Exhibit 10.1
QT 5, INC.
5655 Lindero Canyon Road
Suite 120
West Lake Village, CA 91362
October __, 2003
The purchasers signatory to that certain Securities Purchase Agreement, dated
August 19, 2003, by and among such purchasers and QT 5, Inc.
Re: ADVANCEMENT OF FUNDS
Dear Purchaser:
Reference is made to that certain Securities Purchase Agreement (the
"PURCHASE AGREEMENT"), dated August 19, 2003, entered into by and among each of
you and QT 5, Inc. (the "COMPANY"). The Company requests that, notwithstanding
the absence of an effective registration statement, you each advance your
pro-rata portion (based on your initial purchases of debentures pursuant to the
Purchase Agreement in proportion to all purchases of debentures under the
Purchase Agreement) of $200,000 out of the Second Closing ("ADVANCE"), which
Advance shall reduce each of your Second Closing Subscription Amounts by the
amount you Advance hereunder. You will each be issued a Debenture representing
your pro-rata portion of the Advance and the funding shall otherwise occur
pursuant to the terms of the Escrow Agreement. Terms capitalized but not defined
herein shall have the meaning ascribed to such terms in the Purchase Agreement.
As consideration for advancing said funds, without which the Company agrees and
acknowledges that you would not agree to such Advance, the Company agrees as
follows:
1. The use of proceeds paid in such Advance shall be first applied to the
Company's products liability insurance policy underwritten by AICCO in
the amount of $49,276.97 and the balance of the proceeds paid in such
Advance to the following suppliers (not in order of importance) until
such proceeds are used in full:
Nirvana Bottler $21,626.40
Dolisos Nicotinum $10,328.95
Impact Displays Rite Aid $100,000.00
NWP Pack Out $16,544.50
PM Industries Printing $15,000.00
Any amounts not used for such purposes shall not be used for any other
purpose until approved by you.
2. For a period of 12 months from the date hereof, the Company shall not
issue shares of Common Stock or grant options to employees, officers
and directors of the Company pursuant to any stock option plan or
employee incentive plan or agreement duly adopted or approved by a
majority of the non-employee members of the Board of Directors of the
Company or a majority of the members of a committee of non-employee
directors established for such purpose in excess of (if options,
assuming exercise in full on the date of issuance) 50,000 shares per
month without the prior consent of each of you.
3. Reference is made to that certain stock purchase warrant ("WARRANT")
issued to you pursuant to the Purchase Agreement. Effective
immediately, the Company hereby agrees to amend the Warrant held by you
(and your assigns) such that, the "EXERCISE PRICE", as defined in the
Warrant, is reduced to equal $0.01, subject to further adjustment
therein. This amendment to the Warrant is immediate and automatic
without any further action required by you or the Company. Said
reduction is not revocable by the Company.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
under the corresponding section of the disclosure schedules attached to the
Purchase Agreement or as set forth in the supplementary schedules attached
hereto, if any, all representations and warranties of the Company contained in
Section 3.1 of the Purchase Agreement were true and correct as of August 19,
2003, and remain true and correct as of the date hereof, as though made at and
as of the date hereof. The Company has performed all of the covenants of the
Company contained in the Purchase Agreement to be performed by the Company
through the date hereof. The Company shall, by the Trading Day following the
date of this letter, publicly disclose the Advance on Form 8-K filed with the
Commission, which disclosure shall be reasonably acceptable to you disclosing
all material terms of the transactions contemplated hereby otherwise in
compliance with Section 4.7 of the Purchase Agreement.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. You hereby represent
and warrant to the Company, severally and not jointly with the other signatories
hereto, that your representations and warranties listed in Section 3.2 of the
Purchase Agreement are true and correct with respect to you as of the date
hereof.
SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
AMENDMENT AND WAIVER. Except as specifically amended by the terms of
this letter, the Purchase Agreement and its exhibits shall remain unmodified and
in full force and effect, and shall not be in any way changed, modified or
superseded by the terms set forth herein. Neither this letter nor any term
hereof may be amended, waived, discharged or terminated, except by a written
instrument signed by all the parties hereto.
SEVERABILITY. If any provision of this letter is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this letter shall not in any way be affected or impaired
thereby and the parties will attempt to agree upon a valid and enforceable
provision that is a reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this letter. The headings herein are
for convenience only, do not constitute a part of this letter and shall not be
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deemed to limit or affect any of the provisions hereof. The language used in
this letter will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
COUNTERPARTS. This letter may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution of this amendment may be
made by delivery by facsimile.
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, except as set forth on the signature pages hereto.
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GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of this letter shall be determined with the
provisions of the Purchase Agreement.
Sincerely,
QT 5, INC.
By: _____________________________________
Name:
Title:
ACCEPTED AND AGREED TO:
PALISADES MASTER FUND L.P.
By:_________________________
Name:
Title:
CRESCENT INTERNATIONAL LTD.
By: ____________________________
Name:
Title:
ALPHA CAPITAL, AG
By: ___________________________
Name:
Title:
BRISTOL INVESTMENT FUND, LTD.
By: ____________________________
Name:
Title:
ELLIS INTERNATIONAL LTD
By: __________________________
Name:
Title:
ZENNY TRADING LIMITED
BY: ___________________________
Name:
Title:
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