SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT, dated as of July 16, 2013 (this
“Agreement”), is entered into by and between COMPETITIVE TECHNOLOGIES, INC., a
Delaware corporation (the “Company”), and TONAQUINT, INC., a Utah corporation,
its successors and/or assigns (“Buyer”).

RECITALS:

A.

The Company and the Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration for offers and sales to
accredited investors afforded, inter alia, under Regulation D (“Regulation D”)
as promulgated by the United States Securities and Exchange Commission (the
“SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and/or
Section 4(2) of the 1933 Act.

B.

The Buyer wishes to acquire from the Company, and the Company desires to issue
and sell to the Buyer, the Note (as defined below), which Note will be
convertible into shares of common stock of the Company, par value $0.01 per
share (the “Common Stock”); and the Warrant (as defined below), upon the terms
and subject to the conditions of the Note, the Warrant, this Agreement and the
other Transaction Documents (as defined below).

AGREEMENT:

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

1.

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

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

“Buyer’s Counsel” means Hansen Black Anderson PLLC.

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

“Certificate of Incorporation” means the certificate of incorporation, articles
of incorporation or other charter document (howsoever denominated) of the
Company, as amended to date.

“Closing Date” means the date of the closing of the purchase and sale of the
Securities.

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

“Company Counsel” means the Cutler Law Group, PC.

“Company’s SEC Documents” means the Company’s filings on the SEC’s EDGAR system.

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“Conversion Date” means the date a Holder submits a Conversion Notice, as
provided in the Note.

“Conversion Notice” has the meaning ascribed to it in the Note.

“Conversion Price” has the meaning ascribed to it in the Note.

“Conversion Shares” has the meaning ascribed to it in the Note.

“Delivery Date” means (a) the date that Conversion Shares are required to be
delivered to Holder under Section 3 or Section 8 of the Note, as applicable, or
(b) the date Delivery Shares are required to be delivered to the Holder under
the Warrant, as applicable.

“Delivery Shares” has the meaning ascribed to it in the Warrant.

“DTC” means the Depository Trust Company.

“DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer Program.

“DWAC” means Deposit Withdrawal at Custodian as defined by the DTC.

“DWAC Eligible Conditions” means that (i) the Common Stock is eligible at DTC
for full services pursuant to DTC’s Operational Arrangements, including without
limitation transfer through DTC’s DWAC system, (ii) the Company has been
approved (without revocation) by the DTC’s underwriting department, and (iii)
the Transfer Agent is approved as an agent in the DTC/FAST Program, (iv) the
Conversion Shares are otherwise eligible for delivery via DWAC; and (v) the
Transfer Agent does not have a policy prohibiting or limiting delivery of the
Conversion Shares via DWAC.

“Exercise Price” has the meaning ascribed to it in the Warrant.

“Holder” means the Person holding the relevant Securities at the relevant time.

“Last Audited Date” means December 31, 2012.

“Market Price” has the meaning ascribed to it in the Note.

“Material Adverse Effect” means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (a) adversely
affect the legality, validity or enforceability of the Note, the Warrant, or any
of the other Transaction Documents, (b)  have or result in a material adverse
effect on the results of operations, assets, or financial condition of the
Company and its Subsidiaries, taken as a whole, or (c) adversely impair the
Company’s ability to perform fully on a timely basis its material obligations
under any of the Transaction Documents or the transactions contemplated thereby.

“Maturity Date” has the meaning ascribed to it in the Note.

“Notice of Exercise” has the meaning ascribed to it in the Warrant.

“Outstanding Balance” has the meaning ascribed to it in the Note.

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“Permitted Liens” means (a) any Lien (as defined herein) for taxes not yet due
or delinquent or being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP, (b) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, and (c) any Lien
created by operation of law, such as materialmen’s liens, mechanics’ liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings.

“Person” means any living person or any entity, such as, but not necessarily
limited to, a corporation, partnership or trust.

“Principal Trading Market” means (a) the NYSE Amex, (b) the New York Stock
Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, (e) the
OTC Bulletin Board, (f) the OTCQX or OTCQB, or (g) such other market on which
the Common Stock is principally traded at the relevant time, but shall not
include OTC Pink (a.k.a., “pink sheets”).

“Purchase Price” is defined in Section 2.1(a) hereof.

“Registration Statement” means a registration statement of the Company under the
1933 Act covering securities of the Company (including Common Stock) on Form
S-3, if the Company is then eligible to file using such form, and if not
eligible, on Form S-1 or other appropriate form.

“Rule 144” means (a) Rule 144 promulgated under the 1933 Act or (b) any other
similar rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration under the 1933
Act.

“Securities” means the Note, the Warrant and the Shares.

“Shares” means the shares of Common Stock representing any or all of the
Conversion Shares and the Warrant Shares.

“State of Incorporation” means Delaware.

“Subsidiary” or “Subsidiaries” means, as of the relevant date, any subsidiary or
subsidiaries of the Company (whether or not included in the Company’s SEC
Documents) whether now existing or hereafter acquired or created.

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

“Transaction Documents” means this Agreement, the Note, the Transfer Agent
Letter (defined below), the Warrant, and all other certificates (including
without limitation the Secretary’s Certificate (defined below), documents,
agreements, resolutions and instruments delivered to any party under or in
connection with this Agreement, as the same may be amended from time to time.

“Transfer Agent” means, at any time, the transfer agent for the Common Stock.

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrant.

“Wire Instructions” means the wire instructions for the Purchase Price, as
provided by the Company, set forth on ANNEX I.

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2.

AGREEMENT TO PURCHASE; PURCHASE PRICE.

2.1.

Purchase.

(a)

Subject to the terms and conditions of this Agreement and the other Transaction
Documents, the undersigned Buyer hereby agrees to purchase from the Company a
Convertible Promissory Note in the principal amount of $112,500.00 substantially
in the form attached hereto as ANNEX II (the “Note”). In consideration thereof,
the Buyer shall pay $100,000.00 (the “Purchase Price”) to the Company. The
Purchase Price shall be paid to the Company at Closing (defined below) in
accordance with the Wire Instructions.  

(b)

In consideration for the Purchase Price, the Company shall, at the Closing
(defined below):

(i)

execute and deliver to the Buyer that certain Warrant to Purchase Shares of
Common Stock substantially in the form attached hereto as ANNEX III (“Warrant”);

(ii)

execute and deliver to the Transfer Agent, and the Transfer Agent shall execute
to indicate its acceptance thereof, the irrevocable letter of instructions to
transfer agent substantially in the form attached hereto as ANNEX IV (the
“Transfer Agent Letter”);

(iii)

cause to be executed and delivered to the Buyer a fully executed secretary’s
certificate and written consent of directors evidencing the Company’s approval
of the Transaction Documents substantially in the forms attached hereto as ANNEX
V (together, the “Secretary’s Certificate”); and

(iv)

cause to be executed and delivered to the Buyer a fully executed share issuance
resolution to be delivered to the Transfer Agent substantially in the form
attached hereto as ANNEX VI (the “Share Issuance Resolution”).

(c)

At the Closing, the Buyer shall deliver to the Company the Purchase Price.

2.2.

Form of Payment; Delivery of Securities.  The purchase and sale of the
Securities shall take place at a closing (the “Closing”) to be held at the
offices of the Buyer on the Closing Date.  At the Closing, the Company will
deliver the Transaction Documents to the Buyer against delivery by the Buyer to
the Company of the Purchase Price.

2.3.

Purchase Price. The Note carries an original issue discount of $10,000.00 (the
“OID”).  In addition, the Company agrees to pay $5,000.00 to the Buyer to cover
the Buyer’s legal fees, accounting costs, due diligence, monitoring and other
transaction costs incurred in connection with the purchase and sale of the
Securities (the “Transaction Expense Amount”), $2,500.00 of which has been
previously paid to the Buyer and the remaining $2,500.00 of which is included in
the initial principal balance of the Note (the “Carried Transaction Expense
Amount”). The Purchase Price, therefore, shall be $100,000.00, computed as
follows: $112,500.00 original principal balance, less the OID, less the Carried
Transaction Expense Amount.

3.

BUYER REPRESENTATIONS AND WARRANTIES. The Buyer represents and warrants to, and
covenants and agrees with, the Company, as of the date hereof and as of the
Closing Date, as follows:

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3.1.

