SECURITIES PURCHASE AGREEMENT
 
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of December 31, 2007,
by and among RxElite, Inc., a Delaware corporation, with headquarters located at
1404 North Main, Suite 200, Meridian, Idaho 83642 (the "Company"), and the
investors listed on the Schedule of Buyers attached hereto (individually, a
"Buyer" and collectively, the "Buyers").
 
WHEREAS:
 
A. The Company and each Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act.
 
B. The Company has authorized a new series of senior secured convertible notes
of the Company which notes shall be convertible into the Company's common stock,
par value $0.001 per share (the "Common Stock"), in accordance with the terms of
the Notes (as defined below).
 
C. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms
and conditions stated in this Agreement, (i) that aggregate principal amount of
the Notes, in substantially the form attached hereto as Exhibit A (the "Notes"),
set forth opposite such Buyer's name in column (3) on the Schedule of Buyers
attached hereto (which aggregate amount for all Buyers shall be $10,500,000) (as
converted, collectively, the "Conversion Shares"), (ii) that aggregate number of
shares (the "Common Shares") of the Common Stock, set forth opposite such
Buyer's name in column (4) on the Schedule of Buyers (which aggregate amount for
all Buyers shall be five million five hundred ninety four thousand thirty three
(5,594,033)), (iii) warrants, in substantially the form attached hereto as
Exhibit B-1 (the "Series A Warrants"), to acquire up to that number of shares of
Common Stock set forth opposite such Buyer's name in column (5) on the Schedule
of Buyers (as exercised, collectively, the "Series A Warrant Shares") and (iv)
warrants, in substantially the form attached hereto as Exhibit B-2 (the "Series
B Warrants" and collectively with the Series A Warrants, the "Warrants")), to
acquire up to that number of shares of Common Stock set forth opposite such
Buyer's name in column (6) on the Schedule of Buyers (as exercised,
collectively, the "Series B Warrant Shares" and collectively with the Series A
Warrant Shares, the "Warrants Shares").
 
D. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit C (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in
the Registration Rights Agreement) under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
 
E. The Notes, the Conversion Shares, the Common Shares, the Warrants and the
Warrant Shares collectively are referred to herein as the "Securities".
 

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F. The Notes will rank senior to all outstanding and future indebtedness of the
Company and will be secured by a first priority perfected security interest in
all of the assets of the Company and the stock, equity interests and assets of
each of the Company's subsidiaries, as evidenced by (i) pledge agreement, in the
form attached hereto as Exhibit D (as amended or modified from time to time in
accordance with its terms, the "Pledge Agreement"), (ii) a security agreement,
in the form attached hereto as Exhibit E (as amended or modified from time to
time in accordance with its terms, the "Security Agreement"), and (iii) the
guaranties of the subsidiaries of the Company in the form attached hereto as
Exhibit F (as amended or modified from time to time in accordance with its
terms, the "Guaranty" and, together with the Pledge Agreement, the Security
Agreement and any ancillary documents related thereto, collectively the
"Security Documents").
 
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
 
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
 
(a) Purchase of Notes and Warrants. Subject to the satisfaction (or waiver) of
the conditions set forth in Sections 6 and 7 below, the Company shall issue and
sell to each Buyer, and each Buyer severally, but not jointly, agrees to
purchase from the Company on the Closing Date (as defined below), (w) a
principal amount of Notes as is set forth opposite such Buyer's name in column
(3) on the Schedule of Buyers, (x) the number of Common Shares as is set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers, (y) Series A
Warrants to acquire up to that number of Warrant Shares as is set forth opposite
such Buyer's name in column (5) on the Schedule of Buyers and (z) Series B
Warrants to acquire up to that number of Warrant Shares as is set forth opposite
such Buyer's name in column (6) on the Schedule of Buyers (the "Closing").
 
(b) Closing. The date and time of the Closing (the "Closing Date") shall be
10:00 a.m., New York City time, on the date hereof (or such later date as is
mutually agreed to by the Company and each Buyer) after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New
York, New York 10022.
 
(c) Purchase Price.
 
(i) The aggregate purchase price for the Notes, the Common Shares and the
Warrants to be purchased by each such Buyer at the Closing (the "Purchase
Price") shall be the amount set forth opposite each Buyer's name in column (7)
of the Schedule of Buyers. Each Buyer shall pay $1,000 for each $1,000 of
principal amount of Notes and related Common Shares and Warrants to be purchased
by such Buyer at the Closing.
 
(ii) The Buyers and the Company agree that the Notes, the Warrants and the
Common Shares constitute an "investment unit" for purposes of Section 1273(c)(2)
of the Internal Revenue Code of 1986, as amended (the "Code"). The Buyers and
the Company mutually agree that the allocation of the issue price of such
investment unit between the Notes, the Warrants and the Common Shares in
accordance with Section 1273(c)(2) of the Code and Treasury Regulation Section
1.1273-2(h) shall be (i) an amount equal to the black scholes value allocated to
the Warrants, (ii) an aggregate amount of $0.85 per share allocated to the
Common Shares and (iii) the balance of the Purchase Price allocated to the
Notes.
 
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(d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its Purchase
Price to the Company for the Notes, the Common Shares and the Warrants to be
issued and sold to such Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions and
(ii) the Company shall deliver to each Buyer the Notes (allocated in the
principal amounts as such Buyer shall request) which such Buyer is then
purchasing hereunder along with the Common Shares (allocated in the amounts as
such Buyer shall request) and Warrants (allocated in the amounts as such Buyer
shall request) which such Buyer is purchasing, in each case duly executed on
behalf of the Company and registered in the name of such Buyer or its designee
(so long as any such designee is an "accredited investor" as that term is
defined in Rule 501(d) of Regulation D).
 
2. BUYER'S REPRESENTATIONS AND WARRANTIES. Each Buyer, severally and not
jointly, represents and warrants with respect to only itself that:
 
(a) No Public Sale or Distribution. Such Buyer is (i) acquiring the Notes, the
Common Shares and the Warrants and (ii) upon conversion of the Notes and
exercise of the Warrants (other than pursuant to a Cashless Exercise (as defined
in the Warrants)) will acquire the Conversion Shares issuable upon conversion of
the Notes and the Warrant Shares issuable upon exercise of the Warrants, for its
own account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act. Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.
 
(b) Accredited Investor Status. Such Buyer is an "accredited investor" as that
term is defined in Rule 501(a) of Regulation D.
 
(c) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire the
Securities.
 
(d) Information. Such Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities which have been
requested by such Buyer. Such Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer's right to
rely on the Company's representations and warranties contained herein. Such
Buyer understands that its investment in the Securities involves a high degree
of risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
 
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(e) No Governmental Review. Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
 
(f) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such Buyer
provides the Company with reasonable assurance that such Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the
1933 Act, as amended, (or a successor rule thereto) (collectively, "Rule 144");
(ii) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(s)) through whom the sale is made) may
be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Securities may be pledged in connection with a bona
fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).
 
(g) Legends. Such Buyer understands that the certificates or other instruments
representing the Notes and the Warrants and, until such time as the resale of
the Conversion Shares, the Common Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares, the Common
Shares and the Warrant Shares, except as set forth below, shall bear any legend
as required by the "blue sky" laws of any state and a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
 
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[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
 
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at DTC (as defined below), unless otherwise required by state securities
laws, (i) such Securities are registered for resale under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer, such holder provides the
Company with an opinion of counsel, in a generally acceptable form, to the
effect that such sale, assignment or transfer of the Securities may be made
without registration under the applicable requirements of the 1933 Act, or (iii
such holder provides the Company with reasonable assurance that the Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A.
 
