ex10-1.htm


Exhibit 10.1


 



SUBSCRIPTION AGREEMENT







THIS SUBSCRIPTION AGREEMENT (this “Agreement”), is dated as of May 11, 2012, by and between Innovative Food Holdings, Inc., a Florida corporation (the “Company”), and the subscribers identified on Schedule 1 hereto (the “Subscribers”).







WHEREAS, the Company and the Subscribers are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”);







WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Subscribers, as provided herein, and the Subscribers shall purchase for up to $1,080,000 (“Purchase Price”), in the aggregate, (i) $1,200,000 of principal amount (“Principal Amount”) secured promissory notes of the Company (“Note” or “Notes”), a form of which is annexed hereto as Exhibit A, convertible into shares of the Company’s Common Stock, $0.0001 par value (the “Common Stock”) at a per share conversion price set forth in the Notes (“Conversion Price”); and (ii) Warrants (the “Warrants”) in the forms attached hereto as Exhibit B1, B2, B3, and B4, to purchase shares of the Company’s Common Stock (the “Warrant Shares”) (the “Offering”).  The Notes, shares of Common Stock issuable upon conversion of the Notes (the “Conversion Shares”), the Warrants and the Warrant Shares are collectively referred to herein as the “Securities”; and







WHEREAS, the aggregate proceeds of the sale of the Notes and the Warrants contemplated hereby (“Purchase Price”) shall be held in escrow by Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581 (the “Escrow Agent”) pursuant to the terms of an Escrow Agreement to be executed by the parties substantially in the form attached hereto as Exhibit C (the “Escrow Agreement”).







NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement the Company and the Subscribers hereby agree as follows:







1.           Closing.  Subject to the satisfaction or waiver of the terms and conditions of this Agreement, on the “Closing Date,” Subscribers shall purchase and the Company shall sell to such Subscribers the Shares and the Warrants as described in Section 2 below.  The date the Escrow Agent releases the funds received from one or more Subscribers to the Company and releases the Escrow Documents (as defined in the Escrow Agreement) to the parties in accordance with the provisions of the Escrow Agreement shall be the Closing Date with respect to such released funds and Escrow Documents, and such release is referred to herein as the “Closing.”  There shall be only one Closing.







2.           Notes and Warrants.







(a)           Notes.   Subject to the satisfaction or waiver of the terms and conditions of this Agreement, on the Closing Date, each Subscriber shall purchase from the Company, and the Company shall sell to each such Subscriber, a Note in the Principal Amount designated on Schedule 1 hereto for each such Subscriber’s Purchase Price indicated thereon.







(b)           Warrants.  On the Closing Date, the Company will issue and deliver the Warrants to the Subscribers.  The exercise price to acquire a Warrant Share upon exercise of a Class E Warrant shall be $0.0002, subject to reduction as described in the Warrants.  Each Warrant will be exercisable for eight years.  Up to 23,000,000 Class E Warrants will be exercisable commencing the Closing Date.  Up to 12,000,000 Class F Warrants will be exercisable commencing twelve months after the Closing Date.  Up to 15,000,000 Class G Warrants will be exercisable commencing twenty months after the Closing Date.  Up to 25,000,000 Class H Warrants will be exercisable commencing twenty-eight months after the Closing Date.


 




  





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(c)           Allocation of Purchase Price.   The Purchase Price will be allocated by each Subscriber, at each Subscriber’s election, among the components of the Securities so that each component of the Securities will be fully paid and non-assessable, and acquired for value.