Binding Obligation. The Transaction Documents to which the Buyer is a party, and
the transactions contemplated hereby and thereby, have been duly and validly
authorized by the Buyer.  This Agreement has been executed and delivered by the
Buyer, and this Agreement is, and each of the other Transaction Documents to
which the Buyer is a party, when executed and delivered by the Buyer (if
necessary), will be valid and binding obligations of the Buyer enforceable in
accordance with their respective terms, subject as to enforceability only to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors’ rights generally.

3.2.

Accredited Investor Status. The Buyer is an “accredited investor” as that term
is defined in Regulation D.

4.

COMPANY REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to
the Buyer as of the date hereof and as of the Closing Date that:

4.1.

Rights of Others Affecting the Transactions.  There are no preemptive rights of
any stockholder of the Company, as such, to acquire the Securities. No other
party has a currently exercisable right of first refusal which would be
applicable to any or all of the transactions contemplated by the Transaction
Documents.

4.2.

Status.  The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Incorporation and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted.  The Company is duly qualified as a foreign corporation to do
business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not have
or result in a Material Adverse Effect.  The Company has registered its stock
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
“1934 Act”), and is obligated to file reports pursuant to Section 13 or
Section 15(d) of the 1934 Act. The Company has not taken and will not take any
action designed to terminate, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the 1934 Act,
nor has the Company received any notification that the SEC is contemplating
terminating such registration.  The Common Stock is quoted on the Principal
Trading Market.  The Company has received no notice, either oral or written,
with respect to the continued eligibility of the Common Stock for quotation on
the Principal Trading Market, and the Company has maintained all requirements on
its part for the continuation of such quotation. The Company has not, in the
twelve (12) months preceding the date hereof, received notice from the Principal
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Principal Trading Market. The Company is, and has no reason
to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.

4.3.

Authorized Shares.

(a)

The authorized capital stock of the Company consists of 35,920 shares of 5%
preferred stock, $25 par value per share, of which 2,427 are outstanding; 20,000
shares of Series B preferred stock, $0.001 par value per share, no shares of
which are outstanding; 750 shares of Series C convertible preferred stock,
$1,000 par value per share, of which 375 are outstanding; and 40,000,000 shares
of Common Stock, $0.01 par value per share, of which approximately 16,354,804
are outstanding. Of the outstanding shares of Common Stock, approximately
3,218,240 shares are beneficially owned by Affiliates of the Company.

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(b)

Other than as set forth in the Company’s SEC Documents, there are no outstanding
securities which are convertible into or exchangeable for shares of Common
Stock, whether such conversion is currently exercisable or exercisable only upon
some future date or the occurrence of some event in the future.

(c)

All issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable. After considering all
other commitments that may require the issuance of Common Stock, the Company has
sufficient authorized and unissued shares of Common Stock as may be necessary to
effect the issuance of the Shares on the Closing Date, were (i) the Note issued
and fully converted on that date and (ii) the Warrant issued and fully exercised
on that date.

(d)

The Shares have been duly authorized by all necessary corporate action on the
part of the Company as of or prior to the Closing in accordance with the terms
of this Agreement, and, when issued on conversion of, or in payment of interest
on the Note in accordance with the terms thereof, or upon exercise of the
Warrant in accordance with the terms thereof, as applicable, will have been duly
and validly issued, fully paid and non-assessable, free from all taxes, liens,
claims, pledges, mortgages, restrictions, obligations, security interests and
encumbrances of any kind, nature and description, and will not subject the
Holder thereof to personal liability by reason of being a Holder.

(e)

The Conversion Shares and Warrant Shares are enforceable against the Company and
the Company presently has no claims or defenses of any nature whatsoever with
respect to the Conversion Shares or the Warrant Shares.

4.4.

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

4.5.

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

4.6.

Approvals.  No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the stockholders or any lender of the Company is required to be
obtained by the Company for the issuance and sale of the

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Securities to the Buyer as contemplated by this Agreement, except such
authorizations, approvals and consents that have been obtained.

4.7.

Filings; Financial Statements.  None of the Company’s SEC Documents contained,
at the time they were filed, any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by the Company with the SEC
under the 1934 Act on a timely basis or has received a valid extension of such
time of filing and has filed any such report, schedule, form, statement or other
document prior to the expiration of any such extension.  As of their respective
dates, the financial statements of the Company included in the Company’s 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 generally accepted accounting principles, consistently applied, during the
periods involved (except (a) as may be otherwise indicated in such financial
statements or the notes thereto, or (b) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).  No other
information provided by or on behalf of the Company to the Buyer which is not
included in the Company’s SEC Documents, including, without limitation,
information referred to in this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading.

4.8.

Absence of Certain Changes.  Since the Last Audited Date, there has been no
Material Adverse Effect. Since the Last Audited Date, the Company has not (a)
incurred or become subject to any material liabilities (absolute or contingent)
except liabilities incurred in the ordinary course of business consistent with
past practices; (b) discharged or satisfied any material lien or encumbrance or
paid any material obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business consistent with past
practices; (c) declared or made any payment or distribution of cash or other
property to stockholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or redeem, any shares of its
capital stock; (d) sold, assigned or transferred any other material tangible
assets, or canceled any material debts owed to the Company by any third party or
material claims of the Company against any third party, except in the ordinary
course of business consistent with past practices; (e) waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of existing business; (f) made any increases in
employee compensation, except in the ordinary course of business consistent with
past practices; or (g) experienced any material problems with labor or
management in connection with the terms and conditions of their employment.

4.9.

Full Disclosure.  There is no fact known to the Company or that the Company
should know after having made all reasonable inquiries (other than conditions
known to the public generally or as disclosed in the Company’s SEC Documents
since the Last Audited Date) that has not been disclosed in writing to the Buyer
that would reasonably be expected to have or result in a Material Adverse
Effect.

4.10.

Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company before or
by any governmental authority or non-

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governmental department, commission, board, bureau, agency or instrumentality or
any other person, wherein an unfavorable decision, ruling or finding would have
a Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, any of the Transaction Documents.  The Company is not aware
of any valid basis for any such claim that (either individually or in the
aggregate with all other such events and circumstances) could reasonably be
expected to have a Material Adverse Effect. There are no outstanding or
unsatisfied judgments, orders, decrees, writs, injunctions or stipulations to
which the Company is a party or by which the Company or any of its properties is
bound, that involve the transactions contemplated herein or that, alone or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.

4.11.

Absence of Events of Default.  Neither the Company nor any of its Subsidiaries
is in violation of or in default with respect to (a) its Certificate of
Incorporation or bylaws or other organizational documents, each as currently in
effect, or any material judgment, order, writ, decree, statute, rule or
regulation applicable to such entity; or (b) any material mortgage, indenture,
agreement, instrument or contract to which such entity is a party or by which it
or any of its properties or assets are bound (nor is there any waiver in effect
which, if not in effect, would result in such a violation or default), except
such breach or default which would not have or result in a Material Adverse
Effect.

4.12.

Absence of Certain Company Control Person Actions or Events.  None of the
following has occurred during the past five (5) years with respect to a Company
Control Person:

(a)

A petition under the federal bankruptcy laws or any state insolvency law was
filed by or against, or a receiver, fiscal agent or similar officer was
appointed by a court for the business or property of such Company Control
Person, or any partnership in which he or she was a general partner at or within
two (2) years before the time of such filing, or any corporation or business
association of which he or she was an executive officer at or within two (2)
years before the time of such filing;

(b)

Such Company Control Person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses);

(c)

Such Company Control Person was the subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him or her from, or otherwise
limiting, the following activities:

(i)

acting, as an investment advisor, underwriter, broker or dealer in securities,
or as an affiliated person, director or employee of any investment company,
bank, savings and loan association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool
operator, floor broker, any other Person regulated by the Commodity Futures
Trading Commission (“CFTC”) or engaging in or continuing any conduct or practice
in connection with such activity;

(ii)

engaging in any type of business practice; or

(iii)

engaging in any activity in connection with the purchase or sale of any security
or commodity or in connection with any violation of federal or state securities
laws or federal commodities laws;

(d)

Such Company Control Person was the subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any federal or state
authority barring,

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suspending or otherwise limiting for more than sixty (60) calendar days the
right of such Company Control Person to engage in any activity described in
Section 4.12(c) above, or to be associated with Persons engaged in any such
activity; or

(e)

Such Company Control Person was found by a court of competent jurisdiction in a
civil action or by the CFTC or SEC to have violated any federal or state
securities law, and the judgment in such civil action or finding by the CFTC or
SEC has not been subsequently reversed, suspended, or vacated.