(h) Validity; Enforcement. This Agreement, the Registration Rights Agreement and
the Security Documents to which such Buyer is a party have been duly and validly
authorized, executed and delivered on behalf of such Buyer and shall constitute
the legal, valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
 
(i) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement, the Registration Rights Agreement and the Security Documents to which
such Buyer is a party and the consummation by such Buyer of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of such Buyer or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to such Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
 
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(j) Residency. Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.
 
(k) Organization and Standing of the Buyers. If the Buyer is an entity, such
Buyer is a corporation, limited liability company or partnership duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization.
 
(l) No General Solicitation. Each Buyer acknowledges that the Notes, the Common
Shares and the Warrants were not offered to such Buyer by means (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio or
(ii) any seminar or meeting to which such Buyer was invited by any of the
foregoing means of communications.
 
(m) Trading Activities. Other than consummating the transactions contemplated
hereunder, such Buyer has not directly or indirectly, nor has any person acting
on behalf of or pursuant to any understanding with such Buyer, executed any
purchases or sales, including short sales, of the securities of the Company
during the period commencing from the time that such Buyer first received from
the Company or any other person (i) a term sheet (written or oral) or (ii) a
draft of any Transaction Document, in each case setting forth the material terms
of the transactions contemplated hereunder, until the date hereof.
 
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
 
The Company represents and warrants to each of the Buyers that:
 
(a) Organization and Qualification. Each of the Company and its "Subsidiaries"
(which for purposes of this Agreement means any entity in which the Company
directly or indirectly, owns any of the capital stock or holds an equity or
similar interests) are entities duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authorization to own their properties and to carry on
their business as now being conducted. Each of the Company and its Subsidiaries
is duly qualified as a foreign entity to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Documents or by the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). The Company has
no Subsidiaries except as set forth on Schedule 3(a).
 
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(b) Authorization; Enforcement; Validity. The Company has the requisite power
and authority to enter into and perform its obligations under this Agreement,
the Notes, the Registration Rights Agreement, the Security Documents, the
Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the
Warrants, and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction Documents") and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Notes, the Common Shares and the Warrants, the reservation for issuance and
the issuance of the Conversion Shares issuable upon conversion of the Notes, the
reservation for issuance and issuance of Warrant Shares issuable upon exercise
of the Warrants, and the granting of a security interest in the Collateral (as
defined in the Security Documents) have been duly authorized by the Company's
Board of Directors and (other than (i) the filing of appropriate UCC financing
statements with the appropriate states and other authorities pursuant to the
Security Agreement, and (ii) the filing with the SEC of a Form D, one or more
Current Reports on Form 8-K as contemplated by Section 4(i) or as otherwise
required by applicable law after the Closing Date and one or more Registration
Statements in accordance with the requirements of the Registration Rights
Agreement) no further filing, consent, or authorization is required by the
Company, its Board of Directors or its stockholders. This Agreement and the
other Transaction Documents of even date herewith have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
 
(c) Issuance of Securities. The issuance of the Notes, the Common Shares and the
Warrants are duly authorized and are free from all taxes, liens and charges with
respect to the issue thereof. As of the applicable Closing, a number of shares
of Common Stock shall have been duly authorized and reserved for issuance which
equals or exceeds 130% of the aggregate of the maximum number of shares of
Common Stock (i) issuable upon conversion of the Notes, and (ii) upon exercise
of the Warrants, without taking into account any limitations on the Conversion
of the Notes or exercise of the Warrants set forth in the Notes and Warrants,
respectively). Upon conversion or payment in accordance with the Notes or
exercise in accordance with the Warrants, as the case may be, the Conversion
Shares and the Warrant Shares, respectively, will be validly issued, fully paid
and nonassessable and free from all preemptive or similar rights, taxes, liens
and charges with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock. The offer and issuance by
the Company of the Securities is exempt from registration under the 1933 Act.
 
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(d) No Conflicts. Notwithstanding anything to the contrary contained in Schedule
3(d), the execution, delivery and performance of the Transaction Documents by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Notes,
the Common Shares and the Warrants, the granting of a security interest in the
Collateral and reservation for issuance and issuance of the Conversion Shares
and the Warrant Shares) will not (i) result in a violation of any certificate of
incorporation, certificate of formation, any certificate of designations or
other constituent documents of the Company or any of its Subsidiaries, any
capital stock of the Company or any of its Subsidiaries or the bylaws of the
Company or any of its Subsidiaries or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party
(including, without limitation, the Conversion Agreement specified in Schedule
3(d)), or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including foreign, federal and state securities laws and
regulations and the rules and regulations of the OTC Bulletin Board (the
"Principal Market")) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the cases of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
 
(e) Consents. Neither the Company nor any of its Subsidiaries is required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the Closing Date, and the Company and its Subsidiaries
are unaware of any facts or circumstances which might prevent the Company from
obtaining or effecting any of the registration, application or filings pursuant
to the preceding sentence. The Company is not in violation of the listing
requirements of the Principal Market and has no knowledge of any facts which
would reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future.
 
(f) Acknowledgment Regarding Buyer's Purchase of Securities. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of an
arm's-length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company, (ii) to the Company's knowledge, an "affiliate" of
the Company or any of its Subsidiaries (as defined in Rule 144) or (iii) to the
knowledge of the Company, a "beneficial owner" of more than 10% of the shares of
Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "1934 Act")). The Company further acknowledges that
no Buyer is acting as a financial advisor or fiduciary of the Company or any of
its Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Buyer's purchase of the Securities. The Company
further represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
 
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(g) No General Solicitation; Fees. Neither the Company, nor any of its
Subsidiaries or affiliates, nor any Person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the Securities.
The Company shall be responsible for the payment of any placement agent's fee,
finder's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim. The Company has not engaged any placement agent, finder or
other agent in connection with the sale of the Securities.
 
(h) No Integrated Offering. None of the Company, its Subsidiaries, any of their
affiliates, and any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of any of the
Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. None of the
Company, its Subsidiaries, their affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other offerings.
 
(i) Dilutive Effect. The Company understands and acknowledges that the number of
Conversion Shares issuable upon conversion of the Notes and the Warrant Shares
issuable upon exercise of the Warrants will increase in certain circumstances.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Notes in accordance with this Agreement and the Notes and
its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants in each case, is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.
 
(j) Application of Takeover Protections; Rights Agreement. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation (as defined in
Section 3(r)) or the laws of the jurisdiction of its formation which is or could
become applicable to any Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company's issuance of the
Securities and any Buyer's ownership of the Securities. The Company has not
adopted a stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.
 
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(k) SEC Documents; Financial Statements. Except as disclosed in Schedule 3(k),
since July 13, 2007, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing filed prior
to the date hereof and all exhibits included therein and financial statements,
notes and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the "SEC Documents"). The Company has delivered
to the Buyers or their respective representatives true, correct and complete
copies of the SEC Documents not available on the EDGAR system. Except as
disclosed in Schedule 3(k) as of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Except as disclosed in Schedule 3(k), as of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.
 
