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ASSIGNMENT & NON-COMPETITION AGREEMENT
 
dated as of
 
January 4th, 2008
 
by and between
 
RxELITE INC.
 
and
 
DR. ARIE GUTMAN
 

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TABLE OF CONTENTS
 
1.
Non-Competition Undertaking.
1
2.
Assignment of Rights
2
3.
Consideration
3
4.
Board representation
4
5.
Representations and Warranties of RxElite
4
6.
Representations and Warranties of Gutman
8
7.
Closing
8
8.
Certain Covenants
9
9.
Indemnification
9
10.
Miscellaneous
11

 

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ASSIGNMENT & NON-COMPETITION AGREEMENT
 
THIS ASSIGNMENT & NON-COMPETITION AGREEMENT (the “Agreement”) is made and
entered into as of January 4th, 2008, by and between RxElite Inc., a Delaware
corporation (“RxElite”), and Dr. Arie Gutman, an Israeli citizen (“Gutman”).
 
WITNESSETH :

WHEREAS, Gutman is an internationally known scientist, with many inventions,
experience and connections in the field of active pharmaceutical materials, and
is the sole shareholder of FineTech Laboratories, Ltd., a company organized
under the laws of the State of Israel (“Finetech”);
 
WHEREAS, RxElite is a Delaware corporation currently doing business in the field
of pharmaceutical products, and the shares of RxElite are traded on the
Electronic Bulletin Board;
 
WHEREAS, RxElite desires to secure Gutman’s personal commitment to allow RxElite
and Finetech to benefit from his non-competition in the Prohibited Business over
the Period (as hereinafter defined); 
 
WHEREAS, Finetech has assigned to Gutman certain rights to receive Royalties
from certain Applicable Contracts (as hereinafter defined), and the Parties
hereto wish to terminate such assignment in such manner that the right to the
Royalties shall revert to Finetech, all according to the terms set out herein;
 
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows,
intending to be legally bound:
 

1.
Non-Competition Undertaking.

 

1.1
For the Consideration as set out below, Gutman hereby undertakes as provided in
this Aticle 1 below.

 

1.2
For a period of one (1) year from and after the end of Employment (the
“Period”), Gutman will not, directly or indirectly (whether as an owner,
proprietor, partner, shareholder, officer, employee, independent contractor,
director, joint venturer, consultant, lender or investor), solicit or engage in
the Prohibited Business (“Non-Compete Undertaking”). For purposes of this
Agreement, the “Prohibited Business” means: offering to provide or providing any
product or service competitive with the business of RxElite or its Israeli
subsidiary RxElite Israel Ltd (collectively: the “Companies”), worldwide. The
Non-Compete Undertaking notwithstanding, Gutman may be a securities holder in
certain entities operating in the pharmaceutical field, as follows: (i)
securities of RxElite itself; and (ii) up to 5% of the securities of entities
publicly traded on a national securities exchange. To avoid doubts, the
provisions of Section 2.3 below will not be deemed a breach of the Non-Compete
Undertaking.

 

1.3
From and after the Closing Date, Gutman shall not, directly or indirectly, (i)
discourage any person from accepting employment with the Companies, or (ii)
solicit the employment or services of any person who is employed by the
Companies, or is otherwise engaged to perform services for the Companies
(whether in the capacity of employee, consultant, independent contractor or
otherwise), or is offered a position by the Companies, or (iii) cause or attempt
to cause such person as described above to leave the employment or service of
the Companies.

 

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1.4
Gutman acknowledges and agrees that the limitations imposed by Sections 1.2 and
1.3 as to time, geographical area, and scope of activity being restrained are
reasonable and do not impose a greater restraint than is necessary to protect
the goodwill or other business interests of the Companies.

 

1.5
The parties hereby agree that if Gutman violates the provisions of this Article
1, it will be difficult to determine the entire cost, damage or injury which the
Companies would sustain. Gutman acknowledges that if he violates or threatens to
violate the provisions of this Article 1, the Companies may not have adequate
remedy at law. In that event, the Companies shall have the right, in addition to
any other rights that may be available to them, to apply for injunctive relief
in any court of competent jurisdiction, in order to restrain any or threatened
violation by Gutman of the provisions of this Article 1 or to compel specific
performance by Gutman of one or more of his undertakings hereunder. The seeking
or obtaining by the Companies of such injunctive relief shall not foreclose or
in any way limit the right of the Companies to obtain a monetary judgment
against Gutman for any damage to the Companies that may result from any breach
by Gutman of the provisions of this Article 1.  

 

1.6
Should a final judgment of a court of competent jurisdiction declare any term or
provision of this Article 1 to be invalid or unenforceable, the parties agree
that the court making such determination of invalidity or unenforceability shall
have the power to reduce the scope, duration or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Article 1 shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed. Such
judgment shall not effect any other provision of this Agreement.