4.13.

No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations other than those disclosed in the Transaction Documents or the
Company’s most recently filed SEC Documents (Form 10-K or 10-Q) or those
incurred in the ordinary course of the Company’s business since the Last Audited
Date, or which individually or in the aggregate, do not or would not have a
Material Adverse Effect.  No event or circumstance has occurred or exists with
respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, under applicable
laws, rules or regulations, requires public disclosure or announcement prior to
the date hereof by the Company but which has not been so publicly announced or
disclosed.  There are no proposals currently under consideration or currently
anticipated to be under consideration by the Board of Directors or the executive
officers of the Company which proposal would (a) change the Certificate of
Incorporation or bylaws of the Company, each as currently in effect, with or
without stockholder approval, which change would reduce or otherwise adversely
affect the rights and powers of the stockholders of the Common Stock, or (b)
materially or substantially change the business, assets or capital of the
Company, including its interests in Subsidiaries.

4.14.

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 offer
or sale of any security of the Company or solicited any offer to buy any such
security under circumstances that would eliminate the availability of the
exemption from registration under Regulation D in connection with the offer and
sale of the Securities as contemplated hereby.

4.15.

Dilution.  Each of the Company and its executive officers and directors is aware
that the number of shares of Common Stock issuable upon the execution of this
Agreement, the conversion of the Note and exercise of the Warrant, or pursuant
to the other terms of the Transaction Documents may have a dilutive effect on
the ownership interests of the other stockholders (and Persons having the right
to become stockholders) of the Company. The Company specifically acknowledges
that its obligations to issue (a) the Conversion Shares upon a conversion of the
Note, and (b) the Warrant Shares upon an exercise of the Warrant, are binding
upon the Company and enforceable regardless of the dilution such issuances may
have on the ownership interests of other stockholders of the Company, and the
Company will honor such obligations, including honoring every Conversion Notice
and Notice of Exercise, unless the Company is subject to an injunction (which
injunction was not sought by the Company or any of its directors or executive
officers) prohibiting the Company from doing so.

4.16.

Fees to Brokers, Placement Agents and Others. With respect to any brokerage
commissions, placement agent or finder’s fees or similar payments that will or
would become due and owing by the Company to any Person as a result of this
Agreement or the transactions contemplated hereby (“Broker Fees”), any such
Broker Fees will be made in full compliance with all applicable laws and
regulations and only to a Person that is a registered investment adviser or
registered broker-dealer. The Buyer shall have no obligation with respect to any
such Broker Fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this subsection that may be due in
connection with the transactions contemplated hereby. The Company shall
indemnify and hold

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harmless each of the Buyer, the Buyer’s employees, officers, directors,
stockholders, managers, agents, and partners, and their respective Affiliates,
from and against all claims, losses, damages, costs (including the costs of
preparation and attorneys’ fees) and expenses suffered in respect of any such
claimed or existing fees.

4.17.

Disclosure.  All information relating to or concerning the Company or its
Subsidiaries set forth in the Transaction Documents or in the Company’s SEC
Documents or other public filings provided by or on behalf of the Company to the
Buyer 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, 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
its Subsidiaries or any of their business, properties, prospects, operations or
financial conditions, which under applicable laws, rules or regulations,
requires public disclosure or announcement by the Company or any such
Subsidiary.

4.18.

Confirmation.  The Company agrees that, if, to the knowledge of the Company, any
events occur or circumstances exist prior to the payment of the Purchase Price
by the Buyer to the Company which would make any of the Company’s
representations or warranties set forth herein materially untrue or materially
inaccurate as of such date, the Company shall immediately notify the Buyer in
writing prior to such date of such events or circumstances, specifying which
representations or warranties are affected and the reasons therefor.

4.19.

Title. The Company and the Subsidiaries, if applicable, own and have good and
marketable title in fee simple absolute to, or a valid leasehold interest in,
all their respective real properties and good title to their other respective
assets and properties, subject to no liens, claims or encumbrances except as
have been disclosed to the Buyer.

4.20.

Intellectual Property.

(a)

Ownership.  The Company owns or possesses or can obtain on commercially
reasonable terms sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses (software or otherwise),
information, know-how, inventions, discoveries, published and unpublished works
of authorship, processes and any and all other proprietary rights (“Intellectual
Property”) necessary to the business of the Company as presently conducted, the
lack of which could reasonably be expected to have a Material Adverse Effect.
 Except for agreements with its own employees or consultants, standard end-user
license agreements, support/maintenance agreements and agreements entered in the
ordinary course of the Company’s business, all of which have been made available
for review by the Buyer, there are no outstanding options, licenses or
agreements relating to the Intellectual Property of the Company, and the Company
is not bound by or a party to any options, licenses or agreements with respect
to the Intellectual Property of any other person or entity.  The Company has not
received any written communication alleging that the Company has violated or, by
conducting its business as currently conducted, would violate any of the
Intellectual Property of any other person or entity, nor is the Company aware of
any basis therefor.  The Company is not obligated to make any payments by way of
royalties, fees or otherwise to any owner or licensor of or claimant to any
Intellectual Property with respect to the use thereof in connection with the
present conduct of its business other than in the ordinary course of its
business.  There are no agreements, understandings, instruments, contracts,
judgments, orders or decrees to which the Company is a party or by which it is
bound which involve indemnification by the Company with respect to infringements
of Intellectual Property, other than in the ordinary course of its business.

(b)

No Breach by Employees.  The Company is not aware that any of its employees is
obligated under any contract or other agreement, or subject to any judgment,
decree or order

10

of any court or administrative agency, that would materially interfere with the
use of his or her efforts to promote the interests of the Company or that would
conflict with the Company’s business as presently conducted.  Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company’s
business by the employees of the Company, nor the conduct of the Company’s
business as presently conducted, will, to the Company’s knowledge, conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any such
employee is now obligated.  The Company does not believe it is or will be
necessary to use any inventions of any of its employees made prior to their
employment by the Company of which it is aware.

4.21.

No Shell Company. The Company is not, nor has it ever been, the type of “issuer”
defined in Rule 144(i)(1) under the 1933 Act (a “Shell Company”). The Company
acknowledges and agrees that (a) it is essential to the Buyer that the Buyer be
able to sell Common Stock the Buyer receives under the Note or Warrant in
reliance on Rule 144, (b) if the Company were or ever had been a Shell Company,
any Common Stock received by the Buyer under the Note or Warrant could not be
sold in reliance on Rule 144 (at least without satisfying additional
conditions), and (c) Buyer is relying on the truth and accuracy of the Company’s
representation in the foregoing sentence and the availability of Rule 144 with
respect to Buyer’s selling of Common Stock in entering into this Agreement,
purchasing the Note and receiving the Warrant.

4.22.

Environmental Matters.

(a)

No Violation. 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.

(b)

No Hazardous Materials. 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.

(c)

No Storage Tanks.  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.

11

5.

CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

5.1.

Covenants and Acknowledgements of the Buyer.

(a)

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

(b)

Restrictive Legend.  The Buyer acknowledges and agrees that, until such time as
the relevant Securities have been registered under the 1933 Act, and may be sold
in accordance with an effective Registration Statement, or until such Securities
can otherwise be sold without restriction, whichever is earlier, the
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF
COUNSEL IN COMPARABLE TRANSACTIONS OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED, OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.

5.2.

Covenants, Acknowledgements and Agreements of the Company. As a condition to the
Buyer’s obligation to purchase the Securities contemplated by this Agreement,
and as a material inducement for the Buyer to enter into this Agreement and the
other Transaction Documents, until all of the Company’s obligations hereunder
and the Note are paid and performed in full and the Warrant is exercised in full
(or otherwise expired), or within the timeframes otherwise specifically set
forth below, the Company shall comply with the following covenants:

(a)

Filings.  From the date hereof until the date that is six (6) months after all
the Conversion Shares and Warrant Shares either have been sold by the Buyer, or
may permanently be sold by the Buyer without any restrictions pursuant to Rule
144 (the “Registration Period”), the Company shall timely make all filings
required to be made by it under the 1933 Act, the 1934 Act, Rule 144 or any
United States state securities laws and regulations thereof applicable to the
Company or by the rules and regulations of the Principal Trading Market, and
such filings shall conform to the requirements of applicable laws, regulations
and government agencies, and, unless such filings are publicly available

12

on the SEC’s EDGAR system (via the SEC’s web site at no additional charge), the
Company shall provide a copy thereof to the Buyer promptly after such filings.
Without limiting the foregoing, 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 the Buyer promptly after such filing. Additionally, within four (4) Trading
Days following the date of this Agreement, the Company shall file a current
report on Form 8-K describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and approved by the
Buyer and attaching the material Transaction Documents as exhibits to such
filing. The Company shall further redact all confidential information from such
Form 8-K. Additionally, the Company shall furnish to the Buyer, so long as the
Buyer owns any Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company, and (iii) such other information as may be reasonably
requested to permit the Buyer to sell such Securities pursuant to Rule 144
without registration.

