Document:

SECURITIES PURCHASE AGREEMENT

      This Securities Purchase Agreement (this "Agreement") is dated as of
February __, 2004, among QT 5, Inc., a Delaware corporation (the "Company"), and
the purchasers identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").

      WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:

                                    ARTICLE I

                                   DEFINITIONS

      1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:

            "Affiliate" means any Person that, directly or indirectly through
      one or more intermediaries, controls or is controlled by or is under
      common control with a Person, as such terms are used in and construed
      under Rule 144 under the Securities Act.

            "Capital Shares" means the Common Stock and any shares of any other
      class of common stock whether now or hereafter authorized, having the
      right to participate in the distribution of earnings and assets of the
      Company.

            "Capital Shares Equivalents" means any securities, rights or
      obligations that are convertible into or exchangeable for or give any
      right to subscribe for or purchase, directly or indirectly, any Capital
      Shares of the Company or any warrants, options or other rights to
      subscribe for or purchase, directly or indirectly, Capital Shares or any
      such convertible or exchangeable securities.

            "Closing Dates" means, collectively, the dates of the First Closing
      and Second Closing.

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            "Closing Price" means on any particular date (a) the last reported
      closing bid price per share of Common Stock on such date on the Principal
      Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b)
      if there is no such price on such date, then the closing bid price on the
      Principal Market on the date nearest preceding such date (as reported by
      Bloomberg L.P. at 4:15 PM (New York time) for the closing bid price for
      regular session trading on such day), or (c) if the Common Stock is not
      then listed or quoted on the Principal Market and if prices for the Common
      Stock are then reported in the "pink sheets" published by the National
      Quotation Bureau Incorporated (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid
      price per share of the Common Stock so reported, or (d) if the shares of
      Common Stock are not then publicly traded the fair market value of a share
      of Common Stock as determined by a qualified independent appraiser
      selected in good faith by the Purchasers of a majority in interest of the
      principal amount of Debentures then outstanding.

            "Closings" means collectively, the closings of the purchase and sale
      of the Securities pursuant to Section 2.1, and any reference to "Closing"
      or "Closings" shall be construed to include the First Closing and the
      Second Closing unless only one such closing is expressly referred to.

            "Commission" means the Securities and Exchange Commission.

            "Common Stock" means the common stock of the Company, par value
      $0.001 per share, and any securities into which such common stock shall
      hereinafter have been reclassified into.

            "Company Counsel" means Sichenzia Ross Friedman Ference LLP.

            "Debentures" means, the Convertible Debentures due 24 months from
      their date of issuance, issued by the Company to the Purchasers hereunder,
      in the form of Exhibit A.

            "Disclosure Schedules" shall have the meaning ascribed to such term
      in Section 3.1 hereof.

            "Effective Date" means the date that the initial Registration
      Statement filed by the Company pursuant to the Registration Rights
      Agreement is first declared effective by the Commission.

            "Escrow Agent" shall have the meaning set forth in the Escrow
      Agreement.

            "Escrow Agreement" means the Escrow Agreement in substantially the
      form of Exhibit E hereto executed and delivered contemporaneously with
      this Agreement.

            "Exchange Act" means the Securities Exchange Act of 1934, as
      amended.

            "First Closing" shall have the meaning ascribed to such term in
      Section 2.1 hereof.

            "First Closing Date" means the date of the First Closing.

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            "FW" means Feldman Weinstein LLP with offices at 420 Lexington
      Avenue, Suite 2620, New York, New York 10170-0002.

            "GAAP" shall have the meaning ascribed to such term in Section
      3.1(h) hereof.

            "Liens" shall have the meaning ascribed to such term in Section
      3.1(a) hereof.

            "Losses" means any and all losses, claims, damages, liabilities,
      settlement costs and expenses, including without limitation costs of
      preparation and reasonable attorneys' fees.

            "Material Adverse Effect" shall have the meaning assigned to such
      term in Section 3.1(b) hereof.

            "Person" means an individual or corporation, partnership, trust,
      incorporated or unincorporated association, joint venture, limited
      liability company, joint stock company, government (or an agency or
      subdivision thereof) or other entity of any kind.

            "Principal Amount" shall mean, as to each Purchaser, the amounts set
      forth below such Purchaser's signature block on the signature pages hereto
      and next to the heading "First Closing Principal Amount" and "Second
      Closing Principal Amount", in United States Dollars, which shall be 125%
      of the corresponding Subscription Amount.

            "Principal Market" means initially the OTC Bulletin Board and shall
      also include the American Stock Exchange, New York Stock Exchange, the
      NASDAQ Small-Cap Market or the NASDAQ National Market, whichever is at the
      time the principal trading exchange or market for the Common Stock, based
      upon share volume.

            "Proceeding" means an action, claim, suit, investigation or
      proceeding (including, without limitation, an investigation or partial
      proceeding, such as a deposition), whether commenced or threatened.

            "Registration Rights Agreement" means the Registration Rights
      Agreement, dated the Closing Date, among the Company and the Purchasers,
      in the form of Exhibit B.

            "Registration Statement" means the registration statement to be
      filed by the Company pursuant to the Registration Rights Agreement.

            "Required Approvals" shall have the meaning ascribed to such term in
      Section 3.1(e) hereof.

            "Required Minimum" means, as of any date, the maximum aggregate
      number of shares of Common Stock then issued or potentially issuable in
      the future pursuant to the Transaction Documents, including any Underlying
      Shares issuable upon exercise or conversion in full of all Warrants and
      Debentures, ignoring any conversion or exercise limits set forth therein,
      and assuming that the Set Price is at all times on and after the date of
      determination the lesser of (a) the Set Price then in effect and (b) 75%
      of the Closing Price on the Trading Day immediately prior to the date of
      determination.

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<PAGE>

            "Rule 144" means Rule 144 promulgated by the Commission pursuant to
      the Securities Act, as such Rule may be amended from time to time, or any
      similar rule or regulation hereafter adopted by the Commission having
      substantially the same effect as such Rule.

            "SEC Reports" shall have the meaning ascribed to such term in
      Section 3.1(h) hereof.

            "Second Closing" shall have the meaning ascribed to such term in
      Section 2.1 hereof.

            "Second Closing Date" means the date of the Second Closing.

            "Securities" means the Debentures, the Warrants and the Underlying
      Shares.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Set Price" shall have the meaning ascribed to such term in the
      Debentures.

            "Subscription Amount" means, as to each Purchaser, the amounts set
      forth below such Purchaser's signature block on the signature pages hereto
      and next to the headings "First Closing Subscription Amount" and "Second
      Closing Subscription Amount", in United States Dollars and in immediately
      available funds.

            "Subsidiary" means any subsidiary of the Company as set forth in the
      SEC Reports.

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

            "Transaction Documents" means this Agreement, the Debentures, the
      Warrants, the Registration Rights Agreement, the Escrow Agreement and any
      other documents or agreements executed in connection with the transactions
      contemplated hereunder.

            "Underlying Shares" means the shares of Common Stock issuable upon
      conversion of the Debentures and upon exercise of the Warrants and issued
      and issuable in lieu of the cash payment of interest on the Debentures.

            "Warrants" means collectively the Common Stock purchase warrants, in
      the form of Exhibit C delivered to the Purchasers at the Closing in
      accordance with Section 2.2 hereof.

            "Warrant Shares" means the shares of Common Stock issuable upon
      exercise of the Warrants.

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<PAGE>

                                   ARTICLE II

                                PURCHASE AND SALE

      2.1 Closing. Each Purchaser shall purchase at each Closing, severally and
not jointly with the other Purchasers, the Principal Amount of Debentures equal
to such Purchaser's Principal Amount applicable to such Closing and the Company
shall sell such Principal Amount of Debentures to each such Purchaser. The
Principal Amount of each Debenture shall be convertible in accordance with its
terms at the applicable Set Price. The Closing shall take place in two stages as
set forth below (respectively, the "First Closing" and the "Second Closing").
The aggregate Principal Amount of debentures purchased at all of the Closings
shall be up to $1,000,000.

            (a) First Closing. The First Closing shall be limited to $500,000 in
      aggregate Principal Amount of Debentures, and shall occur within 5 Trading
      Days of the date hereof.

            (b) Second Closing. The Second Closing shall be limited to $500,000
      in aggregate Principal Amount of Debentures, and shall occur on the 5th
      Trading Day following the Effective Date.

      2.2 Closing Conditions. Each Closing shall take place at the offices of
the Escrow Agent, or at such other location as the parties may agree, pursuant
to the terms of the Escrow Agreement. Upon satisfaction or waiver by the party
sought to be benefited thereby of the conditions set forth in this Section 2.2,
as applicable, each Closing shall occur.