 

2.
Assignment of Rights

 

2.1
Finetech and Gutman have previously executed an assignment deed effective as of
February 1, 2006 (the “Assignment Deed”) whereby Gutman was assigned all rights
to receive a certain share in the sales of two Israeli companies (such share is
herein referred to as “Royalties”), as provided in the following agreements: (i)
an agreement dated October 26, 2003 between Finetech and the Israeli company
Unipharm Ltd. regarding sales of Latanoprost (the “Unipharm Agreement”), (ii) an
agreement dated January 9, 2004 between Finetech and the Israeli company Trima
Israel Pharmaceutical Products Maabarot Ltd. regarding sales of Cabergoline (the
“Trima Agreement” and together with the Unipharm Agreement, the “Applicable
Contracts”);

 

2.2
As of the Closing and subject to receipt of the Consideration as set out below,
Gutman hereby reassigns to Finetech all his rights under the Assignment Deed
(such reassignment is herein referred to as the “Assignment”). Consequently, all
rights to receive the Royalties under the Applicable Contracts shall revert to
Finetech, and the Assignment Deed shall terminate as of the Closing. To avoid
doubts, no promise or guarantee is given or made by Gutman as to economic value
of the Assignment or the actual Royalties amounts to be paid to Finetech
consequent to the Applicable Contracts. 

 
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2.3
During past years, Gutman was granted/assigned the right to receive royalties
due as a result of sales of products based on intellectual properties
developed/provided by Gutman and/or Finetech, as follows: (i) royalties due on
sales of Donepezil products by Unipharm Ltd. and its affiliates (agreement dated
1998), and (ii) royalties due on sales of Rotinirole, Latanoprost and Donepezil
products by PAR Pharmaceutical, Inc. and its affiliates (agreement dated January
2006). The right to receive the aforesaid royalties is not included in the
Assignment hereunder, and this right shall survive and continue to be valid to
the benefit of Gutman, without any claim by either Finetech or RxElite.

 

3.
Consideration

 

3.1
In consideration for the Non-Compete Undertaking and the Assignment, RxElite
shall pay to Gutman at the Closing an amount of US $21,054,592 in 18,632,383
unregistered shares of Common Stock of RxElite (the “Shares” and the “Common
Stock” respectively), valued at US$1.13 per Share.  

 

 
The Shares shall be unregistered under the US Securities Act of 1933 (the “Act”)
and accordingly any disposition by Gutman shall require their registration or an
exemption from registration under said Act. 

 

 
Once issued, the Shares shall be validly issued, fully paid and non-assessable,
and free of any encumbrance or third party rights.

 

3.2
RxElite represents that as of the date hereof and as of the Closing, the
outstanding share capital of RxElite, on a fully diluted as converted and as
exercised basis, including all current, contingent or otherwise promised
securities of any kind, is 147,120,967 shares of Common Stock (exclusive of
11,771,033 ISOP options that were authorized but not yet allocated), and no
other equity securities (or securities exercisable or convertible into equity
securities), of any class, are outstanding. RxElite undertakes to maintain the
aforesaid throughout the period until the Closing, and during this period
RxElite shall not promise or undertake to issue any such securities.

 

3.3
By not later than the Closing, RxElite and Gutman shall execute and deliver a
Registration Rights Agreement in customary form (the "Registration Rights
Agreement"), whereby RxElite will provide certain registration rights with
respect to the Shares, under the Act and the rules and regulations promulgated
thereunder, and under applicable state securities laws.

 

3.4
RxElite warrants and undertakes that, except as required in order to comply with
applicable securities laws and the Registration Rights Agreement, there shall be
no limitations on the right of Gutman to effect the transfer of any of the
Shares, and neither RxElite nor anybody acting on its behalf or by its
instructions shall stop or delay such transfers. During the first two years
after the Closing, the Shares will be restricted shares, meaning that no
transfers will be allowed, except to Permitted Transferees. For that purpose,
“Permitted Transferees” are family members or Affiliates of the transferor; and
“Affiliate” shall mean an entity that, directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is under common control
with, the transferor (for this definition, “control” and its derivatives means
the possession, directly or indirectly, or as trustee or executor, of the power
to direct or cause the direction of the management and policies of an entity,
whether through ownership of voting equity interests, as trustee or executor, by
contract or credit arrangements or otherwise). Gutman shall always be entitled
to transfer some or all of the Shares to Permitted Transferees.

 
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4.
Board representation

 

4.1
RxElite shall make best effort to appoint Gutman or his nominee as a member of
the Board of Directors of RxElite (the “Board”) and to renew such appointment
from time to time, unless Gutman waives this right. As a Board member, Gutmans
or his nominee (as the case may be) shall have the right to serve on any (or
all) committee he deems fit.

 

4.2
Until the date such nomination to the Board takes effect, Gutman will be invited
to all Board and Board committees meetings, shall have the right to attend each
such meeting as a non-voting observer, and shall receive all materials,
information and privileges provided to the Board members.

 

4.3
Gutman shall be included in any D&O insurance and undertaking provided by
RxElite to its directors and officers.

 

5.
Representations and Warranties of RxElite

 
RxElite hereby represents and warrants to Gutman as of the date hereof and as of
the Closing Date (unless another date is expressly set forth below) that the
representations and warranties set forth in this Article 5 below are and will be
accurate, true and complete. 
 

