Document:

NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), 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 1933 ACT, OR (B) AN OPINION OF COUNSEL,
      IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
      ACT
      (II) UNLESS SOLD OR TRANSFERS TO A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE
      MEANING OF RULE 144A UNDER THE 1933 ACT OR TO AN "ACCREDITED INVESTOR" AS THAT
      TERM IS DEFINED IN RULE 501(A) OF REGULATION D OR
      (III) 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. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF
      THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE HOLDER OF THIS
      NOTE AGREES TO THE TERMS AND PROVISIONS SET FORTH IN SECTION 4(o) OF THE
      SECURITIES PURCHASE AGREEMENT REGARDING THE COLLATERAL AGENT (AS DEFINED IN
      THE
      SECURITIES PURCHASE AGREEMENT). THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE
      AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS
      THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii)
      OF
      THIS NOTE.

     

    RxElite,
      Inc.

     

    Senior
      Secured Convertible Note

     

    
      	
              Issuance
                Date: December 31, 2007

            	
              Original
                Principal Amount: $10,500,000

            

    

    

    FOR
      VALUE RECEIVED,
      RxElite,
      Inc., a Delaware corporation (the "Company"),
      hereby promises to pay to the order of CASTLERIGG MASTER INVESTMENTS
      LTD. or
      registered assigns ("Holder")
      the
      amount set out above as the Original Principal Amount (as reduced pursuant
      to
      the terms hereof pursuant to redemption, conversion or otherwise, the
      "Principal")
      when
      due, whether upon the Maturity Date (as defined below), acceleration, redemption
      or otherwise (in each case in accordance with the terms hereof) and to pay
      interest ("Interest")
      on any
      outstanding Principal at the applicable Interest Rate, from the date set out
      above as the Issuance Date (the "Issuance Date")
      until
      the same becomes due and payable, whether upon an Interest Date (as defined
      below) or the Maturity Date, acceleration, conversion, redemption or otherwise
      (in each case in accordance with the terms hereof). This Senior Secured
      Convertible Note (including all Senior Secured Convertible Notes issued in
      exchange, transfer or replacement hereof, this "Note")
      is one
      of an issue of Senior Secured Convertible Notes issued pursuant to the
      Securities Purchase Agreement (as defined below) on the Closing Date
      (collectively, the "Notes"
      and
      such other Senior Secured Convertible Notes, the "Other Notes").
      Certain capitalized terms used herein are defined in Section 28.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (1) PAYMENTS
      OF PRINCIPAL.
      On the
      Maturity Date, the Company shall pay to the Holder an amount in cash
      representing all outstanding Principal, accrued and unpaid Interest and accrued
      and unpaid Late Charges, if any, on such Principal and Interest. The
      "Maturity Date"
      shall
      be December 31, 2009, as may be extended at the option of the Holder (i) in
      the
      event that, and for so long as, an Event of Default (as defined in Section
      4(a))
      shall have occurred and be continuing on the Maturity Date (as may be extended
      pursuant to this Section 1) or any event that shall have occurred and be
      continuing that with the passage of time and the failure to cure would result
      in
      an Event of Default and (ii) through the date that is ten (10) Business Days
      after the consummation of a Change of Control in the event that a Change of
      Control is publicly announced or a Change of Control Notice (as defined in
      Section 5(b)) is delivered prior to the Maturity Date. Other than as
      specifically permitted by this Note, the Company may not prepay any portion
      of
      the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
      Late Charges on Principal and Interest, if any. Notwithstanding any provision
      of
      this Section 1 to the contrary, the Holder may, at its option and in its sole
      discretion, deliver a written notice to the Company at least two (2) days prior
      to the Maturity Date electing to have the payment of all or any portion of
      the
      Principal and Interest payable on the Maturity Date deferred (such amount
      deferred, the "Deferral
      Amount")
      up
      to a
      date that is two (2) years after the Maturity Date, which date shall thereafter
      be the "Maturity
      Date"
      for all
      purposes hereunder. Any notice delivered by the Holder pursuant to this Section
      1 shall set forth (i) the Deferral Amount and (ii) the date that such Deferral
      Amount shall now be payable.

     

    (2) INTEREST;
      INTEREST RATE.
      Interest on this Note shall commence accruing on the Issuance Date and shall
      be
      computed on the basis of a 360-day year comprised of twelve (12) thirty (30)
      day
      months and shall be payable in arrears for each Calendar Quarter on the first
      (1st)
      day of
      the succeeding Calendar Quarter during the period beginning on the Issuance
      Date
      and ending on, and including, the Maturity Date (each, an "Interest Date")
      with
      the first Interest Date being April 1, 2008. Interest shall be payable on each
      Interest Date, to the record holder of this Note on the applicable Interest
      Date, in cash. Prior to the payment of Interest on an Interest Date, Interest
      on
      this Note shall accrue at the Interest Rate and be payable by way of inclusion
      of the Interest in the Conversion Amount in accordance with Section 3(b)(i).
      From and after the occurrence and during the continuance of an Event of Default,
      the Interest Rate shall be increased to fifteen percent (15.0%) per annum.
      In
      the event that such Event of Default is subsequently cured, the adjustment
      referred to in the preceding sentence shall cease to be effective as of the
      date
      of such cure; provided that the Interest as calculated and unpaid at such
      increased rate during the continuance of such Event of Default shall continue
      to
      apply to the extent relating to the days after the occurrence of such Event
      of
      Default through and including the date of cure of such Event of Default.

     

    
      
        
        

      

      
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    (3) CONVERSION
      OF NOTES.
      This
      Note shall be convertible into shares of the Company's common stock, par value
      $0.001 per share (the "Common
      Stock"),
      on
      the terms and conditions set forth in this Section 3.

     

    (a) Conversion
      Right.
      Subject
      to the provisions of Section 3(d), at any time or times on or after the Issuance
      Date, the Holder shall be entitled to convert any portion of the outstanding
      and
      unpaid Conversion Amount (as defined below) into fully paid and nonassessable
      shares of Common Stock in accordance with Section 3(c), at the Conversion Rate
      (as defined below). The Company shall not issue any fraction of a share of
      Common Stock upon any conversion. If the issuance would result in the issuance
      of a fraction of a share of Common Stock, the Company shall round such fraction
      of a share of Common Stock up to the nearest whole share. The Company shall
      pay
      any and all transfer, stamp and similar taxes that may be payable with respect
      to the issuance and delivery of Common Stock upon conversion of any Conversion
      Amount.

     

    (b) Conversion
      Rate.
      The
      number of shares of Common Stock issuable upon conversion of any Conversion
      Amount pursuant to Section 3(a) shall be determined by dividing (x) such
      Conversion Amount by (y) the Conversion Price (the "Conversion
      Rate").

     

    (i) "Conversion
      Amount"
      means
      the sum of (A) the portion of the Principal to be converted, redeemed or
      otherwise with respect to which this determination is being made, (B) accrued
      and unpaid Interest with respect to such Principal, and (C) accrued and unpaid
      Late Charges with respect to such Principal and Interest.

     

    (ii) "Conversion
      Price"
      means,
      as of any Conversion Date (as defined below) or other date of determination,
      $1.1262, subject to adjustment as provided herein.

     

    (c) Mechanics
      of Conversion.

     

    (i) Optional
      Conversion.
      To
      convert any Conversion Amount into shares of Common Stock on any date (a
      "Conversion
      Date"),
      the
      Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
      on or
      prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice
      of conversion in the form attached hereto as Exhibit
      I
      (the
      "Conversion
      Notice")
      to the
      Company and (B) if required by Section 3(c)(iii), surrender this Note to a
      common carrier for delivery to the Company as soon as practicable on or
      following such date (or an indemnification undertaking with respect to this
      Note
      in the case of its loss, theft or destruction). On or before the first
      (1st)
      Business Day following the date of receipt of a Conversion Notice, the Company
      shall transmit by facsimile a confirmation (the “Conversion
      Confirmation”)
      of
      receipt of such Conversion Notice to the Holder and the Company's transfer
      agent
      (the "Transfer
      Agent").
      On or
      before the (2nd)
      second
      Business Day following the date of receipt of a Conversion Notice (the
      "Share
      Delivery Date"),
      the
      Company shall (X) provided that the Transfer Agent is participating in the
      Depository Trust Company's ("DTC")
      Fast
      Automated Securities Transfer Program, credit such aggregate number of shares
      of
      Common Stock to which the Holder shall be entitled to the Holder's or its
      designee's balance account with DTC through its Deposit Withdrawal Agent
      Commission system or (Y) if the Transfer Agent is not participating in the
      DTC
      Fast Automated Securities Transfer Program, issue and deliver to the address
      as
      specified in the Conversion Notice, a certificate, registered in the name of
      the
      Holder or its designee, for the number of shares of Common Stock to which the
      Holder shall be entitled. If this Note is physically surrendered for conversion
      as required by Section 3(c)(iii) and the outstanding Principal of this Note
      is
      greater than the Principal portion of the Conversion Amount being converted,
      then the Company shall as soon as practicable and in no event later than three
      (3) Business Days after receipt of this Note and at its own expense, issue
      and
      deliver to the holder a new Note (in accordance with Section 18(d)) representing
      the outstanding Principal not converted. The Person or Persons entitled to
      receive the shares of Common Stock issuable upon a conversion of this Note
      shall
      be treated for all purposes as the record holder or holders of such shares
      of
      Common Stock on the Conversion Date.

     

    
      
        
        

      

      
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    (ii) Company's
      Failure to Timely Convert.
      If
      the
      Company shall fail to issue a certificate to the Holder or credit the Holder's
      balance account with DTC, as applicable, for the number of shares of Common
      Stock to which the Holder is entitled upon conversion of any Conversion Amount
      on or prior to the date which is three (3) Trading Days after the Conversion
      Date (a "Conversion
      Failure"),
      then
      (A) the Company shall pay damages to the Holder for each Trading Day of such
      Conversion Failure in an amount equal to 1.5% of the product of (I) the sum
      of
      the number of shares of Common Stock not issued to the Holder on or prior to
      the
      Share Delivery Date and to which the Holder is entitled, and (II) the Closing
      Sale Price of the Common Stock on the Share Delivery Date and (B) the Holder,
      upon written notice to the Company, may void its Conversion Notice with respect
      to, and retain or have returned, as the case may be, any portion of this Note
      that has not been converted pursuant to such Conversion Notice; provided
      that the
      voiding of a Conversion Notice shall not affect the Company's obligations to
      make any payments which have accrued prior to the date of such notice pursuant
      to this Section 3(c)(ii) or otherwise. In addition to the foregoing,
      if
      within
      three (3) Trading Days after the Company's receipt of the facsimile copy of
      a
      Conversion Notice the Company shall fail to issue and deliver a certificate
      to
      the Holder or credit the Holder's balance account with DTC for the number of
      shares of Common Stock to which the Holder is entitled upon such holder's
      conversion of any Conversion Amount, and if on or after such Trading Day the
      Holder purchases (in an open market transaction or otherwise) Common Stock
      to
      deliver in satisfaction of a sale by the Holder of Common Stock issuable upon
      such conversion that the Holder anticipated receiving from the Company (a
      "Buy-In")
      or on
      any date of the Company's obligation to deliver shares of Common Stock as
      contemplated pursuant to clause (B) below, then the Company shall, within three
      (3) Business Days after the Holder's request and in the Holder's discretion,
      either (A) pay cash to the Holder in an amount equal to the Holder's total
      purchase price (including brokerage commissions and other out of pocket
      expenses, if any) for the shares of Common Stock so purchased (the "Buy-In
      Price"),
      at
      which point the Company's obligation to issue and deliver such certificate
      or to
      credit the Holder's balance account with DTC for the number of shares of Common
      Stock to which the Holder is entitled upon such Holder's conversion of any
      Conversion Amount shall terminate, or (B) promptly honor its obligation to
      deliver to the Holder a certificate or certificates representing such Common
      Stock and pay cash to the Holder in an amount equal to the excess (if any)
      of
      the Buy-In Price over the product of (1) such number of shares of Common Stock,
      times (2) the Closing Bid Price on the Conversion Date.

     

    
      
        
        

      

      
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    (iii) Registration;
      Book-Entry.
      The
      Company shall maintain a register (the "Register")
      for
      the recordation of the names and addresses of the holders of each Note and
      the
      principal amount of the Notes held by such holders (the "Registered
      Notes").
      The
      entries in the Register shall be conclusive and binding for all purposes absent
      manifest error. The Company and the holders of the Notes shall treat each Person
      whose name is recorded in the Register as the owner of a Note for all purposes,
      including, without limitation, the right to receive payments of Principal and
      Interest hereunder, notwithstanding notice to the contrary. A Registered Note
      may be assigned or sold in whole or in part only by registration of such
      assignment or sale on the Register. Upon its receipt of a request to assign
      or
      sell all or part of any Registered Note by a Holder, the Company shall record
      the information contained therein in the Register and issue one or more new
      Registered Notes in the same aggregate principal amount as the principal amount
      of the surrendered Registered Note to the designated assignee or transferee
      pursuant to Section 18. Notwithstanding anything to the contrary set forth
      herein, upon conversion of any portion of this Note in accordance with the
      terms
      hereof, the Holder shall not be required to physically surrender this Note
      to
      the Company unless (A) the full Conversion Amount represented by this Note
      is
      being converted or (B) the Holder has provided the Company with prior written
      notice (which notice may be included in a Conversion Notice) requesting
      reissuance of this Note upon physical surrender of this Note. The Holder and
      the
      Company shall maintain records showing the Principal, Interest and Late Charges,
      if any, converted and the dates of such conversions or shall use such other
      method, reasonably satisfactory to the Holder and the Company, so as not to
      require physical surrender of this Note upon conversion.

     

    (iv) Pro
      Rata Conversion; Disputes.
      In the
      event that the Company receives a Conversion Notice from more than one holder
      of
      Notes for the same Conversion Date and the Company can convert some, but not
      all, of such portions of the Notes submitted for conversion, the Company,
      subject to Section 3(d), shall convert from each holder of Notes electing to
      have Notes converted on such date a pro rata amount of such holder's portion
      of
      its Notes submitted for conversion based on the principal amount of Notes
      submitted for conversion on such date by such holder relative to the aggregate
      principal amount of all Notes submitted for conversion on such date. In the
      event of a dispute as to the number of shares of Common Stock issuable to the
      Holder in connection with a conversion of this Note, the Company shall issue
      to
      the Holder the number of shares of Common Stock not in dispute and resolve
      such
      dispute in accordance with Section 23.

     

    
      
        
        

      

      
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    (d) Limitations
      on Conversions.
      

     

    (i) Beneficial
      Ownership.
      The
      Company shall not effect any conversion of this Note, and the Holder of this
      Note shall not have the right to convert any portion of this Note pursuant
      to
      Section 3(a), to the extent that after giving effect to such conversion, the
      Holder (together with the Holder's affiliates) would beneficially own in excess
      of 4.99% (the "Maximum
      Percentage")
      of the
      number of shares of Common Stock outstanding immediately after giving effect
      to
      such conversion. For purposes of the foregoing sentence, the number of shares
      of
      Common Stock beneficially owned by the Holder and its affiliates shall include
      the number of shares of Common Stock issuable upon conversion of this Note
      with
      respect to which the determination of such sentence is being made, but shall
      exclude the number of shares of Common Stock which would be issuable upon (A)
      conversion of the remaining, nonconverted portion of this Note beneficially
      owned by the Holder or any of its affiliates and (B) exercise or conversion
      of
      the unexercised or nonconverted portion of any other securities of the Company
      (including, without limitation, any Other Notes or warrants) subject to a
      limitation on conversion or exercise analogous to the limitation contained
      herein beneficially owned by the Holder or any of its affiliates. Except as
      set
      forth in the preceding sentence, for purposes of this Section 3(d)(i),
      beneficial ownership shall be calculated in accordance with Section 13(d) of
      the
      Securities Exchange Act of 1934, as amended (the "1934
      Act").
      For
      purposes of this Section 3(d)(i), in determining the number of outstanding
      shares of Common Stock, the Holder may rely on the number of outstanding shares
      of Common Stock as reflected in (x) the Company's most recent Form 10-KSB,
      Form
      10-QSB, Form 8-K or other public filing with the SEC, as the case may be, (y)
      a
      more recent public announcement by the Company or (z) any other notice by the
      Company or the Transfer Agent setting forth the number of shares of Common
      Stock
      outstanding. For any reason at any time, upon the written or oral request of
      the
      Holder, the Company shall within one (1) Business Day confirm orally and in
      writing to the Holder the number of shares of Common Stock then outstanding.
      In
      any case, the number of outstanding shares of Common Stock shall be determined
      after giving effect to the conversion or exercise of securities of the Company,
      including this Note, by the Holder or its affiliates since the date as of which
      such number of outstanding shares of Common Stock was reported. By written
      notice to the Company, the Holder may increase or decrease the Maximum
      Percentage to any other percentage not in excess of 9.99% specified in such
      notice; provided that (i) any such increase will not be effective until the
      sixty-first (61st)
      day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of Notes.
      

     

    (ii) Principal
      Market Regulation.
      The
      Company shall not be obligated to issue any shares of Common Stock upon
      conversion of this Note if the issuance of such shares of Common Stock would
      exceed the aggregate number of shares of Common Stock which the Company may
      issue upon conversion or exercise, as applicable, of the Notes and Warrants
      without breaching the Company's obligations under the rules or regulations
      of
      any applicable Eligible Market (the "Exchange
      Cap"),
      except that such limitation shall not apply in the event that the Company (A)
      obtains the approval of its stockholders as required by the applicable rules
      of
      such Eligible Market for issuances of Common Stock in excess of such amount
      or
      (B) obtains a written opinion from outside counsel to the Company that such
      approval is not required, which opinion shall be reasonably satisfactory to
      the
      Required Holders. Until such approval or written opinion is obtained, no
      purchaser of the Notes pursuant to the Securities Purchase Agreement (each,
      a
      "Purchaser"
      and
      collectively the "Purchasers")
      shall
      be issued in the aggregate, upon conversion or exercise or otherwise, as
      applicable, of Notes or Warrants, shares of Common Stock in an amount greater
      than the product of the Exchange Cap multiplied by a fraction, the numerator
      of
      which is the principal amount of Notes issued to any Purchaser pursuant to
      the
      Securities Purchase Agreement on the Closing Date and the denominator of which
      is the aggregate principal amount of all Notes issued to all of the Purchasers
      pursuant to the Securities Purchase Agreement on the Closing Date (with respect
      to each Purchaser, the "Exchange
      Cap Allocation").
      In
      the event that any Purchaser shall sell or otherwise transfer any of such
      Purchaser's Notes, the transferee shall be allocated a pro rata portion of
      such
      Purchaser's Exchange Cap Allocation, and the restrictions of the prior sentence
      shall apply to such transferee with respect to the portion of the Exchange
      Cap
      Allocation allocated to such transferee. In the event that any holder of Notes
      shall convert all of such holder's Notes into a number of shares of Common
      Stock
      which, in the aggregate, is less than such holder's Exchange Cap Allocation,
      then the difference between such holder's Exchange Cap Allocation and the number
      of shares of Common Stock actually issued to such holder shall be allocated
      to
      the respective Exchange Cap Allocations of the remaining holders of Notes on
      a
      pro rata basis in proportion to the aggregate principal amount of the Notes
      then
      held by each such holder. 