(l) Absence of Certain Changes. Except as disclosed in Schedule 3(l), since
December 31, 2006, there has been no material adverse change and no material
adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company or
its Subsidiaries. Except as disclosed in Schedule 3(l), since December 31, 2006,
the Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $100,000. Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. The
Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below). For purposes of this Section 3(l), "Insolvent" means, with
respect to any Person, (i) the present fair saleable value of such Person's
assets is less than the amount required to pay such Person's total Indebtedness
(as defined in Section 3(s)), (ii) such Person is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
 
(m) No Undisclosed Events, Liabilities, Developments or Circumstances. Except as
contemplated by this Agreement or the Transactions Documents, no event,
liability, development or circumstance has occurred or currently exists, or is
contemplated to occur with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form SB-2 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
 
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(n) Conduct of Business; Regulatory Permits. Neither the Company nor its
Subsidiaries is in violation of any term of or in default under any certificate
of designations of any outstanding series of preferred stock of the Company, its
Certificate of Incorporation or Bylaws or their organizational charter or
certificate of incorporation or bylaws, respectively. Neither the Company nor
any of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Company is
not in violation of any of the rules, regulations or requirements of the
Principal Market and has no knowledge of any facts or circumstances which would
reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. Since July 13, 2007, the Common Stock has been
designated for quotation on the Principal Market. Since July, 13 2007, (i)
trading in the Common Stock has not been suspended by the SEC or the Principal
Market and (ii) the Company has received no communication, written or oral, from
the SEC or the Principal Market regarding the suspension or delisting of the
Common Stock from the Principal Market. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
 
(o) Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other Person acting on behalf of
the Company or any of its Subsidiaries has, in the course of its actions for, or
on behalf of, the Company or any of its Subsidiaries (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
 
(p) Sarbanes-Oxley Act. The Company is in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof, and any and all applicable rules and regulations promulgated by the SEC
thereunder that are effective as of the date hereof.
 
(q)  Transactions With Affiliates. Except as set forth on Schedule 3(q), none of
the officers, directors or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company or any of its Subsidiaries, any corporation,
partnership, trust or other entity in which any such officer, director, or
employee has a substantial interest or is an officer, director, trustee or
partner.
 
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(r) Equity Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) 200,000,000 shares of Common Stock, of which as
of the date hereof, 91,088,887 are issued and outstanding, 14,873,883 shares are
reserved for issuance pursuant to the Company's stock option and purchase plans
and 25,177,817 shares are reserved for issuance pursuant to securities (other
than the aforementioned options, the Notes and the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii)
1,000,000 shares of preferred stock, par value $0.001 per share, of which as of
the date hereof, none are issued and outstanding. All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(r): (i) none of the Company's
capital stock is subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become
bound; (iv) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Company or any of its Subsidiaries; (v) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except pursuant
to the Registration Rights Agreement); (vi) there are no outstanding securities
or instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The Company has
furnished to the Buyers true, correct and complete copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the " Certificate of Incorporation"), and the Company's Bylaws, as amended and
as in effect on the date hereof (the "Bylaws"), and the terms of all securities
convertible into, or exercisable or exchangeable for, shares of Common Stock and
the material rights of the holders thereof in respect thereto.
 
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(s) Indebtedness and Other Contracts. Except as disclosed in Schedule 3(s),
neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument would result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in the aggregate,
in a Material Adverse Effect, or (iv) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the
judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. Schedule 3(s) provides a detailed description of the material
terms of any such outstanding Indebtedness. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services, including, without limitation,
"capital leases" in accordance with generally accepted accounting principles
(other than trade payables entered into in the ordinary course of business), (C)
all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; (y) "Contingent Obligation" means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; and
(z) "Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
 
(t) Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, the Common Stock or any of the Company's Subsidiaries or any
of the Company's or its Subsidiaries' officers or directors in their capacities
as such, except as set forth in Schedule 3(t).
 
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(u) Insurance. The Company and each of its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.
 
(v) Employee Relations. (i) Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union.
The Company and its Subsidiaries believe that their relations with their
employees are good. No executive officer of the Company or any of its
Subsidiaries has notified the Company or any such Subsidiary that such officer
intends to leave the Company or any such Subsidiary or otherwise terminate such
officer's employment with the Company or any such Subsidiary. No executive
officer of the Company or any of its Subsidiaries, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters.
 
(ii) The Company and its Subsidiaries are in compliance with all applicable
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
 
(w) Title. Neither the Company nor any of its Subsidiaries own any real
property. The Company and its Subsidiaries have good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and any of its Subsidiaries. Any real property and facilities held
under lease by the Company and any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries.
 
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(x) Intellectual Property Rights. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights ("Intellectual Property Rights")
necessary to conduct their respective businesses as now conducted. Except as set
forth in Schedule 3(x), none of the Company's Intellectual Property Rights have
expired or terminated, or are expected to expire or terminate, within three
years from the date of this Agreement. The Company does not have any knowledge
of any infringement by the Company or its Subsidiaries of Intellectual Property
Rights of others. There is no claim, action or proceeding being made or brought,
or to the knowledge of the Company or its Subsidiaries, being threatened,
against the Company or its Subsidiaries regarding its Intellectual Property
Rights. The Company is unaware of any facts or circumstances which would
reasonably be expected to give rise to any of the foregoing infringements or
claims, actions or proceedings. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
 
(y) Environmental Laws. The Company and its Subsidiaries (i) are in compliance
with any and all Environmental Laws (as hereinafter defined), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. The term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
 
(z) Subsidiary Rights. Except as set forth in Schedule 3(z), the Company or one
of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of its Subsidiaries as owned by the Company or such
Subsidiary.
 
(aa) Investment Company Status. The Company is not, and upon consummation of the
sale of the Securities will not be, an "investment company," a company
controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
 
(bb) Tax Status. The Company and each of its Subsidiaries (i) has made or filed
all foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
 
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(cc) Internal Accounting and Disclosure Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The
Company maintains disclosure controls and procedures (as such term is defined in
Rule 13a-14 under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
1934 Act is accumulated and communicated to the Company's management, including
its principal executive officer or officers and its principal financial officer
or officers, as appropriate, to allow timely decisions regarding required
disclosure. During the twelve months prior to the date hereof neither the
Company nor any of its Subsidiaries have received any notice or correspondence
from any accountant relating to any material weakness in any part of the system
of internal accounting controls of the Company or any of its Subsidiaries
 
(dd) Off Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company and an unconsolidated or other off
balance sheet entity that is required to be disclosed by the Company in its
Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
 
(ee) Ranking of Notes. Except as set forth on Schedule 3(ee), no Indebtedness of
the Company is senior to or ranks pari passu with the Notes in right of payment,
whether with respect of payment of redemptions, interest, damages or upon
liquidation or dissolution or otherwise.
 
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(ff) Eligibility for Registration. The Company is eligible to register the
Conversion Shares, the Common Shares and the Warrant Shares for resale by the
Buyers using Form SB-2 promulgated under the 1933 Act, subject to the cutbacks
pursuant to Rule 415 of the 1933 Act contemplated in the Registration Rights
Agreement.
 
(gg) Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the sale and transfer of the Securities to be sold to each Buyer hereunder
will be, or will have been, fully paid or provided for by the Company, and all
applicable laws imposing such taxes will be or will have been complied with.
 
(hh) Manipulation of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase any other
securities of the Company.
 
(ii) Acknowledgement Regarding Buyers' Trading Activity. It is understood and
acknowledged by the Company that (i) none of the Buyers have been asked to
agree, nor has any Buyer agreed, to desist from purchasing or selling, long
and/or short, securities of the Company, or "derivative" securities based on
securities issued by the Company or to hold the Securities for any specified
term; (ii) any Buyer, and counter parties in "derivative" transactions to which
any such Buyer is a party, directly or indirectly, presently may have a "short"
position in the Common Stock, and (iii) each Buyer shall not be deemed to have
any affiliation with or control over any arm's length counter-party in any
"derivative" transaction. The Company further understands and acknowledges that
(a) one or more Buyers may engage in hedging and/or trading activities at
various times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Conversion Shares
and the Warrant Shares are being determined and (b) such hedging and/or trading
activities, if any, can reduce the value of the existing stockholders' equity
interest in the Company both at and after the time the hedging and/or trading
activities are being conducted. The Company acknowledges that such
aforementioned hedging and/or trading activities do not constitute a breach of
this Agreement, the Notes, the Warrants or any of the documents executed in
connection herewith.
 
