Document:

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                                                                    EXHIBIT 10.1

                               K-2 FINANCIAL CORP.
                               -------------------
                         400 SOUTH 4TH STREET, SUITE 955
                              MINNEAPOLIS MN 55415
                  TELEPHONE (612) 338-1097 - FAX (612) 338-1197

                              CONSULTING AGREEMENT

                  THIS AGREEMENT is made as of January 28, 2000

                                 By and Between

                    HORIZON PHARMACIES, INC. (THE "COMPANY")

                                       And

                     K-2 FINANCIAL CORP. (THE "CONSULTANT")

RECITALS

     A.   The Company desires to promote its business plans to the investment
community and to build the value of the Company for the benefit of its
respective Shareholders;

     B.   The Consultant is involved in investment banking;

     C.   The Company recognizes the experience and knowledge of the Consultant
in matters relating to investment banking;

     D. The Company has determined that it is in the best interest of the
Company to engage the services of the Consultant; and

     E.   The Company desires to retain the services and counsel of the
Consultant, and the Consultant desires to render such services to the Company
upon the terms set forth in this Consulting Agreement (this "Agreement").

     NOW THEREFORE, in consideration of the mutual promises and covenants set
forth below, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby agree as follows:

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     1.   ENGAGEMENT: The Company hereby engages the Consultant, and the
Consultant accepts engagement by the Company, upon the terms and conditions set
forth in this Agreement.

     2.   TERM: The term of this Agreement shall begin on the date hereof and
shall continue for a period of twenty-four (24) months.

     3.   DUTIES: During the term of this Agreement, the Consultant shall
provide financial consulting services to the Company as requested. The services
shall be directed toward achieving the Company's business and financial goals as
established by the Company's board of directors, which may include the
consummation of mergers or acquisitions, changes in the internal capital
structure of the Company, the placement of new debt or equity issues, or any
combination thereof (any such transaction proposed by the Company, a "Proposed
Transaction"). The Consultant's duties shall include, but not be limited to,
assisting the Company (i) to develop strategies and structure proposals related
to the Company's business and financial goals, and to analyze the financial
implications thereof; (ii) to prepare and make presentations to the Company's
board of directors regarding any such strategies or proposals; (iii) to
formulate negotiation strategies and conduct any negotiations necessary to
implementing such strategies and proposals; (iv) to prepare agreements in
principle and definitive agreements necessary to implementing any Proposed
Transaction; and (v) to assist in such other matters as may be agreed upon from
time to time by the Company and the Consultant. The terms of any Proposed
Transaction will be subject in all respects to the Company's approval, and
Consultant is not authorized to make any agreement or commitment on behalf of
the Company under any circumstances. When the Consultant presents a Proposed
Transaction to the Company, the Company in a reasonable time will either approve
or disapprove such Transaction in writing by an authorized officer of the
Company.

     4.   GRANT AND VESTING OF WARRANTS; CONSULTING FEES:

          A.   WARRANTS

               (1)  In exchange for the payment of $50, the receipt and
                    sufficiency of which are hereby acknowledged, the Company
                    hereby issues to the Consultant warrants to purchase 200,000
                    shares of the Company's Common Stock, par value $.01 per
                    share ("Common Stock"), for a purchase price per share equal
                    to $2.75 per share (the closing price of the Company's
                    Common Stock on the American Stock Exchange on January 27,
                    2000 -- the business day immediately preceding the grant of
                    such warrants (the "Warrants"); provided, however, that the
                    rights to exercise

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                    such Warrants shall vest immediately if the Company
                    terminates this Agreement other than pursuant to
                    PARAGRAPH7(b) hereof prior to the second anniversary of the
                    date hereof or as set forth below in this PARAGRAPH 4(a).
                    The Warrants shall be in substantially in the form of
                    EXHIBIT A attached hereto and shall contain such other terms
                    and conditions as are to be mutually agreed upon by the
                    parties.

                        (i)     STRATEGIC ALLIANCES. If through the efforts of
                    the Consultant the Company enters into one or more strategic
                    alliances, whether by way of merger, consolidation, joint
                    venture, joint marketing agreement or similar agreements of
                    strategic nature, but specifically not including agreements
                    for investment banking, financial consulting or similar
                    services (each, an "Alliance"), with one or more entities,
                    then the Consultant shall be entitled to exercise a portion
                    of the Warrant for the purchase of One Hundred Thousand
                    (100,000) shares of Common Stock upon the consummation of
                    each such Alliance; or

                        (ii) ADVERTISING REVENUES.

                                    (A)      If through the efforts of the
                     Consultant the Company's monthly advertising revenues (the
                     "Advertising Revenues") (i) increase by Ten Thousand
                     dollars ($10,000) but less than Twenty Thousand dollars
                     ($20,000) over the trailing three month period and (ii)
                     remain at such level for four consecutive months, then the
                     Consultant shall be entitled to exercise a portion of the
                     Warrant for the purchase of Forty Thousand (40,000) shares
                     of Common stock; or

                                    (B)      If through the efforts of the
                     Consultant the Company's monthly Advertising Revenues (i)
                     increase by Twenty Thousand dollars ($20,000) but less than
                     Thirty Thousand dollars ($30,000) over the trailing three
                     month period and (ii) remain at such level for four
                     consecutive months, then Consultant shall be entitled to
                     exercise a portion of the Warrant for the purchase of
                     Eighty Thousand (80,000) shares of Common stock; or

                                    (C)      If through the efforts of the
                     Consultant the Company's monthly Advertising Revenues (i)

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                     increase by Thirty Thousand dollars ($30,000) but less than
                     Forty Thousand dollars ($40,000) over the trailing three
                     month period and (ii) remain at such level for four
                     consecutive months, then the Consultant shall be entitled
                     to exercise a portion of the Warrant for the purchase of
                     One Hundred Twenty Thousand (120,000) shares of Common
                     stock; or

                                    (D)      If through the efforts of the
                    Consultant the Company's monthly Advertising Revenues (i)
                    increase by Forty Thousand dollars ($40,000) but less than
                    Fifty Thousand dollars ($50,000) over the trailing three
                    month period and (ii) remain at such level for four
                    consecutive months, then the Consultant shall be entitled to
                    exercise a portion of the Warrant for the purchase of One
                    Hundred Sixty Thousand (160,000) shares of Common stock; or

                                    (E)      If through the efforts of the
                     Consultant the Company's monthly Advertising Revenues (i)
                     increase by Fifty Thousand dollars ($50,000) or more over
                     the trailing three month period and (ii) remain at such
                     level for four consecutive months, then the Consultant
                     shall be entitled to exercise a portion of the Warrant for
                     the purchase of Two Hundred Thousand (200,000) shares of
                     Common stock;

                            (iii) DISPLAY ALLOWANCES.