3.           Security Interest.   On February 24, 2005, in connection with an offering of the Company’s promissory notes and Common Stock purchase warrants (the “February 2005 Offering”), certain lenders and subsequently their assignees (“Other Secured Parties”) were granted a security interest in the assets of the Company, including ownership of Food Innovations, Inc., one of the Company’s Subsidiaries (as defined in Section 5(a) of the Agreement) and in the assets of Food Innovations, Inc., which security interest was memorialized in two “Security and Pledge Agreements” dated as of February 24, 2005, as amended on August 25, 2005 pursuant to a Modification and Amendment Agreement and as further amended on August 25, 2005 pursuant to an Amendment, Waiver and Consent and further amended on December 31, 2008 pursuant to the December 31, 2008 Transaction Documents, and further amended pursuant to Amendment Waiver and Consent dated January 1, 2009 (collectively with the February 2005 Offering, the “Other Offerings”).  The Subsidiaries (as defined in Section 5(a) of this Agreement) shall guarantee the Company’s obligations under the Transaction Documents [as defined in Section 5(c)].   Such guarantee will be memorialized in a “Subsidiary Guaranty”, a form of which is annexed hereto as Exhibit D.  The Security and Pledge Agreements are hereby amended to include the Subscribers and the Company agrees that the Subscribers are hereby made parties to the Security and Pledge Agreements as “Secured Parties” therein and their interests in the Obligations (as defined in the Security Agreement) are pari pasu in proportion to their specific Obligation amounts and of equal priority with each other to each other in relation to the Obligations arising under this Subscription Agreement and Transaction Documents and the interests of the Other Secured Parties in the Collateral.  The Company will execute such other agreements, documents and financing statements reasonably requested by the Subscribers to memorialize and further protect the security interest described herein, which will be filed at the Company’s expense with the jurisdictions, states and counties designated by the Subscribers.  The Company will also execute all such documents reasonably necessary in the opinion of Subscribers to memorialize and further protect the security interest described herein.  Pursuant to Section 13 of this Agreement, such Other Secured Parties will waive their rights and consent to the Transaction Documents as necessary to allow the Subscribers to join in the Security and Pledge Agreements as Secured Parties (as defined therein).







4.           Subscriber Representations and Warranties.  Each of the Subscribers hereby represents and warrants to and agrees with the Company with respect only to such Subscriber that:







(a)           Organization and Standing of the Subscriber.  Subscriber, to the extent applicable, is an entity duly formed, validly existing and in good standing under the laws of the jurisdiction of its formation.







(b)           Authorization and Power.  Such Subscriber has the requisite power and authority to enter into and perform this Agreement and the other Transaction Documents [as defined in Section 5(a)] and to purchase the Note and Warrants being sold to it hereunder.  The execution, delivery and performance of this Agreement and the other Transaction Documents by such Subscriber and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action, and no further consent or authorization of Subscriber or its board of directors or stockholders, if applicable, is required.  This Agreement and the other Transaction Documents have been duly authorized, executed and delivered by such Subscriber and constitutes, or shall constitute, when executed and delivered, a valid and binding obligation of such Subscriber, enforceable against Subscriber in accordance with the terms thereof.


 




  





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(c)           No Conflicts.  The execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation by such Subscriber of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such Subscriber’s charter documents, bylaws or other organizational documents, if applicable; (ii) conflict with nor constitute a default (or an event which with notice or lapse of time or both would become a default) under any agreement to which such Subscriber is a party; nor (iii) result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Subscriber or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on Subscriber).  Such Subscriber is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement and the other Transaction Documents  nor to purchase the Securities in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, such Subscriber is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.







(d)           Information on Company.   Such Subscriber has been furnished with or has had access to the EDGAR Website of the Commission to the Company’s filings made with the Commission through the tenth business day preceding the Closing Date, referred to herein collectively as the “Reports”.  Subscribers are not deemed to have any knowledge of any information not included in the Reports unless such information is delivered in the manner described in the next sentence.  In addition, such Subscriber may have received in writing from the Company such other information concerning its operations, financial condition and other matters as such Subscriber has requested in writing, identified thereon as OTHER WRITTEN INFORMATION (such other information is collectively, the “Other Written Information”), and considered all factors such Subscriber deems material in deciding on the advisability of investing in the Securities.







(e)           Information on Subscriber.   Such Subscriber is, and, unless the Company is notified by the Subscribers otherwise, will be at the time of the conversion of the Notes and exercise of the Warrants, an “accredited investor,” as such term is defined in Regulation D promulgated by the Commission under the 1933 Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States publicly-owned companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable such Subscriber to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment.  Such Subscriber has the authority and is duly and legally qualified to purchase and own the Securities.  Such Subscriber is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.  The information set forth on Schedule 1 hereto regarding such Subscriber is accurate.







(f)           Purchase of Notes and Warrants.  On the Closing Date, such Subscriber will purchase the Note and Warrants as principal for its own account for investment only and not with a view toward, or for resale in connection with, the public sale or any distribution thereof.