(jj) U.S. Real Property Holding Corporation. The Company is not, nor has ever
been, a U.S. real property holding corporation within the meaning of Section 897
of the Internal Revenue Code of 1986, as amended, and the Company shall so
certify upon any Buyer's request.
 
(kk) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries
is subject to the Bank Holding Company Act of 1956, as amended (the "BHCA") and
to regulation by the Board of Governors of the Federal Reserve System (the
"Federal Reserve"). Neither the Company nor any of its Subsidiaries or
affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.
 
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(ll) Disclosure. The Company confirms that neither it, nor any other Person
acting on its behalf has provided any of the Buyers or their agents or counsel
with any information that constitutes or could reasonably be expected to
constitute material, nonpublic information. The Company understands and confirms
that each of the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided by the
Company, its Subsidiaries, its officers or directors, its agents or its counsel
to the Buyers regarding the Company, or any of its Subsidiaries, their business
and the transactions contemplated hereby, including the Schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each press release issued by the Company or any of its
Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
 
4. COVENANTS.
 
(a) Best Efforts. Each party shall use its best efforts timely to satisfy each
of the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.
 
(b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer reasonably promptly after such filing. The Company shall, reasonably
promptly (and in no event later than 15 days) after the Closing Date, take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for or to qualify the Securities for sale to the Buyers at the
Closing pursuant to this Agreement under applicable securities or "Blue Sky"
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyers reasonably promptly after such filing. The Company shall make all filings
and reports relating to the offer and sale of the Securities required under
applicable securities or "Blue Sky" laws of the states of the United States
following the Closing Date.
 
(c) Reporting Status. Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all the Conversion Shares and
Warrant Shares and none of the Notes or Warrants is outstanding (the "Reporting
Period"), the Company shall timely file all reports required to be filed with
the SEC pursuant to the 1934 Act, and the Company shall not terminate its status
as an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would permit such termination.
 
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(d) Use of Proceeds. The Company will use up to $6,500,000 the proceeds from the
sale of the Securities for mergers and acquisitions, and the remainder of the
proceeds shall be used for general corporate and for working capital purposes
and not for except as set forth on Schedule 4(d), (i) the repayment of any
outstanding Indebtedness of the Company or any of its Subsidiaries, (ii) the
redemption or repurchase of any of its or its Subsidiaries' equity securities or
(iii) the settlement of any claims, actions or proceedings against the Company
or any of its Subsidiaries.
 
(e) Financial Information. The Company agrees to send the following to each
Investor (as defined in the Registration Rights Agreement) during the Reporting
Period (i) unless the following are filed with the SEC through EDGAR and are
available to the public through the EDGAR system, within one (1) Business Day
after the filing thereof with the SEC, a copy of its Annual Reports and
Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any Current Reports on
Form 8-K and any registration statements (other than on Form S-8) or amendments
filed pursuant to the 1933 Act, and (ii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders. As used herein, "Business Day" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
 
(f) Listing. The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system, if any, upon
which the Common Stock is then listed (subject to official notice of issuance)
and shall maintain such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall
maintain the Common Stocks' authorization for quotation on the Principal Market.
Neither the Company nor any of its Subsidiaries shall take any action which
would be reasonably expected to result in the delisting or suspension of the
Common Stock on the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).
 
(g) Fees. The Company shall reimburse Castlerigg Master Investments Ltd. (a
Buyer) or its designee(s) (in addition to any other expense amounts paid to any
Buyer prior to the date of this Agreement) for all reasonable costs and expenses
incurred in connection with the transactions contemplated by the Transaction
Documents (including all reasonable legal fees and disbursements in connection
therewith, documentation and implementation of the transactions contemplated by
the Transaction Documents and due diligence in connection therewith), which
amount shall be withheld by such Buyer from its Purchase Price at the Closing.
The Company shall be responsible for the payment of any placement agent's fees,
finder's fees, financial advisory fees, or broker's commissions (other than for
Persons engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment, other than for Persons engaged by
any Buyer. Except as otherwise set forth in the Transaction Documents, each
party to this Agreement shall bear its own expenses in connection with the sale
of the Securities to the Buyers.
 
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(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, Section 2(f) hereof;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to execute
and deliver such documentation as a pledgee of the Securities may reasonably
request in connection with a pledge of the Securities to such pledgee by an
Investor.
 
(i) Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York City time, on the second Business Day following the date of this
Agreement, the Company shall issue a press release and file a Current Report on
Form 8-K describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and attaching the
material Transaction Documents (including, without limitation, this Agreement,
the form of the Notes, the form of Warrant, the form the Registration Rights
Agreement and the form of Security Documents as exhibits to such filing
(including all attachments, the "8-K Filing"). No later than two (2) months
after the Closing date, the Company shall file a Current Report on Form 8-K
disclosing all information disclosed in Schedule 4(i) (the "Second 8-K Filing").
From and after the filing of the Second 8-K Filing with the SEC, no Buyer shall
be in possession of any material, nonpublic information received from the
Company, any of its Subsidiaries or any of their respective officers, directors,
employees or agents, that is not disclosed in the 8-K Filing. The Company shall
not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents, not to, provide any Buyer
with any material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the 8-K Filing with the SEC without
the express written consent of such Buyer. If a Buyer has, or believes it has,
received any such material, nonpublic information regarding the Company or any
of its Subsidiaries, it shall provide the Company with written notice thereof.
The Company shall, within three (3) Trading Days (as defined in the Notes) of
receipt of such notice, make public disclosure of such material, nonpublic
information. In the event of a breach of the foregoing covenant by the Company,
any of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. No Buyer shall have any liability to the Company, its Subsidiaries,
or any of its or their respective officers, directors, employees, stockholders
or agents for any such disclosure except where, as a result of the willful
misconduct or gross negligence of such Buyer, any such disclosure contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Subject
to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or
other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Without the
prior written consent of any applicable Buyer, and except as contemplated by the
prior subsection (i) or as required by applicable law or regulation, neither the
Company nor any of its Subsidiaries or affiliates shall disclose the name of
such Buyer in any filing, announcement, release or otherwise.
 
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(j) Restriction on Redemption and Cash Dividends. Except for the redemption of
up to 350,000 shares of Common Stock held by the former holders of the Series A
Preferred Stock of RxElite Holdings, Inc. that is due within fifty (50) days of
December 31, 2008 at a redemption price of $4.00 per share, so long as any Notes
are outstanding, the Company shall not, directly or indirectly, redeem, or
declare or pay any cash dividend or distribution on, the Common Stock without
the prior express written consent of the holders of Notes representing not less
than a majority of the aggregate principal amount of the then outstanding Notes.
 
(k) Additional Notes; Variable Securities; Dilutive Issuances. So long as any
Buyer beneficially owns any Securities, the Company will not issue any Notes
other than to the Buyers as contemplated hereby, and the Company shall not issue
any other securities that would cause a breach or default under the Notes. For
so long as any Notes or Warrants remain outstanding, the Company shall not, in
any manner, issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the
market price of the Common Stock, including by way of one or more reset(s) to
any fixed price unless the conversion, exchange or exercise price of any such
security cannot be less than the then applicable Conversion Price (as defined in
the Notes) with respect to the Common Stock into which any Note is convertible
or the then applicable Exercise Price (as defined in the Warrants) with respect
to the Common Stock into which any Warrant is exercisable. For so long as any
Notes or Warrants remain outstanding, the Company shall not, in any manner,
enter into or affect any Dilutive Issuance (as defined in the Notes) if the
effect of such Dilutive Issuance is to cause the Company to be required to issue
upon conversion of any Note or exercise of any Warrant any shares of Common
Stock in excess of that number of shares of Common Stock which the Company may
issue upon conversion of the Notes and exercise of the Warrants without
breaching the Company's obligations under the rules or regulations of the
Principal Market or any applicable Eligible Market (as defined in the
Registration Rights Agreement).
 