5.1
Existence and Power. RxElite is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, and has all corporate powers
and all governmental licenses, permits, authorizations, consents and approvals
required to own its property and to carry on its business and operations as now
conducted or proposed to be conducted. RxElite has heretofore delivered to
Gutman true and complete copies of RxElite’s Certificate of Incorporation and
By-laws as currently in effect.

 

5.2
Authorization. The execution, delivery and performance by RxElite of this
Agreement and all other documents and agreements to be executed by RxElite in
connection herewith (the “Related Documents”) and the consummation by RxElite of
the transaction contemplated hereby require no action by or in respect of, or
filing with, any governmental body, agency, official or authority in the United
States on federal or state level.

 

5.3
Enforcement. This Agreement and the Registration Rights Agreement and all
ancillary documents (collectively, the “Transaction Documents”) have been duly
executed and delivered by RxElite and constitute the valid and legally binding
obligation of RxElite, enforceable against RxElite in accordance with their
respective terms including without limitation the issuance of the Shares to
Gutman in accordance with the terms hereof, except as such enforceability may be
limited by laws governing bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws, without limitation, relating to or
affecting creditors’ rights generally.

 
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5.4
Non-Contravention. The execution, delivery and performance by RxElite of this
Agreement and the other Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby (including the issuance of the
Shares to Gutman), do not and will not:

 

5.4.1
Contravene, violate or conflict with, or constitute a violation of, any
provision of any law (including federal and state securities laws and
regulations and the rules and regulations of the NASD Over-the-Counter market
(the "OTC")), regulation, judgment, injunction, order or decree, the Certificate
of Incorporation or Bylaws, binding upon or applicable to RxElite;

 

5.4.2
Conflict with, result in a breach or violation of, or constitute a default
under, or result in a contractual right to cause the termination or cancellation
of or loss of a benefit under, or right to accelerate, any agreement, contract
or other instrument binding upon RxElite or license, franchise, permit or other
similar authorization held by RxElite; or

 

5.4.3
Result in the creation or imposition of any Encumbrance on any of the Shares.

 

5.5
SEC Documents; Other Information. RxElite has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the US Securities and Exchange Commission (“SEC”) and with similar State
agencies pursuant to the reporting requirements of the 1934 Act and applicable
State laws (all of the foregoing filed prior to the date hereof, and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). Except as modified by subsequent filings, as of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

 

5.6
Subsidiaries. Other than RxElite Holdings, Inc., RxElite does not own directly
or indirectly, any capital stock, equity interest or other ownership interest in
any corporation, partnership, association, joint venture, limited liability
company or other entity.

 

5.7
Financial Statements. The Financial Statements and complementary information
contained and referenced in the RxElite 10-QSB report for the quarter ending on
September 30, 2007 (Collectively, the “Financial Statements”) have been
previously delivered to Gutman. The Financial Statements were prepared in
accordance with Generally Accepted Accounting Principles in the US (“GAAP”)
applied on a consistent basis. The Financial Statements fairly present the
financial position of RxElite as of the date thereof and its results of
operations for the period then ended.

 

5.8
Absence of Certain Changes. Since September 30, 2007, to the knowledge of
RxElite, except as set forth in Schedule 5.8 and except as disclosed on the
Financial Statements, there has not been any Material Adverse Effect applicable
to RxElite or the Common Stock, or any event, occurrence, development or state
of circumstances or facts which as of the date hereof could reasonably be
expected to have a Material Adverse Effect on RxElite or the Common Stock.

 
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5.9
Stock. Prior to the Closing, the authorized capital stock of RxElite consists of
1,000,000 shares of Preferred Stock par value $0.001 each, of which as of the
date hereof, none are issued and outstanding, and 200,000,000 shares of Common
Stock par value $0.001 each, of which:

 

5.9.1
96,682,920 shares have been duly issued and are outstanding;

5.9.2
38,014,328 shares are reserved for issuance upon full exercise of warrants;

5.9.3
9,323,388 shares are reserved for issuance upon conversion of a convertible
note;

5.9.4
3,102,850 shares are reserved for issuance upon exercise of options previously
allocated under the RxElite Incentive Stock Option Plan (“ISOP”);

5.9.5
11,771,033 additional shares are reserved for issuance upon allocation and
exercise of as yet un-allocated options under the ISOP;

5.9.6
All of such outstanding shares have been validly issued, and ISOP was duly
adopted. All resolutions regarding the issuance of securities (including
warrants and options) were duly adopted and carried out.

 
Except as set forth above, at the date hereof (i) there are no outstanding
rights to subscribe to any shares of capital stock of RxElite, (ii) there are no
securities or rights convertible into, or exercisable or exchangeable for,
shares of capital stock of RxElite, (iii) there are no contracts, commitments,
understandings or arrangements by which RxElite is or may become bound to issue
additional shares of its capital stock; (iv) there are no securities or
instruments which grant to their holders rights or privileges superior to those
attached to the Shares.
 

