Document:

AGREEMENT

    

    THIS
      AGREEMENT is made and entered into as of this 4th day of October, 2006, by
      and
      between Interpharm, Inc., having
      its principal place of business at 75 Adams Avenue, Hauppauge, New York, 11788
      (“Interpharm”),
      and Tris
      Pharma, Inc. having its principal place of business at 2033 Route 130, Suite
      D,
      Monmouth Junction, NJ 08852
      (“Tris”).

     

    RECITALS

     

    A.  Interpharm
      is engaged in, among other things, the marketing and sale of finished drug
      products; 

     

    B.  Tris
      is
      engaged in,
      among other things,
      research
      and product development of pharmaceutical liquids and manufacturing of
      pharmaceutical products;

     

    C.  Interpharm
      and Tris desire to establish a relationship pursuant to which Tris will develop
      and manufacture, and Interpharm will market and sell,
      certain pharmaceutical liquids;
      

     

    D.  Interpharm
      and Tris previously entered into an agreement for the development of liquid
      products dated as of February 24, 2005 (the “Prior Agreement”); 

     

    E.  As
      set
      forth below, this Agreement shall supersede the Prior Agreement, which shall
      be
      of no further force or effect;

     

    F.  On
      February 24, 2005, Interpharm and Tris entered into an agreement whereby Tris
      is
      to transfer certain research and technology to Interpharm which it will use
      to
      develop and manufacture certain solid oral dosage pharmaceutical products (the
      “Solids Agreement”);

     

    G.  On
      July
      6, 2005, Interpharm and Tris entered into an amendment to the Solids Agreement
      (“Amendment No. 1”) to add certain pharmaceutical products to the Solids
      Agreement; 

     

    H.  On
      April
      28, 2006, Interpharm and Tris entered into an amendment (Amendment No. 2) to
      the
      Solids Agreement, as amended by Amendment No. 1; and

     

    I.  On
      October 4, 2006, Interpharm entered into an Amendment No. 3 to the Solids
      Agreement, as amended by Amendment No. 1 and Amendment No. 2.

     

    NOW,
      THEREFORE, in consideration of the foregoing premises, and the mutual covenants
      and obligations set forth herein, Interpharm and Tris hereby agree as
      follows:

     

    ARTICLE
      I

     

    DEFINITIONS

     

    1.1. “ANDA”
shall
      mean the Abbreviated New Drug Application for a Product filed with the FDA
      by
      Interpharm, and any supplements thereto.

     

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    1.2
       “API”
shall
      mean the active pharmaceutical ingredient for a Product.

     

    1.3
       “Commercialization”
shall
      mean the use of Commercially Reasonable efforts for the commercial marketing
      and
      sale of a Product in the Territory, including advertising, education, planning,
      marketing, promotion, distribution, market and product support studies for
      the
      Products in the Territory.

     

    1.4
       “Commercially
      Reasonable”
shall
      mean a party’s reasonable efforts and diligence in accordance with its business,
      legal, medical and scientific judgment, taking into account the competitiveness
      of the marketplace, the proprietary position of a Product, the regulatory
      structure involved, the profitability of a Product, and other relevant factors
      including, without limitation, technical, legal, scientific or medical
      factors.

     

    1.5
       “Confidential
      Information”
shall
      mean, with respect to a party, all information of any kind whatsoever (including
      without limitation, data, compilations, formulae, models, patent disclosures,
      procedures, processes, projections, protocols, results of experimentation and
      testing, specifications, strategies and techniques), and all tangible and
      intangible embodiments thereof of any kind whatsoever (including without
      limitation, apparatus, compositions, documents, drawings, machinery, patent
      applications, records and reports), which is disclosed by such party to the
      other party and is marked, identified as or otherwise acknowledged to be
      confidential at the time of disclosure to the other party, including all Product
      Details and this Agreement. Notwithstanding the foregoing, Confidential
      Information of a party shall not include information which the other party
      can
      establish by written documentation (a) to have been publicly known prior to
      disclosure of such information by the disclosing party to the other party,
      (b)
      to have become publicly known, without fault on the part of the other party,
      subsequent to disclosure of such information by the disclosing party to the
      other party, (c) to have been received by the other party at any time from
      a
      source, other than the disclosing party, rightfully having possession of and
      the
      right to disclose such information, (d) to have been otherwise known by the
      other party prior to disclosure of such information by the disclosing party
      to
      the other party, or (e) to have been independently developed by employees or
      agents of the other party without the use of such information disclosed by
      the
      disclosing party to the other party.

     

    1.6
       “Direct
      Labor and Benefits”
      shall
      mean that portion of basic wages, labor and related payroll taxes and employee
      benefits spent in actual production of a Product which can be identified with
      or
      charged to a Product.

     

    1.7
       “FDA”
shall
      mean the United States Food and Drug Administration, and any successor agency
      thereto.

     

    1.8
       “GMP”
shall
      mean current Good Manufacturing Practices promulgated by the
      FDA.

     

    1.9
       “Labeling”
shall
      mean all labels and other written, electronic, printed or graphic matter upon
      (i) a Product or any container or wrapper utilized with a Product, or (ii)
      any
      written material accompanying a Product, including, without limitation, package
      inserts.

     

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    1.10
       “Liquids
      Pro Rata Share”
      shall
      mean, with respect to a Party, such Party’s portion contributed to the Liquids
      Set Aside Amount in proportion to the other Party.

     

    1.11  “Liquids
      Set Aside Amount”
      shall
      mean an amount of money equal to: (i) the Initial Payment, (ii) the Second
      Payment, (iii) the Third Payment, (iv) the Fourth Payment and (v) all Research
      and Development Costs.

     

    1.12
       “Losses”
shall
      mean any liabilities, damages, costs or expenses, including reasonable
      attorney's fees, incurred by either party which arise from any claim, lawsuit
      or
      other action by a third party.

     

    1.13 “Manufacturing
      Costs”
      shall
      mean, with respect to a Product, raw material costs, Product components and
      the
      actual cost of manufacturing a Product, including the cost of Direct Labor
      and
      Benefits, and Manufacturing Overhead, all determined in accordance with U.S.
      Generally Accepted Accounting Principles.
      Upon Interpharm’s prior written approval which shall not be unreasonably
      withheld, Manufacturing Costs shall include, to the extent applicable, the
      cost
      to Tris of having some portion of the manufacturing process (e.g., particle
      size
      reduction of API), performed by a third party.