                                    (A)      If through the efforts of the
                     Consultant the Company's monthly display allowances (the
                     "Display Allowances") (i) increase by Ten Thousand dollars
                     ($10,000) but less than Twenty Thousand dollars ($20,000)
                     over the trailing three month period and (ii) remain at
                     such level for four consecutive months, then the Consultant
                     shall be entitled to exercise a portion of the Warrant for
                     the purchase of Forty Thousand (40,000) shares of Common
                     stock; or

                                    (B)      If through the efforts of the
                     Consultant the Company's monthly Display Allowances (i)
                     increase by Twenty Thousand dollars ($20,000) but less than
                     Thirty Thousand dollars ($30,000) over the trailing

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                     three month period and (ii) remain at such level for four
                     consecutive months, then the Consultant shall be entitled
                     to exercise a portion of the Warrant for the purchase of
                     Eighty Thousand (80,000) shares of Common stock; or

                                    (C)      If through the efforts of the
                     Consultant the Company's monthly Display Allowances (i)
                     increase by Thirty Thousand dollars ($30,000) but less than
                     Forty Thousand dollars ($40,000) over the trailing three
                     month period (ii) remain at such level for four consecutive
                     months, then the Consultant shall be entitled to exercise a
                     portion of the Warrant for the purchase of One Hundred
                     Twenty Thousand (120,000) shares of Common stock; or

                                    (D)      If through the efforts of the
                     Consultant the Company's monthly Display Allowances (i)
                     increase by Forty Thousand dollars ($40,000) but less than
                     Fifty Thousand dollars ($50,000) over the trailing three
                     month period and (ii) remain at such level for four
                     consecutive months, then the Consultant shall be entitled
                     to exercise a portion of the Warrant for the purchase of
                     One Hundred Sixty Thousand (160,000) shares of Common
                     stock; or

                                    (E)      If through the efforts of the
                     Consultant the Company's monthly Display Allowances (i)
                     increase by Fifty Thousand dollars ($50,000) or more over
                     the trailing three month period and (ii) remain at such
                     level for four consecutive months, then the Consultant
                     shall be entitled to exercise a portion of the Warrant for
                     the purchase of Two Hundred Thousand (200,000) shares of
                     Common stock;

                            (iv)   MERCHANT REBATES.

                                    (A)      If through the efforts of the
                     Consultant the Company's monthly merchant rebates (the
                     "Merchant Rebates") (i) increase by Ten Thousand dollars
                     ($10,000) but less than Twenty Thousand dollars ($20,000)
                     over the average amount of merchant rebates the Company
                     received in the trailing three month period and (ii) remain
                     at such level for four consecutive months, then the
                     Consultant shall be entitled to exercise a portion of the
                     Warrant for the

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                     purchase of Forty Thousand (40,000) shares of Common
                     stock; or

                                    (B)      If through the efforts of the
                     Consultant the Company's monthly Merchant Rebates (i)
                     increase by Twenty Thousand dollars ($20,000) but less than
                     Thirty Thousand dollars ($30,000) over the trailing three
                     month period and (ii) remain at such level for four
                     consecutive months, then the Consultant shall be entitled
                     to exercise a portion of the Warrant for the purchase of
                     Eighty Thousand (80,000) shares of Common stock; or

                                    (C)      If through the efforts of the
                     Consultant the Company's monthly Merchant Rebates (i)
                     increase by Thirty Thousand dollars ($30,000) but less than
                     Forty Thousand dollars ($40,000) over the trailing three
                     month period and (ii) remain at such level for four
                     consecutive months, then the Consultant shall be entitled
                     to exercise a portion of the Warrant for the purchase of
                     One Hundred Twenty Thousand (120,000) shares of Common
                     stock; or

                                    (D)      If through the efforts of the
                     Consultant the Company's monthly Merchant Rebates (i)
                     increase by Forty Thousand dollars ($40,000) but less than
                     Fifty Thousand dollars ($50,000) over the trailing three
                     month period and (ii) remain at such level for four
                     consecutive months, then the Consultant shall be entitled
                     to exercise a portion of the Warrant for the purchase of
                     One Hundred Sixty Thousand (160,000) shares of Common
                     stock; or

                                    (E)      If through the efforts of the
                     Consultant the Company's monthly Merchant Rebates (i)
                     increase by Fifty Thousand dollars ($50,000) or more over
                     the trailing three month period and (ii) remain at such
                     level for four consecutive months, then the Consultant
                     shall be entitled to exercise a portion of the Warrant for
                     the purchase of Two Hundred Thousand (200,000) shares of
                     Common stock;

                     Pursuant to each of PARAGRAPH 4(a)(1)(ii), (iii) and (iv),
                     only one vesting event may occur during any consecutive
                     three-

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                     month period. The vesting of Warrants under this PARAGRAPH
                     4(a)(i), (ii), (iii) AND (iv) can be combined and occur
                     simultaneously upon satisfaction of the requirements set
                     forth herein.

              (2)    The Warrants shall be immediately forfeited by the
       Consultant if at any time (A) the Company terminates this Agreement by
       reason of a breach by the Consultant or (B) if the Consultant terminates
       this Agreement for any reason.

              (3)    The Consultant hereby represents to the Company that it
       qualifies as an "accredited investor" under Rule 501 promulgated by the
       Securities and Exchange Commission under the Securities Act of 1933
       ("Rule 501").