(b)

Reporting Status.  So long as the Buyer beneficially owns Securities and for at
least twenty (20) Trading Days thereafter, the Company shall file all reports
required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934
Act, and shall take all reasonable action under its control to ensure that
adequate current public information with respect to the Company, as required in
accordance with Rule 144, is publicly available, and shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would permit such termination.  

(c)

Listing.  The Common Stock shall be listed or quoted for trading on any of (i)
the NYSE Amex, (ii) the New York Stock Exchange, (iii) the Nasdaq Global Market,
(iv) the Nasdaq Capital Market, (v) the OTC Bulletin Board, (vi) the OTCQX or
(vii) the OTCQB. The Company shall promptly secure the listing of all of the
Conversion Shares and Warrant Shares upon each national securities exchange and
automated quotation system, if any, upon which the Common Stock is then listed
(subject to official notice of issuance) and shall maintain such listing of all
securities from time to time issuable under the terms of the Transaction
Documents. The Company shall comply in all material respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Principal Trading Market and/or the Financial Industry Regulatory Authority,
Inc. (“FINRA”) or any successor thereto, as the case may be, applicable to it at
least through the date which is sixty (60) calendar days after the later of (I)
the date on which the Note has been converted or paid in full, and (II) the date
on which the Warrant has been exercised in full (or the date on which the
Warrant has expired).

(d)

Use of Proceeds.  The Company shall use the net proceeds received hereunder for
working capital and general corporate purposes only; provided, however, the
Company will not use such proceeds to pay fees payable (i) to any broker or
finder relating to the offer and sale of the Note and/or the Warrant, or (ii) to
any other party relating to any financing transaction effected prior to the
Closing Date.

(e)

Publicity, Filings, Releases, Etc.  Neither party shall disseminate any
information relating to the Transaction Documents or the transactions
contemplated thereby, including issuing any press releases, holding any press
conferences or other forums, or filing any reports (collectively, “Publicity”),
without giving the other party reasonable advance notice and an opportunity to
comment on the contents thereof.  Neither party will include in any such
Publicity any statement or statements or other material to which the other party
reasonably objects, unless in the reasonable opinion of counsel to the party
proposing such statement, such statement is legally required to be included.  In
furtherance of the foregoing, the Company shall provide to the Buyer’s Counsel a
draft of the first current report on Form 8-K or a quarterly or annual report on
Form 10-Q or 10-K, as the case may be, intended to

13

be made with the SEC which refers to the Transaction Documents or the
transactions contemplated thereby as soon as practicable (but at least two (2)
Trading Days before such filing will be made) and shall not include in such
filing (or any other filing filed before then) any statement or statements or
other material to which the Buyer reasonably objects, unless in the reasonable
opinion of counsel to the Company such statement is legally required to be
included. Notwithstanding the foregoing, each of the parties hereby consents to
the inclusion of the text of the Transaction Documents in filings made with the
SEC (but any descriptive text accompanying or part of such filing shall be
subject to the other provisions of this subsection).

(f)

FINRA Rule 5110. In the event that the Corporate Financing Rule 5110 of FINRA is
or becomes applicable to the transactions contemplated by the Transaction
Documents or to the sale by a Holder of any of the Securities, then the Company
shall, to the extent required by such rule, timely make any filings and
cooperate with any broker or selling stockholder in respect of any consents,
authorizations or approvals that may be necessary for FINRA to timely and
expeditiously permit the Holder to sell the Securities.

(g)

Keeping of Records and Books of Account. The Company shall keep and cause each
Subsidiary to keep adequate records and books of account, in which complete
entries shall be made in accordance with GAAP consistently applied, reflecting
all financial transactions of the Company and such Subsidiaries, and in which,
for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.

(h)

Corporate Existence.  The Company shall (i) do all things necessary to remain
duly qualified and in good standing in each jurisdiction in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary; (ii) preserve and keep in full
force and effect all licenses or similar qualifications required by it to engage
in its business in all jurisdictions in which it is at the time so engaged;
(iii) continue to engage in business of the same general type as conducted as of
the date hereof; and (iv) continue to conduct its business substantially as now
conducted or as otherwise permitted hereunder.

(i)

Taxes.  The Company shall pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property before the same shall become
delinquent or in default, which, if unpaid, might reasonably be expected to give
rise to liens or charges upon such properties or any part thereof, unless, in
each case, the validity or amount thereof is being contested in good faith by
appropriate proceedings and the Company has maintained adequate reserves with
respect thereto in accordance with GAAP.

(j)

Compliance. The Company shall comply in all material respects with all federal,
state and local laws and regulations, orders, judgments, decrees, injunctions,
rules, regulations, permits, licenses, authorizations and requirements
(collectively, “Requirements”) of all governmental bodies, insurers,
departments, commissions, boards, courts, authorities, officials or officers
which are applicable to the Company, its business, operations, or any of its
properties, except where the failure to so comply would not have a Material
Adverse Effect; provided, however, that nothing provided herein shall prevent
the Company from contesting in good faith the validity or the application of any
Requirements.

(k)

Litigation. From and after the date hereof and until all of the Company’s
obligations hereunder and the Note are paid and performed in full and the
Warrant is exercised in full (or otherwise expired), the Company shall notify
the Buyer in writing, promptly upon learning thereof, of any litigation or
administrative proceeding commenced or threatened against the Company involving
a claim in excess of $100,000.00.

14

(l)

Performance of Obligations.  The Company shall promptly and in a timely fashion
perform and honor all demands, notices, requests and obligations that exist or
may arise under the Transaction Documents.

(m)

Failure to Make Timely Filings.  The Company agrees that, if the Company fails
to timely file on the SEC’s EDGAR system any information required to be filed by
it, whether on a Form 10-K, Form 10-Q, Form 8-K, Proxy Statement or otherwise so
as to be deemed a “reporting issuer” with current public information under the
1934 Act, the Company shall be liable to pay to the Holder, in addition to any
other available remedies in the Transaction Documents or at law or in equity, an
amount based on the following schedule (where, for purposes of this subsection,
“No. Trading Days Late” refers to each Trading Day after the latest due date for
the relevant filing):

Late Filing Payment For

Each $10,000.00 of

 

No. Trading Days Late

 

Outstanding Principal of the Note        

1

$100.00

2

$200.00

3

$300.00

4

$400.00

5

$500.00

6

$600.00

7

$700.00

8

$800.00

9

$900.00

          10

$1,000.00

        >10

$1,000.00 + $200.00 for each Trading

                  Day late beyond 10

The Company shall pay any payments incurred under this subsection in immediately
available funds upon demand by the Holder; provided, however, that the Holder
making the demand may specify that the payment shall be made in shares of Common
Stock at the Conversion Price applicable to the date of such demand.  If the
payment is to be made in shares of Common Stock, such shares shall be considered
Conversion Shares under the Note, with the “Delivery Date” for such shares being
determined from the date of such demand. The demand for payment of such amount
in shares of Common Stock shall be considered a “Conversion Notice” under the
Note (but the delivery of such shares shall be in payment of the amount
contemplated by this subsection and not in payment of any principal or interest
on the Note).