5.10
Intellectual Property. RxElite owns all right, title and interest in and to or
is duly licensed to use or may freely use, all of the Intellectual Property
presently used in the operation of its business as it is conducted or as
expected to be conducted on the Closing Date, but excluding “off the shelf”
licenses pursuant to which such Intellectual Property is made available through
regular commercial distribution channels on standard terms and conditions. To
the knowledge of RxElite, there is no other item of Intellectual Property that
is necessary for the conduct of RxElite business as presently operated or as
expected to be operated as of the Closing Date. To the knowledge of RxElite, the
operation of its business does not interfere with, infringe, misappropriate or
otherwise violate or misuse any Intellectual Property of any third party (“Third
Party Intellectual Property Assets”).

 

5.11
Licenses and Permits. RxElite holds all governmental licenses, permits,
authorizations, consents and approvals that are necessary or useful for the
conduct of its business. All such Permits are valid and in full force and
effect, will not be terminated or impaired or become terminable as a result of
the transaction contemplated hereby and are sufficient for the operation of the
business of RxElite as presently conducted or as expected to be conducted after
the Closing Date.

 

5.12
Environmental Matters. Without in any manner limiting any other representation
or warranty set forth in this Agreement with respect to premises and facilities
used or operated by RxElite (each a “Business Facility”), to the knowledge of
RxElite, RxElite is in compliance with, and has no liability under any
applicable environmental law.

 

5.13
Tax Matters. RxElite has timely filed (taking into account any applicable
extensions) all applicable Tax Returns and reports for all years and periods for
which such returns and reports were due to be filed by it prior to the Closing
Date. To the knowledge of RxElite, each of such Tax Returns as filed was correct
and complete.

 
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With the exception of a 2004 Audit, RxElite is not currently the subject of an
audit, other examination, matter in controversy, proposed adjustment, refund
litigation or other proceeding with respect to Taxes by the federal and state
Tax authorities of the US, nor has RxElite received any notices from any Tax
authority relating to any such issue or potential issue.

 

 
There are no liens for Taxes upon any assets or properties of RxElite, except
for statutory liens for current Taxes not yet due. RxElite has not, as of the
date hereof, entered into an agreement or waiver extending any statute of
limitations relating to the payment or collection of Taxes.

 

 
RxElite has timely paid all Taxes and Tax liabilities in respect of periods
prior to the date hereof and, to the knowledge of RxElite, has accrued on its
Financial Statements an amount necessary to pay in full all unpaid Taxes. To its
knowledge, RxElite has complied with all applicable Tax Laws.

 

 
To its knowledge, all Taxes that RxElite is or was required to withhold have
been duly withheld and, to the extent required, have been paid to the proper
Governmental Authority. 

 

5.14
Compliance with Laws; No Defaults. To its knowledge, RxElite is not (i) in
violation of any statute, law, rule or regulation or any judgment, order, writ,
injunction or decree of any court or Governmental Authority to which RxElite is
subject, or (ii) subject to any claim asserted by any Governmental Authority
that RxElite is in violation of any Legal Requirement.

 

 
To its knowledge, as of the date hereof, RxElite is not in default under, and no
condition exists that with notice or lapse of time or both would constitute a
default under, any contract or other instrument binding upon RxElite or
affecting or relating to its business or any license, authorization, permit,
consent or approval held by RxElite or affecting or relating to its business,
except as otherwise disclosed in this Agreement or in Schedules attached hereto.

 

5.15
Legal Proceedings. There is no order in which relief is sought involving,
affecting, or relating to RxElite or its business or the ownership, operation or
use by RxElite of any of its assets or that would prevent, delay or make illegal
the transaction contemplated by this Agreement, and there is no litigation,
action, suit, proceeding or governmental investigation pending or, to RxElite’s
knowledge, threatened against (orally or in writing), involving, affecting or
relating to RxElite, the Common Stock or the transaction contemplated by this
Agreement. 

 

5.16
No Undisclosed Liabilities. RxElite is not aware of any liabilities, except for:
(i) liabilities reflected or reserved against in the Financial Statements, (ii)
current liabilities incurred in the Ordinary Course of Business of RxElite since
the date of the Financial Statements, (iii) liabilities arising from RxElite’s
contracts, and (iv) liabilities imposed by applicable law.

 

5.17
Compliance With The Foreign Corrupt Practices Act And Export Control And
Antiboycott Laws. RxElite shall comply fully with all laws, rules, and
regulations applicable to it and the performance of its obligations under this
Agreement, including laws and regulations dealing with payments, gifts, and
gratuities.

 
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RxElite has at all times been in compliance with all Legal Requirements
applicable to it, relating to export control and trade embargoes. No product
sold or service provided by RxElite during the last five (5) years has been,
directly or indirectly, sold to or performed on behalf of Cuba, Iraq, Iran,
Libya or North Korea.

 

 
RxElite has not violated the antiboycott prohibitions applicable to it. During
the last five (5) years, RxElite has not been a party to, is not a beneficiary
under and has not performed any service or sold any product under any contract
under which a product has been sold to customers in Cuba, Iraq, Iran, Libya or
North Korea.

 

5.18
Books and Records. The books of account, stock record books, and other records
of RxElite, are complete and correct and have been maintained in accordance with
sound business practices. At the Closing, all of those books and records will be
in the possession of RxElite. Upon request, RxElite will make available to
Gutman such books and records.

