions: The Option agreements authorized under the Plan
            shall contain such other provisions, including, without limitation,
            restrictions upon the exercise of the Options, as the Board or the
            Committee shall deem advisable. Shares shall not be issued pursuant
            to the exercise of an Option, if the exercise of such Option or the
            issuance of shares thereunder would violate, in the opinion of legal
            counsel for the Company, the provisions of any applicable law or the
            rules or regulations of any applicable governmental or
            administrative agency or body, such as the Code, the Securities Act,
            the Exchange Act, the New York Securities Rules, New York
            corporation law, and the rules promulgated under the foregoing or
            the rules and regulations of any exchange upon which the shares of
            the Company are listed. Without limiting the generality of the
            foregoing, the exercise of each Option shall be subject to the
            condition that if at any time the Company shall determine that (i)
            the satisfaction of withholding tax or other similar liabilities, or
            (ii) the listing, registration or qualification of any shares
            covered by such exercise upon any securities exchange or under any
            state or federal law, or (iii) the consent or approval of any
            regulatory body, or (iv) the perfection of any exemption from any
            such withholding, listing, registration, qualification, consent or
            approval is necessary or desirable in connection with such exercise
            or the issuance of shares thereunder, then in any such event, such
            exercise shall not be effective unless such withholding, listing
            registration, qualification, consent, approval or exemption shall
            have been effected, obtained or perfected free of any conditions not
            acceptable to the Company.

      (n)   Repurchase Agreement: The Board may, in its discretion, require as a
            condition to the Grant of ---------------------- an Option
            hereunder, that an Optionee execute an agreement with the Company,
            in form and substance satisfactory to the Board in its discretion
            ("REPURCHASE AGREEMENT"), (i) restricting the Optionee's right to
            transfer shares purchased under such Option without first offering
            such shares to the Company or another shareholder of the Company
            upon the same terms and conditions as provided therein; and (ii)
            providing that upon termination of Optionee's employment with the
            Company, for any reason, the Company (or another shareholder of the
            Company, as provided in the Repurchase Agreement) shall have the
            right at its discretion (or the discretion of such other
            shareholders) to purchase and/or redeem all such shares owned by the
            Optionee on the date of termination of his or her employment at a
            price equal to: (A) the fair value of such shares as of such date of
            termination; or (B) if such repurchase right lapses at 20% of the
            number of shares per year, the original purchase price of such
            shares, and upon terms of payment permissible under the New York
            securities rules; provided that in the case of Options or Stock
            Awards granted to officers, directors, consultants or affiliates of
            the Company, such repurchase provisions may be subject to additional
            or greater restrictions as determined by the Board or Committee.

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6.    Stock Awards and Restricted Stock Purchase Offers.

      (a)   Types of Grants.

            (i)   Stock Award. All or part of any Stock Award under the Plan may
                  be subject to conditions established by the Board or the
                  Committee, and set forth in the Stock Award Agreement, which
                  may include, but are not limited to, continuous service with
                  the Company, achievement of specific business objectives,
                  increases in specified indices, attaining growth rates and
                  other comparable measurements of Company performance. Such
                  Awards may be based on Fair Market Value or other specified
                  valuation. All Stock Awards will be made pursuant to the
                  execution of a Stock Award Agreement substantially in the form
                  attached hereto as Exhibit C.

            (ii)  Restricted Stock Purchase Offer. A Grant of a Restricted Stock
                  Purchase Offer under the Plan shall be subject to such (i)
                  vesting contingencies related to the Participant's continued
                  association with the Company for a specified time and (ii)
                  other specified conditions as the Board or Committee shall
                  determine, in their sole discretion, consistent with the
                  provisions of the Plan. All Restricted Stock Purchase Offers
                  shall be made pursuant to a Restricted Stock Purchase Offer
                  substantially in the form attached hereto as Exhibit D.