            (a) At or prior to each Closing, unless otherwise indicated below,
      the Company shall deliver or cause to be delivered to the Escrow Agent the
      following:

                  (i) a Debenture for each Purchaser with a principal amount
            equal to such Purchaser's Principal Amount as to the applicable
            Closing, registered in the name of such Purchaser;

                  (ii) as to the First Closing only, a Warrant registered in the
            name of each Purchaser to purchase up to a number of shares of
            Common Stock equal to 50% of such Purchaser's aggregate Principal
            Amount for both Closings divided by the Set Price, with a term of 5
            years and an exercise price equal to $0.01, as adjusted therein;

                  (iii) as to the First Closing only, the legal opinion of
            Company Counsel, in the form of Exhibit D attached hereto, addressed
            to the Purchasers;

                  (iv) as to the First Closing only, the Escrow Agreement duly
            executed by the Company, in the form of Exhibit E attached hereto;

                  (v) as to the First Closing only, the Registration Rights
            Agreement duly executed by the Company in the form of Exhibit B
            attached hereto;

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<PAGE>

                  (vi) as to the First Closing only, this Agreement, duly
            executed by the Company.

            (b) At or prior to each Closing, unless otherwise indicated below,
      each Purchaser shall deliver or cause to be delivered to the Escrow Agent
      the following:

                  (i) such Purchaser's Subscription Amount, as to the applicable
            Closing, by wire transfer;

                  (ii) as to the First Closing only, the Escrow Agreement duly
            executed by such Purchaser;

                  (iii) as to the First Closing only, this Agreement, duly
            executed by such Purchaser; and

                  (iv) as to the First Closing only, the Registration Rights
            Agreement duly executed by such Purchaser.

            (c) All representations and warranties of the other party contained
      herein shall remain true and correct as of each Closing Date and all
      covenants of the other party shall have been performed if due prior to
      such date.

            (d) There shall have been no Material Adverse Effect (as defined in
      Section 3.1(b)) with respect to the Company since the date hereof.

            (e) From the date hereof to each Closing Date, trading in the Common
      Stock shall not have been suspended by the Commission (except for any
      suspension of trading of limited duration agreed to by the Company, which
      suspension shall be terminated prior to the applicable Closing), and, at
      any time prior to each Closing Date, trading in securities generally as
      reported by Bloomberg Financial Markets shall not have been suspended or
      limited, or minimum prices shall not have been established on securities
      whose trades are reported by such service, or on the Principal Market, nor
      shall a banking moratorium have been declared either by the United States
      or New York State authorities.

            (f) As to the Second Closing only, the Company shall have filed with
      the Commission the Registration Statement registering all of the
      Underlying Shares and, within the time period specified in the
      Registration Rights Agreement, such Registration Statement shall have been
      declared effective by the Commission as to all such securities and been
      maintained effective since such date.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

      3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (the "Disclosure Schedules") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.

                                      -6-
<PAGE>

            (a) Subsidiaries. The Company owns, directly or indirectly, all of
      the capital stock or other equity interests of each Subsidiary free and
      clear of any lien, charge, security interest, encumbrance, right of first
      refusal or other restriction (collectively, "Liens"), and all the issued
      and outstanding shares of capital stock of each Subsidiary are validly
      issued and are fully paid, non-assessable and free of preemptive and
      similar rights. If the Company has no Subsidiaries, then references in the
      Transaction Documents to the Subsidiaries will be disregarded.

            (b) Organization and Qualification. Each of the Company and the
      Subsidiaries is an entity duly incorporated or otherwise organized,
      validly existing and in good standing under the laws of the jurisdiction
      of its incorporation or organization (as applicable), with the requisite
      power and authority to own and use its properties and assets and to carry
      on its business as currently conducted. Neither the Company nor any
      Subsidiary is in violation of any of the provisions of its respective
      certificate or articles of incorporation, bylaws or other organizational
      or charter documents. Each of the Company and the Subsidiaries is duly
      qualified to do business and is in good standing as a foreign corporation
      or other entity in each jurisdiction in which the nature of the business
      conducted or property owned by it makes such qualification necessary,
      except where the failure to be so qualified or in good standing, as the
      case may be, could not, individually or in the aggregate: (i) adversely
      affect the legality, validity or enforceability of any Transaction
      Document, (ii) have or result in or be reasonably likely to have or result
      in a material adverse effect on the results of operations, assets,
      prospects, business or condition (financial or otherwise) of the Company
      and the Subsidiaries, taken as a whole, or (iii) adversely impair the
      Company's ability to perform fully on a timely basis its obligations under
      any of the Transaction Documents (any of (i), (ii) or (iii), a "Material
      Adverse Effect").

            (c) Authorization; Enforcement. The Company has the requisite
      corporate power and authority to enter into and to consummate the
      transactions contemplated by each of the Transaction Documents and
      otherwise to carry out its obligations hereunder or thereunder. The
      execution and delivery of each of the Transaction Documents by the Company
      and the consummation by it of the transactions contemplated hereby or
      thereby have been duly authorized by all necessary action on the part of
      the Company and no further consent or action is required by the Company
      other than Required Approvals. Each of the Transaction Documents has been
      (or upon delivery will be) duly executed by the Company and, when
      delivered in accordance with the terms hereof, will constitute the valid
      and binding obligation of the Company enforceable against the Company in
      accordance with its terms, subject to applicable bankruptcy, insolvency,
      fraudulent conveyance, reorganization, moratorium and similar laws
      affecting creditors' rights and remedies generally and general principles
      of equity. Neither the Company nor any Subsidiary is in violation of any
      of the provisions of its respective certificate or articles of
      incorporation, by-laws or other organizational or charter documents except
      where such violation could not, individually or in the aggregate,
      constitute a Material Adverse Effect.

                                      -7-
<PAGE>

            (d) No Conflicts. The execution, delivery and performance of the
      Transaction Documents by the Company and the consummation by the Company
      of the transactions contemplated thereby do not and will not: (i) conflict
      with or violate any provision of the Company's or any Subsidiary's
      certificate or articles of incorporation, bylaws or other organizational
      or charter documents, or (ii) subject to obtaining the Required Approvals,
      conflict with, or constitute a default (or an event that 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 (with or
      without notice, lapse of time or both) of, any agreement, credit facility,
      debt or other instrument (evidencing a Company or Subsidiary debt or
      otherwise) or other understanding to which the Company or any Subsidiary
      is a party or by which any property or asset of the Company or any
      Subsidiary is bound or affected, or (iii) result, in a violation of any
      law, rule, regulation, order, judgment, injunction, decree or other
      restriction of any court or governmental authority to which the Company or
      a Subsidiary is subject (including federal and state securities laws and
      regulations), or by which any property or asset of the Company or a
      Subsidiary is bound or affected; such as could not, individually or in the
      aggregate, have or result in a Material Adverse Effect.

            (e) Filings, Consents and Approvals. Neither the Company nor any
      Subsidiary is required to obtain any consent, waiver, authorization or
      order of, give any notice to, or make any filing or registration with, any
      court or other federal, state, local or other governmental authority or
      other Person in connection with the execution, delivery and performance by
      the Company of the Transaction Documents, other than (i) the filings
      required under Section 4.7, (ii) the filing with the Commission of the
      Registration Statement, (iii) the notice and/or application(s) to each
      applicable Principal Market for the issuance and sale of the Debentures
      and Warrants and the listing of the Underlying Shares for trading thereon
      in the time and manner required thereby, and (iv) the filing of Form D
      with the Commission and applicable Blue Sky filings (collectively, the
      "Required Approvals").

            (f) Issuance of the Securities. The Securities are duly authorized
      and, when issued and paid for in accordance with the applicable
      Transaction Documents, will be duly and validly issued, fully paid and
      non-assessable, free and clear of all Liens. The Company has reserved from
      its duly authorized capital stock a number of shares of Common Stock for
      issuance of the Underlying Shares at least equal to the Required Minimum
      on the date hereof. The Company has not, and to the knowledge of the
      Company, no Affiliate of the Company has sold, offered for sale or
      solicited offers to buy or otherwise negotiated in respect of any security
      (as defined in Section 2 of the Securities Act) that would be integrated
      with the offer or sale of the Securities in a manner that would require
      the registration under the Securities Act of the sale of the Securities to
      the Purchasers, or that would be integrated with the offer or sale of the
      Securities for purposes of the rules and regulations of any Principal
      Market.

                                      -8-
<PAGE>

            (g) Capitalization. The number of shares and type of all authorized,
      issued and outstanding capital stock of the Company is set forth in the
      Disclosure Schedules attached hereto. No securities of the Company are
      entitled to preemptive or similar rights, and no Person has any right of
      first refusal, preemptive right, right of participation, or any similar
      right to participate in the transactions contemplated by the Transaction
      Documents. Except as a result of the purchase and sale of the Securities,
      there are no outstanding options, warrants, script rights to subscribe to,
      calls or commitments of any character whatsoever relating to, or
      securities, rights or obligations convertible into or exchangeable for, or
      giving any Person any right to subscribe for or acquire, any shares of
      Common Stock, or contracts, commitments, understandings or arrangements by
      which the Company or any Subsidiary is or may become bound to issue
      additional shares of Common Stock, or securities or rights convertible or
      exchangeable into shares of Common Stock. The issuance and sale of the
      Securities will not obligate the Company to issue shares of Common Stock
      or other securities to any Person (other than the Purchasers) and will not
      result in a right of any holder of Company securities to adjust the
      exercise, conversion, exchange or reset price under such securities. The
      Company acknowledges and agrees that the Purchasers are acquiring the
      Debentures for an original issue discount to the Principal Amount of the
      Debentures.

