Current Report Filing (8-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 3, 2015

INERGETICS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		0-3338		22-1558317
(State or other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

	550 Broad Street, Suite 1212, Newark, NJ		07102
	(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (908) 604-2500

N/A

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry Into A Material Definitive Agreement.

Pursuant to a Master Purchase Order Assignment Agreement dated as of September 1, 2015, (the “Agreement”), by and among Inergetics, Inc., a Delaware corporation (the “Registrant”), and the persons named therein (each a “Contractor,” and collectively, the “Contractors,” and, together with the Registrant, collectively, the “Parties”), in order to provide the Registrant with certain financing to, among other items, have its products manufactured, packaged and shipped, the Contractors, on the terms and conditions set forth in the Agreement, made available to the Registrant, until August 31, 2016, purchase order financing, which the Registrant at any time during the term of the Agreement cannot have outstanding more than $1,000,000 (the “$1,000,000 Cap”), under the Agreement.

Pursuant to the terms of the Agreement (i) the Registrant submits for acceptance and assignment purchase orders that it receives from its customers and that the Registrant desires to have the Contractors provide purchase order financing for (each a “PO,” and collectively, “POs”), (ii) if a submitted PO is accepted by the Contractors, such PO will be assigned to the Contractors by the Registrant, and (iii) the Contractors shall thereafter pay directly to the product manufacturer (each a “Manufacturer”, and collectively, the “Manufacturers”) the Manufacturer’s price (the “Manufacturer’s Price”), to manufacturer, package and ship to the customer (or at the Registrant’s option, the Registrant), the finished and packaged products.

For any accepted PO, the Contractors’ funding commitment shall not exceed 100% of the Manufacturer’s Price, except that, in connection with any PO, the Registrant may request the Contractors to provide up to 85% of the gross price to be paid by the customer to the Registrant (“the “Alternative Amount”), which if so agreed by the Contractors, such Alternative Amount shall be payable by the Contractors as follows: (i) 100% of the Manufacturer’s Price directly to the Manufacturer; and (ii) the balance of such Alternative Amount to the Distributor for the uses described in the Agreement including, but not limited to, to purchase inventory, pay all fees and expenses owed to the Contractors under the accepted PO and to reduce outstanding amounts of the Exchange Notes (as defined below), Other Notes (as defined below), the CFAP Notes (as defined below), and/or all other amounts owed to the Contractors and/or any of their respective affiliates by the Registrant.

Following delivery of the products to the customer, the customer pays all amounts owed under the PO directly to the Contractors, who deduct from such amount all fees and expenses owed to the Contractor for such products and all remaining funds will go to the Registrant, except for any funds the Contractors elect to use to reduce obligations owed to them and/or their respective affiliates by the Registrant including, but not limited to , as of September 1, 2015 (i) $507,390 aggregate principal amount of Exchange Notes, (ii) $2,193,130 aggregate principal amount of other outstanding notes, debentures and/or other instruments representing funds owed by the Registrant to the Contractors and/or their respective affiliates (collectively, the “Other Notes”), and (iii) the $125,000 aggregate principal amount CFAP Note. All remaining funds shall be provided to the Registrant. All aggregate principal amount of Exchange Notes outstanding reduces the $1,000,000 amount that the Registrant may request from the Contractor under the Agreement on a dollar for dollar basis.

Pursuant to the Agreement, for all funds advanced by the Contractors to or for the benefit of the Registrant, the Registrant shall pay to the Contractors (in addition to the repayment of all funds advanced under the Agreement) as follows:

(i)

A transaction initiation and set-up fee equal to the product of (x) 3.0%, multiplied by (y) the sum of (a) the Manufacturer’s Price, plus (b) all other funds advanced by Contractor; plus

(ii)

Commencing on and including the date 31 days following the Funding Date (as defined in the Agreement) through and including the Clearance Date (as defined in the Agreement), a product advance fee for each 10 day period (pro-rata for any period less than 10 days) equal to the product of (x) 1.25%, multiplied by (y) the aggregate amount of all funds paid and/or advanced by the Contractors in connection with a PO;

(iii)

A daily maintenance equal to 0.067% (compounding daily) of the aggregate amount of the sum of the Manufacturer’s Price paid plus all other funds advanced by Contractors which remain outstanding for more than ninety (90) days; plus

(iv)

In the event a PO is not paid in full by the customer by the earlier to occur of, among other items (x) the due date set forth in the invoice delivered to the customer, and (y) 120 days of the Funding Date (a “Delinquent PO”), a late payment fee equal to the product of (x) 0.067% of the outstanding portion of the PO Price, multiplied by (y) number of days from the date a PO becomes a Delinquent PO until the PO is paid in full.

All payments due to the Contractors under the Agreement if not paid when due, shall accrue interest thereon at the rate of 2.0% per 30 days (pro-rata for shorter periods) until such amounts are paid in full.

Under certain circumstances, in connection with a PO accepted by and assigned to the Contractors and pursuant to which the Contractors made advances to and/or on behalf of the Registrant, the Contractors can require the Registrant to repurchase the PO and or sell the PO products and pay to the Contractors all amounts owed to them with respect thereto.

In connection with the entering into the Agreement, the Contractors and/or their respective affiliates exchanged $500,000 aggregate principal amount of convertible notes and/or debentures of the Registrant evidencing funds loaned to the Registrant by one or more of the Contractors and/or their affiliates (the “Prior Notes”), for approximately $507,390 aggregate principal amount (which principal amount included all outstanding principal plus accrued but unpaid interest on the Prior Notes as of September 1, 2015), 12% Senior Secured Convertible Demand Promissory Notes of the Registrant (the “Exchange Notes”), which commencing on September 1, 2015, such Exchange Notes accrued interest at the same rates as payments owed to the Contractors by the Registrant under the Agreement and as set forth in (i) and (ii) above.

All obligations of the Registrant owed to the Contractors (and/or their respective affiliates) under (i) the Agreement, (ii) the Exchange Notes, (iii) the Other Notes, and (iv) the CFAP Note are: (x) convertible into shares of common stock, par value $0.001 per share (the “Common Stock”), of the Registrant at a conversion price equal to the lower of (1) $0.07, and (2) 62% of the lowest price any share of Common Stock was bought or sold on the principal market during the ten (10) consecutive trading days immediately preceding the applicable date of determination, adjusted for any stock split, stock dividend, stock combination, reclassification or other similar transactions, (y) have full ratchet anti-dilution provisions, and (z) are secured by a first priority security interest in and to all assets of the Registrant pursuant to a Security Agreement dated September 1, 2015 by and among the Registrant, the Contractors and the other parties named therein. As a condition to the Contractors entering into the Agreement, 3 creditors of the Registrant subordinated all of the obligations owed by the Registrant to such creditors to the obligations of the Registrant to the Contractors and their respective affiliates under, among other items, the Agreement, the Exchange Notes, the CFAP Note and the Other Notes pursuant to a Subordination Agreement dated as of September 1, 2015 by and among the Registrant, the Contractors, certain of their affiliates and the 3 creditors.

The Agreement also contains various other representations, warranties, covenants, events of default and the like.

In consideration of Contractors’ commitment to make available the funds under the Agreement, to pay the Manufacturing Price and otherwise advance funds to the Registrant pursuant to the Agreement, the Registrant agreed to pay to the Contractor’s a $100,000 Commitment Fee (the “Commitment Fee”), in cash, payable in 4 monthly equal tranches of $25,000, or, at the Registrants sole option, through the issuance of a $125,000 aggregate principal amount 12% Senior Secured Convertible Note of the Registrant due August 31, 2016 (the “CFAP Note”). The Registrant elected to pay the Commitment Fee through the issuance to the Contractors of the CFAP Note.

All descriptions of (i) the Agreement, the Exchange Notes, the Security Agreement and the Subordination Agreement (collectively, the “Transaction Documents”), are summary descriptions only and must be read in connection with the form of such documents attached to this Report as Exhibits 10.1, 10.2, 10.3 and 10.4 and (ii) the Other Notes, which were attached to prior Current Reports on Form 8-K of the Registrant files with the Securities and Exchange Commission.

The Registrant does not plan on publicly disseminating acceptances of and assignments to the Contractors of Purchase Orders, funds advanced to (or on behalf of) the Registrant by the Contractors under the Agreement and/or any other transactions under the Agreement as such are within the Registrant’s regular and ordinary business and the Registrant intends to continuously use the Agreement to fund customer PO’s and for other purposes described herein and in the Agreement to the maximum extent until the Agreement is terminated on or about August 31, 2016 (unless earlier terminated pursuant to the terms of the Agreement).

Pursuant to the terms of the Agreement, the Registrant agreed that no later than March 1, 2016, to reserve 400% of the number of shares of Common Stock issuable upon conversion of the Exchange Notes, the CFAP Note and the Other Notes and all other convertible, exercisable and/or exchangeable securities of the Registrant owned by the Contractors and/or any of their respective affiliates.

The Registrant has applied to the State of New Jersey to receive a tax voucher for approximately $810,000 representing its net operating loss (the “NOL”) for the year ended December 31, 2014, which if tax voucher is granted, a 3^rd party can purchase the NOL. Pursuant to the terms of the Agreement, if the tax voucher is granted and the NOL is sold, all funds received from the sale of such NOL will be provided to the Registrant, except for funds the Contractors elect to use to reduce outstanding obligations of the Registrant to the Contractors and any of their respective affiliates set forth elsewhere herein and in the Agreement.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 and Item 3.02 is incorporated by reference into this Item 2.03.

Item 3.02. Unregistered Sales of Equity Securities.

The applicable information set forth in Item 1.01 and Item 2.03 is incorporated by reference into this Item 3.02.

On or about August 21, 2015, one of the Contractors loaned to the Registrant $52,500 which was represented by a $52,500 12% Senior Secured Convertible Promissory Note of the Registrant. On or about September 1, 2015, the Registrant issued to the holder thereof a $52,689.86 aggregate principal amount Exchange Note solely in exchange for the original $52,500 note (which additional $189.86 represented accrued but unpaid interest on such note through and including September 1, 2015).

All offers and sales by the Registrant of the Exchange Notes, the Prior Notes, the CFAP Notes and the Other Notes, were made by the Registrant pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended (the “1933 Act”) pursuant to Section 4(2) and Rule 506 of Regulation D of the 1933 Act.

Special Note Regarding Forward-Looking Statements

This Current Report on Form 8-K contains "forward-looking statements" within the meaning of Section 27A of the 1933 Act, Section 21E of the Securities Exchange Act of 1934, as amended, and as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time, and our actual results could differ materially from expected results. These risks and uncertainties include, without limitation, the Registrant's ability to continue to raise capital to fund its operations and lack of operating capital; as well as other risks. Additional information about these and other risks are set forth in the Registrant's Annual Report on Form 10-K for the year ending December 31, 2014. The Registrant undertakes no obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this statement or to reflect the occurrence of unanticipated events, except as required by law.

The information contained in this Current Report on Form 8-K is not an offer to sell or the solicitation of an offer to buy the Registrant’s common stock or any other securities of the Registrant, but merely included to disclose the terms of the transaction mentioned herein.

Item 9.01. Financial Statements and Exhibits.

(d)	Exhibits

	Exhibit Number	Description

	10.1	Form of Master Purchase Order Assignment Agreement dated as of September 1, 2015

	10.2	Form of 12% Senior Secured Convertible Demand Promissory Note (Exchange Note)

	10.3	Form of Security Agreement dated as of September 1, 2015

	10.4	Form of Subordination Agreement dated as of September 1, 2015

The above documents attached as Exhibits to this Report (the “Transaction Documents”) have been included as exhibits in this Report to provide information regarding the terms thereof. Such documents are not intended to provide any other financial or other information about the Registrant. The representations, warranties and covenants contained in the Transaction Documents were made only for purposes of those documents and as of specific dates; were solely for the benefit of the parties and/or beneficiaries named in the Transaction Documents; may be subject to limitations agreed upon by the parties, and may be subject to standards of materiality. No person should rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the Registrant. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the particular Transaction Document, which subsequent information may or may not be fully reflected in public disclosures by the Registrant.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	INERGETICS, INC.

Date: September 14, 2015	By:	/s/ Michael C. James
		Name: Michael C. James
		Title: Chief Executive Officer and
		Chief Financial Officer

Exhibit 10.1

MASTER PURCHASE ORDER ASSIGNMENT AGREEMENT

Dated as of September 1, 2015

by and between

[______] (CONTRACTOR)

and

[______] (CONTRACTOR)

and

INERGETICS, INC. (DISTRIBUTOR)

MASTER PURCHASE ORDER ASSIGNMENT AGREEMENT

THIS AGREEMENT (this “Agreement”) is dated as of September 1, 2015, by and among ______ (the “______”),______ (“______” and together with ______ collectively, the “Contractors” and each a “Contractors”) and INERGETICS, INC., a Delaware corporation (the “Distributor”) and, together with the Contractors, collectively, the “Parties” with each being a “Party”), as follows:

RECITALS

The Distributor is a distributor of nutritional supplements which are manufactured by third-party manufacturers (each a “Manufacturer”, and, collectively, the “Manufacturers”).

The Parties desire to enter into this Agreement to set forth the terms and conditions of a purchase order assignment program between the Distributor and the Contractors pursuant to which, among other related items (i) the Distributor will assign customer purchase orders to the Contractors, (ii) request the Contractors to pay directly to the Manufacturers the Manufacturer’s cost and expenses to manufacturer, package and ship to the Distributor, or at the Distributor’s option, the customer, the finished goods set forth in the customer purchase orders, (iii) the Contractors shall retain the Distributor to, among other items, warehouse, process, and ship ordered goods to its customers, or arrange for the delivery of goods to the customers, as the case may be, and (iv) fees will be paid to the Distributor for such servicing following payment to the Contractors for the goods.

THEREFORE, in consideration of the payments to be made, and the obligations to be assumed as set forth in this Agreement, and such other consideration, the receipt and sufficiency at which is hereby acknowledged the Parties agree as follows:

1. DEFINITIONS. In this Agreement, the following terms are defined as set forth in this this Paragraph 1:

(a) The “CERTIFICATE” means the Purchase Order Package Certificate required to be delivered with each written request by the Distributor to the Contractor for an assignment of a purchase order. The form of Certificate is attached to this Agreement as Exhibit “A” and made part hereof.

(b) With respect to each purchase order submitted for assignment to the Contractors hereunder, the Certificate will define (i) the “PRODUCT” (the end product) to be delivered to the Customer, (ii) the “CUSTOMER” (the business entity/person which issues the purchase order to the Distributor), (iii) the “MANUFACTURER” (the person/entity who will manufacture the Product), (iv) the “Manufacturer’s PREMISES” (the address of the facility or such other facility identified in the Certificate where the Product will be manufactured by the Manufacturer), (v) the “MANUFACTURER’S PRICE” (the dollar amount confirmed by the Distributor in writing to the Manufacturer, setting forth the aggregate manufacturer’s price to manufacture, package and ship the Product in accordance with the specifications and in the amounts set for the in the Accepted P.O., including, but not limited to, the Manufacturer’s costs and expenses to purchase all materials and packaging necessary to produce the final Product and have such Product delivered to the Distributor’s Facility (or to the Customer, if so requested by the Distributor), (vi) the “P.O. PRICE” (the purchase price to be paid by the Customer for the Products), (vii) the “P.O. DELIVERY DATE” (the date on which Products are to be delivered to the Customer), (viii) the “DISTRIBUTOR’S PREMISES” (the Distributor’s warehouse facilities where the Products will be delivered, held, processed and shipped by the Distributor to the Customer (unless such product is being shipped directly to the Customer, in which event such shall be set forth in the Certificate)) and (ix) the “PRODUCT DELIVERY DATE” (the date on which the Products are to be delivered to the Customer). The term “MANUFACTURER’S SHIPPING NOTICE” shall mean the written notice delivered by the Manufacturer to the Distributor (who shall immediately forward the same to the Contractor or the Contractors, indicating that the Products for a particular Accepted P.O. are completed and ready to be shipped to the Distributor or the Customer, as the case may be. The Distributor is not engaged in the manufacturing business but is engaged in the development, sale, warehousing, processing and distribution of Products.

(c) A purchase order delivered to the Distributor in the ordinary course of its business from a Customer is referred to as a “P.O.” and a P.O. that (x) meets all of the requirements of Section 3 below and (y) is accepted by the Contractors, is an “ACCEPTED P.O.” The date on which the Contractors deliver written notice to the Distributor of acceptance of the assignment of a P.O. is referred to as the “ACCEPTANCE DATE”. When an Accepted P.O. is made null and void pursuant to this Agreement, it is referred to as a “CANCELED P.O.” Under certain circumstances, when a P.O. is not assignable to the Contractors, the Contractors may accept an assignment of the proceeds of the P.O. and in such cases, the terms P.O. and Accepted P.O. will mean the proceeds of such P.O. or Accepted P.O. as the case may be. The inventory of Products produced by a Manufacturer for satisfaction of a P.O. is referred to as the “P.O. INVENTORY”; the invoice rendered by the Distributor to the Customer upon delivery of Products pursuant to a P.O. is referred to as a “P.O. INVOICE”; and payments received on account of P.O. Invoices (whether paid by the Customer, the Distributor and/or anyone else), are referred to as the “P.O. PROCEEDS”.

(d) “INDEBTEDNESS” of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including (without limitation) “capital leases” in accordance with GAAP (other than trade payables entered into in the ordinary course of business), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (vii) all indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (viii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vii) above.

(e) “CONTINGENT OBLIGATION” means, as to any person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the person incurring such liability, or the primary effect thereof, is to provide assurance to the oblige of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

(f) The Distributor may (and in certain circumstances shall be required to) repurchase an Accepted P.O. pursuant to Paragraph 8(b) of this Agreement. In absence of such repurchase, an Accepted P.O. becomes a “DELINQUENT P.O.” if the P.O. Price is not paid to the Contractors by the earlier of (i) the due date for payment of the P.O. Invoice, (ii) one hundred and twenty (120) days following the Funding Date, or (iii) the date on which the Accepted P.O. is canceled.

(g) “CONTRACTORS’ BANK ACCOUNT” is the bank account or similar account established by the Contractors where all funds required to be sent to the Contractors and/or deposited in an account of the Contractors by the Distributor and/or any other person whether pursuant to this Agreement and/or any other Transaction Document, whether for Contractors to keep, and/or distribute as provided elsewhere herein and/or in any other Transaction Document; and “CONTRACTORS’ BANK” means the bank (or other institution), where the Contractors establish the Contractors’ Bank Account. The Contractors shall inform the Distributor in writing of the name and certain other information regarding the Contractors’ Bank Account and Contractors’ Bank so that all funds required to be deposited into the Contractors’ Bank Account can so be deposited. Such information is set forth on Addendum I attached hereto (or will be provided subsequently to the Distributor). The Contractors at their sole option may, at any time and from time to time, change the Contractors’ Bank and the Contractors’ Bank Account and provide the substantially identical information as set forth in Addendum I to the Distributor as to any new Contractors’ Bank Account and Contractors’ Bank.

(h) The “FUNDING DATE” is the earliest to occur of the date on which the Contractors make their first (x) payment to the Manufacturer of the designated Products in connection with an Accepted P.O., and (y) advance of funds in connection with and/or related to an Accepted P.O. (whether to the Distributor or any other person. The “CLEARANCE DATE” is the date on which the Contractors (or the Contractors’ Bank) have received full payment of the P.O. Price in connection with an Accepted P.O. in immediately available funds in U.S. dollars.

(i) The Distributor will perform its obligations in accordance with the “DISTRIBUTOR’S SPECIFICATIONS” which are set forth on Exhibit “B” attached hereto and will be paid a “DISTRIBUTOR’S FEE”, computed in accordance with Section 7(c). The Distributor’s obligations are secured pursuant to and in accordance with the terms of a “SECURITY AGREEMENT” described in Section 10 below.

(j) The Contractors will be paid (i) “COMMITMENT FEE” (computed and paid pursuant to Paragraph 6 below), the (ii) “CONTRACTORS’ DEAL FEES” (computed and paid pursuant to Paragraph 7 below), and (iii) “CONTRACTORS’ EXPENSES” (computed and paid pursuant to Paragraph 9 below).

(k) “PRIOR NOTES” shall mean the following notes issued by the Distributor: the (i) ____% $______ aggregate principal amount Convertible Promissory Note, Issue Date: ______; issued to ______; (ii) ____% $______ aggregate principal amount Convertible Promissory Note, Issue Date: ______; issued to ______; (iii) ____% $______ aggregate principal amount Convertible Promissory Note, Issue Date: ______; issued to ______; (iv) ____% $______ aggregate principal amount Convertible Promissory Note, Issue Date: ______; issued to ______, (v) ____% $______ aggregate principal amount Convertible Promissory Note, Issue Date: ______; issued to ______; and (vi) ____% $______ aggregate principal amount Convertible Promissory Note, Issue Date: ______; issued to ______.

(l) The “DISTRIBUTOR’S NOTES” means the form of 12% senior subordinated convertible promissory notes of the Company in the form annexed hereto as Exhibit C, with such modifications and changes as agreed to by the Distributor and the party receiving any such notes as reflected in the final executed note of the Distributor.

(m) The “EXCHANGE NOTES” shall mean the $______ aggregate principal amount of the Senior Secured Convertible Notes of the Distributor issued to the holders of the Prior Notes in exchange for the Prior Notes, the economics of which Exchange Notes shall be substantially the same as the economics received by the Contractors from the Distributor in connection with an Accepted P.O., but each such Exchange Note shall, among other terms and conditions, be convertible into shares of common stock, par value $0.001 per share, of the Distributor (the “Common Stock”) and contain such other terms and conditions as agreed to by the holders of the Prior Notes and the Distributor, as evidenced by the Exchange Notes so issued by the Distributor to the holders of the Prior Notes in exchange for the Prior Notes. The aggregate principal amount of each Exchange Note shall equal the sum of (i) the aggregate principal amount of the Prior Notes being exchanged for such Exchange Note, and (ii) all accrued but unpaid interest and other sums, if any, owed to the holder of the Prior Note being exchanged for an Exchange Note, through and including the date of such exchange, which shall occur substantially simultaneously with the execution of this Agreement by the Parties herein.

(n) “TRANSACTION DOCUMENTS” shall mean collectively, this Agreement, any blocked account agreement, the Letter from the Distributor to its transfer agent, dated on or about the date hereof related to the shares of Common Stock of the Distributor to be reserved for issuance upon conversion of any Notes owned by either of the Contractors and/or their respective Affiliates including, but not limited to, _____, including, but not limited to, the Distributor’s Notes, the Exchange Notes, the Prior Notes (the “TA Letter”), all financing statements (or comparable documents now or hereafter filed in accordance with the Uniform Commercial Code or other comparable or similar laws, rules and/or regulations) in favor of the Contractors as secured parties perfecting all Liens the Contractors and/or any of their respective Affiliates including, but not limited to, _____, have on All Collateral (as defined below) and/or other assets of the Distributor, the Subordination Agreements (as defined below), the Security Agreement (as defined below), any perfection certificate, the Notes including, but not limited to, Distributor’s Notes, the Exchange Notes and/or the Prior Notes and all other instruments, certificates, supplements, amendments, exhibits and schedules required and/or attached pursuant to this Agreement and/or any of the above documents, and/or any other document and/or instrument related to the above documents and the transactions hereunder and/or thereunder, and/or any other documents or instruments required or contemplated hereunder or thereunder, whether now existing or at any time hereafter arising.

