Exhibit
      10.10

     

    SECURITY
      AGREEMENT

     

    SECURITY
      AGREEMENT (this “Security
      Agreement”)
      dated
      as of the 7th day of November, 2007, by and among INTERPHARM HOLDINGS INC.
      (the
“Company”)
      and
      INTERPHARM, INC. (the “Subsidiary”
and
      together with the Company, the “Debtors”),
      and
      SUTARIA FAMILY REALTY, LLC, in its capacity as the collateral agent (together
      with any successors thereto in such capacity, the “Collateral
      Agent”)
      for
      the benefit of the holders (the “Holders”)
      of the
      Note (as defined below) (the Collateral Agent and the Holders are hereinafter
      referred to as the “Secured
      Parties”).

     

    Recitals

     

    A. Debtors
      have agreed to issue to the Holders, the Debtors’ Junior Subordinated Secured
      12% Note due 2010 in the principal amount of $3,000,000 (the “Note”);
      and

     

    C. As
      a
      condition to each of the Holders’ obligation to purchase the Note, the Secured
      Parties have required, and the Debtors have agreed, to execute and deliver
      certain agreements to provide collateral security for the obligations of the
      Debtors under the Note, this Security Agreement and any other agreements entered
      into, now or in the future by the Debtors in connection with the Note
      (hereinafter collectively referred to as the “Sutaria
      Documents”);
      

     

    Agreement

     

    NOW,
      THEREFORE, in consideration of the premises and mutual covenants herein
      contained and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, the parties hereto agree as
      follows:

     

    1. Defined
      Terms.
      Terms
      not
      otherwise defined in this Security Agreement (including Annex
      A
      hereto),
      unless the context indicates otherwise, have the meanings set forth in the
      Note,
      or if not defined in the Note, then as provided for by the Code to the extent
      the same are used or defined therein.

     

    2. Grant
      Of Lien.
      

     

    (a) To
      secure
      the prompt and complete payment, performance and observance when due (whether
      at
      stated maturity, by acceleration or otherwise) of all of the Secured
      Obligations, the Debtors hereby grant, assign, convey, mortgage, pledge,
      hypothecate and transfer to the Collateral Agent, for itself and the benefit
      of
      the Secured Parties, security interests in all of their right, title and
      interest in, to and under all personal property and other assets described
      below, whether now owned by or owing to, or hereafter acquired by or arising
      in
      favor of the Debtors, and whether owned or consigned by or to, or leased from
      or
      to, the Debtors, and regardless of where located (all of which being hereinafter
      collectively referred to as the “Collateral”):
      (i)
      all Accounts; (ii) all General Intangibles; (iii) all goods, including, without
      limitation, Inventory and Equipment; (iv) all real property and fixtures; (v)
      all Chattel Paper; (vi) all Instruments (including all promissory notes); (vii)
      all documents; (viii) all Deposit Accounts, including all deposits therein;
      (ix)
      all money, cash or cash equivalents of the Debtor; (x) all books and records
      pertaining to the Collateral; (xi) all investment property (including
      securities, whether certificated or uncertificated, securities accounts,
      security entitlements, commodity contracts or commodity accounts); (xii) to
      the
      extent not otherwise included, all Proceeds, tort claims, insurance claims
      and
      other rights to payments not otherwise included in the foregoing and products
      of
      the foregoing and all accessions to, substitutions and replacements for, and
      rents and profits of, each of the foregoing.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b) In
      addition, to secure the prompt and complete payment, performance and observance
      of the Secured Obligations and in order to induce the Secured Parties as
      aforesaid, the Debtors hereby grant to the Collateral Agent, for the benefit
      of
      the Secured Parties, a right of setoff against the property of the Debtor held
      by the Secured Parties, consisting of property described above in Section
      2(a)
      now or
      hereafter in the possession or custody of or in transit to the Secured Parties,
      for any purpose, including safekeeping, collection or pledge, for the account
      of
      the Debtors, or as to which the Debtors may have any right or
      power.

     

    3. Representations
      and Warranties.
      The
      Debtors represent and warrant that:

     

    (a) The
      Debtors are corporations duly organized and in good standing under the laws
      of
      the jurisdiction of its incorporation. The execution and delivery, and
      performance of this Security Agreement, the Note to which it is a party and
      the
      transactions contemplated hereunder and thereunder (i) are all within the
      Debtors’ corporate powers, (ii) have been duly authorized, (iii) are not in
      contravention of law or the terms of the Debtors’ certificates of incorporation
      or by-laws, or other organizational documentation, or any indenture, agreement
      or undertaking to which the Debtors are a party or by which their property
      is
      bound and (iv) will not result in the creation or imposition of, or require
      or
      give rise to any obligation to grant, any lien, security interest, charge or
      other encumbrance upon any property of the Debtors other than in favor of the
      Secured Parties. This Security Agreement and the Note to which the Debtors
      are a
      party constitute legal, valid and binding obligations of the Debtors enforceable
      in accordance with their respective terms.

     

    (b) As
      of the
      date hereof and after the creation of the Secured Obligations and the security
      interest of the Secured Parties, the Debtors (i) own assets and property
      whose fair saleable value is greater than the amount that is likely to be
      required to pay all of their liabilities (including contingent liabilities
      as
      and when they become due); (ii) are able to pay all of its liabilities as
      such liabilities mature; (iii) have capital sufficient to carry on its
      business and transactions and all business and transactions in which it is
      about
      to engage; and (iv) are not “insolvent” within the meaning of Section
      101(32) of the Bankruptcy Code.

     

    (c) The
      Debtors have rights in and the power to transfer, and are the sole beneficial
      owners of, each item of the Collateral upon which it purport to grant a Lien
      hereunder free and clear of any and all Liens.

     

    (d) No
      effective security agreement, financing statement, equivalent security or Lien
      instrument or continuation statement covering all or any part of the Collateral
      is on file or of record in any public office, except pursuant to the Senior
      Credit Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (e) This
      Security Agreement is effective to create a valid and continuing Lien on and,
      upon the filing of appropriate financing statements with the governmental
      offices listed on Schedule
      I
      hereto,
      a perfected Lien in favor of the Collateral Agent, for the benefit of the
      Secured Parties, on the Collateral with respect to which a Lien may be perfected
      by filing pursuant to Article 9 of the Code. As of the Initial Closing, such
      Lien will be prior to all other Liens (other than Liens in favor of the lender
      under the Senior Credit Agreement and those in favor of the Purchaser), and
      is
      enforceable as such as against any and all creditors of and purchasers from
      the
      Debtors.

     

    (f) The
      Debtors’ names as they appears in official filings in the jurisdiction of its
      incorporation or other organization, the type of entity of each Debtor
      (including corporation, partnership, limited partnership or limited liability
      company), organizational identification number issued by the Debtors’
jurisdictions of incorporation or organization or a statement that no such
      number has been issued, the Debtors’ jurisdictions of organization or
      incorporation, the location of the Debtors’ chief executive offices, principal
      places of business, offices and premises where Collateral is stored or located,
      and the locations of their books and records concerning the Collateral are
      set
      forth on Schedule
      II
      hereto.
      Each of the Debtors has only one state of incorporation or organization. The
      Debtors have not, during the five years prior to the date of this Security
      Agreement, been known by or used any other corporate or fictitious name or
      been
      party to any merger or consolidation, or acquired all or substantially all
      of
      the assets of any Person, or acquired any of its property or assets out of
      the
      ordinary course of business, except as set forth on Schedule
      II
      hereto.
      The Debtors have not (i) within the period of four months prior to the date
      hereof, changed their locations (as defined in Section 9-307 of the Code),
      (ii) except as specified on Schedule
      II
      hereto,
      heretofore changed their names, or (iii) except as specified on
Schedule
      II
      hereto,
      heretofore became “new debtor” (as defined in Section 9-102(a)(56) of the Code)
      with respect to a currently effective security agreement previously entered
      into
      by any other Person.

     

    (g) The
      Debtors do not own or license any Trademarks, Patents or Copyrights or other
      Intellectual Property, except as set forth on Schedule
      III
      hereto.

     

    4. Covenants.
      The
      Debtors covenant and agree with the Collateral Agent, for the benefit of the
      Secured Parties, that from and after the date of this Security Agreement and
      until the Termination Date:

     

    (a) Further
      Assurances.