              (4)    The Warrants shall be immediately forfeited upon any
       transfer or assignment by the Consultant, or any transferee or assignee
       of the Consultant, to any person or entity not qualifying as an
       "accredited investor" under Rule 501.

       b. CONSULTING FEE: The Company shall pay a monthly consulting fee for one
(1) year of Ten Thousand dollars ($10,000) per month, payable no later than the
10th of each month, effective as of February, 2000.

     5.   NATURE OF ENGAGEMENT: The Consultant is being engaged by the Company
as an independent contractor and shall be responsible for payment of its own
taxes. Nothing in this Agreement shall be construed so as to create an
employer-employee relationship between the parties.

     6.   EXPENSES: Upon receipt of requests from the Consultant for
reimbursement, the Company shall reimburse the Consultant for all reasonable and
necessary expenses the Consultant incurs prior to and after the date of this
Agreement in performing its duties in connection with this Agreement; provided,
however, that the Company shall not be liable or obligated to reimburse the
Consultant for more than $10,000 of expenses hereunder (not including, for the
purpose of this limitation, any expenses that are incurred with the prior
approval of the Chief Executive Officer ("CEO") or the Chief Financial Officer
("CFO") of the Company).

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     7.   TERMINATION.

          a.   This Agreement may be terminated by either party immediately upon
written notice beginning twelve (12) months from the date of this Agreement.
Such notice shall be effective upon receipt by the non-terminating party.

          b.   Notwithstanding anything in this Agreement to the contrary, the
Company shall have the right to terminate this Agreement at any time upon any
breach by the Consultant of the provisions of this Agreement. If the Company
elects to exercise such right, it shall provide the Consultant with written
notice, and the termination shall be effective immediately upon receipt of such
notice to the Consultant.

     8.   NOTICES: All notices, requests consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, sent by telecopier,
telex or delivered by Federal Express, United Parcel Service or another similar
company, addressed as follows:

          a.   if to the Company, at 531 W. Main Street, Suite 100, Denison,
Texas 75020, Attention: Ricky D. McCord, with a copy to Vinson & Elkins L.L.P.,
3700 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas 75201, Attention: Jay
H. Hebert; and

          b.   if to the Consultant, at 400 South 4th Street, Suite 955,
Minneapolis, Minnesota 55415, Attention: John M. Whitesides, with a copy to Paul
des Hotels.

          c.   Any notice or communication hereunder shall be deemed to have
been given or made as of the date so delivered if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and five
calendar days after mailing if sent by registered or certified mail (except that
a notice of change of address shall not be deemed to have been given until
actually received by the addressee). If a notice or communication is mailed in
the manner provided above, it is duly given, whether or not the addressee
receives it.

     9.   MISCELLANEOUS PROVISIONS:

          a.   GOVERNING LAW: This Agreement shall be governed by, interpreted
and enforced in accordance with the laws of the State of Minnesota.

          b.   WAIVER: The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate as a waiver of any other breach of
any provision of this Agreement by any party.

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          c.   ENTIRE AGREEMENT:This instrument contains the entire Agreement of
the parties concerning engagement and may not be changed or modified except by
written agreement duly executed by the parties hereto.

          d.   SUCCESSORS AND ASSIGNS: This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns.

          e.   ADDITIONAL DOCUMENTS: The Company agrees to execute such other
documents and agreements to effectuate the purposes of this Agreement, as the
Consultant may request from time to time.

          f.   ASSIGNMENTS: The obligation of the parties under this Agreement
shall not be assigned without the written consent of the parties which shall not
be unreasonably withheld.

          g.   COUNTERPARTS: This Agreement may be executed in counterparts, and
all counterparts will be considered as part of one agreement binding on all
parties to this Agreement.

          h.   FACSIMILE SIGNATURES: The parties may execute this Agreement by
facsimile, which signature[s] shall be deemed as an original and shall be
binding upon such party.

          i.   SEVERABILITY: If any term, condition or provision of this
Agreement or the application thereof to any party of circumstance shall, at any
time or to any extent, be invalid or unenforceable, the remainder of this
Agreement, or the application of such term, condition or provision to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, condition and provision of their
Agreement shall be valid and enforceable to the fullest extent permitted by the
Law.

          j.   DISPUTE PROCEDURE: Any dispute, claim or controversy arising out
of or relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association at a location mutually acceptable to both parties. The
parties further agree that they will abide by and perform any award rendered by
the Arbitrator[s]. Judgment upon any such award may be in any court, State or
Federal, having any arbitration demand, service or process, notice of motion or
other application the court or any Judge thereof may require. Service may be by
registered or certified mail, or by personal service, provided a reasonable time
for appearance or answer is allowed.

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          k.   AUTHORITY: The Company hereby represents and warrants that the
person executing this Agreement on its behalf is duly authorized to do so, that
the execution of the Agreement has been duly approved by the Board of Directors
of the Company, and that this Agreement is binding upon the Company.

          l.   INDEMNITY:

          (i)  In addition to the amounts which the Company has herein agreed to
               pay to the Consultant, the Company shall indemnify and hold the
               Consultant and its officers, directors, agents and controlling
               persons harmless against any losses, claims, damages or
               liabilities to which the Consultant or any of them may become
               subject insofar as the same arises from an action which alleges
               or is based upon the alleged untrue statement of a material fact,
               or omission of a material fact, or any other violation of
               applicable securities or other laws, by the Company or its
               officers, directors, agents and controlling persons and to
               reimburse the Consultant for any legal or other expenses
               reasonably incurred by it in connection with investigating,
               settling or defending any action or claim in connection
               therewith; provided, however, that the Company shall not be
               liable in any such case to the extent that any such loss, claim,
               damage or liability: (A) is found in a final judgment of a court
               of competent jurisdiction to have resulted from a breach of the
               Consultant's obligations to the Company in connection with the
               performance by the Consultant of the services pursuant hereto or
               from the Consultant's gross negligence or misfeasance in
               performing such services or (B) arises out of, or is based upon,
               any untrue statement of a material fact or omission of a material
               fact made in any written communication or any amendment or
               supplement thereto in reliance upon, and in conformity with,
               information furnished to the Company by the Consultant expressly
               for use therein.