(o) “LIENS” shall mean a lien, mortgage, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction, clouds on title and/or encumbrances.

(p) “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time.

(q) “NOTES” shall man all promissory notes, debentures, debt securities and/or other instruments evidencing Indebtedness and/or obligations of funds owed by the Distributor to one or more of the Contractors and their respective Affiliates including, but not limited to, ____, including, but not limited to, the Prior Notes, the Distributor’s Notes, the Exchange Notes and the following notes and/or debentures and/or any replacement thereof: (i) the ___% $_____ aggregate principal amount Convertible Debenture, Issue Date: _____; issued to _____, (ii) ___% $_____ aggregate principal amount Convertible Debenture, Issue Date: _____; issued to _____, (iii) ___% $_____ aggregate principal amount Convertible Debenture, Issue Date: _____; issued to _____, (iv) ___% $_____ aggregate principal amount Convertible Debenture, Issue Date: _____; issued to _____, and (v) ___% $_____ aggregate principal amount Convertible Debenture, Issue Date: _____; issued to _____.

(r) An “AFFILIATE” shall mean a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.

2. SUBMISSION OF P.O.’s FOR ASSIGNMENT. Subject to the terms and conditions and requirements of this Agreement, the Distributor may request in writing that the Contractors (x) accept an assignment of each P.O. submitted to and accepted by the Distributor from a Customer and (y) pay to the Manufacturer of the Products set forth in the Accepted P.O., such Manufacturer’s Price to manufacture and fulfill the Accepted P.O. Each such request shall be made pursuant to a completed and signed Certificate delivered to the Contractors, provided all requests by the Distributor to the Contractors for the Contractors to accept the assignment of a P.O. shall only be delivered to the Contractors on Tuesdays and Thursdays of each week; and requests received following a Thursday will be treated as having been received by the Contractors on the next Tuesday.

3. ACCEPTANCE OF P.O. ASSIGNMENTS; AMOUNT OF FUNDS ELIGIBLE TO BE ADVANCED PURSUANT TO AN ACCEPTED P.O.

(a) Subject to the conditions and requirements set forth in this Section 3, Contractors agree to accept or decline acceptance of the assignment of a P.O. submitted to the Contractors by the Distributor pursuant to the provisions of Section 2 above (in the Contractors’ sole discretion), by delivery of written notice to Distributor; and Contractors will use their commercially reasonable best efforts to deliver such written acceptance or declination by 5:00 p.m. before or during the fourth (4^th) full business day after the date Contractors receive the applicable Certificate.

(b) Notwithstanding the provisions of Section 3(a) above, Contractors shall not accept the assignment of any P.O. which does not meet the following requirements:

(i)

(x) Contractors funding commitment with respect to the P.O. shall not exceed 100% of the Manufacturer’s Price, and (y) be payable as follows: (I) 50% to the Manufacturer within five (5) business days following the Acceptance Date; and (II) the remaining 50% within five (5) business days following Contractors’ receipt of the Manufacturer’s Shipping Notice; provided, however, that notwithstanding anything to the contrary provided herein or elsewhere, in the Certificate sent by the Distributor to the Contractor to determine if the Contractors will accept the assignment of a P.O., the Distributor may request the Contractors provide up to 85% of the P.O. Price (“Increased Funds”), which if so agreed by the Contractors, such Increased Funds shall be payable by the Contractors as follows: (A) 50% of the Manufacturer’s Price directly to the Manufacturer; (B) the remaining 50% of the Manufacturer’s Price shall be paid directly to the Manufacturer by the Contractors, as provided elsewhere in this Agreement, provided, such amount shall not be treated as being paid by the Contractor until the date the balance (or any lesser portion), of the Manufacturer’s Price is paid by the Contractors to the Manufacturer; and (C) the balance of such Increased Funds directly to the Distributor; provided, that a request by the Distributor, shall be conditioned on, among other terms and conditions, the Distributor acknowledging and agreeing (and by executing this Agreement, the Distributor hereby expressly does so acknowledge and agree), that out of the Increased Funds provided directly to the Distributor, the Distributor shall only use such portion of the Increased Funds, to pay any costs and expenses relating to existing or subsequent Accepted P.O.’s, Delinquent P.O.s, any funds due and owing to the Contractors and/or their respective Affiliates, including, but not limited to, ____, including as a result of any Notes owned by any such persons, to create inventory of Products, to pay taxes, transfer agent fees, legal fees and expenses, payments to vendors that the Contractors approve and related working capital and other general corporate purposes;

(ii)

Assuming payment of the total Manufacturer’s Price by the Contractors as set forth herein and in the Certificate for the particular P.O. and/or any other advances of funds in connection with such P.O., the Contractors aggregate outstanding funding pursuant to this Agreement shall not exceed in the aggregate $1,000,000 (including, but not limited to, the aggregate principal amount of all Exchange Notes);

(iii)

An original, signed copy of the Certificate shall have been delivered to the Contractors;

(iv)

All information contained in the Certificate and in any attachment thereto, shall be verified by Contractors to ensure (to Contractors’ satisfaction), among other items, that the Manufacturer’s Price, the Purchase Order, P.O. Price, Product Delivery Date and P.O. Delivery Date are reasonable and accurate and that the P.O. is in all respects bona fide (which verification may include, without limitation, direct confirmation from the Customer and the particular Manufacturer);

(v)

The Contractors’ have approved all items in the Certificate and/or related to the P.O. including, but not limited to, the proposed Manufacturer;

(vi)

The Distributor shall have delivered to the Contractors such additional information and documentation as the Contractors may have from time to time requested; and

(vii)

The Distributor has obtained and provided to the Contractors a fully executed and dated waiver and release of the Contractors (and the Contractors’ Agents, if any), and such other persons as set forth in the form annexed to this Agreement as Exhibit E (the “Warranty/Waiver Release”), by and from the Customer, of and from any and all liability for breach of any and all express or implied warranties or product liability claims with respect to the Products or the use and distribution thereof;

(c) Notwithstanding the other provisions of this Section 3 or elsewhere, the Contractors acceptance of the assignment of a P.O. shall be made null and void and the P.O. shall be deemed a Canceled P.O. upon the occurrence of any one of the following:

(i)

Any change in the terms and conditions agreed to by the Manufacturer relating to the manufacturing of the Products in a P.O. including, but not limited to, the Manufacturer’s Price.

(ii)

The failure of the Distributor to take any action including, but not limited to, paying all costs and/or expenses (other than the funds expressly agreed to be paid by the Contractors to the Manufacturer relating to the particular Accepted P.O.), to be taken to produce and ship the final Products in such amounts and that conform to the Product’s specifications and other items in the Certificate and/or the P.O.

(iii)

The failure of a Manufacturer to deliver Products (in the amounts of which conform to the specifications in the P.O. or in the Certificate), to the Premises (or to the Customer if so required and set forth in the Certificate) on or before the Product Delivery Date. Upon such failure of delivery, Contractor shall have the right to require Distributor to purchase the Products from Contractor and shall assign to Distributor the right to receive those Products which have not then arrived at the Premises;

(iv)

Any cancellation and/or change of or to the P.O. by the Customer prior to delivery of the Products to the Customer (except for reasonable extensions or delays to the Product Delivery Date requested by the Customer and accepted by the Contractors);

(v)

Any other change relating to the Products, the Manufacturer, the Distributor, the information in the P.O. and/or the Certificate and/or otherwise that could have an adverse effect on the Contractors and/or their rights relating to the P.O.; and

(vi)

Upon the occurrence of any event set forth in Sections 3(b)(i)-(vii), any remaining obligations of the Contractors’ discretions under or pursuant to the P.O., this Agreement and/or any other Transaction Document relating to a particular P.O., shall in the Contractor’s sole discretion, be automatically terminated absolutely and in addition to any other rights and remedies the Contractors’ may have hereunder, in any of the other Transaction Documents and/or in law or equity the Distributor shall pay to the Contractors such sums as so required by Section 8.

(d) A P.O. shall be deemed an Accepted P.O. only when: (i) the P.O. is submitted for assignment by the Distributor pursuant to a Certificate or such other form of submission to which the Contractors may from time to time consent, (ii) the Contractors shall deliver notice of acceptance of assignment to the Distributor pursuant to Section 3(a) or, in the absence of such notice of acceptance, the Contractors shall purchase Products with respect to the P.O. or otherwise advance of funds in connection with the P.O., (iii) the P.O. shall meet each of the requirements of Section 3(b) above unless otherwise waived in writing by the Contractors and (iv) none of the events described in Section 3(c) above shall have occurred prior to delivery of the Products to the Customer pursuant to the P.O. Until such time as each of the afore-described requirements and conditions is satisfied in full, Contractors’ acceptance of any assigned P.O. shall be deemed conditional and subject to revocation at any time.

APPOINTMENT OF DISTRIBUTOR FOR CERTAIN ITEMS.

(a) Subject to the other provisions of this Agreement, with respect to all Accepted P.O.’s (and only so long as such P.O. remains an Accepted P.O.), Contractors hereby appoint the Distributor as Contractors’ exclusive source for acceptance of Products at the Premises, performance of all processes, warehousing, warehousing requirements and delivery to the Customers, with respect to the Products (unless the Products are being delivered directly to the Customer by the Manufacturer) and the Distributor hereby accepts such appointment. Distributor agrees to perform all such requirements using its best efforts and in a businesslike manner and to utilize quality control procedures consistent with applicable industry standards.

(b) So long as any Products are located at the Distributor’s Premises or are scheduled for delivery to the Distributor’s Premises, Distributor agrees to warehouse all Products and, with respect to such warehousing obligations, agrees to perform such warehousing obligations in accordance with all of the Distributor’s Specifications.

(c) Distributor further agrees that with respect to all Products covered by an Accepted P.O. or that Contractors otherwise paid all or part of the Manufacturer’s Price for, or made any advances with regard to any such Accepted P.O., which are not (or cannot be) used in connection with the applicable Accepted P.O., the Contractors’ shall have the option of taking (and/or requiring the Distributor to take), the following actions, in the Contractors’ sole discretion, by written notice to the Distributor:

(i)

Distributor shall purchase such Products from Contractors within three (3) business days following Contractors’ notice for an aggregate purchase price equal to Contractors’ aggregate costs and expenses (including advances and payment of the Manufacturer’s Price paid by the Contractors) paid and/or it is bound or obligated to pay, relating to the Products;

(ii)

The Contractors can sell the Products and the proceeds thereof applied first to Contractors’ Manufacturing Price payments, other advances made in connection with such Products and all costs and expenses relating thereto including all costs and expenses in connection with the sale of such Products including, but not limited to, legal fees and expenses, publishing costs, filing fees and then any remaining funds shall be applied as provided in Section 7, and the balance, if any, to Distributor; provided, however, if the Contractors elect to have the Distributor purchase all or any portion of the Products as provided in Section 4(c)(i) above, but the Distributor fails to do so in full and/or in the time frame provided in such Section 4(c)(i), the Contactors can, by written notice to the Distributor, cancel its election to have some or all of the applicable Products purchased by the Distributor and sell such amount of Product or the remaining unsold amount of Products that the Contractors have not required (or cancelled the requirement for), the Distributor to purchase from the Contractors; or

(iii)

The Contractors can require the Distributor to sell the Products and the Distributor shall use its best efforts to sell and maximize the sale price thereof and shall upon all sales immediately send the sale proceeds to the Contractors.

PAYMENT AND RESASSIGNMENT.

(a) Upon delivery of Products to the Customer pursuant to an Accepted P.O., Distributor shall issue a P.O. Invoice (and deliver any other related documents required by the applicable P.O. for issuance of an invoice on account of such P.O.) to the Customer for the full P.O. Price. Unless otherwise expressly assigned by and at Contractors’ written direction, the P.O. so issued shall be in the name of the Contractor and shall direct the Customer to make payment to the Contractors’ Bank Account, if applicable. Distributor shall immediately pay to the Contractor any sums from time to time received by the Distributor from the Customer or any other party other than the Contractors on account of a P.O. Invoice. Upon Contractors’ demand, each P.O. Invoice shall be prepared on such invoice form as Contractors may designate.

(b) At such time as Contractors have received payment in full in cleared funds on account of a P.O. Invoice, the Contractors shall pay Distributor in accordance with Section 7 below, and shall re-assign the applicable Accepted P.O. and all rights with respect thereto to the Distributor and the Distributor shall accept such re-assignment. The re-assignment shall be evidenced by a Re-Assignment and Release of Purchase Order in the form of Exhibit “C” attached hereto.

(c) Sums received by the Contractor on account of a P.O. Invoice shall be applied by the Contractor for the satisfaction of the expenses, fees and charges described in this Agreement pursuant to the priorities of payment set forth in Section 7 below; provided, however, that Distributor shall pay all sums due Contractors upon a Delinquent P.O. in the manner and pursuant to the terms of Section 8 below.

6. COMMITMENT FEE. Subject to the provisions of this Section 6, Distributor shall pay Contractor a commitment fee the (“Commitment Fee”) in consideration of Contractors’ commitment to have available sufficient funds to pay the Manufacturing Price for Products or to otherwise advance funds in connection with an Accepted P.O. in amounts equal to but not exceeding $1,000,000, as contemplated by this Agreement. The Commitment Fee shall be in the sum of $100,000 and is payable in 4 equal installments of $25,000 in cash payable as follows: (i) $25,000 on the date of this Agreement, and $25,000 every consecutive 30 days following the date of this Agreement until the $100,000 amount is paid in full; provided, however, that at the Distributors, sole option the Distributor in lieu of paying the $100,000 Commitment Fee in cash, in accordance with the provisions of this Section 6, the Distributor may issue to the Contractors a Distributors Note in the aggregate principal amount of $125,000. The Commitment Fee for the term of this Agreement is deemed by the Parties to have been earned by the Contractors upon the signing of this Agreement by the Contractor.

7. PAYMENTS AND COMPENSATION OF CONTRACTORS AND DISTRIBUTOR.

(a) Payments received by the Contractor or into the Contractors’ Bank Account on account of Accepted P.O.’s will be applied in the following order of priority:

(i)

First, to pay Contractors’ Expenses (as defined in Section 9), to the extent that such Contractors’ Expenses are then due pursuant to the terms of Section 9;

(ii)

Second, to the payment of the Contractors’ Deal Fees (as set forth in Section 7(b), in connection with the Accepted P.O. and all other Accepted P.O.’s that became Accepted P.O’s concurrently with such Accepted P.O.;

(iii)

Third, to reimburse the Contractors for the Manufacturer Price paid by the Contractors and for other advances made by the Contractors (without regard to term or prompt payment discounts) in connection with the Accepted P.O. and all other Accepted P.O.’s that became Accepted P.O.’s concurrently with such Accepted P.O.;

(iv)

Fourth, to repay any outstanding amounts owed to the Contractors including, but not limited to, pursuant to the Exchange Notes, Distributor’s Notes and/or any other Notes or obligations the Distributor has to the Contractors and/or any of their respective Affiliates including, but not limited to, ____; and

(v)

Fifth, to the payment of the Distributor’s Fee in connection with the Accepted P.O.; provided, however, that notwithstanding anything to the contrary provided in this Agreement or elsewhere, the Contractors may in their sole discretion, subtract from the Distributor’s Fee and pay directly to any vendor or other person owed funds by the Distributor including, but not limited to, fees and expenses of the Distributor’s transfer agent, taxes and/or filing fees.

(b)

The “Contractors’ Deal Fees” with respect to each Accepted P.O. shall be as follows:

(i)

A transaction initiation and set-up fee in a sum equal to 3.0% of the Manufacturer’s Price plus all other funds advanced by Contractor; plus

(ii)

Commencing on and including the date 31 days following the Funding Date through and including the Clearance Date for each particular Accepted P.O., a Product advance fee for each 10 day period (pro-rata for any period less than 10 days) equal to the product of (I) 1.25%, (compounding daily) multiplied by (II) the aggregate amount of all funds paid and/or advanced by the Contractors in connection with an Accepted P.O. (including, but not limited to, the Manufacturer’s Price, plus

(iii)

(iv)

In the event of a Delinquent P.O., a late payment fee equal to 0.067% (compounding daily) of the outstanding portion of the P.O. Price multiplied by the number of days from the date an Accepted P.O. becomes a Delinquent P.O. to and including the Clearance Date.

Notwithstanding the foregoing, if the sum of the transaction initiation and set-up fee and the daily maintenance fee is not equal to or greater than $1,000 with respect to an Accepted P.O., the minimum aggregate amount payable by Distributor to Contractor for the transaction initiation and set-up fee and the daily maintenance fee with respect to such Accepted P.O. shall be $1,000.

(c) The “Distributor's Fee” with respect to each Accepted P.O. shall be equal to the collected P.O. Proceeds with respect to such Accepted P.O. less all sums payable pursuant to Section (a)(i)-(v) of this Section 7 and less 100% of all term discounts or discounts for prompt payment and/or other discount.

(d) Sums due to Contractors above all shall be paid as and when proceeds are received with respect to the applicable Accepted P.O. The Distributor’s Fee will be paid not later than the fifth (5^th) business day after the Clearance Date and after satisfaction of all costs, fees and expenses having a higher priority than due and owing by the Distributor including, but not limited to, those provided in this Section 7.

REPURCHASE; REASSIGNMENT.

(a) Contractor shall have the right to require the Distributor to immediately purchase any Delinquent P.O. (and inventory of Products in the case of a Canceled P.O.) for an amount equal to the full amount outstanding under the P.O. Invoice (or the P.O. Price in the case of a Canceled P.O.). Any such payment by the Distributor shall be deemed to be P.O. Proceeds and shall be applied in accordance with the priorities and terms set forth in Section 7 above.

(b) In the event that Distributor makes all payments due on a Delinquent P.O. or Canceled P.O. pursuant to the provisions of Section 8(a), Contractor shall thereupon immediately assign to Distributor all of Contractors’ rights and interests in and to the P.O. Invoice and the P.O. Proceeds and any Products in the possession of Contractor or Distributor with respect to such Delinquent P.O. or Canceled P.O.

9. CONTRACTORS’ EXPENSES. Immediately upon Contractors’ demand, Distributor shall pay or reimburse Contractor for all Contractors’ Expenses. “Contractors’ Expenses” include, but are not limited to, all reasonable expenses, fees, and costs incurred by Contractor in connection with the negotiation of creation of and performance of this Agreement and the other Transaction Documents and each of the transactions contemplated hereby and thereby, including without limitation, the fees and expenses of Contractors’ Agent, if any, insurance and credit insurance premiums, audit costs, attorney's fees, Contractors’ travel expenses, Contractors’ due diligence, Contractors’ Bank Account and such other charges and filing fees incurred by the Contractors. Contractors’ demand for payment of Contractors’ Expenses will be made in writing and will include reasonable documentation of the expenses for which reimbursement is demanded.

10. SECURITY INTERESTS; LIENS. As security for the performance by the Distributor of each and all of its obligations under this Agreement and the other Transaction Documents, Distributor hereby grants the following security interests and rights to the Contractors:

(a) A security interest in All Collateral (as defined below) in accordance with the provisions of the Security Agreement and this Agreement, which security interest shall be senior to all Indebtedness of the Distributor including, but not limited to, each person who has a security interest and/or Lien on any of the All Collateral including, but not limited to ____, ____, ____ (the “Subordinating Debt Holders”), each of whom shall, no later than the date of this Agreement deliver to the Contractors’ executed copies of subordination agreements, in form and substance satisfactory to the Contractors, pursuant to which each Subordinating Debt Holder shall subordinate each of their respective security interests in and Liens on any and all of the All Collateral (the “Subordination Agreements”).

(b) The right to set-off against any and all amounts due to the Distributor hereunder and/or in any other Transactional Document, against any sums which are due to the Contractors which have become past due and delinquent under this Agreement and/or any other Transaction Document.

(c) All checks, notes, deposits, drafts, and other instruments of payment on account of or related to an Accepted P.O. hereby irrevocably designate and appoint the Contractors (and all persons designated by the Contractor) as the Distributor’s true and lawful attorney-in-fact and agent-in-fact and Contractor (or Contractors Representative) may, without notice to Distributor:

(i)

At any time endorse by writing or stamping Distributor's names on any checks, notes, deposits, drafts or other instruments of payment on account of, relating to, or representing the proceeds of an Accepted P.O., any other assets of the Distributor or collateral described herein and/or the Collateral, as defined in the Security Agreement (collectively "All Collateral"), which come into the possession of the Contractor or are under Contractors’ control and deposit the same to the account of the Contractors for application to all sums due from the Distributor to the Contractors hereunder and/or under any other Transaction Documents; and

(ii)

At any time after the occurrence of an Event of Default pursuant to this Agreement and/or any of the other Transaction Documents, in Distributor's or Contractors’ name, demand payment of, enforce payment of, exercise all of Distributor's rights and remedies with respect to, settle, adjust, compromise, initiate and prosecute legal proceeding with respect to, and otherwise take all actions with respect to All Collateral which are, in the Contractors’ sole discretion, necessary or desirable in order to fulfill Distributor's obligations under this Agreement and other Transaction Documents and otherwise realize the full economic value of All Collateral.

11. WARRANTIES AND REPRESENTATIONS OF DISTRIBUTOR. Distributor hereby makes the following warranties and representations to Contractors, each of which is deemed a material inducement to the Contractors entering into and performing its obligations under the Agreement and any other Transaction Document it is a party to, and each of which representations and warranties shall be deemed renewed and restated as of each Acceptance Date of each Accepted P.O.:

(a) Distributor is a corporation duly organized, validly existing, and in good standing under the laws of the state of Delaware, and is qualified or licensed as a foreign corporation to do business in every location in which the laws require Distributor to be so qualified or licensed;

(b) Distributor has the right and power and is duly authorized and empowered to enter into, execute, deliver, and perform all of its obligations and responsibilities in this Agreement and other Transaction Documents;

(c) The execution, delivery, and performance by Distributor of this Agreement and all other Transaction Documents described herein does not constituted a violation of any law, regulation, judgment, order, contract, charter, by-laws, or other instrument to which Distributor is a party or is otherwise bound or subject;

(d) Distributor is not in default under any loan agreement, mortgage, lease, trust deed or similar agreement relating to the borrowing of money to which Distributor and/or any of its assets are otherwise bound;

(e) Each P.O. submitted for assignment by the Distributor to the Contractors is a bona fide purchase order from the Customer named therein and conforms in all respects to the representations contained in the Certificate, which Certificate is true and correct in all respects;

(f) The Distributor shall at all times maintain such types and amounts of insurance coverage (including without limitation credit insurance) with respect to Distributor's business operations, the Premises, the Products located upon the Premises and as set forth in any Accepted P.O. and such other insurance as Contractors may from time to time reasonably require; such insurance to name the Contractors as the insured Party in the manner and to the extent required by Contractors from time to time and, upon the failure to maintain such coverage, Contractors may purchase the same and the cost thereof shall be deemed a Contractors’ Expense;

(g) Except for those set forth on Schedule I thereto, there are no Liens, judgments or claims affecting or relating to the Distributor or any of All Collateral.

