EXHIBIT 10.1
 
LONG-TERM SUPPLY AGREEMENT

THIS LONG-TERM SUPPLY AGREEMENT (the "Supply Agreement") is made effective as of
the ____ day of July, 2012 ("Effective Date"), by and between ____________
(“Supplier”), ________________________ its principal place of business at
________________ ("Supplier"), and Islet Sciences, Inc., (“ISI”), a Nevada
corporation, having its principal place of business at
__________________("Buyer").
 
Recitals
 
A.  Buyer researches, develops, and commercializes certain technologies in the
field of xenotransplantation, specifically the use of porcine islets for the
treatment of diabetes; and

B.  Supplier desires to sell to Buyer, and Buyer desires to purchase from
Supplier, certain Pigs sourced from Supplier's barrier facility located at
______________________ (the "Facility," “Source Animal Facility,” and “SAF”)
solely for Buyer's use in its diabetes research, including xenotransplantation
in humans for clinical trials, such use to include provision of such Pigs to
third parties under contract with Buyer solely in connection with such research
(the "Permitted Use").

NOW, THEREFORE, in consideration of the foregoing and the covenants contained
herein, the parties agree as follows:

Article 1.          Purchase and Supply of Pigs: Terms

1.1      Pigs.  Subject to Section 1.2, Supplier shall use its best efforts to
breed, grow and provide to Buyer without further cost (beyond fees and expenses
due pursuant to Sections 1.3, 1.4 and 2.2) the number of "Designated Pathogen
Free" (as specified in more detail in Exhibit A), pre-weaned pigs of 16 to 22
days of age (or pancreases or islets, if mutually agreed upon) requested by
Buyer from the Facility (collectively, "Pigs”).  In two of the first three
months of the term of this Supply Agreement Supplier will provide a limited
number of Pigs.  Thereafter Supplier’s target production will be, in each of the
three month periods beginning November, February, May, August during the term of
this Supplier Agreement, two batches of between twenty (20) and thirty-five (35)
Pigs each; provided however, that to the extent production capacity is available
at Supplier’s facility, Supplier shall use its best efforts to deliver two
batches of up to forty-five (45) Pigs in each three month period. For all
purposes under this Supply Agreement, the term "month'" shall mean the period
from the 15ih day of one calendar month through the 14lh day of the following
calendar month. The first month under this agreement is the period July 15, 2012
to August 15, 2012, the second month is the period August 15, 2012 to September
15, 2012 and so on. Buyer shall use the Pigs solely for the Permitted Use and
will be responsible for complying with all Laws applicable to and relating to
Buyer's Permitted Use.  As used in this Supply Agreement, the term "Laws" means
all applicable U.S. laws, regulations, rules, ordinances and requirements,
including without limitation the United States Food, Drug, and Cosmetic Act, the
Occupational Safety and Health Act, the Fair Labor Standards Act and all
regulations and orders issued there under, and all applicable Federal Food and
Drug Administration ("FDA") and other applicable regulatory authorities'
standards.
 
1.2   Production Amounts. Buyer, on the date of this Supply Agreement, and on
the 15th day of each month thereafter, shall provide Supplier a good-faith six
month rolling forecast for the number of requested Pigs. During the term of this
Supply Agreement and any extension thereof, orders may be made for a one-month
supply of Pigs, on a monthly basis.

 
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1.3  Fees and Expenses. Regardless of the number of Pigs ordered during each
month of this Supply Agreement, Buyer shall pay Supplier a monthly fee of
$100,000 for each month of this Supply Agreement (the "Monthly Fee'').  Supplier
may, -at any time, and from time-to-time, during any renewal term of this
Agreement, upon at least 30 days prior written notice to Buyer, increase the
Monthly Fee; provided, however that each such increase, if any, must not exceed
the CPI Fraction for the increase in question. The increase in Monthly Fee shall
be calculated as follows: $100,000 multiplied by the CPI Fraction. "CPI
Fraction" shall mean a fraction, the numerator of which is the most recent CPI
as of the commencement of the month, or months as the Supplier shall determine
from time-to-time and at any time during any month during the initial term or
any renewal term of this Agreement of this Supply Agreement, and the denominator
of which is the most recent CPI as of the Effective Date of this Supply
Agreement. "CPI means the "Consumer Price Index, All Urban Consumers, U.S. City
Average, All Items, Standard Reference Base 1982-84 = 100.” If the CPI is
discontinued, comparable statistics on the purchasing power of the consumer
dollar as published al the time of said discontinuation by a responsible
financial periodical of recognized authority selected by Supplier, shall be used
for making the above computation. If the Standard Reference Base used in
computing the CPI is changed such that the CPI for the 1982-84 = 100 Standard
Reference Base is no longer published, the figures used in making the foregoing
adjustments shall accordingly be changed so that all increases in the CPI are
taken into account notwithstanding any change in the Standard Reference Base.

