Document:

EXHIBIT 10.16

                          REGISTRATION RIGHTS AGREEMENT

         This  Registration  Rights  Agreement  (this  "AGREEMENT")  is made and
entered  into as of August 19, 2003,  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.

                      "INDEMNIFYING  PARTY"  shall have the meaning set forth in
         Section 5(c) hereof.

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                  "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.

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                       "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 130% 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 until the date which
is two  years  after  the date  that such  Registration  Statement  is  declared
effective by the Commission 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.

               (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

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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 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. 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.

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               (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

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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.

               (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

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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.

               (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

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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.

        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.

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               (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.

               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

                                       9
<PAGE>

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 set  forth  on
Schedule  6(c)  attached  hereto,  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.

                                       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>

                       [SIGNATURE PAGE OF HOLDERS TO RRA]

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

                                    By: _____________________________________
                                           Name:
                                           Title:

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       16
<PAGE>

                       [SIGNATURE PAGE OF HOLDERS TO RRA]

                                    CRESCENT INTERNATIONAL LTD.

                                    By: ____________________________
                                    Name:
                                    Title:

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       17
<PAGE>

                       [SIGNATURE PAGE OF HOLDERS TO RRA]

                                    ALPHA CAPITAL AG

                                    By: _____________________________________
                                           Name:
                                           Title:

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       18
<PAGE>

                       [PURCHASER'S SIGNATURE PAGE TO RRA]

                                    BRISTOL INVESTMENT FUND, LTD.

                                    By: ___________________________
                                            Name:
                                            Title:

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       19
<PAGE>

                       [SIGNATURE PAGE OF HOLDERS TO RRA]

                                    ELLIS INTERNAIONAL LTD

                                    By:  __________________________
                                         Name:
                                           Title:

                                    ZENNY TRADING LIMITED

                                    By: ____________________________
                                            Name:
                                            Title:

                                       20
<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        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.

                                       21
<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.

                                       22
<PAGE>

                                  SCHEDULE 6(B)

                                       23
<PAGE>

                                  SCHEDULE 6(C)

                                       24Exhibit 10.17

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
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 TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY  AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES

                          COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                                   QT 5, Inc.

                  THIS COMMON STOCK PURCHASE  WARRANT  CERTIFIES that, for value
received,  _____________ (the "Holder"), is entitled, upon the terms and subject
to the limitations on exercise and the conditions  hereinafter set forth, at any
time on or after August 19, 2003 (the "Initial  Exercise  Date") and on or prior
to the close of business on the fifth  anniversary of the Initial  Exercise Date
(the "Termination Date") but not thereafter,  to subscribe for and purchase from
QT 5, Inc.,  a  corporation  incorporated  in Delaware  (the  "Company"),  up to
____________ shares (the "Warrant Shares") of Common Stock, par value $0.001 per
share, of the Company (the "Common  Stock").  The purchase price of one share of
Common Stock (the "Exercise Price") under this Warrant shall be $0.075,  subject
to adjustment hereunder. The Exercise Price and the number of Warrant Shares for
which the  Warrant is  exercisable  shall be subject to  adjustment  as provided
herein.  Capitalized  terms used and not otherwise defined herein shall have the
meanings set forth in that certain Securities  Purchase Agreement (the "Purchase
Agreement"),  dated  August 19,  2003,  between the  Company  and the  investors
signatory thereto.

                                       1
<PAGE>

         1.  Title to  Warrant.  Prior to the  Termination  Date and  subject to
compliance with applicable laws and Section 7 of this Warrant,  this Warrant and
all rights  hereunder  are  transferable,  in whole or in part, at the office or
agency of the  Company by the Holder in person or by duly  authorized  attorney,
upon surrender of this Warrant  together with the Assignment Form annexed hereto
properly  endorsed.  The transferee shall sign an investment  letter in form and
substance reasonably satisfactory to the Company.

         2.  Authorization  of Shares.  The Company  covenants  that all Warrant
Shares which may be issued upon the exercise of the purchase rights  represented
by this Warrant will, upon exercise of the purchase  rights  represented by this
Warrant,  be duly authorized,  validly issued,  fully paid and nonassessable and
free from all taxes,  liens and charges in respect of the issue  thereof  (other
than taxes in  respect of any  transfer  occurring  contemporaneously  with such
issue).

