Document:

EXHIBIT 10.11

                     INVESTOR REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 21,
2004, by and among PRODUCTIVITY TECHNOLOGIES CORPORATION, a Delaware corporation
(the  "Company"),  and  the  undersigned  investors  (each,  an  "Investor"  and
collectively, the "Investors").

     WHEREAS:

     A. In connection  with the Securities  Purchase  Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"),  the
Company  has  agreed,  upon the  terms  and  subject  to the  conditions  of the
Securities  Purchase  Agreement,  to  issue  and sell to the  Investors  secured
convertible debentures (the "Convertible Debentures") which shall be convertible
into that number of shares of the Company's common stock, par value US$0.001 per
share (the "Common  Stock"),  pursuant to the terms of the  Securities  Purchase
Agreement for an aggregate  purchase  price of up to Five Hundred Sixty Thousand
U.S. Dollars  (US$560,000).  Capitalized terms not defined herein shall have the
meaning ascribed to them in the Securities Purchase Agreement.

     B. To induce the Investors to execute and deliver the  Securities  Purchase
Agreement,  the Company has agreed to provide certain  registration rights under
the  Securities  Act of 1933, as amended,  and the rules and  regulations  there
under, or any similar  successor  statute  (collectively,  the "1933 Act"),  and
applicable state securities laws.

     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 Company  and the  Investors
hereby agree as follows:

     1. DEFINITIONS.

     As used in this  Agreement,  the  following  terms shall have the following
meanings:

          (a) "Person"  means a corporation,  a limited  liability  company,  an
     association, a partnership,  an organization,  a business, an individual, a
     governmental or political subdivision thereof or a governmental agency.

          (b)  "Register,"   "registered,"   and   "registration"   refer  to  a
     registration  effected  by  preparing  and filing one or more  Registration
     Statements (as defined below) in compliance  with the 1933 Act and pursuant
     to Rule 415 under the 1933 Act or any successor rule providing for offering
     securities  on  a  continuous  or  delayed  basis  ("Rule  415"),  and  the
     declaration or ordering of effectiveness of such Registration  Statement(s)
     by the United States Securities and Exchange SEC (the "SEC").

          (c) "Registrable Securities" means the shares of Common Stock issuable
     to Investors upon conversion of the Convertible  Debentures pursuant to the
     Securities  Purchase

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     Agreement and the Investor's Shares, as this term is defined in the Standby
     Equity Distribution Agreement dated the date hereof.

          (d) "Registration  Statement" means a registration statement under the
     1933 Act which covers the Registrable Securities.

     2. REGISTRATION.

          (a) Subject to the terms and conditions of this Agreement, the Company
     shall prepare and file, no later than thirty (30) days from the date hereof
     (the "Scheduled Filing Deadline"), with the SEC a registration statement on
     Form S-1 or SB-2 (or, if the Company is then  eligible,  on Form S-3) under
     the 1933 Act (the "Initial  Registration  Statement") for the  registration
     for the  resale  by all  Investors  who  purchased  Convertible  Debentures
     pursuant to the Securities  Purchase  Agreement  _________ shares of Common
     Stock to be issued upon  conversion of the  Convertible  Debentures  issued
     pursuant to the Securities  Purchase  Agreement and the Investor's  Shares.
     The Company  shall cause the  Registration  Statement  to remain  effective
     until all of the Registrable Securities have been sold. Prior to the filing
     of the  Registration  Statement  with the SEC, the Company  shall furnish a
     copy of the Initial  Registration  Statement  to the  Investors  and Butler
     Gonzalez  LLP for their  review  and  comment.  The  Investors  and  Butler
     Gonzalez LLP shall furnish comments on the Initial  Registration  Statement
     to the Company within  twenty-four  (24) hours of the receipt  thereof from
     the Company.

          (b) Effectiveness of the Initial Registration  Statement.  The Company
     shall use its best efforts (i) to have the Initial  Registration  Statement
     declared effective by the SEC no later than ninety (90) days after the date
     hereof (the  "Scheduled  Effective  Deadline")  and (ii) to insure that the
     Initial Registration  Statement and any subsequent  Registration  Statement
     remains in effect until all of the  Registrable  Securities have been sold,
     subject to the terms and conditions of this Agreement.

          (c)  Failure  to  File or  Obtain  Effectiveness  of the  Registration
     Statement.  In the event  the  Registration  Statement  is not filed by the
     Scheduled  Filing  Deadline or is not  declared  effective by the SEC on or
     before the Scheduled Effective Date, or if after the Registration Statement
     has been  declared  effective by the SEC,  sales cannot be made pursuant to
     the  Registration  Statement  (whether  because  of a  failure  to keep the
     Registration  Statement effective,  failure to disclose such information as
     is necessary for sales to be made pursuant to the  Registration  Statement,
     failure to register  sufficient shares of Common Stock or otherwise then as
     partial relief for the damages to any holder of  Registrable  Securities by
     reason  of any  such  delay  in or  reduction  of its  ability  to sell the
     underlying  shares of Common Stock (which  remedy shall not be exclusive of
     any other remedies at law or in equity), the Company will pay as liquidated
     damages (the "Liquidated  Damages") to the holder,  at the holder's option,
     either a cash amount or shares of the  Company's  Common Stock within three
     (3) business days, after demand therefore, equal to two percent (2%) of the
     outstanding principal balance of the Convertible  Debentures outstanding as
     Liquidated  Damages  for each  thirty  (30) day period or any part  thereof
     after the Scheduled Filing Deadline or the Scheduled  Effective Date as the
     case may be.
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          (d)  Liquidated   Damages.   The  Company  and  the  Investor   hereto
     acknowledge  and agree that the sums payable  under  subsection  2(c) above
     shall constitute  liquidated  damages and not penalties and are in addition
     to all other rights of the Investor, including the right to call a default.
     The  parties  further  acknowledge  that (i) the  amount of loss or damages
     likely to be incurred is incapable  or is difficult to precisely  estimate,
     (ii)  the  amounts   specified  in  such   subsections  bear  a  reasonable
     relationship  to, and are not plainly or grossly  disproportionate  to, the
     probable loss likely to be incurred in  connection  with any failure by the
     Company  to  obtain  or  maintain  the   effectiveness  of  a  Registration
     Statement,  (iii)  one of the  reasons  for the  Company  and the  Investor
     reaching an agreement as to such  amounts was the  uncertainty  and cost of
     litigation  regarding the question of actual damages,  and (iv) the Company
     and  the  Investor  are  sophisticated   business  parties  and  have  been
     represented by  sophisticated  and able legal counsel and  negotiated  this
     Agreement at arm's length.

     3. RELATED OBLIGATIONS.

          (a) The  Company  shall  keep  the  Registration  Statement  effective
     pursuant  to Rule 415 at all times  until  the date on which  the  Investor
     shall have sold all the Registrable Securities covered by such Registration
     Statement  (the  "Registration   Period"),   which  Registration  Statement
     (including any amendments or supplements thereto and prospectuses contained
     therein) shall not contain any untrue  statement of a material fact or omit
     to state a material  fact  required to be stated  therein,  or necessary to
     make the statements  therein,  in light of the  circumstances in which they
     were made, not misleading.

          (b) The Company  shall  prepare and file with the SEC such  amendments
     (including  post-effective  amendments)  and  supplements to a Registration
     Statement  and the  prospectus  used in connection  with such  Registration
     Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
     under the 1933 Act, as may be necessary to keep such Registration Statement
     effective at all times during the  Registration  Period,  and,  during such
     period,  comply  with the  provisions  of the 1933 Act with  respect to the
     disposition of all  Registrable  Securities of the Company  covered by such
     Registration   Statement  until  such  time  as  all  of  such  Registrable
     Securities  shall have been  disposed of in  accordance  with the  intended
     methods of  disposition  by the  seller or sellers  thereof as set forth in
     such Registration Statement. In the case of amendments and supplements to a
     Registration  Statement  which are  required  to be filed  pursuant to this
     Agreement  (including  pursuant  to this  Section  3(b)) by  reason  of the
     Company's  filing a report on Form  10-KSB,  Form 10-QSB or Form 8-K or any
     analogous report under the Securities Exchange Act of 1934, as amended (the
     "1934 Act"),  the Company shall  incorporate  such report by reference into
     the Registration Statement, if applicable, or shall file such amendments or
     supplements  with the SEC on the same day on which  the 1934 Act  report is
     filed which created the  requirement for the Company to amend or supplement
     the Registration Statement.

          (c) The  Company  shall  furnish to each  Investor  whose  Registrable
     Securities are included in any Registration Statement,  without charge, (i)
     at least one (1) copy of such Registration  Statement as declared effective
     by the SEC and any amendment(s) thereto, including financial statements and
     schedules,  all documents  incorporated therein by reference,  all exhibits
     and  each  preliminary  prospectus,  (ii)  ten  (10)  copies  of the  final
     prospectus  included in such Registration  Statement and all amendments and
     supplements  thereto (or such other  number

<PAGE>

     of copies as such  Investor  may  reasonably  request) and (iii) such other
     documents  as such  Investor  may  reasonably  request from time to time in
     order to facilitate the disposition of the Registrable  Securities owned by
     such Investor.

          (d) The Company shall use its best efforts to (i) register and qualify
     the Registrable  Securities covered by a Registration  Statement under such
     other  securities  or "blue sky" laws of such  jurisdictions  in the United
     States as any Investor reasonably requests,  (ii) prepare and file in those
     jurisdictions,  such amendments (including  post-effective  amendments) and
     supplements to such registrations and qualifications as may be necessary to
     maintain the effectiveness  thereof during the Registration  Period,  (iii)
     take such other actions as may be necessary to maintain such  registrations
     and  qualifications in effect at all times during the Registration  Period,
     and (iv)  take all other  actions  reasonably  necessary  or  advisable  to
     qualify  the  Registrable   Securities  for  sale  in  such  jurisdictions;
     provided,  however,  that the Company  shall not be required in  connection
     therewith  or as a  condition  thereto  to  (w)  make  any  change  to  its
     certificate of incorporation or by-laws,  (x) qualify to do business in any
     jurisdiction  where it would not  otherwise  be required to qualify but for
     this  Section  3(d),  (y)  subject  itself to general  taxation in any such
     jurisdiction,  or (z) file a general  consent  to service of process in any
     such  jurisdiction.  The Company  shall  promptly  notify each Investor who
     holds  Registrable  Securities  of  the  receipt  by  the  Company  of  any
     notification  with  respect  to  the  suspension  of  the  registration  or
     qualification  of any of the  Registrable  Securities  for sale  under  the
     securities or "blue sky" laws of any  jurisdiction  in the United States or
     its receipt of actual notice of the  initiation or threat of any proceeding
     for such purpose.