In addition to the Monthly Fee provided for herein, Buyer shall pay expenses for
fixtures and equipment needed to enable efficient production and organ harvest
from pigs at the age range required by Buyer not to exceed an amount of $25,000
during the initial term of this Agreement.  Buyer shall also pay Supplier's
agreed upon out-of-pocket expenses for enabling the harvest of or harvesting the
pancreases, if the parties agree that Supplier shall harvest and supply
pancreases, the preparation and packaging of the pancreases for shipping, the
shipping and insurance costs and all applicable taxes and other governmental
charges. Similarly, Buyer shall pay Supplier's agreed upon expenses associated
with the isolation and shipping of islets if the parties agree that Supplier
shall harvest and supply islets. Supplier's expenses shall consist of Supplier's
actual costs, plus overhead determined in accordance with Supplier's standard
overhead policies. Buyer shall have the right to audit such expense amounts. Any
additional testing other than that specified in Appendix A that is performed at
the request of Buyer will be paid for by the Buyer.

1.4      Payment Terms, The Monthly Fee shall be due on or before the 15th of
each month, with the first payment due on the date of last signature on this
Supply Agreement. Supplier shall submit invoices for the additional fees and
expenses due pursuant to Section 1.3, and Buyer shall pay such invoices in full
within 30 days after the receipt of the applicable invoice.

Article 2.          Specifications; Quality Assurance; inspections

2.1  Specifications.

   A. All Pigs supplied by Supplier shall:

(i) meet all material requirements, standards and specifications inExhibit Aas
applies to Supplier (the "Specifications");
(ii) be labeled as indicated by Supplier: and
(iii) be free and clear of all liens and encumbrances or other defects intitle
(collectively, the "QA Standards").

   B. Supplier shall maintain ongoing quality assurance and testing procedures
as set forth in Exhibit A. Supplier shall be responsible for complying with all
Laws applicable to and relating to the Pigs during the time such Pigs are in
Supplier's custody and control. Supplier shall participate in any discussions
with FDA regarding the use of the Pigs for human clinical trials and provide any
reasonably requested assistance and documentation with respect to the Pigs and
such use.

 
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   C. Supplier will agree to modifications of the Specifications as requested by
the Buyer and as required to ensure compliance with FDA guidelines, regulations
and applicable laws of the United States.

2.2  Shipping. Unless Buyer elects to pick up Pigs directly from Supplier’s
facility, Supplier shall: (a) ship all Pigs to Buyer according to Buyer's
shipping instructions, FOB delivered freight collect, with title to the Pigs and
risk of loss and damage passing to Buyer upon delivery of the Pigs to the
carrier specified by Buyer; and (b) pack all Pigs suitably for shipment
according to common carriers’ requirements. It shall be Buyer's duty to insure
the Pigs in transit. Buyer shall pay all applicable taxes and other governmental
charges associated with the sale of the Pigs. If Buyer elects to pick up Pigs
directly from Supplier’s facility Buyer will bear all costs of harvesting,
packing, shipping and related expense, as well as all risk of loss.

2.3  Inspection of Pigs. Buyer shall inspect each Pig within 5 days after its
receipt and within 10 days after its receipt advise Supplier if any such Pig
does not conform to the QA Standards. If Supplier agrees that any Pig, with
respect to which Buyer has given timely notice, does not conform to the QA
Standards, the Buyer shall, at Supplier's expense and option, either destroy or
have destroyed such Pig, and Supplier shall make arrangements to replace it with
another Pig free of any charge or expense to Buyer, including any costs or
expenses for redelivery.