            (h) SEC Reports; Financial Statements. The Company has filed all
      reports required to be filed by it under the Securities Act and the
      Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
      the two years preceding the date hereof (or such shorter period as the
      Company was required by law to file such material) (the foregoing
      materials being collectively referred to herein as the "SEC Reports") on a
      timely basis or has received a valid extension of such time of filing and
      has filed any such SEC Reports prior to the expiration of any such
      extension. As of their respective dates, the SEC Reports complied in all
      material respects with the requirements of the Securities Act and the
      Exchange Act and the rules and regulations of the Commission promulgated
      thereunder, and none of the SEC Reports, when filed, contained any untrue
      statement of a material fact or omitted to state a material fact required
      to be stated therein or necessary in order to make the statements therein,
      in light of the circumstances under which they were made, not misleading.
      The financial statements of the Company included in the SEC Reports comply
      in all material respects with applicable accounting requirements and the
      rules and regulations of the Commission with respect thereto as in effect
      at the time of filing. Such financial statements have been prepared in
      accordance with generally accepted accounting principles applied on a
      consistent basis during the periods involved ("GAAP"), except as may be
      otherwise specified in such financial statements or the notes thereto, and
      fairly present in all material respects the financial position of the
      Company and its consolidated subsidiaries as of and for the dates thereof
      and the results of operations and cash flows for the periods then ended,
      subject, in the case of unaudited statements, to normal, immaterial,
      year-end audit adjustments.

                                      -9-
<PAGE>

            (i) Material Changes. Since the date of the latest audited financial
      statements included within the SEC Reports, except as specifically
      disclosed in the SEC Reports: (i) there has been no event, occurrence or
      development that has had or that could result in a Material Adverse
      Effect, (ii) the Company has not incurred any liabilities (contingent or
      otherwise) other than (A) trade payables and accrued expenses incurred in
      the ordinary course of business consistent with past practice and (B)
      liabilities not required to be reflected in the Company's financial
      statements pursuant to GAAP or required to be disclosed in filings made
      with the Commission, (iii) the Company has not altered its method of
      accounting or the identity of its auditors, (iv) the Company has not
      declared or made any dividend or distribution of cash or other property to
      its stockholders or purchased, redeemed or made any agreements to purchase
      or redeem any shares of its capital stock, and (v) the Company has not
      issued any equity securities to any officer, director or Affiliate, except
      pursuant to existing Company stock option or similar plans.

            (j) Litigation. There is no action, suit, inquiry, notice of
      violation, proceeding or investigation pending or, to the knowledge of the
      Company, threatened against or affecting the Company, any Subsidiary or
      any of their respective properties before or by any court, arbitrator,
      governmental or administrative agency or regulatory authority (federal,
      state, county, local or foreign) (collectively, an "Action") which: (i)
      adversely affects or challenges the legality, validity or enforceability
      of any of the Transaction Documents or the Securities or (ii) could, if
      there were an unfavorable decision, individually or in the aggregate, have
      or reasonably be expected to result in a Material Adverse Effect. Neither
      the Company nor any Subsidiary, nor any director or officer thereof, is or
      has been the subject of any Action involving a claim of violation of or
      liability under federal or state securities laws or a claim of breach of
      fiduciary duty. The Company does not have pending before the Commission
      any request for confidential treatment of information. There has not been,
      and to the knowledge of the Company, there is not pending or contemplated,
      any investigation by the Commission involving the Company or any current
      or former director or officer of the Company. The Commission has not
      issued any stop order or other order suspending the effectiveness of any
      registration statement filed by the Company or any Subsidiary under the
      Exchange Act or the Securities Act.

            (k) Compliance. Neither the Company nor any Subsidiary: (i) is in
      default under or in violation of (and no event has occurred that has not
      been waived that, with notice or lapse of time or both, would result in a
      default by the Company or any Subsidiary under), nor has the Company or
      any Subsidiary received notice of a claim that it is in default under or
      that it is in violation of, any indenture, loan or credit agreement or any
      other agreement or instrument to which it is a party or by which it or any
      of its properties is bound (whether or not such default or violation has
      been waived), (ii) is in violation of any order of any court, arbitrator
      or governmental body, or (iii) is or has been in violation of any statute,
      rule or regulation of any governmental authority, except in each case as
      could not, individually or in the aggregate, have or result in a Material
      Adverse Effect.

            (l) Labor Relations. No material labor dispute exists or, to the
      knowledge of the Company, is imminent with respect to any of the employees
      of the Company.

            (m) Regulatory Permits. The Company and the Subsidiaries possess all
      certificates, authorizations and permits issued by the appropriate
      federal, state, local or foreign regulatory authorities necessary to
      conduct their respective businesses as described in the SEC Reports,
      except where the failure to possess such permits could not, individually
      or in the aggregate, have or reasonably be expected to result in a
      Material Adverse Effect ("Material Permits"), and neither the Company nor
      any Subsidiary has received any notice of proceedings relating to the
      revocation or modification of any Material Permit.

                                      -10-
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            (n) Title to Assets. The Company and the Subsidiaries have good and
      marketable title in fee simple to all real property owned by them that is
      material to the business of the Company and the Subsidiaries and good and
      marketable title in all personal property owned by them that is material
      to the business of the Company and the Subsidiaries, in each case free and
      clear of all Liens, except for Liens as do not materially affect the value
      of such property and do not materially interfere with the use made and
      proposed to be made of such property by the Company and the Subsidiaries.
      Any real property and facilities held under lease by the Company and the
      Subsidiaries are held under valid, subsisting and enforceable leases of
      which the Company and the Subsidiaries are in compliance.

            (o) Patents and Trademarks. The Company and the Subsidiaries have,
      or have rights to use, all patents, patent applications, trademarks,
      trademark applications, service marks, trade names, copyrights, licenses
      and other similar rights necessary or material for use in connection with
      their respective businesses as described in the SEC Reports and which the
      failure to so have could have a Material Adverse Effect (collectively, the
      "Intellectual Property Rights"). Neither the Company nor any Subsidiary
      has received a written notice that the Intellectual Property Rights used
      by the Company or any Subsidiary violates or infringes upon the rights of
      any Person. To the knowledge of the Company, all such Intellectual
      Property Rights are enforceable and there is no existing infringement by
      another Person of any of the Intellectual Property Rights.

            (p) Insurance. The Company and the Subsidiaries are insured by
      insurers of recognized financial responsibility against such losses and
      risks and in such amounts as are prudent and customary in the businesses
      in which the Company and the Subsidiaries are engaged. To the best of
      Company's knowledge, such insurance contracts and policies are accurate
      and complete. Neither the Company nor any Subsidiary has any reason to
      believe 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 without a
      significant increase in cost.

            (q) Transactions With Affiliates and Employees. Except as required
      to be set forth in the SEC Reports, none of the officers or directors of
      the Company and, to the knowledge of the Company, none of the employees of
      the Company is presently a party to any transaction with the Company or
      any Subsidiary (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 entity in which any officer, director, or any such employee
      has a substantial interest or is an officer, director, trustee or partner.

                                      -11-
<PAGE>

            (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in
      material compliance with all provisions of the Sarbanes-Oxley Act of 2002
      which are applicable to it as of the Closing Date. The Company and the
      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 GAAP 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. The
      Company has established disclosure controls and procedures (as defined in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
      such disclosure controls and procedures to ensure that material
      information relating to the Company, including its subsidiaries, is made
      known to the certifying officers by others within those entities,
      particularly during the period in which the Company's most recently filed
      periodic report under the Exchange Act, as the case may be, is being
      prepared. The Company's certifying officers have evaluated the
      effectiveness of the Company's controls and procedures as of the date
      prior to the filing date of the most recently filed periodic report under
      the Exchange Act (such date, the "Evaluation Date"). The Company presented
      in its most recently filed periodic report under the Exchange Act the
      conclusions of the certifying officers about the effectiveness of the
      disclosure controls and procedures based on their evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no significant
      changes in the Company's internal controls (as such term is defined in
      Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's
      knowledge, in other factors that could significantly affect the Company's
      internal controls.

            (s) Solvency/Indebtedness. Based on the financial condition of the
      Company as of each Closing Date: (i) the fair saleable value of the
      Company's assets exceeds the amount that will be required to be paid on or
      in respect of the Company's existing debts and other liabilities
      (including known contingent liabilities) as they mature; (ii) the
      Company's assets do not constitute unreasonably small capital to carry on
      its business for the current fiscal year as now conducted and as proposed
      to be conducted including its capital needs taking into account the
      particular capital requirements of the business conducted by the Company,
      and projected capital requirements and capital availability thereof; and
      (iii) the current cash flow of the Company, together with the proceeds the
      Company would receive, were it to liquidate all of its assets, after
      taking into account all anticipated uses of the cash, would be sufficient
      to pay all amounts on or in respect of its debt when such amounts are
      required to be paid. The Company does not intend to incur debts beyond its
      ability to pay such debts as they mature (taking into account the timing
      and amounts of cash to be payable on or in respect of its debt). The
      Company has no knowledge of any facts or circumstances which lead it to
      believe that it will file for reorganization or liquidation under the
      bankruptcy or reorganization laws of any jurisdiction within one year from
      the Closing Date. The SEC Reports set forth as of the dates thereof all
      outstanding secured and unsecured Indebtedness of the Company or any
      Subsidiary, or for which the Company or any Subsidiary has commitments.
      For the purposes of this Agreement, "Indebtedness" shall mean (a) any
      liabilities for borrowed money or amounts owed in excess of $50,000 (other
      than trade accounts payable incurred in the ordinary course of business),
      (b) all guaranties, endorsements and other contingent obligations, whether
      or not the same are or should be reflected in the Company's balance sheet
      or the notes thereto, except guaranties by endorsement of negotiable
      instruments for deposit or collection in the ordinary course of business,
      and (c) the present value of any lease payments in excess of $50,000 due
      under leases required to be capitalized in accordance with GAAP. Neither
      the Company nor any Subsidiary is in default with respect to any
      Indebtedness.