     

    1.14
       “Manufacturing
      Overhead”
      shall
      include a pro-rata portion of all operating expenses incurred by and in support
      of the particular manufacturing cost centers, purchasing department and quality
      assurance operations, with respect to a Product, including indirect labor,
      related payroll taxes, employee benefits, depreciation, taxes, insurance, rent,
      repairs and maintenance, supplies, utilities, and factory administrative
      expenses. The
      pro-rata portion of operating expenses shall be determined by taking the total
      output of Products during the applicable period divided by Tris’ manufacturing
      capacity and multiplying the result by the total amount of liquid products
      manufacturing overhead for the applicable period. Manufacturing Overhead shall
      exclude selling, general and administrative, research and development, and,
      interest expenses and all debt service payments of Tris (other than interest
      expenses and debt service payments which are related to manufacturing which
      may
      be included in Manufacturing Overhead).

     

    1.15
       “Net
      Profits”
      shall
      mean the gross invoice sales of Product to third parties, less the following
      deductions: 

     

    1.15.1
       any
      statutory or contractual liability for rebates to be paid to any government
      entity, including but not limited to, rebates to be paid pursuant to Medicaid
      rebate legislation and state and local government rebate programs;

     

    1.15.2
       cash
      discounts;

     

    1.15.3
       any
      adjustments for allowances or credits for returned Product, damaged Product,
      commercial rebates, promotional allowances given in lieu of price adjustments,
      chargebacks, shelf stock adjustments, trade discounts or any similar and then
      customary discounts, credits or adjustments, whether or not such commercial
      rebates, or trade discounts are paid directly to the customer;

     

    1.15.4
        actual
      freight, shipping and insurance costs incurred by Interpharm;

     

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    1.15.5
       actual
      bad debts; 

     

    1.15.6
       all
      costs
      incurred as the result of any recall, field correction, market withdrawal,
      stock
      recovery, or other similar action with respect to any Product that is not
      recovered through insurance or other third-party claim;

     

    1.15.7
       all
      Manufacturing Costs incurred by Tris; and

     

    1.15.8
       all
      costs
      incurred for Packaging and Labeling.

     

    Sales
      or
      transfers of Products to affiliates for ultimate use or resale by such persons
      shall be at prices (or deemed prices) that are consistent with sales made to
      non-affiliates of the same or a similar business type that make purchases in
      similar quantities. Similarly, any discounts, adjustments, rebates and
      allowances given to customers who are affiliates shall be consistent with such
      adjustments or allowances given to customers who are non-affiliates and are
      in
      the same or similar business and make purchases in similar quantities. In
      addition, if Interpharm enters into an agreement with a third party pursuant
      to
      which Interpharm agrees not to market a Product and, in consideration of that
      agreement, Interpharm receives rights to one or more other products or other
      monetary or non-monetary consideration, the revenues received by Interpharm
      from
      the sales of such other products and the fair market value of any other
      consideration shall be included in Interpharm’s Net Profits
      hereunder.

     

    1.16
       “Packaging”
shall
      mean all primary containers, including blisters, cartons, shipping cases or
      any
      other like matter used in packaging or accompanying a Product, including
      electronic files.

     

    1.17.   
      “Products”
shall
      mean the pharmaceutical immediate release liquid products developed,
      manufactured and sold pursuant to this Agreement which are listed on Exhibit
      A
      hereto. 

     

    1.18.    “Product
      Details”
shall
      mean all properties, specifications and formulations relating to a Product,
      including specifications and formulations of the API, and all properties,
      specifications, formulations and manufacturing processes for the finished
      product necessary for Tris to manufacture and Interpharm to file a complete
      and
      approvable ANDA with the FDA. Product Details shall also include such advice
      and
      counseling regarding information provided by Tris as may be reasonably required
      by Interpharm. 

     

    1.19
       “Replacement
      Products”
      shall
      mean the Products that are listed on Exhibit B by Interpharm from time to time,
      and as may be amended from time to time.

     

    1.20
       “Research
      and Development Costs”
shall
      mean biostudy costs, raw materials and all other costs incurred in connection
      with the research and development of the Products.

     

    1.21. “Territory” shall
      mean the United States of America and its territories and
      possessions.

     

     

    
      
         

      

      
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    ARTICLE
      II

    

    COOPERATION
      

     

    2.1.  Termination
      of the Prior Agreement.
       The
      Parties hereby agree that upon execution of this Agreement, the Prior Agreement
      shall be terminated and of no further force or effect, with neither Party having
      any further obligations thereunder. The Parties further agree to release and
      discharge each other from any and all liabilities, claims, actions, causes
      of
      action, suits, debts, sums of money, accounts and demands whatsoever, in law
      or
      equity, which either Party may have against the other, at any time, arising
      from
      the Prior Agreement.

     

    2.2
       Cooperation.
       Upon
      and
      subject to the terms and conditions of this Agreement, Interpharm and Tris
      shall
      cooperate with respect to researching, developing, manufacturing and marketing
      of up to fourteen (14) Products listed on Exhibit A hereto. Tris hereby agrees
      that the development of each Product shall be completed such that Tris shall
      have taken all steps necessary for Interpharm to file an ANDA for each Product.
      

     

    2.3
       Tris’
      Exclusivity Obligation. Tris
      shall not cooperate with any other person or entity with respect to the
      research, development, manufacture, supply or distribution of a Product
in
      the Territory without
      the prior written consent of Interpharm during the term of this Agreement.
      For
      the avoidance of doubt, Tris may not provide Product Details for a Product
      to,
      or manufacture any Product for, any person or entity outside the Territory
      if
      such person or entity intends to, or will sell Products in the Territory. Tris
      shall take Commercially Reasonable steps to ensure that other parties do not
      sell Products in the Territory, including, but not limited to, requiring such
      other parties to agree not to do so and taking Commercially Reasonable actions
      to enforce such agreements. In the event that Products or Product Details are
      sold in the Territory in contravention of this Agreement, Tris hereby agrees
      that it shall pay over to Interpharm the greater of all profits earned with
      respect to such Products and Product Details or the amount of Interpharm’s lost
      profits as determined by the amount of Products sold in contravention of this
      Section.