         3. Exercise of Warrant.

                  (a)  Exercise  of the  purchase  rights  represented  by  this
         Warrant  may be made at any  time or  times  on or  after  the  Initial
         Exercise Date and on or before the Termination  Date by delivery to the
         Company of a duly  executed  facsimile  copy of the Notice of  Exercise
         Form  annexed  hereto (or such other office or agency of the Company as
         it may designate by notice in writing to the  registered  Holder at the
         address  of  such  Holder  appearing  on the  books  of  the  Company);
         provided,  however,  within 5 Trading  Days of the date said  Notice of
         Exercise is delivered to the Company, the Holder shall have surrendered
         this Warrant to the Company and the Company shall have received payment
         of the aggregate Exercise Price of the shares thereby purchased by wire
         transfer or cashier's check drawn on a United States bank. Certificates
         for shares purchased  hereunder shall be delivered to the Holder within
         the earlier of (i) 5 Trading Days after the date on which the Notice of
         Exercise  shall have been delivered by facsimile copy or (ii) 3 Trading
         Days from the delivery to the Company of the Notice of Exercise Form by
         facsimile copy,  surrender of this Warrant and payment of the aggregate
         Exercise  Price as set forth above  ("Warrant  Share  Delivery  Date");
         provided,  however,  in the event the Warrant is not surrendered or the
         aggregate  Exercise  Price  is not  received  by the  Company  within 5
         Trading  Days after the date on which the Notice of  Exercise  shall be
         delivered by facsimile  copy,  the Warrant Share Delivery Date shall be
         extended  to the extent  such 5 Trading  Day period is  exceeded.  This
         Warrant  shall be deemed to have been  exercised on the date the Notice
         of Exercise is delivered to the Company by facsimile  copy. The Warrant
         Shares  shall be deemed to have been  issued,  and  Holder or any other
         person so designated to be named therein shall be deemed to have become
         a holder of record of such shares for all purposes,  as of the date the
         Warrant has been  exercised  by payment to the Company of the  Exercise
         Price and all taxes required to be paid by the Holder, if any, pursuant
         to Section 5 prior to the issuance of such shares,  have been paid.  If
         the  Company  fails  to  deliver  to  the  Holder  a   certificate   or

                                       2
<PAGE>

         certificates  representing  the Warrant Shares pursuant to this Section
         3(a) by the Warrant Share Delivery Date,  then the Holder will have the
         right to  rescind  such  exercise.  In  addition  to any  other  rights
         available to the Holder,  if the Company fails to deliver to the Holder
         a certificate or certificates  representing the Warrant Shares pursuant
         to an  exercise  by the  second  Trading  Day after the  Warrant  Share
         Delivery  Date,  and if after  such  third  Trading  Day the  Holder is
         required by its broker to purchase  (in an open market  transaction  or
         otherwise)  shares of Common Stock to deliver in satisfaction of a sale
         by the  Holder  of the  Warrant  Shares  which the  Holder  anticipated
         receiving  upon such exercise (a "Buy-In"),  then the Company shall (1)
         pay in cash to the Holder the  amount by which (x) the  Holder's  total
         purchase price (including brokerage commissions, if any) for the shares
         of  Common  Stock so  purchased  exceeds  (y) the  amount  obtained  by
         multiplying  (A) the  number of Warrant  Shares  that the  Company  was
         required to deliver to the Holder in  connection  with the  exercise at
         issue  times (B) the price at which the sell order  giving rise to such
         purchase obligation was executed,  and (2) at the option of the Holder,
         either  reinstate the portion of the Warrant and  equivalent  number of
         Warrant  Shares for which such  exercise  was not honored or deliver to
         the Holder  the  number of shares of Common  Stock that would have been
         issued had the Company  timely  complied with its exercise and delivery
         obligations  hereunder.  For example,  if the Holder  purchases  Common
         Stock having a total  purchase  price of $11,000 to cover a Buy-In with
         respect  to an  attempted  exercise  of shares of Common  Stock with an
         aggregate  sale  price  giving  rise to  such  purchase  obligation  of
         $10,000,  under clause (1) of the  immediately  preceding  sentence the
         Company  shall be required to pay the Holder  $1,000.  The Holder shall
         provide the Company  written notice  indicating the amounts  payable to
         the  Holder  in  respect  of  the  Buy-In,   together  with  applicable
         confirmations and other evidence  reasonably  requested by the Company.
         Nothing  herein  shall  limit a  Holder's  right to  pursue  any  other
         remedies  available  to it  hereunder,  at law or in equity  including,
         without limitation,  a decree of specific performance and/or injunctive
         relief  with  respect  to  the  Company's  failure  to  timely  deliver
         certificates  representing  shares of Common Stock upon exercise of the
         Warrant as required pursuant to the terms hereof.

                  (b) If this Warrant  shall have been  exercised  in part,  the
         Company  shall,   at  the  time  of  delivery  of  the  certificate  or
         certificates  representing  Warrant  Shares,  deliver  to  Holder a new
         Warrant  evidencing  the rights of Holder to purchase  the  unpurchased
         Warrant  Shares called for by this Warrant,  which new Warrant shall in
         all other respects be identical with this Warrant.

                  (c) The Company shall not effect any exercise of this Warrant,
         and the Holder shall not have the right to exercise any portion of this
         Warrant,  pursuant  to Section  3(a) or  otherwise,  to the extent that
         after  giving  effect  to such  issuance  after  exercise,  the  Holder
         (together with the Holder's affiliates), as set forth on the applicable
         Notice of Exercise,  would  beneficially  own in excess of 4.99% of the
         number of shares of the  Common  Stock  outstanding  immediately  after
         giving effect to such issuance. For purposes of the foregoing sentence,
         the number of shares of Common Stock  beneficially  owned by the Holder
         and its  affiliates  shall include the number of shares of Common Stock
         issuable  upon  exercise  of this  Warrant  with  respect  to which the
         determination  of such  sentence is being made,  but shall  exclude the
         number of  shares of Common  Stock  which  would be  issuable  upon (A)
         exercise  of  the  remaining,  nonexercised  portion  of  this  Warrant
         beneficially  owned  by the  Holder  or any of its  affiliates  and (B)
         exercise or conversion of the  unexercised or  nonconverted  portion of
         any other securities of the Company (including, without limitation, any
         other Debentures or Warrants)  subject to a limitation on conversion or