     

    (i) At
      any
      time and from time to time (including upon any written request of the Collateral
      Agent), at the sole expense of the Debtors, the Debtors shall promptly and
      duly
      execute and deliver any and all such further instruments and documents and
      take
      such further actions as may be necessary or desirable or reasonably requested
      by
      the Collateral Agent to obtain the full benefits of this Security Agreement
      and
      of the rights and powers herein granted, including (A) using all reasonable
      efforts to secure all consents and approvals necessary or appropriate to enforce
      the security interests granted hereunder; and (B) filing any financing
      statements, mortgages, continuation statements, assignments and amendments
      with
      respect to the Liens granted hereunder as to those jurisdictions that are not
      Uniform Commercial Code jurisdictions.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (ii) The
      Debtors hereby irrevocably and unconditionally authorize the Collateral Agent
      at
      any time and from time to time to file in any filing office in any Uniform
      Commercial Code jurisdiction any initial financing statements, continuation
      statements, assignments and amendments thereto that (a) indicate the Collateral,
      and (b) contain any other information required by Article 9 of the Code for
      the
      sufficiency or filing office acceptance of any financing statement or amendment.
      The Debtors agree to furnish any such information to the Collateral Agent
      promptly upon request. The Debtors also ratify their authorization for the
      Collateral Agent to have filed in any Uniform Commercial Code jurisdiction
      any
      initial financing statements or amendments thereto if filed prior to the date
      hereof and ratifies and confirms the authorization of the Collateral Agent
      to
      file such financing statements (and amendments, if any). The Debtors hereby
      authorize the Collateral Agent to adopt on behalf of the Debtors any symbol
      required for authenticating any electronic filing. In the event that the
      description of the collateral in any financing statement naming the Collateral
      Agent or its designee as the secured party and the Debtors as debtors includes
      assets and properties of the Debtors that do not at any time constitute
      Collateral, whether hereunder, under any of the other Documents or otherwise,
      the filing of such financing statement shall nonetheless be deemed authorized
      by
      the Debtors to the extent of the Collateral included in such description and
      it
      shall not render the financing statement ineffective as to any of the Collateral
      or otherwise affect the financing statement as it applies to any of the
      Collateral. In no event shall the Debtors at any time file, or permit or cause
      to be filed, any correction statement or termination statement with respect
      to
      any financing statement (or amendment or continuation with respect thereto)
      naming the Collateral Agent or its designee as secured party and the Debtors
      as
      debtors.

     

    (iii) The
      Debtors shall take all steps necessary to grant the Collateral Agent control
      of
      and a perfected Lien on all Chattel Paper, Instruments, Deposit Accounts,
      Investment Property, investment accounts, security accounts, commodity accounts,
      letters of credit or banker’s acceptance constituting Collateral (including,
      without limitation, the delivery to the Collateral Agent of all such Collateral,
      accompanied by such instruments of transfer or assignment duly executed in
      black, the delivery of a deposit or investment property control agreement
      executed by the Debtors and any applicable financial institution).

     

    (iv) The
      Debtors shall, upon the occurrence and during the continuance of any Event
      of
      Default, upon request of the Collateral Agent, promptly notify (and the Debtors
      hereby authorize the Collateral Agent so to notify) each Account Debtor in
      respect of any Accounts of the Debtors that such Collateral has been assigned
      to
      the Collateral Agent hereunder, and that any payments due or to become due
      in
      respect thereof are to be made directly to the Collateral Agent.

     

    (b) Maintenance
      of Records.
      The
      Debtors shall keep and maintain, at its own cost and expense, satisfactory
      and
      complete records of the Collateral, including a record of any and all payments
      received and any and all credits granted with respect to the Collateral in
      the
      same manner such records are presently kept and maintained. 

     

    (c) Limitation
      on Liens on Collateral.
      The
      Debtors will not create, permit or suffer to exist, and the Debtors will defend
      the Collateral against, and take such other action as is necessary to remove,
      any Lien on the Collateral, and will defend the right, title and interest of
      the
      Secured Parties in and to any of the Debtors’ rights under the Collateral
      against the claims and demands of all Persons whomsoever, other than Liens
      pursuant to the Senior Credit Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (d) Limitations
      on Disposition.
      The
      Debtors will not sell, license, lease, transfer or otherwise dispose of any
      of
      the Collateral (other than Inventory in the ordinary course of business), or
      attempt or contract to do so.

     

    (e) Further
      Identification of Collateral.
      The
      Debtors will, if so requested by the Collateral Agent, furnish to the Collateral
      Agent, as often as the Collateral Agent reasonably requests, statements and
      schedules further identifying and describing the Collateral and such other
      reports in connection with the Collateral as the Collateral Agent may reasonably
      request, all in such detail as the Collateral Agent may reasonably
      specify.

     

    (f) Notices.
      The
      Debtors will advise the Collateral Agent promptly, in reasonable detail, (i)
      of
      any Lien or written claim made or asserted against any of the Collateral, and
      (ii) of the occurrence of any other event which could have a material adverse
      effect on the value of the Collateral or on the Liens created
      hereunder.

     

    (g) No
      Reincorporation; No Name Change.
      The
      Debtors shall not reincorporate or reorganize itself under the laws of any
      jurisdiction other than the jurisdictions in which they are incorporated or
      organized as of the date hereof without the prior written consent of the
      Collateral Agent. The Debtors shall not change their legal names without first
      giving 30 days prior written notice of its intent to do so to the Collateral
      Agent.

     

    5. Collateral
      Agent’s Appointment As Attorney-in-fact.
      On
      the
      Original Issue Date, the Debtors shall execute and deliver to the Collateral
      Agent a power of attorney (the “Power
      of Attorney”)
      substantially in the form attached hereto as Exhibit
      A.
      The
      power of attorney granted pursuant to the Power of Attorney is a power coupled
      with an interest and shall be irrevocable until the Termination Date. The powers
      conferred on the Collateral Agent, for the benefit of the Secured Parties,
      under
      the Power of Attorney are solely to protect the Collateral Agent’s interests
      (for the benefit of the Secured Parties) in the Collateral and shall not impose
      any duty upon the Secured Parties to exercise any such powers. The Collateral
      Agent agrees that (a) except for the powers granted in clause (h) of the Power
      of Attorney, it shall not exercise any power or authority granted under the
      Power of Attorney unless an Event of Default has occurred and is continuing,
      and
      (b) the Collateral Agent shall account for any moneys received by the Collateral
      Agent in respect of any foreclosure on or disposition of Collateral pursuant
      to
      the Power of Attorney provided that the Secured Parties shall not have any
      duty
      as to any Collateral, and the Secured Parties shall be accountable only for
      amounts that they actually receive as a result of the exercise of such powers.
      NONE OF THE SECURED PARTIES OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS,
      EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO THE DEBTORS FOR
      ANY
      ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN
      RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL
      MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
      JURISDICTION.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    6. Remedies:
      Rights Upon Default.
      

     

    (a) In
      addition to all other rights and remedies granted to it under this Security
      Agreement, the Note and under any other instrument or agreement securing,
      evidencing or relating to any of the Secured Obligations, if any Event of
      Default shall have occurred and be continuing, the Secured Parties may exercise
      all rights and remedies of a secured party under the Code. Without limiting
      the
      generality of the foregoing, the Debtors expressly agree that in any such event
      the Secured Parties, without demand of performance or other demand,
      advertisement or notice of any kind (except the notice specified below of time
      and place of public or private sale) to or upon the Debtors or any other Person
      (all and each of which demands, advertisements and notices are hereby expressly
      waived to the maximum extent permitted by the Code and other applicable law),
      may forthwith enter upon the premises of the Debtors where any Collateral is
      located through self-help, without judicial process, without first obtaining
      a
      final judgment or giving the Debtors or any other Person notice and opportunity
      for a hearing on the Secured Parties’ claim or action and may collect, receive,
      assemble, process, appropriate and realize upon the Collateral, or any part
      thereof, and may forthwith sell, lease, license, assign, give an option or
      options to purchase, or sell or otherwise dispose of and deliver said Collateral
      (or contract to do so), or any part thereof, in one or more parcels at a public
      or private sale or sales, at any exchange at such prices as it may deem
      acceptable, for cash or on credit or for future delivery without assumption
      of
      any credit risk. The Secured Parties shall have the right upon any such public
      sale or sales and, to the extent permitted by law, upon any such private sale
      or
      sales, to purchase for the benefit of the Secured Parties, the whole or any
      part
      of said Collateral so sold, free of any right or equity of redemption, which
      equity of redemption the Debtors hereby release. Such sales may be adjourned
      and
      continued from time to time with or without notice. The Secured Parties shall
      have the right to conduct such sales on the Debtors’ premises or elsewhere and
      shall have the right to use the Debtors’ premises without charge for such time
      or times as the Secured Parties deems necessary or advisable.