2.4  Documentation and Inspections. Subject to the provisions of Article 3 of
this Supply Agreement, and further subject to Supplier's security, health and
safety and other policies and procedures with respect to the Facility, Supplier
shall make available to Buyer, as may be reasonably requested by Buyer, the
Specifications and related documents directly related to the Pigs and Supplier's
compliance with QA Standards, and any other provisions of this Agreement,
including Section 1.3 above. Subject to the provisions of Article 3 of this
Supply Agreement, Buyer shall have the right with advance written notice and at
times agreed to by Supplier, such agreement not to be unreasonably withheld,
during regular business hours, to enter upon Facility and to (a) make
inspections reasonably necessary to properly ascertain compliance with the QA
Standards and this Supply Agreement, and (b) harvest or train Supplier personnel
to harvest Pig pancreases or islets.

2.5  Required Notification. Supplier shall immediately give Buyer notice, by
telecopy, with confirming notice by U.S. mail, if Supplier becomes aware of any
defect or condition which in any way does not conform to the Specifications or
quality of any Pigs supplied by Supplier or which may render any such Pig
ineffective, dangerous and/or in material violation of the QA Standards.

2.6  Tracing. Supplier shall: (a) trace and maintain records regarding the
source and, if applicable, lot number of each Pig; and (b) maintain such records
for not less than 50 years after the termination or expiration of this Supply
Agreement or such lesser time period as required under applicable law.

Article 3.          Confidentiality

A. A party receiving Confidential Information will restrict the use of the
Confidential Information to those purposes necessary for the performance of the
receiving party's obligations and the exercise of the receiving party’s rights
under this Agreement, and, during the term of this Agreement and thereafter,
will safeguard against disclosure of the Confidential Information to third
parties using the same degree of care to prevent disclosure as it uses to
protect its own information of like importance, but at least reasonable care.  A
party may make only the minimum number of copies of any Confidential Information
required to carry out the purpose of this Agreement.  All proprietary and
copyright notices in the original must be affixed to copies or partial copies. 
Each party must provide the other with notice of any governmental, judicial or
administrative order or proceeding to compel the disclosure of Confidential
Information received under this Agreement, as promptly as the circumstances of
such order or proceeding reasonably permit.

 
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For purposes of this Agreement “Confidential Information” means all information
that is (i) disclosed by either party in any tangible form, (ii) disclosed by
either party orally or visually, or (iii) disclosed by either party, or accessed
by either party, and the recipient knows or should reasonably be expected to
know is confidential to the other party.

B. Neither party will be obligated to maintain any information in confidence or
refrain from use if, (i) the information was in the receiving party's possession
or was known to it prior to its receipt from the disclosing party, (ii) the
information is independently developed by the receiving party without the
utilization of Confidential Information of the disclosing party,  (iii) the
information is or becomes public knowledge without fault of the receiving party
or (iv) the information is disclosed to the receiving party by a third party
having no confidentiality obligation to the disclosing party.

C. Except as may expressly be set forth herein, neither party grants to the
other any rights, by implication, estoppel or otherwise, to or under
their  patents, know-how, copyrights or proprietary information of such party to
the other. All such rights are expressly reserved. Nothing herein shall grant a
right to the other party's logos, names, trade names, service names or
trademarks.

D. Neither party will use publicly for publicity, promotion, or the like, the
other party’s name, logo, name, trade name, service mark, or trademark of the
other, without such party's prior, written, express consent.

Article 4.          Representations and Warranties

4.1       Of Supplier relating to Pigs. Supplier represents and warrants that
(a) all Pigs that are delivered to Buyer hereunder shall conform in all material
respects to and be in accordance with the QA Standards and Supplier's quality
assurance policies and procedures as defined in Appendix A; (b) that the
Facility will be operated in accordance with all applicable laws, regulations
and guidelines, and the Pigs will be qualified for human use.

4.2      Limited Warranty. EXCEPT AS SPECIFICALLY SET FORTH SECTION 4.1 ABOVE,
ALL PIGS  ARE PROVIDED “AS IS” AND SUPPLIER DISCLAIMS ALL WARRANTIES  OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF
TITLE, NON-INFRINGEMENT, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE OF TRADE.

