SETTLEMENT AGREEMENT

Exhibit 10.01

SETTLEMENT AGREEMENT

This Settlement Agreement (the “Agreement”), which is effective as of the date it is fully executed (the “Effective Date”), is made and entered into by and between, on the one hand, General Nutrition Corporation, a Pennsylvania corporation with its principal place of business in Pittsburgh, Pennsylvania (hereinafter referred to as “GNC” as further defined herein), and, on the other hand, Nutrition 21, LLC, a New York limited liability company having its principal place of business in Purchase, New York (hereinafter referred to individually as “Nutrition 21, LLC”), and Nutrition 21, Inc., a New York corporation having its principal place of business in Purchase, New York (hereinafter referred to individually as “Nutrition 21, Inc.”). GNC, Nutrition 21, LLC and Nutrition 21, Inc. are referred to hereinafter collectively as the “Parties.”

Background of Agreement

Nutrition 21, LLC and General Nutrition Corporation are parties to a civil action captioned Nutrition 21, LLC v. General Nutrition Corporation, Civil Action No. 6:05-cv-228, which is pending in the United States District Court for the Eastern District of Texas, Tyler Division (the “Litigation”).

The Parties wish to compromise and settle the Litigation and other possible claims on the terms and conditions stated herein.

The Parties enter into the Agreement in consideration of the mutual covenants and promises set forth herein.

Definitions

In addition to the terms defined elsewhere herein, each of the following terms shall have the meaning set forth below:

“Accused Products” means the products listed on Attachment B hereto and GNC’s Diabetic Support product, a copy of the label for which is attached as Attachment C (hereinafter referred to as “Diabetic Support”).

“Affiliate” means, with respect to each party, any corporation or other legal entity that directly or indirectly controls, is controlled by, or is under common control with, the party, but only for so long as the control continues. For purposes of this definition, “control” means the power, whether or not normally exercised, to direct the management and affairs of another corporation or other legal entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. In the case of a corporation, the direct or indirect ownership of fifty percent (50%) or more of its outstanding voting shares shall in any case be deemed to confer control, provided that the direct or indirect ownership of a lower percentage of such securities shall not necessarily preclude the existence of control.

“Chromium Picolinate” means chromium picolinate, chromium tripicolinate and chromic picolinate.

“Franchisees” means the GNC franchised retail stores of GNC.

“GNC” means General Nutrition Corporation and its Affiliates.

“Licensed Entities” means any corporation, company, partnership or other form of business entity that is licensed by GNC to use the GNC trademark in connection with the sale of nutritional supplements in a designated outlet or area of a store or website, such as, for example, Rite Aid and drugstore.com.

“Multi-ingredient Chromium Picolinate Products” means a product containing chromium as Chromium Picolinate and at least one other active ingredient.

“Nutrition 21” means Nutrition 21, LLC and Nutrition 21, Inc., both individually and collectively.

“Nutrition 21’s Other Patents” means, individually and collectively, (a) all United States patents other than the Patents-in-Suit that are now assigned to or otherwise owned, in whole or in part, by (or subject to a duty of assignment or transfer of ownership in whole or in part to) Nutrition 21, including, but not limited to, those patents listed on Attachment A hereto, and all continuations, continuations-in-part, divisions, reissues and reexamination certificates thereof, and (b) all United States patents hereafter issued or assigned to or otherwise owned, in whole or in part, by Nutrition 21 based on (i) currently pending applications, including, but not limited to, those listed on Attachment A or (ii) future applications claiming priority to any of the patents described in subparagraph (a) hereof, and all continuations, continuations-in-part, divisions, reissues and reexamination certificates thereof.

“Patents-in-Suit” means, individually and collectively, (a) United States Patent No. 5,087,623, United States Patent No. 5,087,624 and United States Patent No. 5,175,156, and all continuations, continuations-in-part, divisions, reissues and reexamination certificates thereof, and (b) all United States patents hereafter issued or assigned to or otherwise owned, in whole or in part, by Nutrition 21 based on currently pending applications or future applications claiming priority to any of such patents, and all continuations, continuations-in-part, divisions, reissues and reexamination certificates thereof.

"Standalone" means a product in which chromium as Chromium Picolinate is the only active ingredient.

Payment by GNC

Within three (3) business days of the delivery to Gardere Wynne Sewell, LLP of a fully executed copy of the Agreement, GNC will pay Nutrition 21, LLC the sum of Two Million Six Hundred Thousand Dollars ($2,600,000.00) by wire transfer.