      (b)   Conditions and Restrictions. Shares of Stock which Participants may
            receive as a Stock Award under a Stock Award Agreement or Restricted
            Stock Purchase Offer under a Restricted Stock Purchase Offer may
            include such restrictions as the Board or Committee, as applicable,
            shall determine, including restrictions on transfer, repurchase
            rights, right of first refusal, and forfeiture provisions. When
            transfer of Stock is so restricted or subject to forfeiture
            provisions it is referred to as "RESTRICTED STOCK". Further, with
            Board or Committee approval, Stock Awards or Restricted Stock
            Purchase Offers may be deferred, either in the form of installments
            or a future lump sum distribution. The Board or Committee may permit
            selected Participants to elect to defer distributions of Stock
            Awards or Restricted Stock Purchase Offers in accordance with
            procedures established by the Board or Committee to assure that such
            deferrals comply with applicable requirements of the Code including,
            at the choice of Participants, the capability to make further
            deferrals for distribution after retirement. Any deferred
            distribution, whether elected by the Participant or specified by the
            Stock Award Agreement, Restricted Stock Purchase Offers or by the
            Board or Committee, may require the payment be forfeited in
            accordance with the provisions of Section 6(c). Dividends or
            dividend equivalent rights may be extended to and made part of any
            Stock Award or Restricted Stock Purchase Offers denominated in Stock
            or units of Stock, subject to such terms, conditions and
            restrictions as the Board or Committee may establish.

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      (c)   Cancellation and Rescission of Grants. Unless the Stock Award
            Agreement or Restricted Stock Purchase Offer specifies otherwise,
            the Board or Committee, as applicable, may cancel any unexpired,
            unpaid, or deferred Grants at any time if the Participant is not in
            compliance with all other applicable provisions of the Stock Award
            Agreement or Restricted Stock Purchase Offer, the Plan and with the
            following conditions:

            (i)   A Participant shall not render services for any organization
                  or engage directly or indirectly in any business which, in the
                  judgment of the chief executive officer of the Company or
                  other senior officer designated by the Board or Committee, is
                  or becomes competitive with the Company, or which organization
                  or business, or the rendering of services to such organization
                  or business, is or becomes otherwise prejudicial to or in
                  conflict with the interests of the Company. For Participants
                  whose employment has terminated, the judgment of the chief
                  executive officer shall be based on the Participant's position
                  and responsibilities while employed by the Company, the
                  Participant's post-employment responsibilities and position
                  with the other organization or business, the extent of past,
                  current and potential competition or conflict between the
                  Company and the other organization or business, the effect on
                  the Company's customers, suppliers and competitors and such
                  other considerations as are deemed relevant given the
                  applicable facts and circumstances. A Participant who has
                  retired shall be free, however, to purchase as an investment
                  or otherwise, stock or other securities of such organization
                  or business so long as they are listed upon a recognized
                  securities exchange or traded over-the-counter, and such
                  investment does not represent a substantial investment to the
                  Participant or a greater than ten percent (10%) equity
                  interest in the organization or business.

            (ii)  A Participant shall not, without prior written authorization
                  from the Company, disclose to anyone outside the Company, or
                  use in other than the Company's business, any confidential
                  information or material, as defined in the Company's
                  Proprietary Information and Invention Agreement or similar
                  agreement regarding confidential information and intellectual
                  property, relating to the business of the Company, acquired by
                  the Participant either during or after employment with the
                  Company.

            (iii)A Participant, pursuant to the Company's Proprietary
                  Information and Invention Agreement, shall disclose promptly
                  and assign to the Company all right, title and interest in any
                  invention or idea, patentable or not, made or conceived by the
                  Participant during employment by the Company, relating in any
                  manner to the actual or anticipated business, research or
                  development work of the Company and shall do anything
                  reasonably necessary to enable the Company to secure a patent
                  where appropriate in the United States and in foreign
                  countries.