(n)

Share Reserve. In order to allow for, as of the relevant date of determination,
the conversion of the entire Outstanding Balance into Common Stock and the
delivery of Warrant Shares necessary for a complete exercise of the Warrant, the
Company shall take all action necessary from time to time to reserve for the
benefit of the Holder the number of authorized but unissued shares of Common
Stock equal to the amount calculated as follows (such calculated amount is
referred to as the “Share Reserve”): (i) three times the higher of (A) the
Outstanding Balance divided by the Conversion Price, and (B) the Outstanding
Balance divided by the Market Price, plus (ii) three times the number of
Delivery Shares that would be required to be delivered to the Holder in order to
effect a complete exercise of the Warrant pursuant to the terms thereof. If at
any time the Share Reserve is less than required herein, the Company shall
immediately increase the Share Reserve in an amount equal to no less than the
deficiency. If the Company does not have sufficient authorized and unissued
shares of Common Stock available to increase the Share Reserve, the Company
shall call a special meeting of the

15

stockholders as soon as practicable after such occurrence, but in no event later
than thirty (30) calendar days after such occurrence, and hold such meeting as
soon as practicable thereafter, but in no event later than sixty (60) calendar
days after such occurrence, for the sole purpose of increasing the number of
authorized shares of Common Stock. The Company’s management shall recommend to
the Company’s stockholders to vote in favor of increasing the number of
authorized shares of Common Stock.  Management shall also vote all of its shares
in favor of increasing the number of authorized shares of Common Stock. The
Company shall use its best efforts to cause such additional shares of Common
Stock to be authorized so as to comply with the requirements of this subsection.
All calculations with respect to determining the Share Reserve shall be made
without regard to any limitations on conversion of the Note or exercise of the
Warrant.

(o)

DWAC Eligibility. At all times during which any portion of the Note remains
outstanding, or any portion of the Warrant remains unexercised, the Company
shall cause all DWAC Eligible Conditions to be satisfied.

(p)

Anti-Dilution Certification.  For so long as any portion of the Note remains
outstanding, the Company shall deliver to the Buyer, within two (2) Trading Days
of a written request by the Buyer, a certificate in the form attached hereto as
ANNEX VII (“Anti-Dilution Certificate”) whereby the Company shall notify the
Buyer of a Dilutive Issuance (as defined in the Note) or any other event(s) that
occurred since the later of the Closing Date and the delivery of the most recent
Anti-Dilution Certificate that triggers anti-dilution protection or other
adjustments to the applicable Conversion Price or Exercise Price (each an
“Anti-Dilution Event”), or, if no Anti-Dilution Event occurred, certifying to
the Buyer that no Anti-Dilution Event occurred since the Closing Date that has
not been disclosed on a previous Anti-Dilution Certificate.

(q)

Change in Nature of Business. The Company shall not directly or indirectly
engage in any material line of business substantially different from those lines
of business conducted by or publicly contemplated to be conducted by the Company
on the date of this Agreement or any business substantially related or
incidental thereto. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, modify its or their corporate
structure or purpose if such modification may have a material adverse effect on
any rights of, or benefits to, the Holder under any of the Transaction
Documents.

(r)

Maintenance of Properties, Etc. The Company shall maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its properties
which are necessary or useful in the proper conduct of its business, in good
working order and condition, ordinary wear and tear excepted, and comply, and
cause each of its Subsidiaries to comply, at all times with the provisions of
all leases to which it is a party as lessee or under which it occupies property,
so as to prevent any loss or forfeiture thereof or thereunder.

(s)

Maintenance of Insurance.  The Company shall maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to its
properties (including all real properties leased or owned by it) and business,
in such amounts and covering such risks as is required by any governmental
authority having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated.

(t)

Restriction on Redemption. The Company shall not, directly or indirectly, redeem
or repurchase its capital stock without the prior express written consent of the
Holder.

16

(u)

Restriction on Transfer of Assets. The Company shall not, and the Company shall
cause each of its Subsidiaries to not, directly or indirectly, sell, lease,
license, assign, transfer, convey or otherwise dispose of any assets or rights
of the Company or any Subsidiary owned or hereafter acquired, whether in a
single transaction or a series of related transactions, other than (i) sales,
leases, licenses, assignments, transfers, conveyances and other dispositions of
such assets or rights supported by fair market value consideration as determined
in the reasonable discretion of the board of directors or the Chief Executive
Officer of the Company or its Subsidiary, as the case may be, or (ii) sales of
inventory in the ordinary course of business.

(v)

Existence of Liens. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, allow, grant, or suffer to
exist any mortgage, lien, pledge, charge, security interest, tax lien, judgment,
or other encumbrance (collectively, “Liens”), upon the property or assets
(including accounts and contract rights) owned by the Company or any of its
Subsidiaries, other than Permitted Liens.

(w)

Intellectual Property.  The Company shall not, and the Company shall not permit
any of its Subsidiaries, directly or indirectly, to encumber or allow any Liens
on, any of its copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether
published or unpublished, any patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues,
extensions, and continuations-in-part of the same, trademarks, service marks
and, to the extent permitted under applicable law, any applications therefor,
whether registered or not, and the goodwill of the business of the Company and
its Subsidiaries connected with and symbolized thereby, know-how, operating
manuals, trade secret rights, rights to unpatented inventions, and any claims
for damage by way of any past, present, or future infringement of any of the
foregoing, other than Permitted Liens.

(x)

Transactions with Affiliates.  The Company shall not, nor shall it permit any of
its Subsidiaries to, enter into, renew, extend or be a party to, any transaction
or series of related transactions (including, without limitation, the purchase,
sale, lease, transfer or exchange of property or assets of any kind or the
rendering of services of any kind) with any Affiliate, except in the ordinary
course of business in a manner and to an extent consistent with past practice
and necessary or desirable for the prudent operation of its business, for fair
consideration and on terms no less favorable to it or its Subsidiaries than
would be obtainable in a comparable arm’s length transaction with a person that
is not an Affiliate thereof.

(y)

Certain Negative Covenants of the Company.  From and after the date hereof and
until all of the Company’s obligations hereunder and the Note are paid and
performed in full and the Warrant is exercised in full (or otherwise expired),
the Company shall not:

(i)

Enter into any transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate of the Company, or amend or modify any agreement related to any of the
foregoing, except on terms that are no less favorable, in any material respect,
than those obtainable from any person or entity who is not an Affiliate of the
Company.

(ii)

So long as the Note is outstanding, the Company shall not, and the Company shall
not permit any of its Subsidiaries to, directly or indirectly, pay cash
dividends or distributions on any equity securities of the Company or of its
Subsidiaries.

(z)

Rule 144 Opinion. Either counsel to the Company has delivered to the Buyer an
opinion letter, or the Company shall accept, in its reasonable discretion, an
opinion letter

17

prepared by legal counsel of Buyer’s choosing (in either case, the “Opinion
Letter”), stating that (i) the Company is not a shell company or the type of
“issuer” defined in Rule 144(i)(1) under the 1933 Act (a “Shell Company”), (ii)
the Company has never been a Shell Company, (iii) the Company is in compliance
with all filing requirements under Rule 144 as of the date hereof, and (iv) the
Shares may be sold by the Buyer without any restrictions pursuant to Rule 144,
so long as the applicable holding period specified by Rule 144 is satisfied,
and, as applicable, the Company shall give instructions to its Transfer Agent to
issue shares of Common Stock upon conversion of the Note based upon or otherwise
consistent with such Opinion Letter.

(aa)

Transfer Agent Reserve.  From and after the date hereof and until all of the
Company’s obligations hereunder and the Note are paid and performed in full and
the Warrant is exercised in full (or otherwise expired):

(i)

the Company shall at all times require its Transfer Agent to establish a reserve
of shares of authorized but unissued Common Stock in an amount not less than the
Share Reserve or such other amount as the Holder may authorize from time to time
in writing (the “Transfer Agent Reserve”);

(ii)

the Company shall require its Transfer Agent to hold the Transfer Agent Reserve
for the exclusive benefit of the Holder and shall authorize the Transfer Agent
to issue the shares of Common Stock held in the Transfer Agent Reserve to the
Holder only (subject to subsection (iii) immediately below);

(iii)

the Company shall cause the Transfer Agent to agree that when the Transfer Agent
issues shares of Common Stock to the Holder pursuant to the Transaction
Documents, the Transfer Agent will not issue such shares from the Transfer Agent
Reserve, unless such issuance is pre-approved in writing by the Holder;

(iv)

the Company shall cause the Transfer Agent to agree that it will not reduce the
Transfer Agent Reserve under any circumstances, unless such reduction is
pre-approved in writing by the Holder;

(v)

upon Holder’s written request, but no less frequently than at the end of each
calendar quarter, the Company shall increase (or decrease if authorized by
Holder in writing) the Transfer Agent Reserve as of such time to equal the Share
Reserve (each a “Transfer Agent Reserve Calculation”), and if additional shares
of Common Stock are required to be added to the Transfer Agent Reserve pursuant
to subsection (i) above, the Company shall immediately give written instructions
to the Transfer Agent to cause the Transfer Agent to set aside and increase the
Transfer Agent Reserve by the necessary number of shares of Common Stock; and

(vi)

no less frequently than quarterly, the Company shall certify in writing to the
Holder (A) the correctness of the Company’s Transfer Agent Reserve Calculation
and (B) that either (1) the Company has instructed the Transfer Agent to
increase the Transfer Agent Reserve in accordance with the terms hereof, or (2)
there was no need to increase the Transfer Agent Reserve, in either case
consistent with the Transfer Agent Reserve Calculation.    

