INTELLECTUAL PROPERTY SECURITY AGREEMENT

     Intellectual  Property  Security  Agreement (this  "Agreement"  dated as of
August  12,  2004,  by  and  among  QT 5,  Inc.,  a  Delaware  corporation  (the
"Company"),  and the  secured  parties  signatory  hereto  and their  respective
endorsees, transferees and assigns (collectively, the "Secured Party").

                              W I T N E S S E T H :

     WHEREAS,  pursuant  to a  Securities  Purchase  Agreement,  dated  the date
hereof,  between  Company  and the  Secured  Party (the  "Purchase  Agreement"),
Company  has  agreed to issue to the  Secured  Party and the  Secured  Party has
agreed to purchase  from Company  certain of Company's  10% Secured  Convertible
Notes, due two years from the date of issue (the "Notes"), which are convertible
into shares of Company's  Common  Stock,  par value $.001 per share (the "Common
Stock"). In connection therewith,  Company shall issue the Secured Party certain
Common Stock purchase warrants (the "Warrants"); and

     WHEREAS,  in order to induce  the  Secured  Party to  purchase  the  Notes,
Company has agreed to execute and  deliver to the Secured  Party this  Agreement
for the  benefit  of the  Secured  Party  and to  grant  to it a first  priority
security interest in certain Intellectual Property (defined below) of Company to
secure the prompt payment, performance and discharge in full of all of Company's
obligations  under the Notes and  exercise  and  discharge  in full of Company's
obligations under the Warrants; and

     NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable  consideration,  the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

          1.   Defined Terms.  Unless otherwise defined herein,  terms which are
defined in the Purchase Agreement and used herein are so used as so defined; and
the following terms shall have the following meanings:

               "Software Intellectual Property" shall mean:

               (a)  all software  programs  (including  all source code,  object
code and all related applications and data files),  whether now owned, upgraded,
enhanced, licensed or leased or hereafter acquired by the Company, above;

               (b)  all computers and electronic  data  processing  hardware and
firmware associated therewith;

               (c)  all  documentation  (including flow charts,  logic diagrams,
manuals, guides and specifications) with respect to such software,  hardware and
firmware described in the preceding clauses (a) and (b); and

               (d)  all rights with respect to all of the foregoing,  including,
without limitation, any and all upgrades,  modifications,  copyrights, licenses,
options,   warranties,   service  contracts,   program  services,  test  rights,
maintenance  rights,  support  rights,  improvement  rights,  renewal rights and
indemnifications   and   substitutions,   replacements,   additions,   or  model
conversions of any of the foregoing.


<PAGE>


               "Copyrights"  shall mean (a) all  copyrights,  registrations  and
applications  for  registration,   issued  or  filed,  including  any  reissues,
extensions or renewals thereof, by or with the United States Copyright Office or
any similar  office or agency of the United States,  any state  thereof,  or any
other country or political  subdivision  thereof, or otherwise,  including,  all
rights  in  and  to  the  material  constituting  the  subject  matter  thereof,
including, without limitation, any referred to in Schedule B hereto, and (b) any
rights in any material  which is  copyrightable  or which is protected by common
law,  United  States  copyright  laws or  similar  laws or any law of any State,
including, without limitation, any thereof referred to in Schedule B hereto.

               "Copyright  License" shall mean any  agreement,  written or oral,
providing for a grant by the Company of any right in any  Copyright,  including,
without limitation, any thereof referred to in Schedule B hereto.

               "Intellectual Property" shall means,  collectively,  the Software
Intellectual Property, Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks, Trademark Licenses and Trade Secrets.

               "Obligations"  means all of the Company's  obligations under this
Agreement  and the  Notes,  in each case,  whether  now or  hereafter  existing,
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or  unliquidated,  whether or not jointly owed with  others,  and whether or not
from time to time  decreased or  extinguished  and later  decreased,  created or
incurred,  and all or any portion of such  obligations or  liabilities  that are
paid,  to the  extent all or any part of such  payment  is avoided or  recovered
directly  or  indirectly  from the  Secured  Party as a  preference,  fraudulent
transfer  or  otherwise  as  such  obligations  may  be  amended,  supplemented,
converted, extended or modified from time to time.

               "Patents"  shall mean (a) all letters patent of the United States
or any other country or any political  subdivision thereof, and all reissues and
extensions thereof,  including,  without limitation,  any thereof referred to in
Schedule B hereto,  and (b) all  applications  for letters  patent of the United
States and all divisions, continuations and continuations-in-part thereof or any
other country or any political subdivision,  including,  without limitation, any
thereof referred to in Schedule B hereto.

               "Patent  License" shall mean all  agreements,  whether written or
oral, providing for the grant by the Company of any right to manufacture, use or
sell any  invention  covered by a Patent,  including,  without  limitation,  any
thereof referred to in Schedule B hereto.

               "Security  Agreement" shall mean the a Security Agreement,  dated
the date hereof between Company and the Secured Party.