     

    
      
        
        

      

      
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    (4) RIGHTS
      UPON EVENT OF DEFAULT.

     

    (a) Event
      of Default.
      Each of
      the following events shall constitute an "Event
      of Default":

     

    (i) the
      failure of the applicable Registration Statement required to be filed pursuant
      to the Registration Rights Agreement to be declared effective by the SEC on
      or
      prior to the date that is sixty (60) days after the applicable Effectiveness
      Deadline (as defined in the Registration Rights Agreement), or, while the
      applicable Registration Statement is required to be maintained effective
      pursuant to the terms of the Registration Rights Agreement, the effectiveness
      of
      the applicable Registration Statement lapses for any reason (including, without
      limitation, the issuance of a stop order) or is unavailable to any holder of
      the
      Notes for sale of all of such holder's Registrable Securities (as defined in
      the
      Registration Rights Agreement) in accordance with the terms of the Registration
      Rights Agreement, and such lapse or unavailability continues for a period of
      five (5) consecutive days or for more than an aggregate of twenty (20) days
      in
      any 365-day period (other than days during an Allowable Grace Period (as defined
      in the Registration Rights Agreement)); provided, however, that notwithstanding
      anything to the contrary contained herein, the Company's failure to meet one
      or
      more of the requirements of this Section 4(a) shall not constitute an Event
      of
      Default (A) where such failure is solely the result of a comment received from
      the SEC requiring a limit on the number of Registrable Securities included
      in
      the applicable Registration Statement in order for such Registration Statement
      to be able to avail itself of Rule 415 under the 1933 Act or (B) if all of
      the
      Registrable Securities 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;

     

    (ii) the
      suspension from trading or failure of the Common Stock to be listed on an
      Eligible Market for a period of five (5) consecutive Trading Days or for more
      than an aggregate of ten (10) Trading Days in any 365-day period;

     

    (iii) the
      Company's (A) failure to cure a Conversion Failure by delivery of the required
      number of shares of Common Stock within ten (10) Business Days after the
      applicable Conversion Date or (B) notice, written or oral, to any holder of
      the
      Notes, including by way of public announcement or through any of its agents,
      at
      any time, of its intention not to comply with a request for conversion of any
      Notes into shares of Common Stock that is tendered in accordance with the
      provisions of the Notes, other than pursuant to Section 3(d);

     

    (iv) at
      any
      time following the tenth (10th)
      consecutive Business Day that the Holder's Authorized Share Allocation is less
      than the number of shares of Common Stock that the Holder would be entitled
      to
      receive upon a conversion of the full Conversion Amount of this Note (without
      regard to any limitations on conversion set forth in Section 3(d) or
      otherwise);

     

    
      
        
        

      

      
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    (v) the
      Company's failure to pay to the Holder any amount of Principal, Interest, Late
      Charges or other amounts when and as due under this Note (including, without
      limitation, the Company's failure to pay any redemption payments or amounts
      hereunder) or any other Transaction Document (as defined in the Securities
      Purchase Agreement) or any other agreement, document, certificate or other
      instrument delivered in connection with the transactions contemplated hereby
      and
      thereby to which the Holder is a party, except, in the case of a failure to
      pay
      Interest and Late Charges when and as due, in which case only if such failure
      continues for a period of at least five (5) Business Days;

     

    (vi) any
      default under, redemption of or acceleration prior to maturity of any
      Indebtedness of the Company or any of its Subsidiaries (as defined in Section
      3(a) of the Securities Purchase Agreement) other than with respect to any Other
      Notes;

     

    (vii) the
      Company or any of its Subsidiaries, pursuant to or within the meaning of Title
      11, U.S. Code, or any similar Federal, foreign or state law for the relief
      of
      debtors (collectively, "Bankruptcy
      Law"),
      (A)
      commences a voluntary case, (B) consents to the entry of an order for relief
      against it in an involuntary case, (C) consents to the appointment of a
      receiver, trustee, assignee, liquidator or similar official (a "Custodian"),
      (D)
      makes a general assignment for the benefit of its creditors or (E) admits in
      writing that it is generally unable to pay its debts as they become
      due;

     

    (viii) a
      court
      of competent jurisdiction enters an order or decree under any Bankruptcy Law
      that (A) is for relief against the Company or any of its Subsidiaries in an
      involuntary case, (B) appoints a Custodian of the Company or any of its
      Subsidiaries or (C) orders the liquidation of the Company or any of its
      Subsidiaries;

     

    (ix) a
      final
      judgment or judgments for the payment of money aggregating in excess of $200,000
      are rendered against the Company or any of its Subsidiaries, and which judgments
      are not, within sixty (60) days after the entry thereof, bonded, discharged
      or
      stayed pending appeal, or are not discharged within sixty (60) days after the
      expiration of such stay; provided, however, that any judgment which is covered
      by insurance or an indemnity from a credit worthy party shall not be included
      in
      calculating the amount set forth above so long as the Company provides the
      Holder a written statement from such insurer or indemnity provider (which
      written statement shall be reasonably satisfactory to the Holder) to the effect
      that such judgment is covered by insurance or an indemnity and the Company
      will
      receive the proceeds of such insurance or indemnity within thirty (30) days
      of
      the issuance of such judgment;

     

    (x) the
      Company breaches any representation, warranty, covenant or other term or
      condition of any Transaction Document, except, in the case of a breach of a
      covenant or other term or condition of any Transaction Document which is
      curable, only if such breach continues for a period of at least ten (10)
      consecutive Business Days;

     

    (xi) any
      breach or failure in any respect to comply with Section 14 of this Note;

     

    
      
        
        

      

      
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    (xii) the
      Company or any Subsidiary shall fail to perform or comply with any covenant
      or
      agreement contained in any Security Agreement to which it is a party or any
      Pledge Agreement to which it is a party;

     

    (xiii) any
      material provision of any Security Document (as determined by the Collateral
      Agent) shall at any time for any reason (other than pursuant to the express
      terms thereof) cease to be valid and binding on or enforceable against the
      Company or any Subsidiary intended to be a party thereto, or the validity or
      enforceability thereof shall be contested by any party thereto, or a proceeding
      shall be commenced by the Company or any Subsidiary or any governmental
      authority having jurisdiction over any of them, seeking to establish the
      invalidity or unenforceability thereof, or the Company or any Subsidiary shall
      deny in writing that it has any liability or obligation purported to be created
      under any Security Document; 

     

    (xiv) any
      Security Agreement, any Pledge Agreement or any other security document, after
      delivery thereof pursuant hereto, shall for any reason fail or cease to create
      a
      valid and perfected and, except to the extent permitted by the terms hereof
      or
      thereof, first priority Lien in favor of the Collateral Agent for the benefit
      of
      the holders of the Notes on any Collateral (as defined in the Security
      Documents) purported to be covered thereby;

     

    (xv) any
      bank
      at which any deposit account, blocked account, or lockbox account of the Company
      or any Subsidiary is maintained shall fail to comply with any material term
      of
      any deposit account, blocked account, lockbox account or similar agreement
      to
      which such bank is a party or any securities intermediary, commodity
      intermediary or other financial institution at any time in custody, control
      or
      possession of any investment property of the Company or any Subsidiary shall
      fail to comply with any of the terms of any investment property control
      agreement to which such Person is a party (it being understood that only
      accounts pursuant to which the Collateral Agent has requested account control
      agreements should be subject to this clause (xv));

     

    (xvi) any
      material damage to, or loss, theft or destruction of, any Collateral, whether
      or
      not insured, or any strike, lockout, labor dispute, embargo, condemnation,
      act
      of God or public enemy, or other casualty which causes, for more than fifteen
      (15) consecutive days, the cessation or substantial curtailment of revenue
      producing activities at any facility of the Company or any Subsidiary, if any
      such event or circumstance could reasonably be expected to have a Material
      Adverse Effect (as defined in the Securities Purchase Agreement); 

     

    (xvii) upon
      failure to deliver to the Collateral Agent no later than five (5) Business
      Days
      after the Issuance Date, the shares of Common Stock required to be delivered
      to
      the Collateral Agent pursuant to the Tiburon Pledge Agreement (as defined in
      the
      Securities Purchase Agreement) along with duly executed blank stock
      powers;

     

    (xviii) at
      any
      time that the Company does not meet the minimum Consolidated EBITDA for the
      relevant Fiscal Quarter as set forth in Schedule
      I-A
      attached
      hereto (the "Lower
      EBITDA Thresholds");
      or

     

    
      
        
        

      

      
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    (xix) any
      Event
      of Default (as defined in the Other Notes) occurs with respect to any Other
      Notes.

     

    (b) Redemption
      Right.
      Upon
      the occurrence of an Event of Default, the Company shall within one (1) Business
      Day deliver written notice thereof via facsimile and overnight courier (an
      "Event
      of Default Notice")
      to the
      Holder. At any time after the earlier of the Holder's receipt of an Event of
      Default Notice and the Holder becoming aware of an Event of Default, the Holder
      may require the Company to redeem all or any portion of this Note by delivering
      written notice thereof (the "Event
      of Default Redemption Notice")
      to the
      Company, which Event of Default Redemption Notice shall indicate the portion
      of
      this Note the Holder is electing to redeem. Each portion of this Note subject
      to
      redemption by the Company pursuant to this Section 4(b) shall be redeemed by
      the
      Company at a price equal to the greater of (i) the product of (A) the Conversion
      Amount to be redeemed and (B) the Redemption Premium and (ii) the product of
      (A)
      the Conversion Rate with respect to such Conversion Amount in effect at such
      time as the Holder delivers an Event of Default Redemption Notice and (B) the
      product of (1) the Equity Value Redemption Premium and (2) the greatest Closing
      Sale Price of the Common Stock during the period beginning on the date
      immediately preceding such Event of Default and ending on the date the Holder
      delivers the Event of Default Redemption Notice (the "Event
      of Default Redemption
      Price").
      Redemptions required by this Section 4(b) shall be made in accordance with
      the
      provisions of Section 12. To the extent redemptions required by this Section
      4(b) are deemed or determined by a court of competent jurisdiction to be
      prepayments of the Note by the Company, such redemptions shall be deemed to
      be
      voluntary prepayments. The parties hereto agree that in the event of the
      Company's redemption of any portion of the Note under this Section 4(b), the
      Holder's damages would be uncertain and difficult to estimate because of the
      parties' inability to predict future interest rates and the uncertainty of
      the
      availability of a suitable substitute investment opportunity for the Holder.
      Accordingly, any Redemption Premium due under this Section 4(b) is intended
      by
      the parties to be, and shall be deemed, a reasonable estimate of the Holder's
      actual loss of its investment opportunity and not as a penalty.

     

    (5) RIGHTS
      UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

     

    (a) Assumption.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      (i)  the Successor Entity assumes in writing all of the obligations of the
      Company under this Note and the other Transaction Documents in accordance with
      the provisions of this Section 5(a) pursuant to written agreements in form
      and
      substance satisfactory to the Required Holders and approved by the Required
      Holders prior to such Fundamental Transaction, including agreements to deliver
      to each holder of Notes in exchange for such Notes a security of the Successor
      Entity evidenced by a written instrument substantially similar in form and
      substance to the Notes, including, without limitation, having a principal amount
      and interest rate equal to the principal amounts then outstanding and the
      interest rates of the Notes held by such holder, having similar conversion
      rights as the Notes and having similar ranking to the Notes, and satisfactory
      to
      the Required Holders and (ii) the Successor Entity (including its Parent
      Entity) is a publicly traded corporation whose common stock is quoted on or
      listed for trading on an Eligible Market. Upon the occurrence of any Fundamental
      Transaction, the Successor Entity shall succeed to, and be substituted for
      (so
      that from and after the date of such Fundamental Transaction, the provisions
      of
      this Note referring to the "Company"
      shall
      refer instead to the Successor Entity), and may exercise every right and power
      of the Company and shall assume all of the obligations of the Company under
      this
      Note with the same effect as if such Successor Entity had been named as the
      Company herein. Upon consummation of the Fundamental Transaction, the Successor
      Entity shall deliver to the Holder confirmation that there shall be issued
      upon
      conversion or redemption of this Note at
      any
      time after the consummation of the Fundamental Transaction, in lieu of the
      shares of the Company's Common Stock (or
      other
      securities, cash, assets or other property) issuable
      upon the conversion or redemption of the Notes prior to such Fundamental
      Transaction,
      such
      shares of the publicly traded common stock (or their equivalent) of the
      Successor Entity (including its Parent Entity), as adjusted in accordance with
      the provisions of this Note. The
      provisions of this Section shall apply similarly and equally to successive
      Fundamental Transactions and shall be applied without regard to any limitations
      on the conversion or redemption of this Note.

     

    
      
        
        

      

      
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    (b) Redemption
      Right.
      No
      sooner than fifteen (15) Trading Days nor later than ten (10) Trading Days
      prior
      to the consummation of a Change of Control, but not prior to the public
      announcement of such Change of Control, the Company shall deliver written notice
      thereof via facsimile and overnight courier to the Holder (a "Change
      of Control Notice").
      At
      any time during the period beginning after the Holder's receipt of a Change
      of
      Control Notice and ending twenty (20) Trading Days after the date of the
      consummation of such Change of Control, the Holder may require the Company
      to
      redeem all or any portion of this Note by delivering written notice thereof
      ("Change
      of Control Redemption Notice")
      to the
      Company, which Change of Control Redemption Notice shall indicate the Conversion
      Amount the Holder is electing to redeem. The portion of this Note subject to
      redemption pursuant to this Section 5 shall be redeemed by the Company in cash
      at a price equal to the greater of (i) 150% of the Conversion Amount being
      redeemed and (ii) the product of (x) the Equity Value Redemption Premium and
      (y)
      the product of (1) the Conversion Amount being redeemed multiplied by (2) the
      quotient determined by dividing (A) the aggregate cash consideration and the
      aggregate cash value of any non-cash consideration per Common Share to be paid
      to the holders of the Common Shares upon consummation of the Change of Control
      (any such non-cash consideration consisting of marketable securities to be
      valued at the higher of the Closing Sale Price of such securities as of the
      Trading Day immediately prior to, the Closing Sale Price as of the Trading
      Day
      immediately following the public announcement of such proposed Change of Control
      and the Closing Sale Price of the Common Stock immediately prior to the public
      announcement of such proposed Change of Control) by (B) the Conversion Price
      (the "Change
      of Control Redemption Price").
      Redemptions required by this Section 5 shall be made in accordance with the
      provisions of Section 12 and shall have priority to payments to stockholders
      in
      connection with a Change of Control. To the extent redemptions required by
      this
      Section 5(b) are deemed or determined by a court of competent jurisdiction
      to be
      prepayments of the Note by the Company, such redemptions shall be deemed to
      be
      voluntary prepayments. Notwithstanding anything to the contrary in this Section
      5, but subject to Section 3(d), until the Change of Control Redemption Price
      (together with any interest thereon) is paid in full, the Conversion Amount
      submitted for redemption under this Section 5(b) (together with any interest
      thereon) may be converted, in whole or in part, by the Holder into Common Stock
      pursuant to Section 3. The parties hereto agree that in the event of the
      Company's redemption of any portion of the Note under this Section 5(b), the
      Holder's damages would be uncertain and difficult to estimate because of the
      parties' inability to predict future interest rates and the uncertainty of
      the
      availability of a suitable substitute investment opportunity for the Holder.
      Accordingly, any Change of Control redemption premium due under this Section
      5(b) is intended by the parties to be, and shall be deemed, a reasonable
      estimate of the Holder's actual loss of its investment opportunity and not
      as a
      penalty.

     

    
      
        
        

      

      
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    (6) RIGHTS
      UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

     

    (a) Purchase
      Rights.
      If at
      any time the Company grants, issues or sells any Options, Convertible Securities
      or rights to purchase stock, warrants, securities or other property pro rata
      to
      the record holders of any class of Common Stock (the "Purchase
      Rights"),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete conversion of this Note (without taking into account any
      limitations or restrictions on the convertibility of this Note) immediately
      before the date on which a record is taken for the grant, issuance or sale
      of
      such Purchase Rights, or, if no such record is taken, the date as of which
      the
      record holders of Common Stock are to be determined for the grant, issue or
      sale
      of such Purchase Rights.

     

    (b) Other
      Corporate Events.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any Fundamental Transaction pursuant to which holders of shares
      of Common Stock are entitled to receive securities or other assets with respect
      to or in exchange for shares of Common Stock (a "Corporate
      Event"),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon a conversion of this Note, at the
      Holder's option, (i) in addition to the shares of Common Stock receivable upon
      such conversion, such securities or other assets to which the Holder would
      have
      been entitled with respect to such shares of Common Stock had such shares of
      Common Stock been held by the Holder upon the consummation of such Corporate
      Event (without taking into account any limitations or restrictions on the
      convertibility of this Note) or (ii) in lieu of the shares of Common Stock
      otherwise receivable upon such conversion, such securities or other assets
      received by the holders of shares of Common Stock in connection with the
      consummation of such Corporate Event in such amounts as the Holder would have
      been entitled to receive had this Note initially been issued with conversion
      rights for the form of such consideration (as opposed to shares of Common Stock)
      at a conversion rate for such consideration commensurate with the Conversion
      Rate. Provision made pursuant to the preceding sentence shall be in a form
      and
      substance satisfactory to the Required Holders. The provisions of this Section
      shall apply similarly and equally to successive Corporate Events and shall
      be
      applied without regard to any limitations on the conversion or redemption of
      this Note.

     

    (7) RIGHTS
      UPON ISSUANCE OF OTHER SECURITIES.