     

    If
      any
      Event of Default shall have occurred and be continuing, the Debtors further
      agree, at the Collateral Agent’s request, to assemble the Collateral and make it
      available to the Collateral Agent at a place or places designated by the
      Collateral Agent which are reasonably convenient to the Collateral Agent and
      the
      Debtors, whether at the Debtors’ premises or elsewhere. Until the Secured
      Parties are able to affect a sale, lease, or other disposition of Collateral,
      the Secured Parties shall have the right to hold or use Collateral, or any
      part
      thereof, to the extent that it deems appropriate for the purpose of preserving
      Collateral or its value or for any other purpose deemed appropriate by the
      Secured Parties. The Secured Parties shall have no obligation to the Debtors
      to
      maintain or preserve the rights of the Debtors as against third parties with
      respect to Collateral while Collateral is in the possession of the Secured
      Parties. The Secured Parties may, if they so elect, seek the appointment of
      a
      receiver or keeper to take possession of Collateral and to enforce any of the
      Secured Parties’ remedies, with respect to such appointment without prior notice
      or hearing as to such appointment. The Secured Parties shall apply the net
      proceeds of any such collection, recovery, receipt, appropriation, realization
      or sale to the Secured Obligations, and only after so paying over such net
      proceeds, and after the payment by the Secured Parties of any other amount
      required by any provision of law, need the Secured Parties account for the
      surplus, if any, to the Debtors. To the maximum extent permitted by applicable
      law, the Debtors hereby waive all claims, damages, and demands against the
      Secured Parties arising out of the repossession, retention or sale of the
      Collateral except such as arise solely out of the gross negligence or willful
      misconduct of such Secured Party as finally determined by a court of competent
      jurisdiction. The Debtors agree that ten (10) days prior notice by the Secured
      Parties of the time and place of any public sale or of the time after which
      a
      private sale may take place is reasonable notification of such matters. The
      Debtors shall remain liable for any deficiency if the proceeds of any sale
      or
      disposition of the Collateral are insufficient to pay all Secured Obligations,
      including any attorneys’ fees and other expenses incurred by the Secured Parties
      to collect such deficiency.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b) Except
      as
      otherwise specifically provided herein, the Debtors hereby waive presentment,
      demand, protest or any notice (to the maximum extent permitted by applicable
      law) of any kind in connection with this Security Agreement or any
      Collateral.

     

    (c) To
      the
      extent that applicable law imposes duties on Secured Parties to exercise
      remedies in a commercially reasonable manner, the Debtors acknowledge and agree
      that it is not commercially unreasonable for the Secured Parties (i) to fail
      to
      incur expenses reasonably deemed significant by the Secured Parties to prepare
      Collateral for disposition or otherwise to complete raw material or work in
      process into finished goods or other finished products for disposition, (ii)
      to
      fail to obtain third party consents for access to Collateral to be disposed
      of,
      or to obtain or, if not required by other law, to fail to obtain governmental
      or
      third party consents for the collection or disposition of Collateral to be
      collected or disposed of, (iii) to fail to exercise collection remedies against
      Account Debtors or other Persons obligated on Collateral or to remove Liens
      on
      or any adverse claims against Collateral, (iv) to exercise collection remedies
      against Account Debtors and other Persons obligated on Collateral directly
      or
      through the use of collection agencies and other collection specialists, (v)
      to
      advertise dispositions of Collateral through publications or media of general
      circulation, whether or not the Collateral is of a specialized nature, (vi)
      to
      contact other Persons, whether or not in the same business as the Debtors,
      for
      expressions of interest in acquiring all or any portion of such Collateral,
      (vii) to hire one or more professional auctioneers to assist in the disposition
      of Collateral, whether or not the Collateral is of a specialized nature, (viii)
      to dispose of Collateral by utilizing internet sites that provide for the
      auction of assets of the types included in the Collateral or that have the
      reasonable capacity of doing so, or that match buyers and sellers of assets,
      (ix) to dispose of assets in wholesale rather than retail markets, (x) to
      disclaim disposition warranties, such as title, possession or quiet enjoyment,
      (xi) to purchase insurance or credit enhancements to insure the Secured Parties
      against risks of loss, collection or disposition of Collateral or to provide
      to
      the Secured Parties a guaranteed return from the collection or disposition
      of
      Collateral, or (xii) to the extent deemed appropriate by the Secured Parties,
      to
      obtain the services of other brokers, investment bankers, consultants and other
      professionals to assist the Secured Parties in the collection or disposition
      of
      any of the Collateral. The Debtors acknowledge that the purpose of this
Section
      6(c)
      is to
      provide non-exhaustive indications of what actions or omissions by the Secured
      Parties would not be commercially unreasonable in the Secured Parties’ exercise
      of remedies against the Collateral and that other actions or omissions by the
      Secured Parties shall not be deemed commercially unreasonable solely on account
      of not being indicated in this Section
      6(c).
      Without
      limitation upon the foregoing, nothing contained in this Section
      6(c)
      shall be
      construed to grant any rights to the Debtors or to impose any duties on the
      Secured Parties that would not have been granted or imposed by this Security
      Agreement or by applicable law in the absence of this Section
      6(c).

     

    (d) The
      Secured Parties shall not be required to make any demand upon, or pursue or
      exhaust any of their rights or remedies against, the Debtors, any other obligor,
      guarantor, pledgor or any other Person with respect to the payment of the
      Secured Obligations or to pursue or exhaust any of their rights or remedies
      with
      respect to any Collateral therefor or any direct or indirect guarantee thereof.
      The Secured Parties shall not be required to marshal the Collateral or any
      guarantee of the Secured Obligations or to resort to the Collateral or any
      such
      guarantee in any particular order, and all of its and their rights hereunder
      or
      under any other Document shall be cumulative. To the extent it may lawfully
      do
      so, the Debtors absolutely and irrevocably waive and relinquish the benefit
      and
      advantage of, and covenant not to assert against the Secured Parties, any
      valuation, stay, appraisement, extension, redemption or similar laws and any
      and
      all rights or defenses it may have as sureties now or hereafter existing which,
      but for this provision, might be applicable to the sale of any Collateral made
      under the judgment, order or decree of any court, or privately under the power
      of sale conferred by this Security Agreement, or otherwise. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    7. Grant
      Of Licenses To Use Intellectual Property Collateral.
      For
      the
      purpose of enabling the Secured Parties to exercise rights and remedies under
      Section
      6
      hereof
      (including, without limiting the terms of Section
      6
      hereof,
      in order to take possession of, hold, preserve, process, assemble, prepare
      for
      sale, market for sale, sell or otherwise dispose of Collateral) at such time
      as
      the Secured Parties shall be lawfully entitled to exercise such rights and
      remedies, the Debtors hereby grant to the Secured Parties, irrevocable,
      nonexclusive licenses (exercisable without payment of royalty or other
      compensation to the Debtors) to use, license or sublicense any Intellectual
      Property now owned or hereafter acquired by the Debtors, and wherever the same
      may be located, and including in such licenses access to all media in which
      any
      of the licensed items may be recorded or stored and to all computer software
      and
      programs used for the compilation or printout thereof.