                                     - 10 -
<PAGE>

            (iv)  Upon exercise, payment or delivery pursuant to a Grant, the
                  Participant shall certify on a form acceptable to the
                  Committee that he or she is in compliance with the terms and
                  conditions of the Plan. Failure to comply with all of the
                  provisions of this Section 6(c) prior to, or during the six
                  months after, any exercise, payment or delivery pursuant to a
                  Grant shall cause such exercise, payment or delivery to be
                  rescinded. The Company shall notify the Participant in writing
                  of any such rescission within two years after such exercise,
                  payment or delivery. Within ten days after receiving such a
                  notice from the Company, the Participant shall pay to the
                  Company the amount of any gain realized or payment received as
                  a result of the rescinded exercise, payment or delivery
                  pursuant to a Grant. Such payment shall be made either in cash
                  or by returning to the Company the number of shares of Stock
                  that the Participant received in connection with the rescinded
                  exercise, payment or delivery.

      (d)   Nonassignability.

            (i)   Except pursuant to Section 6(e)(iii) and except as set forth
                  in Section 6(d)(ii), no Grant or any other benefit under the
                  Plan shall be assignable or transferable, or payable to or
                  exercisable by, anyone other than the Participant to whom it
                  was granted.

            (ii)  Where a Participant terminates employment and retains a Grant
                  pursuant to Section 6(e)(ii) in order to assume a position
                  with a governmental, charitable or educational institution,
                  the Board or Committee, in its discretion and to the extent
                  permitted by law, may authorize a third party (including but
                  not limited to the trustee of a "blind" trust), acceptable to
                  the applicable governmental or institutional authorities, the
                  Participant and the Board or Committee, to act on behalf of
                  the Participant with regard to such Awards.

      (e)   Termination of Employment. If the employment or service to the
            Company of a Participant terminates, other than pursuant to any of
            the following provisions under this Section 6(e), all unexercised,
            deferred and unpaid Stock Awards or Restricted Stock Purchase Offers
            shall be cancelled immediately, unless the Stock Award Agreement or
            Restricted Stock Purchase Offer provides otherwise:

            (i)   Retirement Under a Company Retirement Plan. When a
                  Participant's employment terminates as a result of retirement
                  in accordance with the terms of a Company retirement plan, the
                  Board or Committee may permit Stock Awards or Restricted Stock
                  Purchase Offers to continue in effect beyond the date of
                  retirement in accordance with the applicable Grant Agreement
                  and the exercisability and vesting of any such Grants may be
                  accelerated.

            (ii)  Rights in the Best Interests of the Company. When a
                  Participant resigns from the Company and, in the judgment of
                  the Board or Committee, the acceleration and/or continuation
                  of outstanding Stock Awards or Restricted Stock Purchase
                  Offers would be in the best interests of the Company, the
                  Board or Committee may (i) authorize, where appropriate, the
                  acceleration and/or continuation of all or any part of Grants
                  issued prior to such termination and (ii) permit the exercise,
                  vesting and payment of such Grants for such period as may be
                  set forth in the applicable Grant Agreement, subject to
                  earlier cancellation pursuant to Section 9 or at such time as
                  the Board or Committee shall deem the continuation of all or
                  any part of the Participant's Grants are not in the Company's
                  best interest.

                                     - 11 -
<PAGE>

            (iii) Death or Disability of a Participant.

                  (1)   In the event of a Participant's death, the Participant's
                        estate or beneficiaries shall have a period up to the
                        expiration date specified in the Grant Agreement within
                        which to receive or exercise any outstanding Grant held
                        by the Participant under such terms as may be specified
                        in the applicable Grant Agreement. Rights to any such
                        outstanding Grants shall pass by will or the laws of
                        descent and distribution in the following order: (a) to
                        beneficiaries so designated by the Participant; if none,
                        then (b) to a legal representative of the Participant;
                        if none, then (c) to the persons entitled thereto as
                        determined by a court of competent jurisdiction. Grants
                        so passing shall be made at such times and in such
                        manner as if the Participant were living.