          (e) As promptly as  practicable  after becoming aware of such event or
     development,  the  Company  shall  notify  each  Investor in writing of the
     happening  of any event as a result of which the  prospectus  included in a
     Registration  Statement, as then in effect, includes an untrue statement of
     a material  fact or omission to state a material fact required to be stated
     therein  or  necessary  to make  the  statements  therein,  in light of the
     circumstances under which they were made, not misleading  (provided that in
     no event shall such notice  contain any material,  nonpublic  information),
     and  promptly  prepare  a  supplement  or  amendment  to such  Registration
     Statement  to correct such untrue  statement  or omission,  and deliver ten
     (10) copies of such  supplement or amendment to each Investor.  The Company
     shall also  promptly  notify each Investor in writing (i) when a prospectus
     or any prospectus  supplement or  post-effective  amendment has been filed,
     and when a  Registration  Statement  or any  post-effective  amendment  has
     become effective  (notification of such effectiveness shall be delivered to
     each Investor by facsimile on the same day of such effectiveness),  (ii) of
     any request by the SEC for  amendments  or  supplements  to a  Registration
     Statement or related  prospectus or related  information,  and (iii) of the
     Company's  reasonable  determination  that a post-effective  amendment to a
     Registration Statement would be appropriate.

          (f) The Company  shall use its best efforts to prevent the issuance of
     any stop  order or other  suspension  of  effectiveness  of a  Registration
     Statement, or the suspension of the qualification of any of the Registrable
     Securities for sale in any jurisdiction within the United States of America
     and, if such an order or suspension is issued,  to obtain the withdrawal of
     such order or suspension at the earliest possible moment and to notify each
     Investor  who holds  Registrable  Securities  being sold of the issuance of
     such order and the  resolution  thereof or its receipt of actual  notice of
     the initiation or threat of any proceeding for such purpose.
<PAGE>

          (g) At the  reasonable  request of any  Investor,  the  Company  shall
     furnish  to  such  Investor,  on  the  date  of  the  effectiveness  of the
     Registration Statement and thereafter from time to time on such dates as an
     Investor may  reasonably  request (i) a letter,  dated such date,  from the
     Company's independent certified public accountants in form and substance as
     is  customarily  given  by  independent  certified  public  accountants  to
     underwriters in an underwritten public offering, and (ii) an opinion, dated
     as of such date, of counsel  representing  the Company for purposes of such
     Registration  Statement,  in form,  scope and  substance as is  customarily
     given in an underwritten public offering, addressed to the Investors.

(h)  The Company  shall make  available  for  inspection by (i) any Investor and
     (ii) one (1) firm of accountants or other agents  retained by the Investors
     (collectively, the "Inspectors") all pertinent financial and other records,
     and  pertinent   corporate   documents   and   properties  of  the  Company
     (collectively,  the "Records"),  as shall be reasonably deemed necessary by
     each Inspector,  and cause the Company's officers,  directors and employees
     to supply all  information  which any  Inspector  may  reasonably  request;
     provided,  however,  that each  Inspector  shall agree,  and each  Investor
     hereby  agrees,  to hold in  strict  confidence  and  shall  not  make  any
     disclosure  (except to an Investor) or use any Record or other  information
     which the Company determines in good faith to be confidential, and of which
     determination the Inspectors are so notified,  unless (a) the disclosure of
     such Records is necessary to avoid or correct a misstatement or omission in
     any Registration Statement or is otherwise required under the 1933 Act, (b)
     the release of such Records is ordered pursuant to a final,  non-appealable
     subpoena  or  order  from  a  court  or   government   body  of   competent
     jurisdiction,  or (c)  the  information  in  such  Records  has  been  made
     generally  available to the public other than by disclosure in violation of
     this or any other  agreement  of which the  Inspector  and the Investor has
     knowledge.   Each  Investor  agrees  that  it  shall,  upon  learning  that
     disclosure of such Records is sought in or by a court or governmental  body
     of competent jurisdiction or through other means, give prompt notice to the
     Company and allow the  Company,  at its expense,  to undertake  appropriate
     action to prevent  disclosure of, or to obtain a protective  order for, the
     Records deemed confidential.

          (i) The Company shall hold in confidence  and not make any  disclosure
     of  information  concerning an Investor  provided to the Company unless (i)
     disclosure of such information is necessary to comply with federal or state
     securities  laws,  (ii) the disclosure of such  information is necessary to
     avoid or correct a misstatement or omission in any Registration  Statement,
     (iii) the release of such  information is ordered pursuant to a subpoena or
     other  final,  non-appealable  order from a court or  governmental  body of
     competent  jurisdiction,  or (iv) such  information has been made generally
     available  to the public  other than by  disclosure  in  violation  of this
     Agreement or any other  agreement.  The Company agrees that it shall,  upon
     learning  that  disclosure  of such  information  concerning an Investor is
     sought in or by a court or governmental  body of competent  jurisdiction or
     through other means,  give prompt written notice to such Investor and allow
     such Investor,  at the Investor's expense, to undertake  appropriate action
     to  prevent  disclosure  of,  or to obtain a  protective  order  for,  such
     information.

          (j) The  Company  shall use its best  efforts  either to cause all the
     Registrable Securities covered by a Registration Statement (i) to be listed
     on each securities exchange on which securities of the same class or series
     issued by the  Company  are then  listed,  if any,  if the  listing of such
     Registrable  Securities is then permitted  under the rules of such exchange
     or

<PAGE>

     (ii) the inclusion for quotation on the National  Association of Securities
     Dealers,  Inc.  OTC Bulletin  Board for such  Registrable  Securities.  The
     Company shall pay all fees and expenses in connection  with  satisfying its
     obligation under this Section 3(j).

          (k)  The  Company  shall   cooperate   with  the  Investors  who  hold
     Registrable  Securities  being  offered and, to the extent  applicable,  to
     facilitate the timely preparation and delivery of certificates (not bearing
     any  restrictive  legend)  representing  the  Registrable  Securities to be
     offered pursuant to a Registration  Statement and enable such  certificates
     to be in  such  denominations  or  amounts,  as the  case  may  be,  as the
     Investors  may  reasonably  request  and  registered  in such  names as the
     Investors may request.

          (l) The Company  shall use its best  efforts to cause the  Registrable
     Securities  covered  by  the  applicable   Registration   Statement  to  be
     registered  with  or  approved  by  such  other  governmental  agencies  or
     authorities  as may be  necessary to  consummate  the  disposition  of such
     Registrable Securities.

          (m) The Company shall make generally available to its security holders
     as soon as  practical,  but not later than ninety (90) days after the close
     of the period  covered  thereby,  an earnings  statement (in form complying
     with the  provisions of Rule 158 under the 1933 Act) covering a twelve (12)
     month period beginning not later than the first day of the Company's fiscal
     quarter next following the effective date of the Registration Statement.

          (n) The Company  shall  otherwise  use its best efforts to comply with
     all  applicable  rules and  regulations  of the SEC in connection  with any
     registration hereunder.

          (o) Within two (2) business days after a Registration  Statement which
     covers Registrable Securities is declared effective by the SEC, the Company
     shall deliver, and shall cause legal counsel for the Company to deliver, to
     the  transfer  agent for such  Registrable  Securities  (with copies to the
     Investors whose  Registrable  Securities are included in such  Registration
     Statement)  confirmation that such Registration Statement has been declared
     effective by the SEC in the form attached hereto as Exhibit A.

          (p) The Company shall take all other reasonable  actions  necessary to
     expedite  and  facilitate  disposition  by  the  Investors  of  Registrable
     Securities pursuant to a Registration Statement.

     4. OBLIGATIONS OF THE INVESTORS.

     Each Investor  agrees that,  upon receipt of any notice from the Company of
the  happening  of any event of the kind  described in Section 3(f) or the first
sentence of 3(e),  such Investor will  immediately  discontinue  disposition  of
Registrable  Securities pursuant to any Registration  Statement(s) covering such
Registrable  Securities  until  such  Investor's  receipt  of the  copies of the
supplemented  or amended  prospectus  contemplated by Section 3(e) or receipt of
notice that no supplement or amendment is required.  Notwithstanding anything to
the contrary,  the Company shall cause its transfer agent to deliver  unlegended
certificates  for  shares of Common  Stock to a  transferee  of an  Investor  in
accordance  with the terms of the  Securities  Purchase  Agreement in connection
with any sale of  Registrable  Securities  with respect to which an Investor has
entered  into a contract  for sale prior to the  Investor's  receipt of a notice
from the

<PAGE>

Company of the  happening of any event of the kind  described in Section 3(f) or
the first sentence of 3(e) and for which the Investor has not yet settled.

     5. EXPENSES OF REGISTRATION.

     All  expenses  incurred  in  connection  with  registrations,   filings  or
qualifications pursuant to Sections 2 and 3, including,  without limitation, all
registration,  listing and qualifications fees,  printers,  legal and accounting
fees shall be paid by the Company.

     6. INDEMNIFICATION.

     With respect to Registrable Securities which are included in a Registration
Statement under this Agreement:

          (a) To the fullest  extent  permitted  by law, the Company  will,  and
     hereby  does,  indemnify,  hold  harmless  and defend  each  Investor,  the
     directors,  officers, partners, employees, agents,  representatives of, and
     each Person,  if any,  who controls any Investor  within the meaning of the
     1933 Act or the 1934 Act  (each,  an  "Indemnified  Person"),  against  any
     losses, claims, damages, liabilities, judgments, fines, penalties, charges,
     costs,  reasonable attorneys' fees, amounts paid in settlement or expenses,
     joint  or  several  (collectively,  "Claims")  incurred  in  investigating,
     preparing  or  defending  any action,  claim,  suit,  inquiry,  proceeding,
     investigation  or appeal taken from the foregoing by or before any court or
     governmental,  administrative or other regulatory agency,  body or the SEC,
     whether  pending or threatened,  whether or not an indemnified  party is or
     may be a party thereto  ("Indemnified  Damages"),  to which any of them may
     become subject insofar as such Claims (or actions or  proceedings,  whether
     commenced  or  threatened,  in respect  thereof)  arise out of or are based
     upon: (i) any untrue  statement or alleged  untrue  statement of a material
     fact in a Registration Statement or any post-effective amendment thereto or
     in any filing made in  connection  with the  qualification  of the offering
     under the securities or other "blue sky" laws of any  jurisdiction in which
     Registrable  Securities are offered ("Blue Sky Filing"), or the omission or
     alleged  omission to state a material fact required to be stated therein or
     necessary to make the statements  therein not  misleading;  (ii) any untrue
     statement or alleged  untrue  statement of a material fact contained in any
     final  prospectus  (as amended or  supplemented,  if the Company  files any
     amendment  thereof or  supplement  thereto with the SEC) or the omission or
     alleged  omission to state therein any material fact  necessary to make the
     statements  made  therein,  in light of the  circumstances  under which the
     statements  therein were made,  not  misleading;  or (iii) any violation or
     alleged  violation  by the Company of the 1933 Act, the 1934 Act, any other
     law, including,  without limitation,  any state securities law, or any rule
     or regulation  there under relating to the offer or sale of the Registrable
     Securities  pursuant  to a  Registration  Statement  (the  matters  in  the
     foregoing clauses (i) through (iii) being, collectively, "Violations"). The
     Company shall  reimburse the  Investors  and each such  controlling  person
     promptly as such  expenses are  incurred  and are due and payable,  for any
     legal fees or disbursements or other reasonable  expenses  incurred by them
     in   connection   with   investigating   or   defending   any  such  Claim.
     Notwithstanding   anything   to  the   contrary   contained   herein,   the
     indemnification  agreement  contained in this Section  6(a):  (x) shall not
     apply to a Claim by an  Indemnified  Person  arising out of or based upon a
     Violation which occurs in reliance upon and in conformity with  information
     furnished in writing to the Company by such  Indemnified  Person  expressly
     for use in connection with the preparation of the Registration

<PAGE>

     Statement or any such amendment  thereof or supplement  thereto;  (y) shall
     not be  available  to the  extent  such  Claim is based on a failure of the
     Investor  to  deliver  or to  cause to be  delivered  the  prospectus  made
     available by the Company,  if such  prospectus was timely made available by
     the Company  pursuant to Section  3(c);  and (z) shall not apply to amounts
     paid in settlement of any Claim if such settlement is effected  without the
     prior  written  consent  of  the  Company,   which  consent  shall  not  be
     unreasonably withheld. Such indemnity shall remain in full force and effect
     regardless  of any  investigation  made by or on behalf of the  Indemnified
     Person and shall survive the transfer of the Registrable  Securities by the
     Investors pursuant to Section 9 hereof.