(h) Except as set forth on Schedule II hereto, there are no suits, administrative proceedings, arbitration proceedings or other adversarial proceedings or investigations pending or (to the best of Distributor’s knowledge) threatened against Distributor.

(i) The Distributor is subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the Distributor is current in its filing obligations under the 1934 Act, including, without limitation, as to its filings of Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (collectively, the “Public Reports”). The Public Reports, at the time filed with the SEC, did not contain any untrue statement of a material fact or omit to state any fact necessary to make any statement therein not misleading. All financial statements included in the Public Reports (the “Financial Statements”) have been prepared in accordance GAAP applied on a consistent basis throughout the periods indicated and with each other, except that unaudited Financial Statements may not contain all footnotes required by generally accepted accounting principles. The Financial Statements fairly present, in all material respects, the financial condition and operating results of the Distributor as of the dates, and for the periods, indicated therein, subject in the case of unaudited Financial Statements to normal year-end audit adjustments.

(j) Distributor has duly filed all federal, state, county, local, and foreign income, excise, sales, customs, property, withholding, social security and other tax and information returns and reports required to be filed by it to the date hereof, or in the alternative, has obtained extensions for filing pursuant to established procedures, and has paid or made provision for payment of all taxes (including interest and penalties) due and payable. Distributor has no material liability for any taxes of any nature whatsoever, except for approximately $90,000 due to the State of New Jersey for prior payroll taxes.

(k) Distributor has no Subsidiaries and without the express prior written consent of the Contractors, will not establish any Subsidiaries.

(l) Since the date of the latest audited Financial Statements included in the Public Reports, except as specifically disclosed in a subsequent Public Report filed with the SEC prior to the date hereof: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a material adverse effect on the Distributor, its business and/or its assets, (ii) the Distributor has not incurred any Indebtedness and/or other liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice, (B) liabilities not required to be reflected in the Distributor’s Financial Statements pursuant to GAAP or disclosed in Public Reports pursuant to SEC rules and/or regulations, (iii) the Distributor has not altered its method of accounting, (iv) the Distributor has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, except a quarterly stock dividend on its Series G Convertible Preferred Stock and (v) the Distributor has not issued any equity securities to any officer, director or affiliate, except pursuant to existing Distributor stock option plans and/or disclosed in its Public Reports. The Distributor does not have pending before the SEC any request for confidential treatment of information. Except for the entering into and the performance by the Distributor of this Agreement and the other Documents, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Distributor or its business, properties, operations, assets or financial condition, that would be required to be disclosed by the Distributor under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one trading day prior to the date that this representation is made.

(m) Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Distributor confirms that neither it nor any other person acting on its behalf has provided either of the Contractors or its agents or counsel with any information that constitutes material, non-public information. The Distributor understands and confirms that the Contractor will rely on the Transaction Documents, the information included therein including, but not limited to, the foregoing representation and warranty and the Public Reports in effecting the transactions contemplated in the Transaction Documents. All of the disclosure furnished by or on behalf of the Distributor to the Contractor in the Transaction Documents and/or in the Public Reports regarding, among other matters relating to the Distributor, its business and the transactions contemplated in the Transaction Documents, are true and correct in all material respects as of the date made and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(n) The execution, delivery and performance of the Transaction Documents and the transactions contemplated thereby by the Distributor, including, but not limited to, issuance of the Exchange Notes for the Prior Notes, all Distributor’s Notes, the issuance of shares of Common Stock upon conversion of any Notes and/or other instruments of the Distributor owned by one or both Contractors and/or their respective Affiliates, including, but not limited to, ____, the reservation of the shares of Common Stock required to be reserved pursuant to the TA Letter and the payment of all fees, Indebtedness and/or other obligations owed by the Distributor to the Contractors and/or any of their respective Affiliates as provided herein and/or therein (i) are within Distributor’s corporate powers and have been duly executed by the Distributor, (ii) have been duly authorized by all necessary action by or on behalf of Distributor (and/or its shareholders to the extent required by law), (iii) the Distributor has received all necessary and/or required governmental, regulatory and other approvals and consents (if any shall be required), (iv) do not and shall not contravene or conflict with any provision of, or require any consents under (1) any law, rule, regulation or ordinance, (2)Distributor’s organizational documents; and/or (3) any agreement binding upon Distributor or any of Distributor’s properties except as would not reasonably be expected to have a material adverse effect on the Distributor, and (v) do not result in, or require, the creation or imposition of any Lien and/or encumbrance on any of Distributor’s assets or revenues pursuant to any law, rule, regulation or ordinance or otherwise, except to the Contractors and/or any of their respective Affiliates including, but not limited to, ____, as provided herein, in the Security Agreement and/or any other Transaction Documents.

12. PRODUCT WARRANTIES. Distributor expressly assumes and agrees to make all product and service warranties (expressed or implied) to Customers with respect to Products and further agrees to defend, indemnify and hold the Contractors harmless from and against any claims, proceedings, suits, investigations, obligations, costs, or expenses (including all reasonable attorney's fees and legal expenses) with respect to all express or implied warranties in connection with the Products

13. AUDIT RIGHTS. Distributor shall deliver to Contractors (or if a Contractors’ Agent (as defined in Section 20), has been appointed, such deliveries shall be made directly to such Contractors’ Agent), monthly financial statements, aged accounts receivable, aged accounts payable, and Distributor's and Contractors’ inventory schedules within ten (10) business days following the end of each month during the term hereof. In addition, Contractors shall have the right (or if a Contractors’ Agent has been appointed, the following rights shall be provided to the Contractors’ Agent), to, among other items, inspect bank accounts, audit and copy any financial books, computer programs, and other data containing financial information in connection with the Distributor at any time upon not less than 24 hours' prior written notice. Distributor agrees to prepare and maintain complete and accurate business records with respect to the transactions contemplated by this Agreement and/or the other Transaction Documents.

14. RELATIONSHIP OF THE PARTIES. The Distributor on the one hand and the Contractors on the other hand are independent contractors and are not (and shall not be deemed to be) partners, joint venturers, agents or representatives of the other, except and only to the extent and expressly provided in this Agreement and/or any other Transactional Document. Each of such Parties are exclusively responsible for the conduct of their own respective business and are not (except and to the extent expressly set forth herein), authorized to bind the other Parties in any manner whatsoever). Further in this regard, Distributor acknowledges that it has no ownership interest in any P.O., work-in-progress, or Products in connection with an Accepted P.O., except and to the extent otherwise expressly provided in this Agreement.

15. INDEMNICATION. Distributor agrees to indemnify, hold harmless and defend each Contractor, each Contractors’ Agent and all of each such Contractor’s and each Contractors’ Agent’s respective officers, directors, agents, managers, attorneys, representatives, stockholders, members, equity holders, debtholders, affiliates, agents, employees and other related persons (each an “Indemnified Party” and, collectively, the “Indemnified Parties”) from and against any loss, costs, (including reasonable attorney’s fees and costs, as and when incurred), claims, suits or causes of action brought, threatened or incurred by or against each and all Indemnified Parties by reason of any of the following:

(a) As a consequence of any breach of this Agreement and/or any other Transaction Document by Distributor, any breach of a representation and warranty made by Distributor hereunder and/or in any other Transaction Document, or the failure of any representation or warranty, hereunder and/or in any other Transaction Document to be true in all respects;

(b) Any investigation suit or other proceeding or threat of suit by any Manufacturer, Customer, supplier and/or vendor including, without limitation, all claims under or with respect to any Products, Product warranties, P.O.s, Accepted P.O.s, Delinquent P.O.’s, and Cancelled P.O.s, except with respect to any suit or claim arising solely and directly by reason of Contractors’ acts or omissions to act which constitute a direct breach of Contractors’ express obligations hereunder;

(c) Any suit or threat of suit by any of Distributor’s officers, directors, managers, successors, affiliates, agents, representatives, employees, debtholders, equity holders, except with respect to any suit or claim arising solely and directly by reason of Contractors’ acts or omissions to act which constitute a breach of Contractors’ obligations hereunder;

(d) Any product liability claims of any kind, including, without limitation, all claims under or with respect to Product warranties; and

(e) Environmental liability, if any, as a result of this Agreement or any transaction contemplated by or engaged in pursuant to or on account of this Agreement.

16.

TERM AND TERMINATION; EVENTS OF DEFAULT

(a) Term of Agreement. This Agreement shall terminate upon the first to occur (the “Termination Date”), of (i) the date of twelve (12) months following the date first appearing above; and (ii) at the Contractors’ sole discretion, upon an Event of Default (as defined below).

(b) Obligations Upon Termination. Except for termination resulting from an Event of Default by the Distributor, on the Termination Date, each Party shall remain liable to perform all matured obligations under this Agreement and the other Transaction Documents, which remain unperformed as of the Termination Date as if this Agreement and the other Transaction Documents, remained in full force and effect. Upon termination for any reason and upon completion of the foregoing obligations in the case of a termination resulting from an Event of Default by the Distributor, all obligations hereunder shall terminate except the continuing obligations of the parties under Sections 11, 12, 13, 15, and 17 (a), (b), (c) hereof.

Any of the foregoing shall constitute an Event of Default:

(i)

If Distributor (A) fails to make any payment due to the Contractors and/or any of their respective Affiliates including, but not limited to, ____, on the date due, or (B) fails in any respect to perform any of its other agreements covenants and/or obligations hereunder and/or in any other Transaction Document and such failure continues unremedied for a period of three (3) business days following Contractor notice thereof, or (C) has made a representation and/or warranty which proves to be false or breaches a representation and/or warranty made hereunder or in any other Transaction Document, or (D) files (or has filed against it) a petition (or otherwise initiates proceedings) for bankruptcy, reorganization, receivership or other proceedings for the protection of debtors, or (E) fails to make any payment due to any third party on or before the due date therefor if the failure to make such payment gives rise to or creates (or if unremedied would give rise to or create) a Lien upon any Products or otherwise restricts and/or limits Contractors’ sale or disposition of the Products or any of them, or (F) has a judgment rendered against it in excess of $50,000, or (G) defaults or any event of default occurs with regard to any material agreement with any third party (or with the passage of time and/or the giving of notice, an event of default or a default would occur).

(ii)

Without waiving or limiting any of Contractors’ other rights and/or other remedies in an Event of a Default and in addition to Contractors’ other rights and remedies (including, but not limited to, its right of set-off pursuant to Section 10(b) hereof), pursuant to this Agreement and/or any other Transaction Document, upon the occurrence of any Event of Default, Distributor shall be liable for immediate payment to Contractors of all amounts due or to become due to Contractors hereunder, including, without limitation, Contractors’ Expenses, Contractors’ Deal Fees the Commitment Fee as well as all Exchange Notes, Distributor’s Notes, and/or other Notes owned by any of the Contractors and/or their respective Affiliates including, but not limited to, ____. Contractors shall further be entitled to reimbursement for all of its costs of collection, whether or not suit has been filed or judgment entered, including, without limitation, reasonable attorneys' fees and expenses as and when occurred. All amounts owed to Contractors pursuant to this Section 16(c) shall carry interest at the rate of 2% per thirty (30) days (or pro-rata if any period is for less than thirty (30) days) (compounding daily) from the date of the Event of Default, or, in the case of Contractors’ costs of collection, from the date such costs are incurred through and including the date all funds owed to the Contractors are paid and received by Contractors in immediately available funds by wire transfer pursuant to wiring instructions provided by Contractor to Distributor.

(iii)

In the Event of Default by Distributor, Contractor shall further be entitled to exercise all the rights and remedies of a secured party under the Uniform Commercial Code as in effect in New York or as otherwise provided under the Security Agreement. The proceeds of any amount recovered by Contractor shall be applied, first, to the payment of Contractors’ reasonable costs and expenses in connection with the enforcement of Contractors’ rights and remedies hereunder; second, toward the payment or satisfaction of all amounts owing Contractor hereunder and/or in any other Transaction Document, including interest thereon; and third, any surplus to be paid to Distributor or as a court of competent jurisdiction may direct. In the case of a deficiency, Distributor shall remain liable for such deficiency after such sale, with interest at the rate herein provided.

17.

MISCELLANEOUS PROVISIONS.

(a) Governing Law, Etc. This Agreement and the terms and conditions set forth herein, shall be governed by and construed solely and exclusively in accordance with the internal laws of the State of New York without regard to the conflicts of laws principles thereof. The parties hereto hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this Agreement shall be brought solely in a federal or state court located in the City, County and State of New York. By its execution hereof, the parties hereto covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agree that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in New York, New York. The parties hereto expressly and irrevocably waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding, the party prevailing therein shall be entitled to payment from the other parties hereto of all of its reasonable counsel fees and disbursements.

(b) ENFORCEMENT, ETC. DISTRIBUTOR AGREES THAT ANY FINAL JUDGMENT RENDERED AGAINST IT IN ANY ACTION OR PROCEEDING SHALL BE CONCLUSIVE AS TO THE SUBJECT OF SUCH FINAL JUDGMENT AND MAY BE ENFORCED IN OTHER JURISDICTIONS IN ANY MANNER PROVIDED BY LAW.

(c) WAIVER OF RIGHT TO JURY TRIAL. THE PARTIES HEREIN ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT, ANY OTHER AGREEMENT RELATED HERETO OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES, AND THEREFORE, THE PARTIES AGREE THAT ANY COURT PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

(d) Notices. All notices required or permitted pursuant to this Agreement shall be in writing and either personally delivered, sent by facsimile transmission (provided evidence of transmission is maintained and produced to show transmissions), email (provided a receipt of such email is provided to the extent necessary to demonstrate such email was sent), Federal Express or similar overnight delivery service, addressed to the respective addresses, email addresses or facsimile numbers of the Parties set forth on the last page of this Agreement, or at such other addresses, emails or facsimile numbers as have from time to time been designated by like written notice. Notices given in the manner prescribed herein shall be deemed given on the date sent or transmitted (as the case may be).

(e) Severability. The paragraphs of this Agreement are severable, and in the event that any paragraph or portion of this Agreement is declared illegal or unenforceable, the remainder of this Agreement will be effective and binding upon the parties.

(f) Waiver; Entire Agreement. This Agreement and other Transaction Documents contain the entire understanding of the parties with respect to the subject matter hereof, and supersedes all prior oral or written agreements, understandings, or arrangements. No waiver of or modifications to the provisions of this Agreement and/or any other Transaction Document will be valid unless in writing and signed by all parties. This Agreement and the other Transaction Document shall be binding upon and inure to the benefit of the parties hereto, their successors, assigns and legal representatives.

(g) Assignment. Distributor may not transfer or assign its rights or obligations hereunder without the prior written consent of the Contractors, and any attempted transfer or assignment shall be null and void.

(h) Reservation of Shares. No later than 180 days following the date hereof (the “Start Date”), the Distributor shall deliver the executed TA Agreement to its then transfer agent, so that at all times commencing on the Start Date and as long as either Contractor (or any of their respective Affiliates including, but not limited to, ____) owns any shares of Common Stock, Notes, securities of the Distributor’s convertible, assignable and/or exchangeable into shares of Common Stock, Distributor’s Notes, and/or Exchange Notes, (the “Common Stock”) the Distributor shall take all action necessary (and/or reasonably requested by the Contractor) to, at all times have authorized, and reserved out of its authorized but unissued shares of Common Stock for the purpose of issuance to the Contractors and any of their respective Affiliates including, but not limited to, ____ upon conversions of Notes by any such persons (“Conversion Shares”), no less than four hundred (400%) percent of the sum of the maximum number of shares of Common Stock issuable upon conversion of the issued and outstanding Notes and all other securities of the Distributor convertible, exercisable and/or exchangeable into shares of Common Stock owned by either Contractor and/or their respective Affiliates including, but not limited to, ____, including, but not limited to, the Class A Warrant to Purchase 2,5000,000 shares (the “Warrant Shares”), of Common Stock ; Warrant No.: A-1; Date of Issuance: July 14, 2014 (the “7/14/14 Warrant”) (without taking into account any limitations on the issuance thereof pursuant to the terms of the Notes, the 7/14/14 Warrant, and/or any other securities of the Distributor) (the “Required Reserved Amount”). If at any time, and from time to time, following the Start Date, the number of shares of Common Stock authorized (and reserved for issuance commencing on the Start Date), is not sufficient to meet the Required Reserved Amount, the Distributor will promptly take all corporate action necessary to authorize (and commencing on the Start Date, reserve) a sufficient number of shares, including, without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Distributor’s obligations under the 7/14/14 Warrant and the Notes, in the case of an insufficient number of authorized shares, obtain stockholder approval of an increase in such authorized number of shares, and voting the management shares of the Distributor in favor of an increase in the authorized shares of the Distributor to ensure that the number of authorized shares is sufficient to meet the Required Reserved Amount. The Distributor shall, no later than the Start Date, initially reserve the Required Reserved Amount on its own books and records (the “Reserve”) for the issuance of Conversion Shares and Warrant Shares and any other shares of Common Stock required to be issued by the Distributor to the Contractor, which initial reservation shall be authorized by the unanimous written consent of the Distributor’s Board of Directors delivered on the date hereof. From and after the Start Date of this Agreement through and including the date all of the Distributors Indebtedness and all other obligations owed to the Contractor pursuant to the Transaction Documents and/or otherwise, including, but not limited to, the Note, is paid and performed in full, confirmation of which must be obtained by in writing from the Contractors, the Distributor shall (a) issue or cause its transfer agent to issue the Conversion Shares, Warrant Shares and all other shares of Common Stock required to be issued to the Contractors or any of such persons’ broker only (subject to the immediately following clause (b)), (b) issue or cause its transfer agent to issue shares of Common Stock to the Contractor and/or any of their respective Affiliates including, but not limited to, ____, or its broker under the Notes and the Warrants and/or other securities of this Company from sources other than the Reserve, unless the Contractor delivers to the Distributor written pre-approval of such issuance from the Reserve, and (c) not reduce the Reserve under any circumstances, unless the Contractor delivers to the Distributor written pre-approval of such reduction. The Distributor shall immediately add shares of Common Stock to the Reserve to ensure that the Required Reserve Amount is in the Reserve at all times. The Distributor shall increase the amount of shares of Common Stock in the Reserve upon receipt of written notice, which may be in email form, by the Contractor (and/or its assigns) in order to ensure that the Reserve contains the Required Reserve Amount. Notwithstanding to the contrary provided herein or elsewhere, if at any time the number of shares of Common Stock in the Reserve, is less than the Required Reserved Amount, the Contractors and/or any of their respective Affiliates including, but not limited to, ____, may send written notice to the Distributor’s then transfer agent to increase out of the Distributor’s authorized but unissued shares of Common Stock such number of additional shares of Common Stock so the Reserve consists of at least the Required Reserve Amount, provided, that the number of shares of Common Stock in the Reserve shall never be decreased or used for any other purposes other than for issue to the holder upon each conversion by the holder of the Notes into Conversion Shares and the 7/14/14 Warrant into Warrant Shares. As a condition to the Contractors executing this Agreement, all actions required by the Distributor in this Section 17(h) shall be approved by the unanimous written consent of the Distributor’s Board of Directors which shall be delivered to the Contractors on the execution of this Agreement.

(i) Reporting Status. Until the date on which the Contractors shall have sold all of their respective Conversion Shares, Warrant Shares and none of the Notes and/or any portion of the 7/14/14 Warrant are outstanding (the “Reporting Period”), the Distributor (i) shall timely file all reports required to be filed by the Distributor with the SEC pursuant to the 1934 Act within the time periods required by the SEC including all applicable extension periods, (ii) the Distributor shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would no longer require or otherwise permit such termination, and (iii) shall at any time and from time to time file, upon request of the Contractors, a Current Report on Form 8-K to publicly disclose any material, non-public information the Contractors reasonably believe they are in possession of (or the Distributor reasonably believes the Contractors are in possession of); and (iv) within two (2) business day from the execution of this Agreement file a Current Report on Form 8-K disclosing this Agreement, the other Transaction Documents and/or any other material, non-public information that the Contractors reasonably believe they might be in possession of.

(j) Further Assurances. From and after the date hereof, each party will execute all documents and take such further actions as the other may from time to time reasonably request in order to carry out the transactions provided for herein and in the other Transaction Documents and accomplish the purposes contemplated hereby and thereby.

(k) Publication. Contractors each shall have the right to publicize (by "tombstone" or comparable publication) the Purchase Order Assignment Program evidenced hereby (including the date and size of the facility).

(l) Counterparts; Facsimile and Email Delivery. This Agreement may be executed in one or more counterparts, each of which taken together shall constitute one and the same instrument, admissible into evidence. Delivery of an executed counterpart of this Agreement by email and/or facsimile shall be equally as effective as delivery of a manually executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by facsimile or email shall also deliver a manually executed counterpart of this Agreement, but the failure to deliver a manually executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement and shall not be considered a breach or violation of this Agreement.

(m) No Issuances. Unless and until (i) prior to the Start Date, there are sufficient authorized but unissued shares of Common Stock to issue upon full conversion of all Notes issued and outstanding and the full exercise of the 7/14/14 Warrant, and (ii) following the Start Date, the amount of shares of Common Stock authorized and reserved is sufficient at all times for the express purposes set forth Section 17(h), then no securities of the Distributor may be issued other than to the Contractors’ and their respective Affiliates including, but not limited to, ____.

18. RIGHT OF CONTRACTORS TO BE PAID IN DISTRIBUTOR’S NOTES. Any funds owed to the Contractors pursuant to this Agreement and/or any of the other Transaction Documents, shall, in the sole discretion of the Contractors, be paid by the Distributor through the issuance to the Contractors of Distributor’s Notes.

19. USERY SAVING CLAUSE; INDEPENDENT ADVICE.

(a) Notwithstanding anything to the contrary provided in this Agreement, or elsewhere, the Contractors shall never be entitled to charge, receive or collect, nor shall amounts received by the Contractor be credited as interest (and/or deemed interest) so that the Contractor shall be paid by the Distributor, a sum greater than interest (and/or deemed interest) at the maximum nonusurious interest rate, if any, that at any time may be contracted for, charged, received, or collected the Distributor’s financial obligations to the Contractors under this Agreement and/or under any other Transaction Document, under applicable law (the “Maximum Rate”). It is the intention of the Distributor and the Contractor that this Agreement and the other Transaction Documents comply with all applicable law. If the Contractor ever contracts for, charges, receives, or collects, anything of value from the Distributor which is deemed to be interest (and/or deemed interest) under applicable law, and if the occurrence of any circumstance, event or contingency, should cause such interest (and/or deemed interest) to exceed the Maximum Rate, any such excess amount shall be applied to the reduction of any Notes and if all of such Notes are already paid in full, any remaining excess shall be deducted from funds owed to the Contractors pursuant to this Agreement and the other Transaction Documents with any excess being paid to the Distributor. In determining whether or not interest (and/or deemed interest) paid or payable exceeds the Maximum Amount, the Distributor and the Contractors shall, to the maximum extent permitted by applicable law, (i) characterize any nonprincipal payment as an expense, fee or premium rather than as interest (and/or deemed interest), (ii) amortize, prorate, allocate and spread the total amount of interest (and/or deemed interest) throughout the full term of the Notes so that the actual rate of interest (and/or deemed interest)on account of such indebtedness is uniform throughout the term of the Notes and/or (iii) allocate interest (and/or deemed interest) between portions of any notes and/or other obligations, to the end that no such portion shall bear interest (and/or deemed interest) at a rate greater than that permitted by applicable law. The terms and provisions of this Section 19 shall control and supersede every other conflicting provision of all agreements between the Distributor and the Contractors.