For the avoidance of any doubt, the requirements of this Section 5.2 are
material to this Agreement and any violation or breach thereof by the Company
shall constitute a default under this Agreement.

18

6.

TRANSFER AGENT.

6.1.

Instructions. The Company covenants that, with respect to the Securities, other
than the stop transfer instructions to give effect to Section 5.1(a) hereof, the
Company will give the Transfer Agent no instructions inconsistent with the
Transfer Agent Letter. Except as required by Sections 5.1(a) and 5.1(b) of this
Agreement and the Transfer Agent Letter, the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents.  Nothing in this
subsection shall affect in any way the Buyer’s obligations and agreement to
comply with all applicable securities laws upon resale of the Securities.  If
the Buyer provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of a resale by the Buyer of any of
the Securities in accordance with clause (i)(B) of Section 5.1(a) of this
Agreement is not required under the 1933 Act or upon request from a Holder while
an applicable Registration Statement is effective, the Company shall (except as
provided in clause (ii) of Section 5.1(a) of this Agreement) permit the transfer
of the Securities and, in the case of the Conversion Shares or the Warrant
Shares, as may be applicable, use its best efforts to cause the Transfer Agent
to promptly deliver to the Holder or the Holder’s broker, as applicable, such
Conversion Shares or Warrant Shares by way of the DWAC system.

6.2.

DWAC Eligible. The Company specifically covenants that, as of the Closing Date,
all DWAC Eligible Conditions are satisfied. The Company shall notify the Buyer
in writing if the Company at any time while the Holder holds Securities becomes
aware of any plans of the Transfer Agent to voluntarily or involuntarily
terminate its participation in the DTC/FAST Program. While Holder holds
Securities, the Company shall at all times after the Closing Date maintain a
transfer agent which participates in the DTC/FAST Program, and the Company shall
not appoint any transfer agent which does not participate in the DTC/FAST
Program.  Nevertheless, if at any time the Company receives a Conversion Notice
or Notice of Exercise and all DWAC Eligible Conditions are not then satisfied
(including without limitation because the Transfer Agent is not then
participating in the DTC/FAST Program or the Conversion Shares or Warrant Shares
are not otherwise transferable via the DWAC system), then the Company shall
instruct the Transfer Agent to immediately issue one or more certificates for
Common Stock without legend in such name and in such denominations as specified
by the Holder and consistent with the terms and conditions of the Transaction
Documents.

6.3.

Transfer Fees. The Company shall assume any fees or charges of the Transfer
Agent or Company Counsel regarding (a) the removal of a legend or stop transfer
instructions with respect to the Securities, and (b) the issuance of
certificates or DWAC registration to or in the name of the Holder or the
Holder’s designee or to a transferee as contemplated by an effective
Registration Statement.

7.

DELIVERY OF SHARES.

7.1.

Delay in Issuing Shares. The Company understands that a delay in the delivery of
Conversion Shares, whether on conversion of all or any portion of the Note
and/or in payment of accrued interest, or a delay in the delivery of Warrant
Shares, whether on exercise of all or any portion of the Warrant, beyond the
relevant Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, in addition to any other available
remedies in the Transaction Documents or at law or in equity, the Company shall
pay late payments to the Holder for late delivery of the Conversion Shares or
Warrant Shares in accordance with the following schedule (where, for purposes of
this subsection, “No. Trading Days Late” is defined as the number of Trading
Days beyond three (3) Trading Days after the applicable Delivery Date):

Late Payment for Each $10,000.00

No. Trading Days Late

of Principal or Interest Being Converted under the Note

19

or Aggregate Exercise Price under the Warrant

      

1

$100.00

2

$200.00

3

$300.00

4

$400.00

5

$500.00

6

$600.00

7

$700.00

8

$800.00

9

$900.00

10

$1,000.00

>10

$1,000.00 + $200.00 for each Trading Day Late beyond 10

As elected by the Holder, the amount of any payments incurred under this
Section 7.1 shall either be automatically added to the principal balance of the
Note (without the need to provide any notice to the Company) or otherwise paid
by the Company in immediately available funds upon demand. Nothing herein shall
limit the Holder’s right to pursue additional damages for the Company’s failure
to issue and deliver the Conversion Shares or Warrant Shares, as applicable, to
the Holder within a reasonable time.  The Company acknowledges that if the
Company fails to effect delivery of the Conversion Shares or the Warrant Shares
as and when required, the Holder may revoke the Conversion Notice or Notice of
Exercise pursuant to the terms set forth in the Note or the Warrant, as
applicable.  Notwithstanding any such revocation, the charges described in this
Section 7.1 which have accrued through the date of such revocation shall remain
due and owing to the Holder.

7.2.

Buy-In Adjustment. If, by the third Trading Day after the relevant Delivery
Date, the Company fails for any reason to deliver the Conversion Shares, but at
any time after the Delivery Date, the Holder purchases, in an arm’s-length open
market transaction or otherwise, shares of Common Stock (the “Covering Shares”)
in order to make delivery in satisfaction of a sale of Common Stock by the
Holder (the “Sold Shares”), which delivery such Holder anticipated to make using
the shares of Common Stock to be issued upon such conversion or exercise (a
“Buy-In”), the Holder shall have the right to require the Company to pay to the
Holder, in addition to and not in lieu of the amounts contemplated in other
provisions of the Transaction Documents, including, but not limited to, the
provisions of the immediately preceding Section 7.1, the Buy-In Adjustment
Amount (as defined below).  The “Buy-In Adjustment Amount” is the amount equal
to the number of Sold Shares multiplied by the excess, if any, of (i) the
Holder’s total purchase price per share (including brokerage commissions, if
any) for the Covering Shares over (ii) the net proceeds per share (after
brokerage commissions, if any) received by the Holder from the sale of the Sold
Shares.  The Company shall pay the Buy-In Adjustment Amount to the Holder in
immediately available funds immediately upon demand by the Holder.  By way of
illustration and not in limitation of the foregoing, if the Holder purchases
shares of Common Stock having a total purchase price (including brokerage
commissions) of $11,000.00 to cover a Buy-In with respect to shares of Common
Stock the Holder sold for net proceeds of $10,000.00, the Buy-In Adjustment
Amount which Company will be required to pay to the Holder will be $1,000.00.

7.3.

Bankruptcy. The Holder of the Note shall be entitled to exercise the Holder’s
conversion privilege with respect to such Note, and exercise privilege with
respect to the Warrant, notwithstanding the commencement of any case under 11
U.S.C. §101 et seq. (the “Bankruptcy Code”).  In the event the Company is a
debtor under the Bankruptcy Code, the Company hereby waives, to the fullest
extent permitted, any rights to relief it may have under 11 U.S.C. §362 in
respect of such Holder’s exercise privileges.  The Company hereby waives, to the
fullest extent permitted, any rights to relief it

20

may have under 11 U.S.C. §362 in respect of the conversion of the Note or
exercise of the Warrant. The Company agrees, without cost or expense to such
Holder, to take or to consent to any and all action necessary to effectuate
relief under 11 U.S.C. §362.

8.

CLOSING DATE.

8.1.

The Closing Date shall occur on the date which is the first Trading Day after
each of the conditions contemplated by Sections 9 and 10 hereof shall have
either been satisfied or been waived by the party in whose favor such conditions
run.

8.2.

Closing of the purchase and sale of the Securities, which the parties anticipate
shall occur concurrently with the execution of this Agreement, shall occur at
the offices of the Buyer and shall take place no later than 3:00 P.M., Eastern
Time, or on such day or such other time as is mutually agreed upon by the
Company and the Buyer.  

9.

CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. The Company’s obligation to sell
the Securities to the Buyer pursuant to this Agreement on the Closing Date is
conditioned upon and subject to the fulfillment, on or prior to the Closing
Date, of all of the following conditions, any of which may be waived in whole or
in part by the Company:

9.1.