          (b) In connection with a Registration Statement,  each Investor agrees
     to severally and not jointly  indemnify,  hold harmless and defend,  to the
     same  extent and in the same  manner as is set forth in Section  6(a),  the
     Company,  each  of  its  directors,   each  of  its  officers,   employees,
     representatives,  or agents  and each  Person,  if any,  who  controls  the
     Company  within  the  meaning  of the 1933  Act or the  1934  Act  (each an
     "Indemnified Party"), against any Claim or Indemnified Damages to which any
     of them may become subject,  under the 1933 Act, the 1934 Act or otherwise,
     insofar as such Claim or Indemnified  Damages arise out of or is based upon
     any  Violation,  in each case to the extent,  and only to the extent,  that
     such  Violation  occurs in reliance  upon and in  conformity  with  written
     information  furnished to the Company by such Investor expressly for use in
     connection with such Registration Statement;  and, subject to Section 6(d),
     such  Investor  will  reimburse  any  legal  or other  expenses  reasonably
     incurred by them in  connection  with  investigating  or defending any such
     Claim;  provided,  however,  that the indemnity agreement contained in this
     Section 6(b) and the agreement  with respect to  contribution  contained in
     Section 7 shall not apply to  amounts  paid in  settlement  of any Claim if
     such  settlement  is  effected  without the prior  written  consent of such
     Investor,  which  consent  shall not be  unreasonably  withheld;  provided,
     further, however, that the Investor shall be liable under this Section 6(b)
     for only that amount of a Claim or  Indemnified  Damages as does not exceed
     the net  proceeds to such  Investor as a result of the sale of  Registrable
     Securities  pursuant to such Registration  Statement.  Such indemnity shall
     remain in full force and effect regardless of any investigation  made by or
     on behalf of such  Indemnified  Party and shall survive the transfer of the
     Registrable   Securities   by  the   Investors   pursuant   to  Section  9.
     Notwithstanding   anything   to  the   contrary   contained   herein,   the
     indemnification  agreement  contained  in this Section 6(b) with respect to
     any prospectus  shall not inure to the benefit of any Indemnified  Party if
     the  untrue  statement  or  omission  of  material  fact  contained  in the
     prospectus  was  corrected  and such new  prospectus  was delivered to each
     Investor prior to such  Investor's use of the prospectus to which the Claim
     relates.

          (c) Promptly  after receipt by an  Indemnified  Person or  Indemnified
     Party under this Section 6 of notice of the  commencement  of any action or
     proceeding  (including any governmental  action or proceeding)  involving a
     Claim,  such Indemnified  Person or Indemnified  Party shall, if a Claim in
     respect  thereof is to be made  against any  indemnifying  party under this
     Section  6,  deliver  to the  indemnifying  party a  written  notice of the
     commencement  thereof,  and the indemnifying  party shall have the right to
     participate  in,  and,  to the extent the  indemnifying  party so  desires,
     jointly with any other  indemnifying  party  similarly  noticed,  to assume
     control of the defense  thereof with counsel  mutually  satisfactory to the
     indemnifying  party and the Indemnified Person or the Indemnified Party, as
     the  case  may  be;  provided,  however,  that  an  Indemnified  Person  or
     Indemnified  Party shall have the right to retain its own counsel  with the
     fees and  expenses of not more than one (1)  counsel  for such  Indemnified
     Person or Indemnified

<PAGE>

     Party to be paid by the indemnifying  party, if, in the reasonable  opinion
     of counsel retained by the indemnifying  party, the  representation by such
     counsel of the Indemnified Person or Indemnified Party and the indemnifying
     party would be inappropriate due to actual or potential differing interests
     between such  Indemnified  Person or Indemnified  Party and any other party
     represented by such counsel in such  proceeding.  The Indemnified  Party or
     Indemnified  Person shall  cooperate fully with the  indemnifying  party in
     connection  with any  negotiation or defense of any such action or claim by
     the  indemnifying  party and shall  furnish to the  indemnifying  party all
     information  reasonably  available to the Indemnified  Party or Indemnified
     Person which relates to such action or claim. The indemnifying  party shall
     keep the  Indemnified  Party or  Indemnified  Person fully  apprised at all
     times as to the status of the defense or any settlement  negotiations  with
     respect thereto.  No indemnifying  party shall be liable for any settlement
     of any action,  claim or  proceeding  effected  without  its prior  written
     consent;   provided,   however,  that  the  indemnifying  party  shall  not
     unreasonably  withhold,  delay or condition  its consent.  No  indemnifying
     party shall,  without the prior written consent of the Indemnified Party or
     Indemnified  Person,  consent  to entry of any  judgment  or enter into any
     settlement or other  compromise  which does not include as an unconditional
     term thereof the giving by the  claimant or  plaintiff to such  Indemnified
     Party or  Indemnified  Person of a release from all liability in respect to
     such  claim  or  litigation.  Following  indemnification  as  provided  for
     hereunder,  the indemnifying party shall be subrogated to all rights of the
     Indemnified Party or Indemnified  Person with respect to all third parties,
     firms or corporations  relating to the matter for which indemnification has
     been made. The failure to deliver written notice to the indemnifying  party
     within a reasonable  time of the  commencement of any such action shall not
     relieve such indemnifying  party of any liability to the Indemnified Person
     or  Indemnified  Party under this  Section 6, except to the extent that the
     indemnifying party is prejudiced in its ability to defend such action.

          (d) The  indemnification  required by this  Section 6 shall be made by
     periodic   payments  of  the  amount  thereof  during  the  course  of  the
     investigation  or defense,  as and when bills are  received or  Indemnified
     Damages are incurred.

          (e) The indemnity  agreements contained herein shall be in addition to
     (i) any  cause of  action  or  similar  right of the  Indemnified  Party or
     Indemnified  Person against the indemnifying  party or others, and (ii) any
     liabilities the indemnifying party may be subject to pursuant to the law.

     7. CONTRIBUTION.

     To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying  party agrees to make the maximum  contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no seller
of Registrable  Securities  guilty of fraudulent  misrepresentation  (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any  seller  of  Registrable   Securities  who  was  not  guilty  of  fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
<PAGE>

     8. REPORTS UNDER THE 1934 ACT.

     With a view to making  available to the  Investors the benefits of Rule 144
promulgated under the 1933 Act or any similar rule or regulation of the SEC that
may at any time permit the  Investors to sell  securities  of the Company to the
public without registration ("Rule 144") the Company agrees to:

     (a)  make  and keep  public  information  available,  as  those  terms  are
understood and defined in Rule 144;

     (b) file with the SEC in a timely  manner all reports  and other  documents
required  of the  Company  under  the  1933  Act and the 1934 Act so long as the
Company remains subject to such  requirements  (it being understood that nothing
herein  shall  limit  the  Company's  obligations  under  Section  4(c)  of  the
Securities  Purchase  Agreement)  and the  filing  of  such  reports  and  other
documents as are required by the applicable provisions of Rule 144; and

     (c) furnish to each  Investor  so long as such  Investor  owns  Registrable
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 such other reports and documents so filed by the Company,  and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.

9.       AMENDMENT OF REGISTRATION RIGHTS.

     Provisions of this Agreement may be amended and the observance  thereof may
be waived (either generally or in a particular instance and either retroactively
or  prospectively),  only with the written  consent of the Company and Investors
who then  hold at least  two-thirds  (2/3) of the  Registrable  Securities.  Any
amendment or waiver  effected in accordance with this Section 9 shall be binding
upon each Investor and the Company.  No such amendment shall be effective to the
extent  that it  applies to fewer  than all of the  holders  of the  Registrable
Securities.  No consideration shall be offered or paid to any Person to amend or
consent to a waiver or  modification  of any provision of any of this  Agreement
unless the same  consideration  also is  offered  to all of the  parties to this
Agreement.

     10. MISCELLANEOUS.

          (a) A Person  is  deemed  to be a  holder  of  Registrable  Securities
     whenever  such Person  owns or is deemed to own of record such  Registrable
     Securities.  If the Company receives conflicting  instructions,  notices or
     elections from two (2) or more Persons with respect to the same Registrable
     Securities, the Company shall act upon the basis of instructions, notice or
     election received from the registered owner of such Registrable Securities.

          (b) Any notices, consents, waivers or other communications required or
     permitted to be given under the terms of this  Agreement must be in writing
     and will be deemed to have been delivered: (i) upon receipt, when delivered
     personally;   (ii)  upon   receipt,   when  sent  by  facsimile   (provided
     confirmation of transmission  is mechanically or  electronically  generated
     and kept on file by the sending party); or (iii) one (1) business day after
     deposit with a nationally

<PAGE>

     recognized  overnight delivery service,  in each case properly addressed to
     the party to receive the same. The addresses and facsimile numbers for such
     communications shall be:

If to the Company, to:                 Productivity Technologies Corporation
                                       3100 Copper Avenue
                                       Fenton, Michigan 48430
                                       Attention:        Jesse Levin, CFO
                                       Telephone:        (810) 714-0200
                                       Facsimile:        (810) 629-8145

                                       Kirkpatrick & Lockhart LLP
                                       201 South Biscayne Boulevard - Suite 2000
                                       Miami, FL  33131-2399
                                       Attention:        Clayton E. Parker, Esq.
                                       Telephone:        (305) 539-3300
                                       Facsimile:        (305) 358-7095

     If to an Investor,  to its address and facsimile  number on the Schedule of
     Investors attached hereto,  with copies to such Investor's  representatives
     as set forth on the Schedule of Investors or to such other  address  and/or
     facsimile  number  and/or  to the  attention  of such  other  person as the
     recipient  party has specified by written  notice given to each other party
     five  (5)  days  prior  to  the  effectiveness  of  such  change.   Written
     confirmation of receipt (A) given by the recipient of such notice, consent,
     waiver or other communication, (B) mechanically or electronically generated
     by the sender's  facsimile  machine  containing the time,  date,  recipient
     facsimile number and an image of the first page of such transmission or (C)
     provided by a courier or  overnight  courier  service  shall be  rebuttable
     evidence  of  personal  service,  receipt by  facsimile  or receipt  from a
     nationally  recognized overnight delivery service in accordance with clause
     (i), (ii) or (iii) above, respectively.