(b) The Distributor hereby acknowledges, represents and warrants that it (i) has been advised by the Contractor to seek the advice of its legal, tax and accounting experts in the connection with the Transaction Documents and the transactions set forth in the Transaction Documents, as to, among other items, the tax and accounting effects thereof, and (ii) it has had the opportunity and has obtained the advice of legal counsel of the Distributor’s choice in connection with the transactions set forth in the Transaction Documents.

20. CONTRACTORS RIGHT TO APPOINT AGENTS

(a) The Contractors shall, in their sole discretion, have the right at any time and from time to time, to appoint an agent (a “Contractors’ Agent”) and/or any substitute Contractors’ Agent (and deliver written notice to the Distributor of the name, address, telephone number, email address and other contact information of the Contractors’ Agent as well as the scope of the Contractors’ Agent’s powers), to act for and on behalf of the Contractors pursuant to and in accordance with this Section 20. With regard to a Contractors’ Agent appointed by the Contractors pursuant to this Agreement, any such Contractors’ Agent can take such actions on Contractors’ behalf and to exercise such powers as are delegated to the Contractors’ Agent by the terms hereof or otherwise in writing from the Contractors, together with such actions and powers as are reasonably incidental thereto. The provisions of this Section 20 are solely for the benefit of the Contractors’ Agent and the Contractors, and the Distributor shall not have rights as a third party beneficiary of any of such provisions.

(b) The person serving as the Contractors’ Agent hereunder shall have the same rights and powers in its capacity as Contractors’ Agent that the Contractors have and may exercise the same as though it were not the Contractors’ Agent and the term “Contractor” or “Contractors” shall, unless otherwise expressly indicated herein or unless the context otherwise requires, include the person serving as the Contractors’ Agent hereunder in its individual capacity. The Contractors’ Agent, in its capacity as agent for the Contractors, may take such actions as expressly provided in writing to the Contractors’ Agent and the Distributor by the Contractors.

(c) The Contractors’ Agent shall not have any duties or obligations except those expressly set forth herein and in the other Transaction Documents. Without limiting the generality of the foregoing, the Contractors’ Agent:

(i) shall not be subject to any fiduciary or other implied duties, regardless of whether a breach or violation of this Agreement and/or any other Transaction Document has occurred and is continuing; and

(ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Transaction Documents that the Contractors’ Agent is required to exercise as directed in writing by either or both Contractors, if any; provided, however, that the Contractors’ Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Contractors’ Agent to liability or that is contrary to any Transaction Document or applicable law; provided, further, the Contractors’ Agent shall not be liable for any action taken or not taken by it (x) with the consent of or as the Contractors’ Agent shall believe in good faith shall be necessary under the circumstances or (y) in the absence of its own gross negligence or willful misconduct.

(d) The Contractors’ Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper person. The Contractors’ Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon.

(e) The Contractors’ Agent may at any time give notice of its resignation to the Contractors and the Distributors.

21. FUNDS FROM PURCHASE OF DISTRIBUTOR’S NET OPERATING LOSS CARRY FORWARD. The Distributor has applied to the State of New Jersey to receive a tax voucher from the State of New Jersey for approximately $810,000 representing the purchase price requested by the Distributor to be paid by a third party purchaser to purchase the Distributor’s net operating loss carry-forward for the year ending December 31, 2014. The Distributor agrees that it will immediately inform the Contractors in writing when such payment (or if it comes in installments, each time it receives installment payments) is received by the Distributor, and each such payment shall be forwarded and deposited in its entirety into the Contractors; Bank Account and upon receipt by the Contractors, the Contractors shall apply all such funds, at their sole option, to pay off any obligations owed to them and/or any of their respective Affiliates including, but not limited to, ____, under the Transaction Documents including, but not limited to, pursuant to any Notes, with any remaining funds to be provided to the Distributor.

22. THE CONTRACTORS. Except if and to the extent otherwise provided in writing by a Contractor to the Distributor and the other Contractor, and notwithstanding anything to the contrary provided herein and/or in any other Transaction Document, the Distributor may rely on any advice, notice, request, document, letter, consent, statement, instructions, direction or other message delivered by either Contractor to the Distributor in writing of any kind and such will be binding on both Contractors, as the Contactors have agreed that each Contractor has the power with respect to this Agreement and the other Transaction Documents to make decisions for and on behalf of and bind the other Contractor; provided, however, neither Contractor shall be able to change the terms of any Note or any other securities in the name of the other Contractor or change the ownership thereof or change any other term of any other Transaction Document to make such term more favorable to such Contractor to the detriment of the other Contractor without the express written consent of such other Contractors.

23. CONFIDENTIALITY. The Parties acknowledge and agree that during the term of this Agreement the Contractors on the one hand and the Distributor on the other, may obtain information relating to each other’s business of a confidential and/or proprietary nature (“Confidential Information”). Such Confidential Information may include, but is not limited to, future product releases, names of vendors including, but not limited to Manufacturers, trade secrets, know-how, data, pricing, discount schedules, lists of customers, financial information and any sales and marketing plans. The Parties agree that each shall at all times, both during the term of this Agreement and at all times thereafter, keep and hold such Confidential Information in the strictest confidence, and shall not use such Confidential Information for any purpose, other than as may be reasonably necessary for the performance of their respective obligations as provided herein and in the other Transaction Documents without the other’s prior written consent. Information shall not be considered to be Confidential Information if (1) it has been published or is otherwise readily available to the public other than by a breach of this Agreement; (2) it has been rightfully received from a third party without confidential limitations; (3) it has been independently developed by personnel or agents having no access to Confidential Information; or (4) it was known prior to its first receipt from the other Party. The Parties agree, however, that each may disclose Confidential Information to their respective representatives, agents, legal counsel and/or employees solely for the purposes of exercising their respective rights or performing their respective obligations under this Agreement and the other Transaction Documents. A disclosure of Confidential Information (i) in response to a valid order by a court, subpoena or other governmental and/or regulatory body, (ii) otherwise required by law, or (iii) necessary to establish and/or enforce a Party’s rights and remedies under this Agreement and/or any other Transaction Documents, shall not be considered to be a breach of this Agreement or a waiver of confidentiality for other purposes; provided, however, that a Party shall provide prompt written notice thereof to the other Parties to enable such other Parties to seek a protective order or otherwise prevent such disclosure.

[SIGNATURE PAGES TO FOLLOW]

This Agreement has been executed in New York, New York on the day and year first above written.

DISTRIBUTOR:	CONTRACTORS:

INERGETICS, INC.	[____]

By:		By:
	Name: Michael James		Name:
	Title: Chief Executive Officer		Title:

Address:			Address:


Facsimile:			Facsimile:

Email:			Email:

			[____]

		By:
			Name:
			Title:

			Address:


			Facsimile:

			Email:

EXHIBIT A

PURCHASE ORDER PACKAGE CERTIFICATE

This Certificate is executed by ___________________________, who is the ______________________ of INERGETICS, INC., a Delaware corporation ("Distributor"), in connection with the Master Purchase Order Agreement dated as of September 1, 2015, (the "Agreement") by and among ____ and ____ (collectively, "Contractors")

This Certificate is being delivered by the Distributor to the Contractors pursuant to the Agreement to provide information to the Contractors to assist the Contractors in determining whether to, among other items, accept the assignment from the Distributor of a P.O. and provide the Distributor with certain funds, all as provided in, pursuant to and in accordance with the Agreement.

The undersigned certifies to Contractors that all of the information contained in this Certificate is true, complete and accurate in all respects and does not omit any information necessary to make the information contained herein in light of the circumstances upon which information is given true, complete and accurate in all respects; and this representation and warranty is made to the Contractors to induce Contractors to accept the assignment of a P.O. and to pay the Manufacturer’s Price for the Products and make advances in accordance with the Agreement in connection with such P.O.

All capitalized terms set forth herein and not otherwise defined herein, shall have the meanings set forth in the Agreement.

all requests by the Distributor to the Contractors for the Contractors to accept an assignment of a P.O. shall only be delivered to the Contractors on TUESDAYS AND Thursdays of each week; and any such requestS received following a Thursday will be TREATED by Contractors AS HAVING BEEN RECEIVED ON the next TUESDAY.

NO P.O. MAY BE SUBMITTED BASED UPON INDICATIONS OF INTEREST BY A CUSTOMER; ALL P.O.’s SUBMITTED TO THE CONTRACTORS FOR APPROVAL MUST BE ACTUAL AND TO THE BEST KNOWLEDGE OF THE DISTRIBUTOR, P.O.’s THAT THE CUSTOMER INTENDS TO HONOR AND BE BOUND BY.

THE DISTRIBUTOR IS REQUESTING THE CONTRACTORS PROVIDE TO THE DISTRIBUTOR THE FOLLOWING DOLLAR AMOUNT OF FUNDS RELATING TO THE P.O.:

(i)

Name of Customer set forth on the P.O. _______

(ii)

Date of P.O. _______

(iii)

Distributor is requesting $_____ from Contractors

(iv)

The P.O. Price is $ _________

(v)

Such $ ________ represents _____ % of the P.O. Price

(vi)

Of such above requested amount, please send (x) $_____ directly to the Manufacturer named and in accordance with the information provided below, which $______, represents 50% of the Manufacturer’s Price for the Products set forth in the P.O. (y) the remaining 50% of the Manufacturer’s Price directly to the Manufacturer within five (5) business days of the Manufacturer’s Shipping Notice provided, such amount shall not be treated as being paid by the Contractors until the date the balance (or any lesser portion), of the Manufacturer’s Price is paid by the Contractors to the Manufacturer, and (z) the remaining funds to the Distributor in accordance with the information provided below, but subject to Section (viii) immediately below.

(vii)

As provided in the Agreement, the undersigned acknowledges, understands and agrees that (x) if the above requested amount of funds is provided by the Contractor to the Distributor, all of the funds sent directly to the Distributor by the Contractors shall only be used for the purposes set forth in Section 3(b)(i)(C) of the Agreement, and (y) in no event shall such requested amount exceed (A) 85% of the P.O. Price and/or (B) when aggregated with all other funds provided to the Distributor (directly and/or indirectly by way of direct payment by the Contractors to the Manufacturer or otherwise), outstanding under the Agreement and/or the other Transaction Documents including, but not limited to, the aggregate principal amount of Exchange Notes, exceed $1,000,000.

(viii)

Such requested amount will only be provided if, among other conditions, all of the required conditions set forth in the Agreement have occurred and no Event of Default has occurred (or with the passage of time would occur) and is continuing.

1. Customer Information

(a) Attached is a purchase order for Products (the “Purchase Order”) number: _______ ; dated: _______________, 201__; in the total amount of: $________; and from the following customer ("Customer"), and Distributor has received a bona fide indication of interest from the following Customer.

Name:
Address:
Person in charge:
Phone Number:
Facsimile:
Email:

(b) Attached is a true and complete credit history, payment history and credit report of the Customer.

______ Assignable to the Contractors by Distributor without Customer's consent; or

______

Not assignable without Customer's consent, but attached is the consent of the Customer to assignment to Contractor;

______

Not assignable, but the proceeds of the Purchase Order are assignable; or

2. Product Information

(a)

Original (or a true, accurate and complete copy of) Purchase Order - attached.

(b)

Identification of "Product(s)":

———————————————————-

(c)

Quantity of Product Ordered:

———————————————————-

(d)

Specifications of Product:

———————————————————-

Price and Delivery Information

(a)

Aggregate Purchase Order Price: __________________

(b)

Price per Unit of Product: __________________

(c)

Delivery Date ("P.O. Delivery Date") __________________

(d)

Terms as to liability for shipping cost, insurance, "process and hold", risk of loss, etc.:

———————————————————-

Manufacturer’s Information

(b)

Name of the Manufacturer:

———————————————————-

(c)

Address of Manufacturer’s Facility where Manufacturing of Products will occur:

———————————————————-

(d)

Contact Person at Such Address:

(i) Name: _____________________________

(ii) Title: ______________________________

(iii) Cell: _______________________________

(iv) Landline: ___________________________

(v) Email: ______________________________

(vi) Facsimile: ___________________________

(e)

Contact Person at Such Address:

(i) Name: _____________________________

(ii) Title: ______________________________

(iii) Cell: _______________________________

(iv) Landline: ___________________________

(v) Email: ______________________________

(vi) Facsimile: ___________________________

(f)

Aggregate Manufacturer’s Price to be Paid:

U.S. $_________________

(g)

Due Date and the Amount of each Installment Payment for the Manufacturer’s Price is due:

(i) $____________ on ______________; and

(ii) $____________ on ______________;

(h)

How Manufacturer’s Price is to be Paid [CHECK ONE]:

(i) ¨ Wire Transfer

(ii) ¨ Check

(i) Wiring Instructions of Manufacturer if Payment of Manufacturer’s Price is to be made by Wire:

———————————————————-

(j) Attached hereto is a copy of the Manufacturer’s Pricing Quote for the Manufacturer’s Price for the Purchase Order

(k) Date Manufacturer will start manufacturing Products:

________________________________

(l) Date Manufacturer will have completed manufacturing:

________________________________

(m) Estimated date Manufacturer will ship Products:

________________________________

(n) Manufacturer will Ship Products to [CHECK ONE]:

(i) ¨ The Distributor

(ii) ¨ The Customer (if to Customer and the Customer’s address for delivery of Product is different than that provided in Section 1(a) of this Certificate, provide below Customer’s address for delivery of the Products:

———————————————————

Production Information

(a)

Brief description of Production Processes and Requirements:

———————————————————-

(b)

Cost of Production:

(c)

Units of Product per day:

(d)

Duration of Production Run to Manufacture Products for the P.O. Order:

6. Gross Margin

Here is the computation of Projected Net Gross Margin before depreciation, including, without limitation, Manufacturer’s Price (which includes all of cost of materials, packaging, shipping and Distributor's direct costs:

7. Assignment of Purchase Order

Attached is an Assignment of the Purchase Order, duly executed by authorized officers of Distributor.

8. Distributor represents, warranties, agrees and covenants that, among the other representations, warranties, agreements and covenants set forth in the Agreement, the Security Agreement and/or any other Transaction Document, that none of the Products, work-in-process or inventory is subject to a Lien and/or other security interest of any person other than the Contractors and/or any of their respective Affiliates including, but not limited to, ____; and the Distributor shall inform the Contractors immediately of, and shall take any and all actions to prevent a Lien and/or security interest being placed on or against, any Products, work-in-process or inventory at any time as long as the Contractors are owed any funds related to such Products, work-in-process or inventory.

9. Attached hereto is a fully executed, dated and binding Warranty/Release Waiver (as required pursuant to and defined in Section 3(b)(vii) of the Agreement), of the Customer.

Dated: ___________________, 2015

INERGETICS, INC.

By:
	Name: Michael James
	Title: Chief Executive Officer

EXHIBIT A (continued)

ACCEPTANCE OF PURCHASE ORDER CERTIFICATE

The foregoing Purchase Order Certificate, as prepared and delivered by Distributor, is hereby accepted and approved.

This Acceptance of Purchase Order Certificate is executed and dated by [CHECK ONE]

The Duly Appointed Agent of the Contractors (the “Agent”)

One of the Contractors

A. If the Agent is signing for and on behalf of the Assignors, the Agent must sign, complete and date the following:

___________________________________

Signature of Agent

___________________________________

Name of Agent (Print)

___________________________________

Social Security Number of Agent

Address of Agent:

___________________________________

If one of the Assignors is signing for the Assignors, such Assignor must check the proper box below, execute, complete and date the following:

Assignor signing for the Assignors [CHECK ONE]

____ (an Assignor)

By:		,
	Name:
	Title:

Dated:

___________, 201__

EXHIBIT A (continued)

ASSIGNMENT OF PURCHASE ORDER

FOR VALUE RECEIVED, INERGETICS, INC., a Delaware corporation ("Assignor") hereby assigns, transfers and delivers to ____, and ____ ("Assignees") all of Assignor's right, title and interest in, to and under that certain Purchase Order, identified as follows, for the purposes, and pursuant to the terms and conditions of that certain Master Purchase Order Purchase Agreement, dated as of September 1, 2015, between Assignor and Assignees:

Assignor's P.O. No.:_______________

Customer Name:_____________________

P.O. Date:_________________________

INERGETICS, INC.

By:
	Name: Michael James
	Title: Chief Executive Officer

EXHIBIT B

DISTRIBUTOR'S SPECIFICATIONS

The following are performance specifications, obligations, agreements and covenants (collectively the "Distributor’s Specifications") required of Distributor in connection with its obligations under the Purchase Order Assignment Agreement (the “Agreement”), to which this Exhibit B is attached. All capitalized terms used but not defined herein shall have the meaning set forth in this Agreement.

1. To deliver to each Customer a Purchase Order Acknowledgement on such form as Contractor may accept directing that payment of each P.O. Invoice be made to Contractor or the Contractors’ Bank (if any).

2. To cooperate with Contractor and the Manufacturer concerning the Manufacturing of Products pursuant to an Accepted P.O.

3. To notify Contractor immediately upon the receipt of Products at the Premises or delivery of the products to the Customer’s Premises. Upon such delivery to the Distributor’s Premises, to inspect the quality and quantity of Products and to notify Contractor of any deficiencies.

4. To permit Contractors access to the Distributor’s Premises during normal business hours for the purpose of inspecting, safeguarding, and otherwise observing and overseeing the storage of Products.

5. To take all actions necessary to ensure the proper manufacturing of Products and the shipment thereof to Customers in accordance with Accepted P.O.'s, including without limitation, processing, warehousing, shipping and insuring Products in accordance with the specifications set forth in the applicable Accepted P.O., and to deliver the same to the Customer on or before the P.O. Delivery Date.

6. To maintain and supply sufficient quantity and quality of equipment, Products, labor and facilities in order to perform each of its obligations described in this Exhibit "B".

7. To maintain all inventories of Products in such segregated locations upon the Premises as the Contractor may approve; to properly identify such Products as being the property of the Contractor and further identify the same by the P.O. and the Customer for which such Products relate; and to implement such commercially reasonable security procedures and devices as Contractor may require for the preservation and segregation of Products, including without limitation, the construction and maintenance of secured cages and storage rooms for such Products. To not ship or otherwise release any Products except with the prior written consent of the Contractors.

8. To ship all P.O. Inventory by such date, by such means, and under such terms as required pursuant to the applicable P.O. and to deliver the P.O. Inventory on or before the P.O. Delivery Date. Distributor shall further provide Contractors with written notice of each shipment of P.O. Inventory immediately following shipment thereof.

9. To prepare and deliver to the Contractors each P.O. Invoice immediately following shipment of the P.O. Inventory.

10. To fully insure in the name of the Distributor and the Contractors all P.O. Inventory during shipment to Customers in amounts, with carriers and on terms and conditions acceptable to Contractor.

11. To direct all Customers to make payment with respect to a P.O. Invoice to the Contractors’ Bank Account and to take no actions and make no statements which direct (or have the effect of causing) any P.O. Customer to make any payment with respect to any P.O. Invoice to anyone other than to the Contractors’ Bank Account.

12. Except as provided in Section 13 below, to not accept any payment (including rebates, set-offs, and other Customer adjustments) with respect to any P.O. Invoice other than through the Contractors’ Bank Account.

13. To receive and hold in trust for the sole and exclusive benefit of Contractors all sums and instruments representing payment of any P.O. Invoice and all proceeds which for any reason come into the possession of Distributor, its agents, representatives or any other party acting on behalf of Distributor, and promptly to deliver or cause delivery of such sums to the Contractor.

14. To maintain in the name of Distributor and Contractors general comprehensive liability insurance, with extended coverage and coverage against theft and product liability and such other insurance and coverages as may be commercially reasonable with exclusions, with carriers, and on terms and conditions that may be acceptable to Contractors in their sole discretion.

15. To deliver to Contractors a list of unpaid accounts receivable relating to P.O. Invoices as of last day of the preceding calendar month, such list to be delivered by the 10th day of the next succeeding month and certified as complete and accurate by a duly authorized officer of Distributor.

16. To not pledge any of its assets or cause or permit any Lien or security interest to be taken in any of its assets and/or the All Collateral, except such Liens as are described on Schedule "I" of this Agreement or are otherwise approved in writing by Contractor.

17. To provide Contractors with written notice immediately upon (i) the filing or threat of filing of a bankruptcy petition by or against Distributor, (ii) the initiation of foreclosure proceedings or other similar action against Distributor or any of its assets, (iii) a request or demand made upon Distributor to make, or for any reason Distributor makes, an assignment for the benefit of its creditors, or (iv) Distributor becomes unable to pay its bills in the ordinary course of business as they become due.

18. To immediately notify Contractors of any pending or threatened litigation, administrative proceeding, arbitration, or governmental investigation concerning or relating to Distributor or any goods, services or assets that are the subject of an Accepted P.O. or are pledged as Collateral pursuant to the Security Agreement.

EXHIBIT D

RE-ASSIGNMENT AND RELEASE OF PURCHASE ORDER

UPON AND SUBJECT TO PAYMENT OF the sum of $_____ on or before _________, 201_ ("Payment Date"), [____] and [____], ("Assignors") hereby assigns, transfers and delivers to INERGETICS, INC. ("Assignee") all of Assignors’ right, title and interest in, to and under that certain Purchase Order identified below, and hereby releases any claims in or with respect to such Purchase Order. The applicable Purchase Order is:

	P.O. Invoice No.:
	Customer Name:
	P.O. Invoice Date:

This Assignment shall become effective immediately upon receipt of immediately available funds in the amount described above.

This Re-Assignment and Release of Purchase Order is executed and dated by [CHECK ONE]

The Duly Appointed Agent of the Assignors (the “Agent”)

One of the Contractors

A. If the Agent is signing for and on behalf of the Assignors, on behalf of the Assignors, the Agent must sign, complete and date the following:

___________________________________

Signature of Agent

___________________________________

Name of Agent (Print)

___________________________________

Social Security Number of Agent

Address of Agent:

___________________________________

If one of the Assignors is signing such Assignor must check the proper box below, execute, complete and date the following:

Assignor signing for the Assignors [CHECK ONE]

____ (an Assignor)

By:
	Name:
	Title:

Dated:

___________, 201__

ACCEPTANCE

INERGETICS, INC., a Delaware corporation ("Assignee"), hereby accepts the foregoing re-assignment of Purchase Order, and covenants and agrees to fully perform all obligations with respect thereto and hereby releases and holds harmless ____, ____, any and all Contractors’ Agents and each of the above named person’s respective employees, successors, Affiliates, equity holders, debtholders, attorneys, representatives, advisors, members, managers, officers and directors and all other related persons from any responsibility for the performance of any such obligations whether required before, on or after the date of this Acceptance.

INERGETICS, INC.

By:		,
	Name:
	Title:

Dated: _________________

ADDENDUM I

In this Agreement:

(a) The "Contractors’ Bank" is:

(b) The "Contractors’ Bank Account" is maintained at the Contractors’ Bank; ACCOUNT NO. ______________ at the Contractors’ Bank.

Exhibit 10.2

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF.

INERGETICS, INC.