4.3      Buyer will undertake all necessary and appropriate actions required by
Laws so as to ensure that Buyer's provision of Pigs to any third party does not
increase the scope of Supplier's responsibility and warranty as set forth above
and Buyer shall defend, indemnify and hold harmless Supplier from all claims by
any third party arising out of or relating to the supply of Pigs to third
parties, excluding any such claims that arise solely out of intentional or
illegal activities by Supplier or Supplier’s breach of Section 4.1. Supplier' s
limits of responsibility as set forth above are valid and enforceable against
whomever they are applicable.

 
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4.4      Other Representations and Warranties. Each of the parties hereby
represents and warrants to the other that: (a) it has full power and authority
required to enter into, execute and deliver this Supply Agreement, to carry out
Its obligations hereunder, and to perform the transactions contemplated hereby;
(b) this Supply Agreement has been duly executed and delivered by, is the valid
and binding obligation of and is enforceable against, such party in accordance
with its terms; (c) the execution and delivery of and performance under this
Supply Agreement by such party does not, and will not, conflict with or violate
any other agreement or obligations with third parties or any restrictions of any
kind or any Law to which it is bound or subject; and (d) it has the unrestricted
right to disclose any information it submits to she other party, free of all
claims of third parties, and that such disclosures do not breach or conflict
with any confidentiality provisions of any agreement to which it is a party.

Article 5.          Limitations of Remedies

5.1      Delay. SUPPLIER SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY
DELAY IN FURNISHING PIGS, OR ANY OTHER PERFORMANCE UNDER OR PURSUANT TO THIS
SUPPLY AGREEMENT.

5.2      Consequential Damages. IN NO EVENT SHALL EITHER PARTY'S LIABILITY OF
ANY KIND INCLUDE ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSSES OR
DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE.
THIS PROVISION SHALL NOT APPLY TO EITHER PARTY’S OBLIGATION TO INDEMNIFY EACH
OTHER HEREUNDER.

Article 6.          Indemnification; Insurance

6.1       Indemnification by Buyer. To the fullest extent allowed by applicable
law, Buyer shall indemnify, defend and hold Supplier   and its officers,
directors, agents, consultants, insurers, employees, and shareholders harmless,
from and against all liabilities, claims, suits, damages, losses, causes of
action, and expenses (including but not limited to: (y) attorneys' fees and
other costs associated with the handling or defense of any such liabilities,
claims, suits, damages, losses, and causes of action; and (z) all costs and
administrative fees associated with any recall of any items supplied by
Supplier) that arise out of or relate to a breach by Buyer of this
Agreement, whether such Liability is stated as a product liability claim, a
strict liability claim, a negligence claim, a contract, a tort claim or any
other claim, unless such claim results solely from Supplier’s breach of this
Agreement.

6.2      Indemnification by Supplier. To the fullest extent allowed by
applicable law, Supplier shall indemnify, defend and hold Buyer and its
officers, directors, agents, consultants, insurers, employees, and shareholders
harmless, from and against all liabilities, claims, suits, damages, losses,
causes of action, and expenses (including but not limited to: (y) attorneys'
fees and other costs associated with the handling or defense of any such
liabilities, claims, suits, damages, losses, and causes of action; and (z) all
costs and administrative fees associated with any recall of any items supplied
by Supplier) that arise out of or relate to a breach by Supplier of this
Agreement, whether such Liability is stated as a product liability claim, a
strict liability claim, a negligence claim, a contract, a tort claim or any
other claim, unless such claim results solely from Buyer’s breach of this
Agreement.
 
6.3      Insurance. Buyer and Supplier shall: (a) at their sole cost and
expense, purchase and maintain in full force and effect, during the term of this
Supply Agreement and for a period sufficient to cover its obligations hereunder,
commercial general liability insurance, in amounts not less than $1 million per
occurrence and $2 million in the aggregate, which names the other party and its
affiliates as additional insureds on such policies and which policies waive
subrogation against the other party and its affiliates and such other additional
insureds: and (b) upon request from the other party from time-to-time, provide
the other party with certificates of insurance from reputable insurers approved
by such party showing compliance with the foregoing provisions.