Purchase of Chromax by GNC

In each of calendar years 2007 and 2008, GNC will purchase from Nutrition 21 a minimum of Thirty Thousand (30,000) bottles of Nutrition 21 brand Chromax® Standalone Chromium Picolinate products at a price of $9.75 per bottle. Unless otherwise agreed by the Parties, the bottles of these products will contain capsules having any or all of the following amounts of chromium as Chromium Picolinate and capsule counts: 200 mcg/90 ct; 400 mcg/75 ct; and, 500 mcg/60 ct. At a minimum, GNC will place orders by January 31, 2007 for delivery of 15,000 bottles. GNC will pay for at least one-half of its 2007 commitment by March 31, 2007 and pay the balance by September 30, 2007. GNC will pay for at least one-half of its 2008 commitment by March 31, 2008 and pay the balance by September 30, 2008.

The Parties will promptly discuss and agree on GNC’s promotional activities to be undertaken in connection with the sale or offer to sell of the Chromax® Standalone-alone Chromium Picolinate products referred to in paragraph 4.1 Patent Licenses, Covenant Not to Sue and Assignment

Nutrition 21 grants to:

GNC, Franchisees and Licensed Entities, and their respective retail customers, with respect to all GNC branded Standalone and GNC branded Multi-ingredient Chromium Picolinate Products in the possession of GNC, Franchisees, Licensed Entities and their respective customers as of the Effective Date, a perpetual, paid up, non-exclusive license, without the right to grant sublicenses, under the Patents-in-Suit, and U. S. Patents No. 5,789,401 and No. 5,929,066 with respect to Diabetic Support, to use the methods and processes covered, in whole or in part, by any claim of the Patents-in-Suit with respect to all GNC branded Standalone and GNC branded Multi-ingredient Chromium Picolinate Products and U. S. Patents No. 5,789,401 and No. 5,929,066 with respect to Diabetic Support; and,

GNC, Franchisees and Licensed Entities a perpetual, paid up, non-exclusive license, without the right to grant sublicenses, with respect to all GNC branded Standalone and GNC branded Multi-ingredient Chromium Picolinate Products in the possession of GNC, Franchisees and Licensed Entities as of the Effective Date, under the Patents-in-Suit, and U. S. Patents No. 5,789,401 and No. 5,929,066 with respect to Diabetic Support, to sell, offer for sale, advertise and promote in any manner, including, but not limited to, books, brochures, advertisements, websites, HealthNotes, signs, labels and shelf-toppers, and for any uses or benefits claimed in the Patents-in-Suit with respect to all GNC branded Standalone and GNC branded Multi-ingredient Chromium Picolinate Products and U. S. Patents No. 5,789,401 and No. 5,929,066 with respect to Diabetic Support.

5.2   Anything contained in paragraph 5.3 hereof notwithstanding, GNC shall have the right to manufacture and sell through its existing inventory as of the Effective Date of Chromium Picolinate and other raw materials, packaging, labeling and other components associated with GNC’s branded Chromium Picolinate containing products. The licenses provided for in subparagraph 5.1 hereof shall apply with respect to all products made pursuant to the foregoing sentence of this subparagraph.

GNC agrees to purchase from Nutrition 21, and Nutrition 21 agrees to sell to GNC, at a price of [**confidential material is omitted and is filed separately with the Securities and Exchange Commission**] per kilogram, all of GNC’s requirements for GNC branded Chromium Picolinate products (including without limitation Standalone and Multi-ingredient Chromium Picolinate Products) to be sold or offered for sale in the United States through December 29, 2009.

With respect to Chromium Picolinate purchased by GNC from Nutrition 21 pursuant to Section 5.3, Nutrition 21 grants to:

GNC a perpetual, paid up, non-exclusive license, without the right to grant sublicenses, under the Patents-in-Suit to make and have made GNC branded Standalone or GNC branded Multi-ingredient Chromium Picolinate Products and under U. S. Patents No. 5,789,401 and No. 5,929,066 to make and have made Diabetic Support;

GNC, Franchisees, Licensed Entities and their respective customers a perpetual, paid up, non-exclusive license, without the right to grant sublicenses, to use the methods and processes covered, in whole or in part, by any claim of the Patents-in-Suit with respect to GNC branded Standalone or GNC branded Multi-ingredient Chromium Picolinate Products or by any claim of U. S. Patents No. 5,789,401 and No. 5,929,066 with respect to Diabetic Support; and,

GNC, Franchisees and Licensed Entities a perpetual, paid up, non-exclusive license, without the right to grant sublicenses, under the Patents-in-Suit with respect to GNC branded Standalone or GNC branded Multi-ingredient Chromium Picolinate Products, and under U. S. Patents No. 5,789,401 and No. 5,929,066 with respect to Diabetic Support, to sell, offer for sale, advertise and promote such products in any manner, including, but not limited to, books, brochures, advertisements, websites, HealthNotes, signs, labels and shelf-toppers, and for any uses or benefits claimed in the Patents-in-Suit with respect to GNC branded Standalone or GNC branded Multi-ingredient Chromium Picolinate Products and under U.S. Patents No. 5,789,401 and No. 5,929,066 with respect to Diabetic Support.

For the avoidance of doubt, the licenses