The execution and delivery of this Agreement and, as applicable, the other
Transaction Documents by the Buyer.

9.2.

Delivery by the Buyer of good funds as payment in full of an amount equal to the
Purchase Price in accordance with this Agreement.

9.3.

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

9.4.

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

10.

CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE. The Buyer’s obligation to
purchase the Securities from the Company pursuant to this Agreement on the
Closing Date is conditioned upon and subject to the fulfillment, on or prior to
the Closing Date, of all of the following conditions, any of which may be waived
in whole or in part by the Buyer:

10.1.

The execution and delivery of this Agreement, the Transfer Agent Letter, the
Secretary’s Certificate, the Share Issuance Resolution, and, as applicable, the
other Transaction Documents by the Company.

10.2.

The delivery by the Company to the Buyer of the Note and the Warrant, each in
original form, duly executed by the Company, in accordance with this Agreement.

10.3.

On the Closing Date, each of the Transaction Documents executed by the Company
on or before such date shall be in full force and effect and the Company shall
not be in default thereunder.

21

10.4.

The Company shall have authorized and reserved for the purpose of issuance under
the Transaction Documents shares of Common Stock in an amount no less than the
Share Reserve as of the Closing Date.

10.5.

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

10.6.

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

10.7.

From and after the date hereof up to and including the Closing Date, each of the
following conditions will remain in effect: (a) the trading of the Common Stock
shall not have been suspended by the SEC or on the Principal Trading Market; (b)
trading in securities generally on the Principal Trading Market shall not have
been suspended or limited; (c) no minimum prices shall have been established for
securities traded on the Principal Trading Market; (d) there shall not have been
any material adverse change in any financial market; and (e) there shall not
have occurred any Material Adverse Effect.

10.8.

Except for any notices required or permitted to be filed after the Closing Date
with certain federal and state securities commissions, the Company shall have
obtained (a) all governmental approvals required in connection with the lawful
sale and issuance of the Securities, and (b) all third party approvals required
to be obtained by the Company in connection with the execution and delivery of
the Transaction Documents by the Company or the performance of the Company’s
obligations thereunder.

10.9.

All corporate and other proceedings in connection with the transactions
contemplated at the Closing and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Buyer.

11.

INDEMNIFICATION.

11.1.

The Company agrees to defend, indemnify and forever hold harmless the Buyer and
the Buyer’s stockholders, directors, officers, managers, members, partners,
Affiliates, employees, attorneys, and agents, and each Buyer Control Person
(collectively, the “Buyer Parties”) from and against any losses, claims,
damages, liabilities or expenses incurred (collectively, “Damages”), joint or
several, and any action in respect thereof to which the Buyer or any of the
other Buyer Parties becomes subject, resulting from, arising out of or relating
to any misrepresentation, breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of the Company contained in this
Agreement or any of the other Transaction Documents, as such Damages are
incurred. The Buyer Parties with the right to be indemnified under this
subsection (the “Indemnified Parties”) shall have the right to defend any such
action or proceeding with attorneys of their own selection, and the Company
shall be solely responsible for all costs and expenses related thereto.  If the
Indemnified Parties opt not to retain their own counsel, the Company shall
defend any such action or proceeding with attorneys of its choosing at its sole
cost and expense, provided that such attorneys have been pre-approved by the
Indemnified Parties, which approval shall not be unreasonably withheld, and
provided further that the Company may not settle any such action or proceeding
without first obtaining the written consent of the Indemnified Parties.

22

11.2.

The indemnity contained in this Agreement shall be in addition to (a) any cause
of action or similar rights of the Buyer Parties against the Company or others,
and (b) any other liabilities the Company may be subject to.

12.

SPECIFIC PERFORMANCE.  The Company and the Buyer acknowledge and agree that
irreparable damage would occur in the event that any provision of this Agreement
or any of the other Transaction Documents were not performed in accordance with
its specific terms or were otherwise breached.  It is accordingly agreed that
the parties (including any Holder) shall be entitled to an injunction or
injunctions, without the necessity to post a bond (except as specified below),
to prevent or cure breaches of the provisions of this Agreement or any of the
other Transaction Documents and to enforce specifically the terms and provisions
hereof or thereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity; provided, however, that the Company, upon
receipt of a Conversion Notice or a Notice of Exercise, (a) may not fail or
refuse to deliver shares or certificates representing shares of Common Stock in
accordance with the terms and conditions of the Transaction Documents, or (b) if
there is a claim for a breach by the Company of any other provision of this
Agreement or any of the other Transaction Documents, the Company shall not raise
as a legal defense to performance any claim that the Holder or anyone associated
or affiliated with the Holder has violated any provision hereof or any of the
other Transaction Documents or has engaged in any violation of law or any other
claim or defense, in either case, unless the Company has first posted a bond for
one hundred fifty percent (150%) of the principal amount and, if relevant, then
obtained a court order specifically directing it not to deliver such shares or
certificates to the Holder. The proceeds of such bond shall be payable to the
Holder to the extent that the Holder obtains judgment or the Holder’s defense is
recognized.  Such bond shall remain in effect until the completion of the
relevant proceeding and, if the Holder appeals therefrom, until all such appeals
are exhausted.  This provision is deemed incorporated by reference into each of
the Transaction Documents as if set forth therein in full.

13.

OWNERSHIP LIMITATION. Notwithstanding anything to the contrary contained in this
Agreement or the other Transaction Documents, if at any time the Holder shall or
would be issued shares of Common Stock under any of the Transaction Documents,
but such issuance would cause the Holder (together with its Affiliates) to
beneficially own a number of shares exceeding the Maximum Percentage (as defined
in the Note), then the Company must not issue to the Holder the excess Ownership
Limitation Shares (as defined in the Note). For purposes of this Section,
beneficial ownership of Common Stock will be determined under the 1934 Act. The
Company will reserve the Ownership Limitation Shares for the exclusive benefit
of the Holder. From time to time, the Holder may notify the Company in writing
of the number of Ownership Limitation Shares that may be issued to the Holder
without causing the Holder to exceed the Maximum Percentage. Upon receipt of
such notice, the Company shall be unconditionally obligated to immediately issue
such designated shares to the Holder, with a corresponding reduction in the
number of the Ownership Limitation Shares. By written notice to the Company, the
Holder may increase, decrease or waive the Maximum Percentage as to itself but
any such waiver will not be effective until the 61st day after delivery thereof.
The foregoing 61-day notice requirement is enforceable, unconditional and
non-waivable and shall apply to all Affiliates and assigns of the Holder.
Additionally, if at any time after the Closing the Market Capitalization of the
Common Stock (as defined in the Note) falls below $5,000,000, then from that
point on, for so long as the Holder or the Holder’s Affiliate owns Common Stock
or rights to acquire Common Stock, the Company shall post (or cause to be
posted), no less frequently than every thirty (30) calendar days, the
then-current number of issued and outstanding shares of its capital stock to the
Company’s web page located at OTCmarkets.com (or such other web page approved by
the Holder). The Company understands that its failure to so post its shares
outstanding could result in economic loss to the Holder.  As compensation to the
Holder for such loss, in addition to any other available remedies in the
Transaction Documents or at law or in equity, the Company shall pay the Holder a
late fee of $500.00 per calendar day for each calendar day that the Company
fails to comply

23

with the foregoing obligation to post its shares outstanding.  As elected by the
Holder, the amount of any late fees incurred under this Section shall either be
automatically added to the principal balance of the Note (without the need to
provide any notice to the Company) or otherwise paid by the Company in
immediately available funds upon demand.

14.

MISCELLANEOUS.

14.1.

Governing Law; Venue. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Utah for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws.  Each party hereto hereby (a) consents to and
expressly submits to the exclusive personal jurisdiction of any state or federal
court sitting in Salt Lake County, Utah in connection with any dispute or
proceeding arising out of or relating to this Agreement, (b) agrees that all
claims in respect of any such dispute or proceeding may only be heard and
determined in any such court, (c) expressly submits to the venue of any such
court for the purposes hereof, and (d) waives any claim of improper venue and
any claim or objection that such courts are an inconvenient forum or any other
claim or objection to the bringing of any such proceeding in such jurisdictions
or to any claim that such venue of the suit, action or proceeding is improper.
Each party hereto hereby irrevocably consents to the service of process of any
of the aforementioned courts in any such proceeding by the mailing of copies
thereof by reputable overnight courier (e.g., FedEx) or certified mail, postage
prepaid, to such party’s address as set forth herein, such service to become
effective ten (10) calendar days after such mailing.

