Document:

EXHIBIT 10.7

                      STANDBY EQUITY DISTRIBUTION AGREEMENT

     THIS STANDBY EQUITY  DISTRIBUTION  AGREEMENT dated as of June 21, 2004 (the
"Agreement")   between  CORNELL  CAPITAL   PARTNERS,   LP,  a  Delaware  limited
partnership (the  "Investor"),  and  PRODUCTIVITY  TECHNOLOGIES  CORPORATION,  a
corporation  organized and existing under the laws of the State of Delaware (the
"Company").

     WHEREAS,  the  parties  desire  that,  upon the  terms and  subject  to the
conditions  contained herein,  the Company shall issue and sell to the Investor,
from time to time as provided  herein,  and the Investor shall purchase from the
Company up to Five Million Dollars  ($5,000,000) of the Company's  common stock,
par value $0.001 per share (the "Common Stock"); and

     WHEREAS,  such  investments will be made in reliance upon the provisions of
Regulation D ("Regulation D") of the Securities Act of 1933, as amended, and the
regulations  promulgated  thereunder (the  "Securities  Act"),  and or upon such
other exemption from the registration  requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.

     WHEREAS,  the Company has engaged  Newbridge  Securities  Corporation  (the
"Placement  Agent"),  to act as  the  Company's  exclusive  placement  agent  in
connection with the sale of the Company's Common Stock to the Investor hereunder
pursuant to the Placement Agent Agreement dated the date hereof by and among the
Company, the Placement Agent and the Investor (the "Placement Agent Agreement").

     NOW, THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I.
                               Certain Definitions

     Section  1.1.  "Advance"  shall mean the portion of the  Commitment  Amount
requested by the Company in the Advance Notice.

     Section 1.2.  "Advance Date" shall mean the date Butler Gonzalez LLP Escrow
Account is in receipt of the funds from the Investor and Butler Gonzalez LLP, as
the Investor's Counsel, is in possession of free trading shares from the Company
and  therefore  an Advance by the Investor to the Company can be made and Butler
Gonzalez LLP can release the free trading  shares to the  Investor.  The Advance
Date shall be one (1) Trading Day after an applicable Pricing Period.

     Section 1.3.  "Advance  Notice" shall mean a written notice to the Investor
setting forth the Advance amount that the Company requests from the Investor and
the Advance Date.

     Section  1.4.  "Advance  Notice  Date"  shall  mean each  date the  Company
delivers to the  Investor an Advance  Notice  requiring  the Investor to advance
funds to the Company,  subject to the terms of this Agreement. No Advance Notice
Date shall be less than seven (7) Trading  Days after the prior  Advance  Notice
Date.
<PAGE>

     Section 1.5. "Bid Price" shall mean, on any date, the closing bid price (as
reported by Bloomberg  L.P.) of the Common Stock on the  Principal  Market or if
the Common Stock is not traded on a Principal  Market,  the highest reported bid
price  for the  Common  Stock,  as  furnished  by the  National  Association  of
Securities Dealers, Inc.

     Section  1.6.  "Closing"  shall mean one of the  closings of a purchase and
sale of Common Stock pursuant to Section 2.3.

     Section 1.7.  "Commitment  Amount" shall mean the aggregate amount of up to
Five Million  Dollars  ($5,000,000)  which the Investor has agreed to provide to
the Company in order to purchase  the  Company's  Common  Stock  pursuant to the
terms and conditions of this Agreement.

     Section 1.8.  "Commitment  Period" shall mean the period  commencing on the
earlier to occur of (i) the  Effective  Date,  or (ii) such  earlier date as the
Company and the  Investor  may  mutually  agree in writing,  and expiring on the
earliest to occur of (x) the date on which the Investor  shall have made payment
of Advances  pursuant to this Agreement in the aggregate  amount of Five Million
Dollars  ($5,000,000),  (y) the date this  Agreement is  terminated  pursuant to
Section  2.5,  or (z) the date  occurring  twenty-four  (24)  months  after  the
Effective Date.

     Section 1.9.  "Common  Stock" shall mean the Company's  common  stock,  par
value $0.001 per share.

     Section  1.10.  "Condition  Satisfaction  Date"  shall have the meaning set
forth in Section 7.2.

     Section 1.11.  "Damages"  shall mean any loss,  claim,  damage,  liability,
costs and expenses (including,  without limitation,  reasonable  attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).

     Section 1.12.  "Effective  Date" shall mean the date on which the SEC first
declares  effective  a  Registration  Statement  registering  the  resale of the
Registrable Securities as set forth in Section 7.2(a).

     Section 1.13.  "Escrow Agreement" shall mean the escrow agreement among the
Company, the Investor, and Butler Gonzalez LLP, dated the date hereof.

     Section  1.14.  "Exchange  Act" shall mean the  Securities  Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.

     Section  1.15.   "Material   Adverse  Effect"  shall  mean  any  condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations
under this  Agreement  or the  Registration  Rights  Agreement  in any  material
respect.
<PAGE>

     Section 1.16. "Market Price" shall mean the lowest VWAP of the Common Stock
during the Pricing Period.

     Section  1.17.  "Maximum  Advance  Amount"  shall be Two  Hundred  Thousand
Dollars ($200,000) per Advance Notice.

     Section  1.18.  "NASD" shall mean the National  Association  of  Securities
Dealers, Inc.

     Section  1.19.  "Person"  shall  mean  an  individual,  a  corporation,   a
partnership, an association, a trust or other entity or organization,  including
a government or political subdivision or an agency or instrumentality thereof.

     Section   1.20.   "Placement   Agent"  shall  mean   Newbridge   Securities
Corporation, a registered broker-dealer.

     Section 1.21.  "Pricing Period" shall mean the five (5) consecutive Trading
Days after the Advance Notice Date.

     Section 1.22. "Principal Market" shall mean the Nasdaq National Market, the
Nasdaq SmallCap Market, the American Stock Exchange, the OTC Bulletin Board, the
New York  Stock  Exchange,  or the "Pink  Sheets"  whichever  is at the time the
principal trading exchange or market for the Common Stock.

     Section 1.23. "Purchase Price" shall be set at ninety nine percent (99%) of
the Market Price during the Pricing Period.

     Section  1.24.  "Registrable  Securities"  shall  mean the shares of Common
Stock to be issued hereunder (i) in respect of which the Registration  Statement
has not been declared  effective by the SEC, (ii) which have not been sold under
circumstances  meeting  all of the  applicable  conditions  of Rule  144 (or any
similar  provision then in force) under the Securities Act ("Rule 144") or (iii)
which have not been otherwise  transferred to a holder who may trade such shares
without  restriction  under the Securities  Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.

     Section 1.25.  "Registration  Rights Agreement" shall mean the Registration
Rights Agreement dated the date hereof, regarding the filing of the Registration
Statement for the resale of the Registrable Securities, entered into between the
Company and the Investor.

     Section 1.26.  "Registration Statement" shall mean a registration statement
on Form  S-1 or  SB-2  (if use of such  form is then  available  to the  Company
pursuant to the rules of the SEC and, if not, on such other form  promulgated by
the SEC for which the Company then  qualifies  and which counsel for the Company
shall deem appropriate,  and which form shall be available for the resale of the
Registrable  Securities  to be  registered  thereunder  in  accordance  with the
provisions  of this  Agreement and the  Registration  Rights  Agreement,  and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable  Securities  under
the Securities Act.
<PAGE>

     Section  1.27.  "Regulation  D" shall  have the  meaning  set  forth in the
recitals of this Agreement.

     Section 1.28. "SEC" shall mean the Securities and Exchange Commission.

     Section  1.29.  "Securities  Act" shall have the  meaning  set forth in the
recitals of this Agreement.

     Section 1.30.  "SEC  Documents"  shall mean Annual  Reports on Form 10-KSB,
Quarterly  Reports  on  Form  10-QSB,  Current  Reports  on Form  8-K and  Proxy
Statements  of the  Company as  supplemented  to the date  hereof,  filed by the
Company for a period of at least twelve (12) months  immediately  preceding  the
date  hereof or the  Advance  Date,  as the case may be,  until such time as the
Company  no  longer  has  an  obligation  to  maintain  the  effectiveness  of a
Registration Statement as set forth in the Registration Rights Agreement.

     Section  1.31.  "Trading  Day" shall mean any day during which the New York
Stock Exchange shall be open for business.

     Section 1.32.  "VWAP" shall mean the volume  weighted  average price of the
Company's Common Stock as quoted by Bloomberg, LP.

                                   ARTICLE II.
                                    Advances

     Section 2.1. Investments.

          (a)  Advances.   Upon  the  terms  and  conditions  set  forth  herein
     (including,  without limitation,  the provisions of Article VII hereof), on
     any Advance  Notice Date the Company may request an Advance by the Investor
     by the delivery of an Advance Notice.  The number of shares of Common Stock
     that the Investor  shall  receive for each Advance  shall be  determined by
     dividing the amount of the Advance by the  Purchase  Price.  No  fractional
     shares  shall be  issued.  Fractional  shares  shall be rounded to the next
     higher whole number of shares. The aggregate maximum amount of all Advances
     that the Investor shall be obligated to make under this Agreement shall not
     exceed the Commitment Amount.