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

          (d) The laws of the  State  of New  Jersey  shall  govern  all  issues
     concerning  the  relative  rights of the Company and the  Investors  as its
     stockholders.  All other questions  concerning the construction,  validity,
     enforcement and  interpretation  of this Agreement shall be governed by the
     internal  laws of the State of New  Jersey,  without  giving  effect to any
     choice of law or conflict of law provision or rule (whether of the State of
     New Jersey or any other  jurisdiction)  that would cause the application of
     the laws of any jurisdiction other than the State of New Jersey. Each party
     hereby  irrevocably  submits  to  the  non-exclusive  jurisdiction  of  the
     Superior Courts of the State of New Jersey,  sitting in Hudson County,  New
     Jersey and federal  courts for the District of New Jersey  sitting  Newark,
     New Jersey,  for the adjudication of any dispute hereunder or in connection
     herewith or with any transaction  contemplated  hereby or discussed herein,
     and hereby irrevocably waives, and agrees not to assert in any suit, action
     or  proceeding,  any  claim  that  it is  not  personally  subject  to  the
     jurisdiction  of any such court,  that such suit,  action or  proceeding is
     brought in an inconvenient  forum or that the venue of such suit, action or
     proceeding  is improper.  Each party  hereby  irrevocably  waives  personal
     service of

<PAGE>

     process and consents to process  being  served in any such suit,  action or
     proceeding  by mailing a copy thereof to such party at the address for such
     notices  to it under this  Agreement  and agrees  that such  service  shall
     constitute  good and  sufficient  service  of process  and notice  thereof.
     Nothing  contained  herein shall be deemed to limit in any way any right to
     serve  process in any manner  permitted  by law. If any  provision  of this
     Agreement  shall be  invalid or  unenforceable  in any  jurisdiction,  such
     invalidity   or   unenforceability   shall  not  affect  the   validity  or
     enforceability  of the remainder of this Agreement in that  jurisdiction or
     the validity or  enforceability  of any provision of this  Agreement in any
     other  jurisdiction.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
     HAVE, AND AGREES NOT TO REQUEST,  A JURY TRIAL FOR THE  ADJUDICATION OF ANY
     DISPUTE  HEREUNDER  OR IN  CONNECTION  HEREWITH  OR  ARISING  OUT  OF  THIS
     AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

          (e) This Agreement,  the Irrevocable Transfer Agent Instructions,  the
     Securities   Purchase   Agreement  and  related  documents   including  the
     Convertible Debenture and the Escrow Agreement dated the date hereof by and
     among the  Company,  the  Investors  set forth on the Schedule of Investors
     attached hereto,  and Butler Gonzalez LLP (the "Escrow  Agreement") and the
     Security  Agreement  dated  the  date  hereof  (the  "Security  Agreement")
     constitute  the entire  agreement  among the parties hereto with respect to
     the subject matter hereof and thereof. There are no restrictions, promises,
     warranties  or  undertakings,  other  than those set forth or  referred  to
     herein  and  therein.  This  Agreement,   the  Irrevocable  Transfer  Agent
     Instructions,  the  Securities  Purchase  Agreement  and related  documents
     including the Convertible Debenture,  the Escrow Agreement and the Security
     Agreement  supersede  all prior  agreements  and  understandings  among the
     parties hereto with respect to the subject matter hereof and thereof.

          (f) This  Agreement  shall inure to the benefit of and be binding upon
     the permitted successors and assigns of each of the parties hereto.

          (g) The headings in this  Agreement are for  convenience  of reference
     only and shall not limit or otherwise affect the meaning hereof.

          (h) This Agreement may be executed in identical counterparts,  each of
     which shall be deemed an original but all of which shall constitute one and
     the same  agreement.  This  Agreement,  once  executed  by a party,  may be
     delivered to the other party hereto by facsimile  transmission of a copy of
     this  Agreement  bearing  the  signature  of the party so  delivering  this
     Agreement.

          (i)  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.

     The  language  used in this  Agreement  will be deemed  to be the  language
     chosen by the parties to express their mutual intent and no rules of strict
     construction will be applied against any party.
<PAGE>

          (j) This  Agreement is intended for the benefit of the parties  hereto
     and their respective  permitted  successors and assigns, and is not for the
     benefit of, nor may any provision hereof be enforced by, any other Person.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

          IN WITNESS WHEREOF, the parties have caused this Investor Registration
     Rights  Agreement  to be duly  executed  as of day  and  year  first  above
     written.

                                       COMPANY:
                                       PRODUCTIVITY TECHNOLOGIES CORPORATION

                                       By:      /s/Jesse A. Levine
                                          --------------------------------------
                                       Name:    Jesse A. Levine
                                       Title:   CFO

<PAGE>
<TABLE>
<CAPTION>
                                                    SCHEDULE I

                                               SCHEDULE OF INVESTORS

                                                                                               Address/Facsimile
              Name                                    Signature                                 Number of Buyer
------------------------------     -------------------------------------            ----------------------------------
<S>                                                                                 <C>                       <C>
Cornell Capital Partners, LP       By:      Yorkville Advisors, LLC                 101 Hudson Street - Suite 3700
                                   Its:     General Partner                         Jersey City, NJ  07303
                                                                                    Facsimile:        (201) 985-8266

                                   By:     ______________________                    With a copy to:
                                   Name:     Mark A. Angelo                          Troy J. Rillo
                                   Its:     Portfolio Manager
</TABLE>

<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

____________________________________
____________________________________
____________________________________
____________________________________

Attention:

     Re: PRODUCTIVITY TECHNOLOGIES CORPORATION

Ladies and Gentlemen:

     We  are  counsel  to  Productivity  Technologies  Corporation,  a  Delaware
corporation (the "Company"), and have represented the Company in connection with
that certain Securities Purchase Agreement (the "Securities Purchase Agreement")
entered  into  by  and  among  the  Company  and  the  investors  named  therein
(collectively,  the  "Investors")  pursuant to which the  Company  issued to the
Investors  shares of its Common Stock, par value US$0.001 per share (the "Common
Stock"). Pursuant to the Purchase Agreement, the Company also has entered into a
Registration  Rights  Agreement with the Investors  (the "Investor  Registration
Rights Agreement")  pursuant to which the Company agreed, among other things, to
register  the  Registrable  Securities  (as defined in the  Registration  Rights
Agreement)  under the  Securities  Act of 1933, as amended (the "1933 Act").  In
connection  with  the  Company's   obligations  under  the  Registration  Rights
Agreement,  on ____________ ____, the Company filed a Registration  Statement on
Form ________ (File No.  333-_____________) (the "Registration  Statement") with
the  Securities  and  Exchange  SEC  (the  "SEC")  relating  to the  Registrable
Securities  which names each of the  Investors  as a selling  stockholder  there
under.

     In connection with the foregoing,  we advise you that a member of the SEC's
staff has advised us by  telephone  that the SEC has entered an order  declaring
the  Registration  Statement  effective  under  the 1933 Act at  [ENTER  TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,  after
telephonic  inquiry  of a  member  of the  SEC's  staff,  that  any  stop  order
suspending its  effectiveness  has been issued or that any  proceedings for that
purpose  are  pending  before,  or  threatened  by, the SEC and the  Registrable
Securities  are  available  for  resale  under  the  1933  Act  pursuant  to the
Registration Statement.

                                       Very truly yours,

                                       KIRKPATRICK & LOCKHART LLP

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

cc:      [LIST NAMES OF INVESTORS]EXHIBIT 10.12

                      PRODUCTIVITY TECHNOLOGIES CORPORATION
                            PLACEMENT AGENT AGREEMENT

                                                      Dated as of: June 21, 2004

Newbridge Securities Corporation
1451 Cypress Creek Road, Suite 204
Fort Lauderdale, Florida 33309

Ladies and Gentlemen:

     The  undersigned,   Productivity  Technologies   Corporation,   a  Delaware
corporation (the "Company"), hereby agrees with Newbridge Securities Corporation
(the "Placement  Agent") and Cornell Capital  Partners,  LP, a Delaware  Limited
Partnership (the "Investor"), as follows:

     1. Offering.  The Company hereby engages the Placement  Agent to act as its
exclusive  placement  agent in connection  with the Standby Equity  Distribution
Agreement dated the date hereof (the "Standby Equity  Distribution  Agreement"),
pursuant to which the Company shall issue and sell to the Investor, from time to
time, and the Investor  shall  purchase from the Company (the  "Offering") up to
Five Million U.S.  Dollars  (US$5,000,000)  of the  Company's  common stock (the
"Commitment  Amount"),  par value  US$0.001 per share (the "Common  Stock"),  at
price per share  equal to the  Purchase  Price,  as that term is  defined in the
Standby  Equity  Distribution  Agreement.  The Placement  Agent  services  shall
consist of reviewing the terms of the Standby Equity Distribution  Agreement and
advising the Company with respect to those terms.

     All  capitalized  terms used herein and not otherwise  defined herein shall
have the same  meaning  ascribed to them as in the Standby  Equity  Distribution
Agreement. The Investor will be granted certain registration rights with respect
to the Common Stock as more fully set forth in the Registration Rights Agreement
between the Company and the  Investor  dated the date hereof (the  "Registration
Rights  Agreement").  The  documents to be executed and  delivered in connection
with the Offering, including, but not limited, to the Company's latest Quarterly
Report on Form 10-Q as filed  with the United  States  Securities  and  Exchange
Commission,  this  Agreement,  the Standby Equity  Distribution  Agreement,  the
Registration  Rights  Agreement,  and the Escrow Agreement dated the date hereof
(the "Escrow Agreement"),  are referred to sometimes hereinafter collectively as
the "Offering  Materials." The Company's  Common Stock purchased by the Investor
hereunder or to be issued in connection  with the  conversion of any  debentures
are sometimes  referred to hereinafter as the  "Securities." The Placement Agent
shall not be obligated to sell any Securities.
<PAGE>

     2. Compensation.

          A. Upon the  execution of this  Agreement,  the Company shall issue to
     the Placement Agent or its designee shares of the Company's Common Stock in
     an amount equal to Ten Thousand  U.S.  Dollars  (US$10,000)  divided by the
     volume  weighted  average price of the  Company's  Common Stock on the date
     hereof (the  "Placement  Agent's  Shares").  The  Placement  Agent shall be
     entitled to "piggy-back" registration rights, which shall be triggered upon
     registration  of any shares of Common Stock by the Investor with respect to
     the Placement Agent's Shares pursuant to the Registration  Rights Agreement
     dated the date hereof.