14.2.

Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Except as otherwise expressly provided herein, no Person other
than the parties hereto and their successors and permitted assigns is intended
to be a beneficiary of this Agreement.

14.3.

Pronouns.  All pronouns and any variations thereof in this Agreement refer to
the masculine, feminine or neuter, singular or plural, as the context may permit
or require.

14.4.

Counterparts.  This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument. The parties hereto confirm that any electronic copy
of another party’s executed counterpart of this Agreement (or such party’s
signature page thereof) will be deemed to be an executed original thereof.

14.5.

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

14.6.

Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such provision shall be modified to achieve the objective of the
parties to the fullest extent permitted and such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any other
jurisdiction.

14.7.

Entire Agreement. This Agreement, together with the other Transaction Documents,
constitutes and contains the entire agreement and understanding between the
parties hereto, and supersedes all prior oral or written agreements and
understandings between Buyer, Company, their Affiliates and Persons acting on
their behalf with respect to the matters discussed herein and therein, and,
except as specifically set forth herein or therein, neither Company nor Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters.

24

14.8.

Amendment. Any amendment, supplement or modification of or to any provision of
this Agreement, shall be effective only if it is made or given by an instrument
in writing (excluding any email message) and signed by Company and Buyer.

14.9.

No Waiver. No forbearance, failure or delay on the part of a party hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver of any provision of this Agreement
shall be effective (a) only if it is made or given in writing (including an
email message) and (b) only in the specific instance and for the specific
purpose for which made or given.

14.10.

Currency. All dollar amounts referred to or contemplated by this Agreement or
any other Transaction Documents shall be deemed to refer to US Dollars, unless
otherwise explicitly stated to the contrary.

14.11.

Assignment. Notwithstanding anything to the contrary herein, the rights,
interests or obligations of the Company hereunder may not be assigned, by
operation of law or otherwise, in whole or in part, by the Company without the
prior written consent of the Buyer, which consent may be withheld at the sole
discretion of the Buyer. This Agreement or any of the severable rights and
obligations inuring to the benefit of or to be performed by Buyer hereunder may
be assigned by Buyer to a third party, including the Buyer’s financing sources,
in whole or in part, without the need to obtain the Company’s consent thereto.

14.12.

Advice of Counsel. In connection with the preparation of this Agreement and all
other Transaction Documents, the Company, for itself and on behalf of its
stockholders, officers, agents, and representatives acknowledges and agrees that
Buyer’s Counsel prepared initial drafts of this Agreement and all of the other
Transaction Documents and acted as legal counsel to the Buyer only.  The
Company, for itself and on behalf of its stockholders, officers, agents, and
representatives, (a) hereby acknowledges that he/she/it has been, and hereby is,
advised to seek legal counsel and to review this Agreement and all of the other
Transaction Documents with legal counsel of his/her/its choice, and (b) either
has sought such legal counsel or hereby waives the right to do so.  

14.13.

No Strict Construction. The language used in this Agreement is the language
chosen mutually by the parties hereto and no doctrine of construction shall be
applied for or against any party.

14.14.

Attorney’s Fees. In the event of any action at law or in equity to enforce or
interpret the terms of this Agreement or any of the other Transaction Documents,
the parties agree that the party who is awarded the most money shall be deemed
the prevailing party for all purposes and shall therefore be entitled to an
additional award of the full amount of the attorneys’ fees and expenses paid by
such prevailing party in connection with the litigation and/or dispute without
reduction or apportionment based upon the individual claims or defenses giving
rise to the fees and expenses.  Nothing herein shall restrict or impair a
court’s power to award fees and expenses for frivolous or bad faith pleading.

14.15.

Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND
ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE
RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY.  THIS WAIVER EXTENDS TO
ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY

25

APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO
ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S
RIGHT TO DEMAND TRIAL BY JURY.

14.16.

Rights and Remedies Cumulative.  All rights, remedies, and powers conferred in
this Agreement and the Transaction Documents are cumulative and not exclusive of
any other rights or remedies, and shall be in addition to every other right,
power, and remedy that Buyer may have, whether specifically granted in this
Agreement or any other Transaction Document, or existing at law, in equity, or
by statute, and any and all such rights and remedies may be exercised from time
to time and as often and in such order as the Buyer may deem expedient.

14.17.

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.

14.18.

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

(a)

the date delivered, if delivered by personal delivery as against written receipt
therefor or by email to an executive officer, or by facsimile (with successful
transmission confirmation),

(b)

the fifth Trading Day after deposit, postage prepaid, in the United States
Postal Service (with USPS tracking or by certified mail), or

(c)

the second Trading Day after mailing by domestic or international express
courier (e.g., FedEx), with delivery costs and fees prepaid,

in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
five (5) Trading Days’ advance written notice similarly given to each of the
other parties hereto):

If to the Company:

Competitive Technologies, Inc.

Attn: Carl D. O'Connell

1375 Kings Highway East, Suite 400

Fairfield, Connecticut 06824

with a copy to (which shall not constitute notice):

Cutler Law Group, P.C.

Attn:  M. Richard Cutler

3355 W Alabama, Suite 1150

Houston, TX 77098

26

If to the Buyer:

Tonaquint, Inc.

Attn: John M. Fife

303 East Wacker Drive, Suite 1200

Chicago, Illinois  60601

with a copy to (which shall not constitute notice):

Hansen Black Anderson PLLC

Attn: Jonathan K. Hansen

2940 West Maple Loop Drive, Suite 103

Lehi, Utah 84043

Telephone: 801.922.5000

Email: jhansen@HBAfirm.com

14.19.

Cross Default. Any Event of Default (as defined in the Note) shall be deemed a
default under this Agreement. Upon such a default of this Agreement by the
Company, the Buyer shall have all those rights and remedies available at law or
in equity, including without limitation those remedies set forth in the Note.

14.20.

Expenses. Except as provided in Section 14.14, and except for the Transaction
Expense Amount required to be paid by the Company to the Buyer pursuant to
Section 2.3, the Company and the Buyer shall be responsible for paying such
party’s own fees and expenses (including legal expenses) incurred in connection
with the preparation and negotiation of this Agreement and the other Transaction
Documents and the closing of the transactions contemplated hereby and thereby.

14.21.

Replacement of the Note. Subject to any restrictions on or conditions to
transfer set forth in the Note, the Holder of the Note, at such Holder’s option,
may in person or by duly authorized attorney surrender the same for exchange at
the Company’s principal corporate office, and promptly thereafter and at the
Company’s expense, except as provided below, receive in exchange therefor one or
more new convertible promissory note(s), each in the principal amount requested
by such Holder, dated the date to which interest shall have been paid on the
Note so surrendered or, if no interest shall have yet been so paid, dated the
date of the Note so surrendered and registered in the name of such person or
persons as shall have been designated in writing by such Holder or such Holder’s
attorney for the same principal amount as the then unpaid principal amount of
the Note so surrendered. As applicable, upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of the Note and (a) in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it; or (b) in the case of
mutilation, upon surrender thereof, the Company, at its expense, will execute
and deliver in lieu thereof a new convertible promissory note executed in the
same manner as the Note being replaced, in the same principal amount as the
unpaid principal amount of such Note and dated the date to which interest shall
have been paid on the Note or, if no interest shall have yet been so paid, dated
the date of the Note.

14.22.

Time of the Essence. Time is expressly made of the essence of each and every
provision of this Agreement and the other Transaction Documents.

15.

SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company’s and the
Buyer’s covenants, agreements, representations and warranties contained herein
shall survive the execution and delivery of this Agreement and the other
Transaction Documents and the

27

Closing hereunder for the maximum time allowed by applicable law, and shall
inure to the benefit of the Buyer and the Company and their respective
successors and permitted assigns.

[Remainder of the page intentionally left blank; signature page to follow]

28

IN WITNESS WHEREOF, each of the undersigned parties represents that the
foregoing statements made by such party above are true and correct and that such
party has caused this Agreement to be duly executed (if an entity, on such
party’s behalf by one of its officers thereunto duly authorized) as of the date
first above written.

PURCHASE PRICE:

$100,000.00

THE BUYER:

TONAQUINT, INC.

By: _________________________

       John M. Fife, President

THE COMPANY:

COMPETITIVE TECHNOLOGIES, INC.

By:

      Johnnie Johnson, Chief Financial Officer