          (ii) The Consultant shall indemnify and hold the Company and its
               officers, directors, agents and controlling persons harmless
               against any losses, claims, damages or liabilities to which the
               Company may become subject in connection with the transactions
               contemplated herein, insofar as such losses, claims, damages or
               liabilities arise out of, or are based upon (i) any untrue
               statement or misleading omissions made by the Consultant in
               writing expressly for use in connection with a Financing (other
               than untrue statements of a material fact or omission of a
               material fact made by the Consultant in reliance on information
               supplied to the Consultant by the

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               Company) or (ii) the Consultant's gross negligence,
               misfeasance or breach of the Consultant's obligation hereunder to
               the Company. The Consultant shall reimburse the Company for any
               legal or other reasonable expenses incurred by it in connection
               with investigating, settling or defending any such action or
               claim.

         (iii) Upon receipt by the Consultant or its officers, directors,
               agents or controlling persons (for purposes of PARAGRAPH
               8(l)(i)), or the Company or its officers, directors, agents
               or controlling persons (for purposes of PARAGRAPH 8(l)(ii))
               (in each case the "Indemnified Party"), of notice of any
               action, suit, proceeding, claim, demand or assessment
               against the Indemnified Party that might give rise to a
               claim pursuant to this section, the Indemnified Party shall
               give written notice thereof within ten days (the "Notice of
               Claim") to the Company, for purposes of PARAGRAPH 8(l)(i),
               or the Consultant, for purposes of PARAGRAPH 8(l)(ii) (in
               each case the "Indemnifying Party"), indicating the nature
               of such claim and the basis therefor. The Notice of Claim
               shall specify all facts known to the Indemnified Party
               giving rise to such claim and the amount of estimate of the
               amount of liability arising therefrom. Any delay or failure
               to notify the Indemnifying Party shall relive the
               Indemnifying Party of its obligations hereunder only to the
               extent, if at all, that it is prejudiced by reason of such
               delay or failure.

          (iv) Promptly after a claim is made for which the Indemnified
               Party seeks indemnity, the Indemnified Party, at its option
               and expense, to assume the defense of such action, suit,
               proceeding, claim, demand or assessment with full authority
               to conduct such defense and the Indemnified Party will
               cooperate fully with such defense. The Indemnified Party
               shall have the right to employ separate counsel in any of
               the foregoing actions, claims or proceedings and to
               participate in the defense thereof, and the Indemnifying
               Party shall pay the reasonable fees and expenses of such
               counsel in advance at the request of the Indemnified Party.
               Anything in this section to the contrary notwithstanding,
               the Indemnified Party shall not, without the Indemnifying
               Party's prior written consent, settle or compromise any
               action or claim or proceeding or consent to entry of any
               judgment with respect to any such action or claim that
               requires the payment of money damages by the Indemnified
               Party or in any way is binding upon or affects the
               Indemnifying Party.

          (v)  The respective reimbursement and indemnity obligation of the
               Consultant and the Company pursuant to subparagraphs (i) and

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               (ii) of this PARAGRAPH 8(l) shall be in addition to any
               liability which the Consultant or the Company may otherwise
               have and shall be binding upon, and inure to the benefit of,
               their respective successors, assigns, heirs, and personal
               representatives.

          (vi) The respective indemnity agreements of the Consultant and
               the Company contained in subparagraphs (i) and (ii) of this
               PARAGRAPH 8(l) shall remain operative and in full force and
               effect regardless of any termination of this Agreement or of
               any investigation made by or on behalf of this Company or
               the Consultant.

          M. CONSULTANT AUTHORITY: Consultant shall have no authority under this
Agreement to bind the Company to any transaction or contract. The Company has
the right in its sole and absolute discretion to reject any transaction or
contract regardless of the terms proposed.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.

K-2 FINANCIAL CORP.                   HORIZON PHARMACIES, INC.

By /s/ Richard A. Andolshek           By /s/ Ricky D. McCord
   -------------------------------       --------------------------------
   Richard A. Andolshek, President       Ricky D. McCord, President & CEO

                                      S-1

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                                    EXHIBIT A
                                    ---------
                                 FORM OF WARRANT<PAGE>
                                                                    EXHIBIT 10.2

                            WATERFORD FINANCIAL, INC.
                         400 SOUTH 4TH STREET, SUITE 955
                          MINNEAPOLIS, MINNESOTA 55415
                               MEMBER NASD & SIPC
                            TELEPHONE (612) 338-1097
                         FAX (612) 338-1197 OR 338-0996
                       E-MAIL: info@waterfordfinancial.com
                           www.waterfordfinancial.com

                                January 28, 2000

Mr. Rick McCord
President & CEO
HORIZON Pharmacies, Inc.
531 W. Main Street, Suite 100
Denison, TX 75020

Dear Mr. McCord:

This letter of intent (the "Agreement") sets forth our mutual understanding and
agreement regarding the establishment of an exclusive investment banking
relationship between HORIZON Pharmacies, Inc., a Delaware corporation (the
"Company") and Waterford Financial, Inc., a Minnesota corporation ("WFI"). WFI
agrees to assist the Company in connection with future financings on the
following terms and conditions:

     1.   ENGAGEMENT. Subject to PARAGRAPH 7 herein, the Company hereby engages
          WFI to act as the Company's exclusive investment banker to assist the
          Company with various financing arrangements of up to Twenty-Five
          Million dollars ($25,000,000), or such other amounts as shall be
          mutually agreed to by the parties, including, inclusive, (i)
          subordinated debentures, (ii) convertible and/or redeemable preferred
          stock, (iii) common stock, with or without warrants, (iv) convertible
          debt, (v) senior secured revolving credit and (vi) senior secured term
          loan (collectively, the "Financings"). In connection with any such
          Financings, WFI will use its best efforts to review proposals and
          advise the Company with respect to such proposals. In addition, WFI
          shall be ready to meet with officers or directors of the Company upon
          reasonable notice to consult on any financial matters or any items
          related to any issue of financing.