     

    8. Indemnity;
      Expenses; Limitation On Secured Parties’ Duty In Respect Of
      Collateral.
      

     

    (a) Whether
      or not the transactions contemplated hereby are consummated, the Debtors shall
      indemnify and hold the Secured Parties, their respective Affiliates, and each
      of
      their directors, officers, agents and employees (collectively, the “Indemnified
      Persons”)
      harmless from and against any and all liabilities, obligations, losses, damages,
      penalties, claims, demands, actions, judgments, suits, costs, charges, expenses
      and disbursements (including reasonable attorneys fees and expenses) of any
      kind
      or nature whatsoever which may at any time (including at any time following
      the
      termination of the Secured Obligations and the termination, resignation or
      replacement of the Collateral Agent or any assignment by a Secured Party) be
      imposed on, incurred by or asserted against any such Indemnified Person in
      any
      way relating to or arising out of or in connection with the execution, delivery,
      enforcement, performance or administration of this Security Agreement, the
      Note
      or any other agreement, letter or instrument delivered in connection with the
      transactions contemplated hereby or the consummation of the transactions
      contemplated hereby or any actual or prospective claim, litigation,
      investigation or proceeding relating to any of the foregoing, whether based
      on
      contract, tort or any other theory (including any investigation of, preparation
      for, or defense of any pending or threatened claim, investigation, litigation
      or
      proceeding) and regardless of whether any Indemnified Person is a party thereto
      (all the foregoing, collectively, the “Indemnified
      Liabilities”),
      in
      all cases, whether or not caused by or arising, in whole or in part, out of
      the
      negligence of any Indemnified Person; provided that such indemnity shall not,
      as
      to any Indemnified Person, be available to the extent that such Indemnified
      Liabilities are determined by a court of competent jurisdiction by final and
      nonappealable judgment to have resulted from the gross negligence or willful
      misconduct of such Indemnified Person. In the case of an investigation,
      litigation or other proceeding to which the indemnity in this Section
      8
      applies,
      such indemnity shall be effective whether or not such investigation, litigation
      or proceeding is brought by the Debtors, their directors, shareholders or
      creditors or an Indemnified Party or any other Person, whether or not an
      Indemnified Person is otherwise a party thereto and whether or not any of the
      transactions contemplated hereunder or under any of the other Sutaria Documents
      are consummated. All amounts due under this Section
      8
      shall be
      payable within five Business Days after demand therefor. The agreements in
      this
Section
      8
      shall
      survive the resignation of the Collateral Agent, the assignment by a Secured
      Party and the repayment, satisfaction or discharge of all the other Secured
      Obligations. In the event that any investigation, litigation or proceeding
      is
      asserted or threatened in writing or instituted against any Indemnified Person,
      or any remedial, removal or response action which is requested of it or any
      other Indemnified Person, for which such Indemnified Person may desire indemnity
      or defense hereunder, such Indemnified Person shall notify the Debtors in
      writing of such event; provided that failure to so notify the Debtors shall
      not
      affect the right of any Indemnified Person to seek indemnification under this
      Section
      8.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b) The
      Debtors will upon demand pay to the Collateral Agent the amount of any and
      all
      reasonable expenses, including, without limitation, the fees and expenses of
      its
      counsel and of any experts and agents, that the Collateral Agent may incur
      in
      connection with (i) the administration of this Security Agreement, (ii) the
      custody, preservation, use or operation of, or the sale of, collection from
      or
      other realization upon, any of the Collateral of the Debtors, (iii) the exercise
      or enforcement of any of the rights of the Secured Parties hereunder or (iv)
      the
      failure by the Debtors to perform or observe any of the provisions hereof.
      

     

    (c) The
      Secured Parties shall use reasonable care with respect to the Collateral in
      their possession or under their control. The Secured Parties shall not have
      any
      other duty as to any Collateral in its possession or control or in the
      possession or control of any agent or nominee of the Secured Parties, or any
      income thereon or as to the preservation of rights against prior parties or
      any
      other rights pertaining thereto.

     

    9. Collateral
      Agent.
      

     

    (a) Collateral
      Agent Has No Duty.
      The
      powers conferred on the Collateral Agent hereunder are solely to protect its
      interest (on behalf of the Secured Parties) in the Collateral and shall not
      impose any duty on it to exercise any such powers.

     

    (b) Reasonable
      Care.
      The
      Collateral Agent is required to exercise reasonable care in the custody and
      preservation of any of the Collateral in its possession; provided, however,
      that
      the Collateral Agent shall be deemed to have exercised reasonable care in the
      custody and preservation of any of the Collateral if it takes such action for
      that purpose as any owner thereof reasonably requests in writing at times other
      than upon the occurrence and during the continuance of any Event of Default,
      but
      failure of the Collateral Agent, to comply with any such request at any time
      shall not in itself be deemed a failure to exercise reasonable
      care.

     

    (c) Other
      Provisions Relating to the Collateral Agent.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (i) The
      Collateral Agent has such powers, rights and obligations as are expressly
      delegated to the Collateral Agent by the terms of this Security Agreement.
      Subject to Section
      9(c)(iv),
      the
      Collateral Agent may, from time to time, appoint another Person to act as
      Collateral Agent. The Collateral Agent, acting in its capacity as such, shall
      have only such duties with respect to the Collateral as are set forth herein.
      

     

    (ii) Except
      during the continuance of an Event of Default, the Collateral Agent need perform
      only those duties that are specifically set forth in this Security Agreement
      and
      no others, and no implied covenants or obligations will be read into this
      Security Agreement against the Collateral Agent. In case an Event of Default
      has
      occurred and is continuing, the Collateral Agent shall exercise those rights
      and
      powers vested in it by this Security Agreement, and use the same degree of
      care
      and skill in their exercise, as a prudent man would exercise or use under the
      circumstances in the conduct of his own affairs.

     

    (iii) As
      to any
      matters not expressly provided for by this Security Agreement, the Collateral
      Agent shall not be required to take any action or exercise any discretion,
      but
      shall be required to act or to refrain from acting upon the instructions of
      the
      Holders and shall in all such cases be fully protected in acting, or in
      refraining from acting, in accordance with such instructions of the Holders,
      and
      any action taken or failure to act pursuant thereto shall be binding on the
      Holders. Notwithstanding any other provisions herein, the Collateral Agent
      shall
      not be required to advance or expend any funds or otherwise incur any financial
      liability in the performance of its duties or the exercise of its powers or
      rights hereunder at the request of the Holders unless the Debtors or the Holders
      have provided to the Collateral Agent security or indemnity, which the
      Collateral Agent, in its reasonable discretion, deems sufficient against any
      and
      all liability or expense which may be incurred by it by reason of taking or
      continuing to take such action.

     

    (iv) Subject
      to the appointment and acceptance of a successor Collateral Agent, the
      Collateral Agent may resign at any time by giving not less than thirty (30)
      days’ notice thereof to the Holders and the Debtors. Upon the acceptance of any
      appointment as Collateral Agent hereunder by a successor Collateral Agent,
      (A)
      such successor Collateral Agent shall thereupon succeed to and become vested
      with all the rights, powers, privileges and duties of the retiring Collateral
      Agent, and the retiring Collateral Agent shall be discharged from its duties
      and
      obligations hereunder, and (B) the retiring Collateral Agent shall promptly
      transfer all Collateral within its possession or control to the possession
      or
      control of the successor Collateral Agent and shall execute and deliver such
      notices, instructions and assignments as may be necessary or desirable to
      transfer the rights of the Collateral Agent in respect of the Collateral to
      the
      successor Collateral Agent. After any retiring Collateral Agent’s resignation or
      replacement hereunder as Collateral Agent, the provisions of this Section shall
      continue in effect for its benefit in respect of any actions taken or omitted
      to
      be taken by it while it was acting as Collateral Agent. Upon any such
      resignation or removal, the former Collateral Agent shall take all steps
      necessary to assign the Collateral to the successor Collateral
      Agent.

     

    10. Reinstatement.
      This
      Security Agreement shall remain in full force and effect and continue to be
      effective should any petition be filed by or against the Debtors for liquidation
      or reorganization, should the Debtors become insolvent or make an assignment
      for
      the benefit of any creditor or creditors or should a receiver or trustee be
      appointed for all or any significant part of the Debtors’ assets, and shall
      continue to be effective or be reinstated, as the case may be, if at any time
      payment and performance of the Secured Obligations, or any part thereof, is,
      pursuant to applicable law, rescinded or reduced in amount, or must otherwise
      be
      restored or returned by any obligee of the Secured Obligations, whether as
      a
“voidable preference,” “fraudulent conveyance,” or otherwise, all as though such
      payment or performance had not been made. In the event that any payment, or
      any
      part thereof, is rescinded, reduced, restored or returned, the Secured
      Obligations shall be reinstated and deemed reduced only by such amount paid
      and
      not so rescinded, reduced, restored or returned.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    11. Notices.
      Any
      and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile or e-mail at the facsimile number or e-mail address
      specified in this Section prior to 5:00 p.m. (New York City time) on a Business
      Day, (b) the Business Day after the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number specified
      in
      this Security Agreement later than 5:00 p.m. (New York City time) on any date
      and earlier than 11:59 p.m. (New York City time) on such date, (c) the Business
      Day following the date of mailing, if sent by nationally recognized overnight
      courier service, or (d) upon actual receipt by the party to whom such notice
      is
      required to be given. The address for such notices and communications shall
      be
      as follows:


     

    
      	
              If
                to the Debtors:

            	
              Interpharm
                Holdings Inc.

