EXHIBIT
      10.1

     

    SETTLEMENT
      AGREEMENT AND RELEASE

    


    Settlement
      Agreement and Release, dated August 12, 2008, effective as of July 25, 2008
      (this "Agreement"), among Emerald Asset Management, Inc., a Delaware corporation
      with an address at 5 Dogwood Lane, Lawrence, New York 11559 (“Emerald”), Yitz
      Grossman, an individual with an address at 5 Dogwood Lane, Lawrence, New York
      11559 (“Grossman” and, together with Emerald, “Consultant”), New York Health
      Care, Inc., a New York corporation with an address at 1850 McDonald Avenue,
      Brooklyn, New York 11223 (“New York Health Care”), The BioBalance Corporation, a
      Delaware corporation with an address at 1850 McDonald Avenue, Brooklyn, New
      York
      11223 (“BioBalance” and, together with New York Health Care, the “Company”).
      Emerald, Grossman, BioBalance and New York Health Care are collectively referred
      to as the “parties”.

     

    1 RECITALS

    


    A. The
      Company and Consultant were signatories to a Settlement Agreement, dated as
      of
      March 1, 2006, as amended on April 17, 2006, a copy of which is annexed hereto
      as Exhibit
      A
      (the
“2006 Settlement Agreement”).

    


    B. On
      August
      21, 2006, the Company unilaterally rescinded the 2006 Settlement Agreement.
      

    


    C. On
      or
      about April 24, 2008, Consultant delivered to the Company a notice demanding
      that the Company perform its obligations under the Settlement
      Agreement.

    


    D. The
      parties desire to resolve all disputes among them (collectively, the “Disputed
      Matters”) on the terms and subject to the conditions set forth
      herein.

    


    In
      consideration of the mutual covenants and agreements set forth herein and other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties agree as follows:

    


    AGREEMENT:

    


    1. Termination
      of 2006 Settlement Agreement.
      The
      parties acknowledge and agree that the 2006 Settlement Agreement has been
      terminated in all respects, and that no party has any further obligations of
      any
      nature whatsoever to any other party thereunder. In connection therewith, the
      parties acknowledge and agree that the provisions of Sections 2, 3, 4, 5 and
      6
      of this Agreement have been complied with by the parties.

    


    2. Settlement
      Consideration.
      In
      consideration for the settlement of the Disputed Matters, including Consultant’s
      agreement to terminate the 2006 Settlement Agreement, the Company has agreed
      to
      (a) make the Cash Payment (as defined below) to Consultant, (b) cause its
      newly-formed indirectly wholly-owned subsidiary, BioBalance LLC, a Delaware
      limited liability company (“BBAL LLC”), to enter into a membership interest
      subscription agreement with Grossman, or an entity of which Grossman owns 100%
      of the outstanding equity interests (the “Grossman Member”), for membership
      interests of BBAL LLC representing, immediately following the issuance thereof,
      33-1/3% of the issued and outstanding membership interests of BBAL LLC on the
      terms described below and (c) enter into a one-year consulting agreement with
      Grossman on the terms described below. 

    


    3. Cash
      Payment.
      Concurrently with the execution and delivery of this Agreement, in partial
      consideration for the settlement of the Disputed Matters, the Company shall
      deliver to Consultant a cash payment of Six Hundred Fifty Thousand Dollars
      ($650,000) (the “Cash Payment”).

    


    4. Membership
      Interest Subscription Agreement. On
      or
      prior to the date hereof, BioBalance has contributed its intellectual property
      assets to BBAL LLC. Concurrently with the execution and delivery of this
      Agreement, in partial consideration for the settlement of the Disputed Matters,
      BBAL LLC and the Grossman Member shall execute and deliver a membership interest
      subscription agreement, in the form annexed hereto as Exhibit
      B
      (the
“Subscription Agreement”), pursuant to which BBAL LLC shall issue to Grossman or
      his assigns membership interests of BBAL LLC representing 33-1/3% of the issued
      and outstanding membership interests of BBAL LLC. 

    


    5. Consulting
      Agreement.
      Concurrently with the execution and delivery of this Agreement, BioBalance
      and
      Grossman will enter into a one-year consulting agreement, in the form annexed
      hereto as Exhibit
      C
      (the
“Consulting Agreement”), pursuant to which Grossman will serve as a consultant
      to BioBalance at an annual base salary of $180,000, and will be entitled to
      a
      bonus contingent on an increase in the valuation of BioBalance determined in
      accordance with the terms of the Consulting Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    6. Funding
      of BBAL LLC by New York Health Care.
      As a
      condition to entering into the Consulting Agreement, New York Health Care shall
      have advanced to BBAL LLC not less than Two Million Dollars ($2,000,000), with
      such funds to be allocated solely for use by BBAL LLC for the purposes of,
      among
      other things, (a) conducting further studies on Probactrix®, (b) start-up
      production, stability testing and storage of product, (c) funding clinical
      research organization and Mayo Clinic costs and (d) administrative and overhead
      expenses directly related to the foregoing.