     Section 2.2. Mechanics.

          (a) Advance  Notice.  At any time during the  Commitment  Period,  the
     Company  may  deliver an  Advance  Notice to the  Investor,  subject to the
     conditions set forth in Section 7.2; provided, however, the amount for each
     Advance as  designated  by the Company in the  applicable  Advance  Notice,
     shall not be more than the Maximum Advance Amount.  The aggregate amount of
     the Advances  pursuant to this  Agreement  shall not exceed the  Commitment
     Amount.  The Company  acknowledges that the Investor may sell shares of the
     Company's Common Stock  corresponding  with a particular  Advance Notice on
     the day the Advance  Notice is received by the  Investor.  There shall be a
     minimum of seven (7) Trading Days between each Advance Notice Date.
<PAGE>

          (b) Date of Delivery of Advance  Notice.  An Advance  Notice  shall be
     deemed  delivered  on (i) the Trading Day it is  received by  facsimile  or
     otherwise  by the  Investor if such notice is received  prior to 12:00 noon
     Eastern  Time,  or (ii) the  immediately  succeeding  Trading  Day if it is
     received by  facsimile  or  otherwise  after 12:00 noon  Eastern  Time on a
     Trading Day or at any time on a day which is not a Trading  Day. No Advance
     Notice may be deemed delivered on a day that is not a Trading Day.

          (c) Pre-Closing  Share Credit.  Within two (2) business days after the
     Advance  Notice  Date,  the Company  shall credit  shares of the  Company's
     Common  Stock  to  the  Investor's   counsel's  balance  account  with  The
     Depository  Trust  Company  through its  Deposit  Withdrawal  At  Custodian
     system,  in an amount equal to the amount of the requested  Advance divided
     by the closing Bid Price of the  Company's  Common  Stock as of the Advance
     Notice  Date  multiplied  by one point one (1.1).  Any  adjustments  to the
     number of shares to be delivered to the Investor at the Closing as a result
     of  fluctuations  in the closing Bid Price of the  Company's  Common  Stock
     shall be made as of the date of the  Closing.  Any excess  shares  shall be
     credited  to the next  Advance.  In no event  shall  the  number  of shares
     issuable to the Investor  pursuant to an Advance  cause the Investor to own
     in excess of nine and 9/10 percent  (9.9%) of the then  outstanding  Common
     Stock of the Company.

          (d) Hardship.  In the event the Investor  sells the  Company's  Common
     Stock pursuant to subsection (c) above and the Company fails to perform its
     obligations as mandated in Section 2.5 and 2.2 (c), and specifically  fails
     to provide the Investor with the shares of Common Stock for the  applicable
     Advance,  the Company acknowledges that the Investor shall suffer financial
     hardship and therefore shall be liable for any and all losses, commissions,
     fees, or financial hardship caused to the Investor.

     Section 2.3. Closings. On each Advance Date, which shall be one (1) Trading
Day after the applicable  Pricing  Period,  (i) the Company shall deliver to the
Investor's Counsel,  as defined pursuant to the Escrow Agreement,  shares of the
Company's  Common Stock,  representing the amount of the Advance by the Investor
pursuant to Section 2.1 herein,  registered  in the name of the  Investor  which
shall be delivered to the Investor,  or otherwise in accordance  with the Escrow
Agreement  and (ii) the  Investor  shall  deliver  to Butler  Gonzalez  LLP (the
"Escrow  Agent") the amount of the Advance  specified  in the Advance  Notice by
wire  transfer of  immediately  available  funds which shall be delivered to the
Company, or otherwise in accordance with the Escrow Agreement.  In addition,  on
or prior to the Advance Date, each of the Company and the Investor shall deliver
to the other through the  Investor's  Counsel,  all documents,  instruments  and
writings  required to be delivered by either of them pursuant to this  Agreement
in order to implement and effect the transactions  contemplated herein.  Payment
of funds to the  Company  and  delivery  of the  Company's  Common  Stock to the
Investor shall occur in accordance with the conditions set forth above and those
contained in the Escrow  Agreement;  provided,  however,  that to the extent the
Company has not paid the fees, expenses,  and disbursements of the Investor, the
Investor's  counsel or  Kirkpatrick  & Lockhart LLP in  accordance  with Section
12.4, the amount of such fees,  expenses,  and  disbursements may be deducted by
the Investor  (and shall be paid to the  relevant  party) from the amount of the
Advance with no reduction in the amount of shares of the Company's  Common Stock
to be delivered on such Advance Date.
<PAGE>

     Section 2.4.  Termination of Investment.  The obligation of the Investor to
make an  Advance to the  Company  pursuant  to this  Agreement  shall  terminate
permanently  (including  with  respect  to an  Advance  Date  that  has  not yet
occurred)  in the event that (i) there shall occur any stop order or  suspension
of the  effectiveness  of the  Registration  Statement for an aggregate of fifty
(50)  Trading  Days,  other  than due to the acts of the  Investor,  during  the
Commitment  Period,  and (ii) the Company  shall at any time fail  materially to
comply with the  requirements of Article VI and such failure is not cured within
thirty (30) days after receipt of written  notice from the  Investor,  provided,
however,  that  this  termination  provision  shall  not  apply  to  any  period
commencing upon the filing of a  post-effective  amendment to such  Registration
Statement  and ending upon the date on which such post  effective  amendment  is
declared effective by the SEC.

     Section 2.5. Agreement to Advance Funds.

          (a) The Investor agrees to advance the amount specified in the Advance
     Notice  to the  Company  after  the  completion  of each  of the  following
     conditions and the other conditions set forth in this Agreement:

               (i) the execution and delivery by the Company,  and the Investor,
          of this Agreement and the Exhibits hereto;

               (ii) Investor's  Counsel shall have received the shares of Common
          Stock  applicable  to the Advance in  accordance  with Section  2.2(c)
          hereof;

               (iii) the Company's  Registration  Statement  with respect to the
          resale of the  Registrable  Securities in accordance with the terms of
          the Registration  Rights Agreement shall have been declared  effective
          by the SEC;

               (iv) the Company  shall have  obtained all  material  permits and
          qualifications required by any applicable state for the offer and sale
          of the  Registrable  Securities,  or shall  have the  availability  of
          exemptions  therefrom.  The  sale  and  issuance  of  the  Registrable
          Securities  shall be legally  permitted by all laws and regulations to
          which the Company is subject;

               (v) the Company shall have filed with the  Commission in a timely
          manner  all  reports,  notices  and  other  documents  required  of  a
          "reporting  company" under the Exchange Act and applicable  Commission
          regulations;

               (vi) the fees as set forth in Section  12.4 below shall have been
          paid or can be withheld as provided in Section 2.3; and

               (vii) the  conditions  set forth in  Section  7.2 shall have been
          satisfied.

               (viii)  The  Company  shall  have  provided  to the  Investor  an
          acknowledgement,  from  Follmer  Rudzewicz  PLC as to its  ability  to
          provide  all  consents  required  in  order  to  file  a  registration
          statement in connection with this transaction;

               (ix) The Company's transfer agent shall be DWAC eligible.
<PAGE>

     Section 2.6. Lock Up Period.

               (i) During the Commitment  Period, the Company shall not issue or
          sell (i) any Common Stock or Preferred Stock without  consideration or
          for a  consideration  per share less than the Bid Price on the date of
          issuance or (ii) issue or sell any warrant,  option, right,  contract,
          call, or other security or instrument  granting the holder thereof the
          right  to  acquire  Common  Stock  without   consideration  or  for  a
          consideration  per  share  less  than  the Bid  Price  on the  date of
          issuance.

               (ii) On the date  hereof,  the  Company  shall  obtain  from each
          officer and director a lock-up  agreement,  as defined  below,  in the
          form  annexed  hereto  as  Schedule  2.6  agreeing  to  only  sell  in
          compliance with the volume limitation of Rule 144.

                                  ARTICLE III.
                   Representations and Warranties of Investor

     Investor  hereby  represents  and warrants to, and agrees with, the Company
that the  following  are true and as of the date  hereof and as of each  Advance
Date:

     Section  3.1.   Organization  and  Authorization.   The  Investor  is  duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and has all  requisite  power and  authority to
purchase and hold the securities issuable hereunder.  The decision to invest and
the execution and delivery of this Agreement by such Investor,  the  performance
by such  Investor of its  obligations  hereunder  and the  consummation  by such
Investor of the transactions  contemplated  hereby have been duly authorized and
requires no other  proceedings on the part of the Investor.  The undersigned has
the right,  power and  authority to execute and deliver this  Agreement  and all
other  instruments  (including,  without  limitations,  the Registration  Rights
Agreement), on behalf of the Investor. This Agreement has been duly executed and
delivered by the Investor and,  assuming the  execution and delivery  hereof and
acceptance thereof by the Company,  will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.

     Section 3.2.  Evaluation  of Risks.  The Investor  has such  knowledge  and
experience in financial tax and business  matters as to be capable of evaluating
the  merits  and risks of,  and  bearing  the  economic  risks  entailed  by, an
investment  in the Company and of protecting  its  interests in connection  with
this  transaction.  It recognizes that its investment in the Company  involves a
high degree of risk.