     

    (a) Adjustment
      of Conversion Price upon Issuance of Common Stock.
      If and
      whenever on or after the Subscription Date, the Company issues or sells, or
      in
      accordance with this Section 7(a) is deemed to have issued or sold, any
shares
      of
Common
      Stock (including the issuance or sale of shares
      of
Common
      Stock owned or held by or for the account of the Company, but excluding
shares
      of
Common
      Stock deemed to have been issued or sold by the Company in connection with
      any
      Excluded Securities) for a consideration per share (the "New
      Issuance Price")
      less
      than a price (the "Applicable
      Price")
      equal
      to the Conversion Price in effect immediately prior to such issue or sale or
      deemed issuance or sale (the foregoing a "Dilutive
      Issuance"),
      then
      immediately after such Dilutive Issuance the Conversion Price then in effect
      shall be reduced to an amount equal to the
      New
      Issuance Price. For
      purposes of determining the adjusted Conversion Price under this Section 7(a),
      the following shall be applicable:

     

    
      
        
        

      

      
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    (i) Issuance
      of Options.
      If the
      Company in any manner grants or sells any Options and the lowest price per
      share
      for which one share
      of
Common
      Stock is issuable upon the exercise of any such Option or upon conversion or
      exchange or exercise of any Convertible Securities issuable upon exercise of
      such Option is less than the Applicable Price, then such share
      of
Common
      Stock shall be deemed to be outstanding and to have been issued and sold by
      the
      Company at the time of the granting or sale of such Option for such price per
      share. For purposes of this Section 7(a)(i), the "lowest price per share for
      which one share
      of
Common
      Stock is issuable upon the exercise of any such Option or upon conversion or
      exchange or exercise of any Convertible Securities issuable upon exercise of
      such Option" shall be equal to the sum of the lowest amounts of consideration
      (if any) received or receivable by the Company with respect to any one
share
      of
Common
      Stock upon granting or sale of the Option, upon exercise of the Option and
      upon
      conversion or exchange or exercise of any Convertible Security issuable upon
      exercise of such Option. No further adjustment of the Conversion Price shall
      be
      made upon the actual issuance of such share of Common Stock or of such
      Convertible Securities upon the exercise of such Options or upon the actual
      issuance of such Common Stock upon conversion or exchange or exercise of such
      Convertible Securities.

     

    (ii) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one share of Common Stock is issuable upon such
      conversion or exchange or exercise thereof is less than the Applicable Price,
      then such share of Common Stock shall be deemed to be outstanding and to have
      been issued and sold by the Company at the time of the issuance or sale of
      such
      Convertible Securities for such price per share. For the purposes of this
      Section 7(a)(ii), the "lowest price per share for which one share of Common
      Stock is issuable upon such conversion or exchange or exercise" shall be equal
      to the sum of the lowest amounts of consideration (if any) received or
      receivable by the Company with respect to any one share of Common Stock upon
      the
      issuance or sale of the Convertible Security and upon the conversion or exchange
      or exercise of such Convertible Security. No further adjustment of the
      Conversion Price shall be made upon the actual issuance of such share of Common
      Stock upon conversion or exchange or exercise of such Convertible Securities,
      and if any such issue or sale of such Convertible Securities is made upon
      exercise of any Options for which adjustment of the Conversion Price had been
      or
      are to be made pursuant to other provisions of this Section 7(a), no further
      adjustment of the Conversion Price shall be made by reason of such issue or
      sale.

     

    
      
        
        

      

      
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    (iii) Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options, the additional consideration, if
      any, payable upon the issue, conversion, exchange or exercise of any Convertible
      Securities, or the rate at which any Convertible Securities are convertible
      into
      or exchangeable or exercisable for Common Stock increases or decreases at any
      time, the Conversion Price in effect at the time of such increase or decrease
      shall be adjusted to the Conversion Price which would have been in effect at
      such time had such Options or Convertible Securities provided for such increased
      or decreased purchase price, additional consideration or changed conversion
      rate, as the case may be, at the time initially granted, issued or sold. For
      purposes of this Section 7(a)(iii), if the terms of any Option or Convertible
      Security that was outstanding as of the Subscription Date are increased or
      decreased in the manner described in the immediately preceding sentence, then
      such Option or Convertible Security and the Common Stock deemed issuable upon
      exercise, conversion or exchange thereof shall be deemed to have been issued
      as
      of the date of such increase or decrease. No adjustment shall be made if such
      adjustment would result in an increase of the Conversion Price then in effect.
      

     

    (iv) Calculation
      of Consideration Received.
      In case
      any Option or Convertible Security is issued in connection with the issue or
      sale of other securities of the Company, together comprising one integrated
      transaction in which no specific consideration is allocated to such Option
      or
      Convertible Security by the parties thereto, the Option or Convertible Security
      will be deemed to have been issued for a consideration of $.01. If any Common
      Stock, Options or Convertible Securities are issued or sold or deemed to have
      been issued or sold for cash, the consideration received therefor will be deemed
      to be the net amount received by the Company therefor. If any Common Stock,
      Options or Convertible Securities are issued or sold for a consideration other
      than cash, the amount of the consideration other than cash received by the
      Company will be the fair value of such consideration, except where such
      consideration consists of securities, in which case the amount of consideration
      received by the Company will be the Closing Sale Price of such securities on
      the
      date of receipt. If any Common Stock, Options or Convertible Securities are
      issued to the owners of the non-surviving entity in connection with any merger
      in which the Company is the surviving entity, the amount of consideration
      therefor will be deemed to be the fair value of such portion of the net assets
      and business of the non-surviving entity as is attributable to such Common
      Stock, Options or Convertible Securities, as the case may be. The fair value
      of
      any consideration other than cash or securities will be determined jointly
      by
      the Company and the Required Holders. If such parties are unable to reach
      agreement within ten (10) days after the occurrence of an event requiring
      valuation (the "Valuation
      Event"),
      the
      fair value of such consideration will be determined within five (5) Business
      Days after the tenth (10th)
      day
      following the Valuation Event by an independent, reputable appraiser jointly
      selected by the Company and the Required Holders. The determination of such
      appraiser shall be deemed binding upon all parties absent manifest error and
      the
      fees and expenses of such appraiser shall be borne by the Company.

     

    (v) Record
      Date.
      If the
      Company takes a record of the holders of Common Stock for the purpose of
      entitling them (A) to receive a dividend or other distribution payable in Common
      Stock, Options or in Convertible Securities or (B) to subscribe for or purchase
      Common Stock, Options or Convertible Securities, then such record date will
      be
      deemed to be the date of the issue or sale of the Common Stock deemed to have
      been issued or sold upon the declaration of such dividend or the making of
      such
      other distribution or the date of the granting of such right of subscription
      or
      purchase, as the case may be.

     

    (b) Adjustment
      of Conversion Price upon Subdivision or Combination of Common
      Stock.
      If the
      Company at any time on or after the Subscription Date subdivides (by any stock
      split, stock dividend, recapitalization or otherwise) one or more classes of
      its
      outstanding shares of Common Stock into a greater number of shares, the
      Conversion Price in effect immediately prior to such subdivision will be
      proportionately reduced. If the Company at any time on or after the Subscription
      Date combines (by combination, reverse stock split or otherwise) one or more
      classes of its outstanding shares of Common Stock into a smaller number of
      shares, the Conversion Price in effect immediately prior to such combination
      will be proportionately increased.

     

    
      
        
        

      

      
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    (c) Other
      Events.
      If any
      event occurs of the type contemplated by the provisions of this Section 7 but
      not expressly provided for by such provisions (including, without limitation,
      the granting of stock appreciation rights, phantom stock rights or other rights
      with equity features), then the Company's Board of Directors will make an
      appropriate adjustment in the Conversion Price so as to protect the rights
      of
      the Holder under this Note; provided that no such adjustment will increase
      the
      Conversion Price as otherwise determined pursuant to this Section
      7.

     

    (8) SECURITY.
      This
      Note and the Other Notes are secured to the extent and in the manner set forth
      in the Security Documents (as defined in the Securities Purchase
      Agreement).

     

    (9) NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Certificate of Incorporation, Bylaws or through any reorganization, transfer
      of assets, consolidation, merger, scheme of arrangement, dissolution, issue
      or
      sale of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Note, and will at all
      times in good faith carry out all of the provisions of this Note and take all
      action as may be required to protect the rights of the Holder of this Note.
      

     

    (10) RESERVATION
      OF AUTHORIZED SHARES.

     

    (a) Reservation.
      The
      Company shall initially reserve out of its authorized and unissued Common Stock
      a number of shares of Common Stock for each of the Notes equal to 130% of the
      Conversion Rate with respect to the Conversion Amount of each such Note as
      of
      the Issuance Date.
      So
      long as any of the Notes are outstanding, the Company shall take all action
      necessary to reserve and keep available out of its authorized and unissued
      Common Stock, solely for the purpose of effecting the conversion of the Notes,
      130% of the number of shares of Common Stock as shall from time to time be
      necessary to effect the conversion of all of the Notes then outstanding;
      provided that at no time shall the number of shares of Common Stock so reserved
      be less than the number of shares required to be reserved by the previous
      sentence (without regard to any limitations on conversions) (the "Required
      Reserve Amount").
      The
      initial number of shares of Common Stock reserved for conversions of the Notes
      and each increase in the number of shares so reserved shall be allocated pro
      rata among the holders of the Notes based on the principal amount of the Notes
      held by each holder at the Closing (as defined in the Securities Purchase
      Agreement) or increase in the number of reserved shares, as the case may be
      (the
      "Authorized
      Share Allocation").
      In
      the event that a holder shall sell or otherwise transfer any of such holder's
      Notes, each transferee shall be allocated a pro rata portion of such holder's
      Authorized Share Allocation. Any shares of Common Stock reserved and allocated
      to any Person which ceases to hold any Notes shall be allocated to the remaining
      holders of Notes, pro rata based on the principal amount of the Notes then
      held
      by such holders.

     

    
      
        
        

      

      
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    (b) Insufficient
      Authorized Shares.
      If at
      any time while any of the Notes remain outstanding the Company does not have
      a
      sufficient number of authorized and unreserved shares of Common Stock to satisfy
      its obligation to reserve for issuance upon conversion of the Notes at least
      a
      number of shares of Common Stock equal to the Required Reserve Amount (an
      "Authorized
      Share Failure"),
      then
      the Company shall immediately take all action necessary to increase the
      Company's authorized shares of Common Stock to an amount sufficient to allow
      the
      Company to reserve the Required Reserve Amount for the Notes then outstanding.
      Without limiting the generality of the foregoing sentence, as soon as
      practicable after the date of the occurrence of an Authorized Share Failure,
      but
      in no event later than seventy-five (75) days after the occurrence of such
      Authorized Share Failure, the Company shall hold a meeting of its stockholders
      for the approval of an increase in the number of authorized shares of Common
      Stock. In connection with such meeting, the Company shall provide each
      stockholder with a proxy statement and shall use its best efforts to solicit
      its
      stockholders' approval of such increase in authorized shares of Common Stock
      and
      to cause its board of directors to recommend to the stockholders that they
      approve such proposal.

     

    (11) REDEMPTION
      RIGHTS.

     

    (a) Holder's
      Right of Optional Redemption.
      At any
      time and from time to time following the nine (9) month anniversary of the
      Issuance Date, the Holder shall have the right (a "Holder
      Optional Redemption"),
      in
      its sole discretion, to require that the Company redeem a Principal amount
      of
      this Note in an amount up to the Available Redemption Amount plus accrued and
      unpaid Interest on such Available Redemption Amount plus accrued and unpaid
      Late
      Charges with respect to such Principal and Interest (the "Redemption
      Amount")
      by
      delivering written notice thereof to the Company (a "Holder
      Optional Redemption Notice"
      and the
      date the Holder delivers such notice, the "Holder
      Optional Redemption Notice Date").
      The
      Company shall redeem any Redemption Amount within five (5) Trading Days of
      the
      Holder Optional Redemption Notice Date (the "Optional
      Redemption Date")
      in
      cash at a price equal to 120% of the Redemption Amount (the "Holder
      Optional Redemption Price").
      

     

    (b) Company's
      Right of Optional Redemption.
      

     

    (i) General.
      At any
      time, provided there
      is
      not an Event of Default, the
      Company shall have the right to redeem all or any portion of the outstanding
      Conversion Amount under this Note (a "Company
      Optional Redemption").
      The
      portion of this Note subject to redemption shall be redeemed by the Company
      in
      cash at a price equal to (1)120%
      of
      the Conversion Amount of this Note being redeemed (the "Initial Company
      Optional Redemption Price")
      for
      the portion of the Note representing the Available Initial Company Optional
      Redemption Amount and (2)
      the sum
      of (x) the Conversion Amount of this Note being redeemed and (y) the Additional
      Interest Amount (the "Additional
      Company Optional Redemption Price",
      and
      each of the Initial Company Optional Redemption Price and the Additional Company
      Optional Redemption Price, a "Company
      Optional Redemption Price")
      for
      the portion of the Note representing the Available Additional Company Optional
      Redemption Amount. The Company may exercise its redemption right under this
      Section 11(b) by delivering a written notice thereof by confirmed facsimile
      and
      overnight courier to all, but not less than all, of the holders of the Notes
      (the "Company
      Optional Redemption Notice"
      and the
      date such notice is delivered to all the holders is referred to as the
      "Company
      Optional Redemption Notice Date").
      A
      Company Optional Redemption Notice shall be irrevocable. Each Company Optional
      Redemption Notice shall state the aggregate Principal of the Notes which the
      Company has elected to be subject to such Company Optional Redemption from
      all
      of the holders of the Notes pursuant to this Section 11(b) (and analogous
      provisions under the Other Notes) on the Company Optional Redemption Date and
      shall state the portion that represents the Initial Company Optional Redemption
      Price and the portion that represents the Additional Company Optional Redemption
      Price, as the case may be. Upon receipt of a Company Optional Redemption Notice,
      the Holder shall deliver to the Company a written notice within ten
      (10) Trading
      Days stating the date on which the Company Optional Redemption shall occur
      (the
      "Company
      Optional Redemption Date")
      which
      date shall be not be more than forty-five (45) Trading
      Days after the Company Optional Redemption Notice Date.

     

    
      
        
        

      

      
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    (ii) Pro
      Rata Redemption Requirement.
      If the
      Company elects to cause a Company Optional Redemption pursuant to Section 11(b),
      then it must simultaneously take the same action with respect to the Other
      Notes. If the Company elects to cause a Company Optional Redemption pursuant
      to
      this Section 11(b) (or similar provisions under the Other Notes) with respect
      to
      less than all of the principal amount of the Notes then outstanding, then the
      Company shall require redemption of a Principal amount from the Holder and
      each
      holder of the Other Notes equal to the product of (A) the aggregate principal
      amount of Notes which the Company has elected to cause to be redeemed pursuant
      to Section 11(b), multiplied by (B) the fraction, the numerator of which is
      the
      sum of the initial principal amount of Notes purchased by such holder and the
      denominator of which is the initial principal amounts of Notes purchased by
      all
      holders holding outstanding Notes (such fraction with respect to each holder
      is
      referred to as its "Redemption
      Allocation Percentage",
      and
      such amount with respect to each holder is referred to as its "Pro
      Rata Redemption Amount");
      provided that in the event that the initial holder of any Notes has sold or
      otherwise transferred any of such holder's Notes, the transferee shall be
      allocated a pro rata portion of such holder's Redemption Allocation Percentage
      and Pro Rata Redemption Amount.

     

    (c) Redemptions
      Generally.
      Any
      redemptions made pursuant to this Section 11 shall be made in accordance with
      Section 12. No later than one (1) Trading Day following any Optional Redemption
      Date or Company Optional Redemption Date, the Company shall file a Current
      Report on Form 8-K describing the terms of such Holder Optional Redemption
      or
      Company Optional Redemption, as the case may be. To the extent redemptions
      required by this Section 11 are deemed or determined by a court of competent
      jurisdiction to be prepayments of the Note by the Company, such redemptions
      shall be deemed to be voluntary prepayments. The parties hereto agree that
      in
      the event of the Company's redemption of any portion of the Note under this
      Section 11, the Holder's damages would be uncertain and difficult to estimate
      because of the parties' inability to predict future interest rates and the
      uncertainty of the availability of a suitable substitute investment opportunity
      for the Holder. Accordingly, any redemption premium due under this Section
      11 is
      intended by the parties to be, and shall be deemed, a reasonable estimate of
      the
      Holder's actual loss of its investment opportunity and not as a
      penalty.

     

    
      
        
        

      

      
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    (12) REDEMPTIONS.

     

    (a) Mechanics.
      The
      Company shall deliver the applicable Event of Default Redemption Price to the
      Holder within five (5) Business Days after the Company's receipt of the Holder's
      Event of Default Redemption Notice. If the Holder has submitted a Change of
      Control Redemption Notice in accordance with Section 5(b), the Company shall
      deliver the applicable Change of Control Redemption Price to the Holder
      concurrently with the consummation of such Change of Control if such notice
      is
      received prior to the consummation of such Change of Control and within five
      (5)
      Business Days after the Company's receipt of such notice otherwise. The Company
      shall deliver the applicable Holder Optional Redemption Price on the applicable
      Optional Redemption Date and the applicable Company Optional Redemption Price
      on
      the applicable Company Optional Redemption Date. In the event of a redemption
      of
      less than all of the Conversion Amount of this Note, the Company shall promptly
      cause to be issued and delivered to the Holder a new Note (in accordance with
      Section 18(d)) representing the outstanding Principal which has not been
      redeemed. In the event that the Company does not pay the applicable Redemption
      Price to the Holder within the time period required, at any time thereafter
      and
      until the Company pays such unpaid Redemption Price in full, the Holder shall
      have the option, in lieu of redemption, to require the Company to promptly
      return to the Holder all or any portion of this Note representing the Conversion
      Amount that was submitted for redemption and for which the applicable Redemption
      Price (together with any Late Charges thereon) has not been paid. Upon the
      Company's receipt of such notice, (x) the Redemption Notice shall be null and
      void with respect to such Conversion Amount, (y) the Company shall immediately
      return or reinstate this Note, or issue a new Note (in accordance with Section
      18(d)) to the Holder representing such Conversion Amount and (z) the Conversion
      Price of this Note or such new Notes shall be adjusted to the lesser of (A)
      the
      Conversion Price as in effect on the date on which the applicable Redemption
      Notice is voided and (B) the lowest Closing Bid Price of the Common Stock during
      the period beginning on and including the date on which the applicable
      Redemption Notice is delivered to the Company and ending on and including the
      date on which the applicable Redemption Notice is voided. The Holder's delivery
      of a notice voiding a Redemption Notice and exercise of its rights following
      such notice shall not affect the Company's obligations to make any payments
      of
      Late Charges which have accrued prior to the date of such notice with respect
      to
      the Conversion Amount subject to such notice.