     3. Representations, Warranties and Covenants of the Placement Agent.

          A. The Placement Agent represents, warrants and covenants as follows:

               (i) The  Placement  Agent has the  necessary  power to enter into
          this Agreement and to consummate the transactions contemplated hereby.

               (ii) The execution  and delivery by the  Placement  Agent of this
          Agreement and the consummation of the transactions contemplated herein
          will not  result in any  violation  of,  or be in  conflict  with,  or
          constitute a default  under,  any agreement or instrument to which the
          Placement  Agent  is a party or by which  the  Placement  Agent or its
          properties  are  bound,  or any  judgment,  decree,  order  or, to the
          Placement  Agent's   knowledge,   any  statute,   rule  or  regulation
          applicable to the Placement  Agent.  This  Agreement when executed and
          delivered by the Placement Agent, will constitute the legal, valid and
          binding obligations of the Placement Agent,  enforceable in accordance
          with  their  respective  terms,  except  to the  extent  that  (a) the
          enforceability  hereof  or  thereof  may  be  limited  by  bankruptcy,
          insolvency,  reorganization,  moratorium  or similar laws from time to
          time in effect and  affecting the rights of creditors  generally,  (b)
          the enforceability  hereof or thereof is subject to general principles
          of equity, or (c) the indemnification provisions hereof or thereof may
          be held to be in violation of public policy.

               (iii) Upon receipt and execution of this Agreement, the Placement
          Agent will promptly forward copies of this Agreement to the Company or
          its counsel and the Investor or its counsel.

               (iv) The Placement Agent will not  intentionally  take any action
          that it  reasonably  believes  would cause the Offering to violate the
          provisions of the Securities Act of 1933, as amended (the "1933 Act"),
          the Securities  Exchange Act of 1934 (the "1934 Act"),  the respective
          rules  and   regulations   promulgated   thereunder  (the  "Rules  and
          Regulations")   or  applicable   "Blue  Sky"  laws  of  any  state  or
          jurisdiction.

               (v) The Placement  Agent is a member of the National  Association
          of Securities Dealers, Inc., and is a broker-dealer registered as such
          under  the 1934 Act and  under the  securities  laws of the  states in
          which the  Securities  will be offered or sold by the Placement  Agent
          unless an exemption  for such state  registration  is available to the
          Placement  Agent.  The Placement Agent is in material  compliance with
          the rules and regulations  applicable to the Placement Agent generally
          and applicable to the Placement Agent's participation in the Offering.
<PAGE>

     4. Representations and Warranties of the Company.

          A. The Company represents and warrants as follows:

               (i)  The  execution,  delivery  and  performance  of each of this
          Agreement,  the  Standby  Equity  Distribution  Agreement,  the Escrow
          Agreement,  and the Registration  Rights Agreement has been or will be
          duly and validly  authorized by the Company and is, or with respect to
          this Agreement,  the Standby Equity Distribution Agreement, the Escrow
          Agreement, and the Registration Rights Agreement,  will be a valid and
          binding  agreement of the Company,  enforceable in accordance with its
          respective  terms,  except to the extent  that (a) the  enforceability
          hereof  or  thereof   may  be  limited  by   bankruptcy,   insolvency,
          reorganization, moratorium or similar laws from time to time in effect
          and   affecting   the   rights  of   creditors   generally,   (b)  the
          enforceability  hereof or thereof is subject to general  principles of
          equity or (c) the indemnification  provisions hereof or thereof may be
          held to be in violation of public policy.  The Securities to be issued
          pursuant to the  transactions  contemplated  by this Agreement and the
          Standby Equity  Distribution  Agreement have been duly authorized and,
          when  issued  and paid for in  accordance  with  this  Agreement,  the
          Standby Equity Distribution Agreement and the certificates/instruments
          representing such Securities, will be valid and binding obligations of
          the Company,  enforceable in accordance with their  respective  terms,
          except  to the  extent  that  (1) the  enforceability  thereof  may be
          limited  by  bankruptcy,  insolvency,  reorganization,  moratorium  or
          similar laws from time to time in effect and  affecting  the rights of
          creditors generally,  and (2) the enforceability thereof is subject to
          general  principles  of equity.  All corporate  action  required to be
          taken for the  authorization,  issuance and sale of the Securities has
          been duly and validly taken by the Company.

               (ii) The Company has a duly  authorized,  issued and  outstanding
          capitalization   as  set  forth  herein  and  in  the  Standby  Equity
          Distribution Agreement.  The Company is not a party to or bound by any
          instrument,  agreement or other arrangement  providing for it to issue
          any capital  stock,  rights,  warrants,  options or other  securities,
          except for this  Agreement,  the  agreements  described  herein and as
          described in the Standby Equity Distribution Agreement, dated the date
          hereof  and  the  agreements   described   therein.   All  issued  and
          outstanding  securities of the Company,  have been duly authorized and
          validly  issued and are fully  paid and  non-assessable;  the  holders
          thereof have no rights of rescission or preemptive rights with respect
          thereto and are not subject to personal  liability solely by reason of
          being security  holders;  and none of such  securities  were issued in
          violation of the  preemptive  rights of any holders of any security of
          the Company.  As of the June 1, 2004, the authorized  capital stock of
          the Company  consists of 20,000,000  shares of Common Stock, par value
          US$0.001 per share and  1,000,000  shares of Preferred  Stock of which
          2,475,000 shares of Common Stock were issued and outstanding as of the
          date thereof.

               (iii)  The  Common  Stock to be issued  in  accordance  with this
          Agreement and the Standby Equity Distribution  Agreement has been duly
          authorized  and,  when  issued  and paid for in  accordance  with this
          Agreement,    the   Standby   Equity   Distribution   Agreement,   the
          certificates/instruments   representing  such  Common  Stock  will  be
          validly  issued,  fully-paid and  non-assessable;  the holders thereof
          will not be subject to  personal  liability  solely by reason of being
          such holders;  such  Securities are not and will not be subject to the
          preemptive rights of any holder of any security of the Company.
<PAGE>

               (iv) The Company has good and  marketable  title to, or valid and
          enforceable  leasehold  estates  in,  all  items of real and  personal
          property  necessary  to  conduct  its  business  (including,   without
          limitation,  any real or  personal  property  stated  in the  Offering
          Materials to be owned or leased by the Company), free and clear of all
          liens,  encumbrances,  claims,  security  interests and defects of any
          material nature whatsoever, other than those set forth in the Offering
          Materials and liens for taxes not yet due and payable.

               (v) There is no litigation or governmental proceeding pending or,
          to the  best  of  the  Company's  knowledge,  threatened  against,  or
          involving  the  properties  or business of the Company,  except as set
          forth in the Offering Materials.

               (vi) The Company has been duly organized and is validly  existing
          as a  corporation  in good  standing  under  the laws of the  State of
          Delaware.  Except as set forth in the Offering Materials,  the Company
          does not own or control,  directly or  indirectly,  an interest in any
          other corporation, partnership, trust, joint venture or other business
          entity. The Company is duly qualified or licensed and in good standing
          as a foreign  corporation in each  jurisdiction in which the character
          of its operations  requires such  qualification or licensing and where
          failure to so qualify  would  have a  material  adverse  effect on the
          Company.  The Company has all requisite corporate power and authority,
          and all  material and  necessary  authorizations,  approvals,  orders,
          licenses,  certificates  and  permits  of and  from  all  governmental
          regulatory  officials and bodies (domestic and foreign) to conduct its
          businesses  (and  proposed  business)  as  described  in the  Offering
          Materials.  Any disclosures in the Offering  Materials  concerning the
          effects  of  foreign,  federal,  state  and  local  regulation  on the
          Company's  businesses as currently  conducted and as contemplated  are
          correct in all  material  respects and do not omit to state a material
          fact. The Company has all corporate  power and authority to enter into
          this  Agreement,   the  Standby  Equity  Distribution  Agreement,  the
          Registration Rights Agreement,  and the Escrow Agreement, to carry out
          the provisions and  conditions  hereof and thereof,  and all consents,
          authorizations,  approvals and orders required in connection  herewith
          and therewith have been obtained.  No consent,  authorization or order
          of, and no filing with, any court,  government agency or other body is
          required  by  the  Company  for  the  issuance  of the  Securities  or
          execution and delivery of the Offering Materials except for applicable
          federal and state securities  laws. The Company,  since its inception,
          has not incurred  any  liability  arising  under or as a result of the
          application  of any of the provisions of the 1933 Act, the 1934 Act or
          the Rules and Regulations.

               (vii) There has been no material  adverse change in the condition
          or prospects of the Company,  financial or otherwise,  from the latest
          dates as of which such condition or prospects,  respectively,  are set
          forth  in the  Offering  Materials,  and  the  outstanding  debt,  the
          property  and the  business  of the  Company  conform in all  material
          respects  to  the  descriptions  thereof  contained  in  the  Offering
          Materials.

               (viii) Except as set forth in the Offering Materials, the Company
          is not in breach of, or in default under, any term or provision of any
          material  indenture,  mortgage,  deed of trust,  lease,  note, loan or
          Standby Equity Distribution  Agreement or any other material agreement
          or  instrument  evidencing an obligation  for borrowed  money,  or any
          other  material  agreement or  instrument to which it is a party or by
          which  it or any of its  properties  may be  bound  or  affected.  The
          Company is not in violation of any provision of its charter or by-laws
          or in violation of any franchise, license, permit, judgment, decree or
          order,  or in violation of any

<PAGE>

          material  statute,  rule or  regulation.  Neither  the  execution  and
          delivery  of the  Offering  Materials  nor the  issuance  and  sale or
          delivery  of  the  Securities,  nor  the  consummation  of  any of the
          transactions contemplated in the Offering Materials nor the compliance
          by the Company with the terms and  provisions  hereof or thereof,  has
          conflicted  with or will  conflict  with,  or has  resulted in or will
          result in a breach  of,  any of the terms  and  provisions  of, or has
          constituted or will  constitute a default under, or has resulted in or
          will  result in the  creation  or  imposition  of any lien,  charge or
          encumbrance  upon any property or assets of the Company or pursuant to
          the terms of any indenture, mortgage, deed of trust, note, loan or any
          other  agreement or instrument  evidencing an obligation  for borrowed
          money,  or any other  agreement or instrument to which the Company may
          be bound or to which any of the  property  or assets of the Company is
          subject  except (a) where such default,  lien,  charge or  encumbrance
          would not have a material  adverse  effect on the  Company  and (b) as
          described in the Offering  Materials;  nor will such action  result in
          any  violation of the  provisions of the charter or the by-laws of the
          Company or, assuming the due performance by the Placement Agent of its
          obligations  hereunder,  any material  statute or any material  order,
          rule or  regulation  applicable  to the Company of any court or of any
          foreign,  federal,  state  or  other  regulatory  authority  or  other
          government body having jurisdiction over the Company.