     Section 3.3. No Legal Advice From the  Company.  The Investor  acknowledges
that it had the  opportunity  to  review  this  Agreement  and the  transactions
contemplated  by this Agreement with his or its own legal counsel and investment
and tax  advisors.  The Investor is relying  solely on such counsel and advisors
and  not on any  statements  or  representations  of the  Company  or any of its
representatives  or agents for legal,  tax or investment  advice with respect to
this  investment,  the  transactions  contemplated  by  this  Agreement  or  the
securities laws of any jurisdiction.

     Section 3.4. Investment Purpose.  The securities are being purchased by the
Investor  for its own  account,  for  investment  and  without  any  view to the
distribution, assignment or resale to

<PAGE>

others or  fractionalization  in whole or in part.  The  Investor  agrees not to
assign or in any way transfer the  Investor's  rights to the  securities  or any
interest  therein and  acknowledges  that the  Company  will not  recognize  any
purported  assignment or transfer except in accordance  with applicable  Federal
and state securities laws. No other person has or will have a direct or indirect
beneficial  interest  in the  securities.  The  Investor  agrees  not  to  sell,
hypothecate  or  otherwise   transfer  the  Investor's   securities  unless  the
securities are registered  under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to the Company, an exemption from
such laws is available.

     Section 3.5. Accredited Investor.  The Investor is an "Accredited Investor"
as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.

     Section 3.6. Information.  The Investor and its advisors (and its counsel),
if any,  have  been  furnished  with all  materials  relating  to the  business,
finances and  operations of the Company and  information  it deemed  material to
making an informed investment decision.  The Investor and its advisors,  if any,
have been  afforded  the  opportunity  to ask  questions  of the Company and its
management.  Neither such  inquiries nor any other due diligence  investigations
conducted by such Investor or its advisors, if any, or its representatives shall
modify,  amend  or  affect  the  Investor's  right  to  rely  on  the  Company's
representations  and  warranties  contained  in  this  Agreement.  The  Investor
understands that its investment  involves a high degree of risk. The Investor is
in a position  regarding  the  Company,  which,  based upon  employment,  family
relationship or economic bargaining power,  enabled and enables such Investor to
obtain information from the Company in order to evaluate the merits and risks of
this investment. The Investor has sought such accounting,  legal and tax advice,
as it has  considered  necessary to make an informed  investment  decision  with
respect to this transaction.

     Section  3.7.  Receipt of  Documents.  The  Investor  and its counsel  have
received and read in their entirety: (i) this Agreement and the Exhibits annexed
hereto;  (ii) all due  diligence and other  information  necessary to verify the
accuracy and  completeness  of such  representations,  warranties and covenants;
(iii) the Company's Form 10-K for the year ended June 30, 2003 and Form 10-Q for
the period ended March 31, 2003;  and (iv) answers to all questions the Investor
submitted  to the  Company  regarding  an  investment  in the  Company;  and the
Investor  has  relied  on the  information  contained  therein  and has not been
furnished any other documents, literature, memorandum or prospectus.

     Section  3.8.  Registration  Rights  Agreement  and Escrow  Agreement.  The
parties have  entered  into the  Registration  Rights  Agreement  and the Escrow
Agreement, each dated the date hereof.

     Section 3.9. No General  Solicitation.  Neither the Company, nor any of its
affiliates,  nor any person  acting on its or their  behalf,  has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation D under the Securities  Act) in connection  with the offer or sale of
the shares of Common Stock offered hereby.

     Section 3.10. Not an Affiliate. The Investor is not an officer, director or
a person  that  directly,  or  indirectly  through  one or more  intermediaries,
controls or is controlled by, or is under common control with the Company or any
"Affiliate"  of the  Company  (as  that  term  is  defined

<PAGE>

in Rule 405 of the Securities Act).  Neither the Investor nor its Affiliates has
an open short  position in the Common  Stock of the  Company,  and the  Investor
agrees that it will not, and that it will cause its Affiliates not to, engage in
any short sales of or hedging  transactions  with  respect to the Common  Stock,
provided  that the  Company  acknowledges  and  agrees  that upon  receipt of an
Advance  Notice the  Investor  will sell the Shares to be issued to the Investor
pursuant to the Advance  Notice,  even if the Shares have not been  delivered to
the Investor.

     Section 3.11.  Trading  Activities.  The Investor's trading activities with
respect to the Company's Common Stock shall be in compliance with all applicable
federal  and state  securities  laws,  rules and  regulations  and the rules and
regulations  of the  Principal  Market on which the  Company's  Common  Stock is
listed or traded.  Neither the  Investor  nor its  affiliates  has an open short
position in the Common Stock of the Company and, except as set forth below,  the
Investor shall not and will cause its affiliates not to engage in any short sale
as defined in any applicable SEC or National  Association of Securities  Dealers
rules on any hedging  transactions  with  respect to the Common  Stock.  Without
limiting the  foregoing,  the  Investor  agrees not to engage in any naked short
transactions  in excess of the  amount of shares  owned (or an  offsetting  long
position) during the Commitment  Period.  The Investor shall be entitled to sell
Common Stock during the applicable Pricing Period.

                                   ARTICLE IV.
                  Representations and Warranties of the Company

     Except as stated below, on the disclosure  schedules  attached hereto or in
the SEC  Documents  (as defined  herein),  the  Company  hereby  represents  and
warrants to, and  covenants  with,  the Investor that the following are true and
correct as of the date hereof:

     Section  4.1.   Organization  and   Qualification.   The  Company  is  duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and  has  all  requisite  power  and  authority
corporate  power to own its properties and to carry on its business as now being
conducted.  Each of the  Company and its  subsidiaries  is duly  qualified  as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the  business  conducted  by it makes such  qualification
necessary,  except to the extent  that the failure to be so  qualified  or be in
good standing  would not have a Material  Adverse  Effect on the Company and its
subsidiaries taken as a whole.

     Section 4.2. Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the  requisite  corporate  power and authority to enter into
and perform  this  Agreement,  the  Registration  Rights  Agreement,  the Escrow
Agreement,  the  Placement  Agent  Agreement  and  any  related  agreements,  in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement,  the Registration  Rights Agreement,  the Escrow Agreement,  the
Placement  Agent  Agreement  and any related  agreements  by the Company and the
consummation by it of the  transactions  contemplated  hereby and thereby,  have
been duly  authorized by the Company's Board of Directors and no further consent
or  authorization  is required by the  Company,  its Board of  Directors  or its
stockholders,  (iii) this Agreement,  the  Registration  Rights  Agreement,  the
Escrow Agreement,  the Placement Agent Agreement and any related agreements have
been duly  executed  and  delivered  by the Company,  (iv) this  Agreement,  the
Registration  Rights  Agreement,  the  Escrow  Agreement,  the  Placement  Agent
<PAGE>

Agreement and assuming the execution and delivery  thereof and acceptance by the
Investor and any related agreements constitute the valid and binding obligations
of the Company  enforceable  against the Company in accordance with their terms,
except as such  enforceability may be limited by general principles of equity or
applicable bankruptcy,  insolvency,  reorganization,  moratorium, liquidation or
similar laws relating to, or affecting generally,  the enforcement of creditors'
rights and remedies.

     Section  4.3.  Capitalization.  As of the June ___,  2004,  the  authorized
capital stock of the Company consists of 20,000,000  shares of Common Stock, par
value $0.001 per share and 1,000,000  shares of Preferred Stock par value $0.001
of which 2,475,000  shares of Common Stock were issued and  outstanding.  All of
such  outstanding  shares  have  been  validly  issued  and are  fully  paid and
nonassessable.  Except as  disclosed in the SEC  Documents,  no shares of Common
Stock are subject to preemptive  rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company. Except as disclosed in the
SEC  Documents,  as of the date hereof,  (i) there are no  outstanding  options,
warrants,  scrip,  rights to subscribe to, calls or commitments of any character
whatsoever  relating to, or securities or rights convertible into, any shares of
capital  stock  of  the  Company  or  any of  its  subsidiaries,  or  contracts,
commitments,  understandings  or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional  shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character  whatsoever  relating to, or
securities  or rights  convertible  into,  any  shares of  capital  stock of the
Company  or  any  of its  subsidiaries,  (ii)  there  are  no  outstanding  debt
securities (iii) there are no outstanding  registration statements other than on
Form S-8 and (iv)  there  are no  agreements  or  arrangements  under  which the
Company or any of its  subsidiaries  is obligated to register the sale of any of
their  securities  under the Securities Act (except pursuant to the Registration
Rights   Agreement).   There  are  no  securities  or   instruments   containing
anti-dilution or similar  provisions that will be triggered by this Agreement or
any related  agreement or the consummation of the transactions  described herein
or therein. The Company has furnished to the Investor true and correct copies of
the Company's  Certificate of Incorporation,  as amended and as in effect on the
date hereof (the "Certificate of Incorporation"),  and the Company's By-laws, as
in effect on the date hereof (the  "By-laws"),  and the terms of all  securities
convertible  into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.