     

    (b) Redemption
      by Other Holders.
      Upon
      the Company's receipt of notice from any of the holders of the Other Notes
      for
      redemption or repayment as a result of an event or occurrence substantially
      similar to the events or occurrences described in Section 4(b), Section 5(b)
      or
      Section 11(a) (each, an "Other
      Redemption Notice"),
      the
      Company shall immediately, but no later than one (1) Business Day of its receipt
      thereof, forward to the Holder by facsimile a copy of such notice. If the
      Company receives a Redemption Notice and one or more Other Redemption Notices,
      during the seven (7) Business Day period beginning on and including the date
      which is three (3) Business Days prior to the Company's receipt of the Holder's
      Redemption Notice and ending on and including the date which is three (3)
      Business Days after the Company's receipt of the Holder's Redemption Notice
      and
      the Company is unable to redeem all principal, interest and other amounts
      designated in such Redemption Notice and such Other Redemption Notices received
      during such seven (7) Business Day period, then the Company shall redeem a
      pro
      rata amount from each holder of the Notes (including the Holder) based on the
      principal amount of the Notes submitted for redemption pursuant to such
      Redemption Notice and such Other Redemption Notices received by the Company
      during such seven Business Day period.

     

    
      
        
        

      

      
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    (13) VOTING
      RIGHTS.
      The
      Holder shall have no voting rights as the holder of this Note, except as
      required by law, including, but not limited to, the General Corporation Law
      of
      the State of Delaware and as expressly provided in this Note.

     

    (14) COVENANTS.
      So long
      as this Note is outstanding:

     

    (a) Rank. All
      payments due under this Note ii)
      shall
      rank pari
      passu
      with all
      Other Notes and iii)
      shall be
      senior to all other Indebtedness of the Company and its
      Subsidiaries.

     

    (b) Incurrence
      of Indebtedness.
      The
      Company shall not, and the Company shall not permit any of its Subsidiaries
      to,
      directly or indirectly, incur or guarantee, assume or suffer to exist any
      Indebtedness, other than (i) the Indebtedness evidenced by this Note and the
      Other Notes and (ii) other Permitted Indebtedness.

     

    (c) Existence
      of Liens.
      The
      Company shall not, and the Company shall not permit any of its Subsidiaries
      to,
      directly or indirectly, allow or suffer to exist any mortgage, lien, pledge,
      charge, security interest or other encumbrance upon or in any property or assets
      (including accounts and contract rights) owned by the Company or any of its
      Subsidiaries (collectively, "Liens")
      other
      than Permitted Liens and Permitted Vaporizer Liens. 

     

    (d) Restricted
      Payments.
      The
      Company shall not, and the Company shall not permit any of its Subsidiaries
      to,
      directly or indirectly, redeem, defease, repurchase, repay or make any payments
      in respect of, by the payment of cash or cash equivalents (in whole or in part,
      whether by way of open market purchases, tender offers, private transactions
      or
      otherwise), all or any portion of any Indebtedness (other than this Note and
      the
      Other Notes), whether by way of payment in respect of principal of (or premium,
      if any) or interest on such Indebtedness, if at the time such payment is due
      or
      is otherwise made or, after giving effect to such payment, an event
      constituting, or that with the passage of time and without being cured would
      constitute, an Event of Default has occurred and is continuing; provided that
      notwithstanding the foregoing, no principal (or any portion thereof) of any
      Subordinated Indebtedness may be paid (whether upon maturity, redemption,
      acceleration or otherwise) so long as this Note is outstanding.

     

    (e) Restriction
      on Redemption and Cash Dividends.
      Until
      all of the Notes have been converted, redeemed or otherwise satisfied in
      accordance with their terms, the Company shall not, directly or indirectly,
      redeem, repurchase or declare or pay any cash dividend or distribution on its
      capital stock without the prior express written consent of the Required Holders
      other than the redemption of up to 350,000 shares of Common Stock held by former
      holders of the Series A Preferred Stock of RxElite Holdings, Inc., that is
      due
      within 50 days of December 31, 2008 at a redemption price of $4.00 per
      share.

     

    
      
        
        

      

      
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    (f) Creation
      of New Subsidiaries.
      So long
      as the obligations of the Company under this Note are outstanding, if the
      Company shall create or acquire any Subsidiary, simultaneous with the creation
      or acquisition of such Subsidiary, the
      Company shall (i) promptly cause such Subsidiary to become a guarantor by
      executing a guaranty in favor of the Holder in form and substance reasonably
      acceptable to the Company, the Subsidiary and the Holder, (ii) promptly cause
      such Subsidiary to become a grantor under the Security Agreement by executing
      a
      joinder to the Security Agreement in form and substance reasonably acceptable
      to
      the Company, the Subsidiary and the Holder, (iii) promptly cause such Subsidiary
      to become a pledgor by the Company and such Subsidiary executing a pledge
      agreement in form and substance reasonably acceptable to the Company, the
      Subsidiary and the Holder, and (iv) promptly cause such Subsidiary to duly
      execute and/or deliver such opinions of counsel and other documents, in form
      and
      substance reasonable acceptable to the Holder, as the Holder shall reasonably
      request with respect thereto. 

     

    (g) Intellectual
      Property.
      So long
      as the obligations of the Company under this Note are outstanding,
      the
      Company shall not, and shall not permit any Subsidiary to, directly or
      indirectly, (i) assign, transfer or otherwise encumber or allow any other Person
      to have any rights or license to any of the Intellectual Property Rights (as
      defined in the Securities Purchase Agreement) of the Company or its Subsidiaries
      or (ii) take any action or inaction to impair the value of their Intellectual
      Property Rights.

     

    (h) Change
      in Collateral; Collateral Records.
      The
      Company shall (i) give the Collateral Agent (as defined in the Securities
      Purchase Agreement) not less than thirty (30) days' prior written notice of
      any change in the location of any Collateral (as defined in the Security
      Documents (as defined in the Securities Purchase Agreement)), other than to
      locations set forth on Schedule 14(h) hereto and with respect to which the
      Collateral Agent has filed financing statements and otherwise fully perfected
      its Liens thereon, (ii) advise the Collateral Agent promptly, in sufficient
      detail, of any material adverse change relating to the type, quantity or quality
      of the Collateral or the Lien granted thereon and (iii) execute and
      deliver, and cause each of its Subsidiaries to execute and deliver, to the
      Collateral Agent for the benefit of the Holder and holders of the Other Notes
      from time to time, solely for the Collateral Agent's convenience in maintaining
      a record of Collateral, such written statements and schedules as the Collateral
      Agent may reasonably require, designating, identifying or describing the
      Collateral.

     

    (i) Transactions
      with Affiliates.
      Except
      with respect to the Put Option Agreement (as defined in the Securities Purchase
      Agreement) and the Tiburon Pledge Agreement, the Company shall not, nor shall
      it
      permit any of its Subsidiaries to, enter into, renew, extend or be a party
      to,
      any transaction or series of related transactions (including, without
      limitation, the purchase, sale, lease, transfer or exchange of property or
      assets of any kind or the rendering of services of any kind) with any Affiliate,
      except in the ordinary course of business in a manner and to an extent
      consistent with past practice and necessary or desirable for the prudent
      operation of its business, for fair consideration and on terms no less favorable
      to it or its Subsidiaries than would be obtainable in a comparable arm's length
      transaction with a Person that is not an Affiliate thereof.

     

    (j) Change
      in Nature of Business.
      The
      Company shall not make, or permit any of its Subsidiaries to make, any change
      in
      the nature of its business as described in the Company's current report on
      Form
      8-K filed with the SEC on July 17, 2007. The
      Company shall not modify its corporate structure or purpose.

     

    
      
        
        

      

      
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    (k) Preservation
      of Existence, Etc.
      The
      Company shall maintain and preserve, and cause each of its Subsidiaries to
      maintain and preserve, its existence, rights and privileges, and become or
      remain, and cause each of its Subsidiaries to become or remain, duly qualified
      and in good standing in each jurisdiction in which the character of the
      properties owned or leased by it or in which the transaction of its business
      makes such qualification necessary. 

     

    (l) Maintenance
      of Properties, Etc.
      The
      Company shall maintain and preserve, and cause each of its Subsidiaries to
      maintain and preserve, all of its properties which are necessary or useful
      in
      the proper conduct of its business in good working order and condition, ordinary
      wear and tear excepted, and comply, and cause each of its Subsidiaries to
      comply, at all times with the provisions of all leases to which it is a party
      as
      lessee or under which it occupies property, so as to prevent any loss or
      forfeiture thereof or thereunder.

     

    (m) Maintenance
      of Insurance.
      The
      Company shall maintain, and cause each of its Subsidiaries to maintain,
      insurance with responsible and reputable insurance companies or associations
      (including, without limitation, comprehensive general liability, hazard, rent
      and business interruption insurance) with respect to its properties (including
      all real properties leased or owned by it) and business, in such amounts and
      covering such risks as is required by any governmental authority having
      jurisdiction with respect thereto or as is carried generally in accordance
      with
      sound business practice by companies in similar businesses similarly situated
      and in any event in amount, adequacy and scope reasonably satisfactory to the
      Collateral Agent. All policies covering the Collateral are to be made payable
      to
      the Collateral Agent for the benefit of the Holder and the holder of the Other
      Notes, as its interests may appear, in case of loss, under a standard
      non-contributory "lender" or "secured party" clause and are to contain such
      other provisions as the Collateral Agent may require to fully protect the
      interest of the Holder and the holder of the Other Notes in the Collateral
      and
      to any payments to be made under such policies. All certificates of insurance
      are to be delivered to the Collateral Agent and the policies are to be premium
      prepaid, with the loss payable and additional insured endorsement in favor
      of
      the Collateral Agent and such other Persons as the Collateral Agent may
      designate from time to time, and shall provide for not less than 30 days' prior
      written notice to the Collateral Agent of the exercise of any right of
      cancellation. If the Company or any of its Subsidiaries fails to maintain such
      insurance, the Collateral Agent may arrange for such insurance, but at the
      Company's expense and without any responsibility on the Collateral Agent's
      part
      for obtaining the insurance, the solvency of the insurance companies, the
      adequacy of the coverage, or the collection of claims. Upon the occurrence
      and
      during the continuance of an Event of Default, the Collateral Agent shall have
      the sole right, in the name of the Holder and the holders of the Other Notes,
      the Company and its Subsidiaries, to file claims under any insurance policies,
      to receive, receipt and give acquittance for any payments that may be payable
      thereunder, and to execute any and all endorsements, receipts, releases,
      assignments, reassignments or other documents that may be necessary to effect
      the collection, compromise or settlement of any claims under any such insurance
      policies.

     

    
      
        
        

      

      
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    (n) Conversion
      Price Adjustment Upon Failure to Meet Higher EBITDA Thresholds.
      Upon
      the failure of the
      Company to achieve the minimum Consolidated EBITDA for the relevant Fiscal
      Quarter as set forth in Schedule
      I-B
      attached
      hereto (the "Higher
      EBITDA Thresholds"),
      the
      then current Conversion Price hereunder shall be reset on
      the
      seventh (7th) Trading Date after the earlier to occur of the applicable
      Operating Results Announcement Date (as defined below) or
      Operating Results Announcement Date Deadline (as
      defined below) to
      the
      lower of the iv)
      then
      existing Conversion Price and v)
      85% of
the
      Average Market Price as of the date that is seven (7) Trading Days after
such
      Announcement Date or Announcement Date Deadline, as applicable; provided
      however, that the Conversion Price will not be reset with respect to the first
      Fiscal Quarter of 2008 if the Company has redeemed an amount equal to at least
      fifty percent (50%) of the Original
      Principal Amount of this Note on the Issuance Date prior
      to
      the earlier of the applicable (x) Operating Results Announcement Date and (y)
      Operating Results Announcement Deadline.

     

    (o) Debt
      Coverage Ratio.
      From
      and after December 31, 2008, the Company shall maintain a Consolidated Total
      Debt to Consolidated EBITDA Ratio equal to or less than the applicable
      Consolidated Total Debt to Consolidated EBITDA Ratio set forth in Schedule
      I-C
      attached
      hereto (the "Debt
      Coverage Thresholds"
      and
      together with the Lower EBITDA Thresholds and the Higher EBITDA Thresholds,
      the
      "Financial
      Milestones").

     

    (p) Operating
      Results Announcement.
      Commencing with the Fiscal Quarter ending December 31, 2007, the Company shall
      publicly disclose and disseminate (an "Operating
      Results Announcement Date")
      its
      operating results (the "Operating
      Results")
      (x)
      for each of the first three (3) Fiscal Quarters of each fiscal year no later
      than the forty-fifth (45th)
      day
      after the end of such Fiscal Quarter and (y) for the fourth (4th)
      Fiscal
      Quarter of each fiscal year, no later than the ninetieth (90th)
      day
      after the end of such Fiscal Quarter (each of the foregoing, an "Operating
      Results Announcement Deadline").
      Such
      Operating Results shall include the amount of the Consolidated EBITDA and
      Consolidated Total Debt for the relevant Fiscal Quarter, and whether the Company
      has met each of the Financial Milestones, and, in the event the Company shall
      have achieved the Financial Milestones, such announcement shall include a
      statement to the effect that the Company has achieved the Financial Milestone
      for such Fiscal Quarter; provided, however, that in the event the Company is
      delayed in announcing its Operating Results for any such Fiscal Quarter, the
      Company shall, in lieu of the foregoing, (i) publicly disclose (the
      "Interim
      Announcement")
      on a
      Current Report on Form 8-K on or prior to the applicable Operating Results
      Date
      Deadline that it has complied with all of its covenants under the Notes,
      including, without limitation, the achievement of the Financial Milestones
      for
      such Fiscal Quarter and (ii) provide to the holders of Notes a certification,
      in
      accordance with terms of the next sentence, certifying the same. On each
      Operating Results Announcement Date or Interim Announcement Date, the Company
      shall also provide to the Holders a certification, executed on behalf of the
      Company by the Chief Financial Officer of the Company, certifying that the
      Company achieved each applicable Financial Milestone and, in the case of the
      Interim Announcement Date, setting forth the Consolidated EBITDA and
      Consolidated Total Debt for the applicable Fiscal Quarter required by the
      foregoing sentence.

     

    (15) PARTICIPATION.
      The
      Holder, as the holder of this Note, shall be entitled to receive such dividends
      paid and distributions made to the holders of Common Stock to the same extent
      as
      if the Holder had converted this Note into Common Stock (without regard to
      any
      limitations on conversion herein or elsewhere) and had held such shares of
      Common Stock on the record date for such dividends and distributions. Payments
      under the preceding sentence shall be made concurrently with the dividend or
      distribution to the holders of Common Stock. 

     

    
      
        
        

      

      
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    (16) VOTE
      TO ISSUE, OR CHANGE THE TERMS OF, NOTES.
      The
      affirmative vote at a meeting duly called for such purpose or the written
      consent without a meeting of the Required Holders shall be required for any
      change or amendment to this Note or the Other Notes. No
      consideration shall be offered or paid to any holder of Notes to amend or
      consent to a waiver or modification of the Notes unless the same consideration
      also is offered to all of the holders of Notes.

     

    (17) TRANSFER.
      This
      Note and any shares of Common Stock issued upon conversion of this Note may
      be
      offered, sold, assigned or transferred by the Holder without the consent of
      the
      Company, subject only to the provisions of Section 2(f) of the Securities
      Purchase Agreement.

     

    (18) REISSUANCE
      OF THIS NOTE.

     

    (a) Transfer.
      If this
      Note is to be transferred, the Holder shall surrender this Note to the Company,
      whereupon the Company will forthwith issue and deliver upon the order of the
      Holder a new Note (in accordance with Section 18(d)), registered as the Holder
      may request, representing the outstanding Principal being transferred by the
      Holder and, if less then the entire outstanding Principal is being transferred,
      a new Note (in accordance with Section 18(d)) to the Holder representing the
      outstanding Principal not being transferred. The Holder and any assignee, by
      acceptance of this Note, acknowledge and agree that, vi)
      by
      reason of the provisions of Section 3(c)(iii) following conversion or redemption
      of any portion of this Note, the outstanding Principal represented by this
      Note
      may be less than the Principal stated on the face of this Note and vii)
      it will
      be bound by the appointment of the Collateral Agent (as defined in the
      Securities Purchase Agreement) and collateral agency provisions regarding such
      appointment as set forth in Section 4(o) of the Securities Purchase
      Agreement.

     

    (b) Lost,
      Stolen or Mutilated Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note, and, in the case of loss,
      theft or destruction, of any indemnification undertaking by the Holder to the
      Company in customary form and, in the case of mutilation, upon surrender and
      cancellation of this Note, the Company shall execute and deliver to the Holder
      a
      new Note (in accordance with Section 18(d)) representing the outstanding
      Principal.

     

    (c) Note
      Exchangeable for Different Denominations.
      This
      Note is exchangeable, upon the surrender hereof by the Holder at the principal
      office of the Company, for a new Note or Notes (in accordance with Section
      18(d)) representing in the aggregate the outstanding Principal of this Note,
      and
      each such new Note will represent such portion of such outstanding Principal
      as
      is designated by the Holder at the time of such surrender.

     

    (d) Issuance
      of New Notes.
      Whenever the Company is required to issue a new Note pursuant to the terms
      of
      this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall
      represent, as indicated on the face of such new Note, the Principal remaining
      outstanding (or in the case of a new Note being issued pursuant to Section
      18(a)
      or Section 18(c), the Principal designated by the Holder which, when added
      to
      the principal represented by the other new Notes issued in connection with
      such
      issuance, does not exceed the Principal remaining outstanding under this Note
      immediately prior to such issuance of new Notes), (iii) shall have an issuance
      date, as indicated on the face of such new Note, which is the same as the
      Issuance Date of this Note, (iv) shall have the same rights and conditions
      as
      this Note, and (v) shall represent accrued and unpaid Interest and Late Charges,
      if any, on the Principal and Interest of this Note from the Issuance
      Date.

     

    
      
        
        

      

      
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    (19) REMEDIES,
      CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
      RELIEF.
      The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note and any of the other Transaction Documents
      at
      law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the Holder's right to pursue
      actual and consequential damages for any failure by the Company to comply with
      the terms of this Note. Amounts set forth or provided for herein with respect
      to
      payments, conversion and the like (and the computation thereof) shall be the
      amounts to be received by the Holder and shall not, except as expressly provided
      herein, be subject to any other obligation of the Company (or the performance
      thereof). The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, the Holder shall be entitled,
      in
      addition to all other available remedies, to an injunction restraining any
      breach, without the necessity of showing economic loss and without any bond
      or
      other security being required.