                                      -12-
<PAGE>

            (t) Certain Fees. Except as set forth in Section 5.2, no brokerage
      or finder's fees or commissions are or will be payable by the Company to
      any broker, financial advisor or consultant, finder, placement agent,
      investment banker, bank or other Person with respect to the transactions
      contemplated by this Agreement, and the Company has not taken any action
      that would cause any Purchaser to be liable for any such fees or
      commissions. The Company agrees that the Purchasers shall have no
      obligation with respect to any fees or with respect to any claims made by
      or on behalf of any Person for fees of the type contemplated by this
      Section with the transactions contemplated by this Agreement.

            (u) Private Placement. Assuming the accuracy of the representations
      and warranties of the Purchasers set forth in Sections 3.2(b)-(f), the
      offer, issuance and sale of the Securities to the Purchasers as
      contemplated hereby are exempt from the registration requirements of the
      Securities Act. The issuance and sale of the Securities hereunder does not
      contravene the rules and regulations of the Principal Market and no
      shareholder approval is required for the Company to fulfill its
      obligations under the Transaction Documents.

            (v) Listing and Maintenance Requirements. The Company has not, in
      the 12 months preceding the date hereof, received notice from any
      Principal Market on which the Common Stock is or has been listed or quoted
      to the effect that the Company is not in compliance with the listing or
      maintenance requirements of such Principal Market. The Company is, and has
      no reason to believe that it will not in the foreseeable future continue
      to be, in compliance with all such listing and maintenance requirements.

            (w) Registration Rights. The Company has not granted or agreed to
      grant to any Person any rights (including "piggy-back" registration
      rights) to have any securities of the Company registered with the
      Commission or any other governmental authority that have not been
      satisfied.

            (x) Application of Takeover Protections. The Company and its Board
      of Directors have taken all necessary action, if any, in order to render
      inapplicable any control share acquisition, business combination, poison
      pill (including any distribution under a rights agreement) or other
      similar anti-takeover provision under the Company's Certificate of
      Incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to the Purchasers as a
      result of the Purchasers and the Company fulfilling their obligations or
      exercising their rights under the Transaction Documents, including without
      limitation as a result of the Company's issuance of the Securities and the
      Purchasers' ownership of the Securities.

                                      -13-
<PAGE>

            (y) Seniority. As of each Closing Date, no indebtedness of the
      Company is senior to the Debentures in right of payment, whether with
      respect to interest or upon liquidation or dissolution, or otherwise,
      other than indebtedness secured by purchase money security interests
      (which is senior only as to underlying assets covered thereby) and capital
      lease obligations (which is senior only as to the property covered
      thereby).

            (z) Disclosure. The Company confirms that neither it nor any other
      Person acting on its behalf has provided any of the Purchasers or their
      agents or counsel with any information that constitutes or might
      constitute material, nonpublic information. The Company understands and
      confirms that the Purchasers will rely on the foregoing representations in
      effecting transactions in securities of the Company. All disclosure
      provided to the Purchasers regarding the Company, its business and the
      transactions contemplated hereby, including the Schedules to this
      Agreement, furnished by or on behalf of the Company with respect to the
      representations and warranties made herein are true and correct with
      respect to such representations and warranties and do not contain any
      untrue statement of a material fact or omit to state any material fact
      necessary in order to make the statements made therein, in light of the
      circumstances under which they were made, not misleading. The Company
      acknowledges and agrees that no Purchaser makes or has made any
      representations or warranties with respect to the transactions
      contemplated hereby other than those specifically set forth in Section 3.2
      hereof.

            (aa) Tax Status. The Company and each of its Subsidiaries has made
      or filed all federal, state and foreign income and all other tax returns,
      reports and declarations required by any jurisdiction to which it is
      subject (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) and 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
      provisions 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. The Company has not executed
      a waiver with respect to the statute of limitations relating to the
      assessment or collection of any foreign, federal, statue or local tax.
      None of the Company's tax returns is presently being audited by any taxing
      authority.

            (bb) Acknowledgment Regarding Purchasers' Purchase of Securities.
      The Company acknowledges and agrees that the Purchasers are acting solely
      in the capacity of arm's length purchasers with respect to this Agreement
      and the transactions contemplated hereby. The Company further acknowledges
      that no Purchaser is acting as a financial advisor or fiduciary of the
      Company (or in any similar capacity) with respect to this Agreement and
      the transactions contemplated hereby and any statement made by any
      Purchaser or any of their respective representatives or agents in
      connection with this Agreement and the transactions contemplated hereby is
      not advice or a recommendation and is merely incidental to the Purchasers'
      purchase of the Securities. The Company further represents to each
      Purchaser that the Company's decision to enter into this Agreement has
      been based solely on the independent evaluation of the Company and its
      representatives.

            (cc) No General Solicitation or Advertising in Regard to this
      Transaction. Neither the Company nor, to the knowledge of the Company, any
      of its directors or officers (i) has conducted or will conduct any general
      solicitation (as that term is used in Rule 502(c) of Regulation D) or
      general advertising with respect to the sale of the Debentures or the
      Warrants, or (ii) made any offers or sales of any security or solicited
      any offers to buy any security under any circumstances that would require
      registration of the Debentures, the Underlying Shares or the Warrants
      under the Securities Act or made any "directed selling efforts" as defined
      in Rule 902 of Regulation S.

                                      -14-
<PAGE>

            (dd) No Disagreements with Accountants and Lawyers. There are no
      disagreements of any kind presently existing, or reasonably anticipated by
      the Company to arise, between the accountants and lawyers formerly or
      presently employed by the Company and the Company is current with respect
      to any fees owed to its accountants and lawyers.

      3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:

            (a) Organization; Authority. Such Purchaser is an entity duly
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its organization with the requisite corporate or
      partnership power and authority to enter into and to consummate the
      transactions contemplated by the Transaction Documents and otherwise to
      carry out its obligations thereunder. The purchase by such Purchaser of
      the Securities hereunder has been duly authorized by all necessary action
      on the part of such Purchaser. Each of this Agreement, the Escrow
      Agreement and the Registration Rights Agreement has been duly executed by
      such Purchaser, and when delivered by such Purchaser in accordance with
      the terms hereof, will constitute the valid and legally binding obligation
      of such Purchaser, enforceable against it in accordance with its terms.

            (b) Investment Intent. Such Purchaser is acquiring the Securities as
      principal for its own account for investment purposes only and not with a
      view to or for distributing or reselling such Securities or any part
      thereof, without prejudice, however, to such Purchaser's right, subject to
      the provisions of this Agreement, at all times to sell or otherwise
      dispose of all or any part of such Securities pursuant to an effective
      registration statement under the Securities Act or under an exemption from
      such registration and in compliance with applicable federal and state
      securities laws. Nothing contained herein shall be deemed a representation
      or warranty by such Purchaser to hold Securities for any period of time.
      Such Purchaser is acquiring the Securities hereunder in the ordinary
      course of its business. Such Purchaser does not have any agreement or
      understanding, directly or indirectly, with any Person to distribute any
      of the Securities.

                                      -15-
<PAGE>

            (c) Purchaser Status. At the time such Purchaser was offered the
      Securities, it was, and at the date hereof it is, and on each date on
      which it exercises any Warrants or converts any Debentures it will be, an
      "accredited investor" as defined in Rule 501(a) under the Securities Act.
      Such Purchaser has not been formed solely for the purpose of acquiring the
      Securities. Such Purchaser is not a registered broker-dealer under Section
      15 of the Exchange Act.

            (d) Experience of such Purchaser. Such Purchaser, either alone or
      together with its representatives, has such knowledge, sophistication and
      experience in business and financial matters so as to be capable of
      evaluating the merits and risks of the prospective investment in the
      Securities, and has so evaluated the merits and risks of such investment.
      Such Purchaser is able to bear the economic risk of an investment in the
      Securities and, at the present time, is able to afford a complete loss of
      such investment.

            (e) General Solicitation. Such Purchaser is not purchasing the
      Securities as a result of any advertisement, article, notice or other
      communication regarding the Securities published in any newspaper,
      magazine or similar media or broadcast over television or radio or
      presented at any seminar or any other general solicitation or general
      advertisement.

      The Company acknowledges and agrees that each Purchaser does not make or
      has not made any representations or warranties with respect to the
      transactions contemplated hereby other than those specifically set forth
      in this Section 3.2.