(l) Corporate Existence. So long as any Buyer beneficially owns any Securities,
the Company shall not be party to any Fundamental Transaction (as defined in the
Notes) unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Notes and the Warrants.
 
(m) Reservation of Shares. So long as any Buyer owns any Securities, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, no less than 130% of the sum of the number of
shares of Common Stock issuable (i) upon conversion of the Notes and (ii) upon
exercise of the Warrants then outstanding (without taking into account any
limitations on the conversion of the Notes or exercise of the Warrants set forth
in the Notes and Warrants, respectively).
 
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(n) Conduct of Business. The business of the Company and its Subsidiaries shall
not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.
 
(o) Additional Issuances of Securities.
 
(i) For purposes of this Section 4(o), the following definitions shall apply.
 
(1) "Convertible Securities" means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for shares of Common Stock.
 
(2) "Options" means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible Securities.
 
(3) "Common Stock Equivalents" means, collectively, Options and Convertible
Securities.
 
(ii) Except with respect to the Company's Registration Statement on Form SB-2
(File No. 333-146641) originally filed with the SEC on October 30, 2007 (which
may be amended or supplemented, but not to register more securities), from the
date hereof until the earlier of the date when all Registrable Securities (as
defined in the Registration Rights Agreement) have been registered or may be
sold without the requirement to be in compliance with Rule 144(c)(1) and
otherwise without restriction or limitation pursuant to Rule 144 (the "Trigger
Date"), the Company will not, directly or indirectly, file any registration
statement with the SEC other than the Registration Statement (as defined in the
Registration Rights Agreement). From the date hereof until the Trigger Date, the
Company will not, (i) directly or indirectly, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition of) any of its or its Subsidiaries'
equity or equity equivalent securities, including without limitation any debt,
preferred stock or other instrument or security that is, at any time during its
life and under any circumstances, convertible into or exchangeable or
exercisable for shares of Common Stock or Common Stock Equivalents (any such
offer, sale, grant, disposition or announcement being referred to as a
"Subsequent Placement") or (ii) be party to any solicitations, negotiations or
discussions with regard to the foregoing. Solely for the purpose of the
immediately preceding sentence, "Subsequent Placement" shall exclude (i) any
Common Stock issued or issuable upon conversion or exercise of equity securities
in connection with any strategic acquisition by the Company, the primary purpose
of which is not to raise equity capital and (ii) any debt, preferred stock,
Common Stock or Common Stock Equivalents issued in connection with the full
redemption of the Notes issued to the Buyers.
 
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(iii) From the Trigger Date until the second anniversary of the Closing Date,
the Company will not, directly or indirectly, effect any Subsequent Placement
unless the Company shall have first complied with this Section 4(o)(iii).
 
(1) The Company shall deliver to each Buyer an irrevocable written notice
(the "Offer Notice"), of any proposed or intended issuance or sale or exchange
(the "Offer") of the securities being offered (the "Offered Securities") in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the persons or entities
(if known) to which or with which the Offered Securities are to be offered,
issued, sold or exchanged and (z) offer to issue and sell to or exchange with
such Buyers all of the Offered Securities, allocated among such Buyers (a) based
on such Buyer's pro rata portion of the aggregate principal amount of Notes
purchased hereunder (the "Basic Amount"), and (b) with respect to each Buyer
that elects to purchase its Basic Amount, any additional portion of the Offered
Securities attributable to the Basic Amounts of other Buyers as such Buyer shall
indicate it will purchase or acquire should the other Buyers subscribe for less
than their Basic Amounts (the "Undersubscription Amount"). Notwithstanding the
foregoing, if the Company would be required to disclose material non-pubic
information to any Buyer in connection with the delivery of any Offer Notice,
the Company shall first ask such Buyer if it would be willing to receive
material non-public information (without disclosing any material non-public
information to such Buyer). If such Buyer elects to receive material non-public
information in connection with an Offer Notice, upon delivery of such Offer
Notice, such Buyer shall maintain the confidentiality of the information
identified as material non-public information contained in such Offer Notice
until such information is publicly disclosed (other than disclosure to its
officers, director, partners, members, agents or advisors or as required to be
disclosed by law or legal process). If such Buyer elects not to receive material
non-public information, the Company shall not be required to deliver any Offer
Notice that contains material non-public information.
 
(2) To accept an Offer, in whole or in part, such Buyer must deliver a written
notice to the Company prior to the end of the tenth (10th) Business Day after
such Buyer's receipt of the Offer Notice (the "Offer Period"), setting forth the
portion of such Buyer's Basic Amount that such Buyer elects to purchase and, if
such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the "Notice of Acceptance"). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all Buyers that have subscribed for Undersubscription
Amounts, subject to rounding by the Company to the extent it deems reasonably
necessary. Notwithstanding anything to the contrary contained herein, if the
Company desires to modify or amend the terms and conditions of the Offer prior
to the expiration of the Offer Period, the Company may deliver to the Buyers a
new Offer Notice and the Offer Period shall expire on the tenth (10th) Business
Day after such Buyer's receipt of such new Offer Notice.
 
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(3) The Company shall have five (5) Business Days from the expiration of the
Offer Period above to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by the
Buyers (the "Refused Securities"), but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring person or persons or less favorable to the
Company than those set forth in the Offer Notice and (ii) to publicly announce
(a) the execution of such Subsequent Placement Agreement, and (b) either (x) the
consummation of the transactions contemplated by such Subsequent Placement
Agreement or (y) the termination of such Subsequent Placement Agreement, which
shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent
Placement Agreement and any documents contemplated therein filed as exhibits
thereto.
 
(4) In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 4(o)(iii)(3) above), then each Buyer may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of
which shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of the
Offered Securities. In the event that any Buyer so elects to reduce the number
or amount of Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced number or amount
of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(o)(iii)(1) above.
 
(5) Upon the closing of the issuance, sale or exchange of all or less than all
of the Refused Securities, the Buyers shall acquire from the Company, and the
Company shall issue to the Buyers, the number or amount of Offered Securities
specified in the Notices of Acceptance, as reduced pursuant to Section
4(o)(iii)(3) above if the Buyers have so elected, upon the terms and conditions
specified in the Offer. The purchase by the Buyers of any Offered Securities is
subject in all cases to the preparation, execution and delivery by the Company
and the Buyers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Buyers and their respective
counsel.
 
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(6) Any Offered Securities not acquired by the Buyers or other persons in
accordance with Section 4(o)(iii)(3) above may not be issued, sold or exchanged
until they are again offered to the Buyers under the procedures specified in
this Agreement.
 
(7) The Company and the Buyers agree that if any Buyer elects to participate in
the Offer, neither the agreement regarding the Subsequent Placement (the
"Subsequent Placement Agreement") with respect to such Offer nor any other
transaction documents related thereto (collectively, the "Subsequent Placement
Documents") shall include any term or provisions whereby any Buyer shall be
required to agree to any restrictions in trading as to any securities of the
Company owned by such Buyer prior to such Subsequent Placement.
 