     Section 4.4. No Conflict.  The execution,  delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated  hereby will not (i) result in a violation  of the  Certificate  of
Incorporation,  any certificate of  designations  of any  outstanding  series of
preferred  stock of the Company or By-laws or (ii) conflict with or constitute a
default (or an event  which with notice or lapse of time or both would  become a
default)  under,  or  give to  others  any  rights  of  termination,  amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its  subsidiaries  is a party, or result in a violation of
any law, rule,  regulation,  order,  judgment or decree  (including  federal and
state  securities  laws and  regulations  and the rules and  regulations  of the
Principal Market on which the Common Stock is quoted)  applicable to the Company
or any of its  subsidiaries  or by which any  material  property or asset of the
Company or any of its  subsidiaries is bound or affected and which would cause a
Material Adverse Effect.  Except as disclosed in the SEC Documents,  neither the
Company nor its subsidiaries is in violation of any

<PAGE>

term of or in default under its Certificate of Incorporation or By-laws or their
organizational  charter or  by-laws,  respectively,  or any  material  contract,
agreement, mortgage,  indebtedness,  indenture,  instrument, judgment, decree or
order or any  statute,  rule or  regulation  applicable  to the  Company  or its
subsidiaries.  The  business of the Company  and its  subsidiaries  is not being
conducted  in  violation  of any  material  law,  ordinance,  regulation  of any
governmental entity.  Except as specifically  contemplated by this Agreement and
as required under the Securities Act and any applicable  state  securities laws,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental  agency in order
for  it to  execute,  deliver  or  perform  any  of  its  obligations  under  or
contemplated  by  this  Agreement  or  the  Registration   Rights  Agreement  in
accordance  with the terms  hereof or  thereof.  All  consents,  authorizations,
orders,  filings  and  registrations  which the  Company is  required  to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date  hereof.  The Company and its  subsidiaries  are unaware of any fact or
circumstance which might give rise to any of the foregoing.

     Section 4.5. SEC Documents;  Financial  Statements.  Since January 1, 2003,
the  Company  has filed all  reports,  schedules,  forms,  statements  and other
documents required to be filed by it with the SEC under of the Exchange Act. The
Company has delivered to the Investor or its representatives,  or made available
through the SEC's website at http://www.sec.gov, true and complete copies of the
SEC Documents.  As of their respective  dates,  the financial  statements of the
Company disclosed in the SEC Documents (the "Financial  Statements") complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally  accepted  accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise  indicated in such financial  statements or the notes  thereto,  or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary  statements) and, fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  No other  information  provided by or on behalf of the Company to
the  Investor  which is not  included in the SEC  Documents  contains any untrue
statement of a material  fact or omits to state any material  fact  necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they were made, not misleading.

     Section 4.6. 10b-5. The SEC Documents do not include any untrue  statements
of material  fact,  nor do they omit to state any material  fact  required to be
stated  therein  necessary  to  make  the  statements  made,  in  light  of  the
circumstances under which they were made, not misleading.

     Section  4.7. No Default.  Except as disclosed  in the SEC  Documents,  the
Company is not in default  in the  performance  or  observance  of any  material
obligation,  agreement,  covenant  or  condition  contained  in  any  indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it is or its  property is bound and  neither the  execution,
nor the  delivery  by the  Company,  nor the  performance  by the Company of its
obligations  under this Agreement or any of the exhibits or  attachments  hereto
will  conflict  with or result in the breach or violation of any of the terms or
provisions  of, or  constitute a default or

<PAGE>

result in the  creation  or  imposition  of any lien or charge on any  assets or
properties of the Company under its Certificate of Incorporation,  By-Laws,  any
material  indenture,  mortgage,  deed  of  trust  or  other  material  agreement
applicable  to the Company or  instrument  to which the Company is a party or by
which it is bound,  or any statute,  or any decree,  judgment,  order,  rules or
regulation of any court or governmental  agency or body having jurisdiction over
the Company or its  properties,  in each case which  default,  lien or charge is
likely to cause a Material Adverse Effect on the Company's business or financial
condition.

     Section 4.8. Absence of Events of Default.  Except for matters described in
the SEC Documents and/or this Agreement,  no Event of Default, as defined in the
respective  agreement to which the Company is a party, and no event which,  with
the giving of notice or the  passage of time or both,  would  become an Event of
Default (as so  defined),  has occurred  and is  continuing,  which would have a
Material  Adverse  Effect  on the  Company's  business,  properties,  prospects,
financial condition or results of operations.

     Section 4.9. Intellectual Property Rights. The Company and its subsidiaries
own or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights,    copyrights,    inventions,    licenses,    approvals,    governmental
authorizations,  trade secrets and rights  necessary to conduct their respective
businesses as now conducted.  The Company and its  subsidiaries  do not have any
knowledge of any  infringement by the Company or its  subsidiaries of trademark,
trade name rights, patents,  patent rights,  copyrights,  inventions,  licenses,
service names, service marks, service mark registrations,  trade secret or other
similar  rights of others,  and, to the  knowledge of the  Company,  there is no
claim,  action or proceeding being made or brought against,  or to the Company's
knowledge,  being threatened against, the Company or its subsidiaries  regarding
trademark,  trade name, patents, patent rights, invention,  copyright,  license,
service names, service marks, service mark registrations,  trade secret or other
infringement;  and the Company and its  subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.

     Section  4.10.  Employee  Relations.  Neither  the  Company  nor any of its
subsidiaries  is involved in any labor  dispute  nor,  to the  knowledge  of the
Company or any of its subsidiaries,  is any such dispute threatened. None of the
Company's or its subsidiaries'  employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.

     Section 4.11.  Environmental Laws. The Company and its subsidiaries are (i)
in compliance with any and all applicable material foreign,  federal,  state and
local  laws and  regulations  relating  to the  protection  of human  health and
safety,  the environment or hazardous or toxic substances or wastes,  pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits, licenses
or other  approvals  required  of them under  applicable  Environmental  Laws to
conduct their  respective  businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval.

     Section 4.12. Title. Except as set forth in the SEC Documents,  the Company
has good and marketable title to its properties and material assets owned by it,
free and clear of any pledge,  lien,  security interest,  encumbrance,  claim or
equitable  interest  other than such as are not

<PAGE>

material to the business of the Company.  Any real property and facilities  held
under lease by the Company and its  subsidiaries  are held by them under  valid,
subsisting and  enforceable  leases with such exceptions as are not material and
do not interfere  with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.

     Section  4.13.  Insurance.  The  Company and each of its  subsidiaries  are
insured by insurers of recognized financial  responsibility  against such losses
and risks and in such  amounts  as  management  of the  Company  believes  to be
prudent  and  customary  in  the   businesses  in  which  the  Company  and  its
subsidiaries  are engaged.  Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such  subsidiary has any reason to believe that it will not be able to renew
its existing  insurance  coverage as and when such coverage expires or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise,  or the earnings,  business or operations of the Company
and its subsidiaries, taken as a whole.

     Section 4.14.  Regulatory Permits. The Company and its subsidiaries possess
all material certificates,  authorizations and permits issued by the appropriate
federal,  state or foreign  regulatory  authorities  necessary to conduct  their
respective  businesses,  and neither the  Company  nor any such  subsidiary  has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

     Section 4.15.  Internal  Accounting  Controls.  The Company and each of its
subsidiaries  maintain a system of internal  accounting  controls  sufficient to
provide  reasonable  assurance that (i)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (ii)  transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity with generally accepted  accounting  principles and to maintain asset
accountability,  (iii) access to assets is  permitted  only in  accordance  with
management's   general  or  specific   authorization   and  (iv)  the   recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate action is taken with respect to any differences.

     Section 4.16. No Material Adverse Breaches, etc. Except as set forth in the
SEC Documents, neither the Company nor any of its subsidiaries is subject to any
charter,  corporate or other legal restriction,  or any judgment, decree, order,
rule or  regulation  which in the judgment of the  Company's  officers has or is
expected  in the  future to have a  Material  Adverse  Effect  on the  business,
properties,  operations, financial condition, results of operations or prospects
of the Company or its  subsidiaries.  Except as set forth in the SEC  Documents,
neither the Company nor any of its  subsidiaries is in breach of any contract or
agreement  which breach,  in the judgment of the Company's  officers,  has or is
expected  to  have  a  Material  Adverse  Effect  on the  business,  properties,
operations,  financial  condition,  results of  operations  or  prospects of the
Company or its subsidiaries.
<PAGE>

     Section  4.17.  Absence  of  Litigation.  Except  as set  forth  in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency,  self-regulatory  organization
or body pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a Material Adverse Effect on the transactions  contemplated hereby (ii)
adversely affect the validity or enforceability  of, or the authority or ability
of the Company to perform its  obligations  under,  this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents,  have  a  Material  Adverse  Effect  on  the  business,   operations,
properties,  financial  condition or results of operation of the Company and its
subsidiaries taken as a whole.

     Section 4.18.  Subsidiaries.  Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly,  any interest
in any other corporation, partnership, association or other business entity.

     Section 4.19.  Tax Status.  Except as disclosed in the SEC  Documents,  the
Company  and each of its  subsidiaries  has made or filed all  federal and state
income and all other tax  returns,  reports  and  declarations  required  by any
jurisdiction  to which it is subject and (unless and only to the extent that the
Company  and each of its  subsidiaries  has set  aside on its  books  provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other  governmental  assessments  and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except  those  being  contested  in good  faith  and has set  aside on its books
provision  reasonably  adequate  for  the  payment  of  all  taxes  for  periods
subsequent to the periods to which such returns,  reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction,  and the officers of the Company know of no basis
for any such claim.