     

    (20) PAYMENT
      OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
      If (a)
      this Note is placed in the hands of an attorney for collection or enforcement
      or
      is collected or enforced through any legal proceeding or the Holder otherwise
      takes action to collect amounts due under this Note or to enforce the provisions
      of this Note or (b) there occurs any bankruptcy, reorganization, receivership
      of
      the Company or other proceedings affecting Company creditors' rights and
      involving a claim under this Note, then the Company shall pay the costs incurred
      by the Holder for such collection, enforcement or action or in connection with
      such bankruptcy, reorganization, receivership or other proceeding, including,
      but not limited to, financial advisory fees and attorneys' fees and
      disbursements.

     

    (21) CONSTRUCTION;
      HEADINGS.
      This
      Note shall be deemed to be jointly drafted by the Company and all the Purchasers
      and shall not be construed against any person as the drafter hereof. The
      headings of this Note are for convenience of reference and shall not form part
      of, or affect the interpretation of, this Note.

     

    (22) FAILURE
      OR INDULGENCE NOT WAIVER.
      No
      failure or delay on the part of the Holder in the exercise of any power, right
      or privilege hereunder shall operate as a waiver thereof, nor shall any single
      or partial exercise of any such power, right or privilege preclude other or
      further exercise thereof or of any other right, power or privilege.

     

    
      
        
        

      

      
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          24
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    (23) DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of (a) the Closing Bid Price, the
      Closing Sale Price or the Weighted Average Price or (b) the arithmetic
      calculation of the Conversion Rate or any Redemption Price, the Company shall
      submit the disputed determinations or arithmetic calculations via facsimile
      within one (1) Business Day of receipt, or deemed receipt, of the Conversion
      Notice or Redemption Notice or other event giving rise to such dispute, as the
      case may be, to the Holder. If the Holder and the Company are unable to agree
      upon such determination or calculation within one (1) Business Day of such
      disputed determination or arithmetic calculation being submitted to the Holder,
      then the Company shall, within one (1) Business Day submit via facsimile (a)
      the
      disputed determination of the Closing Bid Price, the Closing Sale Price or
      the
      Weighted Average Price to an independent, reputable investment bank selected
      by
      the Company and approved by the Holder or (b) the disputed arithmetic
      calculation of the Conversion Rate or any Redemption Price to the Company's
      independent, outside accountant. The Company, at the Company's expense, shall
      cause the investment bank or the accountant, as the case may be, to perform
      the
      determinations or calculations and notify the Company and the Holder of the
      results no later than five (5) Business Days from the time it receives the
      disputed determinations or calculations. Such investment bank's or accountant's
      determination or calculation, as the case may be, shall be binding upon all
      parties absent demonstrable error.

     

    (24) NOTICES;
      PAYMENTS.

     

    (a) Notices.
      Whenever notice is required to be given under this Note, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Securities Purchase Agreement. The Company shall provide the Holder with
      prompt written notice of all actions taken pursuant to this Note, including
      in
      reasonable detail a description of such action and the reason therefore. Without
      limiting the generality of the foregoing, the Company will give written notice
      to the Holder (i) immediately upon any adjustment of the Conversion Price,
      setting forth in reasonable detail, and certifying, the calculation of such
      adjustment and (ii) at least twenty (20) days prior to the date on which the
      Company closes its books or takes a record (A) with respect to any dividend
      or
      distribution upon the Common Stock, (B) with respect to any pro rata
      subscription offer to holders of Common Stock or (C) for determining rights
      to
      vote with respect to any Fundamental Transaction, dissolution or liquidation,
      provided in each case that such information shall be made known to the public
      prior to or in conjunction with such notice being provided to the
      Holder.

     

    (b) Payments.
      Whenever any payment of cash is to be made by the Company to any Person pursuant
      to this Note, such payment shall be made in lawful money of the United States
      of
      America by a check drawn on the account of the Company and sent via overnight
      courier service to such Person at such address as previously provided to the
      Company in writing (which address, in the case of each of the Purchasers, shall
      initially be as set forth on the Schedule of Buyers attached to the Securities
      Purchase Agreement); provided that the Holder may elect to receive a payment
      of
      cash via wire transfer of immediately available funds by providing the Company
      with prior written notice setting out such request and the Holder's wire
      transfer instructions. Whenever any amount expressed to be due by the terms
      of
      this Note is due on any day which is not a Business Day, the same shall instead
      be due on the next succeeding day which is a Business Day and, in the case
      of
      any Interest Date which is not the date on which this Note is paid in full,
      the
      extension of the due date thereof shall not be taken into account for purposes
      of determining the amount of Interest due on such date. Any amount of Principal
      or other amounts due under the Transaction Documents which is not paid when
      due
      shall result in a late charge being incurred and payable by the Company in
      an
      amount equal to interest on such amount at the rate of eighteen percent (18%)
      per annum from the date such amount was due until the same is paid in full
      ("Late
      Charge").

     

    
      
        
        

      

      
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          25
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    (25) CANCELLATION.
      After
      all Principal, accrued Interest and other amounts at any time owed on this
      Note
      have been paid in full, this Note shall automatically be deemed canceled, shall
      be surrendered to the Company for cancellation and shall not be
      reissued.

     

    (26) WAIVER
      OF NOTICE.
      To the
      extent permitted by law, the Company hereby waives demand, notice, protest
      and
      all other demands and notices in connection with the delivery, acceptance,
      performance, default or enforcement of this Note and the Securities Purchase
      Agreement.

     

    (27) GOVERNING
      LAW; JURISDICTION;
      SEVERABILITY; JURY TRIAL.
      This
      Note shall be construed and enforced in accordance with, and all questions
      concerning the construction, validity, interpretation and performance of this
      Note 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.
      The Company 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. Nothing contained herein
      shall be deemed to limit in any way any right to serve process in any manner
      permitted by law. In the event that any provision of this Note is invalid or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of this Note.
      Nothing contained herein shall be deemed or operate to preclude the Holder
      from
      bringing suit or taking other legal action against the Company in any other
      jurisdiction to collect on the Company's obligations to the Holder, to realize
      on any collateral or any other security for such obligations, or to enforce
      a
      judgment or other court ruling in favor of the Holder. THE
      COMPANY 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 NOTE OR ANY TRANSACTION CONTEMPLATED
      HEREBY.

     

    (28) CERTAIN
      DEFINITIONS.
      For
      purposes of this Note, the following terms shall have the following
      meanings:

     

    (a) "Additional
      Interest Amount"
      means,
      an
      amount equal to the difference between (i) an amount of Interest that, but
      for
      the applicable redemption, would have been paid to the Holder on such redemption
      amount from the Issuance Date through the Maturity Date and (ii) the amount
      of
      Interest already paid to the Holder through the applicable redemption
      date.

     

    (b) "Approved
      Stock Plan"
      means
      any employee benefit plan which has been or hereafter is approved by the Board
      of Directors of the Company, pursuant to which the Company's securities may
      be
      issued to any employee, officer or director for services provided to the
      Company.

     

    
      
        
        

      

      
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          26
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    (c) "Available
      Initial Company Optional Redemption Amount"
      means
      an amount equal to the difference between (i) one-half of the Original Principal
      Amount of this Note on the Issuance Date (the "Initial
      Company Optional Redemption Amount")
      and
      (ii) the aggregate of all Principal amounts previously converted or redeemed
      pursuant to any of the terms of this Note up to the Initial Company Redemption
      Amount.

     

    (d) "Available
      Additional Company Optional Redemption Amount"
      means
      an amount equal to the difference between viii)
      the
      Original Principal Amount of this Note on the Issuance Date and ix)
      the
      aggregate of all Principal amounts previously converted or redeemed pursuant
      to
      any of the terms of this Note exceeding the Available Initial Company Redemption
      Amount.

     

    (e) "Available
      Redemption Amount"
      means
      an amount equal to the difference between (i) one-half of the Original Principal
      Amount of this Note on the Issuance Date and (ii) the aggregate of all Principal
      amounts previously redeemed pursuant to Section 11(a).

     

    (f) "Average
      Market Price"
      means,
      for any given date, the lesser of (i) the arithmetic average of the lowest
      Weighted Average Price of the Common Stock during the twenty (20) consecutive
      Trading Days ending on the Trading Day immediately prior to such given date
      (the
      "Measuring
      Period")
      and
      (ii) the arithmetic average of the Weighted Average Price of the Common Stock
      of
      the three (3) Trading Days with the lowest Weighted Average Price of the Common
      Stock during the Measuring Period; provided, that all such determinations shall
      be appropriately adjusted for any stock split, stock dividend, stock combination
      or other similar transaction that proportionately decreases or increases the
      Common Stock during such periods.

     

    (g) "Bloomberg"
      means
      Bloomberg Financial Markets.

     

    (h) "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.

     

    (i) "Calendar
      Quarter"
      means
      each of: the period beginning on and including January 1 and ending on and
      including March 31; the period beginning on and including April 1 and ending
      on
      and including June 30; the period beginning on and including July 1 and ending
      on and including September 30; and the period beginning on and including October
      1 and ending on and including December 31.

     

    (j) "Change
      of Control"
      means
      any Fundamental Transaction other than (A) any reorganization, recapitalization
      or reclassification of the Common Stock, in which holders of the Company's
      voting power immediately prior to such reorganization, recapitalization or
      reclassification continue after such reorganization, recapitalization or
      reclassification to hold publicly traded securities and, directly or indirectly,
      the voting power of the surviving entity or entities necessary to elect a
      majority of the members of the board of directors (or their equivalent if other
      than a corporation) of such entity or entities, or (B) pursuant to a migratory
      merger effected solely for the purpose of changing the jurisdiction of
      incorporation of the Company, or (C) any Fundamental Transaction in which the
      Holder is the Person or part of the group of Persons described in clauses (i)(A)
      - (D) or clause (ii) of the definition thereof.

     

    
      
        
        

      

      
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          27
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    (k) "Closing
      Bid Price"
      and
      "Closing
      Sale Price"
      means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
      by Bloomberg, or, if the Principal Market is not the principal securities
      exchange or trading market for such security, the last closing bid price or
      last
      trade price, respectively, of such security on the principal securities exchange
      or trading market where such security is listed or traded as reported by
      Bloomberg, or if the foregoing do not apply, the last closing bid price or
      last
      trade price, respectively, of such security in the over-the-counter market
      on
      the electronic bulletin board for such security as reported by Bloomberg, or,
      if
      no closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the "pink
      sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
      If
      the Closing Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price, as the case may be, of such security on such
      date shall be the fair market value as mutually determined by the Company and
      the Holder. If the Company and the Holder are unable to agree upon the fair
      market value of such security, then such dispute shall be resolved pursuant
      to
      Section 23. All such determinations to be appropriately adjusted for any stock
      dividend, stock split, stock combination or other similar transaction during
      the
      applicable calculation period.

     

    (l) "Closing
      Date"
      shall
      have the meaning set forth in the Securities Purchase Agreement which
      corresponds to the date this Note and the Other Notes were initially issued
      pursuant to the terms of the Securities Purchase Agreement.

     

    (m) "Consolidated
      EBITDA"
      means,
      with respect to any Person and its Subsidiaries for any applicable Fiscal
      Quarters, the Consolidated Net Income of such Person and its Subsidiaries as
      set
      forth in the financial statements of the Company contained in the Form 10-Q
      or
      Form 10-K of the Company for the applicable Fiscal Quarter, plus without
      duplication, the sum of the following amounts of the Company and its
      Subsidiaries for such period to the extent deducted in determining Consolidated
      Net Income of such Persons for such period: (i) Consolidated Net Interest
      Expense, (ii) income tax expense, (iii) depreciation expense and (iv)
      amortization expense.

     

    (n) "Consolidated
      Net Interest Expense"
      means,
      for any applicable period, gross interest expense of the Company and its
      Subsidiaries for such period less interest income for such period, each
      determined on a consolidated basis and in accordance with GAAP. 

     

    
      
        
        

      

      
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          28
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    (o) "Consolidated
      Net Income"
      means,
      for any applicable period, the net income (loss) of the Company and its
      Subsidiaries for such period, determined on a consolidated basis and in
      accordance with GAAP, but excluding from the determination of Consolidated
      Net
      Income (without duplication) (a) any extraordinary or non recurring gains
      or losses or gains or losses from dispositions, (b) restructuring charges,
      (c) any tax refunds, net operating losses or other net tax benefits and
      (d) effects of discontinued operations.

     

    (p) "Consolidated
      Total Debt to Consolidated EBITDA Ratio"
      means,
      for any Fiscal Quarter, the ratio of (i) Consolidated Total Debt for such Fiscal
      Quarter to (ii) the Consolidated EBITDA for the trailing twelve month period
      ending with such Fiscal Quarter.

     

    (q) "Consolidated
      Total Debt"
      means,
      for any period, the total consolidated Indebtedness of the Company and its
      Subsidiaries for such period, as determined in accordance with GAAP consistent
      with past practices.

     

    (r) "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.

     

    (s) "Convertible
      Securities"
      means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for Common Stock.

     

    (t) "Eligible
      Market"
      means
      the Principal Market, The New York Stock Exchange, Inc., the American Stock
      Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market or The
      NASDAQ Capital Market, or any market that is a successor to any of the
      foregoing.

     

    (u) "Equity
      Value Redemption Premium"
      means
      for any Change of Control Notice or Event of Default Notice, as applicable,
      delivered or required to be delivered in connection with a Change of Control
      or
      Event of Default, as applicable, 150%.

     

    (v) "Excluded
      Securities"
      means
      any Common Stock issued or issuable: (i) in connection with any Approved Stock
      Plan; (ii) upon conversion of the Notes or the exercise of the Warrants; (iii)
      in connection with any stock split, stock dividend, recapitalization or similar
      transaction by the Company for which adjustment is made pursuant to Section
      7(b); and (iv) upon exercise of any Options or Convertible Securities which
      are
      outstanding on the day immediately preceding the Subscription Date, provided
      that the terms of such Options or Convertible Securities are not amended,
      modified or changed on or after the Subscription Date.

     

    (w) "Fiscal
      Quarters"
      means
      each of the fiscal quarters adopted by the Company for financial reporting
      purposes that correspond to the Company's fiscal year that ends on December
      31,
      or such other fiscal quarter adopted by the Company for financial reporting
      purposes in accordance with GAAP.

     

    
      
        
        

      

      
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          29
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    (x) "Fundamental
      Transaction"
      means
      that (i) the Company shall, directly or indirectly, in one or more related
      transactions, (A) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person or Persons, if the holders of
      the
      Voting Stock (not including any shares of Voting Stock held by the Person or
      Persons making or party to, or associated or affiliated with the Persons making
      or party to, such consolidation or merger) immediately prior to such
      consolidation or merger shall hold or have the right to direct the voting of
      less than 50% of the Voting Stock or such voting securities of such other
      surviving Person immediately following such transaction, or (B) sell, assign,
      transfer, convey or otherwise dispose of all or substantially all of the
      properties or assets of the Company to another Person, or (C) allow another
      Person to make a purchase, tender or exchange offer that is accepted by the
      holders of more than the 50% of the outstanding shares of Voting Stock (not
      including any shares of Voting Stock held by the Person or Persons making or
      party to, or associated or affiliated with the Persons making or party to,
      such
      purchase, tender or exchange offer), or (D) consummate a stock purchase
      agreement or other business combination (including, without limitation, a
      reorganization, recapitalization, spin-off or scheme of arrangement) with
      another Person whereby such other Person acquires more than the 50% of the
      outstanding shares of Voting Stock (not including any shares of Voting Stock
      held by the other Person or other Persons making or party to, or associated
      or
      affiliated with the other Persons making or party to, such stock purchase
      agreement or other business combination), (E) reorganize, recapitalize or
      reclassify its Common Stock or (ii) any "person" or "group" (as these terms
      are
      used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
      become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
      Act),
      directly or indirectly, of 50% of the aggregate Voting Stock of the
      Company.

     

    (y) "GAAP"
      means
      United States generally accepted accounting principles, consistently
      applied.

     

    (z) "Indebtedness"
      of any
      Person means, without duplication (i) all indebtedness for borrowed money,
      (ii)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services, including (without limitation) "capital leases" in
      accordance with GAAP (other than trade payables entered into in the ordinary
      course of business), (iii) all reimbursement or payment obligations with respect
      to letters of credit, surety bonds and other similar instruments, (iv) 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, (v) 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), (vi) all monetary obligations under
      any
      leasing or similar arrangement which, in connection with GAAP, consistently
      applied for the periods covered thereby, is classified as a capital lease,
      (vii)
      all indebtedness referred to in clauses (i) through (vi) 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 (viii) all Contingent Obligations in respect of
      indebtedness or obligations of others of the kinds referred to in clauses (i)
      through (vii) above.

     

    
      
        
        

      

      
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    (aa) "Interest
      Rate"
      means,
      nine and one-half percent (9.50%) per annum, subject to adjustment as set forth
      in Section 2 hereof.

     

    (bb) "Options"
      means
      any rights, warrants or options to subscribe for or purchase shares of Common
      Stock or Convertible Securities.

     

    (cc) "Parent
      Entity"
      of a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

     

    (dd) "Permitted
      Indebtedness"
      means
      (i) Indebtedness incurred by the Company that is made expressly subordinate
      in
      right of payment to the Indebtedness evidenced by this Note, as reflected in
      a
      written agreement acceptable to the Holder and approved by the Holder in
      writing, and which Indebtedness does not provide at any time for (1) the
      payment, prepayment, repayment, repurchase or defeasance, directly or
      indirectly, of any principal or premium, if any, thereon until ninety-one (91)
      days after the Maturity Date or later and (2) total interest and fees at a
      rate
      in excess of the initial Interest Rate per annum (such Indebtedness, the
      "Subordinated
      Indebtedness");
      provided, however, that any Subordinated Indebtedness incurred in connection
      with the repayment of the Notes in full shall not be limited by clause (2)
      of
      the foregoing, (ii) Indebtedness secured by Permitted Liens, (iii) Indebtedness
      under this Note and the Other Notes, (iv) Indebtedness incurred by the Company,
      the proceeds of which are used to redeem this Note and the Other Notes in full,
      and (v) extensions,
      refinancings and renewals of any items in clauses (i) through (ii) above,
      provided that the principal amount is not increased or the terms modified to
      impose more burdensome terms upon the Company or its Subsidiaries, as the case
      may be.