                  (2)   In the event a Participant is deemed by the Board or
                        Committee to be unable to perform his or her usual
                        duties by reason of mental disorder or medical condition
                        which does not result from facts which would be grounds
                        for termination for cause, Grants and rights to any such
                        Grants may be paid to or exercised by the Participant,
                        if legally competent, or a committee or other legally
                        designated guardian or representative if the Participant
                        is legally incompetent by virtue of such disability.

                  (3)   After the death or disability of a Participant, the
                        Board or Committee may in its sole discretion at any
                        time (1) terminate restrictions in Grant Agreements; (2)
                        accelerate any or all installments and rights; and (3)
                        instruct the Company to pay the total of any accelerated
                        payments in a lump sum to the Participant, the
                        Participant's estate, beneficiaries or representative;
                        notwithstanding that, in the absence of such termination
                        of restrictions or acceleration of payments, any or all
                        of the payments due under the Grant might ultimately
                        have become payable to other beneficiaries.

                  (4)   In the event of uncertainty as to interpretation of or
                        controversies concerning this Section 6, the
                        determinations of the Board or Committee, as applicable,
                        shall be binding and conclusive.

7.    Investment Intent. All Grants under the Plan are intended to be exempt
      from registration under the Securities Act provided by Rule 701
      thereunder. Unless and until the granting of Options or sale and issuance
      of Stock subject to the Plan are registered under the Securities Act or
      shall be exempt pursuant to the rules promulgated thereunder, each Grant
      under the Plan shall provide that the purchases or other acquisitions of
      Stock thereunder shall be for investment purposes and not with a view to,
      or for resale in connection with, any distribution thereof. Further,
      unless the issuance and sale of the Stock have been registered under the
      Securities Act, each Grant shall provide that no shares shall be purchased
      upon the exercise of the rights under such Grant unless and until (i) all
      then applicable requirements of state and federal laws and regulatory
      agencies shall have been fully complied with to the satisfaction of the
      Company and its counsel, and (ii) if requested to do so by the Company,
      the person exercising the rights under the Grant shall (i) give written
      assurances as to knowledge and experience of such person (or a
      representative employed by such person) in financial and business matters
      and the ability of such person (or representative) to evaluate the merits
      and risks of exercising the Option, and (ii) execute and deliver to the
      Company a letter of investment intent and/or such other form related to
      applicable exemptions from registration, all in such form and substance as
      the Company may require. If shares are issued upon exercise of any rights
      under a Grant without registration under the Securities Act, subsequent
      registration of such shares shall relieve the purchaser thereof of any
      investment restrictions or representations made upon the exercise of such
      rights.

                                     - 12 -
<PAGE>

8.    Amendment, Modification, Suspension or Discontinuance of the Plan. The
      Board may, insofar as permitted by law, from time to time, with respect to
      any shares at the time not subject to outstanding Grants, suspend or
      terminate the Plan or revise or amend it in any respect whatsoever, except
      that without the approval of the shareholders of the Company, no such
      revision or amendment shall (i) increase the number of shares subject to
      the Plan, (ii) decrease the price at which Grants may be granted, (iii)
      materially increase the benefits to Participants, or (iv) change the class
      of persons eligible to receive Grants under the Plan; provided, however,
      no such action shall alter or impair the rights and obligations under any
      Option, or Stock Award, or Restricted Stock Purchase Offer outstanding as
      of the date thereof without the written consent of the Participant
      thereunder. No Grant may be issued while the Plan is suspended or after it
      is terminated, but the rights and obligations under any Grant issued while
      the Plan is in effect shall not be impaired by suspension or termination
      of the Plan.