     Section  4.20.  Certain  Transactions.  Except  as set  forth  in  the  SEC
Documents  none of the  officers,  directors,  or  employees  of the  Company is
presently a party to any  transaction  with the Company (other than for services
as employees,  officers and  directors),  including  any contract,  agreement or
other  arrangement  providing for the furnishing of services to or by, providing
for rental of real or  personal  property  to or from,  or  otherwise  requiring
payments to or from any officer,  director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer,  director,  or any such  employee has a  substantial  interest or is an
officer, director, trustee or partner.

     Section  4.21.  Fees  and  Rights  of First  Refusal.  The  Company  is not
obligated to offer the securities  offered hereunder on a right of first refusal
basis or otherwise to any third parties  including,  but not limited to, current
or former shareholders of the Company,  underwriters,  brokers,  agents or other
third parties.

     Section 4.22. Use of Proceeds. The Company represents that the net proceeds
from this offering will be used for general corporate  purposes.  However, in no
event shall the net proceeds  from this  offering be used by the Company for the
payment (or loaned to any such person for the payment) of any judgment, or other
liability,  incurred by any executive officer,  officer, director or employee of
the Company, except for any liability owed to such person for services rendered,
<PAGE>

or if any  judgment or other  liability  is incurred by such person  originating
from  services  rendered to the  Company,  or the Company has  indemnified  such
person from liability.

     Section 4.23. Further  Representation and Warranties of the Company. For so
long  as  any  securities   issuable  hereunder  held  by  the  Investor  remain
outstanding, the Company acknowledges,  represents,  warrants and agrees that it
will maintain the listing of its Common Stock on the Principal Market.

     Section 4.24. Opinion of Counsel.  Investor shall receive an opinion letter
from Kirkpatrick & Lockhart LLP, counsel to the Company, on the date hereof.

     Section 4.25. Opinion of Counsel. The Company will obtain for the Investor,
at the  Company's  expense,  any  and  all  opinions  of  counsel  which  may be
reasonably  required in order to sell the securities  issuable hereunder without
restriction.

     Section 4.26. Dilution. The Company is aware and acknowledges that issuance
of shares of the  Company's  Common  Stock  could  cause  dilution  to  existing
shareholders and could  significantly  increase the outstanding number of shares
of Common Stock.

     Section 4.27. No Bankruptcy Intent. The Board of Directors has no intent to
initiate  the  filing of a  bankruptcy  petition  by the  Company  or any of its
subsidiaries, and is not aware of any such intent by any of the Company's or its
subsidiaries creditors.

                                   ARTICLE V.
                                 Indemnification

     The Investor  and the Company  represent  to the other the  following  with
respect to itself:

     Section 5.1. Indemnification.

          (a) In consideration of the Investor's  execution and delivery of this
     Agreement,  and in addition to all of the Company's other obligations under
     this  Agreement,  the Company  shall  defend,  protect,  indemnify and hold
     harmless  the  Investor,  and  all of its  officers,  directors,  partners,
     employees and agents  (including,  without  limitation,  those  retained in
     connection   with  the   transactions   contemplated   by  this  Agreement)
     (collectively,  the  "Investor  Indemnitees")  from and against any and all
     actions, causes of action, suits, claims, losses, costs,  penalties,  fees,
     liabilities and damages, and expenses in connection therewith (irrespective
     of whether any such Investor  Indemnitee is a party to the action for which
     indemnification  hereunder is sought), and including reasonable  attorneys'
     fees and  disbursements  (the "Indemnified  Liabilities"),  incurred by the
     Investor  Indemnitees  or any of them as a result of, or arising out of, or
     relating to (a) any  misrepresentation  or breach of any  representation or
     warranty made by the Company in this Agreement or the  Registration  Rights
     Agreement or any other  certificate,  instrument  or document  contemplated
     hereby or thereby, (b) any breach of any covenant,  agreement or obligation
     of the Company  contained  in this  Agreement  or the  Registration  Rights
     Agreement or any other  certificate,  instrument  or document  contemplated
     hereby or  thereby,  or (c) any cause of action,  suit or claim  brought or
     made  against  such  Investor  Indemnitee  not arising out of any action or
     inaction of an Investor  Indemnitee,  and arising out of or resulting  from
     the  execution,  delivery,  performance or enforcement of this Agreement or
     any other instrument, document or agreement executed pursuant hereto by any
     of the Investor  Indemnitees.  To the extent that the foregoing undertaking
     by the Company may be unenforceable for any reason,  the Company shall make
     the maximum  contribution  to the payment and  satisfaction  of each of the
     Indemnified Liabilities, which is permissible under applicable law.

          (b) In consideration  of the Company's  execution and delivery of this
     Agreement, and in addition to all of the Investor's other obligations under
     this  Agreement,  the Investor  shall defend,  protect,  indemnify and hold
     harmless  the Company  and all of its  officers,  directors,  shareholders,
     employees and agents  (including,  without  limitation,  those  retained in
     connection   with  the   transactions   contemplated   by  this  Agreement)
     (collectively,  the  "Company  Indemnitees")  from and  against any and all
     Indemnified  Liabilities incurred by the Company Indemnitees or any of them
     as a result of, or arising out of, or relating to (a) any misrepresentation
     or breach of any  representation  or warranty  made by the Investor in this
     Agreement, the Registration Rights Agreement, or any instrument or document
     contemplated hereby or thereby executed by the Investor,  (b) any breach of
     any covenant,  agreement or obligation of the Investor(s) contained in this
     Agreement,  the  Registration  Rights  Agreement or any other  certificate,
     instrument  or  document  contemplated  hereby or thereby  executed  by the
     Investor, or (c) any cause of action, suit or claim brought or made against
     such Company Indemnitee based on  misrepresentations  or due to a breach by
     the Investor and arising out of or resulting from the execution,  delivery,
     performance  or  enforcement  of this  Agreement  or any other  instrument,
     document  or  agreement  executed  pursuant  hereto  by any of the  Company
     Indemnitees.  To the extent that the foregoing  undertaking by the Investor
     may be  unenforceable  for any reason,  the Investor shall make the maximum
     contribution  to the payment and  satisfaction  of each of the  Indemnified
     Liabilities, which is permissible under applicable law.

          (c) The  obligations of the parties to indemnify or make  contribution
     under this Section 5.1 shall survive termination.

                                   ARTICLE VI.
                            Covenants of the Company

     Section 6.1.  Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.

     Section 6.2. Listing of Common Stock. The Company shall maintain the Common
Stock's authorization for quotation on the Principal Market.

     Section 6.3. Exchange Act  Registration.  The Company will cause its Common
Stock to continue to be registered under Section 12(g) of the Exchange Act, will
file in a timely  manner all  reports  and other  documents  required of it as a
reporting  company  under the  Exchange Act and will not take any action or file
any document  (whether or not permitted by Exchange Act or the rules thereunder)
to  terminate  or suspend  such  registration  or to  terminate  or suspend  its
reporting and filing obligations under said Exchange Act.
<PAGE>

     Section 6.4. Transfer Agent  Instructions.  Not later than two (2) business
days  after  each  Advance  Notice  Date  and  prior  to  each  Closing  and the
effectiveness  of the  Registration  Statement and resale of the Common Stock by
the Investor,  the Company will deliver  instructions  to its transfer  agent to
issue shares of Common Stock free of restrictive legends.

     Section 6.5. Corporate Existence. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.

     Section 6.6. Notice of Certain Events Affecting Registration; Suspension of
Right to Make an Advance.  The Company will immediately notify the Investor upon
its becoming aware of the  occurrence of any of the following  events in respect
of a  registration  statement or related  prospectus  relating to an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other Federal or state  governmental  authority during the period
of effectiveness of the Registration  Statement for amendments or supplements to
the registration  statement or related prospectus;  (ii) the issuance by the SEC
or  any  other  Federal  or  state  governmental  authority  of any  stop  order
suspending the effectiveness of the Registration  Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the  Registrable  Securities for sale in any  jurisdiction  or the initiation or
threatening of any proceeding for such purpose;  (iv) the happening of any event
that  makes  any  statement  made  in  the  Registration  Statement  or  related
prospectus of any document  incorporated or deemed to be incorporated therein by
reference  untrue in any  material  respect or that  requires  the making of any
changes in the Registration Statement,  related prospectus or documents so that,
in the case of the  Registration  Statement,  it will  not  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 not misleading,  and
that in the case of the  related  prospectus,  it will not  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 the light of the
circumstances under which they were made, not misleading;  and (v) the Company's
reasonable  determination  that a  post-effective  amendment to the Registration
Statement would be appropriate;  and the Company will promptly make available to
the Investor any such  supplement  or amendment to the related  prospectus.  The
Company  shall not  deliver  to the  Investor  any  Advance  Notice  during  the
continuation of any of the foregoing events.