     

    (ee) "Permitted
      Liens"
      means
      (i) any Lien for taxes not yet due or delinquent or being contested in good
      faith by appropriate proceedings for which adequate reserves have been
      established in accordance with GAAP, (ii) any statutory Lien arising in the
      ordinary course of business by operation of law with respect to a liability
      that
      is not yet due or delinquent, (iii) any Lien created by operation of law, such
      as materialmen's liens, mechanics' liens and other similar liens, arising in
      the
      ordinary course of business with respect to a liability that is not yet due
      or
      delinquent or that are being contested in good faith by appropriate proceedings,
      (iv) Liens (A) upon or in any equipment (as defined in the Security Agreement)
      acquired or held by the Company or any of its Subsidiaries to secure the
      purchase price of such equipment or indebtedness incurred solely for the purpose
      of financing the acquisition or lease of such equipment, or (B) existing on
      such
      equipment at the time of its acquisition, provided that the Lien is confined
      solely to the property so acquired and improvements thereon, and the proceeds
      of
      such equipment, (v) Liens incurred in connection with the extension, renewal
      or
      refinancing of the indebtedness secured by Liens of the type described in
      clauses (i) and (iv) above, provided that any extension, renewal or replacement
      Lien shall be limited to the property encumbered by the existing Lien and the
      principal amount of the Indebtedness being extended, renewed or refinanced
      does
      not increase, (vi) Liens securing the Company's obligations under the Notes;
      (vii) leases or subleases and licenses and sublicenses granted to others in
      the
      ordinary course of the Company's business, not interfering in any material
      respect with the business of the Company and its Subsidiaries taken as a whole,
      (viii) Liens in favor of customs and revenue authorities arising as a
      matter of law to secure payments of custom duties in connection with the
      importation of goods and (ix) Liens arising from judgments, decrees or
      attachments in circumstances not constituting an Event of Default under Section
      4(a)(viii).

     

    
      
        
        

      

      
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    (ff) "Permitted
      Vaporizer Liens"
      means
      Liens upon or in any equipment vaporizers acquired after the date hereof and
      held by the Company or any of its Subsidiaries to secure Indebtedness not to
      exceed $4,000,000 in the aggregate incurred solely for the purpose of financing
      the vaporizers, provided that the vaporizer is purchased with the proceeds
      of
      such financing and the Lien is confined solely to the acquired vaporizers and
      the proceeds of such vaporizers.

     

    (gg) "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization, any other entity and
      a
      government or any department or agency thereof. 

     

    (hh) "Principal
      Market"
      means
      the OTC Bulletin Board.

     

    (ii) "Redemption
      Notices"
      means,
      collectively, any Event of Default Redemption Notices, any Change of Control
      Redemption Notices, any Holder Optional Redemption Notices and Company Optional
      Redemption Notices, each of the foregoing, individually, a Redemption
      Notice.

     

    (jj) "Redemption
      Premium"
      means
      (i) in the case of the Events of Default described in Section 4(a)(i) - (vi)
      and
      (ix) - (xix), 125% or (ii) in the case of the Events of Default described in
      Section 4(a)(vii) - (viii), 100%.

     

    (kk) "Redemption
      Prices"
      means,
      collectively, the Event of Default Redemption Price, Change of Control
      Redemption Price, the Holder Optional Redemption Price and the Company Optional
      Redemption Price each of the foregoing, individually, a Redemption
      Price.

     

    (ll) "Registration
      Rights Agreement"
      means
      that certain Registration Rights Agreement dated as of the Subscription Date
      by
      and among the Company and the initial holders of the Notes.

     

    (mm) "Required
      Holders"
      means
      the holders of Notes representing at least majority of the aggregate principal
      amount of the Notes then outstanding.

     

    (nn) "SEC"
      means
      the United States Securities and Exchange Commission. 

     

    
      
        
        

      

      
        -
          32
          -

        
          

        

      

      
        
        

      

    

     

    (oo) "Securities
      Purchase Agreement"
      means
      that certain securities purchase agreement dated as of the Subscription Date
      by
      and among the Company and the initial holders of the Notes pursuant to which
      the
      Company issued the Notes and Warrants. 

     

    (pp) "Subscription
      Date"
      means
      December 31, 2007.

     

    (qq) "Subsidiary"
      means
      any entity in which the Company, directly or indirectly, owns any of the capital
      stock or holds an equity or similar interest (other
      than beneficial ownership of less than 5% of common stock of a publicly traded
      corporation).

     

    (rr) "Successor
      Entity"
      means
      the Person, which may be the Company, formed by, resulting from or surviving
      any
      Fundamental Transaction or the Person with which such Fundamental Transaction
      shall have been made, provided that if such Person is not a publicly traded
      entity whose common stock or equivalent equity security is quoted or listed
      for
      trading on an Eligible Market, Successor Entity shall mean such Person's Parent
      Entity.

     

    (ss) "Trading
      Day"
      means
      any day on which the Common Stock is traded on the Principal Market, or, if
      the
      Principal Market is not the principal trading market for the Common Stock,
      then
      on the principal securities exchange or securities market on which the Common
      Stock is then traded; provided that "Trading
      Day"
      shall
      not include any day on which the Common Stock is scheduled to trade on such
      exchange or market for less than 4.5 hours or any day that the Common Stock
      is
      suspended from trading during the final hour of trading on such exchange or
      market (or if such exchange or market does not designate in advance the closing
      time of trading on such exchange or market, then during the hour ending at
      4:00:00 p.m., New York Time).

     

    (tt) "Voting
      Stock"
      of a
      Person means capital stock of such Person of the class or classes pursuant
      to
      which the holders thereof have the general voting power to elect, or the general
      power to appoint, at least a majority of the board of directors, managers or
      trustees of such Person (irrespective of whether or not at the time capital
      stock of any other class or classes shall have or might have voting power by
      reason of the happening of any contingency).

     

    (uu) "Warrants"
      has the
      meaning ascribed to such term in the Securities Purchase Agreement, and shall
      include all warrants issued in exchange therefor or replacement
      thereof.

     

    (vv) "Weighted
      Average Price"
      means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market during the period beginning at 9:30:01
      a.m., New York Time (or such other time as the Principal Market publicly
      announces is the official open of trading), and ending at 4:00:00 p.m., New
      York
      Time (or such other time as the Principal Market publicly announces is the
      official close of trading) as reported by Bloomberg through its "Volume at
      Price" functions, or, if the foregoing does not apply, the dollar
      volume-weighted average price of such security in the over-the-counter market
      on
      the electronic bulletin board for such security during the period beginning
      at
      9:30:01 a.m., New York Time (or such other time as such market publicly
      announces is the official open of trading), and ending at 4:00:00 p.m., New
      York
      Time (or such other time as such market publicly announces is the official
      close
      of trading) as reported by Bloomberg, or, if no dollar volume-weighted average
      price is reported for such security by Bloomberg for such hours, the average
      of
      the highest closing bid price and the lowest closing ask price of any of the
      market makers for such security as reported in the "pink sheets" by Pink Sheets
      LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average
      Price cannot be calculated for a security on a particular date on any of the
      foregoing bases, the Weighted Average Price of such security on such date shall
      be the fair market value as mutually determined by the Company and the Holder.
      If the Company and the Holder are unable to agree upon the fair market value
      of
      such security, then such dispute shall be resolved pursuant to Section 23.
      All
      such determinations to be appropriately adjusted for any stock dividend, stock
      split, stock combination or other similar transaction during the applicable
      calculation period.

     

    
      
        
        

      

      
        -
          33
          -

        
          

        

      

      
        
        

      

    

     

    (29) DISCLOSURE.
      Upon
      receipt or delivery by the Company of any notice in accordance with the terms
      of
      this Note, unless the Company has in good faith determined that the matters
      relating to such notice do not constitute material, nonpublic information
      relating to the Company or its Subsidiaries, the Company shall within one (1)
      Business Day after any such receipt or delivery publicly disclose such material,
      nonpublic information on a Current Report on Form 8-K or otherwise. In the
      event
      that the Company believes that a notice contains material, nonpublic
      information, relating to the Company or its Subsidiaries, the Company shall
      indicate to the Holder contemporaneously with delivery of such notice, and
      in
      the absence of any such indication, the Holder shall be allowed to presume
      that
      all matters relating to such notice do not constitute material, nonpublic
      information relating to the Company or its Subsidiaries. 

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        -
          34
          -

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
      the
      Issuance Date set out above.

    

      
        	 	
                RxELITE,
                  INC.

              
	 	 
	 	 
	 	
                By:

              	/s/
                Jonathan Houssian	 
	 	
                Name:
                  Jonathan Houssian

              
	 	
                Title:  
                  President and Chief Executive
                  Officer

              

      

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      I

     

    FINANCIAL
      MILESTONES

     

    Schedule
      I-A

    

    Lower
      EBITDA Thresholds

    
      

        
          	 	 	
                  Fiscal

                  Quarter

                  ending March

                  31, 2008

                	 	
                  Fiscal Quarter

                  ending

                  June 30, 2008

                	 	
                  Fiscal

                  Quarter

                  ending

                  September

                  30, 2008

                	 	
                  Fiscal Quarter

                  ending

                  December 31,
                    2008

                	 	
                  Each

                  Fiscal Quarter

                  Thereafter

                	 
	
                  Consolidated
                    EBITDA

                	 	$	
                  -1,500,000

                	 	$ 	
                  -1,000,000

                	 	
                  $

                	
                  450,000

                	 	
                  $

                	
                  1,000,000

                	 	
                  $

                	
                  1,000,000

                	 

        

      

      

      Schedule
        I-B

      

      Higher
        EBITDA Thresholds

      

      
        	 	 	
                Fiscal Quarter

                ending March

                31, 2008

              	 	
                Fiscal Quarter

                ending

                June 30, 2008

              	 	
                Fiscal

                Quarter

                ending

                September

                30, 2008

              	 	
                Fiscal Quarter

                ending

                December 31,

                2008

              	 	
                Each

                Fiscal Quarter

                Thereafter

              	 
	
                Consolidated
                  EBITDA

              	 	$	
                -500,000

              	 	
                $

              	
                0.00

              	 	
                $

              	
                1,000,000

              	 	
                $

              	
                2,000,000

              	 	
                $

              	
                2,000,000

              	 

      

      

      Schedule
        I-C

      

      Debt
        Coverage Thresholds

      

      
        	 	 	
                Fiscal Quarter

                ending

                December 31,

                2007

              	 	
                Fiscal

                Quarter

                ending March

                31, 2008

              	 	
                Fiscal Quarter

                ending
                  

                June 30, 2008

              	 	
                Fiscal

                Quarter

                ending

                September

                30, 2008

              	 	
                Fiscal Quarter

                ending

                December 31,

                2008

              	 	
                Each

                Fiscal Quarter

                Thereafter

              	 
	
                Consolidated
                  Total Debt to Consolidated EBITDA Ratio

              	 	 	
                3.50

              	 	 	
                3.50

              	 	 	
                3.50

              	 	 	
                3.50

              	 	 	
                3.00

              	 	 	
                3.00

              	 

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    SCHEDULE
      14(h)

     

    Change
      in Collateral

     

    1404
      North Main Street

    Meridian,
      Idaho 83642

     

    1205
      Highway 20

    Mountain
      Home, ID 83647

     

    16961
      Madison Road

    Nampa,
      ID
      8368NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE 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.

     

    RxElite,
      Inc.

     

    Warrant
      To Purchase Common Stock

    

    Warrant
      No.: 1

    Number
      of
      Shares of Common Stock: 13,985,083

    Date
      of
      Issuance: December 31, 2007 ("Issuance
      Date")

     

    RxElite,
      Inc., a Delaware corporation, (the "Company"),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, CASTLERIGG MASTER INVESTMENTS
      LTD., the registered holder hereof or its permitted assigns (the "Holder"),
      is
      entitled, subject to the terms set forth below, to purchase from the Company,
      at
      the Exercise Price (as defined below) then in effect, upon surrender of this
      Warrant to Purchase Common Stock (including any Warrants to purchase Common
      Stock issued in exchange, transfer or replacement hereof, the "Warrant"),
      at
      any time or times on or after the date hereof, but not after 11:59 p.m., New
      York Time, on the Expiration Date (as defined below), Thirteen Million Nine
      Hundred Eighty Five Thousand Eighty Three (13,985,083) fully paid nonassessable
      shares of Common Stock (as defined below) (the
      "Warrant
      Shares").
      Except as otherwise defined herein, capitalized terms in this Warrant shall
      have
      the meanings set forth in Section 16. This Warrant is one of the Warrants to
      purchase Common Stock (the "SPA
      Warrants")
      issued
      pursuant to Section 1 of that certain Securities Purchase Agreement, dated
      as of
      December 31, 2007 (the "Subscription
      Date"),
      by
      and among the Company and the investors (the "Buyers")
      referred to therein (the "Securities
      Purchase Agreement").

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1. EXERCISE
      OF WARRANT.

     

    (a) Mechanics
      of Exercise.
      Subject
      to the terms and conditions hereof (including, without limitation, the
      limitations set forth in Section 1(f)), this Warrant may be exercised by the
      Holder on any day on or after the date hereof in whole or in part, by
      (i) delivery of a written notice, in the form attached hereto as
Exhibit
      A
      (the
      "Exercise
      Notice"),
      of
      the Holder's election to exercise this Warrant and (ii) (A) payment to the
      Company of an amount equal to the applicable Exercise Price multiplied by the
      number of Warrant Shares as to which this Warrant is being exercised (the
      "Aggregate
      Exercise Price")
      in
      cash or by wire transfer of immediately available funds or (B) by notifying
      the
      Company that this Warrant is being exercised pursuant to a Cashless Exercise
      (as
      defined in Section 1(d)). The Holder shall not be required to deliver the
      original Warrant in order to effect an exercise hereunder. Execution and
      delivery of the Exercise Notice with respect to less than all of the Warrant
      Shares shall have the same effect as cancellation of the original Warrant and
      issuance of a new Warrant evidencing the right to purchase the remaining number
      of Warrant Shares. On or before the first Business Day following the date on
      which the Company has received each of the Exercise Notice and the Aggregate
      Exercise Price (or notice of a Cashless Exercise) (the "Exercise
      Delivery Documents"),
      the
      Company shall transmit by facsimile an acknowledgment of confirmation of receipt
      of the Exercise Delivery Documents to the Holder and the Company's transfer
      agent (the "Transfer
      Agent").
      On or
      before the third Trading Day following the date on which the Company has
      received all of the Exercise Delivery Documents (the "Share
      Delivery Date"),
      the
      Company shall (X) provided that the Transfer Agent is participating in The
      Depository Trust Company ("DTC")
      Fast
      Automated Securities Transfer Program, upon the request of the Holder, credit
      such aggregate number of shares of Common Stock to which the Holder is entitled
      pursuant to such exercise to the Holder's or its designee's balance account
      with
      DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
      Transfer Agent is not participating in the DTC Fast Automated Securities
      Transfer Program, issue
      and
      dispatch by overnight courier
      to the
      address as specified in the Exercise Notice, a certificate, registered in the
      Company's share register in the name of the Holder or its designee, for the
      number of shares of Common Stock to which the Holder is entitled pursuant to
      such exercise. Upon delivery of the Exercise Delivery Documents, the Holder
      shall be deemed for all corporate purposes to have become the holder of record
      of the Warrant Shares with respect to which this Warrant has been exercised,
      irrespective of the date such Warrant Shares are credited to the Holder's DTC
      account or the date of delivery of the certificates evidencing such Warrant
      Shares, as the case may be. If this Warrant is submitted in connection with
      any
      exercise pursuant to this Section 1(a) and the number of Warrant Shares
      represented by this Warrant submitted for exercise is greater than the number
      of
      Warrant Shares being acquired upon an exercise, then the Company shall as soon
      as practicable and in no event later than three Business Days after any exercise
      and at its own expense, issue a new Warrant (in accordance with Section 7(d))
      representing the right to purchase the number of Warrant Shares purchasable
      immediately prior to such exercise under this Warrant, less the number of
      Warrant Shares with respect to which this Warrant is exercised. No fractional
      shares of Common Stock are to be issued upon the exercise of this Warrant,
      but
      rather the number of shares of Common Stock to be issued shall be rounded up
      to
      the nearest whole number. The Company shall pay any and all taxes which may
      be
      payable with respect to the issuance and delivery of Warrant Shares upon
      exercise of this Warrant.

     

    (b) Exercise
      Price.
      For
      purposes of this Warrant, "Exercise
      Price"
      means
      $1.1262, subject to adjustment as provided herein.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (c) Company's
      Failure to Timely Deliver Securities.
      If
      the
      Company shall fail for any reason or for no reason to issue to the Holder within
      three (3) Trading Days of receipt of the Exercise Delivery Documents, a
      certificate for the number of shares of Common Stock to which the Holder is
      entitled and register such shares of Common Stock on the Company's share
      register or to credit the Holder's balance account with DTC for such number
      of
      shares of Common Stock to which the Holder is entitled upon the Holder's
      exercise of this Warrant, then, in addition to all other remedies available
      to
      the Holder, the Company shall pay in cash to the Holder on each day after such
      third Trading
      Day that the issuance of such shares of Common Stock is not timely effected
      an
      amount equal to 1.5% of the product of (A) the sum of the number of shares
      of
      Common Stock not issued to the Holder on a timely basis and to which the Holder
      is entitled and (B) the Closing Sale Price of the shares of Common Stock on
      the
      Trading Day immediately preceding the last possible date which the Company
      could
      have issued such shares of Common Stock to the Holder without violating Section
      1(a). In addition to the foregoing, if
      within
      three (3) Trading Days after the Company's receipt of the facsimile copy of
      a
      Exercise Notice the Company shall fail to issue and deliver a certificate to
      the
      Holder and register such shares of Common Stock on the Company's share register
      or credit the Holder's balance account with DTC for the number of shares of
      Common Stock to which the Holder is entitled upon the Holder's exercise
      hereunder, and if on or after such Trading Day the Holder purchases (in an
      open
      market transaction or otherwise) shares of Common Stock to deliver in
      satisfaction of a sale by the Holder of shares of Common Stock issuable upon
      such exercise that the Holder anticipated receiving from the Company (a
      "Buy-In"),
      then
      the Company shall, within three Business Days after the Holder's request and
      in
      the Holder's discretion, either (i) pay cash to the Holder in an amount equal
      to
      the Holder'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 certificate (and to issue
      such shares of Common Stock) or credit such Holder's balance account with DTC
      shall terminate, or (ii) promptly honor its obligation to deliver to the Holder
      a certificate or certificates representing such shares of Common Stock or credit
      such Holder's balance account with DTC and pay cash to the Holder 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 on the date
      of
      exercise.

     

    (d) Cashless
      Exercise.
       Notwithstanding
      anything contained herein to the contrary, if a Registration Statement (as
      defined in the Registration Rights Agreement) covering the resale of the Warrant
      Shares that are the subject of the Exercise Notice (the "Unavailable
      Warrant Shares")
      is not
      available for the resale of such Unavailable Warrant Shares, the Holder may,
      in
      its sole discretion, exercise this Warrant in whole or in part and, in lieu
      of
      making the cash payment otherwise contemplated to be made to the Company upon
      such exercise in payment of the Aggregate Exercise Price, elect instead to
      receive upon such exercise the "Net Number" of shares of Common Stock determined
      according to the following formula (a "Cashless
      Exercise"):

    

      
        	
                Net Number =  

              	
                 (A
                  x B) - (A x C) 

              
	 	
                          B

              

      

    

     

    For
      purposes of the foregoing formula:

     

    A=
      the
      total number of shares with respect to which this Warrant is then being
      exercised.