                                   ARTICLE IV

                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

            (a) The Securities may only be disposed of in compliance with state
      and federal securities laws. In connection with any transfer of Securities
      other than pursuant to an effective registration statement, to the Company
      or to an Affiliate of a Purchaser, the Company may require the transferor
      thereof to provide to the Company an opinion of counsel selected by the
      transferor and reasonably acceptable to the Company, the form and
      substance of which opinion shall be reasonably satisfactory to the
      Company, to the effect that such transfer does not require registration of
      such transferred Securities under the Securities Act. As a condition of
      transfer, any such transferee shall agree in writing to be bound by the
      terms of this Agreement and shall have the rights of a Purchaser under
      this Agreement and the Registration Rights Agreement.

            (b) Each Purchaser agrees to the imprinting, so long as is required
      by this Section 4.1(b), of the following legend on any certificate
      evidencing Securities:

                                      -16-
<PAGE>

      [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
      ARE [EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES
      AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
      RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
      OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
      UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
      A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR REASONABLY
      ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
      REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE SECURITIES
      ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

            The Company acknowledges and agrees that a Purchaser may from time
      to time pledge pursuant to a bona fide margin agreement or grant a
      security interest in some or all of the Securities and, if required under
      the terms of such arrangement, such Purchaser may transfer pledged or
      secured Securities to the pledgees or secured parties. If required by the
      Company's transfer agent in order to effect a pledge, the Company shall
      cause its counsel, at no cost to the Purchasers, to issue an opinion of
      counsel to the Company's transfer agent. Further, no notice shall be
      required of such pledge. At the appropriate Purchaser's expense, the
      Company will execute and deliver such reasonable documentation as a
      pledgee or secured party of Securities may reasonably request in
      connection with a pledge or transfer of the Securities, including the
      preparation and filing of any required prospectus supplement under Rule
      424(b)(3) of the Securities Act or other applicable provision of the
      Securities Act to appropriately amend the list of Selling Stockholders
      thereunder.

            (c) Certificates evidencing Underlying Shares shall not contain any
      legend (including the legend set forth in Section 4.1(b) hereof): (i)
      while a registration statement (including the Registration Statement)
      covering the resale of such security is effective under the Securities
      Act, or (ii) following any sale of such Underlying Shares pursuant to Rule
      144, or (iii) if such Underlying Shares are eligible for sale under Rule
      144(k), or (iv) if such legend is not required under applicable
      requirements of the Securities Act (including judicial interpretations and
      pronouncements issued by the staff of the Commission); provided, however,
      in connection with the issuance of the Underlying Shares, each Purchaser,
      severally and not jointly with the other Purchasers, hereby agrees to
      adhere to and abide by all prospectus delivery requirements under the
      Securities Act and rules and regulations of the Commission. If all or any
      portion of a Debenture or Warrant is converted or exercised (as
      applicable) at a time when there is an effective registration statement to
      cover the resale of the Underlying Shares, or if such Underlying Shares
      may be sold under Rule 144(k) or if such legend is not otherwise required
      under applicable requirements of the Securities Act (including judicial
      interpretations thereof) then such Underlying Shares shall be issued free
      of all legends. The Company agrees that following the Effective Date or at
      such time as such legend is no longer required under this Section 4.1(c),
      it will, no later than three Trading Days following the delivery by a
      Purchaser to the Company or the Company's transfer agent of a certificate
      representing Underlying Shares issued with a restrictive legend (such
      third Trading Day, the "Legend Removal Date", deliver or cause to be
      delivered to such Purchaser a certificate representing such shares that is
      free from all restrictive and other legends. The Company may not make any
      notation on its records or give instructions to any transfer agent of the
      Company that enlarge the restrictions on transfer set forth in this
      Section.

                                      -17-
<PAGE>

            (d) In addition to such Purchaser's other available remedies, the
      Company shall pay to a Purchaser, in cash, as partial liquidated damages
      and not as a penalty, for each $5,000 of Underlying Shares (based on the
      Closing Price of the Common Stock on the date such Securities are
      submitted to the Company's transfer agent) delivered for removal of the
      restrictive legend and subject to this Section 4.1(c), $50 per Trading Day
      (increasing to $100 per Trading Day 3 Trading Days after such damages have
      begun to accrue) for each Trading Day after the Legend Removal Date until
      such certificate is delivered without a legend.

      4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.

      4.3 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. Upon the request
of any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.

      4.4 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Principal Market.

                                      -18-
<PAGE>

      4.5 Reservation and Listing of Securities.

            (a) The Company shall maintain a reserve from its duly authorized
      shares of Common Stock for issuance pursuant to the Transaction Documents
      in such amount as may be required to fulfill its obligations in full under
      the Transaction Documents. So long as at least 20% of the principal amount
      of the Debentures, in the aggregate, issued at either the First Closing or
      Second Closing are then outstanding, the Company will not undertake a
      forward or reverse stock split or reclassification of the Common Stock
      without the prior written consent of each Purchaser holding Debentures at
      such time.

            (b) If, on any date, the number of authorized but unissued (and
      otherwise unreserved) shares of Common Stock is less than the Required
      Minimum on such date, then the Board of Directors of the Company shall use
      commercially reasonable efforts to amend the Company's certificate or
      articles of incorporation to increase the number of authorized but
      unissued shares of Common Stock to at least the Required Minimum at such
      time, as soon as possible and in any event not later than the 75th day
      after such date.

            (c) The Company shall, if applicable: (i) in the time and manner
      required by the Principal Market, prepare and file with such Principal
      Market an additional shares listing application covering a number of
      shares of Common Stock at least equal to the Required Minimum on the date
      of such application, (ii) take all steps necessary to cause such shares of
      Common Stock to be approved for listing on the Principal Market as soon as
      possible thereafter, (iii) provide to the Purchasers evidence of such
      listing, and (iv) maintain the listing of such Common Stock on any date at
      least equal to the Required Minimum on such date on such Principal Market
      or another Principal Market.

      4.6 Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the
Debentures set forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.

      4.7 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the First Closing Date, issue a press
release or file a Current Report on Form 8-K reasonably acceptable to each
Purchaser disclosing all material terms of the transactions contemplated hereby.
The Company and the Purchasers shall consult with each other in issuing any
press releases with respect to the transactions contemplated hereby.
Notwithstanding the foregoing, other than in any registration statement filed
pursuant to the Registration Rights Agreement and filings related thereto, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Principal Market, without the prior written consent of such Purchaser, except
to the extent such disclosure is required by law or Principal Market
regulations, in which case the Company shall provide each Purchaser with prior
notice of such disclosure.

                                      -19-
<PAGE>

      4.8 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

      4.9 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables, capital lease obligations, and accrued expenses in the ordinary course
of the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.

      4.10 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company,
solely as a result of such Purchaser's acquisition of the Securities under this
Agreement and without causation by any other activity, obligation, condition or
liability on the part of, or pertaining to such Purchaser and not to the
purchase of Securities pursuant to this Agreement, the Company will reimburse
such Purchaser, to the extent such reimbursement is not provided for in Section
4.11, for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations (and limitations thereon) of the Company under this paragraph shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any Affiliates of the Purchasers
who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement except to the extent any covenant or warranty owing to the
Company is breached.

      4.11 Indemnification of Purchasers. Subject to the provisions of this
Section 4.11, each party (the "Indemnifying Party") will indemnify and hold the
other parties and their directors, officers, shareholders, partners, employees
and agents (each, an "Indemnified Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Indemnified Party may
suffer or incur as a result of or relating to any breach of any of the
representations, warranties, covenants or agreements made by the Indemnifying
Party in this Agreement or in the other Transaction Documents. If any action
shall be brought against any Indemnified Party in respect of which indemnity may
be sought pursuant to this Agreement, such Indemnified Party shall promptly
notify the Indemnifying Party in writing, and the Indemnifying Party shall have
the right to assume the defense thereof with counsel of its own choosing. Any
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party except to the extent
that (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, (ii) the Indemnifying Party has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of such separate counsel, a
material conflict on any material issue between the position of the Indemnifying
Party and the position of such Indemnified Party. The Indemnifying Party will
not be liable to any Indemnified Party under this Agreement (i) for any
settlement by an Indemnified Party effected without the Indemnifying Party's
prior written consent, which shall not be unreasonably withheld or delayed; or
(ii) to the extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Indemnified Party's breach of any of the
representations, warranties, covenants or agreements made by the Purchasers in
this Agreement or in the other Transaction Documents. In no event shall the
liability of any Purchaser hereunder be greater in amount than the dollar amount
of the net proceeds received by such Purchaser upon the sale of the Securities.

                                      -20-
<PAGE>

      4.12 Shareholders Rights Plan. In the event that a shareholders rights
plan is adopted by the Company, no claim will be made or enforced by the Company
or any other Person that any Purchaser is an "Acquiring Person" under the plan
or in any way could be deemed to trigger the provisions of such plan by virtue
of receiving Securities under the Transaction Documents.