              75
                Adams Avenue

              Hauppauge,
                NY 11788

              Attention:
                Chief Executive Officer

              Fax:
                631-952-9587

            
	 	 
	
              If
                to Collateral Agent:

            	
              Sutaria
                Family Realty, LLC

              75
                Adams Avenue

              Hauppauge,
                New York 11788

              Attention:
                Raj Sutaria

              Fax:
                631-656-7551

            


    

     

    12. Severability.
      Whenever
      possible, each provision of this Security Agreement shall be interpreted in
      a
      manner as to be effective and valid under applicable law, but if any provision
      of this Security Agreement shall be prohibited by or invalid under applicable
      law, such provision shall be ineffective to the extent of such prohibition
      or
      invalidity without invalidating the remainder of such provision or the remaining
      provisions of this Security Agreement. This Security Agreement is to be read,
      construed and applied together with the Note, which, taken together, set forth
      the complete understanding and agreement of the Collateral Agent, the Holders
      and the Debtors with respect to the matters referred to herein and
      therein.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    13. No
      Waiver; Cumulative Remedies.
      The
      Secured Parties shall not by any act, delay, omission or otherwise be deemed
      to
      have waived any of its rights or remedies hereunder, and no waiver shall be
      valid unless in writing, signed by the Collateral Agent and then only to the
      extent therein set forth. A waiver by the Collateral Agent of any right or
      remedy hereunder on any one occasion shall not be construed as a bar to any
      right or remedy which the Collateral Agent would otherwise have had on any
      future occasion. No failure to exercise nor any delay in exercising on the
      part
      of the Secured Parties, any right, power or privilege hereunder, shall operate
      as a waiver thereof, nor shall any single or partial exercise of any right,
      power or privilege hereunder preclude any other or future exercise thereof
      or
      the exercise of any other right, power or privilege. The rights and remedies
      hereunder provided are cumulative and may be exercised singly or concurrently,
      and are not exclusive of any rights and remedies provided by law. None of the
      terms or provisions of this Security Agreement may be waived, altered, modified
      or amended except by an instrument in writing, duly executed by the Collateral
      Agent and the Debtor.

     

    14. Limitation
      By Law.
      All
      rights, remedies and powers provided in this Security Agreement may be exercised
      only to the extent that the exercise thereof does not violate any applicable
      provision of law, and all the provisions of this Security Agreement are intended
      to be subject to all applicable mandatory provisions of law that may be
      controlling and to be limited to the extent necessary so that they shall not
      render this Security Agreement invalid, or unenforceable, in whole or in part,
      or not entitled to be recorded, registered or filed under the provisions of
      any
      applicable law.

     

    15. Termination
      Of This Security Agreement.
      Subject
      to Section
      10
      hereof,
      this Security Agreement shall terminate upon the Termination Date.

     

    16. Successors
      And Assigns.
      This
      Security Agreement and all obligations of the Debtors hereunder shall be binding
      upon the successors and assigns of the Debtors (including any
      debtor-in-possession on behalf of the Debtors) and shall, together with the
      rights and remedies of the Collateral Agent, for the benefit of the Secured
      Parties, hereunder, inure to the benefit of the Secured Parties and all future
      holders of any instrument evidencing any of the Secured Obligations and their
      respective successors and assigns. No sales of participations, other sales,
      assignments, transfers or other dispositions of any agreement governing or
      instrument evidencing the Secured Obligations or any portion thereof or interest
      therein shall in any manner impair the Lien granted to the Collateral Agent,
      for
      the benefit of the Secured Parties, hereunder. The Debtors may not assign,
      sell,
      hypothecate or otherwise transfer any interest in or obligation under this
      Security Agreement.

     

    17. Counterparts.
      This
      Security Agreement may be authenticated in any number of separate counterparts,
      each of which shall collectively and separately constitute one agreement. This
      Security Agreement may be authenticated by manual signature, facsimile or,
      if
      approved in writing by the Collateral Agent, electronic means, all of which
      shall be equally valid.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    18. Governing
      Law.
      ALL
      QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
      OF THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
      IN
      ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
      OF CONFLICTS OF LAW. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
      JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
      BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
      HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
      ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
      JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
      IMPROPER. NOTHING IN THIS SECURITY AGREEMENT SHALL BE DEEMED OR OPERATE TO
      PRECLUDE THE SECURED PARTIES FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
      IN
      ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
      THE SECURED OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR
      OF THE SECURED PARTIES. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE
      OF
      PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
      PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
      OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS
      IN
      EFFECT FOR NOTICES TO IT UNDER THIS SECURITY AGREEMENT AND AGREES THAT SUCH
      SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
      THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
      TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY HEREBY WAIVES
      ALL
      RIGHTS TO A TRIAL BY JURY.

     

    19. Waiver
      Of Jury Trial.
      BECAUSE
      DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
      QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
      PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY, THE PARTIES DESIRE
      THAT
      DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE APPLYING
      SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
      OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT
      TO
      TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
      WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG THE SECURED PARTIES
      AND
      THE DEBTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
      RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY
      OF
      THE OTHER NOTES DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR
      THERETO.

     

    20. Expenses.
      The
      Debtors agree to reimburse the Secured Parties for all costs and expenses
      incurred by them (including, without limitation, the fees and expenses of legal
      counsel) in connection with (i) any Default or Event of Default and any
      enforcement or collection proceeding resulting therefrom, including, without
      limitation, all manner of participation in or other involvement with (w)
      performance by the Collateral Agent of any obligations of the Debtors in respect
      of the Collateral that the Debtors have failed or refused to perform, (x)
      bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
      proceedings, or any actual or attempted sale, or any exchange, enforcement,
      collection, compromise or settlement in respect of any of the Collateral, and
      for the care of the Collateral and defending or asserting rights and claims
      of
      the Collateral Agent in respect thereof, by litigation or otherwise, including
      expenses of insurance, (y) judicial or regulatory proceedings and (z) workout,
      restructuring or other negotiations or proceedings (whether or not the workout,
      restructuring or transaction contemplated thereby is consummated) and (ii)
      the
      enforcement of this Section
      20,
      and all
      such costs and expenses shall be Secured Obligations entitled to the benefits
      of
      the collateral security provided pursuant to Section
      2.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    21. Section
      Titles.
      The
      Section titles contained in this Security Agreement are and shall be without
      substantive meaning or content of any kind whatsoever and are not a part of
      the
      agreement among the parties hereto.

     

    22. No
      Strict Construction.
      The
      parties hereto have participated jointly in the negotiation and drafting of
      this
      Security Agreement. In the event an ambiguity or question of intent or
      interpretation arises, this Security Agreement shall be construed as if drafted
      jointly by the parties hereto and no presumption or burden of proof shall arise
      favoring or disfavoring any party by virtue of the authorship of any provisions
      of this Security Agreement.

     

    23. Benefit
      Of Secured Party.
      All
      Liens
      granted or contemplated hereby shall be for the benefit of the Secured Parties,
      and all proceeds or payments realized from Collateral in accordance herewith
      shall be applied to the Secured Obligations in the manner determined by the
      Collateral Agent in its sole discretion.

     

    [Signature
      Page Follows]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     


    IN
      WITNESS WHEREOF, each of the parties hereto has caused this Security Agreement
      to be executed and delivered by its duly authorized officer as of the date
      first
      set forth above.

     

    
      	 	 	 
	 	
              The
                Debtors:

               

              
                INTERPHARM
                  HOLDINGS INC.

              

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Peter Giallorenzo 
	 	
              

              Name:
                Peter Giallorenzo

              Title:
                CFO

            


    

    

      	 	 	 
	 	
              
                INTERPHARM,
                  INC.