               "Trademarks"   shall  mean  (a)  all  trademarks,   trade  names,
corporate names, company names, business names, fictitious business names, trade
styles,  service marks, logos and other source or business identifiers,  and the
goodwill  associated  therewith,  now existing or hereafter adopted or acquired,


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all  registrations  and recordings  thereof,  and all applications in connection
therewith,  whether in the United States  Patent and Trademark  Office or in any
similar  office or agency of the United  States,  any state thereof or any other
country or any political subdivision thereof, or otherwise,  including,  without
limitation,  any thereof referred to in Schedule B hereto, and (b) all reissues,
extensions or renewals thereof.

               "Trademark  License" shall mean any  agreement,  written or oral,
providing  for the  grant by the  Company  of any  right  to use any  Trademark,
including, without limitation, any thereof referred to in Schedule B hereto.

               "Trade Secrets" shall mean common law and statutory trade secrets
and all other confidential or proprietary or useful information and all know-how
obtained by or used in or  contemplated  at any time for use in the  business of
the Company (all of the foregoing being  collectively  called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form,  including all documents and things embodying,  incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in Schedule B hereto,  and including the right to sue
for  and to  enjoin  and  to  collect  damages  for  the  actual  or  threatened
misappropriation  of any Trade Secret and for the breach or  enforcement  of any
such Trade Secret license.

          2.   Grant of Security  Interest.  In accordance  with Section 3(m) of
the Security Agreement,  to secure the complete and timely payment,  performance
and  discharge  in  full,  as the case may be,  of all of the  Obligations,  the
Company  hereby,   unconditionally   and   irrevocably,   pledges,   grants  and
hypothecates  to the  Secured  Party,  a  continuing  security  interest  in,  a
continuing  first lien upon, an unqualified  right to possession and disposition
of and a right of set-off against,  in each case to the fullest extent permitted
by law, all of the Company's  right,  title and interest of whatsoever  kind and
nature in and to the Intellectual Property (the "Security Interest").

          3.   Representations and Warranties. The Company hereby represents and
warrants, and covenants and agrees with, the Secured Party as follows:

               (a)  The Company has the requisite  corporate power and authority
to  enter  into  this  Agreement  and  otherwise  to carry  out its  obligations
thereunder.  The  execution,  delivery  and  performance  by the Company of this
Agreement and the filings  contemplated therein have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company. This Agreement constitutes a legal, valid and binding obligation of
the Company  enforceable in accordance with its terms,  except as enforceability
may be limited by bankruptcy, insolvency, reorganization,  moratorium or similar
laws affecting the enforcement of creditor's rights generally.

               (b)  The Company  represents and warrants that it has no place of
business or offices where its  respective  books of account and records are kept
(other than  temporarily  at the offices of its  attorneys  or  accountants)  or
places where the Intellectual Property is stored or located, except as set forth
on Schedule A attached hereto;


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<PAGE>


               (c)  The Company is the sole owner of the  Intellectual  Property
(except for non-exclusive licenses granted by the Company in the ordinary course
of business),  free and clear of any liens,  security  interests,  encumbrances,
rights or claims,  and is fully authorized to grant the Security Interest in and
to pledge the Intellectual Property. There is not on file in any governmental or
regulatory  authority,   agency  or  recording  office  an  effective  financing
statement,  security agreement,  license or transfer or any notice of any of the
foregoing  (other than those that have been filed in favor of the Secured  Party
pursuant  to this  Agreement)  covering  or  affecting  any of the  Intellectual
Property.  So long as this Agreement  shall be in effect,  the Company shall not
execute  and shall  not  knowingly  permit  to be on file in any such  office or
agency any such financing  statement or other document or instrument  (except to
the extent filed or recorded in favor of the Secured Party pursuant to the terms
of this Agreement), except for a financing statement covering assets acquired by
the Company after the date hereof,  provided that the value of the  Intellectual
Property  covered by this Agreement along with the Collateral (as defined in the
Security Agreement) is equal to at least 150% of the Obligations.

               (d)  The Company shall at all times maintain its books of account
and records  relating to the  Intellectual  Property at its  principal  place of
business and its Intellectual  Property at the locations set forth on Schedule A
attached hereto and may not relocate such books of account and records unless it
delivers  to the  Secured  Party at least 30 days prior to such  relocation  (i)
written notice of such  relocation  and the new location  thereof (which must be
within the United  States) and (ii) evidence that the necessary  documents  have
been filed and  recorded and other steps have been taken to perfect the Security
Interest to create in favor of the Secured Party valid, perfected and continuing
first  priority  liens in the  Intellectual  Property  to the extent they can be
perfected through such filings.

               (e)  This Agreement creates in favor of the Secured Party a valid
security  interest  in  the  Intellectual  Property  securing  the  payment  and
performance of the Obligations and, upon making the filings required  hereunder,
a perfected first priority security  interest in such  Intellectual  Property to
the extent that it can be perfected through such filings.