 

5.19
Accuracy of Information Furnished. To the knowledge of RxElite, no
representation, statement or information contained in this Agreement (including
the various Schedules and Exhibits attached hereto) or any agreement executed in
connection herewith or in any certificate or other document delivered pursuant
hereto or thereto or made or furnished to Gutman or his representatives by
RxElite, contains or shall contain any untrue statement of a material fact or
omits or shall omit any material fact necessary to make the information
contained herein and therein not misleading. At the request of Gutman, RxElite
will provide to Gutman true, accurate and complete copies of the documents
listed or described in the various Schedules attached hereto.

 

6.
Representations and Warranties of Gutman

 

 
Gutman hereby represents and warrants to RxElite as of the date hereof and as of
the Closing Date (unless another date is expressly set forth below) that the
representations and warranties set forth in this Article 6 below are and will be
accurate, true and complete. 

 

6.1
Non-Contravention. The execution, delivery and performance by Gutman of this
Agreement, and the consummation of the transactions contemplated hereby do not
and will not contravene, violate or conflict with, or constitute a violation of,
any provision of any contract or undertaking binding upon Gutman.

 

6.2
Enforcement. This Agreement constitutes the valid and legally binding obligation
of Gutman, enforceable against him in accordance with its terms, except as such
enforceability may be limited by laws governing bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws, without
limitation, relating to or affecting creditors’ rights generally.

 

6.3
No Promise. Gutman confirms that there is no promise or guarantee by RxElite or
anybody on its behalf as to the technical or commercial success of RxElite or as
to the future value and/or marketability of its Common Stock, and there is no
assurance or guarantee that forward-looking plans or projections, or planned
products, will materialize or achieve the projected or expected results.

 

7.
Closing

 

7.1
The closing of the transactions contemplated by this Agreement (the “Closing”)
shall occur at such time and place as the parties mutually agree in good faith.
The date on which the Closing occurs is referred to in this Agreement as the
“Closing Date.” The Closing may take place by delivery and exchange of documents
by facsimile or electronic mail with originals to follow by overnight courier. 

 
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7.2
At the Closing, RxElite shall deliver to Gutman: (i) a certificate representing
the Shares; (ii) a certificate of the Secretary or Assistant Secretary of
RxElite, certifying as to (a) the certificate of incorporation and the bylaws
(or similar organizational documents) of RxElite, (b) the incumbency of all
officers of RxElite executing this Agreement and any agreement executed in
connection herewith, and (c) the resolutions of the RxElite Board authorizing
the execution, delivery and performance by RxElite of this Agreement and the
transactions contemplated hereby; and (iii) an opinion of counsel to RxElite.

 

8.
Certain Covenants

 

8.1
Conduct Of Business. The business of RxElite shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate, in a
Material Adverse Effect.

 

8.2
SEC Compliance. RxElite shall use best efforts to ensure that the quotation of
the Common Stock on the OTC shall not be suspended or revoked by the SEC or the
OTC.

 

8.3
Reports. RxElite shall always be current in its public reporting obligations
pursuant to applicable United States federal and State securities laws,
regulations and rules.

 

8.4
On-going Updates. RxElite will give Gutman prompt written notice of any material
adverse development causing a breach of any of its representations and
warranties under this Agreement.

 

9.
Indemnification

 

9.1
Indemnification by the RxElite. RxElite hereby agrees to indemnify, defend and
hold Gutman harmless from and against any losses, liabilities, claims,
obligations, damages (including diminution in value), strict liability,
Environmental Responsibility, fines, penalties, assessments, deficiencies,
actions, causes of action, arbitrations, proceedings, remediations, judgments,
settlements, violations or alleged violations of law, costs and expenses
(including reasonable attorneys’ fees and all other expenses incurred in
investigating, preparing, or defending any litigation or proceeding, commenced
or threatened) (collectively, “Gutman Damages”) arising out of or resulting
from:

 

(a)
a breach of any representation or warranty RxElite has made in this Agreement;

(b)
a breach by RxElite of any of its covenants or obligations in this Agreement;
and

(c)
any allegation by a third party of any of the foregoing.

 

 
RxElite will not be liable for indemnification arising under this Section for
any Gutman Damages unless the aggregate amount of such Damages for which RxElite
would be liable exceeds $50,000, in which case RxElite will be liable for all
Gutman Damages incurred by Gutman including such $50,000, up to the maximum
liability amount as set forth below.

 
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The maximum indemnification liability of RxElite (whether arising in law or
equity, in contract, tort or any other theory of law) towards Gutman for any
Gutman Damages giving rise to such indemnification, shall not exceed an
aggregate amount (for all Gutman Damages) of US$620,000 (six hundred and twenty
thousand US Dollars); and Gutman hereby waives any excess amounts of Gutman
Damages. Furthermore, no claim for indemnification may be made after expiration
of the survival period as per Section 10.1 below (18 months following the
Closing Date). The aforesaid limited liability constitutes the sole and
exclusive remedy for Gutman for any breach by RxElite of any and all
representations, warranties and covenants under and arising from this Agreement.
The aforesaid limitations shall not apply in the case of fraud or intentional
misrepresentation by RxElite, and shall not apply to breach of the obligation to
issue to Gutman the Shares as set forth in this Agreement.