SENIOR SECURED CONVERTIBLE DEMAND PROMISSORY NOTE

Issuance Date: September 1, 2015		Original Principal Amount: U.S. $_______
Note: P.O. Note No-[__]

FOR VALUE RECEIVED, Inergetics, Inc., a Delaware corporation (the “Company”), hereby promises to pay to ______ or registered assigns (the “Holder”) $______ (the “Original Principal Amount,” and as reduced pursuant to the terms hereof pursuant to any payment, conversion or otherwise, the “Principal”), and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the “Issuance Date”), until all amounts due under this 12% Senior Secured Convertible Promissory Note (including all Notes issued in exchange, transfer or replacement hereof this “Note”), have been paid in full by the Company to the Holder. This Note was issued to the original Holder by the Company on the Issuance Date pursuant to the Master Purchase Order Assignment Agreement, dated as of September 1, 2015, by and among, ______ (“______”),______ (“______”) and the Company (the “P.O. Agreement”), solely in exchange for a 12% $______ aggregate principal amount Convertible Promissory Note of the Company owed by the Holder; Issue Date ______, 2015 (the “Exchange Note”). The $______ Original Principal Amount of this Note equaled the sum of (i) the $______ aggregate principal amount, plus (ii) $______ accrued but unpaid interest outstanding on the Exchange Note through and including the Issuance Date. Certain capitalized terms used here are defined in Section 22. This Note is one of a series of 12% Senior Secured Convertible Demand Promissory Notes issued pursuant to the P.O. Agreement.

(i) This Note and all obligations of the Company under this Note to the original Holder (the “Obligations”), and (ii) certain other obligations of the Company to the original Holder, ______ and ______ (the original Holder, ______ and ______ shall collectively be referred to as the “Secured Parties”), pursuant to various other notes, debentures and/or other instruments (the “Other Instruments”), are secured by and pursuant to a Security Agreement dated as of September 1, 2015, by and among, the Company and the Secured Parties; and certain payment obligations of the Company to the Subordinating Creditors (as defined below), were expressly subordinated by the Subordinating Creditors to the Obligations of the Company to (i) the Holder under this Note, and (ii) the Holder and the other Secured Parties under the Other Instruments pursuant, to a Subordination Agreement dated September 1, 2015 by, between and among, the Company, ______ and ______ (collectively, the “Subordinating Parties”), and the original Holder and the other Secured Parties (the “Subordination Agreement”).

1) MATURITY. This Note and all amounts due hereunder including, but not limited to, the Principal and Interest thereon (or any portion of this Note if the Demand (as defined below) states that a specific portion of the Principal and Interest on this Note the Holder is declaring due and payable, with the remaining portion of Principal and Interest continuing to be issued and outstanding and continuing to accrue Interest as provided elsewhere herein) shall be due and payable immediately upon the sending of a written demand by the Holder to the Company (a “Demand”).

2) INTEREST; INTEREST RATE.

a) This Note shall accrue Interest daily on a compounding basis on all amounts due under this Note commencing on the Issuance Date through and including the date all amounts owed pursuant to this Note have been received in full by the Holder at the Interest Rate. Interest on this Note shall be due and payable upon (i) Demand, or (ii) upon conversion into shares of Common Stock pursuant to Section 3 of the Principal related to the Interest (each an “Interest Date”). If an Interest Date falls on a Holiday, the next day that is not a Holiday shall be the Interest Date. All amounts due under this Note shall be paid in cash.

b) This Note shall accrue Interest on all Principal owed hereunder (“Interest”) at the rate of (i) 3.5% from the Issuance Date through and including the date and thirty (30) days from the Issuance Date (the “30^th Day”), and (ii) for each ten (10) consecutive days (pro-rata for shorter than 10 day periods) following the 30^th Day, until the date all amounts owed to the Holder under this Note are paid in full, one at one-half (1.5% percent) (collectively, the “Interest Rate”).

c) From and after the occurrence and during the continuance of an Event of Default, the Interest Rate shall be increased to 4.5% and 2.5% for the 30 day period ending on the 30^th Day and for each ten (10) consecutive days (pro-rata for shorter than 10 day periods) following the 30^th Day, respectively. In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided, that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default.

3) CONVERSION OF NOTES. This Note shall be convertible into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), on the terms and conditions set forth in this Section 3.

a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times following the Issuance Date, the Holder shall be entitled to convert all or any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock to the nearest whole share. The Company shall pay any and all transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.

b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).

i) “Conversion Amount” means the sum of (A) the portion of the Principal to be converted, with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such portion of the Principal, and (C) all other amounts due to the Holder hereunder.

ii) “Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination, the Market Price (as defined below).

c) Mechanics of Conversion.

i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company and the Transfer Agent and (B) if required by Section 3(c)(iii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first (1^st) Business Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent. On or before the third (3^rd) Trading Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (x) provided that the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system or (y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled. If required by Section 3(c)(iii), within three (3) Business Days following a conversion of this Note, the Holder shall surrender this Note (or deliver an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction as contemplated by Section 11(b)) to the Company. If this Note is physically surrendered for conversion if required by Section 3(c)(iii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the Holder a new Note (in accordance with Section 11(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date, irrespective of the date such Conversion Shares are credited to the Holder’s account with DTC or the date of delivery of the certificates evidencing such Conversion Shares, as the case may be.

ii) Company’s Failure to Timely Convert. If the Company shall fail to issue a certificate to the Holder or credit the Holder’s balance account with DTC, as applicable, for the number of shares of Common Stock to which the Holder is entitled upon conversion of any Conversion Amount on or prior to the Share Delivery Date (a “Conversion Failure”), then (A) the Company shall pay damages to the Holder for each Trading Day of such Conversion Failure in an amount equal to 5.0% of the product of (1) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled, and (2) the Closing Sale Price of the Common Stock on the Share Delivery Date and (B) the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, any portion of this Note that has not been converted pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In addition to the foregoing, if the Company shall fail on or prior to the Share Delivery Date to issue and deliver a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion of any Conversion Amount or on any date of the Company’s obligation to deliver shares of Common Stock as contemplated pursuant to clause (ii) below, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to issue and deliver such certificate or credit the Holder’s balance account with DTC for the shares of Common Stock to which the Holder is entitled upon the Holder’s conversion of the applicable Conversion Amount shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Sale Price on the Conversion Date.

iii) Registration; Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the name and address of the Holders of the Note and the principal amount of the Note held by such Holders (the “Registered Notes”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the Holders of the Note shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of Principal and Interest, if any, hereunder, notwithstanding notice to the contrary. The Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign or sell all or part of any Registered Note by a Holder, together with any required documentation under the Documents (as defined in the Securities Purchase Agreement) including any legal opinions, if applicable, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate Principal Amount as the Principal Amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 11. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Principal amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal and Interest, if any, converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

iv) Disputes. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 16.

d) Limitations on Conversions. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to the terms and conditions of this Note, to the extent that after giving effect to such conversion, the Holder (together with the Holder’s Affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-K, Form 10-Q, Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the sixty-first (61 st ) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of Notes. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3(d)(i) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.

4) EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT.

a) Event of Default. Each of the following events shall constitute an “Event of Default”:

i) if the Common Stock is or becomes DTC Eligible, then at any time thereafter that the Common Stock is no longer DTC Eligible or DTC has issued a “freeze” or “chill” on the Common Stock;

ii) the suspension from trading or quotation eligibility or failure of the Common Stock to be listed or eligible for quotation on an Eligible Market for a period of five (5) consecutive Trading Days or for more than an aggregate of ten (10) Trading Days in any 360-day period;

iii) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within five (5) days after the applicable Conversion Date or (B) notice, written or oral, to the Holder, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of the Note into shares of Common Stock that is tendered in accordance with the provisions of the Note, other than as a result of Section 3(d);

iv) the Company’s failure to pay to the Holder any amount of Principal, Interest or other amounts when and as due under this Note, the Security Agreement, the P.O. Agreement, any Other Notes and/or any other document, agreement and/or instruments related to any of such items, together with all exhibits, schedules and annexes to any of the above, and as amended supplemental and/or modified from time to time (collectively the “Documents”);

v) any default under or acceleration prior to maturity of an aggregate amount of Indebtedness in excess of $50,000 of the Company;

vi) the Company, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;

vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company in an involuntary case, (B) appoints a Custodian of the Company or (C) orders the liquidation of the Company;

viii) a final judgment or judgments for the payment of money aggregating in excess of $50,000 are rendered against the Company and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay;

ix) other than as specifically set forth in another clause of this Section 4(a), the Company breaches any representation, warranty, agreement, covenant, condition and/or term of this Note and/or any other Document, except, in the case of a breach of a covenant or other term or condition of any Document which is capable of being cured and is cured no later than five (5) Trading Days following such breach; or

x) any event of default occurs (or with the passage of time or giving of notice, would occur) with respect to any Indebtedness.

b) Remedies Upon an Event of Default. Upon the occurrence and, continuance of any Event of Default, notwithstanding anything to the contrary provided herein, and/or in the other Documents and/or elsewhere, Holder may, in its sole and absolute discretion, among other actions declare all Principal, Interest and/or other amounts owed to the Holder by the Company under this Note and any of the other Documents, all through and including the date all amounts owed to the Holder from the Company pursuant to this Note, the other Documents, and/or otherwise, are received in full by the Holder in cash by the payment of immediately available funds by wire transfer pursuant to wire transfer instruction provided to the Company from the Holder (the “Owed Amount”), to be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company, and the Company shall pay to Holder an amount equal to (i) the product of 140% multiplied by (ii) the Owed Amount (collectively, the “Event of Default Payment Amount”); provided, that upon the occurrence of an Event of Default under Section 5(a)(vi)-(vii) hereof, all amounts set forth in this Section 5(b) shall automatically become forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company and the Company shall pay to Holder the Event of Default Payment Amount;

c) Remedies Are Severable and Cumulative. All provisions contained herein pertaining to any remedy of the Holder shall be and are severable and cumulative and in addition to all other rights and remedies available herein and in the other Documents, at law and in equity, and any one or more may be exercised simultaneously or successively. Any notification required pursuant to this Section 4 or under applicable law shall be reasonably and properly given to Company at the address and by any of the methods of giving such notice as set forth in the P.O. Agreement.

d) No Waiver. No waiver or failure to exercise at any time any default and/or remedy or right upon a default shall operate as a direct and/or indirect waiver of any other default or right or of the same default or right on any subsequent occasion..

5) DISTRIBUTION OF ASSETS; RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

a) Distribution of Assets. If the Company shall declare or make any dividend or other distributions of its assets (or rights to acquire its assets) to any or all holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (the “ Distributions ”), then the Holder will be entitled to such Distributions as if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately prior to the date on which a record is taken for such Distribution or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for such Distributions (provided, however, that to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or beneficial ownership of such shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

b) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately prior to the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage, at which time the Holder shall be granted such right to the same extent as if there had been no such limitation).

c) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Major Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, at the Holder’s option, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note.

6) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

a) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased.

b) Issuance of Securities Below the Conversion Price. If and whenever on or after the Subscription Date, the Company issues or sells, or in accordance with this Section 6 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale (such Conversion Price then in effect is referred to as the “Applicable Price”) (the foregoing a “ Dilutive Issuance”), then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. For purposes of determining the adjusted Conversion Price under this Section 6(b), the following shall be applicable:

i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 6(b)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.

ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 6(b)(ii), the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable upon conversion, exercise or exchange thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale of such Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 6(b), except as contemplated below, no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 6(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 6(b) shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such options by the parties thereto, (x) the Options will be deemed to have been issued for the Option Value of such Options and (y) the other securities issued or sold in such integrated transaction shall be deemed to have been issued or sold for the difference of (I) the aggregate consideration received by the Company less any consideration paid or payable by the Company pursuant to the terms of such other securities of the Company, less (II) the Option Value. If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the Closing Sale Price of such security on the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10^th) day following the Valuation Event by an independent, reputable appraiser selected by the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

c) Voluntary Adjustment By Company. The Company may at any time during the term of this Note reduce the then current Conversion Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

7) RESERVATION OF AUTHORIZED SHARES.

a) Reservation. Following the date the Company effectuates a reverse split of its issued and outstanding Common Stock and/or increase its authorized but unissued shares of Common Stock, the Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for this Note equal to 400% of the Conversion Rate with respect to the Conversion Amount of this Note as of the Issuance Date. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of this Note, 400% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of this Note and the Other Notes (not taking into effect any Beneficial Ownership Limitation, but giving effect to any event set forth in Section 5 and Section 6); provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by this sentence (without regard to any limitations on conversions) (the “Required Reserve Amount”).

b) Insufficient Authorized Shares. If at any time while this Note remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of this Note at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for this Note. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall either (x) obtain the written consent of its stockholders for the approval of an increase in the number of authorized shares of Common Stock and provide each stockholder with an information statement with respect thereto or (y) hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

The above Sections 7(a) and 7(b) are subject to Section 17(h) of the P.O. Agreement, which takes precendent over any conflicting provisions set forth in these Sections 7(a) and 7(b).

8) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law and/or as expressly provided in this Note.

9) COVENANTS.

a) Cash Dividend. So long as this Note is outstanding, the Company shall not directly or indirectly, declare or pay any cash dividends or distributions on any Equity Interests of the Company or of its Subsidiaries.

b) Restricted Payments. The Company shall not directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or Cash Equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than with respect to this Note, Other Notes and/or Permitted Indebtedness), whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness (or otherwise);

c) Restriction on Redemption. Until all of this Note has been converted or otherwise satisfied in accordance with its terms, the Company shall not, directly or indirectly, redeem or repurchase its Equity Interests without in each case the prior express written consent of the Holder.

d) Change in Nature of Business. The Company shall not make any material change in the nature of its business as described in the Company’s most recent annual report filed on Form 10-K with the SEC. The Company shall not modify its corporate structure or purpose.

e) Intellectual Property. The Company shall not directly or indirectly, encumber or allow any Liens on, any of its copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of the Company connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing, other than Permitted Liens.

f) Preservation of Existence, Etc. The Company shall maintain and preserve its existence, rights and privileges, and become or remain duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified would not result in a Material Adverse Effect (as defined in the Securities Purchase Agreement).

g) Maintenance of Properties, Etc. The Company shall maintain and preserve all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply in all material respects to comply in all material respects, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any material loss or forfeiture thereof or thereunder.

h) Maintenance of Insurance. The Company shall maintain insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated.

i) Transactions with Affiliates. The Company shall not enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any Affiliate.

10) TRANSFER. This Note and any shares of Common Stock issued and/or issuable upon conversion of this Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to compliance with applicable securities laws.

11) REISSUANCE OF THIS NOTE.

a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 11(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 11(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 11(d)) representing the outstanding Principal.

c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 11(d) and in principal amounts of at least $25,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 11(a) or Section 11(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest, if any, on the Principal of this Note, from the Issuance Date.

12) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF . The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

13) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.

14) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. Terms used in this Note but defined in the other shall have the meanings ascribed to such terms on the Initial Closing Date in such other Transaction Documents unless otherwise consented to in writing by the Holder.

15) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

16) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price or the arithmetic calculation of the Conversion Rate, the Conversion Price or any Redemption Price, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one (1) Business Day of receipt, or deemed receipt, of the Conversion Notice or Redemption Notice or other event giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation within one (1) Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price to an independent, reputable investment bank selected by the Holder, or (b) the disputed arithmetic calculation of the Conversion Rate, Conversion Price or any Redemption Price to an independent, outside accountant, selected by the Holder. The Company, at the Company’s expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five (5) Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

17) NOTICES; PAYMENTS.

a) Notices. Whenever All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, email or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery, delivery by email, or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

	If to the Company, to:

	INERGETICS, INC.
	550 BROAD STREET, SUITE 1212
	NEWARK, NJ 07652
	Attn: Mr. Michael C. James, CEO
	Email: MJames@inergetics.com
	Fax:

	If to the Holder:




	Attn:
	Email:
	Fax:

b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date.

18) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

19) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

20) GOVERNING LAW; JURISDICTION; JURY TRIAL. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the 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 brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company 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 to such party at the address it set forth on the signature page hereto 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. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

21) SEVERABILITY If any provision of this Note is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Note so long as this Note as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

22) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

a) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

b) “Approved Stock Plan” means any employee benefit or incentive plan which has been approved by the Board of Directors of the Company, pursuant to which the Company’s securities may be issued to any employee, officer or director for services provided to the Company.

c) “Bloomberg” means Bloomberg Financial Markets.

d) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

e) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly the Pink OTC Markets Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 16. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction during the applicable calculation period.

f) “Eligible Market” shall mean any of the following markets or exchanges on which the Common Stock (or any other common stock of any other Person that references the Trading Market for its common stock) is listed or quoted for trading on the date in question: the OTC Bulletin Board, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE Arca, the NYSE MKT, or the OTCQX Marketplace, the OTCQB Marketplace, the OTCPink Marketplace or any other tier operated by OTC Markets Group Inc. (or any successor to any of the foregoing)..

g) “Equity Interests” means (a) all shares of capital stock (whether denominated as common stock or preferred stock), equity interests, beneficial, partnership or membership interests, joint venture interests, participations or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person (other than an individual), whether voting or non-voting and (b) all securities convertible into or exchangeable for any of the foregoing and all warrants, options or other rights to purchase, subscribe for or otherwise acquire any of the foregoing, whether or not presently convertible, exchangeable or exercisable.

h) “GAAP” means United States generally accepted accounting principles, consistently applied.

i) “Holiday” means a day other than a Business Day or on which trading does not take place on the Principal Market.

j) “Indebtedness” of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including (without limitation) “capital leases” in accordance with GAAP (other than trade payables entered into in the ordinary course of business), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (vii) all indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (viii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vii) above.

k) “Interest Rate” means has the meaning set forth in Section 3(b).

l) “Liens” means a lien, mortgage, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction, clouds on title and/or encumbrances

m) “Market Price” means the lower of (i) $0.07, and (ii) 62% of the lowest price any share of Common Stock was bought or sold at on the Principal Market during the ten (10) consecutive Trading Days immediately preceding the applicable date of determination. All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination, reclassification or other similar transaction during such period.

n) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

o) “Permitted Indebtedness” means

p) “Permitted Liens” means

q) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

r) “Principal Market” means the Trading Market on the date in question on which the Common Stock trades or is quoted on.

s) “SEC” means the United States Securities and Exchange Commission or the successor thereto.

t) “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time).

u) “Trading Market” shall mean any of the following markets or exchanges on which the Common Stock (or any other common stock of any other Person that references the Trading Market for its common stock) is listed or quoted for trading on the date in question: the OTC Bulletin Board, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE Arca, the NYSE MKT, or the OTCQX Marketplace, the OTCQB Marketplace, the OTCPink Marketplace or any other tier operated by OTC Markets Group Inc. (or any successor to any of the foregoing).

23) DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, nonpublic information relating to the Company or its Subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.

[Signature Page Follows]

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.

	INERGETICS, INC.


	By:
		Name: Michael James
		Title: Chief Executive Officer

Exhibit I

NOTICE OF CONVERSION

The undersigned hereby elects to convert $________________ of the Principal of the Note (defined below) into shares of Common Stock of Inergetics, Inc., a Delaware corporation (the “Company”) according to the conditions of the Senior Secured Demand Convertible Promissory Note of the Company; Issuance Date: September 1, 2015 (the “Note”). No fee will be charged to the Holder or Holder’s Custodian for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

Name of DTC Prime Broker:

Account Number:

The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below:

_______________________________________

Date of Conversion:

Conversion Price:

Shares to Be Delivered:

Remaining Principal Balance Due After This Conversion:

Signature


Print Name:

Exhibit 10.3

SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of September 1, 2015 (as amended, restated or modified from time, this “Security Agreement”), is executed by, between and among by, between and among INERGETICS, INC., a corporation incorporated under the laws of the State of Delaware (the “Grantor”), and _________ (“_____”), _____ (“_____,” and together with _____, collectively, the “Contractors”) and _____ (“_____” and together with the Contractors, collectively, the “Secured Parties”).

WITNESSETH:

WHEREAS, the Contractors have made or will make loans, and/or advances (the “Contractor Loans”), to the Grantor to, among other items, enable the Grantor to have its products manufactured, packaged and shipped to customers pursuant to a Master Purchase Order Assignment Agreement dated as of September 1, 2015, by and between the Contractors and the Grantor (as amended, supplemented, renewed, modified and/or otherwise changed from time to time, the “P.O. Agreement,” and, together with all other related documents including, but not limited to, this Security Agreement, any U.C.C. 1 Financing Statements and/or other documents evidencing and/or perfecting liens created by this Security Agreement and other documents evidencing any such liens, used to establish a lien or security interest in the assets of the Grantor, all Distributor’s Notes, Exchange Notes, Prior Notes and all modifications, exhibits, amendments, supplements, annexes of related items, collectively, and including any and all instruments evidencing the Contractor Loans and all exhibits, schedules, annexes, supplements, modifications and/or amendments to any and/or all of such documents, all as amended, supplemented, modified and/or otherwise changed, from time to time, collectively, the “P.O. Transaction Documents”), which aggregate principal amount of Contractor Loans under the P.O. Agreement cannot at any time exceed $1,000,000 aggregate principal amount; and

WHEREAS, the Contractors have previously made $395,000 aggregate principal amount of loans to the Grantor (the “Prior Loans”) as set forth on Schedule I, which Prior Loans are evidenced by certain documents and/or instruments and all other related documents including (to the extent they exist), but not limited to, any security agreements securing any collateral for such Prior Loans and any U.C.C. 1 Financing Statements and/or other documents evidencing and/or perfecting liens created by the security agreement and other documents evidencing any such liens or used to establish a lien or security interest in the assets of the Grantor, (all such documents including, but not limited to, all exhibits, schedules, annexes, supplements and/or amendments to any of such documents, all as amended, supplemented, modified and/or otherwise changed, collectively, the “Prior Loan Documents”), which (i) Prior Loans with all accrued but unpaid interest, pursuant to the P.O. Agreement, and (ii) a 12% $52,500 aggregate principal amount Convertible Debenture; Issue Date June 2015; issued to _____, as amended, supplemented and/or modified from time to time, will be converted into Contractor Loans and be evidenced by “Exchange Notes” and in the future the Contactors may make other loans and/or advances to the Grantor outside of the P.O. Agreement; and

WHEREAS, _____previously made (and in the future may make additional) loans to the Grantor (the “Other Loans”) as set forth on Schedule II hereto, which Other Loans are (and in the future may be) evidenced by notes, debentures and/or other instruments (all such notes, debentures and/or instruments together with such other documents, agreements and other items related to the Other Loans including, but not limited to, this Security Agreement and any U.C.C. 1 Financing Statements and/or other documents evidencing liens created by the security agreement and other documents evidencing any such liens or used to establish a lien or security interest in the assets of the Grantor, and all exhibits, schedules, annexes, supplements and/or amendments to any of such documents, all as amended, supplemented, modified and/or otherwise changed, collectively, the “Other Loan Documents”); and

WHEREAS, the Secured Parties, the Grantor and certain other debtholders of the Grantor (the “Subordinating Creditors”) have entered into a Subordination Agreement dated as of September 1, 2015 (the “Subordination Agreement”), pursuant to which such Subordinating Creditors agreed to, among other items, subordinate: (i) all of their respective debts and obligations in the Grantor to the Secured Parties to the extent provided therein; and (ii) each Subordinating Creditor’s security interests of any nature or kind to the Secured Parties’ property and assets to the Loans (as hereinafter defined) and to the Collateral (as defined below); and

WHEREAS, the Contactor Loans, Exchange Notes, Prior Loans, Distributor Notes, Other Loans, and all other loans, obligations, payments and/or advances of any nature or kind of Grantor to the Secured Parties including, but not limited to, under and/or pursuant to (a) the P.O. Agreement, (including, but not limited to, the Contractor Expenses, the Commitment Fee, and all Contractors Deal Fees), (b) this Security Agreement, (c) all other P.O. Transaction Documents, (d) all Other Loan Documents, (e) all Other Loans, (f) all Prior Loans and (g) all Prior Loan Documents (the items set forth in (a) - (g), are each a “Loan Document”, and collectively, the “Loan Documents”), whether now existing or hereafter arising, together with all accrued and unpaid interest thereon, all other fees and charges due, owing or payable by the Grantor to one or more of the Secured Parties together with all costs of collection with respect to any of the above (including, but not limited to, attorneys’ fees and court costs and expenses throughout all trial and appellate levels and all negotiations, mediations, arbitrations and bankruptcy proceedings), and any and all other obligations of the Grantor to the Secured Parties whether now existing or arising hereafter shall hereinafter collectively be referred to as the “Loans”; and

WHEREAS, in order to induce the Secured Parties to make the Loans and enter into the P.O. Agreement, and with full knowledge that the Secured Parties would not enter into the P.O. Agreement without this Security Agreement, the Grantor has agreed to execute and deliver this Security Agreement to the Secured Parties, for the benefit of the Secured Parties; and

NOW, THEREFORE, in consideration of the credit extended now and in the future by Secured Parties to the Grantor and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Grantor and Secured Parties hereby agree as follows:

Section 1 DEFINITIONS.