               (f)  Upon request of the Secured Party, the Company shall execute
and deliver any and all agreements,  instruments,  documents,  and papers as the
Secured Party may request to evidence the Secured Party's  security  interest in
the  Intellectual  Property  and the  goodwill  and general  intangibles  of the
Company relating thereto or represented thereby, and the Company hereby appoints
the Secured Party its attorney-in-fact to execute and file all such writings for
the  foregoing  purposes,  all acts of such attorney  being hereby  ratified and
confirmed;  such power being coupled with an interest is  irrevocable  until the
Obligations have been fully satisfied and are paid in full.

               (g)  The  execution,  delivery and  performance of this Agreement
does not  conflict  with or cause a breach or default,  or an event that with or
without the  passage of time or notice,  shall  constitute  a breach or default,
under any  agreement  to which the Company is a party or by which the Company is
bound.  No  consent  (including,  without  limitation,  from  stock  holders  or
creditors  of the Company) is required for the Company to enter into and perform
its obligations hereunder.


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<PAGE>


               (h)  The  Company  shall at all  times  maintain  the  liens  and
Security  Interest  provided for hereunder as valid and perfected first priority
liens and security interests in the Intellectual Property to the extent they can
be perfected by filing in favor of the Secured  Party until this  Agreement  and
the Security  Interest  hereunder  shall  terminate  pursuant to Section 11. The
Company  hereby  agrees to defend  the same  against  any and all  persons.  The
Company shall safeguard and protect all Intellectual Property for the account of
the Secured Party. Without limiting the generality of the foregoing, the Company
shall  pay  all  fees,  taxes  and  other  amounts  necessary  to  maintain  the
Intellectual Property and the Security Interest hereunder, and the Company shall
obtain and furnish to the Secured  Party from time to time,  upon  demand,  such
releases  and/or  subordinations  of claims and liens  which may be  required to
maintain the priority of the Security Interest hereunder.

               (i)  The  Company  will  not   transfer,   pledge,   hypothecate,
encumber,  license (except for non-exclusive  licenses granted by the Company in
the  ordinary  course of  business),  sell or  otherwise  dispose  of any of the
Intellectual Property without the prior written consent of the Secured Party.

               (j)  The  Company  shall,  within  ten  (10)  days  of  obtaining
knowledge thereof,  advise the Secured Party promptly,  in sufficient detail, of
any substantial  change in the Intellectual  Property,  and of the occurrence of
any  event  which  would  have a  material  adverse  effect  on the value of the
Intellectual Property or on the Secured Party's security interest therein.

               (k)  The  Company   shall  permit  the  Secured   Party  and  its
representatives and agents to inspect the Intellectual Property at any time, and
to make  copies of records  pertaining  to the  Intellectual  Property as may be
requested by the Secured Party from time to time.

               (l)  The  Company  will take all steps  reasonably  necessary  to
diligently pursue and seek to preserve,  enforce and collect any rights, claims,
causes  of  action  and  accounts  receivable  in  respect  of the  Intellectual
Property.

               (m)  The  Company  shall  promptly  notify the  Secured  Party in
sufficient detail upon becoming aware of any attachment,  garnishment, execution
or other legal process levied against any Intellectual Property and of any other
information  received by the Company that may materially affect the value of the
Intellectual  Property,  the Security Interest or the rights and remedies of the
Secured Party  hereunder.

               (n)  All information heretofore,  herein or hereafter supplied to
the  Secured  Party  by  or on  behalf  of  the  Company  with  respect  to  the
Intellectual  Property is accurate and  complete in all material  respects as of
the date furnished.

               (o)  Schedule  A  attached  hereto  contains a list of all of the
subsidiaries of Company.

               (p)  Schedule B attached  hereto  includes all Licenses,  and all
Patents and Patent Licenses,  if any, owned by the Company in its own name as of
the date  hereof.  Schedule  B hereto  includes  all  Trademarks  and  Trademark


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<PAGE>


Licenses,  if any,  owned by the Company in its own name as of the date  hereof.
Schedule B hereto includes all Copyrights and Copyright Licenses,  if any, owned
by the Company in its own name as of the date hereof. Schedule B hereto includes
all Trade Secrets and Trade Secret Licenses,  if any, owned by the Company as of
the date hereof. To the best of the Company's knowledge,  each License,  Patent,
Trademark,   Copyright  and  Trade  Secret  is  valid,  subsisting,   unexpired,
enforceable and has not been abandoned.  Except as set forth in Schedule B, none
of such  Licenses,  Patents,  Trademarks,  Copyrights  and Trade  Secrets is the
subject of any  licensing or franchise  agreement.  To the best of the Company's
knowledge,   no  holding,   decision  or  judgment  has  been  rendered  by  any
Governmental  Body which would  limit,  cancel or question  the  validity of any
License,  Patent,  Trademark,  Copyright  and  Trade  Secrets  .  No  action  or
proceeding  is pending (i) seeking to limit,  cancel or question the validity of
any License,  Patent,  Trademark,  Copyright or Trade Secret,  or (ii) which, if
adversely  determined,  would have a material adverse effect on the value of any
License, Patent, Trademark,  Copyright or Trade Secret. The Company has used and
will continue to use for the duration of this Agreement, proper statutory notice
in  connection  with  its use of the  Patents,  Trademarks  and  Copyrights  and
consistent  standards  of quality in products  leased or sold under the Patents,
Trademarks and Copyrights.