     Section 6.7. Expectations  Regarding Advance Notices.  Within ten (10) days
after the  commencement  of each calendar  quarter  occurring  subsequent to the
commencement of the Commitment Period, the Company must notify the Investor,  in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise  during such  calendar  quarter,  if any,  through the issuance of Advance
Notices.  Such  notification  shall  constitute  only the  Company's  good faith
estimate and shall in no way  obligate the Company to raise such amount,  or any
amount,  or otherwise limit its ability to deliver Advance Notices.  The failure
by the  Company  to comply  with this  provision  can be cured by the  Company's
notifying  the  Investor,   in  writing,  at  any  time  as  to  its  reasonable
expectations with respect to the current calendar quarter.

     Section 6.8.  Restriction on Sale of Capital  Stock.  During the Commitment
Period,  the Company  shall not issue or sell (i) any Common  Stock or Preferred
Stock without  consideration or for a consideration  per share less than the bid
price of the Common Stock  determined
<PAGE>

immediately  prior to its  issuance,  (ii)  issue or sell  any  Preferred  Stock
warrant, option, right, contract, call, or other security or instrument granting
the holder  thereof the right to acquire Common Stock without  consideration  or
for a consideration per share less than such Common Stock's Bid Price determined
immediately prior to its issuance,  or (iii) file any registration  statement on
Form S-8.

     Section  6.9.  Consolidation;  Merger.  The Company  shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into,  or a transfer  of all or  substantially  all the assets of the Company to
another  entity (a  "Consolidation  Event")  unless the  resulting  successor or
acquiring  entity  (if  not the  Company)  assumes  by  written  instrument  the
obligation to deliver to the Investor such shares of stock and/or  securities as
the Investor is entitled to receive pursuant to this Agreement.

     Section  6.10.  Issuance of the  Company's  Common  Stock.  The sale of the
shares of Common  Stock  shall be made in  accordance  with the  provisions  and
requirements of Regulation D and any applicable state securities law.

                                  ARTICLE VII.
                Conditions for Advance and Conditions to Closing

     Section 7.1.  Conditions  Precedent to the Obligations of the Company.  The
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the  Investor  incident to each  Closing is subject to the  satisfaction,  or
waiver by the Company, at or before each such Closing, of each of the conditions
set forth below.

          (a) Accuracy of the Investor's  Representations  and  Warranties.  The
     representations and warranties of the Investor shall be true and correct in
     all material respects.

          (b)  Performance by the Investor.  The Investor shall have  performed,
     satisfied and complied in all respects with all  covenants,  agreements and
     conditions required by this Agreement and the Registration Rights Agreement
     to be performed,  satisfied or complied with by the Investor at or prior to
     such Closing.

     Section 7.2. Conditions Precedent to the Right of the Company to Deliver an
Advance Notice and the  Obligation of the Investor to Purchase  Shares of Common
Stock.  The right of the Company to deliver an Advance Notice and the obligation
of the Investor  hereunder to acquire and pay for shares of the Company's Common
Stock incident to a Closing is subject to the fulfillment by the Company, on (i)
the date of delivery of such Advance Notice and (ii) the applicable Advance Date
(each a "Condition Satisfaction Date"), of each of the following conditions:

          (a)  Registration  of the Common Stock with the SEC. The Company shall
     have filed with the SEC a Registration Statement with respect to the resale
     of  the  Registrable  Securities  in  accordance  with  the  terms  of  the
     Registration  Rights  Agreement.  As set forth in the  Registration  Rights
     Agreement,   the  Registration   Statement  shall  have  previously  become
     effective and shall remain  effective on each Condition  Satisfaction  Date
     and (i) neither the Company nor the  Investor  shall have  received  notice
     that the SEC has issued or  intends  to issue a stop order with  respect to
     the Registration Statement or that the SEC otherwise has suspended or

<PAGE>

     withdrawn  the   effectiveness  of  the  Registration   Statement,   either
     temporarily or  permanently,  or intends or has threatened to do so (unless
     the SEC's  concerns  have been  addressed  and the  Investor is  reasonably
     satisfied  that the SEC no longer is  considering  or  intends to take such
     action),  and  (ii) no other  suspension  of the use or  withdrawal  of the
     effectiveness  of the  Registration  Statement or related  prospectus shall
     exist. The Registration  Statement must have been declared effective by the
     SEC prior to the first Advance Notice Date.

          (b)  Authority.  The  Company  shall have  obtained  all  permits  and
     qualifications  required by any  applicable  state in  accordance  with the
     Registration  Rights  Agreement  for the  offer  and sale of the  shares of
     Common Stock, or shall have the availability of exemptions  therefrom.  The
     sale and issuance of the shares of Common Stock shall be legally  permitted
     by all laws and regulations to which the Company is subject.

          (c) Fundamental Changes. There shall not exist any fundamental changes
     to the  information  set forth in the  Registration  Statement  which would
     require the Company to file a post-effective  amendment to the Registration
     Statement.

          (d)  Performance  by the Company.  The Company  shall have  performed,
     satisfied  and  complied  in all  material  respects  with  all  covenants,
     agreements and conditions  required by this Agreement  (including,  without
     limitation,  the  conditions  specified  in  Section  2.5  hereof)  and the
     Registration  Rights Agreement to be performed,  satisfied or complied with
     by the Company at or prior to each Condition Satisfaction Date.

          (e) No Injunction.  No statute,  rule,  regulation,  executive  order,
     decree, ruling or injunction shall have been enacted, entered,  promulgated
     or  endorsed  by  any  court  or   governmental   authority   of  competent
     jurisdiction  that  prohibits or directly and adversely  affects any of the
     transactions  contemplated by this Agreement,  and no proceeding shall have
     been  commenced  that may have  the  effect  of  prohibiting  or  adversely
     affecting any of the transactions contemplated by this Agreement.

          (f) No  Suspension  of Trading in or  Delisting of Common  Stock.  The
     trading of the Common Stock is not  suspended  by the SEC or the  Principal
     Market (if the Common Stock is traded on a Principal Market).  The issuance
     of shares of Common Stock with respect to the applicable  Closing,  if any,
     shall not violate the  shareholder  approval  requirements of the Principal
     Market (if the Common Stock is traded on a Principal  Market).  The Company
     shall not have received any notice threatening the continued listing of the
     Common  Stock on the  Principal  Market (if the Common Stock is traded on a
     Principal Market).

          (g) Maximum Advance Amount.  The amount of an Advance requested by the
     Company shall not exceed the Maximum  Advance  Amount.  In addition,  in no
     event shall the number of shares  issuable to the  Investor  pursuant to an
     Advance cause the Investor to own in excess of nine and 9/10 percent (9.9%)
     of the then outstanding Common Stock of the Company.

          (h) No  Knowledge.  The  Company has no  knowledge  of any event which
     would  be  more  likely  than  not to  have  the  effect  of  causing  such
     Registration Statement to be suspended or otherwise ineffective.
<PAGE>

          (i) Other.  On each  Condition  Satisfaction  Date, the Investor shall
     have received the certificate  executed by an officer of the Company in the
     form of Exhibit A attached hereto.

          (j) Over-the-Counter  Bulletin Board. The Company's Common Stock shall
     be approved for quotations on the Over-the-Counter Bulletin Board.

                                  ARTICLE VIII.
         Due Diligence Review; Non-Disclosure of Non-Public Information

     Section 8.1. Due Diligence Review.  Prior to the filing of the Registration
Statement the Company  shall make  available  for  inspection  and review by the
Investor, its advisors and representatives, and any underwriter participating in
any disposition of the Registrable Securities on behalf of the Investor pursuant
to the Registration  Statement,  any such registration statement or amendment or
supplement  thereto or any blue sky,  NASD or other  filing,  all  financial and
other  records,  all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers,  directors and
employees to supply all such information reasonably requested by the Investor or
any  such  representative,  advisor  or  underwriter  in  connection  with  such
Registration  Statement  (including,  without  limitation,  in  response  to all
questions  and other  inquiries  reasonably  made or  submitted by any of them),
prior to and  from  time to time  after  the  filing  and  effectiveness  of the
Registration  Statement  for the sole  purpose of enabling the Investor and such
representatives,  advisors and underwriters and their respective accountants and
attorneys  to conduct  initial  and ongoing due  diligence  with  respect to the
Company and the accuracy of the Registration Statement.

     Section 8.2. Non-Disclosure of Non-Public Information.

          (a) The  Company  shall not  disclose  non-public  information  to the
     Investor, its advisors, or its representatives,  unless prior to disclosure
     of such  information  the  Company  identifies  such  information  as being
     non-public  information  and  provides  the  Investor,  such  advisors  and
     representatives  with the  opportunity  to accept or refuse to accept  such
     non-public  information  for  review.  The Company  may, as a condition  to
     disclosing any  non-public  information  hereunder,  require the Investor's
     advisors and  representatives to enter into a confidentiality  agreement in
     form reasonably satisfactory to the Company and the Investor.