          Due to the nature of the investment banking relationship, it is
          extremely important that all prospects or referrals for investment
          during the Engagement Period (as defined in PARAGRAPH 6), be directed
          to WFI, subject to PARAGRAPH 7 herein.

<PAGE>

Page 2

          When WFI presents a proposed Financing to the Company, the Company
          will either approve or disapprove such Financing in writing.

     2.   FEES. In consideration of the services to be rendered by WFI pursuant
          to this agreement, the Company agrees to pay, WFI a(n):

          (a)  two percent (2%) fee of any Financing which WFI does not manage
               during the shorter of the Engagement Period or the next three (3)
               years, except for a Financing arranged, managed or controlled by
               an entity set forth in SCHEDULE A attached hereto;

          (b)  three percent (3%) non-accountable expense allowance on all
               consideration raised in a Financing that WFI manages;

          (c)  underwriter's commission, in the context of a Private Offering
               (as defined below) that WFI manages, that is equal to ten percent
               (10%) on all gross proceeds raised on behalf of the Company for
               equity or convertible debt. As used herein, "Private Offering"
               means a debt or equity offering that is not a Public Offering,
               subject to PARAGRAPH 7 herein;

          (d)  underwriter's commission, in the context of a Public Offering (as
               defined below) that WFI manages, that is equal to the maximum
               amount allowable under the rules of the National Association of
               Security Dealers, Inc. (the "NASD") and the American Stock
               Exchange ("AMEX"), or, in the event that the Company is no longer
               trading its stock over AMEX, then whichever exchange the
               Company's stock trades; provided, however, that the underwriter's
               commission payable hereunder shall not, in any event, exceed six
               percent (6%) of the gross proceeds raised on behalf of the
               Company for equity or debt in such Public Offering, subject to
               PARAGRAPH 7 herein. As used herein, "Public Offering" means a
               debt or equity offering requiring the filing of a registration
               statement by the Company under the Securities Act of 1933;

          (e)  five percent (5%) fee on any merger (a "Merger") or acquisition
               (an "Acquisition" and together with a Merger, an "M&A
               Transaction") of the Transaction Value (as defined below) with
               respect to which WFI provides financial consulting services. To
               the extent that the Transaction Value is greater than Five
               Million dollars ($5,000,000), then the five percent (5%) fee
               shall not apply to such excess amount; rather, the applicable fee
               shall be determined with respect to such excess amount by
               multiplying such excess amount by the Excess Formula (as defined
               below);

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Page 3

           (i)      As used herein, "Transaction Value" means all consideration
                    payable to the seller(s) in connection with an M&A
                    Transaction, including but not limited to (i) deferred
                    installments of the purchase price, provided that any fees
                    paid in respect of such deferred amounts shall be payable
                    (without interest) only when and if such deferred amounts
                    are actually received by the seller(s), (ii) any portion of
                    the purchase price held in escrow subsequent to closing
                    which is actually released to the seller(s) pursuant to the
                    terms of the escrow arrangement and (iii) payments made to
                    the seller(s) after closing upon the occurrence of certain
                    contingencies or conditions or the satisfaction of certain
                    earnings, sales levels or other performance objectives which
                    are agreed to on or before the date of closing. In an
                    Acquisition involving the purchase of assets where the
                    Company assumes or repays all or a portion of the target
                    company's, or, if more than one target company, companies'
                    debt, the Transaction Value shall also include the aggregate
                    amount of debt assumed or repaid by the purchaser(s). The
                    Transaction Value shall not include debt assumed or repaid
                    in situations where the M&A Transaction is a Merger,
                    consolidation or purchase or exchange of capital stock;

           (ii)     In the event that all or any portion of the Transaction
                    Value is paid in stock or other securities, deferred
                    installments or consideration other than cash at closing,
                    the amount of the success fee payable with respect thereto
                    shall be determined on the basis of the cash equivalent of
                    such non-cash consideration as of the closing date of the
                    M&A Transaction. If WFI and the Company are unable to agree
                    on the cash equivalent of such non-cash consideration within
                    thirty (30) days after the closing date, the determination
                    of the cash equivalent shall be made promptly by an
                    investment banker or other person experienced in valuing
                    securities mutually acceptable to both WFI and the Company,
                    such determination shall be binding on both WFI and the
                    Company, and WFI and the Company shall each be responsible
                    for paying one-half (1/2) of the fees of such investment
                    banker or other person; and

           (iii)    If requested by the Company, WFI will determine whether the
                    consideration to be paid in the M&A Transaction is fair to
                    shareholders from a financial point of view. If WFI
                    determines the consideration to be paid in the M&A
                    Transaction is fair to the shareholders from a financial
                    point of view, WFI will render a written opinion to that
                    effect to the Board of Directors or to the

<PAGE>

Page 4

                    Special Committee of the Board of Directors of the Company.
                    Such opinion shall be consistent with the generally accepted
                    standards of practice in the investment banking industry for
                    fairness opinions and WFI acknowledges that the Company may
                    rely upon the opinion, in addition to such factors it deems
                    appropriate, in determining whether to consummate the M&A
                    Transaction. At the time the Company requests WFI to make a
                    fairness determination, the Company will pay WFI a
                    non-refundable fee of Twenty-Five Thousand dollars
                    ($25,000); provided, however, that such fee shall be
                    credited against any success fee payable as a result of the
                    M&A Transaction;

               (iv) As used herein, "Excess Formula" means a four percent (4%)
                    fee on excess amounts less than One Million dollars
                    ($1,000,000), then a three percent (3%) fee on excess
                    amounts equal to or greater than One Million dollars
                    ($1,000,000) but less then Two Million dollars ($2,000,000),
                    then a two percent (2%) fee on excess amounts equal to or
                    greater than Two Million dollars ($2,000,000) but less than
                    Three Million dollars ($3,000,000), then a one percent fee
                    (1%) on any excess amounts greater than or equal to Three
                    Million dollars ($3,000,000);

          (f)  five percent (5%) fee on any non-convertible debt; and

          (g)  in any transaction involving a Financing in which the common
               stock, par value $.01 per share, of the Company (the "Common
               Stock") is issued in connection therewith, a non-cancelable
               warrant to purchase an aggregate of ten (10) percent of shares
               sold in such Financing at an exercise price per share of 120% of
               the issuance price per share. Any such warrants shall expire
               within five (5) years of the date of grant and contain a cashless
               exercise provision with customary piggyback registration rights.