     

    2.4 Interpharm’s
      Exclusivity Obligation.

     

    2.4.1
       Interpharm
      hereby covenants not to in-license, market, sell, distribute or have marketed,
      have sold or have distributed any Competitive Product in the Territory during
      the Term. Notwithstanding the foregoing, if Interpharm or an Interpharm
      Affiliate acquires an entity or all or substantially all of the assets of an
      entity and such assets include, a Competitive Product, Interpharm shall use
      its
      Commercially Reasonable efforts to divest itself of such Competitive Product
      within one-hundred and twenty (120) days of the closing of such acquisition
      (subject to any binding commitments to customers), if such Competitive Product
      is not being sold commercially at such time. If, however, any sales of a
      Competitive Product are made, Tris shall be entitled to payment by Interpharm
      of
      the total Net Profits (determined on the same basis under this Agreement as
      in
      the case of the sale of the Product to which the Competitive Product relates)
      from the sales of such Competitive Product. For purposes hereof, a "Competitive
      Product"
      means,
      with respect to any Product, the generic AB rated product equivalent to the
      branded Product listed in Exhibit A.

     

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    2.4.2  
      Interpharm
      hereby
      covenants that it will not, without the prior written authorization of Tris,
      utilize the Product Details delivered hereunder to: (i) promote or actively
      solicit sale of a Product or advertise a Product, outside of the Territory;
      (ii) purchase or cause to be purchased a Product which Interpharm has
      represented, directly or indirectly, as being for the purpose of sale in the
      Territory for sale in any other country outside the Territory; or (iii)
      knowingly sell or distribute for resale a Product purchased hereunder to a
      third
      party who intends to sell outside of the Territory.

     

    2.5. The
      Parties’ Responsibilities.

     

    2.5.1
       Interpharm’s
      Responsibilities.
       Interpharm
      shall be responsible for:

     

    2.5.1.1  Making
      the following payments to Tris. In the event that Interpharm fails to make
      any
      of the following payments, Tris’ sole remedy shall be the commencement of an
      arbitration in accordance with Section 8.2:

     

    2.5.1.1.1
       
      An
      initial payment of $250,000 to Tris, which has already been paid by Interpharm
      and which Tris hereby acknowledges receiving from Interpharm as of the date
      hereof (the “Initial Payment”);

     

    2.5.1.1.2
       $500,000
      to Tris upon execution of this Agreement;

     

    2.5.1.1.3
       [Intentionally
      left blank.]

     

    2.5.1.1.4
       $250,000
      to Tris by December 15, 2006 (the “Fourth Payment”); 

     

    2.5.1.1.5
       payment
      for all Research and Development Costs on net 45 terms; 

     

    2.5.1.1.6
       payment
      for all Packaging and Labeling, on net 45 terms, to the extent not provided
      by
      Interpharm pursuant to Section 2.4.1.7 below; 

     

    2.5.1.1.7
       payment
      for all raw materials and product components necessary to manufacture the
      Products, on net 45 terms, to the extent not otherwise provided by Interpharm
      pursuant to Sections 2.5.1.1.6, 2.5.1.2 or 2.5.1.6 hereof; 

     

    2.5.1.1.8
       payment
      of all Tris Manufacturing Costs on net 45 terms; and

     

    2.5.1.1.9
       conducting
      all biostudies for the Products as necessary to obtain FDA marketing approval
      in
      the territory.

     

    2.5.1.2
       Selecting
      the API suppliers (including auditing them) and providing to Tris and paying
      for
      the APIs necessary to manufacture the Products, and, to the extent available,
      related substances, impurities and technical packages/dossiers of the Products
      (the “Product Information”), and testing of samples for microbial contamination
      during development. In the event that the Product Information is not available,
      Tris may elect not to proceed with the specified Product under this Agreement
      by
      giving notice to Interpharm in writing. Upon receipt of written notice from
      Tris, Interpharm
      shall have the right (i) not to continue with said Product, thereby reducing
      the
      number of Products in Exhibit A by one (1) or (ii) to select a Replacement
      Product pursuant to the provisions of Section 2.5.3, including Section
      2.5.3.1.
      Should Interpharm elect to reduce the number of Products pursuant to clause
      (i)
      of this Section 2.5.1.2, it
      shall
      have the right to recover the “Penalty” (as defined in Section 2.5.3.1 below).
      Any such recovery will be applied against future payments owed to Tris, whether
      pursuant to Section 2.5.1.1 or Section 3.1, as designated by Interpharm, in
      its
      sole discretion.

     

     

    
      
         

      

      
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    2.5.1.3
       Supplying
      to Tris samples of the branded, and if generic versions of the branded Product
      are sold commercially, samples of the generic versions of the Products which
      Tris is requested to develop.   

                    2.5.1.4
 obtaining
      approval of,
      and
      maintenance of, any ANDAs for a Product and
      if required by FDA.
      If any
      other federal or foreign government or regulatory submissions or agreements
      are
      required to manufacture a Product in accordance with the ANDAs, Interpharm
      shall
      be responsible for completing such submissions and for payment of associated
      fees;

     

    2.5.1.5
       Commercialization
      of the Products and payment of all related costs (“Marketing
      Costs”);

     

    2.5.1.6
       performing
      an analysis of all Products to determine whether a Product will infringe on
      the
      intellectual property of another party (an “IP Analysis”). Interpharm shall
      perform an IP Analysis within sixty (60) days of receipt from Tris of the
      Product Details for a Product. In the event that Interpharm believes within
      the
      sixty (60) day period that a Product, as formulated in the Product Details,
      infringes the intellectual property of another party, it shall provide written
      notice to Tris. Tris shall thereupon advise Interpharm as to whether it agrees
      with Interpharm’s position. If (i) Tris does agree with Interpharm, or (ii) if
      it does not, but Interpharm, acting in good faith, remains convinced, after
      hearing Tris’ arguments, that the Product infringes, the parties shall meet in
      good faith to decide on a course of action. In the event that the parties are
      unable to agree on a reformulation plan for the Product so as not to infringe
      on
      the intellectual property of another party, Interpharm shall select a
      Replacement Product with the consent of Tris, such consent not to be
      unreasonably withheld. In the event that Interpharm selects a Replacement
      Product, all rights to the original Product shall revert exclusively to Tris;
      and

     

    2.5.1.7
       providing
      Tris, beginning 180 days after the filing date of each Product ANDA, twelve
      month sales forecasts for such Product (the “Forecasts”). Interpharm shall have
      the right, at any time, to amend the Forecasts in good faith based upon changes
      in market conditions for a Product. The Parties agree to negotiate and finalize
      a comprehensive manufacturing and supply agreement for the Products within
      six
      months from the effective date of this Agreement. 