(8) Notwithstanding anything to the contrary in this Section 4(o) and unless
otherwise agreed to by the Buyers, the Company shall either confirm in writing
to the Buyers that the transaction with respect to the Subsequent Placement has
been abandoned or shall publicly disclose its intention to issue the Offered
Securities, in either case in such a manner such that the Buyers will not be in
possession of material non-public information, by the fifteenth (15th) Business
Day following delivery of the Offer Notice. If by the fifteenth (15th) Business
Day following delivery of the Offer Notice no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice
regarding the abandonment of such transaction has been received by the Buyers,
such transaction shall be deemed to have been abandoned and the Buyers shall not
be deemed to be in possession of any material, non-public information with
respect to the Company. Should the Company decide to pursue such transaction
with respect to the Offered Securities, the Company shall provide each Buyer
with another Offer Notice and each Buyer will again have the right of
participation set forth in this Section 4(o)(iii). The Company shall not be
permitted to deliver more than one such Offer Notice to the Buyers in any 60-day
period.
 
(iv) The restrictions contained in subsections (ii) and (iii) of this Section
4(o) shall not apply in connection with the issuance of any Excluded Securities
(as defined in the Notes).
 
(p) Collateral Agent.
 
(i) Each Buyer hereby (a) appoints Castlerigg Master Investments Ltd., as the
collateral agent hereunder and under the other Security Documents (in such
capacity, the "Collateral Agent"), and (b) authorizes the Collateral Agent (and
its officers, directors, employees and agents) to take such action on such
Buyer's behalf in accordance with the terms hereof and thereof. The Collateral
Agent shall not have, by reason hereof or any of the other Security Documents, a
fiduciary relationship in respect of any Buyer. Neither the Collateral Agent nor
any of its officers, directors, employees and agents shall have any liability to
any Buyer for any action taken or omitted to be taken in connection hereof or
any other Security Document except to the extent caused by its own gross
negligence or willful misconduct, and each Buyer agrees to defend, protect,
indemnify and hold harmless the Collateral Agent and all of its officers,
directors, employees and agents (collectively, the "Indemnitees") from and
against any losses, damages, liabilities, obligations, penalties, actions,
judgments, suits, fees, costs and expenses (including, without limitation,
reasonable attorneys' fees, costs and expenses) incurred by such Indemnitee,
whether direct, indirect or consequential, arising from or in connection with
the performance by such Indemnitee of the duties and obligations of Collateral
Agent pursuant hereto or any of the Security Documents. The Collateral Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the holders of at
least a majority in principal amount of the Notes then outstanding, and such
instructions shall be binding upon all holders of Notes; provided, however, that
the Collateral Agent shall not be required to take any action which, in the
reasonable opinion of the Collateral Agent, exposes the Collateral Agent to
liability or which is contrary to this Agreement or any other Transaction
Document or applicable law.
 
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(ii) The Collateral Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person, and with respect to all matters pertaining to
this Agreement or any of the other Transaction Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it.
 
(iii) The Collateral Agent may resign from the performance of all its functions
and duties hereunder and under the Notes and the Security Documents at any time
by giving at least ten (10) Business Days prior written notice to the Company
and each holder of the Notes. Such resignation shall take effect upon the
acceptance by a successor Collateral Agent of appointment as provided below.
Upon any such notice of resignation, the holders of a majority of the
outstanding principal under the Notes shall appoint a successor Collateral
Agent. Upon the acceptance of the appointment as Collateral Agent, such
successor Collateral Agent shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent, and the
retiring Collateral Agent shall be discharged from its duties and obligations
under this Agreement, the Notes and the other Security Documents. After any
Collateral Agent's resignation hereunder , the provisions of this Section 4(p)
shall inure to its benefit. If a successor Collateral Agent shall not have been
so appointed within said ten (10) Business Day period, the retiring Collateral
Agent shall then appoint a successor Collateral Agent who shall serve until such
time, if any, as the holders of a majority of the outstanding principal under
the Notes appoint a successor Collateral Agent as provided above.
 
(q) Trading in Common Stock. From the date hereof and through the earlier of (i)
the Initial Effective Date (as defined in the Registration Rights Agreement) and
(ii) the Initial Effectiveness Deadline, each Buyer agrees that it shall not,
directly or indirectly in its own capacity or through an agent, engage in any
short sales (as defined in Rule 200 of Regulation SHO under the 1934 Act) with
respect to the Common Stock, or any hedging transaction or securitization,
including obtaining shares of Common Stock to borrow, which establishes any
short position with respect to the Common Stock, whether on a U.S. domestic
exchange or any foreign exchange, provided that the foregoing shall not restrict
any Buyer from selling any or all of the Common Shares during such time period,
which shall not be by a short sale. Furthermore, for so long as such Buyer owns
any Notes, such Buyer shall not maintain a Net Short Position. For purposes of
this Section, a "Net Short Position" by a Buyer means a position whereby such
Buyer has executed one or more sales of Common Stock that is marked as a short
sale and that is executed at a time when such Buyer has no equivalent offsetting
long position in the Common Stock or contract for the foregoing. For purposes of
determining whether a Buyer has an equivalent offsetting long position in the
Common Stock, all Common Stock (i) that is owned by such Buyer or (ii) that
would be issuable upon conversion or exercise in full of all Securities then
held by such Buyer (assuming that such Securities were then fully convertible or
exercisable, notwithstanding any provisions to the contrary, and giving effect
to any conversion or exercise price adjustments that would take effect given
only the passage of time) shall be deemed to be held long by such Buyer.
 
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(r) Public Information. At any time during the period commencing from the six
(6) month anniversary of the Closing Date and ending at such time that all of
the Securities can be sold without the requirement to be in compliance with Rule
144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144,
if a registration statement is not available for the resale of all of the
Securities and the Company shall fail for any reason to satisfy the current
public information requirement under Rule 144 (a "Public Information Failure")
then, as partial relief for the damages to any holder of Securities by reason of
any such delay in or reduction of its ability to sell the Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each such holder an amount in cash equal to
one percent (1.0%) of the aggregate Purchase Price of such holder's Securities
on the day of a Public Information Failure and on every thirtieth day (pro rated
for periods totaling less than thirty days) thereafter until the earlier of (i)
the date such Public Information Failure is cured and (ii) such time that such
public information is no longer required pursuant to Rule 144. The payments to
which a holder shall be entitled pursuant to this Section 4(r) are referred to
herein as "Public Information Failure Payments." Public Information
Failure Payments shall be paid on the earlier of (I) the last day of the
calendar month during which such Public Information Failure Payments are
incurred and (II) the third Business Day after the event or failure giving rise
to the Public Information Failure Payments is cured. In the event the Company
fails to make Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at the rate of 1.5% per
month (prorated for partial months) until paid in full.
 
(s) Additional Relief. If the Company shall fail for any reason or for no reason
to issue to the Buyer unlegended certificates or issue such Common Shares to
such Buyer by electronic delivery at the applicable balance account at DTC
within three (3) Trading Days after the receipt of documents necessary for the
removal of the legend set forth in Section 2(g) above (the "Removal Date"), then
in addition to all other remedies available to the Buyer, if on or after the
Trading Day immediately following such three Trading Day period, the Buyer
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Buyer of such Common Shares that the
Buyer anticipated receiving without legend from the Company (a "Buy-In"), then
the Company shall, within three (3) Business Days after the Buyer's request and
in the Buyer's discretion, either (i) pay cash to the Buyer in an amount equal
to the Buyer's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the "Buy-In Price"), at which point
the Company's obligation to deliver such unlegended Common Shares shall
terminate, or (ii) promptly honor its obligation to deliver to the Buyer such
unlegended Common Shares as provided above and pay cash to the Buyer in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of shares of Common Stock, times (B) the Closing Bid Price (as
defined in the Warrants) on the Removal Date.