      4.13 Future Financings. From the date hereof until 90 days after the
Effective Date, other than as contemplated by this Agreement, neither the
Company nor any Subsidiary shall issue or sell any Capital Shares or Capital
Shares Equivalents. Notwithstanding anything herein to the contrary, the 90 day
period set forth in this Section 4.13 shall be extended for the number of
Trading Days during such period in which (y) trading in the Common Stock is
suspended by any Principal Market, or (z) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Underlying Shares. Notwithstanding anything to the contrary herein, this Section
4.13 shall not apply to the following (a) the granting or issuance of shares of
Common Stock or options to employees, officers and directors of the Company
pursuant to any stock option plan or employee incentive plan or agreement duly
adopted or approved by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, (b) the exercise of a
Debenture or any other security issued by the Company in connection with the
offer and sale of this Company's securities pursuant to this Agreement, or (c)
the exercise of or conversion of any Capital Shares Equivalents issued and
outstanding on the date hereof, provided that such securities have not been
amended since the date hereof, or (d) the issuance of Capital Shares or Capital
Shares Equivalents in connection with acquisitions, strategic investments or
strategic partnering arrangements, the primary purpose of which is not to raise
capital.

                                      -21-
<PAGE>

      4.14 Participation in Future Financing. From the date hereof until 360
days after the Effective Date, the Company shall not effect a financing of its
Capital Shares or Capital Shares Equivalents (a "Subsequent Financing") unless
(i) the Company delivers to each Purchaser a written notice at least 5 Trading
Days prior to the closing of such Subsequent Financing (the "Subsequent
Financing Notice") of its intention to effect such Subsequent Financing, which
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Financing is proposed to be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (ii) such Purchaser shall not have notified the Company by
6:30 p.m. (New York City time) on the fifth (5th) Trading Day after its receipt
of the Subsequent Financing Notice of its willingness to provide (or to cause
its designee to provide), subject to completion of mutually acceptable
documentation, all or part of such financing to the Company on the same terms
set forth in the Subsequent Financing Notice. If one or more Purchasers shall
fail to so notify the Company of their willingness to participate in the
Subsequent Financing, the Company may effect the remaining portion of such
Subsequent Financing on the terms and to the Persons set forth in the Subsequent
Financing Notice; provided that the Company must provide the Purchasers with a
second Subsequent Financing Notice, and the Purchasers will again have the right
of first refusal set forth above in this Section 4.14, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within
60 Trading Days after the date of the initial Subsequent Financing Notice with
the Person identified in the Subsequent Financing Notice. In the event the
Company receives responses to Subsequent Financing Notices from Purchasers
seeking to purchase more than the financing sought by the Company in the
Subsequent Financing such Purchasers shall have the right to purchase their Pro
Rata Portion (as defined below) of the Capital Shares or Capital Shares
Equivalents to be issued in such Subsequent Financing. "Pro Rata Portion" is the
ratio of (x) the principal amount of Debentures purchased by a Purchaser and (y)
the sum of the aggregate principal amount of Debentures issued hereunder.
Notwithstanding anything to the contrary herein, this Section 4.14 shall not
apply to the following (a) the granting of options to employees, officers and
directors of the Company pursuant to any stock option plan duly adopted by a
majority of the non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established
for such purpose, or (b) the exercise of the Debenture or any other security
issued by the Company in connection with the offer and sale of this Company's
securities pursuant to this Agreement, or (c) the exercise of or conversion of
any Capital Shares Equivalents issued and outstanding on the date hereof,
provided such securities have not been amended since the date hereof, or (d) the
issuance of Capital Shares or Capital Shares Equivalents in connection with
acquisitions, strategic investments or strategic partnering arrangements, the
primary purpose of which is not to raise capital or subsequent exercise of any
such Capital Shares Equivalents.

                                      -22-
<PAGE>

                                    ARTICLE V

                                  MISCELLANEOUS

      5.1 Termination. This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before August 22, 2003; provided that no such termination will affect the
right of any party to sue for any breach by the other party (or parties).

      5.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
issuance of any Securities.

      5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

      5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature page prior to 5:30 p.m. (New York City time) on a
Trading Day and an electronic confirmation of delivery is received by the
sender, (b) the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (c) three Trading Days following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such Person.

      5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

      5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.

                                      -23-
<PAGE>

      5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.

      5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.

      5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), 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 improper or inconvenient venue for such
proceeding. 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 via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for 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. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.

      5.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive each Closing and the delivery, exercise and/or
conversion of the Securities, as applicable.

      5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

                                      -24-
<PAGE>

      5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

      5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant, the Purchaser shall be required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.

      5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

      5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

      5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

                                      -25-
<PAGE>

      5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any deemed rate of
interest or default interest, or both of them, when aggregated with any other
sums in the nature of interest that the Company may be obligated to pay under
the Transaction Documents exceed such Maximum Rate. It is agreed that if the
maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.

      5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only HPC Capital Management, the placement agent to the
transaction. The Company has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.

      5.19 Liquidated Damages. The Company's obligations to pay any liquidated
damages or other amounts owing under the Transaction Documents is a continuing
obligation of the Company and shall not terminate until all unpaid liquidated
damages and other amounts have been paid notwithstanding the fact that the
instrument or security pursuant to which such liquidated damages or other
amounts are due and payable shall have been canceled.

                             ***********************

                                      -26-
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

QT 5, INC.                                 Address for Notice:

By:_____________________________
   Name:                                   5655 Lindero Canyon Road
   Title:                                  Suite 120
                                           West Lake Village, CA 91362
                                           ATTN:

                                           Tel: 818.338.1510
                                           Fax:

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

Darrin M. Ocasio, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                      -27-
<PAGE>

        [PURCHASER SIGNATURE PAGES TO QTFV SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

PALISADES MASTER FUND L.P.
By: Discovery Management Limited,          Address for Notice:
Authorized Signatory                       Harbour House
                                           Waterfront Drive
By: ____________________________________   Roadtown, Tortowa
    Name:                                  British Virgin Islands
    Title:                                 Attn: Paul T. Mannion, Jr.

Address for delivery of securities:
Westminster Securities
100 Wall Street, 7th Floor
New York, NY 10005

First Closing Subscription Amount:  $
First Closing Principal Amount: $
Second Closing Subscription Amount: $
Second Closing Principal Amount: $
Warrant Shares:

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

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                      -28-
<PAGE>

        [PURCHASER SIGNATURE PAGES TO QTFV SECURITIES PURCHASE AGREEMENT]

CRESCENT INTERNATIONAL LTD.                Address for Notice:
                                           c/o GreenLight (Switzerland) SA
                                           84, Avenue Louis-Casai
                                           CH 1216 Cointrin, Geneva

By: ____________________________           Switzerland
    Name:                                  Attention: Mel Craw / Maxi Brezzi
    Title:                                 Tel.: + 41 22 791 7170
                                                 / +41 22 791 7256
                                           Fax : +41 22 791 7171

First Closing Subscription Amount:  $
First Closing Principal Amount: $
Second Closing Subscription Amount: $
Second Closing Principal Amount: $
Warrant Shares:

                           [SIGNATURE PAGE CONTINUED]

                                      -29-
<PAGE>

        [PURCHASER SIGNATURE PAGES TO QTFV SECURITIES PURCHASE AGREEMENT]

ALPHA CAPITAL AG                           Address for Notice:
                                           Lettstrasse 32
                                           Furstentum 9490
By:  __________________________            Vaduz, Liechtenstein
     Name:                                 Fax: 011-423 232 3196
     Title:                                Attn: Director

First Closing Subscription Amount:  $
First Closing Principal Amount: $
Second Closing Subscription Amount: $
Second Closing Principal Amount: $
Warrant Shares:

                           [SIGNATURE PAGE CONTINUED]

                                      -30-
<PAGE>

        [PURCHASER SIGNATURE PAGES TO QTFV SECURITIES PURCHASE AGREEMENT]

BRISTOL INVESTMENT FUND, LTD.              Address for Notice:
                                           c/o Bristol DLP, LLC
                                           6363 Sunset Boulevard, 5th Floor
                                           Hollywood, California 90028
By:_________________________               Attn:  Amy Wang, Esq.
   Name:                                   Fax:  (323) 468-8307
   Title:

First Closing Subscription Amount:  $
First Closing Principal Amount: $
Second Closing Subscription Amount: $
Second Closing Principal Amount: $
Warrant Shares:

                           [SIGNATURE PAGE CONTINUED]

                                      -31-
<PAGE>

        [PURCHASER SIGNATURE PAGES TO QTFV SECURITIES PURCHASE AGREEMENT]

ELLIS INTERNATIONAL LTD                    Address for Notice:
                                           53rd Street, Urbanization Obarrio
By:  __________________________            Attn: Swiss Tower, 16th Floor, Panama
     Name:                                 Republic of Panama
     Title:                                Tel:  917-748-3501

First Closing Subscription Amount:  $
First Closing Principal Amount: $
Second Closing Subscription Amount: $
Second Closing Principal Amount: $
Warrant Shares:

                           [SIGNATURE PAGE CONTINUED]

                                      -32-
<PAGE>

        [PURCHASER SIGNATURE PAGES TO QTFV SECURITIES PURCHASE AGREEMENT]

ZENNY TRADING LIMITED

By: ____________________________
         Name:
         Title:

Address for Notice:

Suites 7B & 8B
50 Town Range
Gibralter
Tel:
Fax:
Attn:  Annette Brittendon
abrittenden@mutrust.com

First Closing Subscription Amount:  $
First Closing Principal Amount: $
Second Closing Subscription Amount: $
Second Closing Principal Amount: $
Warrant Shares:

                           [SIGNATURE PAGE CONTINUED]

                                      -33-
<PAGE>

        [PURCHASER SIGNATURE PAGES TO QTFV SECURITIES PURCHASE AGREEMENT]

[PURCHASER] Address for Notice:

By:  __________________________
     Name:
     Title:

First Closing Subscription Amount:  $
First Closing Principal Amount: $
Second Closing Subscription Amount: $
Second Closing Principal Amount: $
Warrant Shares:

                           [SIGNATURE PAGE CONTINUED]

                                      -34-EXHIBIT B

                          REGISTRATION RIGHTS AGREEMENT

      This Registration Rights Agreement (this "Agreement") is made and entered
into as of February __, 2004, among QT 5, Inc., a Delaware corporation (the
"Company"), and the purchasers signatory hereto (each such purchaser is a
"Purchaser" and all such purchasers are, collectively, the "Purchasers").

