Exhibit 10.38
                                 -------------


                                ROYALTY AGREEMENT

         This ROYALTY AGREEMENT ("Agreement") is entered into as of this 1st day
of  March,  2002,  by and  between  Category  5  Technologies,  Inc.,  a  Nevada
corporation  (the "Company") and the individuals set forth on the signature page
hereto ("Sellers").

         WHEREAS,  the Company owns software  that enables the automated  design
and creation of Web sites utilizing Macromedia's Flash technology ("FlashAlly").
Further, the Company has the rights to market said technology exclusively in the
network   marketing,    multi-level   marketing,    direct   selling,   seminar,
telemarketing, and infomercial arenas; and

         WHEREAS,  C5 has agreed to purchase  from  Sellers,  and  Sellers  have
agreed to sell to C5, all right,  title and interest in Flash Ally,  pursuant to
that  certain LLC  Membership  Exchange  Agreement  of even date  herewith  (the
"Purchase Agreement"); and

         WHEREAS,  it is a condition  to the  consummation  of the  transactions
contemplated  by the  Purchase  Agreement  that C5 the  Sellers  enter into this
Agreement.

         NOW, THEREFORE, for good and valuable consideration,  the parties agree
as follows:

         1. Royalty.  C5 hereby agrees to pay to Sellers a cash royalty from the
proceeds of the sale or license of  FlashAlly  software in  existence  as of the
date hereof  ("FlashAlly"), in the following amounts and on the following terms:

              (a) 75% of the net  income  generated  from the sale or license of
         FlashAlly  to or through  any of the  entities  set forth on Schedule I
         attached hereto (the "Existing Leads"),  for a period of not fewer than
         12 months from the Closing.

              (b) If, at any time after 12 months,  the 15-day  average  closing
         price for Category 5 Common  Stock  equals or exceeds  $5.00 per share,
         then the royalty shall decrease to 50% of the net income generated from
         sales of FlashAlly to or through the Existing Leads.

              (c) If, at any time after 12 months,  the 15 day  average  closing
         price for Category 5 Common  Stock equals or exceeds  $10.00 per share,
         then the royalty shall decrease to 25% of the net income generated from
         sales of FlashAlly to or through the Existing Leads.

              (d) If, at any time after 12 months,  the 15-day  average  closing
         price for Category 5 Common  Stock equals or exceeds  $15.00 per share,
         then the royalty shall terminate.


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              (e) Commencing at Closing, and continuing until the earlier of one
         year (12 months) from Closing or until the 15-day average closing price
         for  Category  5 Common  Stock  equals or  exceeds  $10.00  per  share,
         Category 5 shall pay to the  shareholders of Flash a royalty of $15 per
         person per year for sales of FlashAlly  through Category 5 or affiliate
         seminars.

         2.  Definitions.  The term "net income" as used in this agreement shall
mean the  revenue  received  by C5 from  sales  and/or  licensing  of  FlashAlly
software,  less the cost of goods sold, the selling,  general and administrative
costs  involved  with the  sale,  delivery  and  ongoing  support  of  FlashAlly
software,  the tax payable on profits  from such sales,  and any other  expenses
associated with the sale, delivery and ongoing support of FlashAlly software.

         3. Payments.  Payments under this Agreement shall be made to Sellers no
later than thirty (30) days following receipt of 'funds by C5.

         4. Binding  Effect.  This Agreement  shall be binding upon C5, Sellers,
and their successors and assigns.

         5. Arbitration.  Any dispute or controversy  arising out of or relating
to any  interpretation,  construction,  performance or breach of this Agreement,
shall be settled by arbitration  to be held Salt Lake City,  Utah, in accordance
with the rules  then in  effect of the  American  Arbitration  Association.  The
arbitrator may grant injunctions or other relief in such dispute or controversy.
The decision of the  arbitrator  shall be final,  conclusive  and binding on the
parties to the arbitration. Judgment may be entered on the arbitrator's decision
in any court having jurisdiction;  provided,  however, that the arbitrator shall
not have the power to alter or amend this Agreement.

         6. Governing Law. This Agreement shall be construed in accordance with,
and all actions  arising under or in connection  therewith shall be governed by,
the  internal  laws of the State of Utah  (without  reference to conflict of law
principles).

         7.  Attorneys'  Fees.  Should  either I or the  Company,  or any  heir,
personal  representative,  successor or permitted assign of either party, resort
to legal proceedings to enforce this Agreement, the prevailing party (as defined
in Utah statutory law) in such legal proceeding Mall be awarded,  in addition to
such other  relief as may be  granted,  attorneys'  fees and costs  incurred  in
connection with such proceeding.

         8. Severability.  If any term, provision, covenant or condition of this
Agreement, or Me application thereof to any person, place or circumstance, shall
be held to be invalid,  unenforceable  or void,  the remainder of this Agreement
and such term,  provision,  covenant or condition  as applied to other  persons,
places and circumstances shall remain in full force and effect.

         9.  Notices.  Any  notice,  request,  consent or  approval  required or
permitted  to be  given  under  this  Agreement  or  pursuant  to law  shall  be


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sufficient if it is in writing,  and if and when it is hand delivered or sent by
regular  mail with  postage  prepaid,  to the address set forth in the  Purchase
Agreement.

         10.  Assignment.  This  Agreement  may  not  be  assigned  without  the
Company's prior written consent.



         IN WITNESS WHEREOF,  the undersigned have executed this Agreement as of
the date set forth above.

  CATEGORY 5 TECHNOLOGIES, INC.


  By:
     ---------------------

  Name:___________________

  Title:____________________


  SELLERS:


  -------------------------
  Name:



  -------------------------
  Name:




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                                   SCHEDULE I

                                 Existing Leads


    1. The Campbell Group (MLM)
    ---------------------------

    2. Ninnon Direct (Japan and Pacific Rim)
    ----------------------------------------

    3. The Mulligan Groun (Telesales)
    ---------------------------------




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