                                       3
<PAGE>

         exercise  analogous to the  limitation  contained  herein  beneficially
         owned by the  Holder or any of its  affiliates.  Except as set forth in
         the preceding sentence,  for purposes of this Section 3(c),  beneficial
         ownership  shall be calculated in accordance  with Section 13(d) of the
         Exchange  Act.  To the extent  that the  limitation  contained  in this
         Section  3(c)  applies,  the  determination  of whether this Warrant is
         exercisable (in relation to other  securities  owned by the Holder) and
         of which a portion of this Warrant is exercisable  shall be in the sole
         discretion of such Holder,  and the  submission of a Notice of Exercise
         shall be deemed  to be such  Holder's  determination  of  whether  this
         Warrant is exercisable (in relation to other  securities  owned by such
         Holder) and of which  portion of this Warrant is  exercisable,  in each
         case subject to such aggregate percentage  limitation,  and the Company
         shall have no  obligation  to verify or confirm  the  accuracy  of such
         determination.  For purposes of this Section 3(c), in  determining  the
         number of  outstanding  shares of Common Stock,  the Holder may rely on
         the number of  outstanding  shares of Common  Stock as reflected in (x)
         the  Company's  most recent Form 10-Q or Form 10-K, as the case may be,
         (y) a more recent public  announcement  by the Company or (z) any other
         notice by the Company or the Company's Transfer Agent setting forth the
         number of shares of Common Stock outstanding.  Upon the written or oral
         request of the  Holder,  the  Company  shall  within two  Trading  Days
         confirm  orally  and in  writing  to the Holder the number of shares of
         Common Stock then  outstanding.  In any case, the number of outstanding
         shares of Common Stock shall be  determined  after giving effect to the
         conversion  or exercise of securities  of the Company,  including  this
         Warrant,  by the  Holder or its  affiliates  since the date as of which
         such number of  outstanding  shares of Common Stock was  reported.  The
         provisions  of this Section  3(c) may be waived by the Holder upon,  at
         the election of the Holder,  not less than 61 days' prior notice to the
         Company,  and the  provisions  of this Section  3(c) shall  continue to
         apply until such 61st day (or such later  date,  as  determined  by the
         Holder, as may be specified in such notice of waiver).

                           (d) If at any time  after  one year  from the date of
         issuance of this Warrant there is no effective  Registration  Statement
         registering  the  resale  of the  Warrant  Shares by the  Holder,  this
         Warrant  may also be  exercised  at such  time by means of a  "cashless
         exercise"   in  which  the  Holder  shall  be  entitled  to  receive  a
         certificate  for the number of  Warrant  Shares  equal to the  quotient
         obtained by dividing [(A-B) (X)] by (A), where:

                  (A)     = the Closing  Price on the Trading Day  preceding the
                          date of such election;

                  (B)     = the Exercise Price of the Warrants, as adjusted; and

                  (X)     = the number of Warrant Shares  issuable upon exercise
                          of the Warrants in  accordance  with the terms of this
                          Warrant.

         4. No  Fractional  Shares  or  Scrip.  No  fractional  shares  or scrip
representing  fractional  shares  shall  be  issued  upon the  exercise  of this
Warrant.  As to any fraction of a share which Holder would otherwise be entitled
to purchase  upon such  exercise,  the Company  shall pay a cash  adjustment  in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.

                                       4
<PAGE>

         5. Charges,  Taxes and Expenses.  Issuance of certificates  for Warrant
Shares shall be made without  charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate,  all
of which taxes and expenses shall be paid by the Company,  and such certificates
shall be  issued  in the name of the  Holder  or in such name or names as may be
directed by the Holder;  provided,  however,  that in the event certificates for
Warrant  Shares are to be issued in a name  other  than the name of the  Holder,
this  Warrant  when  surrendered  for  exercise  shall  be  accompanied  by  the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

         6. Closing of Books.  The Company will not close its stockholder  books
or records in any manner  which  prevents the timely  exercise of this  Warrant,
pursuant to the terms hereof.

         7. Transfer, Division and Combination.

                  (a) Subject to compliance with any applicable  securities laws
         and the  conditions  set forth in Sections 1 and 7(e) hereof and to the
         provisions of Section 4.1 of the Purchase  Agreement,  this Warrant and
         all  rights  hereunder  are  transferable,  in whole  or in part,  upon
         surrender  of this  Warrant  at the  principal  office of the  Company,
         together with a written assignment of this Warrant substantially in the
         form  attached  hereto  duly  executed  by the  Holder  or its agent or
         attorney and funds  sufficient  to pay any transfer  taxes payable upon
         the making of such transfer. Upon such surrender and, if required, such
         payment,  the  Company  shall  execute  and  deliver a new  Warrant  or
         Warrants  in  the  name  of  the  assignee  or  assignees  and  in  the
         denomination   or   denominations   specified  in  such  instrument  of
         assignment,  and shall issue to the  assignor a new Warrant  evidencing
         the portion of this  Warrant not so assigned,  and this  Warrant  shall
         promptly  be  cancelled.  A  Warrant,  if  properly  assigned,  may  be
         exercised  by a new holder for the purchase of Warrant  Shares  without
         having a new Warrant issued.