      This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").

      The Company and the Purchasers hereby agree as follows:

      1. Definitions

      CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN THAT ARE DEFINED
IN THE PURCHASE AGREEMENT SHALL HAVE THE MEANINGS GIVEN SUCH TERMS IN THE
PURCHASE AGREEMENT. As used in this Agreement, the following terms shall have
the following meanings:

            "Effectiveness Date" means the 150th calendar day following the
      First Closing Date and, with respect to any additional Registration
      Statements which may be required pursuant to Section 3(c), the 90th
      calendar day following the date on which the Company first knows, or
      reasonably should have known, that such additional Registration Statement
      is required hereunder; provided, however, in the event the Company is
      notified by the Commission that one of the above Registration Statements
      will not be reviewed or is no longer subject to further review and
      comments, the Effectiveness Date as to such Registration Statement shall
      be the fifth Trading Day following the date on which the Company is so
      notified if such date precedes the dates required above.

            "Effectiveness Period" shall have the meaning set forth in Section
      2(a).

            "Filing Date" means the 30th day following the First Closing Date
      and, with respect to any additional Registration Statements which may be
      required pursuant to Section 3(c), the 15th day following the date on
      which the Company first knows, or reasonably should have known that such
      additional Registration Statement is required hereunder.

            "Holder" or "Holders" means the holder or holders, as the case may
      be, from time to time of Registrable Securities.

            "Indemnified Party" shall have the meaning set forth in Section 5(c)
      hereof.

                                        1
<PAGE>

            "Indemnifying Party" shall have the meaning set forth in Section
      5(c) hereof.

            "Losses" shall have the meaning set forth in Section 5(a).

            "Proceeding" means an action, claim, suit, investigation or
      proceeding (including, without limitation, an investigation or partial
      proceeding, such as a deposition), whether commenced or threatened.

            "Prospectus" means the prospectus included in a Registration
      Statement (including, without limitation, a prospectus that includes any
      information previously omitted from a prospectus filed as part of an
      effective registration statement in reliance upon Rule 430A promulgated
      under the Securities Act), as amended or supplemented by any prospectus
      supplement, with respect to the terms of the offering of any portion of
      the Registrable Securities covered by a Registration Statement, and all
      other amendments and supplements to the Prospectus, including
      post-effective amendments, and all material incorporated by reference or
      deemed to be incorporated by reference in such Prospectus.

            "Registrable Securities" means all of the shares of Common Stock
      issuable upon conversion in full of the Debentures, all shares issuable as
      interest on the Debentures assuming all interest payments are made in
      shares of Common Stock and the Debentures are held for [three] years or
      maturity, if earlier, exercise in full of the Warrants, shares issuable in
      lieu of the payment of liquidated damages, together with any securities
      issued or issuable upon any stock split, dividend or other distribution
      recapitalization or similar event with respect to the foregoing or in
      connection with any anti-dilution provisions in the Debentures.

            "Registration Statement" means the registration statements required
      to be filed hereunder and any additional registration statements
      contemplated by Section 3(c), including (in each case) the Prospectus,
      amendments and supplements to such registration statement or Prospectus,
      including pre- and post-effective amendments, all exhibits thereto, and
      all material incorporated by reference or deemed to be incorporated by
      reference in such registration statement.

            "Rule 415" means Rule 415 promulgated by the Commission pursuant to
      the Securities Act, as such Rule may be amended from time to time, or any
      similar rule or regulation hereafter adopted by the Commission having
      substantially the same purpose and effect as such Rule.

            "Rule 424" means Rule 424 promulgated by the Commission pursuant to
      the Securities Act, as such Rule may be amended from time to time, or any
      similar rule or regulation hereafter adopted by the Commission having
      substantially the same purpose and effect as such Rule.

            "Securities Act" means the Securities Act of 1933, as amended.

                                       2
<PAGE>

            "Warrants" shall mean the Common Stock purchase warrants issued to
      the Purchasers pursuant to the Purchase Agreement.

            "Warrant Shares" shall mean the shares of Common Stock issuable upon
      exercise of the Warrants.

      2. Shelf Registration

      (a) On or prior to each Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering the resale of 100%
of the Registrable Securities on such Filing Date for an offering to be made on
a continuous basis pursuant to Rule 415. The Registration Statement shall be on
Form S-3 (unless the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance herewith) and shall contain (unless
otherwise directed by the Holders) substantially the "Plan of Distribution"
attached hereto as Annex A. Subject to the terms of this Agreement, the Company
shall use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, but in any event prior to the applicable Effectiveness Date, and shall
use its best efforts to keep such Registration Statement continuously effective
under the Securities Act or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period"). The Company shall immediately notify the Holders via
facsimile of the effectiveness of the Registration Statement on the same day
that the Company receives notification of the effectiveness from the Commission.
Failure to notify the Purchasers within one day shall be deemed an "Event"
pursuant to Section 2(b) and the Company will be liable for liquidated damages
thereunder.

      (b) If: (i) a Registration Statement is not filed on or prior to its
Filing Date (if the Company files a Registration Statement without affording the
Holders the opportunity to review and comment on the same as required by Section
3(a), the Company shall not be deemed to have satisfied clause (i)), or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five
Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (iii) prior to its
Effectiveness Date, the Company fails to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission in respect of
such Registration Statement within 10 Trading Days after the receipt of comments
by or notice from the Commission that such amendment is required in order for a
Registration Statement to be declared effective, or (iv) a Registration
Statement filed or required to be filed hereunder is not declared effective by
the Commission by its Effectiveness Date, or (v) after the Effectiveness Date, a
Registration Statement ceases for any reason to remain continuously effective as
to all Registrable Securities for which it is required to be effective, or the
Holders are not permitted to utilize the Prospectus therein to resell such
Registrable Securities for 15 consecutive Trading Days or in any individual case
an aggregate of 25 Trading Days during any 12 month period (which need not be
consecutive Trading Days) (any such failure or breach being referred to as an
"Event", and for purposes of clause (i) or (iv) the date on which such Event
occurs, or for purposes of clause (ii) the date on which such five Trading Day
period is exceeded, or for purposes of clause (iii) the date which such 10
Trading Day period is exceeded, or for purposes of clause (v) the date on which
such 15 or 25 Trading Day period, as applicable, is exceeded being referred to
as "Event Date"), then, on each such Event Date and every monthly anniversary
thereof until the applicable Event is cured, the Company shall pay to each
Holder an amount in cash, as partial liquidated damages and not as a penalty,
equal to 2.0% per month, pro rata on a daily basis, of (i) the Subscription
Amount paid by such Holder pursuant to the Purchase Agreement for Debentures
then held by such Holder, and (ii) if the Warrants are "in the money" and then
held by the Holder, the value of any outstanding Warrants (valued at the
difference between the average of the Closing Prices during the applicable month
and the Exercise Price multiplied by the number of shares of Common Stock the
Warrants are exercisable into). If the Company fails to pay any liquidated
damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum (or
such lesser maximum amount that is permitted to be paid by applicable law) to
the Holder, accruing daily from the date such liquidated damages are due until
such amounts, plus all such interest thereon, are paid in full. The liquidated
damages pursuant to the terms hereof shall apply on a pro-rata basis for any
portion of a month prior to the cure of an Event.

                                       3
<PAGE>

      3. Registration Procedures

      In connection with the Company's registration obligations hereunder, the
Company shall:

      (a) Not less than five Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to each
Holder copies of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference) will be
subject to the review of such Holders, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities shall reasonably and in good faith
object, provided, the Company is notified of such objection in writing no later
than 3 Trading Days after the Holders have been so furnished copies of such
documents.

                                       4
<PAGE>

      (b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep a Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and as so supplemented or amended to be filed pursuant
to Rule 424; (iii) respond as promptly as reasonably possible, and in any event
within 10 Trading Days, to any comments received from the Commission with
respect to a Registration Statement or any amendment thereto and as promptly as
reasonably possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to a Registration Statement;
and (iv) comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by a Registration Statement during the applicable period in
accordance (subject to the terms of this Agreement) with the intended methods of
disposition by the Holders thereof set forth in such Registration Statement as
so amended or in such Prospectus as so supplemented.