     

     

    
      
         

      

      
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    2.5.2
       Tris’s
      Responsibilities.
       Tris
      shall be responsible for:

     

    2.5.2.1
       providing
      Product Details for the Products, as well as conduct stability testing and
      take
      all steps necessary for Interpharm to file for an ANDA for each Product.

     

    2.5.2.2
       the
      manufacturing and supply of each Product in the event that an ANDA for a Product
      is necessary and is obtained. Specifically, Tris shall manufacture, fill,
      package, label and warehouse each Product in conformity with GMP, the ANDA
      and
      all applicable laws and regulations;

     

    2.5.2.3
       providing
      any and all Product Details to Interpharm in the form that may be necessary
      or
      required to manufacture a Product, market a Product, obtain an ANDA for a
      Product, if an ANDA is necessary, for any step necessary in obtaining an ANDA
      and as may be reasonably requested by Interpharm; 

     

    2.5.2.4
       conducting
      any
      studies (other than the biostudies) required to support an ANDA for a Product
      or
      to reply to a deficiency letter from the FDA with respect to a Product,
      including, but not limited to, stability and microbial testing; and

     

    2.5.2.5
       obtaining
      all equipment necessary to manufacture the Products, and having such equipment
      validated, prior to completion of development of the first Product listed on
      Exhibit A.

     

    2.5.2.6 within
      5
      business days after each shipment of Product, provide Interpharm with a
      statement of its standard manufacturing costs for the Product (“SMC Statement”).
“SMC Statement” shall mean Tris’ good faith estimate of the Manufacturing Costs
      for a specific shipment of Product.

     

    2.5.2.7 within
      45
      days after the end of each calendar quarter, provide Interpharm with a true
      and
      accurate statement of its manufacturing costs for the Product (“TMC Statement”).
“TMC Statement” shall mean Tris’ actual Manufacturing Costs for a specific
      shipment of Product. 

     

    2.5.3
       Replacement
      Products.
       
      With the
      written consent of Tris, such consent not to be unreasonably withheld,
      Interpharm may substitute one of the Replacement Products for any Products
      listed on Exhibit A at any time prior to Tris commencing formulation for a
      Product listed on Exhibit A; provided, that Interpharm shall only have a right
      of substitution in the event that one of the following occurs: (1) Tris confirms
      that it is unable to deliver a formulation for such Product; (2) the
      commencement of such formulation is delayed; or (3) Interpharm has the right
      to
      select a Replacement Product pursuant to Section 2.5.1.7 above.

     

    2.5.3.1 In
      the
      event that Interpharm has the right to request a Replacement Product for a
      Product pursuant to Section 2.5.3 above and Tris withholds consent for more
      than
      two (2) Replacement Products for such Product, Interpharm shall have the right
      not to continue with said Product, thereby reducing the number of Products
      referred to in Section 2.1 by one (1). In the event that Interpharm exercises
      its rights under this Section 2.5.3, it shall have the right to recover any
      amounts paid to Tris under Section 2.4.1.1.4 above, and a pro rata portion
      of
      any payment made to Tris under Section 2.4.1.1.1, 2.4.1.1.2 or Section 2.4.1.1.3
      above (the “Penalty”). Any such recovery will be applied against future payments
      owed to Tris, whether pursuant to Section 2.4.1.1 or Section 3.1, as designated
      by Interpharm, in its sole discretion.

     

     

    
      
         

      

      
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    2.6
       Tris
      License.
       Tris
      shall not, at any time during the term of this Agreement, manufacture or sell
      any Product under License unless, on a product-by-product basis, Interpharm
      (i)
      fails to commercially launch a Product within 12 months of FDA approval and
      such
      decision to delay the launch of the Product is not the result of (a) an
      outstanding infringement claim involving the Product or (b) Tris’ inability to
      manufacture the Product; or (ii) fifteen months after FDA approval of a Product,
      Interpharm’s market share of that Product is less than 35% of the market share
      forecast in the initial Forecast under term 2.5.1.7. In the event that Tris
      wishes to manufacture and/or sell any Product pursuant to this Section 2.6(i)
      or
      (ii), it shall first provide Interpharm with at least 90 days prior written
      notice (a “Tris Manufacturing Notice”). For the sake of clarity, the Tris
      Manufacturing Notice may not be submitted to Interpharm earlier than 90 days
      prior to the 12 month or 15 month time point respectively provided in terms
      2.6(i) and (ii). “License” shall mean Tris’ limited right to manufacture and/or
      sell Product under Interpharm’s ANDA which right shall only be triggered under
      the conditions set forth in this Section 2.6. 

     

    ARTICLE
      III

     

    PROFIT
      SHARING, EXPENSE RECOVERY, SET ASIDE AND BREACH

     

          3.1. Profit
      Sharing.
       

     

            3 .1.1
 Sales
      by Interpharm.
      Upon
      the commencement of Interpharm’s sale of each Product, under this Agreement, 10%
      of Net Profits shall be set aside to be distributed to the Parties (the “Liquids
      Set Aside”), to satisfy each Party’s Liquids Pro Rata Share of the Liquids Set
      Aside Amount, pursuant to Section 3.1.3.1 of the Solids Agreement, as amended.
      Tris shall be entitled to receive 40% of the remaining Net Profits after the
      Liquids Set Aside (the “Tris Payment”). Within twenty (20) business days of the
      end of each month, Interpharm shall provide to Tris a calculation of the Tris
      Payment based on monies actually collected and received by it (the “Tris Net
      Profit Statement”) along with payment in the amount of the Tris Payment. In
      order for Interpharm to calculate the Tris Payment, Tris must provide to
      Interpharm, no more than five (5) business days after each shipment of Product
      to Interpharm, its SMC Statement for the shipment of Product. In the event
      that
      Interpharm fails to deliver a Tris Net Profit Statement for any month, which
      is
      not the result of Tris’ failure to provide its SMC Statement, Tris shall provide
      a written notice of such non-delivery to Interpharm after which it shall have
      an
      additional five (5) business day to provide the Tris Net Profit Statement.
      During each following calendar quarter, Interpharm and Tris shall reconcile
      the
      SMC Statements against the TMC Statements for the preceding quarter and shall
      accordingly adjust the Net Profits due to each Party within 90 days from the
      end
      of the preceding quarter. With respect to any breaches or disputes that arise
      pursuant to this Section, Tris’ sole remedy shall be the commencement of
      arbitration pursuant to Section 8.2.