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(t) Closing Documents. On or prior to fourteen (14) calendar days after the
Closing Date, the Company agrees to deliver, or cause to be delivered, to each
Buyer and Schulte Roth & Zabel LLP executed copies of the Transaction Documents,
Securities and other document required to be delivered to any party pursuant to
Section 7 hereof.
 
(u) Deposit Account Control Agreements. Within forty-five (45) days following
the Closing Date, the Company shall deliver to the Collateral Agent, deposit
account control agreements in a form satisfactory to the Collateral Agent in its
reasonable discretion duly executed by the Company and the depositary
institution, for each of the following accounts of the Company: (1) account No.
22559413 maintained at Bank of America, N.A. and (ii) account
No.224-25380-1-1-OCY maintained at Bank of America Securities, LLC.
 
(v) Assignment for Security. Within ten (10) days following the Closing Date,
the Company shall deliver to the Collateral Agent duly executed Assignments for
Security in the form attached as Exhibit A to the Security Agreement with
respect to the trademarks and patents reflected on Schedule II to the Security
Agreement.
 
(w) Tacking. The Company hereby acknowledges and agrees that for purposes of
Rule 144 holding periods, upon foreclosure of the shares of Common Stock
pursuant to the Tiburon Pledge Agreement (as defined below) in accordance with
its terms, the recipient(s) of those shares will be entitled to tack their
holding period such that the holding period will begin no later than the Closing
Date, and for so long as any holder of such shares represents that it is not an
affiliate of the Company at the time of any proposed sale of such shares
pursuant to Rule 144 and was not an affiliate of the Company for the previous
three months, the Company shall not require a legal opinion in connection with
(i) legend removal under Rule 144 so long as the holder has held, including any
applicable tacking periods, such shares of Common Stock for at least one (1)
year, or (ii) legend removal upon a resale in compliance with Rule 144 so long
as the holder has held, including any applicable tacking period, such shares of
Common Stock for at least six (6) months.
 
(x) Legal Opinion. No later than ten (10) Business Days after the Closing Date,
the Company shall cause one or more law firms reasonably acceptable to the
Buyers to deliver legal opinions with respect to the Put Option Agreement and
the Tiburon Pledge Agreement that are reasonably acceptable to the Buyers.
 
(y) Delivery of Pledged Shares. No later than five (5) Business Days after the
Closing Date, the Company hereby covenants and agrees to cause Tiburon LLC to
deliver to the Collateral Agent the shares of Common Stock required to be
delivered to the Collateral Agent pursuant to the Tiburon Pledge Agreement along
with duly executed blank stock powers.
 
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
 
(a) Register. The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to each
holder of Securities), a register for the Notes and the Warrants in which the
Company shall record the name and address of the Person in whose name the Notes
and the Warrants have been issued (including the name and address of each
transferee), the principal amount of Notes held by such Person, the number of
Conversion Shares issuable upon conversion of the Notes and Warrant Shares
issuable upon exercise of the Warrants held by such Person. The Company shall
keep the register open and available at all times during business hours for
inspection of any Buyer or its legal representatives.

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(b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company ("DTC"), registered in the name of each Buyer or its
respective nominee(s), for the Conversion Shares, the Common Shares and the
Warrant Shares issued at the Closing or upon conversion of the Notes or exercise
of the Warrants in such amounts as specified from time to time by each Buyer to
the Company upon conversion of the Notes or exercise of the Warrants in the form
of Exhibit G (the "Irrevocable Transfer Agent Instructions"). The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions to
give effect to Section 2(g) hereof, will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents. If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Buyer to effect such
sale, transfer or assignment. In the event that such sale, assignment or
transfer involves the Common Shares, Conversion Shares or Warrant Shares sold,
assigned or transferred pursuant to an effective registration statement or
pursuant to Rule 144, the transfer agent shall issue such Securities to the
Buyer, assignee or transferee, as the case may be, without any restrictive
legend. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5(b) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5(b), that a
Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.
 
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
 
The obligation of the Company hereunder to issue and sell the Notes and the
related Common Shares and Warrants to each Buyer at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
 
(i) Such Buyer shall have executed each of the Transaction Documents to which it
is a party and delivered the same to the Company.

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(ii) Such Buyer and each other Buyer shall have delivered to the Company the
Purchase Price set forth opposite such Buyer's and each other Buyer's name in
column (7) of the Schedule of Buyers (less, in the case of Castlerigg Master
Investments Ltd., the amounts withheld pursuant to Section 4(g)) for the Notes
and the related Common Shares and Warrants being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
 
(iii) The representations and warranties of such Buyer shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date which shall be true and correct as of such specified
date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.
 
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
 
The obligation of each Buyer hereunder to purchase the Notes and the related
Common Shares and Warrants at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for each Buyer's sole benefit and may be waived by such
Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:
 
(i) The Company shall have duly executed and delivered to such Buyer (A) each of
the Transaction Documents and, (B) the Notes (in such principal amounts as set
forth opposite such Buyer's name in column (3) of the Schedule of Buyers), being
purchased by such Buyer at the Closing pursuant to this Agreement, (C) the
related Common Shares (in such amounts as set forth opposite such Buyer's name
in Column (4) of the Schedule of Buyers) and (D) the related Warrants (in such
amounts as set forth opposite such Buyer's name in Columns (5) and (6) of the
Schedule of Buyers) being purchased by such Buyer at the Closing pursuant to
this Agreement.
 
(ii) Such Buyer shall have received the opinion of Haynes and Boone, LLP, the
Company's outside counsel, dated as of the Closing Date, in substantially the
form of Exhibit H attached hereto.
 
(iii) The Company shall have delivered to such Buyer a copy of the Irrevocable
Transfer Agent Instructions, in the form of Exhibit G attached hereto, which
instructions shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
 
(iv) The Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in such
entity's jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within 10 days of the
Closing Date.
 
(v) The Company shall have delivered to such Buyer a certificate evidencing the
Company's qualification as a foreign corporation and good standing issued by the
Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts is required to be so qualified, as of a date within 10 days of
the Closing Date.

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(vi) The Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation as certified by the Secretary of State of the State
(or comparable office of Delaware within ten (10) days of the Closing Date.
 
(vii) The Company shall have delivered to such Buyer a certificate, executed by
the Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company's Board of
Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit I.
 
(viii) The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date which shall be true and correct as of such specified date) and the Company
shall have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer in the form
attached hereto as Exhibit J.
 
(ix) The Company shall have delivered to such Buyer a letter from the Company's
transfer agent certifying the number of shares of Common Stock outstanding as of
a date within five days of the Closing Date.
 
(x) The Company shall have caused Tiburon LLC to execute and deliver to the
Buyer the Put Option Agreement by and between the Buyers and Tiburon LLC in the
form attached hereto as Exhibit K (the "Put Option Agreement").
 
(xi) The Company shall have caused Tiburon LLC to execute and deliver to the
Collateral Agent the Pledge Agreement by and between the Collateral Agent and
Tiburon LLC in the form attached hereto as Exhibit L (the "Tiburon Pledge
Agreement").
 
(xii) The Common Stock (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended, as of the Closing Date,
by the SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been threatened, as of
the Closing Date, either (A) in writing by the SEC or the Principal Market or
(B) by falling below the minimum listing maintenance requirements of the
Principal Market.
 
(xiii) The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the sale of the Securities.
 
(xiv) In accordance with the terms of the Security Documents, the Company shall
have delivered to the Collateral Agent (i) certificates representing the
Subsidiaries' shares of capital stock, along with duly executed blank stock
powers and (ii) appropriate financing statements on Form UCC-1 to be duly filed
in such office or offices as may be necessary or, in the opinion of the
Collateral Agent, desirable to perfect the security interests purported to be
created by each Security Document.