              

            
	 
 	 
 	 
 
	
            	By:  	/s/ Peter Giallorenzo 
	 	
              
                

              

              Name: Peter Giallorenzo

              
                Title:
                  CFO

              

            


    

     

    
      	 	 	 
	 	
              
                
                  The
                    Collateral Agent:

                   

                  SUTARIA
                    FAMILY REALTY, LLC

                

              

            
	 
 	 
 	 
 
	
            	By:  	/s/ Maganlal
              Sutaria
	 	
              
                

              

              
                
                  Name:
                    Maganlal Sutaria

                  Title:
                    Managing Member

                

              

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    ANNEX
      A

    to

    SECURITY
      AGREEMENT

    DEFINITIONS

     

    Capitalized
      terms used in the Security Agreement shall have the following respective
      meanings, and all references to Sections, Exhibits, Schedules or Annexes in
      the
      following definitions shall refer to Sections, Exhibits, Schedules or Annexes
      of
      or to the Security Agreement: 

     

    “Account
      Debtor”
means
      any Person who may become obligated to a Debtor under, with respect to, or
      on
      account of, an Account.

     

    “Accounts”
means
      all “accounts,” as such term is defined in the Code, now owned or hereafter
      acquired by a Debtor, including (as the context may reasonably permit)
      (a) all accounts receivable, other receivables, book debts and other forms
      of obligations (other than forms of obligations evidenced by Chattel Paper,
      or
      Instruments), (including any such obligations that may be characterized as
      an
      account or contract right under the Code), (b) all of a Debtor’s rights in,
      to and under all purchase orders or receipts for goods or services, (c) all
      of a Debtor’s rights to any goods represented by any of the foregoing (including
      unpaid sellers’ rights of rescission, reclamation and stoppage in transit and
      rights to returned, reclaimed or repossessed goods), (d) all rights to
      payment due to a Debtor for property sold, leased, licensed, assigned or
      otherwise disposed of, for a policy of insurance issued or to be issued, for
      a
      secondary obligation incurred or to be incurred, for energy provided or to
      be
      provided, for the use or hire of a vessel under a charter or other contract,
      arising out of the use of a credit card or charge card, or for services rendered
      or to be rendered by a Debtor or in connection with any other transaction
      (whether or not yet earned by performance on the part of a Debtor), (e) all
      health care insurance receivables and (f) all collateral security of any
      kind, given by any Account Debtor or any other Person with respect to any of
      the
      foregoing.

     

    “Bankruptcy
      Code”
means
      the provisions of Title 11 of the United States Code, 11 U.S.C. §§ 101
et seq.

     

    “Business
      Day”
means
      any day that is not a Saturday, a Sunday or a day on which banks are required
      or
      permitted to be closed in the City of New York.

     

    “Chattel
      Paper”
means
      any “chattel paper,” as such term is defined in the Code, including electronic
      chattel paper, now owned or hereafter acquired by a Debtor.

     

    “Code”
means
      the Uniform Commercial Code as the same may, from time to time, be enacted
      and
      in effect in the State of New York; provided,
      that to
      the extent that the Code is used to define any term herein and such term is
      defined differently in different Articles of the Code, the definition of such
      term contained in Article 9 of the Code shall govern; provided further,
      that in
      the event that, by reason of mandatory provisions of law, any or all of the
      attachment, perfection or priority of, or remedies with respect to, the Lien
      on
      any Collateral under the Security Agreement is governed by the Uniform
      Commercial Code as enacted and in effect in a jurisdiction other than the State
      of New York, the term “Code”
shall
      mean the Uniform Commercial Code as enacted and in effect in such other
      jurisdiction solely for purposes of the provisions thereof relating to such
      attachment, perfection, priority or remedies and for purposes of definitions
      related to such provisions.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Collateral”
has
      the
      meaning ascribed to it in Section 2(a).

     

    “Copyright
      License”
means
      any and all rights now owned or hereafter acquired by a Debtor under any written
      agreement granting any right to use any Copyright or Copyright
      registration.

     

    “Copyrights”
means
      all of the following now owned or hereafter adopted or acquired by the Debtor:
      (a) all copyrights, all General Intangibles of like nature (whether
      registered or unregistered), all registrations and recordings thereof, and
      all
      applications in connection therewith, including all registrations, recordings
      and applications in the United States Copyright Office or in any similar office
      or agency of the United States, any state or territory thereof, or any other
      country or any political subdivision thereof, (b) all reissues, extensions
      or renewals thereof, (c) the right to recover for all past, present and future
      infringements thereof and (d) all other rights of any kind whatsoever accruing
      thereunder as pertaining thereto.

     

    “Default”
means
      any condition or event which is, or, with notice or lapse of time or both,
      would
      become, an Event of Default.

     

    “Deposit
      Accounts”
means
      all “deposit accounts” as such term is defined in the Code, now or hereafter
      held in the names of a Debtor.

     

    “Event
      of Default”
means
      any event of default under, or any failure by the Parties to perform, keep,
      or
      observe any covenant or agreement contained in this Security Agreement and
      the
      Note.

     

    “General
      Intangibles”
means
      all “general intangibles,” as such term is defined in the Code, now owned or
      hereafter acquired by a Debtor, including (as the context may reasonably permit)
      all right, title and interest that a Debtor may now or hereafter have in or
      under any Contract, all payment intangibles, customer lists, Licenses,
      Copyrights, Trademarks, Patents, and all applications therefor and reissues,
      extensions or renewals thereof, rights in Intellectual Property, interests
      in
      partnerships, joint ventures and other business associations, licenses, permits,
      copyrights, trade secrets, proprietary or confidential information, inventions
      (whether or not patented or patentable), technical information, procedures,
      designs, knowledge, know-how, software, data bases, data, skill, expertise,
      experience, processes, models, drawings, materials and records, goodwill
      (including the goodwill associated with any Trademark or Trademark License),
      all
      rights and claims in or under insurance policies (including insurance for fire,
      damage, loss and casualty, whether covering personal property, real property,
      tangible rights or intangible rights, all liability, life, key man and business
      interruption insurance, and all unearned premiums), choses in action, rights
      to
      receive tax refunds and other payments, rights to receive dividends,
      distributions, cash, Instruments and other property in respect of or in exchange
      for any pledged Investment Property, rights of indemnification, all books and
      records, correspondence, credit files, invoices and other papers, including
      without limitation all tapes, cards, computer runs and other papers and
      documents in the possession or under the control of a Debtor or any computer
      bureau or service company from time to time acting for a Debtor.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Instruments”
means
      all “instruments,” as such term is defined in the Code, now owned or hereafter
      acquired by a Debtor, wherever located, and, in any event, including all
      certificates of deposit, and all promissory notes and other evidences of
      indebtedness, other than instruments that constitute, or are a part of a group
      of writings that constitute, Chattel Paper.

     

    “Intellectual
      Property”
means
      collectively, all Copyrights, all Patents and all Trademarks, together with
      (a)
      all inventions, processes, production methods, proprietary information, know-how
      and trade secrets; (b) all Copyright Licenses, Patent Licenses and Trademark
      Licenses; (c) all information, customer lists, identification of suppliers,
      data, plans, blueprints, specifications, designs, drawings, recorded knowledge,
      surveys, engineering reports, test reports, manuals, materials standards,
      processing standards, performance standards, catalogs, computer and automatic
      machinery software and programs; (d) all field repair data, sales data and
      other
      information relating to sales or service of products now or hereafter
      manufactured; (e) all accounting information and all media in which or on which
      any information or knowledge or data or records may be recorded or stored and
      all computer programs used for the compilation or printout of such information,
      knowledge, records or data; (f) all licenses, consents, permits, variances,
      certifications and approvals of governmental agencies now or hereafter held
      by a
      Debtors and (g) all clauses of action, claims, and warranties now or hereafter
      owned or acquired by a Debtor in respect of any of the items listed
      above.

     

    “Inventory”
means
      all “inventory,” as such term is defined in the Code, now owned or hereafter
      acquired by a Debtor, wherever located, and in any event including (as the
      context may reasonably permit) inventory, merchandise, goods and other personal
      property that are held by or on behalf of a Debtor for sale or lease or are
      furnished or are to be furnished under a contract of service, or that constitute
      raw materials, work in process, finished goods, returned goods, or materials
      or
      supplies of any kind, nature or description used or consumed or to be used
      or
      consumed in a Debtor’s business or in the processing, production, packaging,
      promotion, delivery or shipping of the same, including all supplies and embedded
      software.

     

    “Investment
      Property”
means
      all “investment property” as such term is defined in the Code now owned or
      hereafter acquired by a Debtor, wherever located, including (as the context
      may
      reasonably permit) (i) all securities, whether certificated or
      uncertificated, including stocks, bonds, interests in limited liability
      companies, partnership interests, treasuries, certificates of deposit, and
      mutual fund shares; (ii) all securities entitlements of a Debtor, including
      the rights of a Debtor to any securities account and the financial assets held
      by a securities intermediary in such securities account and any free credit
      balance or other money owing by any securities intermediary with respect to
      that
      account; (iii) all securities accounts of a Debtor; (iv) all commodity
      contracts of a Debtor; and (v) all commodity accounts held by a
      Debtor.