                  (b)  This  Warrant  may be  divided  or  combined  with  other
         Warrants  upon  presentation  hereof  at the  aforesaid  office  of the
         Company,  together  with a  written  notice  specifying  the  names and
         denominations  in which new  Warrants  are to be issued,  signed by the
         Holder or its agent or  attorney.  Subject to  compliance  with Section
         7(a),  as to any  transfer  which may be involved  in such  division or
         combination,  the  Company  shall  execute and deliver a new Warrant or
         Warrants  in  exchange  for the  Warrant or  Warrants  to be divided or
         combined in accordance with such notice.

                  (c) The Company  shall  prepare,  issue and deliver at its own
         expense  (other than transfer  taxes) the new Warrant or Warrants under
         this Section 7.

                  (d) The Company agrees to maintain,  at its aforesaid  office,
         books for the  registration  and the  registration  of  transfer of the
         Warrants.

                  (e) If,  at the  time of the  surrender  of  this  Warrant  in
         connection  with any  transfer of this  Warrant,  the  transfer of this
         Warrant shall not be registered  pursuant to an effective  registration
         statement  under  the  Securities  Act  and  under   applicable   state

                                       5
<PAGE>

         securities or blue sky laws, the Company may require, as a condition of
         allowing  such  transfer  (i) that the  Holder  or  transferee  of this
         Warrant,  as the case may be, furnish to the Company a written  opinion
         of  counsel  (which  opinion  shall be in  form,  substance  and  scope
         customary  for opinions of counsel in comparable  transactions)  to the
         effect that such  transfer may be made without  registration  under the
         Securities Act and under  applicable state securities or blue sky laws,
         (ii) that the holder or  transferee  execute and deliver to the Company
         an investment  letter in form and  substance  acceptable to the Company
         and (iii) that the transferee be an "accredited investor" as defined in
         Rule 501(a) promulgated under the Securities Act.

         8. No Rights as  Shareholder  until  Exercise.  This  Warrant  does not
entitle the Holder to any voting rights or other rights as a shareholder  of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate  Exercise  Price (or by means of a cashless  exercise),
the  Warrant  Shares  so  purchased  shall be and be deemed to be issued to such
Holder as the record  owner of such  shares as of the close of  business  on the
later of the date of such surrender or payment.

         9. Loss,  Theft,  Destruction  or  Mutilation  of Warrant.  The Company
covenants that upon receipt by the Company of evidence  reasonably  satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate  relating  to the  Warrant  Shares,  and in case of  loss,  theft or
destruction,  of indemnity or security reasonably  satisfactory to it (which, in
the case of the  Warrant,  shall not include the posting of any bond),  and upon
surrender and cancellation of such Warrant or stock  certificate,  if mutilated,
the Company  will make and deliver a new  Warrant or stock  certificate  of like
tenor  and  dated  as of such  cancellation,  in lieu of such  Warrant  or stock
certificate.

         10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the  taking of any action or the  expiration  of any right  required  or granted
herein shall be a Saturday,  Sunday or a legal holiday,  then such action may be
taken or such right may be exercised on the next  succeeding day not a Saturday,
Sunday or legal holiday.

         11. Adjustments of Exercise Price and Number of Warrant Shares.

                  (a) Stock  Splits,  etc.  The  number  and kind of  securities
         purchasable  upon the exercise of this  Warrant and the Exercise  Price
         shall be subject to adjustment  from time to time upon the happening of
         any of the  following.  In case the Company shall (i) pay a dividend in
         shares of Common Stock or make a distribution in shares of Common Stock
         to  holders  of  its  outstanding  Common  Stock,  (ii)  subdivide  its
         outstanding  shares of Common  Stock  into a greater  number of shares,
         (iii)  combine its  outstanding  shares of Common  Stock into a smaller
         number  of  shares of Common  Stock,  or (iv)  issue any  shares of its
         capital  stock in a  reclassification  of the  Common  Stock,  then the
         number of Warrant  Shares  purchasable  upon  exercise of this  Warrant
         immediately prior thereto shall be adjusted so that the Holder shall be
         entitled  to receive  the kind and  number of  Warrant  Shares or other
         securities  of the  Company  which it  would  have  owned or have  been
         entitled to receive had such Warrant been exercised in advance thereof.
         Upon each such  adjustment of the kind and number of Warrant  Shares or
         other  securities of the Company which are purchasable  hereunder,  the
         Holder shall  thereafter  be entitled to purchase the number of Warrant

                                       6
<PAGE>

         Shares  or  other  securities  resulting  from  such  adjustment  at an
         Exercise  Price  per  Warrant  Share  or  other  security  obtained  by
         multiplying  the  Exercise  Price in effect  immediately  prior to such
         adjustment by the number of Warrant Shares purchasable  pursuant hereto
         immediately  prior to such  adjustment  and  dividing  by the number of
         Warrant Shares or other  securities of the Company  resulting from such
         adjustment.  An adjustment made pursuant to this paragraph shall become
         effective   immediately   after  the  effective   date  of  such  event
         retroactive to the record date, if any, for such event.

                  (b) Anti-Dilution Provisions.  During the Exercise Period, the
         Exercise  Price  shall be  subject to  adjustment  from time to time as
         provided in this Section 11(b). In the event that any adjustment of the
         Exercise Price as required herein results in a fraction of a cent, such
         Exercise Price shall be rounded up or down to the nearest cent.