               (q)  With respect to any Intellectual Property:

                    (i)  such  Intellectual  Property is subsisting  and has not
                         been adjudged invalid or unenforceable,  in whole or in
                         part;

                    (ii) such Intellectual Property is valid and enforceable;

                    (iii)the  Company  has  made  all   necessary   filings  and
                         recordations   to   protect   its   interest   in  such
                         Intellectual Property,  including,  without limitation,
                         recordations  of all of its  interests  in the Patents,
                         Patent Licenses,  Trademarks and Trademark  Licenses in
                         the United States  Patent and  Trademark  Office and in
                         corresponding  offices  throughout  the  world  and its
                         claims to the Copyrights and Copyright  Licenses in the
                         United  States  Copyright  Office and in  corresponding
                         offices throughout the world;

                    (iv) other than as set forth in  Schedule  B, the Company is
                         the  exclusive  owner of the  entire  and  unencumbered
                         right,  title and interest in and to such  Intellectual
                         Property  and no claim  has been  made  that the use of
                         such  Intellectual  Property  infringes on the asserted
                         rights of any third party; and

                    (v)  the Company has  performed and will continue to perform
                         all acts and has paid all  required  fees and  taxes to
                         maintain each and every item of  Intellectual  Property
                         in full  force and  effect  throughout  the  world,  as
                         applicable.


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<PAGE>


               (r)  Except with respect to any  Trademark or Copyright  that the
Company  shall  reasonably  determine  is of  negligible  economic  value to the
Company, the Company shall:

                    (i)  maintain  each  Trademark  and  Copyright in full force
                         free  from  any  claim  of  abandonment   for  non-use,
                         maintain  as in the past the  quality of  products  and
                         services  offered  under such  Trademark or  Copyright;
                         employ such Trademark or Copyright with the appropriate
                         notice of registration; not adopt or use any mark which
                         is confusingly similar or a colorable imitation of such
                         Trademark or Copyright  unless the Secured  Party shall
                         obtain  a  perfected  security  interest  in such  mark
                         pursuant to this Agreement; and not (and not permit any
                         licensee  or  sublicensee  thereof  to) do  any  act or
                         knowingly  omit to do any act whereby any  Trademark or
                         Copyright may become invalidated;

                    (ii) not,  except  with  respect to any Patent that it shall
                         reasonably determine is of negligible economic value to
                         it,  do any  act,  or omit to do any act,  whereby  any
                         Patent may become abandoned or dedicated; and

                    (iii)notify the Secured Party  immediately  if it knows,  or
                         has   reason   to  know,   that  any   application   or
                         registration  relating  to  any  Patent,  Trademark  or
                         Copyright may become abandoned or dedicated,  or of any
                         adverse   determination   or  development   (including,
                         without  limitation,  the  institution  of, or any such
                         determination  or development in, any proceeding in the
                         United  States  Patent  and  Trademark  Office,  United
                         States Copyright Office or any court or tribunal in any
                         country)   regarding   its  ownership  of  any  Patent,
                         Trademark  or  Copyright  or its right to register  the
                         same or to keep and maintain the same.

               (s)  Whenever the Company, either by itself or through any agent,
employee,  licensee or designee,  shall file an application for the registration
of any  Patent,  Trademark  or  Copyright  with the  United  States  Patent  and
Trademark Office, United States Copyright Office or any similar office or agency
in any other country or any political  subdivision  thereof or acquire rights to
any new Patent,  Trademark or Copyright  whether or not registered,  report such
filing to the Secured  Party within five business days after the last day of the
fiscal quarter in which such filing occurs.

               (t)  The Company shall take all reasonable  and necessary  steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark  Office,  United States  Copyright Office or any similar office or
agency in any other country or any political  subdivision  thereof,  to maintain
and pursue each  application  (and to obtain the relevant  registration)  and to
maintain each registration of the Patents, Trademarks and Copyrights, including,
without  limitation,  filing of applications for renewal,  affidavits of use and
affidavits of incontestability.

               (u)  In  the  event  that  any  Patent,  Trademark  or  Copyright
included in the Intellectual  Property is infringed,  misappropriated or diluted
by a third party,  promptly notify the Secured Party after it learns thereof and
shall,  unless it shall  reasonably  determine  that such  Patent,  Trademark or


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<PAGE>


Copyright is of negligible  economic value to it, which  determination  it shall
promptly   report  to  the  Secured  Party,   promptly  sue  for   infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution,
or take such other actions as it shall  reasonably  deem  appropriate  under the
circumstances  to protect such Patent,  Trademark or  Copyright.  If the Company
lacks the  financial  resources  to comply with this Section  3(t),  the Company
shall so notify the Secured Party and shall cooperate fully with any enforcement
action undertaken by the Secured Party on behalf of the Company.