     

    B=
      the
      Closing Sale Price of the shares of Common Stock (as reported by Bloomberg)
      on
      the date immediately preceding the date of the Exercise Notice.

     

    C=
      the
      Exercise Price then in effect for the applicable Warrant Shares at the time
      of
      such exercise.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (e) Disputes.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the Warrant Shares, the Company shall promptly issue
      to the Holder the number of Warrant Shares that are not disputed and resolve
      such dispute in accordance with Section 12.

     

    (f) Limitation
      on Exercises.
      The
      Company shall not effect the exercise of this Warrant, and the Holder shall
      not
      have the right to exercise this Warrant, to the extent that after giving effect
      to such exercise, such Person (together with such Person's affiliates) would
      beneficially own in excess of 4.99% (the "Maximum
      Percentage")
      of the
      shares of Common Stock outstanding immediately after giving effect to such
      exercise. For purposes of the foregoing sentence, the aggregate number of shares
      of Common Stock beneficially owned by such Person and its affiliates shall
      include the number of shares of Common Stock issuable upon exercise of this
      Warrant with respect to which the determination of such sentence is being made,
      but shall exclude shares of Common Stock which would be issuable upon (A)
      exercise of the remaining, unexercised portion of this Warrant beneficially
      owned by such Person and its affiliates and (B) exercise or conversion of the
      unexercised or unconverted portion of any other securities of the Company
      beneficially owned by such Person and its affiliates (including, without
      limitation, any convertible notes or convertible preferred stock or warrants)
      subject to a limitation on conversion or exercise analogous to the limitation
      contained herein. Except as set forth in the preceding sentence, for purposes
      of
      this paragraph, beneficial ownership shall be calculated in accordance with
      Section 13(d) of the Securities Exchange Act of 1934, as amended (the
      "Exchange
      Act").
      For
      purposes of this Warrant, in determining the number of outstanding shares of
      Common Stock, the Holder may rely on the number of outstanding shares of Common
      Stock as reflected in (1) the Company's most recent Form 10-K, Form 10-KSB,
      Form
      10-Q, Form 10-QSB, Current Report on Form 8-K or other public filing with the
      Securities and Exchange Commission, as the case may be, (2) a more recent public
      announcement by the Company or (3) any other notice by the Company or the
      Transfer Agent setting forth the number of shares of Common Stock outstanding.
      For any reason at any time, upon the written or oral request of the Holder,
      the
      Company shall within one (1) Business Day confirm orally and in writing to
      the
      Holder the number of shares of Common Stock then outstanding. In any case,
      the
      number of outstanding shares of Common Stock shall be determined after giving
      effect to the conversion or exercise of securities of the Company, including
      the
      SPA Securities and the SPA Warrants, by the Holder and its affiliates since
      the
      date as of which such number of outstanding shares of Common Stock was reported.
      By written notice to the Company, the Holder may from time to time increase
      or
      decrease the Maximum Percentage to any other percentage not in excess of 9.99%
      specified in such notice; provided that (i) any such increase will not be
      effective until the sixty-first (61st)
      day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of SPA
      Warrants. The
      provisions of this paragraph shall be construed and implemented in a manner
      otherwise than in strict conformity with the terms of this Section 1(f) to
      correct this paragraph (or any portion hereof) which may be defective or
      inconsistent with the intended beneficial ownership limitation herein contained
      or to make changes or supplements necessary or desirable to properly give effect
      to such limitation.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (g) Insufficient
      Authorized Shares.
      If at
      any time while this Warrant remain outstanding the Company does not have a
      sufficient number of authorized and unreserved shares of Common Stock to satisfy
      its obligation to reserve for issuance upon exercise of this Warrant at least
      a
      number of shares of Common Stock equal to 130% (the "Required
      Reserve Amount")
      of the
      number of shares of Common Stock as shall from time to time be necessary to
      effect the exercise of all of this Warrant then outstanding (an "Authorized
      Share Failure"),
      then
      the Company shall immediately take all action necessary to increase the
      Company's authorized shares of Common Stock to an amount sufficient to allow
      the
      Company to reserve the Required Reserve Amount for this Warrant then
      outstanding. Without limiting the generality of the foregoing sentence, as
      soon
      as practicable after the date of the occurrence of an Authorized Share Failure,
      but in no event later than seventy-five (75) days after the occurrence of such
      Authorized Share Failure, the Company shall hold a meeting of its stockholders
      for the approval of an increase in the number of authorized shares of Common
      Stock. In connection with such meeting, the Company shall provide each
      stockholder with a proxy statement and shall use its best efforts to solicit
      its
      stockholders' approval of such increase in authorized shares of Common Stock
      and
      to cause its board of directors to recommend to the stockholders that they
      approve such proposal.

     

    2. ADJUSTMENT
      OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
      The
      Exercise Price and the number of Warrant Shares shall be adjusted from time
      to
      time as follows:

     

    (a) Adjustment
      upon Issuance of shares of Common Stock.
      If and
      whenever on or after the Subscription Date the Company issues or sells, or
      in
      accordance with this Section 2 is deemed to have issued or sold, any shares
      of
      Common Stock (including the issuance or sale of shares of Common Stock owned
      or
      held by or for the account of the Company, but excluding shares of Common Stock
      deemed to have been issued by the Company in connection with any Excluded
      Securities) for a consideration per share (the "New
      Issuance Price")
      less
      than the Exercise Price (the "Applicable
      Price")
      in
      effect immediately prior to such issue or sale or deemed issuance or sale (the
      foregoing a "Dilutive
      Issuance"),
      then
      immediately after such Dilutive Issuance, the Exercise Price then in effect
      shall be reduced to an amount equal to the New Issuance Price. Upon each such
      adjustment of the Exercise Price hereunder, the number of Warrant Shares shall
      be adjusted to the number of shares of Common Stock determined by multiplying
      the Exercise Price in effect immediately prior to such adjustment by the number
      of Warrant Shares acquirable upon exercise of this Warrant immediately prior
      to
      such adjustment and dividing the product thereof by the Exercise Price resulting
      from such adjustment. For purposes of determining the adjusted Exercise Price
      under this Section 2(a), the following shall be applicable:

     

    (i) Issuance
      of Options.
      If the
      Company in any manner grants any Options and the lowest price per share for
      which one share of Common Stock is issuable upon the exercise of any such Option
      or upon conversion, exercise or exchange of any Convertible Securities issuable
      upon exercise of any such Option is less than the Applicable Price, then such
      share of Common Stock shall be deemed to be outstanding and to have been issued
      and sold by the Company at the time of the granting or sale of such Option
      for
      such price per share. For purposes of this Section 2(a)(i), the "lowest price
      per share for which one share of Common Stock is issuable upon exercise of
      such
      Options or upon conversion, exercise or exchange of such Convertible Securities
      issuable upon exercise of any such Option" shall be equal to the sum of the
      lowest amounts of consideration (if any) received or receivable by the Company
      with respect to any one share of Common Stock upon the granting or sale of
      the
      Option, upon exercise of the Option and upon conversion, exercise or exchange
      of
      any Convertible Security issuable upon exercise of such Option. No further
      adjustment of the Exercise Price or number of Warrant Shares shall be made
      upon
      the actual issuance of such shares of Common Stock or of such Convertible
      Securities upon the exercise of such Options or upon the actual issuance of
      such
      shares of Common Stock upon conversion, exercise or exchange of such Convertible
      Securities.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (ii) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one share of Common Stock is issuable upon the
      conversion, exercise or exchange thereof is less than the Applicable Price,
      then
      such share of Common Stock shall be deemed to be outstanding and to have been
      issued and sold by the Company at the time of the issuance or sale of such
      Convertible Securities for such price per share. For the purposes of this
      Section 2(a)(ii), the "lowest price per share for which one share of Common
      Stock is issuable upon the conversion, exercise or exchange thereof" shall
      be
      equal to the sum of the lowest amounts of consideration (if any) received or
      receivable by the Company with respect to one share of Common Stock upon the
      issuance or sale of the Convertible Security and upon conversion, exercise
      or
      exchange of such Convertible Security. No further adjustment of the Exercise
      Price or number of Warrant Shares shall be made upon the actual issuance of
      such
      shares of Common Stock upon conversion, exercise or exchange of such Convertible
      Securities, and if any such issue or sale of such Convertible Securities is
      made
      upon exercise of any Options for which adjustment of this Warrant has been
      or is
      to be made pursuant to other provisions of this Section 2(a), no further
      adjustment of the Exercise Price or number of Warrant Shares shall be made
      by
      reason of such issue or sale.

     

    (iii) Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options, the additional consideration, if
      any, payable upon the issue, conversion, exercise or exchange of any Convertible
      Securities, or the rate at which any Convertible Securities are convertible
      into
      or exercisable or exchangeable for shares of Common Stock increases or decreases
      at any time, the Exercise Price and the number of Warrant Shares in effect
      at
      the time of such increase or decrease shall be adjusted to the Exercise Price
      and the number of Warrant Shares which would have been in effect at such time
      had such Options or Convertible Securities provided for such increased or
      decreased purchase price, additional consideration or increased or decreased
      conversion rate, as the case may be, at the time initially granted, issued
      or
      sold. For purposes of this Section 2(a)(iii), if the terms of any Option or
      Convertible Security that was outstanding as of the date of issuance of this
      Warrant are increased or decreased in the manner described in the immediately
      preceding sentence, then such Option or Convertible Security and the shares
      of
      Common Stock deemed issuable upon exercise, conversion or exchange thereof
      shall
      be deemed to have been issued as of the date of such increase or decrease.
      No
      adjustment pursuant to this Section 2(a)(iii) shall be made if such adjustment
      would result in an increase of the Exercise Price then in effect or a decrease
      in the number of Warrant Shares.

     

    
      
        
        

      

      
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    (iv) Calculation
      of Consideration Received.
      In case
      any Option or Convertible Security is issued in connection with the issue or
      sale of other securities of the Company, together comprising one integrated
      transaction in which no specific consideration is allocated to such Option
      or
      Convertible Security by the parties thereto, the Option or Convertible Security
      will be deemed to have been issued for a consideration of $0.01. If any shares
      of Common Stock, Options or Convertible Securities are issued or sold or deemed
      to have been issued or sold for cash, the consideration received therefor will
      be deemed to be the net amount received by the Company therefor. If any shares
      of Common Stock, Options or Convertible Securities are issued or sold for a
      consideration other than cash, the amount of such consideration received by
      the
      Company will be the fair value of such consideration, except where such
      consideration consists of publicly traded securities, in which case the amount
      of consideration received by the Company will be the Closing Sale Price of
      such
      security on the date of receipt. If any shares of Common Stock, Options or
      Convertible Securities are issued to the owners of the non-surviving entity
      in
      connection with any merger in which the Company is the surviving entity, the
      amount of consideration therefor will be deemed to be the fair value of such
      portion of the net assets and business of the non-surviving entity as is
      attributable to such shares of Common Stock, Options or Convertible Securities,
      as the case may be. The fair value of any consideration other than cash or
      publicly traded securities will be determined jointly by the Company and the
      Required Holders. If such parties are unable to reach agreement within ten
      (10)
      days after the occurrence of an event requiring valuation (the "Valuation
      Event"),
      the
      fair value of such consideration will be determined within five (5) Business
      Days after the tenth day following the Valuation Event by an independent,
      reputable appraiser jointly selected by the Company and the Required Holders.
      The determination of such appraiser shall be final and binding upon all parties
      absent manifest error and the fees and expenses of such appraiser shall be
      borne
      by the Company.

     

    (v) Record
      Date.
      If the
      Company takes a record of the holders of shares of Common Stock for the purpose
      of entitling them (A) to receive a dividend or other distribution payable
      in shares of Common Stock, Options or in Convertible Securities or (B) to
      subscribe for or purchase shares of Common Stock, Options or Convertible
      Securities, then such record date will be deemed to be the date of the issue
      or
      sale of the shares of Common Stock deemed to have been issued or sold upon
      the
      declaration of such dividend or the making of such other distribution or the
      date of the granting of such right of subscription or purchase, as the case
      may
      be.

     

    
      
        
        

      

      
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    (b) Adjustment
      upon Subdivision or Combination of shares of Common Stock.
      If the
      Company at any time on or after the Subscription Date subdivides (by any stock
      split, stock dividend, recapitalization or otherwise) one or more classes of
      its
      outstanding shares of Common Stock into a greater number of shares, the Exercise
      Price in effect immediately prior to such subdivision will be proportionately
      reduced and the number of Warrant Shares will be proportionately increased.
      If
      the Company at any time on or after the Subscription Date combines (by
      combination, reverse stock split or otherwise) one or more classes of its
      outstanding shares of Common Stock into a smaller number of shares, the Exercise
      Price in effect immediately prior to such combination will be proportionately
      increased and the number of Warrant Shares will be proportionately decreased.
      Any adjustment under this Section 2(b) shall become effective at the close
      of
      business on the date the subdivision or combination becomes
      effective.

     

    (c) Other
      Events.
      If any
      event occurs of the type contemplated by the provisions of this Section 2 but
      not expressly provided for by such provisions (including, without limitation,
      the granting of stock appreciation rights, phantom stock rights or other rights
      with equity features), then the Company's Board of Directors will make an
      appropriate adjustment in the Exercise Price and the number of Warrant Shares
      so
      as to protect the rights of the Holder; provided that no such adjustment
      pursuant to this Section 2(c) will increase the Exercise Price or decrease
      the
      number of Warrant Shares as otherwise determined pursuant to this Section
      2.

     

    3. RIGHTS
      UPON DISTRIBUTION OF ASSETS.
      If the
      Company shall declare or make any dividend or other distribution of its assets
      (or rights to acquire its assets) to holders of shares of Common Stock, by
      way
      of return of capital or otherwise (including, without limitation, any
      distribution of cash, stock or other securities, property or options by way
      of a
      dividend, spin off, reclassification, corporate rearrangement, scheme of
      arrangement or other similar transaction) (a "Distribution"),
      at
      any time after the issuance of this Warrant, then, in each such
      case:

     

    (a) any
      Exercise Price in effect immediately prior to the close of business on the
      record date fixed for the determination of holders of shares of Common Stock
      entitled to receive the Distribution shall be reduced, effective as of the
      close
      of business on such record date, to a price determined by multiplying such
      Exercise Price by a fraction of which (i) the numerator shall be the Closing
      Bid
      Price of the shares of Common Stock on the Trading Day immediately preceding
      such record date minus the value of the Distribution (as determined in good
      faith by the Company's Board of Directors) applicable to one share of Common
      Stock, and (ii) the denominator shall be the Closing Bid Price of the shares
      of
      Common Stock on the Trading Day immediately preceding such record date;
      and

     

    (b) the
      number of Warrant Shares shall be increased to a number of shares equal to
      the
      number of shares of Common Stock obtainable immediately prior to the close
      of
      business on the record date fixed for the determination of holders of shares
      of
      Common Stock entitled to receive the Distribution multiplied by the reciprocal
      of the fraction set forth in the immediately preceding paragraph (a); provided
      that in the event that the Distribution is of shares of common stock
      ("Other
      Shares of Common Stock")
      of a
      company whose common shares are traded on a national securities exchange or
      a
      national automated quotation system, then the Holder may elect to receive a
      warrant to purchase Other Shares of Common Stock in lieu of an increase in
      the
      number of Warrant Shares, the terms of which shall be identical to those of
      this
      Warrant, except that such warrant shall be exercisable into the number of shares
      of Other Shares of Common Stock that would have been payable to the Holder
      pursuant to the Distribution had the Holder exercised this Warrant immediately
      prior to such record date and with an aggregate exercise price equal to the
      product of the amount by which the exercise price of this Warrant was decreased
      with respect to the Distribution pursuant to the terms of the immediately
      preceding paragraph (a) and the number of Warrant Shares calculated in
      accordance with the first part of this paragraph (b).

     

    
      
        
        

      

      
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    4. PURCHASE
      RIGHTS; FUNDAMENTAL TRANSACTIONS.

     

    (a) Purchase
      Rights.
      In
      addition to any adjustments pursuant to Section 2 above, if at any time the
      Company grants, issues or sells any Options, Convertible Securities or rights
      to
      purchase stock, warrants, securities or other property pro rata to the record
      holders of any class of shares of Common Stock (the "Purchase
      Rights"),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete exercise of this Warrant (without regard to any limitations on
      the
      exercise of this Warrant) immediately before the date on which a record is
      taken
      for the grant, issuance or sale of such Purchase Rights, or, if no such record
      is taken, the date as of which the record holders of shares of Common Stock
      are
      to be determined for the grant, issue or sale of such Purchase
      Rights.

     

    (b) Fundamental
      Transactions.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      (i)  the Successor Entity assumes in writing all of the obligations of the
      Company under this Warrant and the other Transaction Documents in accordance
      with the provisions of this Section (4)(b) pursuant to written agreements in
      form and substance satisfactory to the Required Holders and approved by the
      Required Holders prior to such Fundamental Transaction, including agreements
      to
      deliver to each holder of Warrants in exchange for such Warrants a security
      of
      the Successor Entity evidenced by a written instrument substantially similar
      in
      form and substance to this Warrant, including, without limitation, an adjusted
      exercise price equal to the value for the shares of Common Stock reflected
      by
      the terms of such Fundamental Transaction, and exercisable for a corresponding
      number of shares of capital stock equivalent to the shares of Common Stock
      acquirable and receivable upon exercise of this Warrant (without regard to
      any
      limitations on the exercise of this Warrant) prior to such Fundamental
      Transaction, and satisfactory to the Required Holders and (ii) the
      Successor Entity (including its Parent Entity) is a publicly traded corporation
      whose common stock is quoted on or listed for trading on an Eligible Market.
      Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
      succeed to, and be substituted for (so that from and after the date of such
      Fundamental Transaction, the provisions of this Warrant referring to the
      "Company" shall refer instead to the Successor Entity), and may exercise every
      right and power of the Company and shall assume all of the obligations of the
      Company under this Warrant with the same effect as if such Successor Entity
      had
      been named as the Company herein. Upon consummation of the Fundamental
      Transaction, the Successor Entity shall deliver to the Holder confirmation
      that
      there shall be issued upon exercise of this Warrant at any time after the
      consummation of the Fundamental Transaction, in lieu of the shares of the Common
      Stock (or other securities, cash, assets or other property) purchasable upon
      the
      exercise of the Warrant prior to such Fundamental Transaction, such shares
      of
      the publicly traded Common Stock (or its equivalent) of the Successor Entity
      (including its Parent Entity)
      which
      the Holder would have been entitled to receive upon the happening of such
      Fundamental Transaction had this Warrant been converted immediately prior to
      such Fundamental Transaction,
      as
      adjusted in accordance with the provisions of this Warrant. In addition to
      and
      not in substitution for any other rights hereunder, prior to the consummation
      of
      any Fundamental Transaction pursuant to which holders of shares of Common Stock
      are entitled to receive securities or other assets with respect to or in
      exchange for shares of Common Stock (a "Corporate
      Event"),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon an exercise of this Warrant at any
      time after the consummation of
      the
      Fundamental Transaction but prior to the Expiration Date,
      in lieu
      of the shares of the Common Stock (or
      other
      securities, cash, assets or other property) purchasable
      upon the exercise of the Warrant prior to such Fundamental
      Transaction,
      such
      shares of stock, securities, cash, assets or any other property whatsoever
      (including warrants or other purchase or subscription rights) which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had the Warrant been exercised immediately prior to such Fundamental
      Transaction. Provision made pursuant to the preceding sentence shall be in
      a
      form and substance reasonably satisfactory to the Required Holders. The
      provisions of this Section shall apply similarly and equally to successive
      Fundamental Transactions and Corporate Events and shall be applied without
      regard to any limitations on the exercise of this Warrant.