1.1 Defined Terms. Capitalized terms used but not otherwise defined in this Security Agreement shall have the meanings ascribed to them in the P.O. Agreement. For the purposes of this Security Agreement, the following capitalized words and phrases shall have the meanings set forth below.

“Affiliate” shall mean any Person which, directly or indirectly, owns or controls, on an aggregate basis, at least a five percent (5%) interest in any other Person, or which is controlled by or is under common control with any other Person.

“Capital Securities” shall mean, with respect to any Person, all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person’s capital, whether now outstanding or issued or acquired after the date hereof, including common shares, preferred shares, membership interests in a limited liability company, limited or general partnership interests in a partnership or any other equivalent of such ownership interest.

“Collateral” shall have the meaning set forth in Section 2.1 hereof.

“Control” or “Controlling” shall mean the possession of the power to direct, or cause the direction of, the management and policies of a Person by contract, voting of securities, or otherwise.

“Event of Default” shall have the meaning as such term may be defined in any of the other Loan Documents.

“Liens” shall mean a lien, mortgage, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction, clouds on title and/or encumbrances.

“GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time.

“Material Adverse Effect” shall mean a material adverse effect on (a) the business, assets, property, operations, or condition (financial or otherwise) of Grantor, (b) the validity or enforceability of this Agreement or any of the other Loan Documents or (c) the rights or remedies of the Secured Parties hereunder or thereunder.

“Obligations” shall mean, now existing or in the future: (i) all Loans, principal, advances and other financial accommodations (whether primary, contingent or otherwise), (ii) all interest accrued thereon (including interest which would be payable as post-petition in connection with any bankruptcy or similar proceeding, whether or not permitted as a claim thereunder), (iii) any fees due to Secured Parties under this Agreement or any other Loan Documents, (iv) any expenses incurred by the Secured Parties under this Agreement or the other Loan Documents, (v) any and all other liabilities and obligations of each of the Grantor to the Secured Parties, and (vi) the performance by the Grantor of all covenants, agreements and obligations of every nature and kind on the part of the Grantor to be performed under this Agreement and any other Loan Documents.

“Obligor” shall mean Grantor, or any other party liable with respect to the Obligations.

“Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens resulting from this Security Agreement and the Other Security Agreement

“Person” shall mean any individual, partnership, limited liability company, limited liability partnership, corporation, trust, joint venture, joint stock company, association, unincorporated organization, government or agency or political subdivision thereof, or other entity.

“Taxes” shall mean any and all present and future taxes, duties, levies, imposts, deductions, assessments, charges or withholdings, and any and all liabilities (including interest and penalties and other additions to taxes) with respect to the foregoing.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to the Lenders’ liens on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “UCC” 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.

“Unmatured Event of Default” shall mean any event which, with the giving of notice, the passage of time or both, would constitute an Event of Default.

1.2 Other Terms Defined in UCC. All other capitalized words and phrases used herein and not otherwise specifically defined herein, in the P.O. Agreement, or in the other Loan Documents shall have the respective meanings assigned to such terms in the UCC, to the extent the same are used or defined therein.

1.3 Other Interpretive Provisions.

(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. Whenever the context so requires, the neuter gender includes the masculine and feminine, the single number includes the plural, and vice versa, and in particular the word “Grantor” shall be so construed.

(b) Section and Schedule references are to this Security Agreement unless otherwise specified. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Security Agreement shall refer to this Security Agreement as a whole and not to any particular provision of this Security Agreement.

(d) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”.

(e) Unless otherwise expressly provided herein, (i) references to agreements (including this Security Agreement and the other Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, supplements and other modifications thereto, but only to the extent such amendments, restatements, supplements and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation.

(f) To the extent any of the provisions of the other Loan Documents are inconsistent with the terms of this Security Agreement, the provisions of this Security Agreement shall govern.

(g) This Security Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and each shall be performed in accordance with its terms.

Section 2 SECURITY FOR THE OBLIGATIONS.

2.1 Security for Obligations. As security for the payment and performance of the Obligations now existing or in the future, Grantor does hereby pledge, assign, transfer, deliver and grant to the Secured Parties a continuing and unconditional first priority security interest in and to any and all property of Grantor, of any kind or description, tangible or intangible, wheresoever located and whether now existing or hereafter arising or acquired, including, but not limited to, the following (all of which property for Grantor, along with the products and proceeds therefrom, are individually and collectively referred to as the “Collateral”):

(a) all property of, or for the account of, Grantor now or hereafter coming into the possession, control or custody of, or in transit to, the Secured Parties or any agent or bailee for the Secured Parties or any parent, affiliate or subsidiary of the Secured Parties or any participant with the Secured Parties in the Obligations (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise), including all cash, earnings, dividends, interest, or other rights in connection therewith and the products and proceeds therefrom, including the proceeds of insurance thereon; and

(b) the additional property of Grantor, whether now existing or hereafter arising or acquired, and wherever now or hereafter located, together with all additions and accessions thereto, substitutions, betterments and replacements therefor, products and Proceeds therefrom, and all of Grantor's books and records and recorded data relating thereto (regardless of the medium of recording or storage), together with all of Grantor's right, title and interest in and to all computer software required to utilize, create, maintain and process any such records or data on electronic media, identified and set forth as follows:

(i) All Accounts and all goods whose sale, lease or other disposition by Grantor has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, Grantor, or rejected or refused by any person who is or who may become obligated under, with respect to, or on an Account (“Account Grantor”);

(ii) All Inventory, including raw materials, work-in-process and finished goods;

(iii) All goods (other than Inventory), including embedded software, Equipment, vehicles, furniture and Fixtures;

(iv) All Software and computer programs;

(v) All Securities, Investment Property, Financial Assets and Deposit Accounts;

(vi) All Chattel Paper, Electronic Chattel Paper, Instruments, Documents, Letter of Credit Rights, all proceeds of letters of credit, Health-Care-Insurance Receivables, Supporting Obligations, notes secured by real estate, Commercial Tort Claims and General Intangibles, including Payment Intangibles;

(vii) All real estate property owned by Grantor and the interest of Grantor in fixtures related to such real property; and

(viii) All Proceeds (whether Cash Proceeds or Noncash Proceeds) of the foregoing property, including all insurance policies and proceeds of insurance payable by reason of loss or damage to the foregoing property, including unearned premiums, and of eminent domain or condemnation awards.

2.2 Possession and Transfer of Collateral. Until an Event of Default has occurred and is continuing, Grantor shall be entitled to possession and use of the Collateral (other than Instruments or Documents (including Tangible Chattel Paper and Investment Property consisting of certificated securities) and other Collateral required to be delivered to the Secured Parties pursuant to this Section 2) . The cancellation or surrender of any promissory note evidencing an Obligation, upon payment or otherwise, shall not affect the right of the Secured Parties to retain the Collateral for any other of the Obligations except upon payment in full of the Obligations. Grantor shall not sell, assign (by operation of law or otherwise), license, lease or otherwise dispose of, or grant any option with respect to any of the Collateral, except as permitted pursuant to the P.O. Agreement.

2.3 Financing Statements. Grantor authorizes the Secured Parties to prepare and file such financing statements, amendments and other documents and do such acts as the Secured Parties deem necessary in order to establish and maintain valid, attached and perfected, first priority security interests in the Collateral in favor of the Secured Parties, free and clear of all Liens and claims and rights of third parties whatsoever, except Permitted Liens. Grantor hereby irrevocably authorizes the Secured Parties at any time, and from time to time, to file in any jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral is comprised of all assets of Grantor (or words of similar effect), regardless of whether any particular asset comprising a part of the Collateral falls within the scope of Article 9 of the UCC of the jurisdiction wherein such financing statement or amendment is filed, and (b) contain any other information required by Section 5 of Article 9 of the UCC of the jurisdiction wherein such financing statement or amendment is filed regarding the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether Grantor is an organization, the type of organization, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of the real property to which the Collateral relates. Grantor agrees to furnish any such information to the Secured Parties promptly upon request. In addition, Grantor shall make appropriate entries on its books and records disclosing the security interests of the Secured Parties in the Collateral. Grantor hereby agrees that a photogenic or other reproduction of this Security Agreement is sufficient for filing as a financing statement and Grantor authorizes the Secured Parties to file this Security Agreement as a financing statement in any jurisdiction.

2.4 Preservation of the Collateral. The Secured Parties may, but are not required to, take such actions from time to time as the Secured Parties reasonably deems appropriate to maintain or protect the Collateral. The Secured Parties shall have exercised reasonable care in the custody and preservation of the Collateral if the Secured Parties take such action as Grantor shall reasonably request in writing which is not inconsistent with the Secured Parties’ status as a secured party, but the failure of the Secured Parties to comply with any such request shall not be deemed a failure to exercise reasonable care; provided, however , the Secured Parties’ responsibility for the safekeeping of the Collateral shall (i) be deemed reasonable if such Collateral is accorded treatment substantially equal to that which the Secured Parties accords its own property, and (ii) not extend to matters beyond the control of the Secured Parties, including acts of God, war, insurrection, riot or governmental actions. In addition, any failure of the Secured Parties to preserve or protect any rights with respect to the Collateral against prior or third parties, or to do any act with respect to preservation of the Collateral, not so requested by Grantor, shall not be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral. Grantor shall have the sole responsibility for taking such action as may be necessary, from time to time, to preserve all rights of Grantor and the Secured Parties in the applicable Collateral against prior or third parties. Without limiting the generality of the foregoing, where Collateral consists in whole or in part of Capital Securities, Grantor represents to, and covenants with, the Secured Parties that Grantor has made arrangements for keeping informed of changes or potential changes affecting the Capital Securities (including rights to convert or subscribe, payment of dividends, reorganization or other exchanges, tender offers and voting rights), and Grantor agrees that the Secured Parties shall have no responsibility or liability for informing Grantor of any such or other changes or potential changes or for taking any action or omitting to take any action with respect thereto.

2.5 Other Actions as to any and all Collateral. Grantor further agrees to take any other action reasonably requested by the Secured Parties to ensure the attachment, perfection and first priority of, and the ability of the Secured Parties to enforce, the security interest of the Secured Parties in any and all of the Collateral including (a) causing the Secured Parties’ name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of the Secured Parties to enforce, the security interest of the Secured Parties in such Collateral, (b) if within the control of the Grantor, complying with, and, if not within the control of the Grantor, using best efforts to comply with, any provision of any statute, regulation or treaty of the United States as to any material portion of the Collateral as soon as possible but not more than forty-five (45) days after such request if compliance with such provision is a condition to attachment, perfection or priority of, or ability of the Secured Parties to enforce, the security interest of the Secured Parties in such Collateral, (c) using best efforts to obtain governmental and other third party consents and approvals, including without limitation any consent of any licensor, lessor or other Person with authority or control over or an interest in any material portion of the Collateral as soon as possible but not more than forty-five (45) days after such request, (d) using best efforts to obtain waivers from mortgagees and landlords in form and substance reasonably satisfactory to the Secured Parties which affect any material portion of the Collateral as soon as possible but not more than forty-five (45) days after such request, and (e) taking all actions required by the UCC in effect from time to time or by other law, as applicable in any relevant UCC jurisdiction, or by other law as applicable in any foreign jurisdiction. Grantor further agrees to indemnify and hold the Secured Parties harmless against claims of any Persons not a party to this Security Agreement concerning disputes arising over the Collateral except to the extent resulting from the gross negligence or willful misconduct of the Secured Parties or its Affiliates.

2.6 Collateral in the Possession of a Warehouseman or Bailee. If any material portion of the Collateral at any time is in the possession of a warehouseman or bailee, Grantor shall promptly notify the Secured Parties thereof, and, as soon as possible but not more than forty-five (45) days later, shall use best efforts to obtain a Collateral Access Agreement in form and substance reasonably satisfactory to the Secured Parties from such warehouseman or bailee.

2.7 Letter-of-Credit Rights. If Grantor at any time is a beneficiary under a letter of credit now or hereafter issued in favor of Grantor, Grantor shall promptly notify the Secured Parties thereof and, at the request and option of the Secured Parties, Grantor shall, pursuant to an agreement in form and substance reasonably satisfactory to the Secured Parties, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Secured Parties of the proceeds of any drawing under the letter of credit, or (ii) arrange for the Secured Parties to become the transferee beneficiary of the letter of credit, with the Secured Parties agreeing, in each case, that the proceeds of any drawing under the letter to credit are to be applied as provided in the P.O. Agreement.

2.8 Commercial Tort Claims. If Grantor shall at any time hold or acquire a Commercial Tort Claim, Grantor shall promptly notify the Secured Parties in writing signed by Grantor of the details thereof and grant to the Secured Parties in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Security Agreement, in each case in form and substance reasonably satisfactory to the Secured Parties, and shall execute any amendments hereto deemed reasonably necessary by the Secured Parties to perfect the security interest of the Secured Parties in such Commercial Tort Claim.

2.9 Electronic Chattel Paper and Transferable Records. If Grantor at any time holds or acquires an interest in any electronic chattel paper or any “transferable record”, as that term is defined in Section 201 of the federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, Grantor shall promptly notify the Secured Parties thereof and, at the request of the Secured Parties, shall take such action as the Secured Parties may reasonably request to vest in the Secured Parties control under Section 9-105 of the UCC of such electronic chattel paper or control under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Secured Parties agrees with Grantor that the Secured Parties will arrange, pursuant to procedures reasonably satisfactory to the Secured Parties and so long as such procedures will not result in the Secured Parties loss of control, for Grantor to make alterations to the electronic chattel paper or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to make without loss of control.

Section 3 REPRESENTATIONS AND WARRANTIES.

Grantor makes the following representations and warranties to the Secured Parties:

3.1 Grantor Organization and Name. Grantor is a corporation duly incorporated, existing and in good standing under the laws of the State of Delaware, with full and adequate power to carry on and conduct its business as presently conducted. Grantor is duly licensed or qualified in all foreign jurisdictions wherein the nature of its activities requires such qualification or licensing except where the failure to be so licensed or qualified would not cause a Material Adverse Effect. The exact legal name of Grantor is as set forth in the first paragraph of this Security Agreement.

3.2 Authorization. Grantor has full right, power and authority to enter into this Security Agreement and to perform all of its duties and obligations under this Security Agreement. The execution and delivery of this Security Agreement and the other Loan Documents to which Grantor is a party will not, nor will the observance or performance of any of the matters and things herein or therein set forth, violate or contravene any provision of law or of the articles of incorporation or by-laws of Grantor. All necessary and appropriate action has been taken on the part of Grantor to authorize the execution and delivery of this Security Agreement.

3.3 Validity and Binding Nature. This Security Agreement is the legal, valid and binding obligation of Grantor, enforceable against Grantor in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors' rights generally and to general principles of equity.

3.4 Consent; Absence of Breach. The execution, delivery and performance of this Security Agreement and any other documents or instruments to be executed and delivered by Grantor in connection herewith, do not and will not (a) require any consent, approval, authorization, or filings with, notice to or other act by or in respect of, any governmental authority or any other Person (other than filings or notices in connection with the Liens granted pursuant to his Security Agreement, or pursuant to federal or state securities laws or other than any consent or approval which has been obtained and is in full force and effect); (b) conflict with (i) any provision of law or any applicable regulation, order, writ, injunction or decree of any court or governmental authority except for such conflicts which would not result in a Material Adverse Effect, (ii) the articles of incorporation, bylaws or other organic document of Grantor, or (iii) any material agreement, indenture, instrument or other document, or any judgment, order or decree, which is binding upon Grantor or any of its properties or assets except for such conflicts which would not result in a Material Adverse Effect; or (c) require, or result in, the creation or imposition of any Lien on any asset of Grantor, other than Liens in favor of the Secured Parties created pursuant to this Security Agreement and Permitted Liens.

3.5 Ownership of Collateral; Liens. Grantor is the sole owner of all of the Collateral, free and clear of all Liens, charges and claims (including infringement claims with respect to patents, trademarks, service marks, copyrights and the like), other than Permitted Liens.

3.6 Adverse Circumstances. No condition, circumstance, event, agreement, document, instrument, restriction, litigation or proceeding (or, to Grantor's knowledge, threatened litigation or proceeding or basis therefor) exists which (a) would have a Material Adverse Effect upon Grantor, or (b) would constitute an Event of Default or an Unmatured Event of Default.

3.7 Security Interest. This Security Agreement creates a valid security interest in favor of the Secured Parties in the Collateral and, when properly perfected by filing in the appropriate jurisdictions, or by possession or Control of such Collateral by the Secured Parties or delivery of such Collateral to the Secured Parties, shall constitute a valid, perfected, first-priority security interest in such Collateral.

3.8 Place of Business. The principal place of business and books and records of Grantor and the location of all Collateral, is as set forth on Schedule 3.8 attached hereto and made a part hereof, and Grantor shall promptly notify the Secured Parties of any change in such locations. Grantor will not remove or permit the Collateral to be removed from such locations without the prior written consent of the Secured Parties, except as permitted pursuant to the P.O. Agreement.

3.9 Complete Information. This Security Agreement and all financial statements, schedules, certificates, confirmations, agreements, contracts, and other materials and information heretofore or contemporaneously herewith furnished in writing by Grantor to the Secured Parties for purposes of, or in connection with, this Security Agreement and the transactions contemplated hereby is, and all written information hereafter furnished by or on behalf of Grantor to the Secured Parties pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading in light of the circumstances under which made (it being recognized by the Secured Parties that any projections and forecasts provided by Grantor are based on good faith estimates and assumptions believed by Grantor to be reasonable as of the date of the applicable projections or assumptions and that actual results during the period or periods covered by any such projections and forecasts may differ from projected or forecasted results).

Section 4 REMEDIES.

Upon the occurrence and during the continuation of any Event of Default, the Secured Parties shall have all rights, powers and remedies set forth in this Security Agreement or the other Loan Documents or in any other written agreement or instrument relating to any of the Obligations or any security therefor, as a secured party under the UCC or as otherwise provided at law or in equity. Without limiting the generality of the foregoing, the Secured Parties may, at its option upon the occurrence and during the continuation of any Event of Default, declare its commitments to Grantor to be terminated and all Obligations to be immediately due and payable, or, if provided in the Loan Documents, all commitments of the Secured Parties to Grantor shall immediately terminate and all Obligations shall be automatically due and payable, all without demand, notice or further action of any kind required on the part of the Secured Parties, except as required by the Loan Documents. Grantor hereby waives any and all presentment, demand, notice of dishonor, protest, and all other notices and demands, except as required by the Loan Documents, in connection with the enforcement of the Secured Parties’ rights under the Loan Documents, and hereby consents to, and waives notice of release, with or without consideration, of any Collateral, notwithstanding anything contained herein or in the Loan Documents to the contrary. In addition to the foregoing upon the occurrence and during the continuation of an Event of Default:

4.1 Possession and Assembly of Collateral. The Secured Parties may, without notice, demand or initiate legal process of any kind, take possession of any or all of the Collateral (in addition to Collateral of which the Secured Parties already have possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may at any time enter into any of Grantor's premises where any of the Collateral may be or is supposed to be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of and the Secured Parties shall have the right to store and conduct a sale of the same in any of Grantor's premises without cost to the Secured Parties. At the Secured Parties’ request, Grantor will, at Grantor’s sole expense, assemble the Collateral and make it available to the Secured Parties at a place or places to be designated by the Secured Parties which is reasonably convenient to the Secured Parties and Grantor.

4.2 Sale of Collateral. The Secured Parties may sell any or all of the Collateral at public or private sale, upon such terms and conditions as the Secured Parties may deem proper, and the Secured Parties may purchase any or all of the Collateral at any such sale. Grantor acknowledges that the Secured Parties may be unable to effect a public sale of all or any portion of the Collateral because of certain legal and/or practical restrictions and provisions which may be applicable to the Collateral and, therefore, may be compelled to resort to one or more private sales to a restricted group of offerees and purchasers. Grantor consents to any such private sale so made even though at places and upon terms less favorable than if the Collateral were sold at public sale. The Secured Parties shall have no obligation to clean-up or otherwise prepare the Collateral for sale. The Secured Parties may apply the net proceeds, after deducting all costs, expenses, attorneys' and paralegals' fees incurred or paid at any time in the collection, protection and sale of the Collateral and the Obligations, to the payment of the Obligations, returning the excess proceeds, if any, to Grantor. Any notification of intended disposition of the Collateral required by law shall be conclusively deemed reasonably and properly given if given by the Secured Parties at least ten (10) calendar days before the date of such disposition. Grantor hereby confirms, approves and ratifies all acts and deeds of the Secured Parties relating to the foregoing, and each part thereof, and expressly waives any and all claims of any nature, kind or description which it has or may hereafter have against the Secured Parties or its representatives, by reason of taking, selling or collecting any portion of the Collateral other than in the event of any intentional misconduct or gross negligence. Grantor consents to releases of the Collateral at any time (including prior to default) and to sales of the Collateral in groups, parcels or portions, or as an entirety, as the Secured Parties shall deem appropriate. Grantor expressly absolves the Secured Parties from any loss or decline in market value of any Collateral by reason of delay in the enforcement or assertion or non-enforcement of any rights or remedies under this Security Agreement.

4.3 Standards for Exercising Remedies. To the extent that applicable law imposes duties on the Secured Parties to exercise remedies in a commercially reasonable manner, Grantor acknowledges and agrees that it is not commercially unreasonable for the Secured Parties (a) to incur expenses deemed necessary 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, (b) 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, (c) to fail to exercise collection remedies against Account Grantors or other Persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (d) to exercise collection remedies against Account Grantors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other Persons, whether or not in the same business as Grantor, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (h) 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 capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, including any warranties of title, (k) 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 (l) 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. Grantor acknowledges that the purpose of this section 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. Without limitation upon the foregoing, nothing contained in this Section shall be construed to grant any rights to Grantor 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.