                  In the event of any change in the outstanding Stock by reason
      of a stock split, stock dividend, combination or reclassification of
      shares, recapitalization, merger, or similar event, the Board or the
      Committee may adjust proportionally (a) the number of shares of Stock (i)
      reserved under the Plan, (ii) available for Incentive Stock Options and
      Nonstatutory Options and (iii) covered by outstanding Stock Awards or
      Restricted Stock Purchase Offers; (b) the Stock prices related to
      outstanding Grants; and (c) the appropriate Fair Market Value and other
      price determinations for such Grants. In the event of any other change
      affecting the Stock or any distribution (other than normal cash dividends)
      to holders of Stock, such adjustments as may be deemed equitable by the
      Board or the Committee, including adjustments to avoid fractional shares,
      shall be made to give proper effect to such event. In the event of a
      corporate merger, consolidation, acquisition of property or stock,
      separation, reorganization or liquidation, the Board or the Committee
      shall be authorized to issue or assume stock options, whether or not in a
      transaction to which Section 424(a) of the Code applies, and other Grants
      by means of substitution of new Grant Agreements for previously issued
      Grants or an assumption of previously issued Grants.

9.    Tax Withholding. The Company shall have the right to deduct applicable
      taxes from any Grant payment and withhold, at the time of delivery or
      exercise of Options, Stock Awards or Restricted Stock Purchase Offers or
      vesting of shares under such Grants, an appropriate number of shares for
      payment of taxes required by law or to take such other action as may be
      necessary in the opinion of the Company to satisfy all obligations for
      withholding of such taxes. If Stock is used to satisfy tax withholding,
      such stock shall be valued based on the Fair Market Value when the tax
      withholding is required to be made.

10.   Availability of Information. During the term of the Plan and any
      additional period during which a Grant granted pursuant to the Plan shall
      be exercisable, the Company shall make available, not later than one
      hundred and twenty (120) days following the close of each of its fiscal
      years, such financial and other information regarding the Company as is
      required by the bylaws of the Company and applicable law to be furnished
      in an annual report to the shareholders of the Company.

                                     - 13 -
<PAGE>

11.   Notice. Any written notice to the Company required by any of the
      provisions of the Plan shall be addressed to the chief personnel officer
      or to the chief executive officer of the Company, and shall become
      effective when it is received by the office of the chief personnel officer
      or the chief executive officer.

12.   Indemnification of Board. In addition to such other rights or
      indemnifications as they may have as directors or otherwise, and to the
      extent allowed by applicable law, the members of the Board and the
      Committee shall be indemnified by the Company against the reasonable
      expenses, including attorneys' fees, actually and necessarily incurred in
      connection with the defense of any claim, action, suit or proceeding, or
      in connection with any appeal thereof, to which they or any of them may be
      a party by reason of any action taken, or failure to act, under or in
      connection with the Plan or any Grant granted thereunder, and against all
      amounts paid by them in settlement thereof (provided such settlement is
      approved by independent legal counsel selected by the Company) or paid by
      them in satisfaction of a judgment in any such claim, action, suit or
      proceeding, except in any case in relation to matters as to which it shall
      be adjudged in such claim, action, suit or proceeding that such Board or
      Committee member is liable for negligence or misconduct in the performance
      of his or her duties; provided that within sixty (60) days after
      institution of any such action, suit or Board proceeding the member
      involved shall offer the Company, in writing, the opportunity, at its own
      expense, to handle and defend the same.

13.   Governing Law. The Plan and all determinations made and actions taken
      pursuant hereto, to the extent not otherwise governed by the Code or the
      securities laws of the United States, shall be governed by the law of the
      State of New York and construed accordingly.

14.   Effective and Termination Dates. The Plan shall become effective on the
      date it is approved by the holders of a majority of the shares of Stock
      then outstanding. The Plan shall terminate ten years later, subject to
      earlier termination by the Board pursuant to Section 8.

      The foregoing 2004 Third Incentive Stock Plan (consisting of 14 pages,
including this page) was duly adopted and approved by the Board of Directors on
September 28, 2004.

                                       ADVANCED PLANT
                                       PHARMACEUTICALS, INC.
                                       a Delaware corporation

                                       By: /s/ David Lieberman
                                          --------------------------------------
                                            David Lieberman
                                       Its: Chief Executive Officer

                                     - 14 -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.

<PAGE>

            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.

                                       2
<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.

                                       3
<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.

                                       4
<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.

                                       6
<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.

                                       7
<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

                                       27
<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

                                       28

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