               (ix) Subsequent to the dates as of which  information is given in
          the Offering  Materials,  and except as may  otherwise be indicated or
          contemplated  herein or therein and the securities offered pursuant to
          the Securities  Purchase  Agreement dated the date hereof, the Company
          has not (a)  issued  any  securities  or  incurred  any  liability  or
          obligation,  direct or contingent,  for borrowed money, or (b) entered
          into any transaction other than in the ordinary course of business, or
          (c) declared or paid any dividend or made any other distribution on or
          in respect of its capital  stock.  Except as described in the Offering
          Materials,  the Company has no outstanding  obligations to any officer
          or director of the Company.

               (x) There are no claims for  services in the nature of a finder's
          or origination fee with respect to the sale of the Common Stock or any
          other  arrangements,  agreements or understandings that may affect the
          Placement  Agent's   compensation,   as  determined  by  the  National
          Association of Securities Dealers, Inc.

               (xi) The Company owns or  possesses,  free and clear of all liens
          or  encumbrances  and rights thereto or therein by third parties,  the
          requisite  licenses  or other  rights to use all  trademarks,  service
          marks,  copyrights,   service  names,  trade  names,  patents,  patent
          applications   and   licenses   necessary   to  conduct  its  business
          (including,  without limitation, any such licenses or rights described
          in the Offering  Materials as being owned or possessed by the Company)
          and, except as set forth in the Offering Materials,  there is no claim
          or action by any  person  pertaining  to, or  proceeding,  pending  or
          threatened,  which challenges the exclusive rights of the Company with
          respect to any trademarks,  service marks, copyrights,  service names,
          trade names,  patents,  patent  applications  and licenses used in the
          conduct of the Company's  businesses  (including,  without limitation,
          any such  licenses or rights  described in the  Offering  Materials as
          being owned or possessed  by the  Company)  except any claim or action
          that  would not have a material  adverse  effect on the  Company;  the
          Company's current  products,  services or processes do not infringe or
          will not infringe on the patents currently held by any third party.
<PAGE>

               (xii) Except as described in the Offering Materials,  the Company
          is not  under  any  obligation  to pay  royalties  or fees of any kind
          whatsoever to any third party with respect to any trademarks,  service
          marks,  copyrights,   service  names,  trade  names,  patents,  patent
          applications,  licenses or technology it has developed,  uses, employs
          or intends to use or employ, other than to their respective licensors.

               (xiii) Subject to the  performance by the Placement  Agent of its
          obligations  hereunder the offer and sale of the Securities  complies,
          and  will  continue  to  comply,  in all  material  respects  with the
          requirements  of  Rule  506 of  Regulation  D  promulgated  by the SEC
          pursuant  to the 1933 Act and any other  applicable  federal and state
          laws, rules,  regulations and executive  orders.  Neither the Offering
          Materials nor any  amendment or  supplement  thereto nor any documents
          prepared by the Company in  connection  with the Offering will contain
          any untrue  statement of a material fact or omit to state any material
          fact required to be stated therein or necessary to make the statements
          therein, in light of the circumstances under which they were made, not
          misleading. All statements of material facts in the Offering Materials
          are true and correct as of the date of the Offering Materials.

               (xiv)  All  material  taxes  which are due and  payable  from the
          Company have been paid in full or adequate provision has been made for
          such  taxes on the  books  of the  Company,  except  for  those  taxes
          disputed in good faith by the Company

               (xv)  None of the  Company  nor any of its  officers,  directors,
          employees  or  agents,  nor any other  person  acting on behalf of the
          Company,  has,  directly  or  indirectly,  given or agreed to give any
          money,  gift or similar benefit (other than legal price concessions to
          customers  in the  ordinary  course  of  business)  to  any  customer,
          supplier,  employee or agent of a customer or supplier, or official or
          employee  of  any  governmental   agency  or  instrumentality  of  any
          government  (domestic or foreign) or any political  party or candidate
          for office (domestic or foreign) or other person who is or may be in a
          position  to help or hinder the  business of the Company (or assist it
          in connection with any actual or proposed transaction) which (A) might
          subject the Company to any damage or penalty in any civil, criminal or
          governmental  litigation  or  proceeding,  or (B) if not  given in the
          past,  might  have had a  materially  adverse  effect  on the  assets,
          business  or  operations  of the  Company as  reflected  in any of the
          financial  statements  contained in the Offering Materials,  or (C) if
          not  continued  in the  future,  might  adversely  affect the  assets,
          business, operations or prospects of the Company in the future.

     5. Representations, Warranties and Covenants of the Investor.

          A. The Investor represents, warrants and covenants as follows:

               (i) The  Investor  has the  necessary  power to enter  into  this
          Agreement and to consummate the transactions contemplated hereby.

               (ii) The execution and delivery by the Investor of this Agreement
          and the consummation of the transactions  contemplated herein will not
          result in any  violation  of, or be in conflict  with, or constitute a
          default under,  any agreement or instrument to which the Investor is a
          party or by which the  Investor or its  properties  are bound,  or any
          judgment,  decree, order or, to the Investor's knowledge, any statute,
          rule or regulation  applicable to the Investor.

<PAGE>

          This  Agreement  when  executed and  delivered by the  Investor,  will
          constitute the legal,  valid and binding  obligations of the Investor,
          enforceable in accordance with their respective  terms,  except to the
          extent that (a) the enforceability hereof or thereof may be limited by
          bankruptcy,  insolvency,  reorganization,  moratorium  or similar laws
          from time to time in effect  and  affecting  the  rights of  creditors
          generally,  (b) the  enforceability  hereof or  thereof  is subject to
          general  principles of equity, or (c) the  indemnification  provisions
          hereof or thereof may be held to be in violation of public policy.

               (iii) The Investor  will promptly  forward  copies of any and all
          due diligence questionnaires compiled by the Investor to the Placement
          Agent.

               (iv) The Investor is an Accredited Investor (as defined under the
          1933 Act).

               (v) The Investor is acquiring the  Securities  for the Inventor's
          own account as principal,  not as a nominee or agent,  for  investment
          purposes only, and not with a view to, or for, resale, distribution or
          fractionalization  thereof in whole or in part and no other person has
          a direct or indirect beneficial interest in such Securities.  Further,
          the Investor  does not have any  contract,  undertaking,  agreement or
          arrangement with any person to sell, transfer or grant  participations
          to such  person or to any third  person,  with  respect  to any of the
          Securities.

               (vi) The Investor acknowledges the Investor's  understanding that
          the offering and sale of the  Securities is intended to be exempt from
          registration  under the 1933 Act by virtue of Section 3(b) of the 1933
          Act  and  the  provisions  of  Regulation  D  promulgated   thereunder
          ("Regulation D"). In furtherance  thereof, the Investor represents and
          warrants as follows:

                    (a) The  Investor  has the  financial  ability  to bear  the
               economic risk of the  Investor's  investment,  has adequate means
               for  providing  for the  Inventor's  current  needs and  personal
               contingencies  and has no need for liquidity  with respect to the
               Investor's investment in the Company; and

                    (b) The  Investor  has  such  knowledge  and  experience  in
               financial and business matters as to be capable of evaluating the
               merits and risks of the prospective investment. The Inventor also
               represents it has not been organized for the purpose of acquiring
               the Securities.

               (vii)  The  Investor  has  been  given  the   opportunity  for  a
          reasonable  time  prior to the date  hereof to ask  questions  of, and
          receive  answers from, the Company or its  representatives  concerning
          the terms and conditions of the Offering, and other matters pertaining
          to  this  investment,  and  has  been  given  the  opportunity  for  a
          reasonable  time prior to the date  hereof to obtain  such  additional
          information  in connection  with the Company in order for the Investor
          to evaluate the merits and risks of purchase of the Securities, to the
          extent  the  Company  possesses  such  information  or can  acquire it
          without unreasonable effort or expense. The Investor is not relying on
          the  Placement  Agent or any of its  affiliates  with  respect  to the
          accuracy or completeness of the Offering Materials or for any economic
          considerations involved in this investment.
<PAGE>

     6. Certain Covenants and Agreements of the Company.

     The Company  covenants and agrees at its expense and without any expense to
the Placement Agent as follows:

          A. To advise the  Placement  Agent and the  Investor  of any  material
     adverse change in the Company's financial condition,  prospects or business
     or of any development  materially affecting the Company or rendering untrue
     or misleading any material statement in the Offering Materials occurring at
     any  time as soon as the  Company  is  either  informed  or  becomes  aware
     thereof.

          B. To use its  commercially  reasonable  efforts  to cause the  Common
     Stock issuable in connection with the Standby Equity Distribution Agreement
     to be  qualified  or  registered  for sale on terms  consistent  with those
     stated in the  Registration  Rights Agreement and under the securities laws
     of  such  jurisdictions  as the  Placement  Agent  and the  Investor  shall
     reasonably request.  Qualification,  registration and exemption charges and
     fees shall be at the sole cost and expense of the Company.

          C. Upon  written  request,  to provide  and  continue  to provide  the
     Placement  Agent  and  the  Investor  copies  of  all  quarterly  financial
     statements and audited annual financial statements prepared by or on behalf
     of the Company,  other reports  prepared by or on behalf of the Company for
     public   disclosure   and  all   documents   delivered  to  the   Company's
     stockholders.

          D. To deliver,  during the  registration  period of the Standby Equity
     Distribution Agreement, to the Investor upon the Investor's request, within
     forty five (45) days,  a  statement  of its income for each such  quarterly
     period,  and its balance sheet and a statement of changes in  stockholders'
     equity as of the end of such quarterly  period,  all in reasonable  detail,
     certified by its  principal  financial or accounting  officer;  (ii) within
     ninety (90) days after the close of each fiscal year,  its balance sheet as
     of the close of such fiscal year,  together  with a statement of income,  a
     statement of changes in  stockholders'  equity and a statement of cash flow
     for such fiscal year, such balance sheet, statement of income, statement of
     changes  in  stockholders'  equity  and  statement  of  cash  flow to be in
     reasonable  detail and  accompanied by a copy of the  certificate or report
     thereon  of  independent  auditors  if  audited  financial  statements  are
     prepared;  and  (iii)  a copy of all  documents,  reports  and  information
     furnished to its stockholders at the time that such documents,  reports and
     information are furnished to its stockholders.

          E. To comply with the terms of the Offering Materials.

          F. To ensure that any  transactions  between or among the Company,  or
     any of its officers,  directors and  affiliates be on terms and  conditions
     that are no less  favorable to the Company,  than the terms and  conditions
     that  would  be  available  in  an  "arm's  length"   transaction  with  an
     independent third party.