4.4 UCC and Offset Rights. The Secured Parties may exercise, from time to time, any and all rights and remedies available to it under the UCC or under any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Security Agreement or in any other agreements between any Obligor and the Secured Parties, and may, without demand or notice of any kind, appropriate and apply toward the payment of such of the Obligations, whether matured or unmatured, including costs of collection and attorneys' and paralegals' fees and costs, and in such order of application as the Secured Parties may, from time to time, elect, any indebtedness of the Secured Parties to any Obligor, however created or arising, including balances, credits, deposits, accounts or moneys of such Obligor in the possession, control or custody of, or in transit to the Secured Parties. Grantor, on behalf of itself and any Obligor, hereby waives the benefit of any law that would otherwise restrict or limit the Secured Parties in the exercise of its right, which is hereby acknowledged, to appropriate at any time hereafter any such indebtedness owing from the Secured Parties to any Obligor.

4.5 Additional Remedies. Upon the occurrence and during the continuation of an Event of Default, the Secured Parties shall have the right and power to:

(a) instruct Grantor, at its own expense, to notify any parties obligated on any of the Collateral, including any Account Grantors, to make payment directly to the Secured Parties of any amounts due or to become due thereunder, or the Secured Parties may directly notify such obligors of the security interest of the Secured Parties, and/or of the assignment to the Secured Parties of the Collateral and direct such obligors to make payment to the Secured Parties of any amounts due or to become due with respect thereto, and thereafter, collect any such amounts due on the Collateral directly from such Persons obligated thereon;

(b) enforce collection of any of the Collateral, including any Accounts, by suit or otherwise, or make any compromise or settlement with respect to any of the Collateral, or surrender, release or exchange all or any part thereof, or compromise, extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder;

(c) take possession or control of any proceeds and products of any of the Collateral, including the proceeds of insurance thereon;

(d) extend, renew or modify for one or more periods (whether or not longer than the original period) the Obligations or any obligation of any nature of any other obligor with respect to the Obligations;

(e) grant releases, compromises or indulgences with respect to the Obligations, any extension or renewal of any of the Obligations, any security therefor, or to any other obligor with respect to the Obligations;

(f) transfer the whole or any part of Capital Securities which may constitute Collateral into the name of the Secured Parties or the Secured Parties’ nominee without disclosing, if the Secured Parties so desires, that such Capital Securities so transferred are subject to the security interest of the Secured Parties, and any corporation, association, or any of the managers or trustees of any trust issuing any of such Capital Securities, or any transfer agent, shall not be bound to inquire, in the event that the Secured Parties or such nominee makes any further transfer of such Capital Securities, or any portion thereof, as to whether the Secured Parties or such nominee has the right to make such further transfer, and shall not be liable for transferring the same;

(g) vote the Collateral;

(h) make an election with respect to the Collateral under Section 1111 of the Bankruptcy Code or take action under Section 364 or any other section of Bankruptcy Code; provided , however , that any such action of the Secured Parties as set forth herein shall not, in any manner whatsoever, impair or affect the liability of Grantor hereunder, nor prejudice, waive, nor be construed to impair, affect, prejudice or waive the Secured Parties’ rights and remedies at law, in equity or by statute, nor release, discharge, nor be construed to release or discharge, Grantor, any guarantor or other Person liable to the Secured Parties for the Obligations; and

(i) at any time, and from time to time, accept additions to, releases, reductions, exchanges or substitution of the Collateral, without in any way altering, impairing, diminishing or affecting the provisions of this Security Agreement, the Loan Documents, or any of the other Obligations, or the Secured Parties’ rights hereunder, under the Obligations.

Grantor hereby ratifies and confirms whatever the Secured Parties may do with respect to the Collateral and agrees that the Secured Parties shall not be liable for any error of judgment or mistakes of fact or law with respect to actions taken in connection with the Collateral other than as a result of intentional misconduct or gross negligence.

4.6 Attorney-in-Fact. Grantor hereby irrevocably makes, constitutes and appoints the Secured Parties (and any officer of the Secured Parties or any Person designated by the Secured Parties for that purpose) as Grantor's true and lawful proxy and attorney-in-fact (and agent-in-fact) in Grantor's name, place and stead, with full power of substitution, to (i) take such actions as are permitted in this Security Agreement, (ii) execute such financing statements and other documents and to do such other acts as the Secured Parties may require to perfect and preserve the Secured Parties’ security interest in, and to enforce such interests in the Collateral, and (iii) upon the occurrence of an Event of Default, carry out any remedy provided for in this Security Agreement, including endorsing Grantor's name to checks, drafts, instruments and other items of payment, and proceeds of the Collateral, executing change of address forms with the postmaster of the United States Post Office serving the address of Grantor, changing the address of Grantor to that of the Secured Parties, opening all envelopes addressed to Grantor and applying any payments contained therein to the Obligations. Grantor hereby acknowledges that the constitution and appointment of such proxy and attorney-in-fact are coupled with an interest and are irrevocable. Grantor hereby ratifies and confirms all that such attorney-in-fact may do or cause to be done by virtue of any provision of this Security Agreement.

4.7 No Marshaling. The Secured Parties shall not be required to marshal any present or future collateral security (including this Security Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order. To the extent that it lawfully may, Grantor hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of the Secured Parties’ rights under this Security Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Grantor hereby irrevocably waives the benefits of all such laws.

4.8 No Waiver. No Event of Default shall be waived by the Secured Parties except in writing. No failure or delay on the part of the Secured Parties in exercising any right, power or remedy hereunder shall operate as a waiver of the exercise of the same or any other right at any other time; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. There shall be no obligation on the part of the Secured Parties to exercise any remedy available to the Secured Parties in any order. The remedies provided for herein are cumulative and not exclusive of any remedies provided at law or in equity. Grantor agrees that in the event that Grantor fails to perform, observe or discharge any of its Obligations or liabilities under this Security Agreement or any other agreements with the Secured Parties, no remedy of law will provide adequate relief to the Secured Parties, and further agrees that the Secured Parties shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

4.9 Application of Proceeds. The Secured Parties will within three (3) Business Days after receipt of cash or solvent credits from collection of items of payment, proceeds of Collateral or any other source, apply the whole or any part thereof against the Obligations secured hereby. The Secured Parties shall further have the exclusive right to determine how, when and what application of such payments and such credits shall be made on the Obligations, and such determination shall be conclusive upon Grantor. Any proceeds of any disposition by the Secured Parties of all or any part of the Collateral may be first applied by the Secured Parties to the payment of expenses incurred by the Secured Parties in connection with the Collateral, including reasonable attorneys’ fees and legal expenses and costs as provided for in Section 5.13 hereof.

Section 5 MISCELLANEOUS.

5.1 Entire Agreement. This Security Agreement and the other Loan Documents (i) are valid, binding and enforceable against Grantor and the Secured Parties in accordance with their respective provisions and no conditions exist as to their legal effectiveness; (ii) constitute the entire agreement between the parties with respect to the subject matter hereof and thereof; and (iii) are the final expression of the intentions of Grantor and the Secured Parties. No promises, either expressed or implied, exist between Grantor and the Secured Parties, unless contained herein or therein. This Security Agreement, together with the other Loan Documents, supersedes all negotiations, representations, warranties, commitments, term sheets, discussions, negotiations, offers or contracts (of any kind or nature, whether oral or written) prior to or contemporaneous with the execution hereof with respect to any matter, directly or indirectly related to the terms of this Security Agreement and the other Loan Documents. This Security Agreement and the other Loan Documents are the result of negotiations between the Secured Parties and Grantor and have been reviewed (or have had the opportunity to be reviewed) by counsel to all such parties, and are the products of all parties. Accordingly, this Security Agreement and the other Loan Documents shall not be construed more strictly against the Grantor merely because of the Grantor’s involvement in their preparation.

5.2 Notices. Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Security Agreement must be in writing and in each case properly addressed to the party to receive the same in accordance with the information below, and will be deemed to have been delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address below, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by Federal Express, UPS or other nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., EST, on a Business Day. Any notice hand delivered after 5:00 p.m., EST, shall be deemed delivered on the following Business Day. Notwithstanding the foregoing, notice, consents, waivers or other communications referred to in this Security Agreement may be sent by e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation) that the notice has been received by the other party. The addresses and email adresses for such communications shall be as set forth below, unless such address or information is changed by a notice conforming to the requirements hereof. No notice to or demand on the Grantor in any case shall entitle the Grantor to any other or further notice or demand in similar or other circumstances:

If to the Grantor:	Inergetics, Inc.
	550 Broad Street, Suite 1212
	Newark, NJ 07102
	Attn: Michael James
	E-Mail: ______

With a copy to (which shall	______
not constitute notice)	______

If to the Secured Parties:	_____
	_____
	_____

5.3 Amendments; Waivers. No delay on the part of the Secured Parties in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by the Secured Parties of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Security Agreement or the other Loan Documents shall in any event be effective unless the same shall be in writing and acknowledged by the Secured Parties, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

5.4 WAIVER OF DEFENSES. GRANTOR WAIVES EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH GRANTOR MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY SECURED PARTY IN ENFORCING THIS SECURITY AGREEMENT. PROVIDED SECURED PARTY ACTS IN GOOD FAITH, GRANTOR RATIFIES AND CONFIRMS WHATEVER SECURED PARTY MAY DO PURSUANT TO THE TERMS OF THIS SECURITY AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTY GRANTING ANY FINANCIAL ACCOMMODATION TO GRANTOR.

5.5 MANDATORY FORUM SELECTION. ANY DISPUTE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH THE AGREEMENT OR RELATED TO ANY MATTER WHICH IS THE SUBJECT OF OR INCIDENTAL TO THE AGREEMENT (WHETHER OR NOT SUCH CLAIM IS BASED UPON BREACH OF CONTRACT OR TORT) SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE STATE AND/OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK. THIS PROVISION IS INTENDED TO BE A “MANDATORY” FORUM SELECTION CLAUSE AND GOVERNED BY AND INTERPRETED CONSISTENT WITH NEW YORK LAW.

5.6 WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH SECURED PARTY AND GRANTOR ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTY GRANTING ANY FINANCIAL ACCOMMODATION TO GRANTOR.

5.7 Assignability. The Secured Parties, prior to the occurrence of an Event of Default and with the consent of Grantor, which consent will not be unreasonably withheld, and after the occurrence and during the continuation of an Event of Default without consent from or notice to anyone, may at any time assign the Secured Parties’ rights in this Security Agreement, the other Loan Documents, the Obligations, or any part thereof and transfer the Secured Parties’ rights in any or all of the Collateral, and the Secured Parties thereafter shall be relieved from all liability with respect to such Collateral. This Security Agreement shall be binding upon the Secured Parties and Grantor and its respective legal representatives and successors. All references herein to Grantor shall be deemed to include any successors, whether immediate or remote. In the case of a joint venture or partnership, the term “Grantor” shall be deemed to include all joint venturers or partners thereof, who shall be jointly and severally liable hereunder.

5.8 Binding Effect. This Security Agreement shall become effective upon execution by Grantor and the Secured Parties.

5.9 Governing Law. Except in the case of the Mandatory Forum Selection clause set forth in Section 5.5 hereof, this Security Agreement shall be delivered and accepted in and shall be deemed to be a contract made under and governed by the internal laws of the State of New York, without regard to conflict of laws principles.

5.10 Enforceability. Wherever possible, each provision of this Security Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Security Agreement shall be prohibited by, unenforceable or invalid under any jurisdiction, such provision shall as to such jurisdiction, be severable and be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Security Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

5.11 Time of Essence. Time is of the essence in making payments of all amounts due the Secured Parties under the Loan Documents and in the performance and observance by Grantor of each covenant, agreement, provision and term of this Security Agreement and the other Loan Documents.

5.12 Counterparts; Email Signatures. This Security Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Security Agreement. Receipt of an executed signature page to this Security Agreement by email or other electronic transmission shall constitute effective delivery thereof. Electronic records of executed Loan Documents maintained by the Secured Parties shall be deemed to be originals thereof.

5.13 Costs, Fees and Expenses. Grantor shall pay or reimburse the Secured Parties for all reasonable costs, fees and expenses incurred by the Secured Parties or for which the Secured Parties become obligated in connection with the enforcement of this Security Agreement, including search fees, costs and expenses and attorneys' fees, costs and time charges of counsel to the Secured Parties and all taxes payable in connection with this Security Agreement. In furtherance of the foregoing, Grantor shall pay any and all stamp and other taxes, UCC search fees, filing fees and other costs and expenses in connection with the execution and delivery of this Security Agreement and the other Loan Documents to be delivered hereunder, and agrees to save and hold the Secured Parties harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses. That portion of the Obligations consisting of costs, expenses or advances to be reimbursed by Grantor to the Secured Parties pursuant to this Security Agreement or the other Loan Documents which are not paid on or prior to the date hereof shall be payable by Grantor to the Secured Parties on demand. If at any time or times hereafter the Secured Parties: (a) employs counsel for advice or other representation (i) with respect to this Security Agreement or the other Loan Documents, (ii) to represent the Secured Parties in any litigation, contest, dispute, suit or proceeding or to commence, defend, or intervene or to take any other action in or with respect to any litigation, contest, dispute, suit, or proceeding (whether instituted by the Secured Parties, Grantor, or any other Person) in any way or respect relating to this Security Agreement, or (iii) to enforce any rights of the Secured Parties against Grantor or any other Person under of this Security Agreement; (b) takes any action to protect, collect, sell, liquidate, or otherwise dispose of any of the Collateral; and/or (c) attempts to or enforces any of the Secured Parties’ rights or remedies under this Security Agreement, the costs and expenses incurred by the Secured Parties in any manner or way with respect to the foregoing, shall be part of the Obligations, payable by Grantor to the Secured Parties on demand.

5.14 Termination. This Security Agreement and the Liens and security interests granted hereunder shall not terminate until the termination of the Loan Documents and the commitments to make Loans thereunder and the full and complete performance and satisfaction and payment in full of all the Obligations (other than contingent indemnification obligations to the extent no claim giving rise thereto has been asserted). Upon termination of this Security Agreement, the Secured Parties shall also deliver to Grantor (at the sole expense of Grantor) such UCC termination statements and such other documentation, without recourse, warranty or representation whatsoever, as shall be reasonably requested by Grantor to effect the termination and release of the Liens and security interests in favor of the Secured Parties affecting the Collateral.

5.15 Reinstatement. This Security Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Grantor for liquidation or reorganization, should Grantor 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 Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the 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 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 Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

[-Remainder of Page Deliberately Left Blank-]

IN WITNESS WHEREOF, Grantor and the Secured Parties have executed this Security Agreement as of the date first above written.

	GRANTOR:

	INERGETICS, INC.

	By:
		Name:
		Title:

	SECURED PARTIES:

	_____

	By:
		Name:
		Title:

	_____

	By:
		Name:
		Title:

	_____

	By:
		Name:
		Title:

Exhibit 10.4

SUBORDINATION AGREEMENT

THIS SUBORDINATION AGREEMENT (this “Agreement”) is made and executed as of the 1st day of September, 2015, by, between and among INERGETICS, INC., a corporation incorporated under the laws of the State of Delaware (the “Borrower”); ______ (“______”),______ (“______,” and together with ______, collectively, the “______”) and ______ (“______,” and together with the ______, collectively, the “Senior Lenders”) and ______, ______, ______ (each individually referred to as a “Subordinating Creditor” and all of them collectively sometimes referred to as the “Subordinating Creditors”).

WITNESSETH:

WHEREAS, each of the Subordinating Creditors made one or more loans to the Borrower (collectively, the “Subordinated Debt”) all of which are identified in Schedule I attached hereto, which Subordinated Debt is evidenced by certain documents and/or other instruments and all other related documents and agreements including, but not limited to, those set forth in Schedule I hereto, the Security Agreement dated September 1, 2015, by and among the Borrower, ______ and ______ (as amended by the ______ and all exhibits, schedules, annexes, supplements and modifications and/or amendments thereto collectively, the “Subordinating Creditors’ Security Agreement”), all documents, instruments, notes, debentures or other security agreements and other documents securing any collateral for any Subordinated Debt and any U.C.C. 1 Financing Statements and/or other documents evidencing or perfecting liens and/or security interests in any assets of the Borrower created by any security agreements (all such documents including, but not limited to, all amendments, supplements, exhibits, schedules and/or annexes to such documents, collectively, the “Subordinated Debt Loan Documents”); and

WHEREAS, the Contractors have made or will make loans, and/or advances (the “Contractor Loans”), to the Borrower to, among other items, enable the Borrower to have its products manufactured pursuant to a Master Purchase Order Assignment Agreement dated as of September 1, 2015, by and between the Contractors and the Borrowers (as amended, supplemented, renewed, modified and/or otherwise changed from time to time, the “P.O. Agreement,” and, together with all other related documents including, but not limited to, the security agreement dated September 1, 2015 by and among the Senior Lenders and the Borrower (the “Security Agreement”), any U.C.C. 1 Financing Statements and/or other documents evidencing liens created by the Security Agreement and other documents evidencing any such liens or used to establish a lien or security interest in the assets of the Borrower, all Distributor’s Notes, Exchange Notes, Prior Notes and all modifications, exhibits, amendments, supplements, annexes of related items, collectively, and including any and all instruments evidencing the Contractor Loans and all exhibits, schedules, annexes, supplements, modifications and/or amendments to any and/or all of such documents, all as amended, supplemented, modified and/or otherwise changed, from time to time, collectively, the “P.O. Transaction Documents”), which aggregate principal amount of Contractor Loans under the P.O. Agreement cannot at any time exceed $1,000,000 aggregate principal amount; and

WHEREAS, the Contractors have previously made $______ aggregate principal amount of loans to the Borrower (the “Prior Loans”) as set forth on Schedule II, which Prior Loans are evidenced by certain documents and/or instruments and all other related documents including, but not limited to, any security agreements securing any collateral for such Prior Loans and any U.C.C. 1 Financing Statements and/or other documents evidencing liens created by the security agreement and other documents evidencing any such liens or used to establish a lien or security interest in the assets of the Borrower, (all such documents including, but not limited to, all exhibits, schedules, annexes, supplements and/or amendments to any of such documents, all as amended, supplemented, modified and/or otherwise changed, collectively, the “Prior Loan Documents”), which Prior Loans, pursuant to the P.O. Agreement, will be converted into Contractor Loans and be evidenced by “Exchange Notes”; and

WHEREAS, ______ previously made (and in the future may make additional) loans to the Borrower (the “Other Loans”) as set forth on Schedule III hereto, which Other Loans are (and in the future may be) evidenced by notes, debentures and/or other instruments (all such notes, debentures and/or instruments together with such other documents, agreements and other items related to the Other Loans including, but not limited to, the Security Agreement and any U.C.C. 1 Financing Statements and/or other documents evidencing liens created by the security agreement and other documents evidencing any such liens or used to establish a lien or security interest in the assets of the Borrower, and all exhibits, schedules, annexes, supplements and/or amendments to any of such documents, all as amended, supplemented, modified and/or otherwise changed, collectively, the “Other Loan Documents”); and

WHEREAS, all of Borrower’s current and future obligations to (i) the Contractors pursuant to the P.O. Documents including, but not limited to, the Contractor Loans, Distributor’s Notes and Prior Notes and upon exchange of the Prior Notes for the Exchange Notes, the Exchange Notes, and (ii) ______ under the Other Loans and Other Loan Documents are secured by the Security Agreement, which Security Agreement provides the Senior Lenders with a continuing and unconditional first priority security interest (the “Security Interest”) in the collateral stated therein and also in the case of the Contractors to all Collateral (collectively, the “Collateral”); and

WHEREAS, each Subordinating Creditor has agreed pursuant to this Agreement to subordinate: (i) all of their respective Subordinated Debt; and (ii) each Subordinating Creditor’s security interests of any nature or kind to the Senior Lenders’ property and assets, to the Senior Debt (as hereinafter defined) and to the Security Interest, all as more specifically hereinafter set forth; and

WHEREAS, all capitalized terms used in this Agreement and not otherwise defined herein shall have the same meanings ascribed to such terms in the P.O. Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the Senior Lenders and the Subordinating Creditors do hereby agree as follows:

1. Recitals. The recitals set forth above are true and correct and are incorporated herein by reference.

2. Subordination. Until all (i) Contactor Loans, Exchange Notes, Prior Loans, Distributor Notes, Other Loans, and all other obligations of any nature or kind of Borrower to the Senior Lenders including, but not limited to, under and/or pursuant to (a) the P.O. Agreement, (including, but not limited to, the Contractor Expenses, the Commitment Fee, all Contractors Deal Fees), (b) the Security Agreement, (c) all other P.O. Transaction Documents, (d) the Other Loan Documents, (e) the Other Loans and (f) the Prior Loan Documents (the items set forth in (a) - (f), are each a “Senior Debt Document”, and collectively, the “Senior Debt Documents”), whether now existing or hereafter arising, together with all accrued and unpaid interest thereon, all other fees and charges due, owing or payable by the Borrower to one or more of the Senior Lenders together with all costs of collection with respect to any of the above (including, but not limited to, attorneys’ fees and court costs and expenses throughout all trial and appellate levels and all negotiations, mediations, arbitrations and bankruptcy proceedings), and any and all other obligations of the Borrower to the Senior Lenders whether now existing or arising hereafter (collectively, the “Senior Debt”) are indefeasibly paid in full in immediately available funds to the Senior Lenders (hereinafter referred to as a “Discharge” or as the Senior Debt being “Discharged”), each Subordinating Creditor does hereby fully and unconditionally subordinate: (i) any right to payment or distribution by or on behalf of the Senior Lenders, directly or indirectly, of assets of the Borrower of any kind or character for or on account of the Subordinated Debt; and (ii) any and all security interests, liens, charges, encumbrances or other interests that each Subordinating Creditor may have or obtain at any time in any assets or property of the Borrower to secure the Subordinated Debt, or any portion thereof (collectively, the “Subordinating Creditors Liens”), to the prior payment in full of the Senior Debt, and to the Security Interests in the Collateral, and each Subordinating Creditor agrees that until such time as the Senior Debt has been Discharged, any and all Subordinating Creditors Liens shall be junior and subordinate to the Security Interests, and the Security Interests shall be first, senior and prior to each of the Subordinating Creditors Liens. The priority specified in the preceding sentence shall be applicable and effective irrespective of: (a) the dates, times or order of attachment or perfection of the Subordinating Creditors Liens or the Security Interests; (b) the time or order of filing of any Subordinating Creditors Liens or the Security Interests; (c) the time or order of filing of any financing statements relating to any of the Subordinating Creditors Liens or the Security Interests; (d) the time or order of obtaining control or possession of any Collateral or any other assets of the Borrower; (e) the giving or failure to give notice of the acquisition or expected acquisition of any purchase money liens; or (f) the failure to perfect or maintain the perfection or priority of the Security Interests or the failure of the Senior Lenders to obtain control or possession of any Collateral. Each Subordinating Creditor, to the fullest extent permitted by applicable law, waives as to the Senior Lenders, any requirement regarding, and agrees not to demand, request, plead or otherwise claim the benefit of, any marshaling, appraisement, valuation or other similar right that may otherwise be available to any Subordinating Creditor under applicable law with respect to any Collateral. For avoidance of doubt, each of the Senior Lenders and each Subordinating Creditor hereby clarify for each other that the Senior Debt and the Security Interests shall be senior in all respects to the Subordinated Debt and the Subordinating Creditors Liens, and that the Subordinated Debt and the Subordinating Creditors Liens shall be junior and subordinate in all respects to the Senior Debt and the Security Interests.