 

9.2
Indemnification by Gutman. Gutman hereby agrees to indemnify, defend and hold
RxElite harmless from and against any losses, liabilities, claims, obligations,
damages (including diminution in value), strict liability, fines, penalties,
assessments, deficiencies, actions, causes of action, arbitrations, proceedings,
remediations, judgments, settlements, violations or alleged violations of law,
costs and expenses (including reasonable attorneys’ fees and all other expenses
incurred in investigating, preparing, or defending any litigation or proceeding,
commenced or threatened) (collectively, “RxElite Damages”) arising out of or
resulting from:

 

(a)
any breach of any representation or warranty Gutman has made in this Agreement;

(b)
any breach by Gutman of its covenants or obligations in this Agreement; and

(c)
any allegation by a third party of any of the foregoing.

 

 
The maximum indemnification liability of Gutman (whether arising in law or
equity, in contract, tort or any other theory of law) towards RxElite for any
RxElite Damages giving rise to such indemnification, shall not exceed an
aggregate amount (for all RxElite Damages) of US$620,000 (six hundred and twenty
thousand US Dollars); and RxElite hereby waives any excess amounts of RxElite
Damages. Furthermore, no claim for indemnification may be made after expiration
of the survival period as per Section 10.1 below (18 months following the
Closing Date). The aforesaid limited liability constitutes the sole and
exclusive remedy for RxElite for any breach by Gutman of any and all
representations, warranties and covenants under and arising from this Agreement.
The aforesaid limitations shall not apply in the case of fraud or intentional
misrepresentation by Gutman.

 

9.3
Indemnification Procedure for Third-Party Claims. Promptly after receipt by a
party entitled to indemnification hereunder (the “Indemnified Party”) of written
notice of the institution of any legal proceeding, or of any claim or demand,
asserted by a third party (a “Third Party Claim”) against the Indemnified Party
with respect to which a claim for indemnification is to be made pursuant to
Section 9.1 or 9.2 herein, the Indemnified Party shall give written notice to
the other party (the “Indemnifying Party”) of such Third Party Claim. The
Indemnifying Party shall be entitled to participate in and to assume the defense
of such Third Party Claim with counsel reasonably satisfactory to the
Indemnified Party, and after notice from the Indemnifying Party to such
Indemnified Party of such assumption of defense, and provided that the
Indemnifying Party continues to diligently pursue such defense, the Indemnifying
Party shall not be liable to such Indemnified Party for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof. Notwithstanding the foregoing, an Indemnified Party shall in all cases
be entitled to control its defense, including the selection of separate counsel
(at the cost and expense of the Indemnifying Party), of any Third Party Claim if
such claim: (i) may result in injunctions or other equitable remedies in respect
of the Indemnified Party which would affect its business or operations in any
materially adverse manner; (ii) may result in material liabilities which may not
be fully indemnified hereunder; (iii) may have a significant adverse impact on
the business or the financial condition of the Indemnified Party (including a
Material Adverse Effect on the tax liabilities, earnings or ongoing business
relationships of the Indemnified Party) even if the Indemnifying Party pays all
indemnification amounts in full or (iv) the anticipated defendants in any such
situation, proceeding or action include both the Indemnified Party and the
Indemnifying Party, and the Indemnified Party shall have reasonably concluded
that there may be legal defenses available to it which are different from,
additional to or inconsistent with those available to the Indemnifying Party. No
Indemnifying Party will enter into any settlement with respect to such Third
Party Claim without the prior written consent of the Indemnified Party unless
such settlement (a) requires solely the payment of money damages by the
Indemnifying Party and (b) includes as an unconditional term thereof the release
by the claimant or the plaintiff of the Indemnified Party and the persons for
whom the Indemnified Party is acting or who are acting on behalf of the
Indemnified Party from all liability in respect of the proceeding giving rise to
the Third Party Claim.

 
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9.4
Limitations on Indemnification. Without prejudice to the limitation provisions
of Sections 9.1 and 9.2 above, and except in the case of actual fraud by a party
hereto, no party shall be liable under this Agreement for special, punitive,
exemplary, consequential, or indirect damages, or lost profits, whether based on
contract, tort, strict liability, other Laws or otherwise, and whether or not
arising from the other party’s sole, joint or concurrent negligence, strict
liability or other fault.

 

10.
Miscellaneous

 

10.1
Survival. The representations and warranties of the parties contained in this
Agreement shall survive the Closing for a period of eighteen (18) months after
the Closing Date.

 

10.2
Notices. All notices, requests and other communications to either party
hereunder shall be in writing (including facsimile, telecopy or similar writing)
and shall be deemed given when delivered:

 
If to RxEliste, to:
 
Jonathan Houssian, CEO and President
 
RxElite Inc.
 