(g)           Compliance with Securities Act.   Such Subscriber understands and agrees that the Securities have not been registered under the 1933 Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of the Subscriber contained herein), and that the Securities must be held indefinitely unless a subsequent disposition is registered under the 1933 Act or any applicable state securities laws or is exempt from such registration.  In any event, and subject to compliance with applicable securities laws, the Subscriber may enter into lawful hedging transactions in the course of hedging the position they assume in the Securities, and deliver the Securities, to close out their positions or otherwise settle other transactions, or loan or pledge the Securities, or interests in the Securities, to third parties who in turn may dispose of these Securities.


 




  





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(h)           Conversion Shares and Warrant Shares Legend.  The Conversion Shares and Warrant Shares shall bear the following or similar legend:







“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR 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 (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER AND BE REASONABLY ACCEPTABLE TO THE COMPANY), 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.”







(i)           Notes and Warrants Legend.  The Notes and Warrants shall bear the following legend:







“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE -OR-  EXERCISABLE] 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 (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER AND BE REASONABLY ACCEPTABLE TO THE COMPANY), 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.”







(j)           Communication of Offer.  The offer to sell the Securities was directly communicated to such Subscriber by the Company.  At no time was such Subscriber presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.


 




  





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(k)           Restricted Securities.   Such Subscriber understands that the Securities have not been registered under the 1933 Act and such Subscriber will not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any of the Securities unless pursuant to an effective registration statement under the 1933 Act, or unless an exemption from registration is available.  Notwithstanding anything to the contrary contained in this Agreement, such Subscriber may transfer (without restriction and without the need for an opinion of counsel) the Securities to its Affiliates (as defined below) provided that each such Affiliate is an “accredited investor” under Regulation D and such Affiliate agrees to be bound by the terms and conditions of this Agreement. For the purposes of this Agreement, an “Affiliate” of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity.  For purposes of this definition, “control” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.







(l)           No Governmental Review.  Such Subscriber understands that no United States federal or state agency or any other governmental or state agency has passed on or made recommendations or endorsement of the Securities or the suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.







(m)           Correctness of Representations.  Subscriber represents that the foregoing representations and warranties are true and correct as of the date hereof and, unless Subscriber otherwise notifies the Company prior to the Closing Date, shall be true and correct as of the Closing Date.







(n)           Survival.  The foregoing representations and warranties shall survive the Closing Date.







5.           Company Representations and Warranties.  Except as set forth in the Schedules and except for those matters adopted by the shareholders of the Company at a shareholder meeting held January 25, 2012, the Company represents and warrants to and agrees with each Subscriber that:







(a)           Due Incorporation.  The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power to own its properties and to carry on its business as presently conducted.  The Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect (as defined herein).  For purposes of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect on the financial condition, results of operations, prospects, properties or business of the Company when taken as a whole, other than an effect primarily or proximately resulting from (A) changes in general economic or market conditions affecting the industry generally in which such entity and its Subsidiaries operate, which changes do not disproportionately affect such entity taken as a whole with its Subsidiaries as compare to other similarly situated participants in the industry in which such entity and its Subsidiaries operate; (B) changes in applicable law or generally accepted accounting principles; and (C) acts of terrorism, war or natural disasters which do not disproportionately affect such entity taken as a whole.  For purposes of this Agreement, “Subsidiary” means, with respect to any entity at any date, any direct or indirect corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity of which (A) more than 30% of (i) the outstanding capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such entity, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such entity, or (B) is under the actual control of the Company.  The Company’s Subsidiaries are disclosed on Schedule 5(a).  The Company has not been known by any other names within the last eight (8) years.


 




  





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(b)           Outstanding Stock.  Except as disclosed on Schedule 5(b), all issued and outstanding shares of capital stock and equity interests in the Company have been duly authorized and validly issued and are fully paid and non-assessable.







(c)           Authority; Enforceability.  This Agreement, the Notes, Warrants,  the Escrow Agreement, and any other agreements delivered or required to be delivered together with or pursuant to this Agreement or in connection herewith (collectively “Transaction Documents”) have been duly authorized, executed and delivered by the Company and are valid and binding agreements of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity.   The Company has full corporate power and authority necessary to enter into and deliver the Transaction Documents and to perform their obligations thereunder.