 
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Article 7.         Term and Termination

7.1      Term. Subject to Section 7.2, the initial term of this Supply Agreement
shall be two years, commencing as of the Effective Date and ending two years
thereafter; provided, however, that this Supply Agreement will automatically
renew for one additional two year term unless no later than the date one hundred
and eighty (180) days prior to the first day of that renewal term either party
gives the other notice of its intention not to renew.  All orders for Pigs
placed by Buyer and accepted by Supplier prior to termination or expiration of
this Supply Agreement shall be subject to the terms of this Supply Agreement.

7.2      Early Termination.

A. Notwithstanding Section 7.1, either party shall have the right to terminate
this Supply Agreement without liability therefore, after written notice to the
other, if the other party: (i) materially breaches any of its obligations under
this Supply Agreement and fails to cure such breach within 90 days after
receiving written notice from the non-­breaching party: or (ii) becomes the
subject of voluntary or involuntary bankruptcy, reorganization, receivership, or
insolvency proceedings that are not dismissed within 60 days after commencement
thereof.

B. Upon the expiration or any termination by Buyer or in the event , Buyer shall
thereafter have no liability to Supplier hereunder except (i) for any payments
accrued and owing to Supplier as of such date, or (ii) pursuant to the
provisions of Section 7.3.

C. Force Majeure. Neither party shall be in default in the performance of its
obligations under this Supply Agreement if such performance is prevented or
delayed because of war or similar unrest, labor dispute or strike,
transportation difficulties, unavailability of Pigs or necessary raw materials,
epidemic, fire, natural disaster, any law of any governmental or other
authority, acts of God, or other similar cause, that is beyond the control of
and which could not have reasonably been prevented by the party whose
performance is affected; provided, however, that if such delay continues for 60
days or more, then either party may upon written notice cancel all or any
portion of unfilled Orders and terminate this Supply Agreement.

7.3      Survival. In any event, all obligations which are by their nature
continuing, including without limitation the obligations contained in
Sections 2.4 for a period of one year thereafter. 2.5, 2.6, Article 3, Article
4, Article 5, Article 6, and Article 9, and Buyer’s obligations to make payment
of all amounts then or thereafter due under this Agreement shall survive the
expiration and/or termination of this Supply Agreement for any reason.

Article 8.

8.1      Warrants.  In consideration of Supplier's entering into this Supply
Agreement. Buyer hereby agrees to provide to Supplier warrants to purchase
Buyer's common stock as follows:

A. The first warrant shall be signed and delivered by Buyer to Supplier within
five (5) days after IND approval for a product using the Pigs (the "IND Date").
Such warrant shall be for the right to purchase 75,000 shares of Buyer's common
stock at a warrant exercise price per share of the Reference Market Value. As
used in this Section 8, "Reference Market Value" means the average closing sale
price, as reported by Bloomberg, L.P. of a share of Buyer's common stock for the
fifteen (15) consecutive trading day period ending one day prior to the
Effective Date of this Supply Agreement. The first warrant may be exercised at
anytime and from time-to-time for three (3) years following the IND Date.

 
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B. The second warrant shall be signed and delivered by Buyer to Supplier within
five (5) days after approval to start a Phase II clinical trial using the Pigs
(the "Phase II Date"). Such warrant shall be for the right to purchase 75,000
shares of Buyer's common stock at a warrant exercise price per share of the
Reference Market Value. The second warrant may be exercised at anytime and from
time-to-time for three (3) years following the Phase II Date.

C. The third warrant shall be signed and delivered by Buyer to Supplier within
five (5) days after approval to start a Phase III clinical trial using the Pigs
(the "Phase III Date").  Such warrant shall be for the right to purchase 75,000
shares of Buyer's common stock at a warrant exercise price per share of the
Reference Market Value. The third warrant may be exercised at anytime and from
time-to-time for three (3) years following the Phase III Date.

D. The fourth warrant shall be signed and delivered by Buyer to Supplier within
five (5) days after NDA/BLA approval for a product using the Pigs (the "NDA
Date"). Such warrant shall be for the right to purchase 75,000 shares of Buyer's
common stock at a warrant exercise price per share of the Reference Market
Value. The fourth warrant may be exercised at anytime and from time-to-time for
three (3) years following the NDA Date.
 