     7. Indemnification and Limitation of Liability.

          A. The  Company  hereby  agrees  that it will  indemnify  and hold the
     Placement  Agent  and each  officer,  director,  shareholder,  employee  or
     representative  of  the  Placement  Agent

<PAGE>

     and each person controlling, controlled by or under common control with the
     Placement Agent within the meaning of Section 15 of the 1933 Act or Section
     20 of  the  1934  Act  or  the  SEC's  Rules  and  Regulations  promulgated
     thereunder (the "Rules and Regulations"), harmless from and against any and
     all loss, claim, damage,  liability, cost or expense whatsoever (including,
     but not limited to, any and all  reasonable  legal fees and other  expenses
     and disbursements  incurred in connection with investigating,  preparing to
     defend or defending any action,  suit or proceeding,  including any inquiry
     or  investigation,  commenced or threatened,  or any claim whatsoever or in
     appearing or preparing for  appearance as a witness in any action,  suit or
     proceeding,  including any inquiry,  investigation  or pretrial  proceeding
     such as a  deposition)  to which the  Placement  Agent or such  indemnified
     person of the  Placement  Agent may become  subject under the 1933 Act, the
     1934 Act, the Rules and  Regulations,  or any other federal or state law or
     regulation,  common law or otherwise,  arising out of or based upon (i) any
     untrue  statement or alleged untrue  statement of a material fact contained
     in (a) Section 4 of this  Agreement,  (b) the  Offering  Materials  (except
     those  written  statements  relating  to the  Placement  Agent given by the
     Placement  Agent  for  inclusion  therein),  (c) any  application  or other
     document  or written  communication  executed  by the Company or based upon
     written  information  furnished by the Company filed in any jurisdiction in
     order to qualify the Common Stock under the securities laws thereof, or any
     state  securities  commission  or  agency;  (ii) the  omission  or  alleged
     omission  from  documents  described  in clauses (a), (b) or (c) above of a
     material  fact  required  to be stated  therein  or  necessary  to make the
     statements   therein   not   misleading;   or  (iii)  the   breach  of  any
     representation, warranty, covenant or agreement made by the Company in this
     Agreement.  The Company  further  agrees that upon demand by an indemnified
     person,  at any time or from time to time, it will promptly  reimburse such
     indemnified person for any loss, claim, damage, liability,  reasonable cost
     or expense actually paid by the indemnified  person as to which the Company
     has indemnified such person pursuant hereto.  Notwithstanding the foregoing
     provisions of this Paragraph 7(A), any such payment or reimbursement by the
     Company of fees,  expenses  or  disbursements  incurred  by an  indemnified
     person in any  proceeding in which a final judgment by a court of competent
     jurisdiction  (after all  appeals or the  expiration  of time to appeal) is
     entered against the Placement Agent or such  indemnified  person based upon
     specific  finding  of fact  that the  Placement  Agent or such  indemnified
     person's gross negligence or willful misfeasance will be promptly repaid to
     the Company.

          B. The Placement  Agent hereby agrees that it will  indemnify and hold
     the  Company  and  each  officer,   director,   shareholder,   employee  or
     representative of the Company,  and each person controlling,  controlled by
     or under common  control with the Company  within the meaning of Section 15
     of the 1933 Act or Section 20 of the 1934 Act or the Rules and Regulations,
     harmless from and against any and all loss, claim, damage,  liability, cost
     or  expense  whatsoever  (including,  but  not  limited  to,  any  and  all
     reasonable  legal fees and other  expenses  and  disbursements  incurred in
     connection with investigating, preparing to defend or defending any action,
     suit or proceeding,  including any inquiry or  investigation,  commenced or
     threatened,  or any claim  whatsoever  or in  appearing  or  preparing  for
     appearance as a witness in any action,  suit or  proceeding,  including any
     inquiry,  investigation  or pretrial  proceeding  such as a deposition)  to
     which the  Company or such  indemnified  person of the  Company  may become
     subject under the 1933 Act, the 1934 Act, the Rules and Regulations, or any
     other federal or state law or regulation,  common law or otherwise, arising
     out of or  based  upon  (i)  the  material  breach  of any  representation,
     warranty,  covenant  or  agreement  made  by the  Placement  Agent  in this
     Agreement,  or (ii) any false or  misleading  information  provided  to the
     Company in  writing by

<PAGE>

     one of the Placement Agent's indemnified persons specifically for inclusion
     in the Offering Materials.

          C. The  Investor  hereby  agrees that it will  indemnify  and hold the
     Placement  Agent  and each  officer,  director,  shareholder,  employee  or
     representative  of  the  Placement  Agent,  and  each  person  controlling,
     controlled by or under common  control with the Placement  Agent within the
     meaning  of Section 15 of the 1933 Act or Section 20 of the 1934 Act or the
     Rules and Regulations,  harmless from and against any and all loss,  claim,
     damage, liability,  cost or expense whatsoever (including,  but not limited
     to, any and all reasonable legal fees and other expenses and  disbursements
     incurred in connection with investigating, preparing to defend or defending
     any action,  suit or  proceeding,  including any inquiry or  investigation,
     commenced  or  threatened,  or any  claim  whatsoever  or in  appearing  or
     preparing for  appearance as a witness in any action,  suit or  proceeding,
     including  any  inquiry,  investigation  or pretrial  proceeding  such as a
     deposition) to which the Placement Agent or such indemnified  person of the
     Placement  Agent may become  subject  under the 1933 Act, the 1934 Act, the
     Rules and  Regulations,  or any other  federal or state law or  regulation,
     common law or  otherwise,  arising  out of or based upon (i) the conduct of
     the Investor or its officers, employees or representatives in its acting as
     the  Investor  for  the   Offering,   (ii)  the  material   breach  of  any
     representation, warranty, covenant or agreement made by the Investor in the
     Offering Materials,  or (iii) any false or misleading  information provided
     to the Placement Agent by one of the Investor's indemnified persons.

          D. The Placement  Agent hereby agrees that it will  indemnify and hold
     the  Investor  and  each  officer,  director,   shareholder,   employee  or
     representative of the Investor, and each person controlling,  controlled by
     or under common control with the Investor  within the meaning of Section 15
     of the 1933 Act or Section 20 of the 1934 Act or the Rules and Regulations,
     harmless from and against any and all loss, claim, damage,  liability, cost
     or  expense  whatsoever  (including,  but  not  limited  to,  any  and  all
     reasonable  legal fees and other  expenses  and  disbursements  incurred in
     connection with investigating, preparing to defend or defending any action,
     suit or proceeding,  including any inquiry or  investigation,  commenced or
     threatened,  or any claim  whatsoever  or in  appearing  or  preparing  for
     appearance as a witness in any action,  suit or  proceeding,  including any
     inquiry,  investigation  or pretrial  proceeding  such as a deposition)  to
     which the  Investor or such  indemnified  person of the Investor may become
     subject under the 1933 Act, the 1934 Act, the Rules and Regulations, or any
     other federal or state law or regulation,  common law or otherwise, arising
     out of or based upon the material breach of any  representation,  warranty,
     covenant or agreement  made by the Placement  Agent in this  Agreement.

          E.  Promptly  after  receipt  by an  indemnified  party of  notice  of
     commencement  of any action  covered by Section 7(A),  (B), (C) or (D), the
     party to be indemnified  shall,  within five (5) business days,  notify the
     indemnifying  party of the  commencement  thereof;  the omission by one (1)
     indemnified party to so notify the indemnifying party shall not relieve the
     indemnifying  party of its  obligation to indemnify  any other  indemnified
     party that has given such  notice and shall not  relieve  the  indemnifying
     party of any liability  outside of this  indemnification  if not materially
     prejudiced  thereby.  In the event that any action is brought  against  the
     indemnified  party, the indemnifying  party will be entitled to participate
     therein and, to the extent it may desire, to assume and control the defense
     thereof with counsel  chosen by it which is  reasonably  acceptable  to the
     indemnified  party.  After  notice  from

<PAGE>

     the  indemnifying  party to such  indemnified  party of its  election to so
     assume the defense thereof,  the  indemnifying  party will not be liable to
     such  indemnified  party under such Section 7(A),  (B), (C), or (D) for any
     legal or other expenses  subsequently incurred by such indemnified party in
     connection with the defense thereof,  but the indemnified party may, at its
     own expense,  participate in such defense by counsel chosen by it, without,
     however, impairing the indemnifying party's control of the defense. Subject
     to the proviso of this sentence and  notwithstanding any other statement to
     the contrary  contained herein, the indemnified party or parties shall have
     the right to choose its or their own counsel and control the defense of any
     action,  all at the expense of the indemnifying party if (i) the employment
     of such counsel shall have been  authorized in writing by the  indemnifying
     party in  connection  with the defense of such action at the expense of the
     indemnifying  party, or (ii) the indemnifying party shall not have employed
     counsel reasonably satisfactory to such indemnified party to have charge of
     the  defense  of such  action  within a  reasonable  time  after  notice of
     commencement  of the  action,  or (iii) such  indemnified  party or parties
     shall have reasonably  concluded that there may be defenses available to it
     or them which are different from or additional to those available to one or
     all of the  indemnifying  parties (in which case the  indemnifying  parties
     shall not have the right to direct the  defense of such action on behalf of
     the  indemnified  party or  parties),  in any of which events such fees and
     expenses  of one  additional  counsel  shall be  borne by the  indemnifying
     party;  provided,  however,  that the  indemnifying  party  shall  not,  in
     connection  with any one action or separate  but  substantially  similar or
     related  actions in the same  jurisdiction  arising out of the same general
     allegations or circumstance, be liable for the reasonable fees and expenses
     of more  than  one  separate  firm of  attorneys  at any  time for all such
     indemnified  parties.  No settlement of any action or proceeding against an
     indemnified  party shall be made  without  the consent of the  indemnifying
     party.

          F. In  order  to  provide  for  just  and  equitable  contribution  in
     circumstances in which the indemnification  provided for in Section 7(A) or
     7(B) is due in  accordance  with its terms but is for any reason  held by a
     court to be unavailable on grounds of policy or otherwise,  the Company and
     the  Placement  Agent shall  contribute to the  aggregate  losses,  claims,
     damages  and  liabilities  (including  legal or other  expenses  reasonably
     incurred in connection with the investigation or defense of same) which the
     other may incur in such  proportion  so that the  Placement  Agent shall be
     responsible  for such  percent of the  aggregate  of such  losses,  claims,
     damages and liabilities as shall equal the percentage of the gross proceeds
     paid to the Placement  Agent and the Company shall be  responsible  for the
     balance;   provided,   however,   that  no  person   guilty  of  fraudulent
     misrepresentation within the meaning of Section 11(f) of the 1933 Act shall
     be  entitled  to  contribution  from any  person who was not guilty of such
     fraudulent misrepresentation. For purposes of this Section 7(F), any person
     controlling,  controlled  by or under  common  control  with the  Placement
     Agent, or any partner, director,  officer, employee,  representative or any
     agent of any  thereof,  shall have the same rights to  contribution  as the
     Placement Agent and each person controlling,  controlled by or under common
     control  with the Company  within the meaning of Section 15 of the 1933 Act
     or Section  20 of the 1934 Act and each  officer  of the  Company  and each
     director of the Company shall have the same rights to  contribution  as the
     Company. Any party entitled to contribution will, promptly after receipt of
     notice of commencement of any action, suit or proceeding against such party
     in respect of which a claim for  contribution may be made against the other
     party under this Section 7(D), notify such party from whom contribution may
     be sought,  but the  omission to so notify such party shall not relieve the
     party from whom  contribution  may be sought from any  obligation  they may
     have

<PAGE>

     hereunder or otherwise if the party from whom contribution may be sought is
     not materially prejudiced thereby.