     

    “License”
means
      any Copyright License, Patent License, Trademark License or other license of
      rights or interests now held or hereafter acquired by a Debtor.

     

    “Lien”
means
      any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
      arrangement, lien, charge, claim, security interest, easement or encumbrance,
      or
      preference, priority or other security agreement or preferential arrangement
      of
      any kind or nature whatsoever (including any lease or title retention agreement,
      any financing lease having substantially the same economic effect as any of
      the
      foregoing, and the filing of, or agreement to give, any financing statement
      perfecting a security interest under the Code or comparable law of any
      jurisdiction).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Patent
      License”
means
      rights under any written agreement now owned or hereafter acquired by a Debtor
      granting any right with respect to any invention on which a Patent is in
      existence.

     

    “Patents”
means
      all of the following in which a Debtor now hold or hereafter acquire any
      interest: (a) all letters patent of the United States or of any other
      country, all registrations and recordings thereof, and all applications for
      letters patent of the United States or of any other country, including
      registrations, recordings and applications in the United States Patent and
      Trademark Office or in any similar office or agency of the United States, any
      State, or any other country, (b) all reissues, continuations,
      continuations-in-part or extensions thereof, (c) all income, royalties,
      damages and payments now or hereafter due and/or payable under and with respect
      thereto, including, without limitation, damages and payments for past or future
      infringements thereof, (d) the right to sue for past, present and future
      infringements thereof, and (e) all rights corresponding thereto throughout
      the world.

     

    “Person”
means
      a
      corporation, an association, a partnership, an organization, a business, an
      individual, a government or political subdivision thereof or governmental
      authority.

     

    “Proceeds”
means
      “proceeds,” as such term is defined in the Code, including (as the context may
      reasonably permit) (a) any and all proceeds of any insurance, indemnity,
      warranty or guaranty payable to a Debtor from time to time with respect to
      any
      of the Collateral, (b) any and all payments (in any form whatsoever) made
      or due and payable to a Debtor from time to time in connection with any
      requisition, confiscation, condemnation, seizure or forfeiture of all or any
      part of the Collateral by any governmental authority (or any Person acting
      under
      color of governmental authority), (c) any claim of a Debtor against third
      parties (i) for past, present or future infringement of any Patent or
      Patent License, or (ii) for past, present or future infringement or
      dilution of any Copyright, Copyright License, Trademark or Trademark License,
      or
      for injury to the goodwill associated with any Trademark or Trademark License,
      (d) any recoveries by a Debtor against third parties with respect to any
      litigation or dispute concerning any of the Collateral including claims arising
      out of the loss or nonconformity of, interference with the use of, defects
      in,
      or infringement of rights in, or damage to, Collateral, (e) all amounts
      collected on, or distributed on account of, other Collateral, including
      dividends, interest, distributions and Instruments with respect to Investment
      Property, and (f) any and all other amounts, rights to payment or other
      property acquired upon the sale, lease, license, exchange or other disposition
      of Collateral and all rights arising out of Collateral.

     

    “Secured
      Obligations”
means
      any and all obligations, liabilities and indebtedness of every kind, nature
      and
      description owing by a Debtor or any obligor to the Secured Parties under the
      Note, including principal, interest, charges, fees, premiums, indemnities and
      expenses, however evidenced, whether as principal, surety, endorser, a debtor
      or
      otherwise, whether arising under this Agreement or the Note, whether now
      existing or hereafter arising, whether direct or indirect, absolute or
      contingent, joint or several, due or not due, primary or secondary, liquidated
      or unliquidated, secured or unsecured, and whether arising directly or howsoever
      acquired by a Secured Party.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Security
      Agreement”
means
      this Security Agreement, as the same may be amended, supplemented, restated
      or
      otherwise modified from time to time.

     

    “Termination
      Date”
means
      the date on which all obligations of a Debtor to the Secured Parties or their
      assigns under the Note, and the obligations of a Debtor under this Security
      Agreement and the Note to which it is a party, have been indefeasibly
      satisfied.

     

    “Trademark
      License”
means
      rights under any written agreement now owned or hereafter acquired by a Debtor
      granting any right to use any Trademark.

     

    “Trademarks”
means
      all of the following now owned or hereafter existing or adopted or acquired
      by a
      Debtor: (a) all trademarks, trade names, corporate names, business names,
      trade styles, service marks, logos, other source or business identifiers, prints
      and labels on which any of the foregoing have appeared or appear, designs and
      General Intangibles of like nature (whether registered or unregistered), all
      registrations and recordings thereof, and all applications in connection
      therewith, including registrations, recordings and applications in the United
      States Patent and Trademark Office or in any similar office or agency of the
      United States, any state or territory thereof, or any other country or any
      political subdivision thereof, (b) all reissues, extensions or renewals
      thereof, (c) all rights corresponding thereto throughout the world
      (d) the right to recover for all past, present and future infringements
      thereof and (e) all other rights of any kind whatsoever accruing thereunder
      or
      pertaining thereto, together, in each case, with the product lines and goodwill
      of the business connected with the use of, and symbolized by, any of the
      foregoing.

     

    The
      words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
      the Security Agreement as a whole, including all Annexes, Exhibits and
      Schedules, as the same may from time to time be amended, restated, modified
      or
      supplemented, and not to any particular section, subsection or clause contained
      in the Security Agreement or any such Annex, Exhibit or Schedule.

     

    Wherever
      from the context it appears appropriate, each term stated in either the singular
      or plural shall include the singular and the plural, and pronouns stated in
      the
      masculine, feminine or neuter gender shall include the masculine, feminine
      and
      neuter genders. The words “including”, “includes” and “include” shall be deemed
      to be followed by the words “without limitation”; the word “or” is not
      exclusive; references to Persons include their respective successors and assigns
      or, in the case of governmental Persons, Persons succeeding to the relevant
      functions of such Persons; and all references to statutes and related
      regulations shall include any amendments of the same and any successor statutes
      and regulations. Whenever any provision in this Security Agreement refers to
      the
      knowledge (or an analogous phrase) of the Debtor, such words are intended to
      signify that the Debtor has actual knowledge or awareness of a particular fact
      or circumstance or a Debtor, if it had exercised reasonable diligence, would
      have known or been aware of such fact or circumstance.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      I

    to

    SECURITY
      AGREEMENT

    FILING
      JURISDICTIONS


     

    
      	
              Debtors

            	 	
              Jurisdiction

            
	
              Interpharm
                Holdings Inc.

            	 	
              Secretary
                of State of Delaware

            
	 	 	 
	
              Interpharm,
                Inc. 

            	 	
              Secretary
                of State of New York

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    SCHEDULE
      II

    to

    SECURITY
      AGREEMENT


     

    SCHEDULE
      OF OFFICES, LOCATIONS OF COLLATERAL

    AND
      RECORDS CONCERNING DEBTORS’ COLLATERAL

     

    
      	I.	
              The
                Debtors’ official names: 


            


    

     

    
      	II.	
              Types
                of entity (e.g. corporation, partnership, business trust, limited
                partnership, limited liability company): 

            


    

     

    Corporation

     

    
      	III.	
              Organizational
                identification number issued by the Debtors’ jurisdiction of incorporation
                or organization or a statement that no such number has been
                issued: 

            


    

     

    
      	IV.	
              Jurisdictions
                of Incorporation or Organization of the Debtors:  

            


    

     

    
      	
              V.

            	
              Chief
                Executive Offices and principal places of business of the
                Debtors:

            


    

     

    
      	
              VI.