          The fees set forth in this PARAGRAPH 2 shall apply to any source (or
          source or contact of a source) introduced to the Company by WFI, or
          referred to WFI by the Company (a "Source"), during the Engagement
          Period and for twenty-four (24) months thereafter (the "Tail Period");
          provided, however, that (i) under no circumstance shall any entity
          listed on SCHEDULE A attached hereto, or any such entities' employees,
          agents, officers, directors or representatives be considered a Source
          for purposes of this Agreement, (ii) if a Financing is consummated
          after the Engagement Period and is subject to the Tail Period, the
          three percent (3%) nonaccountable fee to be received by WFI hereunder
          shall be offset by amounts previously paid under PARAGRAPH 3 and (iii)
          the Tail Period shall not apply if the

<PAGE>

Page 5

          Company terminates this Agreement for Cause or if WFI has received
          fees under subparagraphs (c), (d), (e), (f) or (g) of this PARAGRAPH
          2.

          In the event that a corporate transaction involving more than one of
          the services for which WFI has been engaged is successfully concluded
          pursuant to this Agreement, WFI shall be paid the applicable fee
          designated in this Paragraph 2 for each of the services provided, but
          only in proportion to the extent such service or financing is
          proportionate to the entire corporate transaction. For instance, if in
          connection with an acquisition pursuant to subparagraph (e) the
          Company issues a non-convertible note that would also trigger a fee
          payable in accordance with subparagraph (f), then, with respect to
          such transaction, WFI would receive the designated fee for (i) Merger
          and Acquisition services calculated only upon the acquisition value
          included in the transaction and (ii) placement of the non-convertible
          note only for the value of the note. No fee designated in this
          PARAGRAPH 2 would apply to, or be paid for, any service or component
          of the corporate transaction subject to a fee designated under a
          separate provision of this PARAGRAPH 2.

     3.   EXPENSES. In the event a Financing does not occur during the
          Engagement Period, the Company will reimburse WFI for the following
          expenses incurred by WFI in relation to this Agreement:

          (a)  The cost of printing and distributing the offering documents,
               private placement memorandum and blue sky memorandum and any
               additional agreements and/or disclosure documents required by WFI
               or its counsel;

          (b)  The filing fees of the Securities and Exchange Commission (the
               "SEC"), the NASD, state blue sky filings and all regulatory
               filings, and any legal fees incurred by WFI in connection
               therewith;

          (c)  The cost associated with publishing a "Tombstone" advertisement,
               not to exceed in size more than one-fourth of a standard size
               newspaper page, to be published in the Minneapolis and/or St.
               Paul papers, or a similar publication, to be chosen by WFI; and

          (d)  All costs incurred for legal representation related to a
               Financing; provided, however, that such costs shall not exceed
               Twenty-Five Thousand dollars ($25,000).

     4.   OBLIGATION TO PAY FEES. If, and only if, WFI shall have produced a
          commitment (the "Commitment") from a lender or investor which the
          Company, in its sole discretion, accepts in writing, then WFI shall be
          deemed to have earned the

<PAGE>

Page 6

          applicable fee as set forth above in PARAGRAPH 2. The Company shall
          pay such fee(s) to WFI on (i) the date it receives the proceeds of
          such loan or investment, and in the event such proceeds are to be
          paid to the Company in deferred installments, then the fee(s) payable
          to WFI shall be payable in amounts proportionate to each of the
          deferred installments, or (ii) if the Company fails to accept funding
          against an accepted commitment, on the expiration date of the accepted
          commitment; provided, however, if a funding against an accepted
          commitment does not occur as a result of (A) withdrawal by a lender or
          investor, (B) the Company is unable to agree with the lender or
          investor after negotiating in good faith on definitive documentation
          or (C) there are material changes either to the transaction or to the
          circumstances surrounding such transaction that (I) arise after the
          execution of the Company's acceptance of the Commitments or (II) are
          proposed by the lender or investor, then the Company shall have no
          obligation to pay the applicable fee set forth above in PARAGRAPH 2.

     5.   THIRD PARTY RIGHTS. This Agreement has been and is made solely for the
          benefit of WFI and the Company and for their respective agents,
          employees, officers and directors and any successors, assigns and
          heirs. No other person shall acquire or have any right under or by
          virtue of this Agreement.

     6.   TERM; TERMINATION. WFI's right under this Agreement shall extend from
          the date hereof for a period of twelve (12) months or after such
          period until either WFI, upon ninety (90) days written notification,
          or the Company, immediately upon such notification, communicates to
          the other party that it wishes to terminate this Agreement (the
          "Engagement Period"); provided, however, that the provisions of
          PARAGRAPHS 2, 8 and 9 will survive such expiration or termination
          except as otherwise set forth herein. For purposes herein, the
          effective date of Termination shall be deemed to have occurred upon
          the earlier of the actual or constructive date of delivery of the
          written notification.

          Notwithstanding anything in this Agreement to the contrary, the
          Company can terminate this Agreement at any time for Cause (as defined
          below). If the Company elects to terminate this Agreement for Cause,
          then (i) the Company shall owe none of the fees set forth in PARAGRAPH
          2 to WFI under any circumstance whatsoever, including any fees that
          might arise during the Tail Period and (ii) the Company shall
          reimburse WFI only for those accountable expenses incurred in
          connection with this Agreement in accordance with PARAGRAPH 3, and
          (iii) the Company shall not be obligated to indemnify WFI as it
          otherwise would be required to do pursuant to PARAGRAPH 8. For
          purposes of this Agreement, "Cause" means (i) a breach of WFI's duties
          or obligations under this Agreement or (ii) WFI's gross negligence or
          misfeasance in performing its duties and obligations under this
          Agreement.