                           (i) Adjustment of Exercise Price. If and whenever the
                  Company  issues  or  sells,  or  in  accordance  with  Section
                  11(b)(ii)  hereof is deemed to have issued or sold, any shares
                  of Common Stock for a consideration per share of less than the
                  then Exercise Price or for no consideration (such lower price,
                  the "Base  Share  Price" and such  issuances  collectively,  a
                  "Dilutive  Issuance"),  then,  the  Exercise  Price  shall  be
                  reduced  to equal the Base  Share  Price,  provided,  that for
                  purposes hereof, all securities exercisable,  convertible into
                  or exchangeable  for Common Stock  ("Convertible  Securities")
                  shall be deemed outstanding  immediately after the issuance of
                  such Common Stock. Such adjustment shall be made whenever such
                  shares of Common Stock or Convertible Securities are issued.

                           (ii) Effect on Exercise Price of Certain Events.  For
                  purposes of  determining  the  adjusted  Exercise  Price under
                  Section 11(b) hereof, the following will be applicable:

                                             (A)  Issuance of Rights or Options.
                           If the  Company  in any  manner  issues or grants any
                           warrants,   rights  or   options,   whether   or  not
                           immediately  exercisable,  to  subscribe  for  or  to
                           purchase Common Stock or Convertible Securities (such
                           warrants, rights and options to purchase Common Stock
                           or Convertible Securities are hereinafter referred to
                           as "Options")  and the effective  price per share for
                           which Common  Stock is issuable  upon the exercise of
                           such Options is less than the Exercise  Price ("Below
                           Base Price  Options"),  then the maximum total number
                           of shares of Common Stock  issuable upon the exercise
                           of all such Below Base Price Options  (assuming  full
                           exercise,   conversion  or  exchange  of  Convertible
                           Securities,  if  applicable)  will, as of the date of
                           the  issuance  or  grant  of such  Below  Base  Price
                           Options, be deemed to be outstanding and to have been
                           issued  and sold by the  Company  for such  price per
                           share and the  maximum  consideration  payable to the
                           Company upon such exercise  (assuming  full exercise,
                           conversion or exchange of Convertible Securities,  if
                           applicable)  will be deemed to have been  received by
                           the Company.  For purposes of the preceding sentence,
                           the "effective price per share for which Common Stock
                           is  issuable  upon the  exercise  of such  Below Base
                           Price  Options" is  determined  by  dividing  (i) the
                           total amount,  if any,  received or receivable by the
                           Company as consideration for the issuance or granting

                                       7
<PAGE>

                           of all  such  Below  Base  Price  Options,  plus  the
                           minimum aggregate amount of additional consideration,
                           if any,  payable to the Company  upon the exercise of
                           all such Below Base Price Options,  plus, in the case
                           of Convertible  Securities issuable upon the exercise
                           of  such  Below  Base  Price  Options,   the  minimum
                           aggregate amount of additional  consideration payable
                           upon the exercise,  conversion or exchange thereof at
                           the time such  Convertible  Securities  first  become
                           exercisable, convertible or exchangeable, by (ii) the
                           maximum  total  number  of  shares  of  Common  Stock
                           issuable  upon the  exercise  of all such  Below Base
                           Price   Options    (assuming   full   conversion   of
                           Convertible  Securities,  if applicable).  No further
                           adjustment  to the  Exercise  Price will be made upon
                           the actual  issuance  of such  Common  Stock upon the
                           exercise of such Below Base Price Options or upon the
                           exercise,   conversion  or  exchange  of  Convertible
                           Securities  issuable upon exercise of such Below Base
                           Price Options.

                                            (B)    Issuance    of    Convertible
                           Securities.  If the  Company in any manner  issues or
                           sells  any  Convertible  Securities,  whether  or not
                           immediately  convertible  (other  than where the same
                           are  issuable  upon the  exercise of Options) and the
                           effective  price per share for which  Common Stock is
                           issuable upon such  exercise,  conversion or exchange
                           is less than the  Exercise  Price,  then the  maximum
                           total number of shares of Common Stock  issuable upon
                           the  exercise,  conversion  or  exchange  of all such
                           Convertible  Securities  will,  as of the date of the
                           issuance of such Convertible Securities, be deemed to
                           be  outstanding  and to have been  issued and sold by
                           the  Company for such price per share and the maximum
                           consideration   payable  to  the  Company  upon  such
                           exercise  (assuming  full  exercise,   conversion  or
                           exchange of  Convertible  Securities,  if applicable)
                           will be deemed to have been  received by the Company.
                           For  the  purposes  of the  preceding  sentence,  the
                           "effective  price per share for which Common Stock is
                           issuable upon such exercise,  conversion or exchange"
                           is determined  by dividing (i) the total  amount,  if
                           any,   received  or  receivable  by  the  Company  as
                           consideration  for the  issuance  or sale of all such
                           Convertible  Securities,  plus the minimum  aggregate
                           amount of additional  consideration,  if any, payable
                           to the  Company  upon  the  exercise,  conversion  or
                           exchange   thereof  at  the  time  such   Convertible
                           Securities first become  exercisable,  convertible or
                           exchangeable,  by (ii) the  maximum  total  number of
                           shares of Common Stock  issuable  upon the  exercise,
                           conversion  or  exchange  of  all  such   Convertible
                           Securities.  No further  adjustment  to the  Exercise
                           Price will be made upon the actual  issuance  of such
                           Common Stock upon exercise, conversion or exchange of
                           such Convertible Securities.