            	
              Other
                Premises at which Collateral is Stored or
                Located:

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      III

    to

    SECURITY
      AGREEMENT


     

    SCHEDULE
      OF INTELLECTUAL PROPERTY

    


    A. Trademarks

    


    1. Owned

    


    
      	
               

              Trademark

            	 	
              Registration

              Number 

            	 	
              Registration

              Date 

            	 	
              Expiration

              Date 

            
	 	 	 	 	 	 	 


    

     

    
      	
              Trademark

              Application

            	 	
              Application/Serial

              Number 

            	 	
              Application

              Date 

            
	 	 	 	 	 


    

     

    2. Licensed

    


    
      	
               

              Trademark

            	 	
              Registration

              Number 

            	 	
              Registration

              Date 

            	 	
              Expiration

              Date 

            	 	
              Owner/

              Licensor

            
	 	 	 	 	 	 	 	 	 


    

     

    
      	
              Trademark

              Application

            	 	
              Application/Serial

              Number 

            	 	
              Application

              Date 

            
	 	 	 	 	 


    

     

    B. Patents

    


    1. Owned

    


    
      	
              Patent

              Description

            	 	
              Registration

              Number 

            	 	
              Registration

              Date 

            	 	
              Expiration

              Date 

            
	 	 	 	 	 	 	 


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
              Patent

              Application

            	 	
              Application/Serial

              Number 

            	 	
              Application

              Date 

            
	 	 	 	 	 


    

    


    2. Licensed

    


    
      	
              Patent

              Description

            	 	
              Registration

              Number 

            	 	
              Registration

              Date 

            	 	
              Expiration

              Date 

            	 	
              Owner/

              Licensor

            
	 	 	 	 	 	 	 	 	 


    

    


    


    
      	
              Patent

              Application

            	 	
              Application/Serial

              Number 

            	 	
              Application

              Date 

            
	 	 	 	 	 


    

     

    C. Copyrights

    


    1. Owned

    


    
      	
               

              Copyright

            	 	
              Registration

              Number 

            	 	
              Registration

              Date 

            
	 	 	 	 	 


    

    


    2. Licensed

    


    
      	
              Patent

              Description

            	 	
              Registration

              Number 

            	 	
              Registration

              Number 

            	 	
              Expiration

              Date 

            	 	
              Owner/

              Licensor

            
	 	 	 	 	 	 	 	 	 


    

     

    D. Other

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
      A

     

    FORM
      OF

     

    POWER
      OF ATTORNEY

     

    This
      Power of Attorney is executed and delivered by INTERPHARM HOLDINGS INC., a
      Delaware corporation and INTERPHARM, INC., a New York corporation, (the
“Grantors”)
      to
      Sutaria Family Realty, LLC (hereinafter referred to the “Attorney”),
      as
      the Collateral Agent for the benefit of the Secured Parties under a Security
      Agreement, dated as of November 7, 2007 and other related documents collectively
      (the “Documents”).
      No
      person to whom this Power of Attorney is presented, as authority for the
      Attorney to take any action or actions contemplated hereby, shall be required
      to
      inquire into or seek confirmation from the Grantors as to the authority of
      the
      Attorney to take any action described below, or as to the existence of or
      fulfillment of any condition to this Power of Attorney, which is intended to
      grant to the Attorney unconditionally the authority to take and perform the
      actions contemplated herein. The power of attorney granted hereby is coupled
      with an interest, and may not be revoked or canceled by the Grantors without
      the
      Attorney’s written consent.

     

    The
      Grantors hereby irrevocably constitute and appoint the Attorney (and all
      officers, employees or agents designated by the Attorney), with full power
      of
      substitution, as the Grantors’ true and lawful attorney-in-fact with full
      irrevocable power and authority in the place and stead of the Grantors and
      in
      the name of the Grantors or in its own name, from time to time in the Attorney’s
      discretion, without notice to or assent by the Grantors, and at any time in
      the
      case of clause (h) below and at any time an Event of Default (as defined in
      the
      Security Agreement) has occurred and is continuing in the case of (a), (b),
      (c),
      (d), (e), (f), (g), (i) and (j) below, to do the following: (a) change the
      mailing address of the Grantors, open a post office box on behalf of the
      Grantors, open mail for therantor, and ask, demand, collect, give acquittances
      and receipts for, take possession of, endorse any invoices, freight or express
      bills, bills of lading, storage or warehouse receipts, drafts against debtors,
      assignments, verifications, and notices in connection with any property of
      the
      Grantors constituting Collateral; (b) effect any repairs to any asset of the
      Grantors, or continue or obtain any insurance and pay all or any part of the
      premiums therefor and costs thereof, and make, settle and adjust all claims
      under such policies of insurance, and make all determinations and decisions
      with
      respect to such policies; (c) pay or discharge any taxes, liens, security
      interests, or other encumbrances levied or placed on or threatened against
      the
      Grantors or its property constituting Collateral; (d) defend any suit, action
      or
      proceeding brought against the Grantors if the Grantors do not defend such
      suit,
      action or proceeding or if the Attorney believes that the Grantors are not
      pursuing such defense in a manner that will maximize the recovery to the
      Attorney, and settle, compromise or adjust any suit, action, or proceeding
      described above and, in connection therewith, give such discharges or releases
      as the Attorney may deem appropriate; (e) file or prosecute any claim,
      litigation, suit or proceeding in any court of competent jurisdiction or before
      any arbitrator, or take any other action otherwise deemed appropriate by the
      Attorney for the purpose of collecting any and all such moneys due to the
      Grantors whenever payable and to enforce any other right in respect of the
      Grantors’ property constituting Collateral; (f) cause the certified public
      accountants then engaged by the Grantors to prepare and deliver to the Attorney
      at any time and from time to time, promptly upon the Attorney’s request, the
      following reports: (1) a reconciliation of all accounts, (2) an aging of all
      accounts, (3) trial balances, (4) test verifications of such accounts as the
      Attorney may request, and (5) the results of each physical verification of
      inventory; (g) communicate in its own name with any party to any contract with
      regard to the assignment of the right, title and interest of the Grantors in
      and
      under the contracts and other matters relating thereto; (h) file such financing
      statements with respect to the aforesaid Security Agreement, with or without
      the
      Grantors’ signatures, or to file a photocopy of the Security Agreement in
      substitution for a financing statement, as the Collateral Agent may deem
      appropriate and to execute in the Grantors’ names such financing statements and
      amendments thereto and continuation statements which may require the Grantors’
signatures; (i) execute, in connection with any sale provided for in any
      Document, any endorsements, assignments or other instruments of conveyance
      or
      transfer with respect to the Collateral and to otherwise direct such sale or
      resale, all as though the Attorney were the absolute owner of the property
      of
      the Grantors for all purposes, and (j) at the Attorney’s option and the
      Grantors’ expense, at any time or from time to time, all acts and other things
      that the Attorney reasonably deems necessary to perfect, preserve, or realize
      upon the Grantors’ property or assets and the Collateral Agent’s Liens thereon,
      all as fully and effectively as the Grantors might do. The Grantors hereby
      ratify, to the extent permitted by law, all that said Attorney shall lawfully
      do
      or cause to be done by virtue hereof.

     

    [signature
      page follows]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    IN
      WITNESS WHEREOF, this Power of Attorney is executed by each of the Grantors,
      and
      the Grantors have caused their seals to be affixed pursuant to the authority
      of
      its board of directors this 7th day of November, 2007.

     

    
      	 	 	 
	 	
              The
                Grantors:

               

              
                INTERPHARM
                  HOLDINGS INC.

              

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Peter Giallorenzo
	 	
              

              Name:
                Peter Giallorenzo

              Title:
                CFO

            


    

     

    
      	 	 	 
	 	
              INTERPHARM,
                INC.

            
	 
 	 
 	 
 
	
            	By:  	 /s/
              Peter Giallorenzo
	 	
              

              Name:
                Peter Giallorenzo

              Title:
                CFO

            


    

     

    NOTARY
      PUBLIC CERTIFICATES

     

    On
      this
      7th day of November, 2007, Peter
      Giallorenzo,
      who is
      personally known to me appeared before me in his/her capacity as the CFO of
      INTERPHARM HOLDINGS INC. and executed on behalf of such entity the Power of
      Attorney in favor of SUTARIA FAMILY REALTY, LLC to which this Certificate is
      attached.

     

    
      	 	 	 
	
            	 	/s/
              Fei
              Chen
	 	
              

            
	 	Notary
              Public


    

     

    On
      this
      7th day of November, 2007, Peter
      Giallorenzo
      who is
      personally known to me appeared before me in his/her capacity as the CFO of
      INTERPHARM, INC. and executed on behalf of such entity the Power of Attorney
      in
      favor of SUTARIA FAMILY REALTY, LLC to which this Certificate is attached.
      

     

    
      
        	 	 	 
	
              	 	/s/
                Fei
                Chen 
	 	
                

              
	 	Notary
                Public