          4.   Defaults. The following events shall be "Events of Default":

               (a)  The  occurrence  of an Event of Default  (as  defined in the
Notes) under the Notes;

               (b)  Any  representation  or  warranty  of the  Company  in  this
Agreement or in the Security Agreement shall prove to have been incorrect in any
material respect when made;

               (c)  The  failure by the Company to observe or perform any of its
obligations  hereunder  or in the  Security  Agreement  for ten (10) days  after
receipt by the Company of notice of such failure from the Secured Party; and

               (d)  Any breach of, or default under, the Warrants.

          5.   Duty To Hold In  Trust.  Upon  the  occurrence  of any  Event  of
Default and at any time thereafter, the Company shall, upon receipt by it of any
revenue, income or other sums subject to the Security Interest,  whether payable
pursuant  to the  Notes  or  otherwise,  or of any  check,  draft,  note,  trade
acceptance  or other  instrument  evidencing  an obligation to pay any such sum,
hold the same in trust for the  Secured  Party and shall  forthwith  endorse and
transfer  any such  sums or  instruments,  or both,  to the  Secured  Party  for
application to the satisfaction of the Obligations.

          6.   Rights and Remedies Upon Default. Upon occurrence of any Event of
Default and at any time  thereafter,  the Secured  Party shall have the right to
exercise all of the remedies  conferred  hereunder and under the Notes,  and the
Secured  Party shall have all the rights and  remedies of a secured  party under
the UCC and/or any other  applicable law (including the Uniform  Commercial Code
of any jurisdiction in which any Intellectual Property is then located). Without
limitation, the Secured Party shall have the following rights and powers:

               (a)  The Secured Party shall have the right to take possession of
the  Intellectual  Property  and,  for  that  purpose,  enter,  with the aid and
assistance of any person, any premises where the Intellectual  Property,  or any
part  thereof,  is or may be placed and remove the same,  and the Company  shall
assemble the Intellectual Property and make it available to the Secured Party at
places which the Secured Party shall reasonably select, whether at the Company's
premises or elsewhere,  and make available to the Secured  Party,  without rent,
all of the Company's  respective  premises and facilities for the purpose of the
Secured  Party  taking  possession  of,  removing  or putting  the  Intellectual
Property in saleable or disposable form.


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<PAGE>


               (b)  The  Secured  Party  shall  have the  right to  operate  the
business of the Company using the Intellectual Property and shall have the right
to assign,  sell,  lease or otherwise  dispose of and deliver all or any part of
the Intellectual  Property, at public or private sale or otherwise,  either with
or without  special  conditions  or  stipulations,  for cash or on credit or for
future delivery, in such parcel or parcels and at such time or times and at such
place or places,  and upon such terms and  conditions  as the Secured  Party may
deem  commercially  reasonable,  all  without  (except as shall be  required  by
applicable statute and cannot be waived)  advertisement or demand upon or notice
to the Company or right of redemption of the Company, which are hereby expressly
waived. Upon each such sale, lease, assignment or other transfer of Intellectual
Property,  the Secured Party may,  unless  prohibited  by  applicable  law which
cannot be waived,  purchase all or any part of the  Intellectual  Property being
sold,  free from and discharged of all trusts,  claims,  right of redemption and
equities of the Company, which are hereby waived and released.

          7.   Applications of Proceeds. The proceeds of any such sale, lease or
other disposition of the Intellectual Property hereunder shall be applied first,
to the expenses of retaking,  holding,  storing,  processing  and  preparing for
sale, selling, and the like (including,  without limitation, any taxes, fees and
other costs incurred in connection  therewith) of the Intellectual  Property, to
the  reasonable  attorneys'  fees and expenses  incurred by the Secured Party in
enforcing its rights  hereunder and in connection with  collecting,  storing and
disposing  of  the  Intellectual  Property,  and  then  to  satisfaction  of the
Obligations, and to the payment of any other amounts required by applicable law,
after which the Secured Party shall pay to the Company any surplus proceeds. If,
upon the sale,  license or other disposition of the Intellectual  Property,  the
proceeds  thereof are insufficient to pay all amounts to which the Secured Party
is legally  entitled,  the Company will be liable for the  deficiency,  together
with interest  thereon,  at the rate of 15% per annum (the "Default Rate"),  and
the  reasonable  fees of any attorneys  employed by the Secured Party to collect
such  deficiency.  To the extent permitted by applicable law, the Company waives
all claims,  damages and demands  against the Secured  Party  arising out of the
repossession,  removal,  retention or sale of the Intellectual Property,  unless
due to the gross negligence or willful misconduct of the Secured Party.