     

            3.1.2
 Sales
      by Tris.
       In
      the
      event that Tris begins sales of a Product pursuant to a Tris Manufacturing
      Notice, Interpharm shall be entitled to receive its share of the Liquids Set
      Aside, plus 40% of the remaining Net Profits after the Liquids Set Aside (the
      “Interpharm Payment”). Within twenty (20) business days of the end of each
      month, Tris shall provide to Interpharm a calculation of the Interpharm Payment
      based on monies actually collected and received by it (the “Interpharm Net
      Profit Statement”) along with payment in the amount of the Interpharm Payment.
      In the event that Tris fails to deliver an Interpharm Net Profit Statement
      for
      any month, Interpharm shall provide a written notice of such non-delivery to
      Tris after which it shall have an additional five (5) business day to provide
      the Interpharm Net Profit Statement. 

     

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    

    ARTICLE
      IV

     

    FURTHER
      OBLIGATIONS OF THE PARTIES

     

    4.1.  Regulatory
      File Maintenance.
      Interpharm shall be solely responsible for maintaining the ANDA and all other
      applicable FDA approvals and registrations to permit the sale of
      Product.

     

    4.2.  Facility
      Qualification.
      Tris
      shall take all Commercially Reasonable actions to qualify (and thereafter to
      maintain qualification of) the facility (or facilities) at which Tris will
      manufacture Products hereunder, as required under applicable law.

     

    4.3.   Adverse
      Reactions; Recall.
      In
      the
      event Interpharm believes it may be necessary to conduct a recall, field
      correction, market withdrawal, stock recovery, or other similar action with
      respect to a Product (a “Recall”), Interpharm shall have sole discretion to make
      all decisions with respect to such events. To the extent
      the
      Recall arises
      solely from Interpharm acts or omissions in the, marketing, distribution,
      storage or handling of such Product, the cost of goods sold, distribution
      expenses and third-party recall expenses (collectively, "Recall Costs") shall
      be
      borne by Interpharm.
      To the extent the
      recall arises solely from the manufacture of Product or Tris’ breach of this
      Agreement, the Recall Costs shall be borne by Tris. In the event the Recall
      is
      not the fault
      of either
      party the
      Recall Costs shall be borne
      by the parties
      equally.

     

    4.4
       Audit
      Rights.

     

    4.4.1  Tris
      Audit Rights.
      Tris
      shall have the right at any time and from time to time to nominate a firm of
      independent certified public accountants to have access to the financial records
      of Interpharm relating to Products to verify, at Tris’ expense, Net Profits. In
      the event that the auditing accountant finds that Interpharm’s calculation of
      Net Profits, varies from the actual amounts by more than five percent (5%),
      Tris
      shall provide Interpharm with notice of the variance. Interpharm shall have
      thirty (30) days from the receipt of such notice to analyze the variance. At
      the
      conclusion of the thirty (30) day period, Interpharm shall either (i) pay the
      cost of that audit and any monies owed as a result of the variance with interest
      at five percent (5%) per annum on such amount for the period of time that the
      variance existed or (ii) provide Tris written notice of any disagreement with
      Tris’ position (the “Interpharm Notice”). In the event that Tris disagrees with
      the Interpharm Notice, then
      Tris’s sole remedy shall be commencement of an arbitration in accordance with
      Section 8.2. 

     

    4.4.2
       Interpharm
      Audit Rights.
       Interpharm
      shall have the right at any time and from time to time to nominate a firm of
      independent certified public accountants to have access to the financial records
      of Tris relating to Products to verify, at Interpharm’s expense, Manufacturing
      Costs. In the event that the auditing accountant finds that Tris’ calculation of
      Manufacturing Costs, varies from the actual amounts by more than five percent
      (5%), Interpharm shall provide Tris with notice of the variance. Tris shall
      have
      thirty (30) days from the receipt of such notice to analyze the variance. At
      the
      conclusion of the thirty (30) day period, Tris shall either (i) pay the cost
      of
      that audit and any monies owed as a result of the variance with interest at
      five
      percent (5%) per annum on such amount for the period of time that the variance
      existed or (ii) provide Interpharm written notice of any disagreement with
      Interpharm’s position (the “Tris Notice”). In the event that Interpharm
      disagrees with the Tris Notice, then
      Interpharm’s sole remedy shall be commencement of an arbitration in accordance
      with Section 8.2. 

     

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    

     

    ARTICLE
      V

     

    REPRESENTATIONS,
      WARRANTIES AND COVENANTS

     

    5.1. Representations
      and Warranties by each Party.
      Each
      Party hereby represents and warrants to the other party as follows:

     

    5.1.1 Corporate
      Existence.
      Such
      Party is a corporation duly organized, validly existing and in good standing
      under the laws of the jurisdiction in which it is incorporated.

     

    5.1.2
       Authorization
      and Enforcement of Obligations.
      Such
      party (a) has the corporate power and authority and the legal right to enter
      into this Agreement and to perform its obligations hereunder, and (b) has taken
      all necessary corporate action on its part to authorize the execution and
      delivery of this Agreement and the performance of its obligations hereunder.
      This Agreement has been duly executed and delivered on behalf of such party,
      and
      constitutes a legal, valid, binding obligation, enforceable against such party
      in accordance with its terms.

     

    5.1.3
       No
      Conflict.
      The
      execution and delivery of this Agreement and the performance of such party’s
      obligations hereunder (a) do not conflict with or violate any requirement of
      applicable laws or regulations, and (b) do not conflict with, or constitute
      a
      default under, any material contractual obligation of such party.

     

        5.2
       Additional
      Representations, Warranties and Covenants by Tris.
       Tris
      hereby represents, warrants and agrees with Interpharm that all Product Details
      provided to, and to be provided to Interpharm, are and will be true and accurate
      in all respects and will include use of only pharmaceutically accepted products
      listed in the IIG Guide or GRAS (Generally Recognized as Safe)
      products.