    


    7. Release
      of Claims Against the Company and its Affiliates.
      

    


    (a)
      Each
      of Emerald and Grossman, for themselves and on behalf of their respective
      successors, assigns, agents, representatives, heirs and legal representatives
      (collectively, “Grossman Releasors”), hereby release and forever discharge New
      York Health Care and BioBalance, and New York Health Care’s and BioBalance’s
      respective affiliates, stockholders, directors, officers, employees, agents,
      and
      representatives and their respective successors and assigns (collectively,
      “Company Releasees”) from any and all claims, demands, damages, debts, losses,
      actions, or causes of action of any kind whatsoever, known or unknown, accrued
      or to accrue, which any Grossman Releasor could assert against any Company
      Releasee with respect to any matter, cause or thing whatsoever from the
      beginning of the world to the day of the date of this Agreement, including,
      but
      not limited to, claims arising from any Disputed Matter, irrespective of whether
      such claims arise out of contract, tort, violation of laws or regulations or
      otherwise (collectively, “Section 7 Claims”), other than Section 7 Claims
      arising out a breach by the Company of this Agreement or the other agreements
      entered into by the Company and its affiliates on the date hereof in connection
      with this Agreement. 

    


    For
      purposes of this Agreement, an “affiliate” of a person or entity means any other
      person or entity controlling, controlled by, or under common control with,
      such
      person or entity.

    


    (b)
      Each
      of Emerald and Grossman represents and warrants that it is the current legal
      and
      beneficial owner of all Section 7 Claims released hereby and has not assigned,
      pledged or contracted to assign or pledge any such Section 7 Claim to any other
      person or entity. Each of Emerald and Grossman shall indemnify, defend and
      hold
      harmless the Company Releasees from and against and in respect of any and all
      claims, demands, losses, costs, expenses, obligations, liabilities or damages
      asserted against any Company Releasee by any third party in respect of any
      Section 7 Claim assigned or pledged to such third party by Emerald or
      Grossman.

    


    (c)
      The
      foregoing release may be pleaded by the Company Releasees as the full and
      complete defense to, and as a basis for an injunction against, any action,
      suit
      or other proceeding which may be instituted, prosecuted or attempted by Emerald
      or Grossman in breach of this Section 7, and it is understood and agreed that,
      in such event, Emerald and Grossman shall be liable for reasonable attorneys’
fees and costs incurred by any Company Releasee in enforcing the provisions
      hereof, in addition to any other damages that may be incurred by a Company
      Releasee as a result of the breach of the terms hereof.

    


    8. Release
      of Claims Against Emerald and Grossman.
      

    


    (a)
      Each
      of New York Health Care and BioBalance, for themselves and on behalf of their
      respective affiliates, successors, assigns, agents and representatives
      (collectively, “Company Releasors”), hereby release and forever discharge the
      Emerald and Grossman and their respective agents and representatives and their
      respective successors and assigns (collectively, “Grossman Releasees”) from any
      and all claims, demands, damages, debts, losses, actions, or causes of action
      of
      any kind whatsoever, known or unknown, accrued or to accrue, which any Company
      Releasor could assert against any Grossman Releasee with respect to any matter,
      cause or thing whatsoever from the beginning of the world to the day of the
      date
      of this Agreement, including, but not limited to, claims arising from any
      Disputed Matter, irrespective of whether such claims arise out of contract,
      tort, violation of laws or regulations or otherwise (collectively, “Section 8
      Claims”), other than Section 8 Claims arising out a breach by Emerald or
      Grossman of this Agreement or the other agreements entered into by Emerald
      or
      Grossman or their respective affiliates on the date hereof in connection with
      this Agreement. 

    


    (b)
      New
      York Health Care and BioBalance represent and warrant that they, and their
      respective affiliates, are the current legal and beneficial owners of all
      Section 8 Claims released hereby and have not assigned, pledged or contracted
      to
      assign or pledge any such Section 8 Claim to any other person or entity. Each
      of
      New York Health Care and BioBalance shall indemnify, defend and hold harmless
      the Grossman Releasees from and against and in respect of any and all claims,
      demands, losses, costs, expenses, obligations, liabilities or damages asserted
      against any Grossman Releasee by any third party in respect of any Section
      8
      Claim assigned or pledged to such third party by New York Health Care,
      BioBalance or their affiliates, as the case may be.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (c)
      The
      foregoing release may be pleaded by the Grossman Releasees as the full and
      complete defense to, and as a basis for an injunction against, any action,
      suit
      or other proceeding which may be instituted, prosecuted or attempted by New
      York
      Health Care, BioBalance or their affiliates in breach of this Section 8, and
      it
      is understood and agreed that, in such event, New York Health Care or
      BioBalance, as the case may be, shall be liable for reasonable attorneys’ fees
      and costs incurred by any Grossman Releasee in enforcing the provisions hereof,
      in addition to any other damages that may be incurred by a Grossman Releasee
      as
      a result of the breach of the terms hereof.