          8.   Costs and Expenses.  The Company agrees to pay all  out-of-pocket
fees,  costs and  expenses  incurred  in  connection  with any  filing  required
hereunder, including without limitation, any financing statements,  continuation
statements,  partial releases and/or  termination  statements related thereto or
any  expenses of any  searches  reasonably  required by the Secured  Party.  The
Company  shall also pay all other  claims and  charges  which in the  reasonable
opinion of the Secured Party might  prejudice,  imperil or otherwise  affect the
Intellectual  Property or the Security Interest therein.  The Company will also,
upon  demand,  pay to the  Secured  Party the  amount of any and all  reasonable
expenses,  including the reasonable  fees and expenses of its counsel and of any
experts and agents, which the Secured Party may incur in connection with (i) the
enforcement of this Agreement,  (ii) the custody or preservation of, or the sale
of,  collection  from,  or  other  realization  upon,  any of  the  Intellectual
Property,  or (iii) the  exercise  or  enforcement  of any of the  rights of the
Secured Party under the Notes.  Until so paid, any fees payable  hereunder shall
be added to the  principal  amount of the Notes and shall bear  interest  at the
Default Rate.


                                      -9-
<PAGE>


          9.   Responsibility for Intellectual Property. The Company assumes all
liabilities and responsibility in connection with all Intellectual Property, and
the  obligations  of the Company  hereunder  or under the Notes and the Warrants
shall in no way be affected or  diminished  by reason of the loss,  destruction,
damage or theft of any of the Intellectual  Property or its  unavailability  for
any reason.

          10.  Security Interest  Absolute.  All rights of the Secured Party and
all Obligations of the Company  hereunder,  shall be absolute and unconditional,
irrespective of: (a) any lack of validity or  enforceability  of this Agreement,
the Notes,  the Warrants or any agreement  entered into in  connection  with the
foregoing,  or any portion hereof or thereof; (b) any change in the time, manner
or place of  payment or  performance  of, or in any other term of, all or any of
the  Obligations,  or any other  amendment  or waiver of or any  consent  to any
departure from the Notes,  the Warrants or any other  agreement  entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the  Intellectual  Property,  or any  release  or  amendment  or waiver of or
consent to departure from any other Intellectual  Property for, or any guaranty,
or any other security, for all or any of the Obligations;  (d) any action by the
Secured Party to obtain,  adjust,  settle and cancel in its sole  discretion any
insurance  claims or matters made or arising in connection with the Intellectual
Property;  or (e) any other  circumstance  which might otherwise  constitute any
legal or equitable  defense  available to the Company,  or a discharge of all or
any part of the Security  Interest granted hereby.  Until the Obligations  shall
have been paid and  performed  in full,  the rights of the  Secured  Party shall
continue even if the Obligations are barred for any reason,  including,  without
limitation, the running of the statute of limitations or bankruptcy. The Company
expressly waives  presentment,  protest,  notice of protest,  demand,  notice of
nonpayment  and  demand  for  performance.  In the  event  that at any  time any
transfer of any  Intellectual  Property  or any payment  received by the Secured
Party  hereunder  shall  be  deemed  by  final  order  of a court  of  competent
jurisdiction to have been a voidable  preference or fraudulent  conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise  due to any party  other than the  Secured  Party,  then,  in any such
event, the Company's  obligations  hereunder shall survive  cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or  cancellation  of this  Agreement,  but shall  remain a valid and binding
obligation  enforceable in accordance with the terms and provisions  hereof. The
Company  waives all right to require  the Secured  Party to proceed  against any
other person or to apply any  Intellectual  Property which the Secured Party may
hold at any time,  or to  marshal  assets,  or to pursue any other  remedy.  The
Company waives any defense  arising by reason of the  application of the statute
of limitations to any obligation secured hereby.

          11.  Term of Agreement. This Agreement and the Security Interest shall
terminate  on the date on which all  payments  under the Notes have been made in
full  and all  other  Obligations  have  been  paid  or  discharged.  Upon  such
termination,  the  Secured  Party,  at the  request  and at the  expense  of the
Company,  will join in executing any  termination  statement with respect to any
financing statement executed and filed pursuant to this Agreement.  12. Power of
Attorney; Further Assurances.


                                      -10-
<PAGE>


               (a)  The Company  authorizes the Secured  Party,  and does hereby
make, constitute and appoint it, and its respective officers, agents, successors
or assigns with full power of  substitution,  as the  Company's  true and lawful
attorney-in-fact, with power, in its own name or in the name of the Company, to,
after the  occurrence  and during the  continuance  of an Event of Default,  (i)
endorse any notes, checks, drafts, money orders, or other instruments of payment
(including  payments  payable under or in respect of any policy of insurance) in
respect  of the  Intellectual  Property  that may come  into  possession  of the
Secured  Party;  (ii) to sign and endorse  any UCC  financing  statement  or any
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts against  debtors,  assignments,  verifications  and notices in connection
with accounts, and other documents relating to the Intellectual Property;  (iii)
to pay or discharge taxes,  liens,  security  interests or other encumbrances at
any time levied or placed on or threatened  against the  Intellectual  Property;
(iv) to demand, collect, receipt for, compromise,  settle and sue for monies due
in respect of the Intellectual Property; and (v) generally, to do, at the option
of the Secured Party, and at the Company's expense, at any time, or from time to
time,  all acts and things which the Secured  Party deems  necessary to protect,
preserve and realize upon the  Intellectual  Property and the Security  Interest
granted therein in order to effect the intent of this  Agreement,  the Notes and
the Warrants, all as fully and effectually as the Company might or could do; and
the Company hereby ratifies all that said attorney shall lawfully do or cause to
be done by virtue hereof. This power of attorney is coupled with an interest and
shall be  irrevocable  for the term of this  Agreement and thereafter as long as
any of the Obligations shall be outstanding.