     

    ARTICLE
      VI 

     

    OTHER
      AGREEMENTS

     

    6.1. 
      Ownership
      of Intellectual Property Rights other than ANDAs.
      Tris
      hereby grants to Interpharm a royalty free and fully paid up license to use
      all
      technology, discoveries, patent applications, patents, know-how and inventions
      relating to a Product or any Product Details for a Product in the Territory
      (the
“Interpharm License”). Interpharm may use or exploit the Interpharm License for
      any purpose whatsoever in the Territory.

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    6.2
       Ownership
      of ANDAs.
       Tris
      hereby agrees that Interpharm shall have all ownership rights with respect
      to
      all Product ANDAs.

     

    ARTICLE
      VII

     

    CONFIDENTIALITY
      AND PUBLIC DISCLOSURE

     

    7.1. 
      Confidentiality.
      Except
      for literature and information intended for disclosure to customers, and except
      as may be required to obtain government approval to manufacture, sell or use
      a
      Product, or as may be required under applicable federal securities laws, each
      Party will treat as confidential the Confidential Information, and will take
      all
      necessary precautions to assure the confidentiality of such information. Each
      party agrees to return to the other party upon the expiration or termination
      of
      this Agreement all Confidential Information acquired from such other party,
      except as to such information it may be required to retain under applicable
      law
      or regulation, and except for one copy of such information to be retained by
      such party’s legal department or outside counsel. Neither Party shall, during
      the period of this Agreement or for five (5) years thereafter, without the
      other
      party’s express prior written consent use or disclose any such Confidential
      Information for any purpose other than to carry out its obligations hereunder.
      Each Party, prior to disclosure of such Confidential Information to any
      employee, consultant or advisor shall ensure that such person is bound in
      writing to observe the confidentiality provisions of this Agreement. The
      obligations of confidentiality shall not apply to information that the receiving
      party is required by law or regulation to disclose, provided however that the
      receiving party shall so notify the disclosing party of its intent and cooperate
      with the disclosing party on reasonable measures to protect the confidentiality
      of the information.

     

    7.2.  Public
      Disclosure.
      Except
      for such disclosure as is deemed necessary, in the reasonable judgment of a
      Party, to comply with applicable laws, no announcement, news release, public
      statement, publication, or presentation relating to the existence of this
      Agreement, the subject matter hereof, or either Party’s performance hereunder
      will be made without the other Party’s prior written approval, which approval
      shall not be unreasonably withheld. The Parties agree that they will use
      reasonable efforts to coordinate the initial announcement or press release
      relating to the existence of this Agreement so that such initial announcement
      or
      press release by each is made contemporaneously.

     

    ARTICLE
      VIII 

     

    TERM;
      ARBITRATION OF CERTAIN DISPUTES

     

    8.1
       Term.
      Unless
      sooner terminated as provided in this Agreement, in the event that Interpharm
      obtains an ANDA for any Products, the term of this Agreement shall be for the
      same term that the last remaining ANDA for a Product that is valid and in
      effect. 

     

    8.2
       Arbitration
      Procedure.
       The
      Parties hereby agree that only Sections 2.4.1.1, 3.1 and 4.4 of this Agreement
      shall be subject to arbitration. Any arbitration shall be conducted in
      accordance with the following provisions:

     

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

    8.2.1
       Any
      Party
      seeking to commence an arbitration hereunder shall send a written notice
      providing the facts underlying the potential arbitration to the other Party.
      The
      Parties shall then make a good faith effort to settle the dispute. In the event
      that the dispute is not settled within thirty (30) days of delivery of the
      notice, the Party that delivered the notice may commence an arbitration
      hereunder;

    

    8.2.2
       Arbitrations
      shall be conducted in accordance with the Commercial Rules of the American
      Arbitration Association (“AAA”) by three arbitrators at a AAA facility in New
      York City;

    

    8.2.3
       The
      costs
      of the arbitration and of the Parties in conducted the arbitration, including
      reasonable attorneys’ fees, shall be borne by the losing Party;

    

    8.2.4
       Upon
      and
      after the submission of any dispute to arbitration, the Parties shall continue
      to exercise their remaining respective rights, and fulfill their remaining
      respective obligations under this Agreement;

    

    8.2.5
       Any
      arbitration award rendered in accordance with the provisions of this Section
      8.2
      shall be final and binding upon the concerned Parties, and the Parties further
      agree that such award may be enforced by any court having jurisdiction over
      the
      Party against which the award has been rendered or the assets of such Party
      wherever the same may be located. The arbitrators shall be instructed that
      any
      such arbitration shall be completed and an arbitration award issued within
      three
      (3) months following the commencement thereof.

    

    8.2.6
       Liquidated
      Damages.
       In
      the
      event that Interpharm fails to pay a final arbitration award in favor of Tris
      within thirty (30) days of the rendering of the final award, Interpharm shall
      pay to Tris liquidated damages of $20,000 in addition to the award. The Parties
      acknowledge and agree that the sums payable hereunder are liquidated damages
      and
      not penalties. The parties further acknowledge that (i) the amount of loss
      or
      damages likely to be incurred by Tris is incapable or is difficult to precisely
      estimate, (ii) the amounts specified bear a reasonable proportion and are not
      plainly or grossly disproportionate to the probable loss likely to be incurred
      by Tris in the event that a final arbitration award is not paid promptly, and
      (iii) the Parties are sophisticated business parties and have been represented
      by sophisticated and able legal counsel and negotiated this Agreement at arm’s
      length.

     

        8.3 Termination
      by Either Party for Cause.   This
      Agreement may be terminated prior to the expiration of the Term by either Party
      if the other Party is subject to a Chapter 7 or other liquidation bankruptcy,
      dissolution or winding-up of operations (other than dissolution or winding
      up
      for the purposes or reconstruction or amalgamation)

     

          
      8.4 
      Effect
      of Termination. 

     

    8.4.1 
      Upon
      termination of the Agreement by Tris with respect to a particular Product,
      the
      following shall occur:

     

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    8.4.1.1
       All
      rights and licenses granted to Interpharm for such particular Product shall
      terminate immediately;

     

    8.4.1.2
       Interpharm
      shall have no further rights hereunder in the particular Product, and the ANDA
      for such Product shall revert and be transferred to Tris, subject to
      Interpharm's option to sell off existing inventory of such particular Product
      for two (2) years after the termination date;

     

    8.4.2 
      Upon
      termination of the Agreement by Interpharm, the following shall
      occur:

     

    8.4.2.1
       All
      future payment obligations to Tris shall terminate immediately, other than
      the
      obligation to pay any amounts that were due and owing prior to the date of
      termination; 

     

    8.4.2.2
       Interpharm
      shall have the unrestricted right to manufacture and sell the Products in or
      outside of the Territory on a royalty-free basis.