    


    9. No
      Admission of Liability. The
      parties acknowledge and agree that nothing contained in this Agreement
      constitutes an admission or acknowledgement by such party of any (a) violation
      of any federal, state, or local law, regulation, order, rule or other
      requirement of law; (b) breach of any contract or other agreement, actual or
      implied, including, without limitation, the 2006 Settlement Agreement; (c)
      commission of any tort; or (d) other civil wrong.

    


    10. Notices.
      All
      notices, requests, demands and other communications required or permitted to
      be
      given hereunder shall be in writing and shall be deemed to have been given
      (a)
      when received, if delivered in person or by overnight courier, or
      (b)  five (5) business days following the mailing thereof, if mailed
      by certified first class mail, postage prepaid, return receipt requested, in
      any
      such case as follows:

    


    If
      to
      Emerald or Grossman, to:

     

    Each
      of
      them at their respective addresses set forth in the introductory paragraph
      hereto,

     

    with
      a
      copy to:

     

    Heller,
      Horowitz & Feit

    292
      Madison Avenue

    New
      York,
      New York 10017

     

    Attention:
      Richard F. Horowitz, Esq.

     

    If
      to New
      York Health Care or BioBalance, to:

     

    New
      York
      Health Care, Inc.

    1850
      McDonald Avenue

    Brooklyn,
      New York 11223

    Attention:
      Mr. Murry Englard, Chief Executive Officer

     

    with
      a
      copy to:

     

    Cohen
      Tauber Spievack & Wagner P.C.

    420
      Lexington Avenue

    Suite
      2400

    New
      York,
      New York 10170

    Attention:
      Adam Stein, Esq.

    


    or
      at
      such other address or addresses as any party may have advised the other in
      the
      manner provided in this Section.

    


    11. Complete
      Agreement.
      This
      Agreement, together with the agreements referenced herein, set forth the entire
      agreement of the parties with respect to the subject matter hereof and supersede
      all prior agreements, contracts, promises, representations, warranties,
      statements, arrangements and understandings, if any, among the parties hereto
      or
      their representatives. No waiver, modification or amendment of any provision,
      term or condition hereof shall be valid unless in writing and signed by the
      party to be charged therewith, and any such waiver, modification or amendment
      shall be valid only to the extent therein set forth.

    


    12. Governing
      Law; Jurisdiction.
      The
      validity, performance, construction and effect of this Agreement shall be
      governed by the substantive laws of the State of New York, without regard to
      the
      provisions for choice of law thereunder. The parties (a) agree that any
      legal suit, action or proceeding arising out of or relating to this Agreement
      shall be instituted exclusively in a State or Federal Court in the City of
      New
      York, County of New York, (b) waive any objection which they may have now
      or hereafter to the laying of the venue of any such suit, action or proceeding,
      and (c) irrevocably submit to the jurisdiction of any such court in any
      such suit, action, or proceeding.

    


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    13. Binding
      Effect; Third Party Beneficiaries.
      

    


    (a) This
      Agreement shall be binding upon and inure to the benefit of the parties hereto
      and their respective heirs, successors and assigns.

    


    (b) The
      parties acknowledge and agree that the Company Releasees and the Grossman
      Releasees who are not signatories hereto shall be deemed to be third party
      beneficiaries of this Agreement. 

    


    15. Separability.
      Any
      provision of this Agreement which may be determined by a court of competent
      authority to be prohibited or unenforceable in any jurisdiction shall, as to
      such jurisdiction, be ineffective to the extent of such prohibition or
      unenforceability without invalidating the remaining provisions hereof, and
      any
      such prohibition or unenforceability in any jurisdiction shall not invalidate
      or
      render unenforceable such provision in any other jurisdiction.

    


    16. Counterparts.
      This
      Agreement may be executed by facsimile or other electronic transmission and
      in
      counterparts, each of which shall be deemed an original and all of which taken
      together shall constitute a single agreement.

     

    17. Captions.
      The
      captions appearing in this Agreement are inserted only as a matter of
      convenience and for reference and shall in no way affect the interpretation
      or
      construction of this Agreement or any of the provisions hereof.

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed and delivered as of the date first above written.

    


    
      	
              NEW
                YORK HEALTH CARE INC.

            
	 
	
              By:
                /s/Murry Englard

            
	
              Name:
                Murry Englard

            
	
              Title:
                Chief Executive Officer

            
	 
	
              THE
                BIOBALANCE CORPORATION

            
	 
	
              By:
                /s/Murry Englard

            
	
              Name:
                Murry Englard

            
	
              Title:
                Chief Executive Officer

            
	 
	
              EMERALD
                ASSET MANAGEMENT INC.

            
	 
	
              By:
                /s/Yitz Grossman

            
	
              Name:
                Yitz Grossman

            
	
              Title:
                President

            
	 
	
              /s/Yitz
                Grossman

            
	
              Yitz
                Grossman

            


    

     

    EXHIBIT
      A

    


    2006
      SETTLEMENT AGREEMENT

     

    EXHIBIT
      B

    


    MEMBERSHIP
      INTEREST SUBSCRIPTION AGREEMENT

     

    EXHIBIT
      C 

    


    CONSULTING
      AGREEMENT

     

    
      
        
        

      

      
        4