               (b)  On a  continuing  basis,  the  Company  will make,  execute,
acknowledge,  deliver, file and record, as the case may be, in the proper filing
and recording places in any jurisdiction,  including,  without  limitation,  the
jurisdictions  indicated on Schedule C, attached hereto,  all such  instruments,
and take all such action as may reasonably be deemed necessary or advisable,  or
as reasonably  requested by the Secured Party, to perfect the Security  Interest
granted  hereunder  and  otherwise  to carry out the intent and purposes of this
Agreement,  or for assuring  and  confirming  to the Secured  Party the grant or
perfection of a security interest in all the Intellectual Property.

               (c)  The Company hereby irrevocably appoints the Secured Party as
the Company's  attorney-in-fact,  with full  authority in the place and stead of
the  Company  and in the name of the  Company,  from time to time in the Secured
Party's  discretion,  to take any action and to execute any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement,  including  the  filing,  in its  sole  discretion,  of  one or  more
financing or continuation statements and amendments thereto,  relative to any of
the  Intellectual  Property without the signature of the Company where permitted
by law.

          13.  Notices. All notices,  requests, demands and other communications
hereunder shall be in writing,  with copies to all the other parties hereto, and
shall be deemed to have been duly  given  when (i) if  delivered  by hand,  upon


                                      -11-
<PAGE>


receipt,  (ii) if sent by facsimile,  upon receipt of proof of sending  thereof,
(iii) if sent by  nationally  recognized  overnight  delivery  service  (receipt
requested), the next business day or (iv) if mailed by first-class registered or
certified  mail,  return receipt  requested,  postage  prepaid,  four days after
posting in the U.S. mails, in each case if delivered to the following addresses:

          If to the Company:            QT 5, Inc.
                                        5655 Lindero Canyon Road
                                        Suite 120
                                        Westlake Village, California  91362
                                        Attention: Chief Executive Officer
                                        Telephone:  818-338-1510
                                        Facsimile:   818-338-1551

          With copies to:               Sichenzia Ross Friedman Ference LLP
                                        1065 Avenue of the Americas
                                        New York, New York  10018
                                        Attention:  Darrin M. Ocasio, Esq.
                                        Telephone:  212-930-9700
                                        Facsimile:   212-930-9725

          If to the Secured Party:      AJW Partners, LLC
                                        AJW Offshore, Ltd.
                                        AJW Qualified Partners, LLC
                                        New Millennium Capital Partners II, LLC
                                        1044 Northern Boulevard
                                        Suite 302
                                        Roslyn, New York  11576
                                        Attention:  Corey Ribotsky
                                        Telephone:  516-739-7110
                                        Facsimile:  516-739-7115

          With copies to:               Ballard Spahr Andrews & Ingersoll, LLP
                                        1735 Market Street, 51st Floor
                                        Philadelphia, Pennsylvania  19103
                                        Attention:  Gerald J. Guarcini, Esquire
                                        Telephone:  215-864-8625
                                        Facsimile:  215-864-8999

          14.  Other  Security.  To the extent that the  Obligations  are now or
hereafter  secured by property  other than the  Intellectual  Property or by the
guarantee,  endorsement  or property of any other person,  firm,  corporation or
other  entity,  then  the  Secured  Party  shall  have  the  right,  in its sole
discretion, to pursue, relinquish,  subordinate, modify or take any other action
with respect  thereto,  without in any way  modifying  or  affecting  any of the
Secured Party's rights and remedies hereunder.


                                      -12-
<PAGE>


          15.  Miscellaneous.

               (a)  No course of dealing  between  the  Company  and the Secured
Party, nor any failure to exercise, nor any delay in exercising,  on the part of
the Secured Party,  any right,  power or privilege  hereunder or under the Notes
shall operate as a waiver thereof;  nor shall any single or partial  exercise of
any right,  power or  privilege  hereunder or  thereunder  preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.

               (b)  All of the rights and  remedies  of the  Secured  Party with
respect to the Intellectual Property, whether established hereby or by the Notes
or by  any  other  agreements,  instruments  or  documents  or by law  shall  be
cumulative and may be exercised singly or concurrently.

               (c)  This  Agreement and the Security  Agreement  constitute  the
entire agreement of the parties with respect to the subject matter hereof and is
intended to supersede all prior negotiations, understandings and agreements with
respect  thereto.  Except  as  specifically  set  forth  in this  Agreement,  no
provision  of this  Agreement  may be  modified  or amended  except by a written
agreement  specifically  referring to this  Agreement  and signed by the parties
hereto.