Article 9.          Miscellaneous

9.1      Independent Contractors. The parties are independent contractors and
nothing contained in this Supply Agreement shall be deemed to create the
relationship of employment, partnership, joint venture or any association or
relationship between the parties other than that of buyer and supplier. Neither
party has the authority to bind the other without express written authorization
of such other party.

9.2  Entire Agreement: Amendments. The terms of this Supply Agreement, shall
constitute the entire agreement between the parties as to the subject matter of
this Supply Agreement, and the provisions of this Supply Agreement shall
supersede all prior oral and written commitments, contracts, and understandings
relating to the subject matter of this Supply Agreement. All exhibits attached
to this Supply Agreement, and the Specifications and other documentation
referenced herein, are hereby incorporated by reference in this Supply Agreement
and made a part hereof. Notwithstanding anything to the contrary in this Supply
Agreement, any information disclosed prior to the Effective Date shall be
governed by this Supply Agreement. This Supply Agreement may be amended only by
a writing signed by both parties. This Supply Agreement is intended to be solely
for the benefit of the parties and Supplier's Affiliated Entities and no other
person or entity.

9.3  Assignment: Subcontracting. Neither party shall assign this Supply
Agreement, whether voluntarily or involuntarily, without the express written
consent: of the other party, except that either party may assign some or all of
its rights and obligations under this Supply Agreement to any of its Affiliated
Entities; without the other party's consent. For purposes of this Supply
Agreement, "Affiliated Entities" shall mean, with respect to a party, an entity
that, as of the Effective Date owns or controls, is owned or controlled by, or
is under common ownership or control with, the party. This Supply Agreement
shall be binding on the permitted successors and assigns, and shall inure to the
benefit of the permitted successors and assigns of the parties.

9.4  Governing Law: Severability; Waiver; Remedies; Arbitration. The laws of the
State of Minnesota, without reference to its principles of conflicts of laws,
shall govern this Supply Agreement and its interpretation and construction. If
any provision of this Supply Agreement is determined to be unenforceable or
prohibited by applicable law, such provision shall be ineffective only to the
extent of such unenforceability or prohibition without invalidating the
remainder of such provision or the remaining provisions of this Supply
Agreement. The waiver of a breach of any provision of this Supply Agreement
shall not be deemed a waiver of any other breach of the same or different
provision of this Supply Agreement. All disputes arising under or related to
this Agreement will be settled by binding arbitration in Minneapolis, Minnesota
in accordance with the rules of the American Arbitration Association then in
effect, and judgment upon any award rendered in such arbitration (including the
award by the arbitrators of attorneys fees of the prevailing party) may be
entered in any court having competent jurisdiction.

 
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9.5  Compliance with laws. During the term of this Supply Agreement, each of the
parties shall comply with all Laws in any way relating to this Supply Agreement
or the performance of such party's obligations hereunder.

9.6      Notices. Notification required or permitted hereby shall be deemed
given only upon: (a) transmission by telefax, transmission confirmed at the fax
number indicated below; (b) enclosure thereof in an adequately post-paid
envelope, sent certified mail return receipt requested, delivered to a U.S. Post
Office; or (c) sent via a nationally-recognized, overnight delivery service that
guarantees overnight delivery; and addressed to the party to be given
notification at the address/fax number given below or such change of address/fax
number as may be hereafter supplied in writing.
 
If to Supplier:
If to Buyer:   Islet Sciences, Inc.     Attention: Attention: Fax:   E-mail:
E-Mail:       With a copy to :       Ofsink, LLC   900 Third Avenue, 5th Floor  
New York, New York 10022   Fax : 646-224-9844   E-Mail : dofsink@golawintl.com

 
 
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IN WITNESS WHEREOF, the parties have executed this Supply Agreement as of the
Effective Date.
 

Supplier:   Buyer:                  
Islet Sciences, Inc.
            Signature:     Signature:                 Printed Name:     Printed
Name:                 Title:     Title:                 Date:     Date:    

 
 
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