     

    8.4.3
      Expiration or termination of this Agreement shall not relieve the Parties of
      any
      obligation, including any payment obligation, accruing prior to such expiration
      or termination. .

     

    8.4.4
      Within thirty (30) days following the expiration or termination of this
      Agreement, the non-terminating Party shall return to the other Party, or
      destroy, upon the written request of the other Party, any and all Confidential
      Information of the other Party in its possession and upon a Party's request,
      such destruction (or delivery) shall be confirmed in writing to such Party
      by a
      responsible officer of the other Party.

    

     

    ARTICLE
      IX 

     

    INDEMNIFICATION

     

    	9.1  	
            Indemnification.
              

          

     

    9.1.1
       Tris
      Indemnification.
      Tris
      agrees to indemnify, defend and hold Interpharm harmless from and against any
      Losses resulting from or arising out of the execution by Tris of this Agreement,
      the performance or breach by Tris of its representations, warranties, covenants
      or obligations under this Agreement, failure by Tris to take any action required
      to be taken by it (and not by Interpharm) hereunder, at law or otherwise, its
      manufacturing, storage, handling, packaging or labeling of a Product., or its
      negligence or willful misconduct in the performance of its obligations
      hereunder. In the event that Tris markets or sells any Product pursuant to
      Section 2.6, Tris shall further indemnify, defend and hold Interpharm harmless
      from and against any Losses resulting from or arising out of Tris’ sale,
      marketing or commercialization of any Product. 

     

    9.1.2
       Interpharm
      Indemnification.
      Interpharm agrees to indemnify, defend and hold Tris harmless from and against
      any Losses resulting from or arising out of (i) Interpharm’s breach of its
      representations, warranties, covenants or obligations under this Agreement,
      (ii)
      any act of Interpharm or failure by Interpharm to take any action required
      to be
      taken by it (and not by Tris) hereunder, at law or otherwise, (iii) infringement
      on the intellectual property of a third party, or, subject to Tris’s performance
      of Section 5.2, (iv) any injuries caused by (a) the marketing or distribution
      of
      a Product, or (b) the failure to warn of the risks associated with a
      Product.

     

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    9.1.3
       Indemnification
      Procedure.
      A Party
      seeking indemnification (“Indemnified Party”) shall notify, in writing, the
      other party (“Indemnifying Party”) within fifteen (15) days from the assertion
      of any claim or discovery of any fact upon which the Indemnified Party intends
      to base a claim for indemnification. An Indemnified Party's failure to so notify
      the Indemnifying Party shall not, however, relieve such Indemnifying Party
      from
      any liability under this Agreement to the Indemnified Party with respect to
      such
      claim except to the extent that such Indemnifying Party is actually denied,
      during the period of delay in notice, the opportunity to remedy or otherwise
      mitigate the event or activity(ies) giving rise to the claim for indemnification
      and thereby suffers or otherwise incurs additional liquidated or other readily
      quantifiable damages as a result of such failure. The Indemnifying Party, while
      reserving the right to contest its obligations to indemnify hereunder, shall
      be
      responsible for the defense of any claim, demand, lawsuit or other proceeding
      in
      connection with which the Indemnified Party claims indemnification hereunder.
      The Indemnified Party shall have the right at its own expense to participate
      jointly with the Indemnifying Party in the defense of any such claim, demand,
      lawsuit or other proceeding, but with respect to any issue involved in such
      claim, demand, lawsuit or other proceeding with respect to which the
      Indemnifying Party has acknowledged its obligation to indemnify the Indemnified
      party hereunder, the Indemnifying Party shall have the right to select counsel,
      settle, try or otherwise dispose of or handle such claim, demand, lawsuit or
      other proceeding on such terms as the Indemnifying Party shall deem appropriate,
      subject to any reasonable objection of the Indemnified Party. 

     

              9.1.4 Settlements. The
      Indemnifying Party shall not have the right to settle or compromise any claim
      against the Indemnified Party.

     

    ARTICLE
      X

     

    MISCELLANEOUS

     

    10.1. Independent
      Contractor.
      It is
      understood that each Party is acting as an independent contractor for its own
      account and this Agreement does not establish a joint venture, agency,
      partnership or employer/employee relationship between the Parties. Neither
      Party
      shall have authority to conclude contracts or otherwise to act for or bind
      the
      other Party in any manner. 

     

    10.2.
      Notices.
      All
      notices or other communications given pursuant hereto by one party hereto to
      the
      other party shall be in writing and deemed given (a) when delivered by
      messenger, (b) when sent by telecopier, (with receipt confirmed), (c) when
      received by the addressee, if sent by Express Mail, Federal Express or other
      express delivery service (receipt requested), or (d) five days after being
      mailed in the U.S., first-class postage prepaid, registered or certified, in
      each case to the appropriate addresses and telecopier numbers set forth below
      (or to such other addresses and telecopier numbers as a party may designate
      as
      to itself by notice to the other party):

     

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    If
      to
      Tris, to it at:

     

    Tris
      Pharma, Inc. 

    2033
      Route 130, Suite D, Monmouth Junction, NJ 08852

     

    Attention:
      Ketan Mehta

     

    Phone:
      732-940-2800; Fax: 732-940-2855

     

    If
      to
      Interpharm, to it at:

     

    Interpharm,
      Inc.

    75
      Adams
      Avenue

    Hauppauge,
      New York, 11788 

    Attention:
      Kenneth Cappel. Esq.

    Facsimile:
      (631) 952-9587  

    

    with
      a
      copy to:

    

    Guzov
      Ofsink, LLC

    600
      Madison Avenue, 14th
      Floor

    New
      York,
      New York 10022

    Facsimile:
       (212)
      688-7273

     

    10.3. Assignment.
      Neither
      Party shall, without the prior written consent of the other Party having been
      obtained, assign or transfer this Agreement to any person or entity, in whole
      or
      in part, provided that, each Party may assign or transfer this Agreement to
      any
      affiliate or to any successor by merger of such Party, or upon a sale of all
      or
      substantially all of such Parties assets, provided that such assigning Party
      shall remain liable for its obligations hereunder. All of the terms and
      provisions of this Agreement shall be binding upon and inure to the benefit
      of
      and be enforceable by the Parties hereto and their respective successors and
      assigns.