          G. The indemnity and contribution agreements contained in this Section
     7 shall remain  operative  and in full force and effect  regardless  of any
     investigation  made  by or on  behalf  of  any  indemnified  person  or any
     termination of this Agreement.

          H. The Company hereby waives,  to the fullest extent permitted by law,
     any right to or claim of any  punitive,  exemplary,  incidental,  indirect,
     special,  consequential or other damages  (including,  without  limitation,
     loss of profits)  against the Placement  Agent and each officer,  director,
     shareholder,  employee or  representative  of the placement  agent and each
     person  controlling,  controlled  by  or  under  common  control  with  the
     Placement Agent within the meaning of Section 15 of the 1933 Act or Section
     20 of the 1934 Act or the Rules and  Regulations  arising  out of any cause
     whatsoever  (whether  such cause be based in contract,  negligence,  strict
     liability,  other  tort  or  otherwise).  Notwithstanding  anything  to the
     contrary contained herein,  the aggregate  liability of the Placement Agent
     and each officer, director, shareholder,  employee or representative of the
     Placement Agent and each person controlling,  controlled by or under common
     control  with the  Placement  Agent within the meaning of Section 15 of the
     1933 Act or Section 20 of the 1934 Act or the Rules and  Regulations  shall
     not exceed the  compensation  received by the Placement  Agent  pursuant to
     Section 2 hereof.  This limitation of liability  shall apply  regardless of
     the cause of action, whether contract, tort (including, without limitation,
     negligence)   or  breach  of  statute  or  any  other  legal  or  equitable
     obligation.

     8. Payment of Expenses.

     The Company  hereby agrees to bear all of the expenses in  connection  with
the Offering, including, but not limited to the following: filing fees, printing
and duplicating costs, advertisements, postage and mailing expenses with respect
to the  transmission of Offering  Materials,  registrar and transfer agent fees,
escrow agent fees and expenses,  fees of the Company's  counsel and accountants,
issue and transfer taxes, if any.

     9. Conditions of Closing.

     The Closing  shall be held at the offices of the  Investor or its  counsel.
The  obligations  of the  Placement  Agent  hereunder  shall be  subject  to the
continuing accuracy of the representations and warranties of the Company and the
Investor  herein  as of the  date  hereof  and as of the  Date of  Closing  (the
"Closing Date") with respect to the Company or the Investor, as the case may be,
as if it had been made on and as of such Closing Date; the accuracy on and as of
the Closing Date of the  statements of the officers of the Company made pursuant
to the provisions hereof; and the performance by the Company and the Investor on
and as of the Closing Date of its covenants and obligations hereunder and to the
following further conditions:

          A. Upon the  effectiveness  of a registration  statement  covering the
     Standby Equity Distribution Agreement, the Investor and the Placement Agent
     shall  receive the opinion of Counsel to the Company,  dated as of the date
     thereof,   which  opinion  shall  be  in  form  and  substance   reasonably
     satisfactory to the Investor, their counsel and the Placement Agent.

          B. At or prior to the Closing,  the Investor and the  Placement  Agent
     shall have been furnished such documents,  certificates  and opinions as it
     may  reasonably  require for the

<PAGE>

     purpose of enabling them to review or pass upon the matters  referred to in
     this  Agreement  and the  Offering  Materials,  or in order to evidence the
     accuracy,  completeness  or  satisfaction  of any  of the  representations,
     warranties or conditions herein contained.

          C. At and prior to the Closing,  (i) there shall have been no material
     adverse  change  nor  development  involving  a  prospective  change in the
     condition or prospects or the business activities,  financial or otherwise,
     of the  Company  from the latest  dates as of which such  condition  is set
     forth in the Offering Materials; (ii) there shall have been no transaction,
     not in the ordinary course of business except the transactions  pursuant to
     the Securities  Purchase  Agreement entered into by the Company on the date
     hereof which has not been  disclosed  in the  Offering  Materials or to the
     Placement  Agent in  writing;  (iii)  except as set  forth in the  Offering
     Materials,  the Company  shall not be in default under any provision of any
     instrument  relating to any outstanding  indebtedness for which a waiver or
     extension has not been otherwise received;  (iv) except as set forth in the
     Offering Materials, the Company shall not have issued any securities (other
     than those to be issued as provided in the Offering  Materials) or declared
     or paid any dividend or made any  distribution  of its capital stock of any
     class and there shall not have been any change in the indebtedness (long or
     short term) or liabilities  or  obligations  of the Company  (contingent or
     otherwise) and trade payable debt; (v) no material  amount of the assets of
     the Company  shall have been pledged or  mortgaged,  except as indicated in
     the Offering Materials; and (v) no action, suit or proceeding, at law or in
     equity,  against  the  Company  or  affecting  any  of  its  properties  or
     businesses shall be pending or threatened before or by any court or federal
     or state  commission,  board or other  administrative  agency,  domestic or
     foreign,   wherein  an  unfavorable  decision,   ruling  or  finding  could
     materially   adversely  affect  the  businesses,   prospects  or  financial
     condition  or income of the  Company,  except as set forth in the  Offering
     Materials.

          D. If requested at Closing the Investor and the Placement  Agent shall
     receive a  certificate  of the Company  signed by an executive  officer and
     chief financial officer,  dated as of the applicable Closing, to the effect
     that the conditions set forth in subparagraph (C) above have been satisfied
     and that, as of the applicable closing,  the representations and warranties
     of the Company set forth herein are true and correct.

          E. The Placement Agent shall have no obligation to insure that (x) any
     check,  note,  draft or other means of payment for the Common Stock will be
     honored,  paid or enforceable  against the Investor in accordance  with its
     terms,  or  (y)  subject  to  the  performance  of  the  Placement  Agent's
     obligations and the accuracy of the Placement Agent's  representations  and
     warranties  hereunder,  (1) the  Offering is exempt  from the  registration
     requirements of the 1933 Act or any applicable  state "Blue Sky" law or (2)
     the Investor is an Accredited Investor.

     10. Termination.

     This Agreement shall be co-terminus with, and terminate upon the same terms
and conditions as those set forth in, the Standby Equity Distribution Agreement.
The  rights  of the  Investor  and the  obligations  of the  Company  under  the
Registration  Rights  Agreement,  and the rights of the Placement  Agent and the
obligations  of the Company  shall  survive the  termination  of this  Agreement
unabridged.
<PAGE>

     11. Miscellaneous.

          A. This Agreement may be executed in any number of counterparts,  each
     of which shall be deemed to be an  original,  but all which shall be deemed
     to be one and the same instrument.

          B. Any notice  required or  permitted to be given  hereunder  shall be
     given in writing and shall be deemed effective when deposited in the United
     States mail, postage prepaid,  or when received if personally  delivered or
     faxed  (upon  confirmation  of  receipt  received  by the  sending  party),
     addressed as follows to such other address of which written notice is given
     to the others):

If to Placement Agent, to:             Newbridge Securities Corporation
                                       1451 Cypress Creek Road, Suite 204
                                       Fort Lauderdale, Florida 33309
                                       Attention:        Doug Aguililla
                                       Telephone:        (954) 334-3450
                                       Facsimile:        (954) 229-9937

If to the Company, to:                 Productivity Technologies Corporation
                                       3100 Copper Avenue
                                       Fenton, Michigan 48430
                                       Attention:        Jesse Levine, CFO
                                       Telephone:        (248) 219-5500
                                       Facsimile:        (248) 645-9701

With a copy to:                        Kirkpatrick & Lockhart LLP
                                       201 South Biscayne Boulevard - Suite 2000
                                       Miami, Florida  33131-2399
                                       Attention:        Clayton E. Parker, Esq.
                                       Telephone:        (305) 539-3300
                                       Facsimile:        (305) 358-7095

If to the Investor:                    Cornell Capital Partners, LP
                                       101 Hudson Street - Suite 3700
                                       Jersey City, New Jersey  07302
                                       Attention:        Mark A. Angelo
                                                         Portfolio Manager
                                       Telephone:        (201) 985-8300
                                       Facsimile:        (201) 985-8266

With copies to:                        Cornell Capital Partners, LP
                                       101 Hudson Street - Suite 3700
                                       Jersey City, New Jersey  07302
                                       Attention:        Troy J. Rillo
                                       Telephone:        (201) 985-8300
                                       Facsimile:        (201) 985-8266
<PAGE>

          C. This  Agreement  shall be governed by and construed in all respects
     under  the  laws of the  State  of New  Jersey,  without  reference  to its
     conflict  of laws rules or  principles.  Any suit,  action,  proceeding  or
     litigation  arising out of or relating to this  Agreement  shall be brought
     and  prosecuted in such federal or state court or courts located within the
     State of New Jersey as provided by law. The parties hereby  irrevocably and
     unconditionally  consent to the  jurisdiction  of each such court or courts
     located  within  the State of New  Jersey  and to  service  of  process  by
     registered or certified  mail,  return receipt  requested,  or by any other
     manner   provided  by   applicable   law,   and  hereby   irrevocably   and
     unconditionally waive any right to claim that any suit, action,  proceeding
     or litigation so commenced has been commenced in an inconvenient forum.

          D. This Agreement and the other agreements  referenced  herein contain
     the entire understanding between the parties hereto and may not be modified
     or  amended  except by a writing  duly  signed  by the party  against  whom
     enforcement of the modification or amendment is sought.

          E. If any provision of this  Agreement  shall be held to be invalid or
     unenforceable,  such  invalidity or  unenforceability  shall not affect any
     other provision of this Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
     of the date first written above.

                                       COMPANY:
                                       PRODUCTIVITY TECHNOLOGIES CORPORATION

                                       By:      /s/Jesse A. Levine
                                          --------------------------------------
                                       Name:    Jesse A. Levine
                                       Title:   CFO

                                       PLACEMENT AGENT:
                                       NEWBRIDGE SECURITIES CORPORATION

                                       By:      /s/Guy S. Amico
                                          --------------------------------------
                                       Name:    Guy S. Amico
                                       Title:   President

                                       INVESTOR:
                                       CORNELL CAPITAL PARTNERS, LP

                                       By:      Yorkville Advisors, LLC
                                       Its:     General Partner

                                       By:      /s/Mark Angelo
                                          --------------------------------------
                                       Name:    Mark A. Angelo
                                       Title:   Portfolio Manager

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