                                            (C)   Change  in  Option   Price  or
                           Conversion  Rate. If there is a change at any time in

                                       8
<PAGE>

                           (i) the amount of additional consideration payable to
                           the Company upon the  exercise of any  Options;  (ii)
                           the  amount  of  additional  consideration,  if  any,
                           payable to the Company upon the exercise,  conversion
                           or exchange of any Convertible  Securities;  or (iii)
                           the  rate at which  any  Convertible  Securities  are
                           convertible into or exchangeable for Common Stock (in
                           each  such  case,  other  than  under or by reason of
                           provisions designed to protect against dilution), the
                           Exercise  Price in effect at the time of such  change
                           will be readjusted to the Exercise  Price which would
                           have been in effect at such time had such  Options or
                           Convertible Securities still outstanding provided for
                           such  changed  additional  consideration  or  changed
                           conversion  rate,  as the  case  may be,  at the time
                           initially granted, issued or sold.

                                            (D)  Calculation  of   Consideration
                           Received. If any Common Stock, Options or Convertible
                           Securities are issued,  granted or sold for cash, the
                           consideration  received therefor for purposes of this
                           Warrant  will be the amount  received  by the Company
                           therefor, before deduction of reasonable commissions,
                           underwriting   discounts  or   allowances   or  other
                           reasonable  expenses  paid or incurred by the Company
                           in connection  with such issuance,  grant or sale. In
                           case  any  Common  Stock,   Options  or   Convertible
                           Securities  are  issued  or sold for a  consideration
                           part or all of which  shall be other than  cash,  the
                           amount of the consideration  other than cash received
                           by the Company  will be the fair market value of such
                           consideration,   except   where  such   consideration
                           consists of  securities,  in which case the amount of
                           consideration  received  by the  Company  will be the
                           fair market value  (closing  bid price,  if traded on
                           any  market)  thereof as of the date of  receipt.  In
                           case  any  Common  Stock,   Options  or   Convertible
                           Securities  are issued in connection  with any merger
                           or   consolidation   in  which  the  Company  is  the
                           surviving  corporation,  the amount of  consideration
                           therefor  will be deemed to be the fair market  value
                           of such portion of the net assets and business of the
                           non-surviving  corporation as is attributable to such
                           Common Stock, Options or Convertible  Securities,  as
                           the  case  may  be.  The  fair  market  value  of any
                           consideration  other than cash or securities  will be
                           determined in good faith by an  investment  banker or
                           other  appropriate  expert  of  national   reputation
                           selected by the Company and reasonably  acceptable to
                           the holder  hereof,  with the costs of such appraisal
                           to be borne by the Company.

                                            (E)   Exceptions  to  Adjustment  of
                           Exercise  Price.  Notwithstanding  the foregoing,  no
                           adjustment  will be made under this Section  11(b) in
                           respect of (1) 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,  (2) upon the exercise of the  Debentures or
                           any  Debentures of this series or of any other series
                           or security  issued by the Company in connection with
                           the  offer  and  sale  of this  Company's  securities

                                       9
<PAGE>

                           pursuant to the Purchase  Agreement,  or (3) upon the
                           exercise  of  or   conversion   of  any   Convertible
                           Securities or Options  issued and  outstanding on the
                           Original  Issue Date,  provided  that the  securities
                           have not been amended  since the date of the Purchase
                           Agreement   except  as  a  result  of  the   Purchase
                           Agreement,   or   (4)   acquisitions   or   strategic
                           investments,  the primary  purpose of which is not to
                           raise capital.

                           (iii)  Minimum   Adjustment  of  Exercise  Price.  No
                  adjustment of the Exercise Price shall be made in an amount of
                  less than 1% of the Exercise  Price in effect at the time such
                  adjustment  is  otherwise  required  to be made,  but any such
                  lesser  adjustment  shall be carried forward and shall be made
                  at the time and together with the next  subsequent  adjustment
                  which, together with any adjustments so carried forward, shall
                  amount to not less than 1% of such Exercise Price.

         12.   Reorganization,   Reclassification,   Merger,   Consolidation  or
Disposition  of  Assets.  In case the  Company  shall  reorganize  its  capital,
reclassify  its  capital  stock,  consolidate  or  merge  with or  into  another
corporation  (where the Company is not the surviving  corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business  to another  corporation  and,  pursuant to the terms of such
reorganization,   reclassification,  merger,  consolidation  or  disposition  of
assets, shares of common stock of the successor or acquiring corporation, or any
cash,  shares of stock or other securities or property of any nature  whatsoever
(including  warrants or other subscription or purchase rights) in addition to or
in lieu of  common  stock of the  successor  or  acquiring  corporation  ("Other
Property"),  are to be received by or distributed to the holders of Common Stock
of the Company,  then the Holder shall have the right thereafter to receive,  at
the option of the  Holder,  (a) upon  exercise  of this  Warrant,  the number of
shares of Common  Stock of the  successor  or  acquiring  corporation  or of the
Company, if it is the surviving corporation,  and Other Property receivable upon
or as a result of such reorganization,  reclassification,  merger, consolidation
or disposition of assets by a Holder of the number of shares of Common Stock for
which this Warrant is  exercisable  immediately  prior to such event or (b) cash
equal  to the  value  of this  Warrant  as  determined  in  accordance  with the
Black-Scholes  option  pricing  formula.  In  case of any  such  reorganization,
reclassification,  merger, consolidation or disposition of assets, the successor
or acquiring  corporation (if other than the Company) shall expressly assume the
due and  punctual  observance  and  performance  of each and every  covenant and
condition of this  Warrant to be  performed  and observed by the Company and all
the obligations and liabilities hereunder,  subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for  adjustments of Warrant Shares
for which this Warrant is  exercisable  which shall be as nearly  equivalent  as
practicable to the adjustments  provided for in this Section 12. For purposes of
this Section 12, "common stock of the successor or acquiring  corporation" shall
include  stock of such  corporation  of any class which is not  preferred  as to
dividends or assets over any other class of stock of such  corporation and which
is  not  subject  to  redemption   and  shall  also  include  any  evidences  of
indebtedness,  shares of stock or other securities which are convertible into or