<PAGE>

Page 7

     7.   EXCLUSIVITY AND WFI'S FUTURE RIGHTS. During the term of this Agreement
          neither the Company, its officers, directors, shareholders or agents
          shall engage any other entity to secure Financings, nor shall the
          Company, its officers, directors, shareholders or agents initiate or
          pursue discussion with potential financing sources for the purpose of
          obtaining loans on equity funds for Financings, except in conjunction
          with and/or acknowledgment by WFI; provided, however, that this
          Agreement shall not prohibit the Company from engaging in discussions
          or entering into any kind of financial arrangement, with any entity
          identified on SCHEDULE A attached hereto or their respective
          successors-in-interest, and nothing in this Agreement shall be
          applicable or enforceable with respect to any such arrangement that
          the Company discusses or enters into with those entities identified on
          SCHEDULE A attached hereto or their respective successors-in-interest.

          If a Financing is consummated during the term of this Agreement, WFI
          or a party designated on SCHEDULE A shall be designated as the
          placement agent. The fee structure for any such consummated Financing,
          or any additional Financing consummated during the Engagement Period,
          shall be determined in accordance with the provisions of PARAGRAPH 2
          herein. If a Financing is consummated during the Engagement Period for
          which WFI provided substantial services and the Company desires to
          undertake an additional Financing (a "Subsequent Financing") through
          either a Private Offering or a Public Offering during the succeeding
          twelve months, the Company shall provide WFI with written notice of
          the proposed Subsequent Financing. WFI will respond by written
          notification to the Company within fifteen (15) days of such notice if
          it desires to act as placement agent for such Subsequent Financing. If
          WFI responds within such time period, then the Company will appoint
          WFI as the placement agent for such Subsequent Financing upon terms
          and conditions mutually acceptable to both the Company and WFI.

     8.   INDEMNITY.

          (a)  In addition to the amounts which the Company has herein agreed to
               pay to WFI, the Company shall indemnify and hold WFI and its
               officers, directors, agents and controlling persons harmless
               against any losses, claims, damages or liabilities to which WFI
               or any of them may become subject insofar as the same arises from
               an action which alleges or is based upon the alleged untrue
               statement of a material fact, or omission of a material fact, or
               any other violation of applicable securities or other laws, by
               the Company or its officers, directors, agents and controlling
               persons and to reimburse WFI for any legal or other expenses
               reasonably incurred by it in connection with investigating,
               settling or defending any action or claim in connection
               therewith; provided, however, that the Company shall not be

<PAGE>

Page 8

               liable in any such case to the extent that any such loss, claim,
               damage or liability: (i) is found in a final judgment of a court
               of competent jurisdiction to have resulted from a breach of WFI's
               obligations to the Company in connection with the performance by
               WFI of the services pursuant hereto or from WFI's gross
               negligence or misfeasance in performing such services or (ii)
               arises out of, or is based upon, any untrue statement of a
               material fact or omission of a material fact made in any written
               communication or any amendment or supplement thereto in reliance
               upon, and in conformity with, information furnished to the
               Company by WFI expressly for use therein.

          (b)  WFI shall indemnify and hold the Company and its officers,
               directors, agents and controlling persons harmless against any
               losses, claims, damages or liabilities to which the Company may
               become subject in connection with the transactions contemplated
               herein, insofar as such losses, claims, damages or liabilities
               arise out of, or are based upon (i) any untrue statement or
               misleading omissions made by WFI in writing expressly for use in
               connection with a Financing (other than untrue statements of a
               material fact or omission of a material fact made by WFI in
               reliance on information supplied to WFI by the Company) or (ii)
               WFI's gross negligence, misfeasance or breach of WFI's obligation
               hereunder to the Company. WFI shall reimburse the Company for any
               legal or other reasonable expenses incurred by it in connection
               with investigating, settling or defending any such action or
               claim.

          (c)  Upon receipt by WFI or its officers, directors, agents or
               controlling persons (for purposes of PARAGRAPH 8(a)), or the
               Company or its officers, directors, agents or controlling persons
               (for purposes of PARAGRAPH 8(b)) (in each case the "Indemnified
               Party"), of notice of any action, suit, proceeding, claim, demand
               or assessment against the Indemnified Party that might give rise
               to a claim pursuant to this section, the Indemnified Party shall
               give written notice thereof within ten days (the "Notice of
               Claim") to the Company, for purposes of PARAGRAPH 8(a), or WFI,
               for purposes of PARAGRAPH 8(b) (in each case the "Indemnifying
               Party"), indicating the nature of such claim and the basis
               therefor. The Notice of Claim shall specify all facts known to
               the Indemnified Party giving rise to such claim and the amount of
               estimate of the amount of liability arising therefrom. Any delay
               or failure to notify the Indemnifying Party shall relive the
               Indemnifying Party of its obligations hereunder only to the
               extent, if at all, that it is prejudiced by reason of such delay
               or failure.

          (d)  Promptly after a claim is made for which the Indemnified Party
               seeks indemnity, the Indemnified Party, at its option and
               expense, to assume the

<PAGE>

Page 9

               defense of such action, suit, proceeding, claim, demand or
               assessment with full authority to conduct such defense and the
               Indemnified Party will cooperate fully with such defense. The
               Indemnified Party shall have the right to employ separate counsel
               in any of the foregoing actions, claims or proceedings and to
               participate in the defense thereof, and the Indemnifying Party
               shall pay the reasonable fees and expenses of such counsel in
               advance at the request of the Indemnified Party. Anything in this
               section to the contrary notwithstanding, the Indemnified Party
               shall not, without the Indemnifying Party's prior written
               consent, settle or compromise any action or claim or proceeding
               or consent to entry of any judgment with respect to any such
               action or claim that requires the payment of money damages by the
               Indemnified Party or in any way is binding upon or affects the
               Indemnifying Party.