     

    
      
        
        

      

      
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    (c) Notwithstanding
      the foregoing and the provisions of Section 4(b) above, in the event of a
      Fundamental Transaction, at the request of the Holder delivered before the
      ninetieth (90th) day after the consummation of such Fundamental Transaction,
      the
      Company (or the Successor Entity) shall
      purchase
      this Warrant from the Holder by paying to the Holder, within five (5) Business
      Days of such request (or, if later, on the effective date of the Fundamental
      Transaction,
      cash in
      an amount equal to the Black-Scholes Value of the remaining unexercised portion
      of this Warrant on the date of such Fundamental Transaction.

     

    5. WARRANT
      HOLDER NOT DEEMED A STOCKHOLDER.
      Except
      as otherwise specifically provided herein, the Holder, solely in such Person's
      capacity as a holder of this Warrant, shall not be entitled to vote or receive
      dividends or be deemed the holder of share capital of the Company for any
      purpose, nor shall anything contained in this Warrant be construed to confer
      upon the Holder, solely in such Person's capacity as the Holder of this Warrant,
      any of the rights of a shareholder of the Company or any right to vote, give
      or
      withhold consent to any corporate action (whether any reorganization, issue
      of
      stock, reclassification of stock, consolidation, merger, conveyance or
      otherwise), receive notice of meetings, receive dividends or subscription
      rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
      which such Person is then entitled to receive upon the due exercise of this
      Warrant. In addition, nothing contained in this Warrant shall be construed
      as
      imposing any liabilities on the Holder to purchase any securities (upon exercise
      of this Warrant or otherwise) or as a shareholder of the Company, whether such
      liabilities are asserted by the Company or by creditors of the Company.
      Notwithstanding this Section 5, the Company shall provide the Holder with copies
      of the same notices and other information given to the shareholders of the
      Company generally, contemporaneously with the giving thereof to the
      shareholders.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    6. NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Certificate of Incorporation, Bylaws or through any reorganization, transfer
      of assets, consolidation, merger, scheme of arrangement, dissolution, issue
      or
      sale of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Warrant, and will at
      all
      times in good faith carry out all the provisions of this Warrant and take all
      action as may be required to protect the rights of the Holder. Without limiting
      the generality of the foregoing, the Company (i) shall not increase the par
      value of any shares of Common Stock receivable upon the exercise of this Warrant
      above the Exercise Price then in effect, (ii) shall take all such actions
      as may be necessary or appropriate in order that the Company may validly and
      legally issue fully paid and nonassessable shares of Common Stock upon the
      exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants
      are outstanding, take all action necessary to reserve and keep available out
      of
      its authorized and unissued shares of Common Stock, solely for the purpose
      of
      effecting the exercise of the SPA Warrants, 130% of the number of shares of
      Common Stock as shall from time to time be necessary to effect the exercise
      of
      the SPA Warrants then outstanding (without regard to any limitations on
      exercise).

     

    7. REISSUANCE
      OF WARRANTS.

     

    (a) Transfer
      of Warrant.
      If this
      Warrant is to be transferred, the Holder shall surrender this Warrant to the
      Company, whereupon the Company will forthwith issue and deliver upon the order
      of the Holder a new Warrant (in accordance with Section 7(d)), registered as
      the
      Holder may request, representing the right to purchase the number of Warrant
      Shares being transferred by the Holder and, if less than the total number of
      Warrant Shares then underlying this Warrant is being transferred, a new Warrant
      (in accordance with Section 7(d)) to the Holder representing the right to
      purchase the number of Warrant Shares not being transferred.

     

    (b) Lost,
      Stolen or Mutilated Warrant.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Warrant, and, in the case of
      loss, theft or destruction, of any indemnification undertaking by the Holder
      to
      the Company in customary form and, in the case of mutilation, upon surrender
      and
      cancellation of this Warrant, the Company shall execute and deliver to the
      Holder a new Warrant (in accordance with Section 7(d)) representing the right
      to
      purchase the Warrant Shares then underlying this Warrant.

     

    (c) Exchangeable
      for Multiple Warrants.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Warrant or Warrants (in accordance
      with Section 7(d)) representing in the aggregate the right to purchase the
      number of Warrant Shares then underlying this Warrant, and each such new Warrant
      will represent the right to purchase such portion of such Warrant Shares as
      is
      designated by the Holder at the time of such surrender; provided, however,
      that
      no Warrants for fractional shares of Common Stock shall be given.

     

    (d) Issuance
      of New Warrants.
      Whenever the Company is required to issue a new Warrant pursuant to the terms
      of
      this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
      (ii) shall represent, as indicated on the face of such new Warrant, the right
      to
      purchase the Warrant Shares then underlying this Warrant (or in the case of
      a
      new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
      Shares designated by the Holder which, when added to the number of shares of
      Common Stock underlying the other new Warrants issued in connection with such
      issuance, does not exceed the number of Warrant Shares then underlying this
      Warrant), (iii) shall have an issuance date, as indicated on the face of such
      new Warrant which is the same as the Issuance Date, and (iv) shall have the
      same
      rights and conditions as this Warrant.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    8. NOTICES.
      Whenever notice is required to be given under this Warrant, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Securities Purchase Agreement. The Company shall provide the Holder with
      prompt written notice of all actions taken pursuant to this Warrant, including
      in reasonable detail a description of such action and the reason therefore.
      Without limiting the generality of the foregoing, the Company will give written
      notice to the Holder (i) immediately upon any adjustment of the Exercise Price,
      setting forth in reasonable detail, and certifying, the calculation of such
      adjustment and (ii) at least fifteen days prior to the date on which the Company
      closes its books or takes a record (A) with respect to any dividend or
      distribution upon the shares of Common Stock, (B) with respect to any grants,
      issuances or sales of any Options, Convertible Securities or rights to purchase
      stock, warrants, securities or other property to holders of shares of Common
      Stock or (C) for determining rights to vote with respect to any Fundamental
      Transaction, dissolution or liquidation, provided in each case that such
      information shall be made known to the public prior to or in conjunction with
      such notice being provided to the Holder.

     

    9. AMENDMENT
      AND WAIVER.
      Except
      as otherwise provided herein, the provisions of this Warrant may be amended
      and
      the Company may take any action herein prohibited, or omit to perform any act
      herein required to be performed by it, only if the Company has obtained the
      written consent of the Required Holders; provided that no such action may
      increase the exercise price of any SPA Warrant or decrease the number of shares
      or class of stock obtainable upon exercise of any SPA Warrant without the
      written consent of the Holder. No such amendment shall be effective to the
      extent that it applies to less than all of the holders of the SPA Warrants
      then
      outstanding.

     

    10. GOVERNING
      LAW.
      This
      Warrant shall be governed by and construed and enforced in accordance with,
      and
      all questions concerning the construction, validity, interpretation and
      performance of this Warrant 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.

     

    11. CONSTRUCTION;
      HEADINGS.
      This
      Warrant shall be deemed to be jointly drafted by the Company and all the Buyers
      and shall not be construed against any person as the drafter hereof. The
      headings of this Warrant are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Warrant.

     

    12. DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the Warrant Shares, the Company shall submit the
      disputed determinations or arithmetic calculations via facsimile within two
      Business Days of receipt of the Exercise Notice giving rise to such dispute,
      as
      the case may be, to the Holder. If the Holder and the Company are unable to
      agree upon such determination or calculation of the Exercise Price or the
      Warrant Shares within three Business Days of such disputed determination or
      arithmetic calculation being submitted to the Holder, then the Company shall,
      within two Business Days submit via facsimile (a) the disputed determination
      of
      the Exercise Price to an independent, reputable investment bank selected by
      the
      Company and approved by the Holder or (b) the disputed arithmetic calculation
      of
      the Warrant Shares to the Company's independent, outside accountant. The Company
      shall cause at its expense the investment bank or the accountant, as the case
      may be, to perform the determinations or calculations and notify the Company
      and
      the Holder of the results no later than ten Business Days from the time it
      receives the disputed determinations or calculations. Such investment bank's
      or
      accountant's determination or calculation, as the case may be, shall be binding
      upon all parties absent demonstrable error.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    13. REMEDIES,
      OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
      The
      remedies provided in this Warrant shall be cumulative and in addition to all
      other remedies available under this Warrant and the other Transaction Documents,
      at law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the right of the Holder
      right
      to pursue actual damages for any failure by the Company to comply with the
      terms
      of this Warrant. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, the holder of this Warrant shall
      be entitled, in addition to all other available remedies, to an injunction
      restraining any breach, without the necessity of showing economic loss and
      without any bond or other security being required.

     

    14. TRANSFER.
      This
      Warrant may be offered for sale, sold, transferred or assigned without the
      consent of the Company, except as may otherwise be required by Section 2(g)
      of
      the Securities Purchase Agreement.

     

    15. 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).

     

    16. CERTAIN
      DEFINITIONS.
      For
      purposes of this Warrant, the following terms shall have the following
      meanings:

     

    (a) "Approved
      Stock Plan"
      means
      any employee benefit plan which has been approved by the Board of Directors
      of
      the Company, pursuant to which the Company's securities may be issued to any
      employee, consultant, officer or director for services provided to the
      Company.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (b) "Black
      Scholes Value"
      means
      the value of this Warrant based on the Black and Scholes Option Pricing Model
      obtained from the "OV" function on Bloomberg determined as of the day of closing
      of the applicable Fundamental Transaction for pricing purposes and reflecting
      (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a
      period equal to the remaining term of this Warrant as of such date of request,
      (ii) an expected volatility equal to the greater of 100% and the 100 day
      volatility obtained from the HVT function on Bloomberg as of the day immediately
      following the public announcement of the applicable Fundamental Transaction
      and
      (iii) the underlying price per share used in such calculation shall be the
      sum
      of the price per share being offered in cash, if any, plus the value of any
      non
      cash consideration, if any, being offered in the Fundamental
      Transaction.

     

    (c) "Bloomberg"
      means
      Bloomberg Financial Markets.

     

    (d) "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.

     

    (e) "Closing
      Bid Price"
      and
      "Closing
      Sale Price"
      means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
      by Bloomberg, or, if the Principal Market is not the principal securities
      exchange or trading market for such security, the last closing bid price or
      last
      trade price, respectively, of such security on the principal securities exchange
      or trading market where such security is listed or traded as reported by
      Bloomberg, or if the foregoing do not apply, the last closing bid price or
      last
      trade price, respectively, of such security in the over-the-counter market
      on
      the electronic bulletin board for such security as reported by Bloomberg, or,
      if
      no closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the "pink
      sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
      If
      the Closing Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price, as the case may be, of such security on such
      date shall be the fair market value as mutually determined by the Company and
      the Holder. If the Company and the Holder are unable to agree upon the fair
      market value of such security, then such dispute shall be resolved pursuant
      to
      Section 12. All such determinations to be appropriately adjusted for any stock
      dividend, stock split, stock combination or other similar transaction during
      the
      applicable calculation period.

     

    (f) "Common
      Stock"
      means
      (i) the Company's shares of Common Stock, par value $0.001 per share, and
      (ii) any share capital into which such Common Stock shall have been changed
      or any share capital resulting from a reclassification of such Common
      Stock.

     

    (g) "Convertible
      Securities"
      means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for shares of Common Stock.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (h) "Eligible
      Market"
      means
      the Principal Market, the American Stock Exchange, The New York Stock Exchange,
      Inc., The NASDAQ Global Market, The NASDAQ Capital Market or The NASDAQ Global
      Select Market.

     

    (i) "Excluded
      Securities"
      means
      any Common Stock issued or issuable: (i) in connection with any Approved Stock
      Plan; (ii) upon conversion of the SPA Securities or the exercise of the SPA
      Warrants; (iii) in connection with any stock split, stock dividend,
      recapitalization or similar transaction by the Company for which adjustment
      is
      made pursuant to Section 2(b);
      and (iv)
      upon exercise of any Options or Convertible Securities which are outstanding
      on
      the day immediately preceding the Subscription Date, provided that the terms
      of
      such Options or Convertible Securities are not amended, modified or changed
      on
      or after the Subscription Date.

     

    (j) "Expiration
      Date"
      means
      sixty (60) months after the earlier of (A) such time as all of the Conversion
      Shares (as defined in the Securities Purchase Agreement) are available for
      resale pursuant to an effective Registration Statement (as defined in the
      Registration Rights Agreement) and (B) two (2) years after the Issuance Date
      or,
      if any such date falls on a day other than a Business Day or on which trading
      does not take place on the Principal market (a "Holiday"),
      the
      next day that is not a Holiday.

     

    (k) "Fundamental
      Transaction"
      means
      that the Company shall directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person, or (ii) sell, assign, transfer,
      convey or otherwise dispose of all or substantially all of the properties or
      assets of the Company to another Person, or (iii) allow another Person to make
      a
      purchase, tender or exchange offer that is accepted by the holders of more
      than
      the 50% of either the outstanding shares of Common Stock (not including any
      shares of Common Stock held by the Person or Persons making or party to, or
      associated or affiliated with the Persons making or party to, such purchase,
      tender or exchange offer), or (iv) consummate a stock purchase agreement or
      other business combination (including, without limitation, a reorganization,
      recapitalization, spin-off or scheme of arrangement) with another Person whereby
      such other Person acquires more than the 50% of the outstanding shares of Common
      Stock (not including any shares of Common Stock held by the other Person or
      other Persons making or party to, or associated or affiliated with the other
      Persons making or party to, such stock purchase agreement or other business
      combination), or (v) reorganize, recapitalize or reclassify its Common Stock,
      or
      (vi) any "person" or "group" (as these terms are used for purposes of Sections
      13(d) and 14(d) of the Exchange Act), become the "beneficial owner" (as defined
      in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the
      aggregate ordinary voting power represented by issued and outstanding Common
      Stock.

     

    (l) "Options"
      means
      any rights, warrants or options to subscribe for or purchase shares of Common
      Stock or Convertible Securities.

     

    (m) "Parent
      Entity"
      of a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (n) "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization, any other entity and
      a
      government or any department or agency thereof.

     

    (o) "Principal
      Market"
      means
      the OTC Bulletin Board.

     

    (p) "Registration
      Rights Agreement"
      means
      that certain Registration Rights Agreement dated as of the Issuance Date by
      and
      among the Company and the Buyers.

     

    (q) "Required
      Holders"
      means
      the holders of the SPA Warrants representing at least a majority of shares
      of
      Common Stock underlying the SPA Warrants then outstanding.

     

    (r) "SPA
      Securities"
      means
      the Notes issued pursuant to the Securities Purchase Agreement.

     

    (s) "Successor
      Entity"
      means
      the Person (or, if so elected by the Required Holders, the Parent Entity) formed
      by, resulting from or surviving any Fundamental Transaction or the Person (or,
      if so elected by the Required Holders, the Parent Entity) with which such
      Fundamental Transaction shall have been entered into.

     

    (t) "Trading
      Day"
      means
      any day on which the Common Stock is traded on the Principal Market, or, if
      the
      Principal Market is not the principal trading market for the Common Stock,
      then
      on the principal securities exchange or securities market on which the Common
      Stock is then traded; provided that "Trading Day" shall not include any day
      on
      which the Common Stock is scheduled to trade on such exchange or market for
      less
      than 4.5 hours or any day that the Common Stock is suspended from trading during
      the final hour of trading on such exchange or market (or if such exchange or
      market does not designate in advance the closing time of trading on such
      exchange or market, then during the hour ending at 4:00:00 p.m., New York
      Time).

     

    (u) "Weighted
      Average Price"
      means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market during the period beginning at 9:30:01
      a.m., New York Time (or such other time as the Principal Market publicly
      announces is the official open of trading), and ending at 4:00:00 p.m., New
      York
      Time (or such other time as the Principal Market publicly announces is the
      official close of trading) as reported by Bloomberg through its "Volume at
      Price" functions, or, if the foregoing does not apply, the dollar
      volume-weighted average price of such security in the over-the-counter market
      on
      the electronic bulletin board for such security during the period beginning
      at
      9:30:01 a.m., New York Time (or such other time as such market publicly
      announces is the official open of trading), and ending at 4:00:00 p.m., New
      York
      Time (or such other time as such market publicly announces is the official
      close
      of trading) as reported by Bloomberg, or, if no dollar volume-weighted average
      price is reported for such security by Bloomberg for such hours, the average
      of
      the highest closing bid price and the lowest closing ask price of any of the
      market makers for such security as reported in the "pink sheets" by Pink Sheets
      LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average
      Price cannot be calculated for a security on a particular date on any of the
      foregoing bases, the Weighted Average Price of such security on such date shall
      be the fair market value as mutually determined by the Company and the Holder.
      If the Company and the Holder are unable to agree upon the fair market value
      of
      such security, then such dispute shall be resolved pursuant to Section 12.
      All
      such determinations are to be appropriately adjusted for any stock dividend,
      stock split, stock combination or other similar transaction during the
      applicable calculation period.

     

    [Signature
      Page Follows]

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to Purchase Common Stock to be duly executed
      as
      of the Issuance Date set out above.

    

    
      	
              RxELITE,
                INC.

            
	 	 
	 	 
	
              By:

            	
              /s/
                Jonathan
                Houssian                   
                

            
	
              Name: 
                Jonathan
                Houssian

            
	
              Title:
                President
                and Chief Executive Officer

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