3. No Payments or Enforcement. Until the Senior Debt is Discharged, and except only as expressly permitted by this Section 3 below, each Subordinating Creditor agrees that it will not demand or receive from Borrower, and Borrower will not pay to any Subordinating Creditor, all or any part of the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will any Subordinating Creditor exercise any remedy with respect to the Subordinated Debt or any of the Subordinating Creditors Liens against any assets or property of Borrower, nor will any Subordinating Creditor commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against Borrower, or any one of them, in connection with the Subordinated Debt or the Subordinating Creditors Liens; provided, however, that so long as, and only to the extent that, Subordinating Creditors have not received a written notice from the Senior Lenders advising as to the existence of an uncured default or “Event of Default” (as such or similar defined term may be defined in any of the Senior Debt Documents) by Borrower under any of the Senior Debt Documents, Borrower may pay regularly scheduled payments of interest only through the issuance of Borrower’s Common Stock or preferred stock (as the case may be in accordance with the documents underlying the Subordinated Debt) to each Subordinating Creditor on account of the Subordinated Debt (provided that once the Senior Lenders deliver to Subordinating Creditors any notice as to the existence of any such default or Event of Default by Borrower, no such payments or issuances shall be further made by Borrower or accepted by Subordinating Creditors).

4. Subordination Upon Any Distribution of Assets of the Borrower. In the event of any payment or distribution of assets of Borrower of any kind or character, whether in cash, property, or securities, upon the dissolution, winding up, or total or partial liquidation or reorganization, readjustment, arrangement, or similar proceeding relating to the Borrower or its property and assets, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership, arrangement, or similar proceedings or upon an assignment for the benefit of creditors, or upon any other marshaling or composition of the assets and liabilities of the Borrower, or otherwise (such events, collectively, the “Insolvency Events”): (i) all amounts owing on account of the Senior Debt shall first be paid in full and in cash, or payment provided for in cash or in cash equivalents, before any payment or distribution is made on account of the Subordinated Debt; and (ii) to the extent permitted by applicable law, any payments or distributions on account of the Subordinated Debt to which any Subordinating Creditor would be entitled except for the provisions hereof, shall be paid or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of creditors, or other liquidating agent making such payment or distribution directly to the Senior Lenders for application to the payment of the Senior Debt in accordance with clause (i), after giving effect to any concurrent payment or distribution or provision therefor to the Senior Lenders in respect of such Senior Debt.

5. Payment Over to Senior Lenders. In the event that, notwithstanding the provisions of this Agreement, any payments or distributions on account of the Subordinated Debt or in any way relating to the Collateral or any assets or property of any of the Borrower shall be received in contravention of this Agreement by any Subordinating Creditor before all Senior Debt is Discharged, such payments or distributions shall be held in trust for the benefit of the Senior Lenders and shall be immediately paid over or delivered to the Senior Lenders, in the same form as received, with any necessary endorsements, for application to the payment of the Senior Debt remaining unpaid, after giving effect to any concurrent payments or distributions to the Senior Lenders in respect of the Senior Debt.

6. Release of Collateral Upon Permitted Collateral Sale. In connection with any sale, lease, exchange, transfer or other disposition of Collateral or any other assets of the Borrower by the Senior Lenders (or on behalf of, or for the benefit of, the Senior Lenders), each Subordinating Creditor hereby agrees: (i) that upon the written request of the Senior Lenders with respect to the Collateral or other assets subject to such sale or other disposition (which written request shall specify the proposed closing date), release or otherwise terminate any Subordinating Creditors Liens on such Collateral or other assets; (ii) to promptly deliver such terminations of financing statements, partial lien releases, mortgage satisfactions and discharges, endorsements, assignments or other instruments of transfer, termination or release (collectively, “Release Documents”) and take such further actions as the Senior Lenders shall reasonably require in order to release and/or terminate the Subordinating Creditors Liens or any other claims that any Subordinating Creditor may have on the Collateral or any other assets of any of the Borrower subject to such sale or other disposition; provided that no such Release Documents shall be filed or become effective until the closing of such sale or other disposition; and (iii) shall be deemed to have consented under the documents evidencing the Subordinated Debt to such sale or disposition free and clear of such Subordinating Creditors Liens or other claims or security interests any Subordinating Creditor may have and to have waived the provisions of the documents evidencing the Subordinated Debt to the extent necessary to permit such transaction.

7. Authorization to Senior Lenders. If, while any Subordinated Debt is outstanding, any Insolvency Event shall occur and be continuing with respect to the Borrower or its property or assets that constitutes a default or Event of Default under the Senior Debt Documents, each Subordinating Creditor shall promptly take such action as the Senior Lenders reasonably may request to effectuate the provisions of this Agreement: (A) to collect the Subordinated Debt for the account of the Senior Lenders and to file appropriate claims or proofs of claim in respect of the Subordinated Debt; (B) to execute and deliver to the Senior Lenders such powers of attorney, assignments, and other instruments as it may request to enable it to enforce any and all claims with respect to the Subordinated Debt consistent with the terms of this Agreement; and (C) to collect and receive any and all payments and distributions on account of the Subordinated Debt as provided herein until the Senior Debt is Discharged.

8. Power of Attorney. Effective upon the occurrence of an Event of Default by the Borrower under the Senior Debt Documents, each Subordinating Creditor hereby irrevocably constitutes and appoints the Senior Lenders, and any agent or representative of the Senior Lenders, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of each Subordinating Creditor and in the name of each Subordinating Creditor or in the Senior Lenders’ own name, from time to time in the Senior Lenders’ discretion, for the purpose of carrying out the terms of this Agreement, to take any and all action and to execute any and all documents and instruments, in each case, which may be necessary or commercially reasonable and appropriate to accomplish the purposes of this Agreement, including any Release Documents, such power of attorney being coupled with an interest and irrevocable. Each Subordinating Creditor hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in this Section. No Person to whom this power of attorney is presented, as authority for the Senior Lenders to take any action or actions contemplated hereby, shall be required to inquire into or seek confirmation from any Subordinating Creditor as to the authority of the Senior Lenders to take any action described herein, or as to the existence of or fulfillment of any condition to this power of attorney, which is intended to grant to the Senior Lenders the authority to take and perform the actions contemplated herein.

9. Certain Agreements of Subordinating Creditors.

(a) No Benefits. Each Subordinating Creditor understands that there are various agreements between the Senior Lenders and the Borrower evidencing and governing the Senior Debt, and each Subordinating Creditor acknowledges and agrees that such agreements are not intended to confer any benefits on Subordinating Creditors, and that the Senior Lenders shall not have any obligation to any Subordinating Creditor, or any other Persons, to exercise any rights, enforce any remedies, or take any actions which may be available to them under such agreements.

(b) No Interference. Each Subordinating Creditor acknowledges that the Borrower has granted to the Senior Lenders security interests in all of the Collateral, and each agrees not to interfere with or in any manner oppose a disposition of any Collateral by the Senior Lenders in accordance with applicable law and the terms of the Senior Debt Documents.

(c) Reliance by Senior Lenders. Each Subordinating Creditor acknowledges and agrees that the Senior Lenders have relied upon and will continue to rely upon the subordination provisions provided for herein and the other provisions hereof in consenting to any loans or other financial accommodations by the Senior Lenders to the Borrower.

(d) Obligations of Borrower Not Affected. Each Subordinating Creditor hereby agrees that at any time and from time to time, without notice to or the consent of any Subordinating Creditor, without incurring any responsibility or obligation to any Subordinating Creditor, and without impairing or releasing the subordination provided for herein or otherwise impairing the rights of the Senior Lenders hereunder: (i) the time for Borrower’s performance of or compliance with any of its agreements contained in the Senior Debt Documents may be extended or such performance or compliance may be waived by the Senior Lenders; (ii) the agreements of Borrower under the Senior Debt Documents may from time to time be modified by the Senior Lenders and the Borrower for the purpose of adding any requirements thereto or changing in any manner the rights and obligations of the respective parties thereunder; (iii) the manner, place, or terms for payment of the Senior Debt or any portion thereof may be altered or the terms for payment extended, or the Senior Debt may be increased, renewed, modified or amended, in whole or in part, all in accordance with the terms of the Senior Debt Documents; (iv) the maturity of the Senior Debt may be accelerated in accordance with the terms of any present or future agreement between the Borrower and the Senior Lenders; (v) any Collateral may be sold, exchanged, released, or substituted and any of the Security Interests may be terminated, subordinated, or fail to be perfected or become unperfected; (vi) any guarantor or obligor or other Person liable in any manner for Senior Debt may be discharged, released, or substituted; and (vii) all other rights against the Borrower, any other party, or with respect to any Collateral, may be exercised by the Senior Lenders (or the Senior Lenders may waive or refrain from exercising such rights); provided, however, notwithstanding the foregoing to the contrary, the Senior Lenders agree that, without the prior written consent of the Subordinating Creditors (such consent not to be unreasonably withheld, conditioned or delayed): (y) the Senior Lenders shall not increase the principal amount of the Senior Debt beyond the current $1,000,000 credit limit; and (z) the Senior Lenders shall not further subordinate the Senior Debt to other debt obligations incurred by the Borrower in a manner that would, as a result of this Agreement, push the Subordinating Creditors Liens to a third position.

(e) Rights of Senior Lender Not to Be Impaired. No right of the Senior Lenders to enforce the subordination provided for herein or to exercise its other rights hereunder shall at any time in any way be prejudiced or impaired by any act or failure to act by the Borrower or the Senior Lenders hereunder or under or in connection with the Senior Debt Documents, or by any noncompliance by the Borrower with the terms and provisions and covenants herein, in the Senior Debt Documents, regardless of any knowledge thereof the Senior Lenders may have or otherwise be charged with.

(f) Financial Condition of the Borrower. No Subordinating Creditor shall have any right to require the Senior Lenders to obtain or disclose any information with respect to: (i) the financial condition or assets or liabilities of the Borrower, or the ability of the Borrower to pay the Senior Debt, or perform its obligations under the Senior Debt Documents; (ii) the Senior Debt; (iii) the Collateral or other security for any or all of the Senior Debt; (iv) the existence or nonexistence of any guarantees of, or any other subordination agreements with respect to, all or any part of the Senior Debt; (v) any action or inaction on the part of the Senior Lenders or any other party; or (vi) any other matter, fact, or occurrence whatsoever, except that the Senior Lenders agree to provide written notice of any default or Event of Default by Borrowers under the Senior Debt Documents; provided, however, that no rights or benefits conferred upon the Senior Lenders by this Agreement or under the Senior Debt Documents shall be impaired or adversely affected by any failure of the Senior Lenders to provide such notice.

(g) Notices of Default. Each Subordinating Creditor hereby agrees to deliver to the Senior Lenders, concurrently with the giving thereof to the Borrower: (i) a copy of any written notice by such Subordinating Creditor of a breach, default, or “Event of Default” (as such or similar defined term may be defined in any of the Senior Debt Documents) under or in connection with the Subordinated Debt, or any written notice of demand for payment from the Borrower; and (ii) a copy of any written notice sent by any Subordinating Creditor to Borrower stating any Subordinating Creditor’s intention to exercise any enforcement rights or remedies against the Borrower, including written notice pertaining to any foreclosure on all or any part of any assets or properties of the Borrower at any time securing the Subordinated Debt.

(h) No Increase in Subordinating Creditor Debt. Each Subordinating Creditor and the Borrower hereby represent and warrant unto the Senior Lenders that the maximum amount of debt currently permitted under the Subordinated Debt existing as of the date hereof, or the documents or instruments evidencing same, is as stated on Schedule I (for each Subordinating Creditor, as applicable, the “Maximum Limit”). In this regard, each Subordinating Creditor and Borrower hereby covenant and agree that: (i) the Subordinated Debt (in each case for each Subordinating Creditor) shall never exceed the Maximum Limit; and (ii) no Subordinating Creditor will make any other or additional loans, advances, or financial accommodations to the Borrower, directly or indirectly, whether related to the Subordinated Debt, new loans, advances, or accommodations, or otherwise, unless first approved in writing by the Senior Lenders, which approval may be withheld or conditioned in the Senior Lenders’ sole and absolute discretion.

(i) No Other Obligations. Each Subordinating Creditor and the Borrower hereby represent and warrant unto the Senior Lenders that, except for the Subordinated Debt and Subordinating Creditors Liens, no Subordinating Creditor has any other liabilities or obligations owing to them by the Borrower, or any other liens or security interests associated with any such other liabilities or obligations, and to the extent there are any such other liabilities or obligations, or other liens or security interests, for purposes of this Agreement, same shall be included as part of the Subordinated Debt and the Subordinating Creditors Liens, and be subject to all of the terms and provisions of this Agreement in the same manner as the Subordinated Debt and the Subordinating Creditors Liens.

10. Restrictions on Transferability of Subordinated Debt. Each Subordinating Creditor agrees that it shall not transfer, assign, encumber, hypothecate or subordinate, at any time while this Agreement remains in effect, any right, claim or interest of any kind in or to any of the Subordinated Debt, either principal or interest or otherwise, and there shall promptly be placed on each promissory note or other document or agreement constituting a portion of the Subordinated Debt, a legend reciting that the same is subject to this Agreement; provided, however, notwithstanding the foregoing to the contrary, prior to the occurrence of an Event of Default by any the Borrower under the Senior Debt Documents, a Subordinating Creditor shall have the right to transfer or assign any portion of the Subordinated Debt for such Subordinating Creditor, but only if the transferee or assignee first executes an agreement reasonably acceptable to the Senior Lenders pursuant to which such transferee or assignee agrees to the terms and provisions of this Agreement for the benefit of the Senior Lenders (after the occurrence of an Event of Default by the Borrower under the Senior Debt Documents, no such assignment or transfer of any portion of the Subordinated Debt shall be permitted).

11. Statement of Account. Each Subordinating Creditor hereby agrees that, from time to time, but only upon and after the occurrence of an Event of Default by the Borrower under the Senior Debt Documents, it will provide and deliver to the Senior Lenders, upon demand, a statement of the account of the Borrower with each Subordinating Creditor.

12. Miscellaneous.

(a) Subrogation. Each Subordinating Creditor hereby agrees that until the Senior Debt is Discharged, each shall waive any claims and shall not exercise any right or remedy, direct or indirect, arising by way of subrogation or otherwise, against the Borrower.

(b) Continuing Agreement. This Agreement is a continuing agreement of subordination and shall continue in effect and be binding upon the Borrower and each Subordinating Creditor until the Senior Debt is Discharged. The subordinations, agreements, and priorities set forth herein shall remain in full force and effect regardless of whether any party hereto in the future seeks to rescind, amend, terminate, or reform, by litigation or otherwise, its respective agreements with the Borrower.

(c) Reinstatement. This Agreement shall continue to be effective or shall be reinstated, as the case may be, if, for any reason, any payment of the Senior Debt by or on behalf of the Borrower shall be rescinded or must otherwise be restored or returned by the Senior Lenders, whether as a result of an Insolvency Event or otherwise.

(d) Obligations of the Borrower Not Affected. The provisions of this Agreement are intended solely for the purpose of defining the relative rights of Subordinating Creditors, on the one hand, and of the Senior Lenders, on the other hand, with respect to the obligations of the Borrowers to the Senior Lenders and Subordinating Creditors. Nothing contained in this Agreement shall: (i) impair, as between Subordinating Creditors and the Borrowers, the obligation of the Borrowers to pay their respective obligations with respect to the Subordinated Debt as and when the same shall become due and payable (subject, however, to the terms of this Agreement as applicable to the Senior Lenders’ rights hereunder); or (ii) otherwise affect the relative rights of Subordinating Creditors against the Borrowers, on the one hand, and of the other creditors (other than the Senior Lenders) of the Borrower against the Borrower, on the other hand.

(e) Further Assurances and Additional Acts. Each Subordinating Creditor shall execute, acknowledge, deliver, file, notarize, and register at its own expense all such further agreements, instruments, certificates, financing statements, documents, and assurances, and perform such acts as the Senior Lenders reasonably shall deem necessary to effectuate the purposes of this Agreement, and promptly provide the Senior Lenders with evidence of the foregoing reasonably satisfactory to the Senior Lenders.

(f) Entire Agreement. This Agreement: (i) is valid, binding and enforceable against each Subordinating Creditor and the Borrowers in accordance with its terms and provisions and no conditions exist as to its legal effectiveness; and (ii) constitutes the entire agreement between the parties with respect to the subject matter hereof. No promises, either expressed or implied, exist between the Senior Lenders, Subordinating Creditors and the Borrower, unless contained herein. This Agreement is the result of negotiations between Subordinating Creditors, the Borrower and the Senior Lenders and has been reviewed (or have had the opportunity to be reviewed) by counsel to all such parties, and is the product of all parties. Accordingly, this Agreement shall not be construed more strictly against the Borrower merely because of the Borrower’s involvement in its preparation.

(g) Amendments; Waivers. No delay on the part of the Senior Lenders in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by the Senior Lenders of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement shall in any event be effective unless the same shall be in writing and acknowledged by the Senior Lenders, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. The rights and remedies of the Senior Lenders under this Agreement are cumulative and not exclusive of any rights, remedies, powers, and privileges that may otherwise be available to the Senior Lenders provided by law.

(h) MANDATORY FORUM SELECTION. EACH SUBORDINATING CREDITORM EACH SENIOR LENDER AND THE BORROWER IRREVOCABLY AGREE THAT ANY DISPUTE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH, DIRECTLY OR INDIRECTLY, THIS AGREEMENT OR RELATED TO ANY MATTER WHICH IS THE SUBJECT OF OR INCIDENTAL TO THIS AGREEMENT, OR THE COLLATERAL (WHETHER OR NOT SUCH CLAIM IS BASED UPON BREACH OF CONTRACT OR TORT) SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE STATE AND/OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK. THIS PROVISION IS INTENDED TO BE A “MANDATORY” FORUM SELECTION CLAUSE AND GOVERNED BY AND INTERPRETED CONSISTENT WITH NEW YORK LAW. EACH SUBORDINATING CREDITORS, EACH SENIOR LENDER AND BORROWER HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS SITUS IN SAID COUNTY, AND EACH HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS.

(i) Governing Law. This Agreement shall be delivered and accepted in and shall be deemed to be a contract made under and governed by the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of such State, without giving effect to the choice of law provisions of such State.

(j) WAIVER OF JURY TRIAL. EACH SUBORDINATING CREDITOR, THE BORROWER AND EACH SENIOR LENDER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE COLLATERAL, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE SENIOR LENDERS, SUBORDINATING CREDITORS AND THE BORROWER ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

(k) Notices. All notices of request, demand and other communications hereunder shall be addressed to the parties as follows:

	If to the Borrower:	Inergetics, Inc.
		550 Broad Street, Suite 1212
		Newark, NJ 07102
		Attn: Michael James
		E-Mail: ______

	With a copy to (which shall	______
	not constitute notice)	______
		______

	If to the Senior Lenders:	______
		______

	If to Subordinating Creditors:	______
		______

unless the address is changed by the party by like notice given to the other parties. Notice shall be in writing and shall be deemed delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address below, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by Federal Express, UPS or other nationally recognized overnight courier service, overnight delivery, then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., EST, on a business day. Any notice hand delivered after 5:00 p.m., EST, shall be deemed delivered on the following business day. Notwithstanding the foregoing, notice, consents, waivers or other communications referred to in this Agreement may be sent by e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation from the receiving party) that the notice has been received by the other party, which receipt can be evidenced by a regular notice on the party giving notice’s computer or other device showing the email notice was “delivered” or any other similar verbiage demonstrating receipt.

(l) Binding Effect. This Agreement shall become effective upon execution by the parties hereto and shall be binding on the parties hereto and their respective successors and assigns.

(m) Enforceability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by, unenforceable or invalid under any jurisdiction, such provision shall as to such jurisdiction, be severable and be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

(n) Counterparts; Electronic Signatures. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. Receipt of an executed signature page to this Agreement by facsimile or other electronic transmission shall constitute effective delivery thereof.

(o) Costs, Fees and Expenses. The Borrower shall pay or reimburse the Senior Lenders for all reasonable costs, fees and expenses incurred by the Senior Lenders or for which the Senior Lenders become obligated in connection with the enforcement of this Agreement, including costs and expenses and attorneys’ fees, costs and time charges of counsel to the Senior Lenders throughout all court levels.

(p) Termination. This Agreement shall not terminate until the Senior Debt is Discharged, or until the Subordinated Debt is paid in full in accordance with the provisions hereof.

(q) Specific Performance. The Senior Lenders are hereby authorized to demand specific performance and/or any other equitable relief and;/or remedy relating to any provision of this Agreement, the Security Agreement and/or any related documents, whether or not the Borrower and/or the Subordinating Creditors shall have complied with any of the provisions hereof and/or thereof applicable to it, at any time when any Subordinating Creditor shall have failed to comply (and/or have directly and/or indirectly indicated that any of such persons intend not to comply) with any of the provisions of this Agreement, the Security Agreement and/or any related documents, applicable to it. Each Subordinating Creditor and the Borrower each hereby irrevocably waives any defense based on the adequacy of a remedy at law, which might be asserted as a bar to such remedy of specific performance and further knowingly waive after consultation with their respective legal counsel any obligation and/or required under applicable law requiring any Senior Lender to post a bond and/or make any similar undertaking in connection with any action seeking equitable relief.

(r) Authority. Each party hereby represents and warrants to the others that each party has the requisite power and authority to enter into this Agreement and otherwise to carry out its respective obligations hereunder, and that the execution, delivery and performance by each party of this Agreement have been duly authorized by all necessary action on the part of each party, respectively and as applicable, and that the person executing this Agreement on behalf of each party has been fully authorized to do so in accordance with applicable law and the governing documents of each party.

(s) Legal Fees and Expenses. In any action brought concerning and/or arising directly and/or indirectly out of this Agreement and/or any of the other Senior Debt Documents, the prevailing party shall be entitled to recover from the other parties hereto all of its legal fees and expenses incurred by it with respect to any such legal action.

[Signatures on the following page]

[Signatures page to subordination agreement]

IN WITNESS WHEREOF, the undersigned have executed this Subordination Agreement as of the date first written above.

SUBORDINATING CREDITORS:

[______]

By:
Name:
Title:

[______]

____________________________________

[______] (INDIVIDUALLY)

[______]

By:
Name:
Title:

[______]

By:
Name:
Title:

[Signatures page to subordination agreement

continued on next page]

[Signatures page to subordination agreement

continued from prior page]

BORROWER:

INERGETICS, INC., a Delaware corporation

By:
Name:
Title:

SENIOR LENDERS:

[______]

By:
	Name:
	Title:

[______]

By:
	Name:
	Title:

[______]

By:
	Name:
	Title:

[end of Signatures page to subordination agreement]

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