               (d)  In the event that any provision of this Agreement is held to
be invalid,  prohibited or  unenforceable  in any  jurisdiction  for any reason,
unless such  provision  is narrowed by  judicial  construction,  this  Agreement
shall, as to such jurisdiction,  be construed as if such invalid,  prohibited or
unenforceable  provision had been more  narrowly  drawn so as not to be invalid,
prohibited or unenforceable. If, notwithstanding the foregoing, any provision of
this  Agreement  is held  to be  invalid,  prohibited  or  unenforceable  in any
jurisdiction,  such provision, as to such jurisdiction,  shall be ineffective to
the  extent  of  such  invalidity,   prohibition  or  unenforceability   without
invalidating the remaining  portion of such provision or the other provisions of
this  Agreement  and without  affecting the validity or  enforceability  of such
provision or the other provisions of this Agreement in any other jurisdiction.

               (e)  No waiver of any breach or  default or any right  under this
Agreement  shall be  considered  valid unless in writing and signed by the party
giving  such  waiver,  and no such  waiver  shall  be  deemed  a  waiver  of any
subsequent breach or default or right,  whether of the same or similar nature or
otherwise.

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

               (g)  Each party  shall take such  further  action and execute and
deliver such further  documents as may be necessary or  appropriate  in order to
carry out the provisions and purposes of this Agreement.

               (h)  This  Agreement  shall be construed in  accordance  with the
laws of the State of New York, except to the extent the validity,  perfection or
enforcement  of a security  interest  hereunder  in  respect  of any  particular
Intellectual  Property which are governed by a jurisdiction other than the State
of New York in which  case such law shall  govern.  Each of the  parties  hereto


                                      -13-
<PAGE>


irrevocably submit to the exclusive jurisdiction of any New York State or United
States  Federal court sitting in Manhattan  county over any action or proceeding
arising out of or  relating to this  Agreement,  and the parties  hereto  hereby
irrevocably agree that all claims in respect of such action or proceeding may be
heard and determined in such New York State or Federal court. The parties hereto
agree that a final judgment in any such action or proceeding shall be conclusive
and may be enforced  in other  jurisdictions  by suit on the  judgment or in any
other manner  provided by law. The parties hereto further waive any objection to
venue in the State of New York and any  objection to an action or  proceeding in
the State of New York on the basis of forum non conveniens.

               (i)  EACH  PARTY  HERETO  HEREBY  AGREES TO WAIVE ITS  RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL  ENCOMPASSING
OF ANY  DISPUTES  THAT MAY BE FILED IN ANY COURT AND THAT  RELATE TO THE SUBJECT
MATER OF THIS AGREEMENT,  INCLUDING  WITHOUT  LIMITATION  CONTRACT CLAIMS,  TORT
CLAIMS,  BREACH OF DUTY CLAIMS AND ALL OTHER  COMMON LAW AND  STATUTORY  CLAIMS.
EACH PARTY HERETO  ACKNOWLEDGES  THAT THIS WAIVER IS A MATERIAL  INDUCEMENT  FOR
EACH PARTY TO ENTER INTO A BUSINESS  RELATIONSHIP,  THAT EACH PARTY HAS  ALREADY
RELIED ON THIS WAIVER IN ENTERING  INTO THIS  AGREEMENT AND THAT EACH PARTY WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR  RELATED  FUTURE  DEALINGS.  EACH PARTY
FURTHER  WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL,  AND THAT SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO
A JURY TRIAL FOLLOWING SUCH  CONSULTATION.  THIS WAIVER IS IRREVOCABLE,  MEANING
THAT,  NOTWITHSTANDING  ANYTHING HEREIN TO THE CONTRARY,  IT MAY NOT BE MODIFIED
EITHER  ORALLY OR IN  WRITING,  AND THIS WAIVER  SHALL  APPLY TO ANY  SUBSEQUENT
AMENDMENTS,  RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE
EVENT OF A LITIGATION,  THIS  AGREEMENT  MAY BE FILED AS A WRITTEN  CONSENT TO A
TRIAL BY THE COURT.

               (j)  This   Agreement   may  be   executed   in  any   number  of
counterparts,  each of which when so executed  shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any  signature  is  delivered  by  facsimile  transmission,  such
signature shall create a valid binding  obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.




                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



                                      -14-
<PAGE>




         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.

                                        QT 5, INC.


                                        By:
                                          --------------------------------------
                                          Timothy J. Owens
                                          Chief Executive Officer


                                        AJW PARTNERS, LLC
                                        By:  SMS Group, LLC


                                        By:
                                          --------------------------------------
                                          Corey S. Ribotsky
                                          Manager


                                        AJW OFFSHORE, LTD.
                                        By:  First Street Manager II, LLC


                                        By:
                                          --------------------------------------
                                          Corey S. Ribotsky
                                          Manager


                                        AJW QUALIFIED PARTNERS, LLC
                                        By:  AJW Manager, LLC


                                        By:
                                          --------------------------------------
                                          Corey S. Ribotsky
                                          Manager

                                        NEW MILLENNIUM CAPITAL
                                        PARTNERS II, LLC
                                        By:  First Street Manager II, LLC


                                        By:
                                          --------------------------------------
                                          Corey S. Ribotsky
                                          Manager


                                      -15-