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(xv) Within one (1) Business Day prior to the Closing, the Company shall have
delivered or caused to be delivered to each Buyer (A) certified copies of UCC
search results, listing all effective financing statements which name as debtor
the Company or any of its Subsidiaries filed in the prior five years to perfect
an interest in any assets thereof, together with copies of such financing
statements, none of which, except as otherwise agreed in writing by the Buyers,
shall cover any of the Collateral (as defined in the Security Documents) and the
results of searches for any tax lien and judgment lien filed against such Person
or its property, which results, except as otherwise agreed to in writing by the
Buyers shall not show any such Liens (as defined in the Security Documents); and
(B) a perfection certificate, duly completed and executed by the Company and
each of its Subsidiaries, in form and substance satisfactory to the Buyers.
 
(xvi) The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such Buyer or its
counsel may reasonably request.
 
8. TERMINATION. In the event that the Closing shall not have occurred with
respect to a Buyer on or before five (5) Business Days from the date hereof due
to the Company's or such Buyer's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated pursuant to this
Section 8 due to the Company's failure to satisfy the conditions set forth in
Section 7 above, the Company shall remain obligated to reimburse the
non-breaching Buyers for the expenses described in Section 4(g) above.
 
9. MISCELLANEOUS.
 
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. 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 brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 

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(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
 
(c) Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
 
(d) Severability. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
 
(e) Entire Agreement; Amendments. This Agreement and the other Transaction
Documents supersede all other prior oral or written agreements between the
Buyers, the Company, their affiliates and Persons acting on their behalf with
respect to the matters discussed herein, and this Agreement, the other
Transaction Documents and the instruments referenced herein and therein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and the
holders of at least a majority of the aggregate number of Registrable Securities
issued and issuable hereunder and under the Notes, and any amendment to this
Agreement made in conformity with the provisions of this Section 9(e) shall be
binding on all Buyers and holders of Securities, as applicable. No provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the applicable
Securities then outstanding. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration also is offered to
all of the parties to the Transaction Documents, holders of Notes or holders of
the Warrants, as the case may be. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment or
promise or has any other obligation to provide any financing to the Company or
otherwise.

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(f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
 
If to the Company:
   
RxElite, Inc.
   
1404 North Main
 
Suite 200
 
Meridian, Idaho 83642
 
Telephone:
208-288-5550
 
Facsimile:
208-288-1191
 
Attention:
Jonathan Houssian
With a copy to:
   
Haynes and Boone, LLP
 
153 East 53rd Street, Suite 4900
 
New York, NY 10022
 
Telephone:
212-659-7300
 
Facsimile:
212-918-8989
 
Attention:
Harvey J. Kesner, Esq.
     
If to the Transfer Agent:
   
Empire Stock Transfer Inc.
 
2470 Saint Rose Parkway, Suite 304
 
Henderson, Nevada 89074
 
Telephone:
702-818-5898
 
Facsimile:
702-974-1444
 
Attention:
Patrick Mokros
     

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,
 
with a copy (for informational purposes only) to:
 
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Telephone:
(212) 756-2000
Facsimile:
(212) 593-5955
Attention:
 
Eleazer N. Klein, Esq.
 

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or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
 
(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Warrants. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable hereunder, including by way of a
Fundamental Transaction (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the
Warrants). A Buyer may assign some or all of its rights hereunder without the
consent of the Company, in which event such assignee shall be deemed to be a
Buyer hereunder with respect to such assigned rights.
 
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
 
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, and the agreements and covenants set forth in Sections 4, 5
and 9 shall survive the Closing. Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.
 
(j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as any other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
 
(k) Indemnification. In consideration of each Buyer's execution and delivery of
the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status of
such Buyer or holder of the Securities as an investor in the Company pursuant to
the transactions contemplated by the Transaction Documents. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities that is permissible under applicable law.
Except as otherwise set forth herein, the mechanics and procedures with respect
to the rights and obligations under this Section 9(k) shall be the same as those
set forth in Section 6 of the Registration Rights Agreement. This Section 9(k)
shall not apply to any Indemnified Liabilities to the extent that such
Indemnified Liabilities result from the willful misconduct or gross negligence
of any Buyer.

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(l) No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
 
(m) Remedies. Each Buyer and each holder of the Securities shall have all rights
and remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of
its obligations under the Transaction Documents, any remedy at law may prove to
be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond
or other security.
 
(n) Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

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(o) Payment Set Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
 
(p) Independent Nature of Buyers' Obligations and Rights. The obligations of
each Buyer under any Transaction Document are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as, and the Company acknowledges that the Buyers do not so
constitute, a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Buyers are in any way acting in concert
or as a group, and the Company will not assert any such claim with respect to
such obligations or the transactions contemplated by the Transaction Documents
and the Company acknowledges that, to the Company's knowledge, the Buyers are
not acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
and each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.
 
[Signature Page Follows]

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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
 
COMPANY:
 
RxELITE, INC.
       
By:
/s/ Jonathan Houssian  
Name: Jonathan Houssian
 
Title:   President and Chief Executive Officer
   

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

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
 
BUYERS:
 
CASTLERIGG MASTER INVESTMENTS LTD.
  By:  SANDELL ASSET MANAGEMENT CORP.    
By:
/s/ Serge Adam  
Name: Serge Adam
 
Title:   Senior Managing Director
   

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SCHEDULE OF BUYERS
 

(1)
 
(2)
 
(3)
 
(4)
 
(5)
 
(6)
 
(7)
 
(8)
 
Buyer
Address and
Facsimile Number
Aggregate
Principal
Amount of
Notes
Number of
Common Shares
Number of
Series A Warrant Shares
Number of
Series B Warrant Shares
Purchase Price
Legal Representative's Address and Facsimile
Number
               
 
Castlerigg Master Investments Ltd.
c/o Sandell Asset Management
40 West 57th St
26th Floor
New York, NY 10019
Attention: Cem Hacioglu/Matthew Pliskin
Fax: 212-603-5710
Telephone: 212-603-5700
Residence: British Virgin Islands
$10,500,000
 
5,594,033
 
13,985,083
 
4,661,694
 
$10,500,000
 
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Eleazer Klein, Esq.
Facsimile: (212) 593-5955
Telephone: (212) 756-2376
 

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EXHIBITS
 
Exhibit A
Form of Notes
Exhibit B-1
Form of Series A Warrants
Exhibit B-2
Form of Series B Warrants
Exhibit C
Form of Registration Rights Agreement
Exhibit D
Form of Pledge Agreement
Exhibit E
Form of Security Agreement
Exhibit F
Form of Guaranty
Exhibit G
Form of Irrevocable Transfer Agent Instructions
Exhibit H
Form of Opinion of Company's Counsel
Exhibit I
Form of Secretary's Certificate
Exhibit J
Form of Officer's Certificate
Exhibit K
Form of Put Option Agreement
Exhibit L
 
Form of Tiburon Pledge Agreement
 

SCHEDULES
 
Schedule 3(a)
Subsidiaries
Schedule 3(k)
SEC Documents
Schedule 3(l)
Absence of Certain Changes
Schedule 3(q)
Transactions with Affiliates
Schedule 3(r)
Equity Capitalization
Schedule 3(s)
Indebtedness and Other Contracts
Schedule 3(t)
Absence of Litigation
Schedule 3(x)
Intellectual Property Rights
Schedule 3(z)
Subsidiary Rights
Schedule 3(ee)
Ranking of Notes
Schedule 4(d)
Use of Proceeds
Schedule 4(i)
Disclosure of Transactions and Other Material Information

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