1404 North Main Street, Suite 200
 
Meridian, Idaho 83642
 
Telecopier: (208) 288-1191
 
Telephone: (208) 288-5550
     
with a copy (which shall not constitute notice) to:
Haynes and Boone, L.L.P.
 
152 East 53rd Street, 49th Floor
 
New York, New York
 
Attention: Harvey Kesner, Esq.
 
Telecopier: (212) 884-8233
 
Telephone: (212) 659-4973
 

 
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If to Gutman, to:
 
Dr. Arie Gutman
 
33 Narkissim Street
 
Nesher 36601, Israel
 
Telecopier: +972-4-8343341
 
Telephone: +972-52-47338333
     
with a copy (which shall not constitute notice) to:
 
Primes, Shiloh, Givon Meir - Law Firm
 
16, Derech Hayam (Sea Road)
 
Haifa 34741, Israel
 
Attention: Yesha Primes, Adv.
 
Telecopier: +972-4-8381401
 
Telephone: +972-4-8388332
 

   

Each of the above persons may change their address or facsimile number or
telephone number by notice to the other persons in the manner set forth above.

 

10.3
Amendments; No Waivers. Any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case
of an amendment, by RxElite and Gutman, or in the case of a waiver, by the party
against whom the waiver is to be effective. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the existence of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.

 

10.4
Expenses. Except as otherwise provided herein, all costs and expenses incurred
in connection with this Agreement shall be paid by RxElite or Gutman, depending
on which such party incurred or directed the incurrence of such cost or expense.

 

10.5
Successors and Assigns. The provisions of this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party to this Agreement may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of the other party hereto. Neither
this Agreement nor any provision hereof is intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.

 

10.6
Governing Law. This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of New York without regard to any
provision thereof that would require the application of the law of any other
jurisdiction. Each party hereby submits to the exclusive jurisdiction of the
courts of the State of New York, sitting in New York City.

 

10.7
Specific Performance. Each of the parties acknowledges and agrees that the other
party would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the parties agrees that the other party shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof, in addition to any other remedy to which it may be
entitled, at law or in equity.

 
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10.8
Counterparts. Effectiveness. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. Facsimile copies of
signature pages shall have the same legal effect as signed originals. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other party hereto. 

 

10.9
Entire Agreement. This Agreement, the Schedules and Exhibits hereto, and any
other documents referred to herein constitute the entire agreement between the
parties with respect to the subject matter hereof and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
parties with respect thereto. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by either party hereto. 

 

10.10
Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. The following rules of construction shall apply to this
Agreement:

 

(a)
Any reference to any federal, state, provincial or local statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.

(b)
All uses of “include,” “including” or words or phrases of similar import shall
be deemed to be followed by “without limitation.”

(c)
The headings and titles herein are for convenience only and shall have no
significance in the interpretation hereof.

(d)
Unless otherwise provided, all references in this Agreement to “Articles” and
“Sections” are to articles and sections of this Agreement; and all references to
“Exhibits”, “Schedules” or “Annexes” are to exhibits, schedules or annexes
attached to this Agreement, each of which is made a part of this Agreement for
all purposes.

(e)
Unless the context otherwise requires, the words “this Agreement,” “hereof,”
“hereunder,” “herein,” “hereby” or words or phrases of similar import shall
refer to this Agreement as a whole and not to a particular Article, Section,
subsection, clause or other subdivision hereof.

(f)
Capitalized terms that are defined herein shall have the specified meaning
ascribed to them in this Agreement regardless of whether any usage appears
before or after the place where a term is defined.

(g)
Terms defined in the singular shall have the corresponding meaning when used in
the plural and vice versa. Any definition of one part of speech of a word, such
as definition of the noun form of that word, shall have a comparable or
corresponding meaning when used as a different part of speech, such as the verb
form of that word.

(h)
Unless the context otherwise requires, references to agreements shall be deemed
to mean and include such agreements as the same may be amended, supplemented and
otherwise modified from time to time, and references to parties to agreements
shall be deemed to include the permitted successors and assigns of such parties.

 
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(i)
Where the character or amount of any asset or liability or item of income or
expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, the same
shall be done in accordance with generally accepted accounting principles in the
United States, except where such principles are inconsistent with the specific
provisions of this Agreement or any applicable law.

 
10.11
Severability. Any part of this Agreement which is found to be void, invalid,
illegal or unenforceable, shall be severed from this Agreement and ineffective
to the extent of that voidness, invalidity, illegality or unenforceability. Such
voidness, invalidity, illegality or unenforceability will not invalidate, affect
or impair the remaining provisions of this Agreement. If a court of competent
jurisdiction determines that the terms in respect of which covenants in this
Agreement are to be entered are unreasonable or unenforceable for any reason,
then this Agreement shall be reread and construed with such terms, as may be
applicable, as determined to be reasonable by a court of competent jurisdiction
and the Agreement shall be amended and construed accordingly hereby.

 
10.12
Certain Definitions 

 
“Encumbrances” means any mortgages, pledges, liens, encumbrances, charges or
other security interests.
 