     

    10.4.  Severability.
      If any
      portion of this Agreement is held invalid by a court of competent jurisdiction,
      such portion shall be deemed to be of no force and effect and the Agreement
      shall be construed as if such portion had not been included herein, provided
      however, if the deletion of such provision materially impairs the commercial
      value of this Agreement to either party, the Parties shall attempt to
      renegotiate such provision in good faith.

     

    10.5.  Entire
      Agreement.
      This
      Agreement attached hereto contain the sole and entire agreement and
      understanding of the parties hereto and their respective affiliates and
      representatives related to the subject matter hereof and supersede all oral
      or
      written agreements concerning the subject matter made prior to the date of
      this
      Agreement. 

     

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    10.6.  Amendment;
      Waiver.
      This
      Agreement cannot be amended, changed, modified or supplemented orally, and
      no
      amendment, change, modification or supplement of this Agreement shall be
      recognized nor have any effect, unless the writing in which it is set forth
      is
      signed by Interpharm and Tris, nor shall any waiver of any of the provisions
      of
      this Agreement be effective unless in writing and signed by the party to be
      charged therewith. The failure of either Party to enforce, at any time, or
      for
      any period of time, any provision hereof or the failure of either Party to
      exercise any option herein shall not be construed as a waiver of such provision
      or option and shall in no way affect that party’s right to enforce such
      provision or exercise such option. No waiver of any provision hereof shall
      be
      deemed to be, or shall constitute, a waiver of any other provision, or with
      respect to any succeeding breach of the same provision.

     

    10.7. Governing
      Law.
       This
      Agreement shall be governed by, and construed in accordance with, the laws
      of
      the State of New York, as though made and to be fully performed therein without
      regard to conflicts of laws principles thereof.

     

    10.8. Force
      Majeure.
      

     

    10.8.1
       The
      obligations of the either Party hereunder shall be suspended during the time
      and
      to the extent that such Party is prevented from complying therewith due to
      any
      event or circumstances beyond the control and without the fault or negligence
      of
      that Party so affected (which circumstance is hereinafter referred to as “Force
      Majeure”) including but not limited to accidents, perils of navigation, floods,
      fire, storms, earthquakes, lockouts, explosion, hostilities, war (whether
      declared or undeclared), civil disturbances, order or acts of any government,
      whether de jure or de facto or any official purporting to act under authority
      of
      any such government, illegality arising from domestic or foreign laws or
      regulations, insurrections, quarantine or custom restrictions, strikes,
      lockouts, or other labor difficulty at the parties, or acts of God or other
      similar events beyond the reasonable control of Interpharm or Tris resulting
      in
      hindrance of the performance by either Party of its respective obligations
      hereunder.

     

    10.8.2
       As
      soon
      as possible after being affected by a Force Majeure circumstance, the Party
      so
      affected shall furnish to the other party all particulars of the Force Majeure
      and the manner in which its performance is thereby prevented or delayed. The
      Party whose obligations hereunder have been suspended shall promptly and
      diligently pursue appropriate action to enable it to lift the Force Majeure
      situation, except that party shall not be obligated to settle any strike,
      lockout or other labor difficulty on terms contrary to its wishes. In the event
      that a Force Majeure circumstance is not resolved within ninety (90) days the
      other Party may immediately terminate this Agreement.

     

    10.9.   Singular
      and Plural Forms.
      The use
      herein of the singular form shall also denote the plural form, and the use
      herein of the plural form shall denote the singular form, as in each case the
      context may require.

     

    10.10
        Headings.
      The
      headings contained in this Agreement are for convenience of reference only
      and
      shall not constitute a part hereof or define, limit or otherwise affect the
      meaning of any of the terms or provisions hereof.

     

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    10.11
        Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original, but all of which, when taken together, shall constitute
      one
      and the same instrument.

     

    10.12
       Arbitration.
       Only
      disputes arising under Sections 2.3.1.1, 3.1 and 4.4 of this Agreement shall
      be
      arbitrable. The Parties hereby agree that any other dispute arising under this
      Agreement shall not be submitted for arbitration and shall not be
      arbitrable.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

     

    IN
      WITNESS WHEREOF, the parties have caused this Agreement to be executed by their
      respective duly authorized officers as of the date first above
      written.

     

    
      	 	 	 
	 	INTERPHARM,
              INC. 
	 
 	 
 	 
 
	
            	By:  	 
	 	
              

            
	 	Raj
              Sutaria, COO 

    

     

    
      	 	 	 
	 	TRIS
              PHARMA, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              

            
	 	Ketan
              Mehta, CEO and President 

    

     

     

    
      
         

      

      
        19EXHIBIT 10-39

[Schreiber Logo]

November 3, 2006

David Lipka
19 Oakwood Circle
Roslyn, NY 11576

Dear David:

Please accept the following modifications to the Supply Agreement between Galaxy
Nutritional Foods and Schreiber Foods, Inc., dated June 30, 2005.

Current: The Supply Agreement has a volume penalty clause for volume below a
certain level. The timeframe for the measurement of volume is the second year of
the contract with the opportunity to recover any loss volume in year three
without penalty.

Modification: The timeframe for measurement of volume will be the fifth year of
the Supply Agreement.

Current: The Supply Agreement sets the base level for the volume commitment at
*** pounds. This amount includes blocks to be further processed as well as all
product produced for immediate sale.

Modification: The base level will be reduced by the volume of blocks to be
further processed (*** pounds). Thus, the base level will be set at *** pounds
(*** minus *** pounds).

David, I recognize that there are circumstances which have caused the volume to
be below our respective expectations. I hope that these modifications provide
you relief from the financial burden of this reduced volume. We remain hopeful
that with your new marketing strategy volume can grow to the previously expected
level.

We are committed to the success of Galaxy and to continuing to strengthen the
partnership between Galaxy Nutritional Foods and Schreiber Foods, Inc.

Best regards,

/s/ Ronald J. Dunford

Ronald J. Dunford
President & COO
Schreiber Operations

Acknowledged and agreed to this 9th day of November, 2006

/s/ David H. Lipka
David H. Lipka
Chairman
Galaxy Nutritional Foods, Inc.

***    Indicates material omitted pursuant to a confidential treatment request
       and filed separately with the Securities and Exchange Commission.

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