      (c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 90% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file as soon as
reasonably practicable but in any case prior to the applicable Filing Date, an
additional Registration Statement covering the resale by the Holders of not less
than 125% of the number of such Registrable Securities.

      (d) Notify the Holders of Registrable Securities to be sold (which notice
shall, pursuant to clauses (ii) through (vi) hereof, shall be accompanied by an
instruction to suspend the use of the Prospectus until the requisite changes
have been made) as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than five Trading Days prior to such filing) and (if requested
by any such Person) confirm such notice in writing no later than one Trading Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of a
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company 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; (v) of the occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in a Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to a
Registration Statement, Prospectus or other documents so that, in the case of a
Registration Statement or the Prospectus, as the case may be, 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 light of the circumstances under which they were made, not misleading; and
(vi) the occurrence or existence of any pending corporate development with
respect to the Company that the Company believes may be material and that, in
the determination of the Company, makes it not in the best interests of the
Company to allow continued availability or the Registration Statement or
Prospectus; provided that any and all of such information shall remain
confidential to each Holder until such information otherwise becomes public,
unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder's agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.

                                       5
<PAGE>

      (e) Promptly deliver to each Holder, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. Subject
to the terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.

      (f) Use commercially reasonable efforts to register or qualify the resale
of such Registrable Securities as required under applicable securities or Blue
Sky laws of each State within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or subject the Company to any material tax in
any such jurisdiction where it is not then so subject.

      (g) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.

      (h) Upon the occurrence of any event contemplated by this Section 3, as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to a Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither a Registration Statement nor such Prospectus will
contain an 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 under which they were made, not misleading. If the
Company notifies the Holders in accordance with clauses (ii) through (vi) of
Section 3(d) above to suspend the use of the use of any Prospectus until the
requisite changes to such Prospectus have been made, or the Company otherwise
notifies the Holders of its election to suspend the availability of a
Registration Statement and Prospectus pursuant to clause (vi) of Section 3(d),
then the Holders shall suspend use of such Prospectus. The Company will use its
best efforts to ensure that the use of the Prospectus may be resumed as promptly
as is practicable, except that in the case of suspension of the availability of
a Registration Statement and Prospectus pursuant to clause (vi) of Section 3(d),
the Company shall not be required to take such action until such time as it
shall determine that the continued availability of the Registration Statement
and Prospectus is no longer not in the best interests of the Company.

                                       6
<PAGE>

      (i) Comply with all applicable rules and regulations of the Commission.

      (j) Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.

      (k) The Company may require, at any time prior to the third Trading Day
prior to the Filing Date, each Holder to furnish to the Company a statement as
to the number of shares of Common Stock beneficially owned by such Holder and,
if requested by the Commission, the controlling person thereof, within three
Trading days of the Company's request. During any periods that the Company is
unable to meet its obligations hereunder with respect to the registration of the
Registrable Securities solely because any Holder fails to furnish such
information within three Trading Days of the Company's request, any liquidated
damages that are accruing at such time shall be tolled and any Event that may
otherwise occur solely because of such delay shall be suspended, until such
information is delivered to the Company.

      4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Principal Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holders), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the Holders),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, and (v) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.

                                       7
<PAGE>

      5. Indemnification

      (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in a Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue statements or omissions or alleged untrue statements or
omissions are based upon information regarding such Holder furnished in writing
to the Company by such Holder expressly for use therein, or to the extent that
such information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in a Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(e). The Company shall notify the Holders promptly of
the institution, threat or assertion of any Proceeding arising from or in
connection with the transactions contemplated by this Agreement of which the
Company is aware.

                                       8
<PAGE>

      (b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising out of or based upon any untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon: (i) such Holder's failure to comply with the
prospectus delivery requirements of the Securities Act or (ii) any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (1) such untrue statements or
omissions are based upon information regarding such Holder furnished in writing
to the Company by such Holder expressly for use therein, or to the extent such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(e). In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.

      (c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that such failure shall have prejudiced the
Indemnifying Party.

                                       9
<PAGE>

      An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a material conflict of interest is
likely to exist if the same counsel were to represent such Indemnified Party and
the Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the expense of one such counsel for each
Holder shall be at the expense of the Indemnifying Party). The Indemnifying
Party shall not be liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably withheld.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.

      Subject to the terms of this Agreement, all fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Trading Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).

      (d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.

                                       10
<PAGE>

      The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.

      The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

      6. Miscellaneous

      (a) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and all of
the Holders of the then outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of all of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.

      (b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 6(b),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.

      (c) No Piggyback on Registrations. Except as disclosed on the Disclosure
Schedules, neither the Company nor any of its security holders (other than the
Holders in such capacity pursuant hereto) may include securities of the Company
in the Registration Statement other than the Registrable Securities, and the
Company shall not after the date hereof enter into any agreement providing any
such right to any of its security holders. The Company shall not file any other
registration statement prior to the Effective Date.

                                       11
<PAGE>

      (d) Compliance. Each Holder covenants and agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to the Registration
Statement.

      (e) Discontinued Disposition. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Sections 3(d)(ii), (iii) or
(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(h), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. The Company agrees and acknowledges
that any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the
provisions of Section 2(b).

      (f) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered; provided, that, the Company shall not be
required to register any Registrable Securities pursuant to this Section 6(f)
that are eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act or that are the subject of a then effective Registration
Statement.

      (g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set forth
in the Purchase Agreement.

      (h) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of all of the
Holders of the then-outstanding Registrable Securities. Each Holder may assign
their respective rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement.

                                       12
<PAGE>

      (i) Counterparts. 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.

      (j) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, Borough of Manhattan, 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 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 in effect for 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. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of this Agreement, then the
prevailing party in such Proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.

      (k) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.

      (l) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

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

                                       13
<PAGE>

      (n) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

                              ********************

                                       14
<PAGE>

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

                                   QT 5, INC.

                                   By: _________________________________________
                                       Name:
                                       Title:

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       15
<PAGE>

                    [PURCHASER'S SIGNATURE PAGE TO QTFV RRA]

                                  PALISADES MASTER FUND, L.P.
                                  By: PEF ADVISORS, LLC, its authorized agent

                                  By: ____________________________
                                  Name:
                                  Title:

                           [SIGNATURE PAGES CONTINUE]

                                       16
<PAGE>

                    [PURCHASER'S SIGNATURE PAGE TO QTFV RRA]

                                  CRESCENT INTERNATIONAL LTD.

                                  By: ____________________________
                                  Name:
                                  Title:

                           [SIGNATURE PAGES CONTINUE]

                                       17
<PAGE>

                    [PURCHASER'S SIGNATURE PAGE TO QTFV RRA]

                                  ALPHA CAPITAL AG

                                  By: ____________________________
                                  Name:
                                  Title:

                           [SIGNATURE PAGES CONTINUE]

                                       18
<PAGE>

                    [PURCHASER'S SIGNATURE PAGE TO QTFV RRA]

                                  BRISTOL INVESTMENT FUND, LTD.

                                  By: ____________________________
                                  Name:
                                  Title:

                           [SIGNATURE PAGES CONTINUE]

                                       19
<PAGE>

                    [PURCHASER'S SIGNATURE PAGE TO QTFV RRA]

                                  ELLIS INTERNATIONAL LTD

                                  By: ____________________________
                                  Name:
                                  Title:

                           [SIGNATURE PAGES CONTINUE]

                                       20
<PAGE>

                    [PURCHASER'S SIGNATURE PAGE TO QTFV RRA]

                                  ZENNY TRADING LIMITED

                                  By: ____________________________
                                  Name:
                                  Title:

                           [SIGNATURE PAGES CONTINUE]

                                       21
<PAGE>

                    [PURCHASER'S SIGNATURE PAGE TO QTFV RRA]

Name of Investing Entity: __________________________

Signature of Authorized Signatory of Investing Entity: _________________________

Name of Authorized Signatory: _________________________

Title of Authorized Signatory: __________________________

                           [SIGNATURE PAGES CONTINUE]

                                       22
<PAGE>

                              PLAN OF DISTRIBUTION

      The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:

      o     ordinary brokerage transactions and transactions in which the
            broker-dealer solicits purchasers;

      o     block trades in which the broker-dealer will attempt to sell the
            shares as agent but may position and resell a portion of the block
            as principal to facilitate the transaction;

      o     purchases by a broker-dealer as principal and resale by the
            broker-dealer for its account;

      o     an exchange distribution in accordance with the rules of the
            applicable exchange;

      o     privately negotiated transactions;

      o     settlement of short sales;

      o     broker-dealers may agree with the selling stockholders to sell a
            specified number of such shares at a stipulated price per share;

      o     a combination of any such methods of sale; and

      o     any other method permitted pursuant to applicable law.

      The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.

      The selling stockholder may from time to time pledge or grant a security
interest in some or all of the Shares or common stock or Warrant owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.

                                       23
<PAGE>

      The selling stockholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.

      The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The selling stockholders have
informed the Company that none of them have any agreement or understanding,
directly or indirectly, with any person to distribute the common stock.

      The Company is required to pay all fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the selling stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

                                       24
<PAGE>

                                  SCHEDULE 6(B)

                                       25
<PAGE>

                                  SCHEDULE 6(C)

                                       26

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