                                       10
<PAGE>

exchangeable  for any such stock,  either  immediately  or upon the arrival of a
specified  date or the happening of a specified  event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing  provisions of
this  Section  12  shall   similarly   apply  to   successive   reorganizations,
reclassifications, mergers, consolidations or disposition of assets.

         13.  Voluntary  Adjustment by the Company.  The Company may at any time
during the term of this Warrant  reduce the then current  Exercise  Price to any
amount and for any period of time deemed  appropriate  by the Board of Directors
of the Company.

         14.  Notice of  Adjustment.  Whenever  the number of Warrant  Shares or
number or kind of securities or other property  purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided,  the Company
shall give notice thereof to the Holder,  which notice shall state the number of
Warrant Shares (and other securities or property)  purchasable upon the exercise
of this  Warrant  and the  Exercise  Price of such  Warrant  Shares  (and  other
securities or property) after such  adjustment,  setting forth a brief statement
of the facts  requiring  such  adjustment  and setting forth the  computation by
which such adjustment was made.

         15. Notice of Corporate Action. If at any time:

                  (a) the  Company  shall  take a record of the  holders  of its
         Common Stock for the purpose of entitling them to receive a dividend or
         other  distribution,  or any right to  subscribe  for or  purchase  any
         evidences of its indebtedness,  any shares of stock of any class or any
         other securities or property, or to receive any other right, or

                  (b) there shall be any capital  reorganization of the Company,
         any  reclassification  or  recapitalization of the capital stock of the
         Company or any  consolidation  or merger of the  Company  with,  or any
         sale,  transfer or other  disposition of all or  substantially  all the
         property, assets or business of the Company to, another corporation or,

                  (c) there shall be a  voluntary  or  involuntary  dissolution,
         liquidation or winding up of the Company;

then, in any one or more of such cases,  the Company shall give to Holder (i) at
least 20 days' prior written  notice of the date on which a record date shall be
selected for such dividend,  distribution or right or for determining  rights to
vote  in  respect  of  any  such   reorganization,   reclassification,   merger,
consolidation, sale, transfer, disposition,  liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days'  prior  written  notice of the date when the same shall take  place.  Such
notice in accordance  with the foregoing  clause also shall specify (i) the date
on which  any such  record  is to be taken  for the  purpose  of such  dividend,
distribution  or right,  the date on which the holders of Common  Stock shall be
entitled  to any such  dividend,  distribution  or  right,  and the  amount  and
character  thereof,  and  (ii)  the  date  on  which  any  such  reorganization,
reclassification,    merger,   consolidation,   sale,   transfer,   disposition,
dissolution,  liquidation  or winding  up is to take place and the time,  if any
such  time is to be fixed,  as of which the  holders  of Common  Stock  shall be
entitled to exchange  their  Warrant  Shares for  securities  or other  property

                                       11
<PAGE>

deliverable upon such disposition,  dissolution, liquidation or winding up. Each
such written  notice shall be  sufficiently  given if addressed to Holder at the
last address of Holder  appearing  on the books of the Company and  delivered in
accordance with Section 17(d).

         16. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding,  it will reserve from its authorized and unissued Common
Stock a  sufficient  number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant.  The Company
further  covenants  that its  issuance of this  Warrant  shall  constitute  full
authority  to its  officers  who are charged  with the duty of  executing  stock
certificates  to execute and issue the  necessary  certificates  for the Warrant
Shares upon the exercise of the purchase rights under this Warrant.  The Company
will take all such  reasonable  action as may be  necessary  to assure that such
Warrant  Shares  may be issued  as  provided  herein  without  violation  of any
applicable law or regulation,  or of any  requirements  of the Principal  Market
upon which the Common Stock may be listed.

                  Except  and to the  extent as waived  or  consented  to by the
Holder,  the Company  shall not by any action,  including,  without  limitation,
amending  its  certificate  of  incorporation  or  through  any  reorganization,
transfer  of  assets,  consolidation,  merger,  dissolution,  issue  or  sale of
securities or any other voluntary action,  avoid or seek to avoid the observance
or  performance  of any of the terms of this  Warrant,  but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or  appropriate to protect the rights of Holder
as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior to
such  increase  in par value,  (b) take all such action as may be  necessary  or
appropriate  in order that the Company may validly and legally  issue fully paid
and nonassessable  Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having  jurisdiction  thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.

                  Before  taking any action which would result in an  adjustment
in the number of Warrant  Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such  authorizations  or exemptions
thereof,  or consents  thereto,  as may be necessary from any public  regulatory
body or bodies having jurisdiction thereof.

         17. Miscellaneous.

                  (a)  Jurisdiction.  This Warrant  shall  constitute a contract
         under the laws of New York,  without  regard  to its  conflict  of law,
         principles or rules.