          (b) Nothing  herein shall  require the Company to disclose  non-public
     information  to the  Investor or its advisors or  representatives,  and the
     Company represents that it does not disseminate  non-public  information to
     any investors who purchase  stock in the Company in a public  offering,  to
     money  managers  or  to  securities  analysts,   provided,   however,  that
     notwithstanding  anything  herein to the  contrary,  the Company  will,  as
     hereinabove  provided,  immediately notify the advisors and representatives
     of the Investor and, if any, underwriters, of any event or the existence of
     any circumstance  (without any obligation to disclose the specific event or
     circumstance)   of  which  it  becomes   aware,   constituting   non-public
     information  (whether  or not  requested  of the  Company  specifically  or
     generally  during the course of due diligence by such persons or entities),
     which,  if not  disclosed in the  prospectus  included in the  Registration
     Statement would cause such prospectus to include a material misstatement or
     to omit a material fact required to be stated  therein in order to make the
     statements, therein, in light of the circumstances in which they were made,
     not misleading. Nothing contained in this Section 8.2 shall be construed to
     mean that such  persons or entities  other than the  Investor  (without the
     written  consent of the Investor  prior to disclosure of such  information)
     may not  obtain  non-public  information  in the course of  conducting  due
     diligence in accordance with the terms of this Agreement and nothing herein
     shall  prevent any such persons or entities  from  notifying the Company of
     their opinion that based on such due diligence by such persons or entities,
     that the  Registration  Statement  contains an untrue statement of material
     fact or omits a material  fact  required  to be stated in the  Registration
     Statement or necessary to make the statements  contained therein,  in light
     of the circumstances in which they were made, not misleading.

                                   ARTICLE IX.
                           Choice of Law/Jurisdiction

     Section  9.1.  Governing  Law.  This  Agreement  shall be  governed  by and
interpreted in accordance with the laws of the State of Delaware  without regard
to the principles of conflict of laws. The parties further agree that any action
between them shall be heard in Hudson County,  New Jersey, and expressly consent
to the  jurisdiction  and venue of the Superior Court of New Jersey,  sitting in
Hudson  County,  New Jersey and the United States  District Court of New Jersey,
sitting in Newark, New Jersey, for the adjudication of any civil action asserted
pursuant to this paragraph.

                                   ARTICLE X.
                             Assignment; Termination

     Section  10.1.  Assignment.  Neither this  Agreement  nor any rights of the
Company hereunder may be assigned to any other Person.

     Section 10.2. Termination. The obligations of the Investor to make Advances
under  Article II hereof  shall  terminate  twenty-four  (24)  months  after the
Effective Date.

                                   ARTICLE XI.
                                     Notices

     Section  11.1.   Notices.   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 a copy is mailed by U.S.  certified  mail,  return  receipt  requested;
(iii) three (3) days after being sent by U.S.  certified  mail,  return  receipt
requested,  or (iv)  one (1) day  after  deposit  with a  nationally  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:
<PAGE>

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, FL 33131-2399
                                 Attention:        Clayton E. Parker, Esq.
                                 Telephone:        (305) 539-3300
                                 Facsimile:        (305) 358-7095

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

With a Copy to:                  Cornell Capital Partners, LP
                                 101 Hudson Street -Suite 3700
                                 Jersey City, NJ 07302
                                 Attention:        Troy J. Rillo
                                 Telephone:        (201) 985-8300
                                 Facsimile:        (201) 985-8266

Each party shall provide five (5) days' prior written  notice to the other party
of any change in address or facsimile number.

                                  ARTICLE XII.
                                  Miscellaneous

     Section 12.1.  Counterparts.  This Agreement may be executed in two or more
identical  counterparts,  all of  which  shall  be  considered  one and the same
agreement and shall become effective when  counterparts have been signed by each
party and  delivered  to the other  party.  In the event any  signature  page is
delivered  by  facsimile  transmission,  the party  using such means of delivery
shall  cause  four  (4)  additional  original  executed  signature  pages  to be
physically  delivered to the other party  within five (5) days of the  execution
and delivery hereof,  though failure to deliver such copies shall not affect the
validity of this Agreement.

     Section 12.2. Entire Agreement;  Amendments.  This Agreement supersedes all
other prior oral or written agreements between the Investor,  the Company, their
affiliates  and  persons  acting on their  behalf  with  respect to the

<PAGE>

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

     Section 12.3.  Reporting  Entity for the Common Stock. The reporting entity
relied upon for the  determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this  Agreement  shall
be Bloomberg,  L.P. or any successor thereto.  The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.

     Section  12.4.  Fees and  Expenses.  The Company  hereby  agrees to pay the
following fees:

          (a) Legal Fees.  Except as provided  in Section  12.4(b),  each of the
     parties  shall  pay its own fees and  expenses  (including  the fees of any
     attorneys,  accountants,  appraisers  or others  engaged by such  party) in
     connection with this Agreement and the transactions contemplated hereby. On
     each Advance  Date,  the Company will pay Butler  Gonzalez  LLP, the sum of
     Five Hundred Dollars ($500) for legal,  administrative  and escrow fees and
     any outstanding fees or expenses of Kirkpatrick & Lockhart LLP directly out
     the proceeds of any Advances hereunder.

          (b)  Structuring  Fees.  The Company  shall pay the  Investor a fee of
     $15,000 for  structuring  fees,  as well as to  reimburse  the Investor for
     legal fees and  expenses.  Of this total,  $10,000 and $5,000 shall be paid
     from  the  gross   proceeds  of  the  Second  Closing  and  Third  Closing,
     respectively,  of the Securities  Purchase  Agreement of even date herewith
     between the parties  hereto.  This fee shall be deemed  fully earned on the
     date hereof.

          (c) Commitment Fees.

               (i) On each Advance Date the Company  shall pay to the  Investor,
          directly from the gross  proceeds  held in escrow,  an amount equal to
          five percent (5%) of the amount of each  Advance.  The Company  hereby
          agrees that if such payment, as is described above, is not made by the
          Company  on the  Advance  Date,  such  payment  will  be  made  at the
          direction  of the  Investor as outlined and mandated by Section 2.3 of
          this Agreement.

               (ii) Upon the  execution  of this  Agreement,  the Company  shall
          issue to the  Investor  shares  of the  Company's  Common  Stock in an
          amount equal to One Hundred  Sixty Five  Thousand  Dollars  ($165,000)
          divided  by the VWAP of the  Company's  Common  Stock,  as  quoted  by
          Bloomberg, LP, on the date hereof (the "Investor's Shares").

               (iii) Fully Earned.  The Investor's  Shares shall be deemed fully
          earned as of the date hereof.

          (d) Registration Rights. The Investor's Shares shall have "piggy-back"
     and  demand  registration  rights as set forth in the  Registration  Rights
     Agreement of even date herewith between the parties hereto.

                                       1
<PAGE>

     Section 12.5. Brokerage.  Each of the parties hereto represents that it has
had no dealings in connection  with this  transaction  with any finder or broker
who will  demand  payment of any fee or  commission  from the other  party.  The
Company on the one hand, and the Investor, on the other hand, agree to indemnify
the other against and hold the other  harmless from any and all  liabilities  to
any  person  claiming  brokerage  commissions  or  finder's  fees on  account of
services  purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.

     Section  12.6.   Confidentiality.   If  for  any  reason  the  transactions
contemplated by this Agreement are not  consummated,  each of the parties hereto
shall keep  confidential  any information  obtained from any other party (except
information  publicly  available  or in such  party's  domain  prior to the date
hereof,  and except as required by court order) and shall promptly return to the
other  parties  all  schedules,  documents,  instruments,  work  papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Standby  Equity
Distribution  Agreement  to be  executed  by  the  undersigned,  thereunto  duly
authorized, as of the date first set forth above.

                                 COMPANY:
                                 PRODUCTIVITY TECHNOLOGIES CORPORATION

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

                                 INVESTOR:
                                 CORNELL CAPITAL PARTNERS, LP

                                 By:      Yorkville Advisors, LLC
                                 Its:     General Partner

                                 By:      /s/Mark Angelo
                                 Name:    Mark Angelo
                                 Title:   Portfolio Manager

<PAGE>

                                    EXHIBIT A

                      ADVANCE NOTICE/COMPLIANCE CERTIFICATE

                      PRODUCTIVITY TECHNOLOGIES CORPORATION

     The undersigned,  _______________________ hereby certifies, with respect to
the sale of shares of Common Stock of Productivity Technologies Corporation (the
"Company"),  issuable in  connection  with this  Advance  Notice and  Compliance
Certificate dated ___________________ (the "Notice"),  delivered pursuant to the
Standby Equity Distribution Agreement (the "Agreement"), as follows:

     1. The undersigned is the duly elected President of the Company.

     2. There are no  fundamental  changes to the  information  set forth in the
Registration  Statement which would require the Company to file a post effective
amendment to the Registration Statement.

     3. The Company has  performed in all material  respects all  covenants  and
agreements  to be  performed  by the  Company  on or prior to the  Advance  Date
related  to the  Notice  and has  complied  in all  material  respects  with all
obligations and conditions contained in the Agreement.

     4. The Advance requested is _____________________.

     The   undersigned   has  executed  this   Certificate   this  ____  day  of
_________________.