          (e)  The respective reimbursement and indemnity obligation of WFI and
               the Company pursuant to subparagraphs (a) and (b) of this
               PARAGRAPH 8 shall be in addition to any liability which WFIP or
               the Company may otherwise have and shall be binding upon, and
               inure to the benefit of, their respective successors, assigns,
               heirs, and personal representatives.

          (f)  Except as stated otherwise herein, the respective indemnify
               agreements of WFI and the Company contained in subparagraphs (a)
               and (b) of this PARAGRAPH 8 shall remain operative and in full
               force and effect regardless of any termination of this Agreement
               or of any investigation made by or on behalf of this Company or
               WFI.

     9.   CONFIDENTIAL INFORMATION. WFI acknowledges that as a consequence of or
          through its engagement by the Company, it will acquire information
          concerning the Company's business, products and services. All such
          information shall be "Confidential Information" regardless of whether
          it is reduced to writing, used or practiced during the Engagement
          Period. As a condition to the Company's entering into this Agreement,
          WFI agrees that it shall not at any time for a term beginning on the
          date hereof and ending two years after the termination of WFI's
          engagement hereunder, either directly or indirectly, use for the
          benefit of itself or communicate or divulge to any other person,
          partnership, association, corporation or other entity for their use or
          benefit, any Confidential Information known by, or then in the
          possession of, WFI without the prior written consent of the Company.
          The foregoing restriction shall not apply to Confidential Information
          that, at the time of disclosure to WFI, has become a part of the
          public domain through publication or communication by the Company or
          others, unless such matters become part of the public domain in
          connection with or as a result of a violation of this restriction by
          WFI.

<PAGE>

Page 10

     10.  BOARD OBSERVER. WFI shall have the right to appoint an individual to
          act as a non-voting observer of all meetings of the Board of Directors
          of the Company, subject to the terms and conditions of a Board
          Observer Agreement substantially in the form as the Board Observer
          Agreement attached hereto as EXHIBIT A.

     11.  NOTICES. All notices, requests consents and other communications
          hereunder shall be in writing and shall be delivered in person, mailed
          by certified or registered mail, return receipt requested, sent by
          telecopier, telex or delivered by Federal Express, United Parcel
          Service or another similar company, addressed as follows:

          (a)  if to the Company, at 531 W. Main Street, Suite 100, Denison,
               Texas 75020, Attention: Ricky D. McCord, with a copy to Vinson &
               Elkins L.L.P., 3700 Trammell Crow Center, 2001 Ross Avenue,
               Dallas, Texas 75201, Attention: Jay H. Hebert and

          (b)  if to WFI, at 400 South 4th Street, Suite 955, Minneapolis,
               Minnesota 55415, Attention: John M. Whitesides, with a copy to
               Paul des Hotels.

          (c)  Any notice or communication hereunder shall be deemed to have
               been given or made as of the date so delivered if personally
               delivered; when answered back, if telexed; when receipt is
               acknowledged, if telecopied; and five calendar days after mailing
               if sent by registered or certified mail (except that a notice of
               change of address shall not be deemed to have been given until
               actually received by the addressee). If a notice or communication
               is mailed in the manner provided above, it is duly given, whether
               or not the addressee receives it.

     12.  GENERAL. This Agreement may not be modified except in writing. This
          Agreement represents the entire understanding between the Company and
          WFI and all prior discussions and negotiations and all prior
          engagement letters are merged into it.

     13.  ARBITRATION. Any dispute or controversy arising out of this Agreement
          shall be determined by arbitration in accordance with the rules of the
          National Association of Securities Dealers, Inc. as then in effect and
          at a location mutually acceptable to both parties. Any arbitration
          award shall be final and binding upon the Company and WFI, and
          judgment upon the award may be entered in any court having
          jurisdiction.

     14.  ASSIGNABILITY. WFI cannot assign its rights under this Agreement
          without the written consent of the Company.

<PAGE>

Page 11

     15.  SURVIVAL. Compensation, reimbursement, confidentiality and indemnity
          obligations of the Company and WFI, as applicable, under this
          Agreement shall survive any assignment of this Agreement and shall be
          binding upon and entered into the benefit of any successors, assigns,
          heirs and personal representatives of the Company and WFI.

     16.  COUNTERPARTS. This Agreement may be executed in counterparts, and all
          counterparts will be considered as part of one agreement binding on
          all parties to this Agreement.

     17.  FACSIMILE SIGNATURES. The parties may execute this Agreement by
          facsimile, which signature[s] shall be deemed an original and binding
          upon such party.

     18.  GOVERNING LAW. This Agreement shall be governed and construed in
          accordance with the laws of the State of Minnesota.

     If this letter correctly states our agreement, please so indicate by
signing below and returning a signed copy to us. Upon receipt of a signed copy
of this letter, the terms of such letter shall constitute a binding agreement
between WFI and the Company.

                            [Signature page follows]

<PAGE>

Page 12

                                       WATERFORD FINANCIAL, INC.

                                       By /s/  John M. Whitesides
                                          ------------------------------
                                             John M. Whitesides
                                             President

Accepted this 28 day of January, 2000

HORIZON PHARMACIES, INC.

By: /s/ Rick McCord
   ------------------------
      Rick McCord
      President & CEO

<PAGE>

                                   SCHEDULE A

ENTITIES
--------

Allegiance Capital
AmeriSource
Amersco
Bank Boston
Bank of America
Bank One
Bergen Brunswig
Bindley Western
Cardinal Distribution
C.A.S.E.
Chase Bank
Citicorp
Deep Haven Capital
Drug Emporium
Finova
First Union & Congress Financial
Fleet Capital
Fred's
GE Capital
GTCR (Golder Toma)
Heller Financial
J. E. Mathews, LLC
LaSalle Bank
McKesson HBOC
Reichmann International
USA Drug

<PAGE>

                                    EXHIBIT A
                                    ---------

                                     FORM OF
                            BOARD OBSERVER AGREEMENT

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