                  (b)  Restrictions.  The Holder  acknowledges  that the Warrant
         Shares  acquired upon the exercise of this Warrant,  if not registered,
         will  have  restrictions  upon  resale  imposed  by state  and  federal
         securities laws.

                                       12
<PAGE>

                  (c) Nonwaiver and Expenses.  No course of dealing or any delay
         or failure to exercise any right  hereunder on the part of Holder shall
         operate  as a waiver  of such  right or  otherwise  prejudice  Holder's
         rights,  powers  or  remedies,  notwithstanding  all  rights  hereunder
         terminate  on the  Termination  Date.  If  the  Company  willfully  and
         knowingly  fails to comply with any  provision of this  Warrant,  which
         results in any material damages to the Holder, the Company shall pay to
         Holder  such  amounts  as shall be  sufficient  to cover  any costs and
         expenses  including,  but not limited to,  reasonable  attorneys' fees,
         including  those  of  appellate  proceedings,  incurred  by  Holder  in
         collecting  any amounts due pursuant  hereto or in otherwise  enforcing
         any of its rights, powers or remedies hereunder.

                  (d) Notices. Any notice, request or other document required or
         permitted to be given or  delivered to the Holder by the Company  shall
         be delivered in accordance  with the notice  provisions of the Purchase
         Agreement.

                  (e)  Limitation  of  Liability.  No provision  hereof,  in the
         absence of any affirmative action by Holder to exercise this Warrant or
         purchase  Warrant  Shares,  and no enumeration  herein of the rights or
         privileges  of Holder,  shall give rise to any  liability of Holder for
         the  purchase  price of any  Common  Stock or as a  stockholder  of the
         Company,  whether  such  liability  is  asserted  by the  Company or by
         creditors of the Company.

                  (f)  Remedies.  Holder,  in  addition  to  being  entitled  to
         exercise all rights granted by law, including recovery of damages, will
         be entitled to specific  performance  of its rights under this Warrant.
         The  Company  agrees  that  monetary  damages  would  not  be  adequate
         compensation  for any loss  incurred by reason of a breach by it of the
         provisions  of this  Warrant and hereby  agrees to waive the defense in
         any  action  for  specific  performance  that a remedy  at law would be
         adequate.

                  (g) Successors and Assigns.  Subject to applicable  securities
         laws,  this  Warrant and the rights and  obligations  evidenced  hereby
         shall inure to the benefit of and be binding upon the successors of the
         Company  and the  successors  and  permitted  assigns  of  Holder.  The
         provisions  of this  Warrant are  intended to be for the benefit of all
         Holders from time to time of this Warrant and shall be  enforceable  by
         any such Holder or holder of Warrant Shares.

                  (h) Amendment.  This Warrant may be modified or amended or the
         provisions  hereof  waived with the written  consent of the Company and
         the Holder.

                  (i) Severability.  Wherever  possible,  each provision of this
         Warrant  shall be  interpreted  in such manner as to be  effective  and
         valid under  applicable law, but if any provision of this Warrant shall
         be prohibited by or invalid under  applicable law, such provision shall
         be ineffective to the extent of such prohibition or invalidity, without
         invalidating   the  remainder  of  such  provisions  or  the  remaining
         provisions of this Warrant.

                  (j)  Headings.  The headings  used in this Warrant are for the
         convenience of reference only and shall not, for any purpose, be deemed
         a part of this Warrant.

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

                                       13
<PAGE>

                  IN WITNESS WHEREOF,  the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.

Dated:  August __, 2003
                                   QT 5, INC.

                                   By:____________________________________
                                      Name:
                                      Title:

                                       14
<PAGE>

                               NOTICE OF EXERCISE

To: Ambient Corporation

         (1)______The  undersigned  hereby elects to purchase  ________  Warrant
Shares of QT 5, Inc.  pursuant  to the terms of the  attached  Warrant  (only if
exercised in full),  and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.

         (2)______Payment shall take the form of (check applicable box):

                  [ ] in lawful money of the United States; or

                  [ ] the  cancellation  of such number of Warrant  Shares as is
                  necessary,  in  accordance  with  the  formula  set  forth  in
                  subsection  3(d), to exercise this Warrant with respect to the
                  maximum number of Warrant Shares  purchasable  pursuant to the
                  cashless exercise procedure set forth in subsection 3(d).

         (3)______Please  issue a certificate or certificates  representing said
Warrant  Shares  in the  name of the  undersigned  or in such  other  name as is
specified below:

                  ----------------------------------------

The Warrant Shares shall be delivered to the following:

                  ----------------------------------------

                  ----------------------------------------

         (4) Accredited Investor. The undersigned is an "accredited investor" as
defined  in  Regulation  D  promulgated  under the  Securities  Act of 1933,  as
amended.

                                       [PURCHASER]

                                       By: ______________________________
                                           Name:
                                           Title:

                                       Dated:  ________________________

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

         FOR VALUE  RECEIVED,  the  foregoing  Warrant and all rights  evidenced
thereby are hereby assigned to

                                                whose address is
-----------------------------------------------

---------------------------------------------------------------.

---------------------------------------------------------------

                  _________                      Dated:  ______________, _______

                  Holder's Signature:       _____________________________

                  Holder's Address:         _____________________________

                                            _____________________________

Signature Guaranteed:  ___________________________________________

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}]]