PRODUCTIVITY TECHNOLOGIES CORPORATION

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

<PAGE>

                                  SCHEDULED 2.6

                      PRODUCTIVITY TECHNOLOGIES CORPORATION

     The  undersigned  hereby  agrees that for a period  commencing  on the date
hereof and  expiring on the  termination  of the  Agreement  dated June __, 2004
between  Productivity  Technologies  Corporation,  (the "Company"),  and Cornell
Capital  Partners,  LP, (the "Investor") (the "Lock-up  Period"),  he, she or it
will not,  directly  or  indirectly,  without the prior  written  consent of the
Investor,  issue,  offer,  agree or offer to sell, sell, grant an option for the
purchase  or sale of,  transfer,  pledge,  assign,  hypothecate,  distribute  or
otherwise  encumber  or dispose of except  pursuant  to Rule 144 of the  General
Rules and  Regulations  under the  Securities Act of 1933, any securities of the
Company, including common stock or options, rights, warrants or other securities
underlying,  convertible into, exchangeable or exercisable for or evidencing any
right to purchase or subscribe for any common stock (whether or not beneficially
owned by the undersigned), or any beneficial interest therein (collectively, the
"Securities").

     In order to enable the aforesaid covenants to be enforced,  the undersigned
hereby consents to the placing of legends and/or  stop-transfer  orders with the
transfer agent of the Company's securities with respect to any of the Securities
registered  in  the  name  of  the  undersigned  or  beneficially  owned  by the
undersigned, and the undersigned hereby confirms the undersigned's investment in
the Company.

Dated: _______________, 2004

                                         Signature

                                         ---------------------------------------
                                         Address:
                                                 -------------------------------
                                         City, State, Zip Code:
                                                               -----------------

                                         ---------------------------------------
                                         Print Social Security Number
                                         or Taxpayer I.D. NumberEXHIBIT 10.8

                          REGISTRATION RIGHTS AGREEMENT

     REGISTRATION  RIGHTS  AGREEMENT  (this  "Agreement"),  dated as of June 21,
2004,  by  and  between  PRODUCTIVITY  TECHNOLOGIES   CORPORATION,   a  Delaware
corporation  (the  "Company"),  and  CORNELL  CAPITAL  PARTNERS,  LP, a Delaware
limited partnership (the "Investor").

     WHEREAS:

     A. In connection  with the Standby  Equity  Distribution  Agreement of even
date  herewith  by  and  between  the  parties   hereto  (the  "Standby   Equity
Distribution Agreement"),  the Company has agreed, upon the terms and subject to
the conditions of the Standby Equity Distribution  Agreement,  to issue and sell
to the Investor that number of shares of the Company's  common stock,  par value
US$0.001 per share (the "Common Stock"),  which can be purchased pursuant to the
terms of the Standby  Equity  Distribution  Agreement for an aggregate  purchase
price of up to Five Million U.S. Dollars  (US$5,000,000).  Capitalized terms not
defined  herein  shall have the meaning  ascribed to them in the Standby  Equity
Distribution Agreement.

     B. To induce the  Investor  to  execute  and  deliver  the  Standby  Equity
Distribution  Agreement,  the Company has agreed to provide certain registration
rights  under  the  Securities  Act of  1933,  as  amended,  and the  rules  and
regulations  thereunder,  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  Investor
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 Commission (the "SEC").

          c. "Registrable Securities" means the Investor's Shares, as defined in
     the  Standby  Equity  Distribution  Agreement  and  shares of Common  Stock
     issuable  to  Investors   pursuant  to  the  Standby  Equity   Distribution
     Agreement.
<PAGE>

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

     2. REGISTRATION.

          a. Mandatory Registration. The Company shall prepare and file with the
     SEC a Registration  Statement on Form S-1, SB-2 or on such other form as is
     available.  The  Company  shall  cause such  Registration  Statement  to be
     declared  effective  by the SEC prior to the first sale to the  Investor of
     the  Company's  Common Stock  pursuant to the Standby  Equity  Distribution
     Agreement.

          b. Sufficient Number of Shares Registered.  In the event the number of
     shares  available under a Registration  Statement filed pursuant to Section
     2(a) is insufficient to cover all of the Registrable  Securities  which the
     Investor  has  purchased  pursuant  to  the  Standby  Equity   Distribution
     Agreement,  the Company shall amend the Registration  Statement,  or file a
     new  Registration  Statement  (on the short form  available  therefore,  if
     applicable),  or both,  so as to cover all of such  Registrable  Securities
     which  the  Investor  has   purchased   pursuant  to  the  Standby   Equity
     Distribution  Agreement as soon as practicable,  but in any event not later
     than fifteen (15) days after the necessity  therefore  arises.  The Company
     shall use it best efforts to cause such amendment  and/or new  Registration
     Statement to become  effective as soon as practicable  following the filing
     thereof.  For  purposes of the  foregoing  provision,  the number of shares
     available under a Registration  Statement shall be deemed  "insufficient to
     cover  all of the  Registrable  Securities"  if at any time the  number  of
     Registrable  Securities  issuable on an Advance Notice Date is greater than
     the  number  of  shares  available  for  resale  under  such   Registration
     Statement.

     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

<PAGE>

     of the Company's filing a report on Form 10-K, Form 10-Q or Form 8-K or any
     analogous report under the Securities Exchange Act of 1934, as amended (the
     "1934 Act"), the Company shall have  incorporated  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 the Investor  without  charge,  (i) at
     least one 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 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 the 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 the Investor 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  the  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 the 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 the
     Investor by

<PAGE>

     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 the
     Investor 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.

          g. At the  reasonable  request  of the  Investor,  the  Company  shall
     furnish  to  the  Investor,  on  the  date  of  the  effectiveness  of  the
     Registration  Statement and  thereafter  from time to time on such dates as
     the 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 Investor.

          h. The Company shall make available for inspection by (i) the Investor
     and (ii) one firm of accountants  or other agents  retained by the Investor
     (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 the Investor hereby
     agrees,  to hold in strict  confidence  and  shall not make any  disclosure
     (except to an Investor) or use of 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. The 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  the  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

<PAGE>

     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 the Investor
     is sought in or by a court or governmental  body of competent  jurisdiction
     or through  other  means,  give prompt  written  notice to the Investor and
     allow the 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 to secure 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  Investor  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 Investor may reasonably  request and registered in such
     names as the Investor 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-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 ordered 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
     Investor)  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  Investor  of  Registrable
     Securities pursuant to a Registration Statement.
<PAGE>

     4. OBLIGATIONS OF THE INVESTOR.

     The 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),  the Investor  will  immediately  discontinue  disposition  of
Registrable  Securities pursuant to any Registration  Statement(s) covering such
Registrable  Securities  until  the  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 the  Investor  in
accordance  with the  terms of the  Standby  Equity  Distribution  Agreement  in
connection  with any sale of  Registrable  Securities  with respect to which the
Investor has entered into a contract for sale prior to the Investor's receipt of
a 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) 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  the  Investor,  the
     directors,  officers, partners, employees, agents,  representatives of, and
     each Person,  if any,  who controls the 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

<PAGE>

     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  Investor 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 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(e);  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.

          b. In connection with a Registration Statement, the Investor agrees to
     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 who signs the Registration  Statement 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 the
     Investor expressly for use in connection with such Registration  Statement;
     and,  subject to Section  6(d),  the 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 the 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 the 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.
     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 the
     Investor  prior to the  Investor's use of the prospectus to which the Claim
     relates.
<PAGE>

          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 counsel for such Indemnified  Person
     or  Indemnified  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.
<PAGE>

     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.

     8. REPORTS UNDER THE 1934 ACT.

     With a view to making  available  to the  Investor 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 6.3 of the Standby Equity Distribution Agreement) and the filing of
     such reports and other documents is required for the applicable  provisions
     of Rule 144; and

          c. furnish to the Investor so long as the  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  Investor 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 by a written  agreement  between  the  Company and the
Investor.  Any amendment or waiver  effected in  accordance  with this Section 9
shall be binding upon the Investor and the Company.  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.
<PAGE>

     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 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  business  day after
     deposit with a nationally  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 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 Parker, Esq.
                                       Telephone:        (305) 539-3300
                                       Facsimile:        (305) 358-7095

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

With a copy 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>

     Any party may change its address by providing  written  notice to the other
     parties  hereto  at least  five  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. All 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  Delaware.   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
     the  Federal  District  Court for the  District  of New  Jersey  sitting in
     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 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 Standby Equity  Distribution  Agreement,  the
     Escrow Agreement,  and the Placement Agent 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 Standby  Equity  Distribution  Agreement,  the Escrow
     Agreement, and the Placement Agent Agreement supersede all prior agreements
     and  understandings  among the parties  hereto with  respect to the subject
     matter hereof and thereof.
<PAGE>

          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.

          j.  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.

          k. 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  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

                                         INVESTOR:
                                         CORNELL CAPITAL PARTNERS, LP

                                         By:      Yorkville Advisors, LLC
                                         Its:     General Partner

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

<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

Continental Stock Transfer
2 Broadway???
New York, NY 10004

     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  Standby  Equity  Distribution   Agreement  (the  "Standby  Equity
Distribution  Agreement")  entered  into by and  between the Company and Cornell
Capital  Partners,  LP (the "Investor")  pursuant to which the Company issued to
the  Investor  shares of its Common  Stock,  par value  US$0.001  per share (the
"Common  Stock").  Pursuant to the Standby Equity  Distribution  Agreement,  the
Company also has entered into a Registration  Rights Agreement with the Investor
(the  "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  Commission (the "SEC") relating to
the  Registrable  Securities  which names the Investor as a selling  stockholder
thereunder.

     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:      Cornell Capital Partners, LP

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}]]