“Governmental Authority” means any nation, province, state, county, municipality
or any other political subdivision of any of the foregoing, including (A) any
court, governmental department, tribunal, arbitrator or panel of arbitrators,
authority, agency, body, board, bureau, commission, official or other
instrumentality of the United States of America or any nation, state, province,
county, city or other political subdivision or similar governing entity, (B) any
person or entity exercising executive, legislative, regulatory, judicial or
administrative functions and (C) any governmental, quasi-governmental or
non-governmental body (whether executive, legislative, judicial or
administrative) administering, regulating or having general oversight over the
business of RxElite.
 
“Intellectual Property” or “Intellectual Property Assets” means all software,
inventions, art works, patents, patent applications, processes, shop rights,
formulas, brand names, trade secrets, know-how, service marks, trade names,
trademarks, trademark applications, copyrights, source and object codes,
customer lists, drawings, ideas, algorithms, processes, computer software
programs or applications (in code and object code form), tangible or intangible
proprietary information and any other intellectual property and similar items
and related rights owned by or licensed to RxElite or used in its business,
together with any goodwill associated therewith and all rights of action on
account of past, present and future unauthorized use or infringement thereof.
 
“Lease” shall mean any lease or rental agreement pertaining to the occupancy by
RxElite or the use by RxElite of any space on any Real Property.
 
“Legal Requirement” shall mean any national, federal, state, local, municipal,
foreign, international, multinational or other constitution, law, ordinance,
principle of common law, code, regulation, statute or treaty or decision or
order of any applicable Governmental Authority.
 
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“Liabilities” shall mean with respect to any Person, any liability or obligation
of such Person that is required to be accrued on the financial statements of
such Person.
 
“Losses” means all damage, loss, liability and expense, including, without
limitation, penalties, interest, reasonable expenses of investigation and
reasonable attorneys’ fees and expenses in connection with any action, suit or
proceeding incurred or suffered by any of the Indemnified Parties arising out of
any breach of any representation or warranty, covenant or agreement made or to
be performed by Indemnifying Parties pursuant to this Agreement.
 
“Material Adverse Effect” with respect to any Person shall mean any change or
effect (or any development that, insofar as can reasonably be foreseen, could
reasonably be expected to result in any change or effect) that could reasonably
be expected to be materially adverse to the business, properties, assets,
condition (financial or otherwise), results of operations or prospects of that
person and its subsidiaries, taken as a whole and without limiting the
foregoing, such term shall in any case mean an effect or change that adversely
affects or impairs the value, ownership or operation of any asset by, or creates
a liability for, an amount greater than $100,000.
 
“Ordinary Course of Business” means an action taken by a Person will be deemed
to have been taken in the Ordinary Course of Business only if that action:
 

 
(a)
is consistent in nature, scope and magnitude with the past practices of such
Person and is taken in the ordinary course of the normal, day-to-day operations
of such Person;

 
(b)
does not require authorization by the board of directors or shareholders of such
Person (or by any Person or group of Persons exercising similar authority) and
does not require any other separate or special authorization of any nature; and

 
(c)
is similar in nature, scope and magnitude to actions customarily taken, without
any separate or special authorization, in the ordinary course of the normal,
day-to-day operations of other Persons that are in the same line of business as
such Person.

 
“Permits” shall mean all governmental licenses, permits, authorizations,
consents or approvals affecting, or relating in any way to, the RxElite or its
business.
 
“Permitted Encumbrances” shall mean:
 

 
a)
liens for taxes, assessments and governmental charges due and being contested in
good faith and diligently by appropriate proceedings.

 
b)
servitudes, easements, restrictions, rights-of-way and other similar rights in
real property or any interest therein which are covered by title insurance;

 
c)
liens for taxes either not due and payable or due but for which notice of
assessment has not been given; and

 
d)
undetermined or inchoate liens, charges and privileges incidental to current
construction or current operations and statutory liens, charges, adverse claims,
security interests or encumbrances of any nature whatsoever claimed or held by
any Governmental Authority that have not at the time been filed or registered
against the title to the asset or served upon RxElite pursuant to law or that
relate to obligations not due or delinquent.

 
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“Person” means an individual or a corporation, company, limited liability
company, sole proprietorship, joint venture, partnership, trust, estate,
unincorporated organization, association, or other entity.
 
“Real Property” shall mean all real property controlled by RxElite.
 
“Records” shall mean information that is inscribed on a tangible medium or that
is stored in an electronic or other medium and is retrievable in perceivable
form.
 
“Subsidiary” shall mean any Person which is owned or controlled by RxElite.
 
“Tax” or “Taxes” means any national, federal, state, provincial, local or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative minimum or other tax of any kind
whatsoever, including without limitation, any interest, penalty or addition
thereto, whether disputed or not.
 
“Tax Return” means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including without limitation,
any schedule or attachment thereto, and including, without limitation, any
amendment thereof.
 
[signature page follows]
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers effective as of the day and
year first above written but executed on the dates set forth below.
 

 
RxELITE Inc.
         
By: Jonathan Houssian and Earl Sullivan
 
Its Authorized Officers
         
Dr. Arie Gutman

 
Schedule 5.8
 
1. Sandell Convertibel Debt Agreement entered into December 31, 2007.
 

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