(d)           Capitalization and Additional Issuances.   The authorized and outstanding capital stock of the Company on an actually issued and on a fully diluted basis and all outstanding rights to acquire or receive, directly or indirectly, any equity of the Company as of the date of this Agreement and the Closing Date (not including the Securities) are set forth in the Reports or on Schedule 5(d).  Except as set forth on Schedule 5(d), there are no options, warrants, or rights to subscribe to, securities, rights, understandings or obligations convertible into or exchangeable for or granting any right to subscribe for any shares of capital stock or other equity interest of the Company.  The only officer, director, employee and consultant stock option or stock incentive plan or similar plan currently in effect or contemplated by the Company is described on Schedule 5(d).  There are no outstanding agreements or preemptive or similar rights affecting the Company’s Common Stock or equity.







(e)           Consents.  Except for the consent of the Other Secured Parties, no consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, or any of its Affiliates, any Principal Market [as defined in Section 9(b)], or the Company’s stockholders is required for the execution by the Company of the Transaction Documents and compliance and performance by the Company of its obligations under the Transaction Documents, including, without limitation, the issuance and sale of the Securities.  The Transaction Documents and the Company’s performance of its obligations thereunder has been unanimously approved by the Company’s board of directors in accordance with the Company’s Certificate of Incorporation and applicable law.  Any such qualifications and filings will, in the case of qualifications, be effective upon Closing and will, in the case of filings, be made within the time prescribed by law.







(f)           No Violation or Conflict.  Upon Closing, and assuming the representations and warranties of the Subscriber in Section 4 are true and correct, neither the issuance nor the sale of the Securities nor the performance of the Company’s obligations under the Transaction Documents by the Company, will:







(i)           violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (A) the articles or certificate of incorporation, charter or bylaws of the Company, (B) to the Company’s knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company of any court, governmental agency or body, or arbitrator having jurisdiction over the Company or over the properties or assets of the Company or any of its Affiliates, (C) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company or any of its Affiliates is a party, by which the Company or any of its Affiliates is bound, or to which any of the properties of the Company or any of its Affiliates is subject, or (D) the terms of any “lock-up” or similar provision of any underwriting or similar agreement to which the Company, or any of its Affiliates is a party except the violation, conflict, breach, or default of which would not have a Material Adverse Effect; or


 




  





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(ii)           result in the creation or imposition of any lien, charge or encumbrance upon the Securities or any of the assets of the Company or any of its Affiliates except in favor of each Subscriber as described herein; or







(iii)           result in the activation of any anti-dilution rights or a reset or repricing of any debt, equity or security instrument of any creditor or equity holder of the Company, or the holder of the right to receive any debt, equity or security instrument of the Company nor result in the acceleration of the due date of any obligation of the Company; or







           (iv)           result in the triggering of any rights of first refusal, participation rights, piggy-back or other registration rights of any person or entity holding securities of the Company or having the right to receive securities of the Company or pursuant to any agreement with the Company.







(g)           The Securities.  The Securities upon issuance:







(i)           are, or will be, free and clear of any security interests, liens, claims or other encumbrances, subject only to restrictions upon transfer under the 1933 Act and any applicable state securities laws;







(ii)           subject to the accuracy of the representations of the Subscibers set forth in Section 4, Notes and Warrants, have been, or will be, duly and validly authorized and on the dates of issuance of the Notes and Warrants, the Conversion Shares upon conversion of the Notes, and the Warrant Shares upon exercise of the Warrants, such Notes, Warrants, Conversion Shares and Warrant Shares will be duly and validly issued, fully paid and non-assessable and if registered pursuant to the 1933 Act and resold pursuant to an effective registration statement or an exemption from registration in compliance with securities laws and prospectus delivery requirements, will be free trading, unrestricted and unlegended;







(iii)           will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company or rights to acquire securities or debt of the Company;







(iv)           will not subject the holders thereof to personal liability by reason of being such holders unless caused by the act or omission of such holders taken or omitted contrary to the Transaction Documents; and







           (v)           assuming the representations and warranties of the Subscribers as set forth in Section 4 hereof are true and correct, will not result in a violation of Section 5 under the 1933 Act.







(h)           Litigation.  Except as disclosed in the Reports, there is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates that would affect the execution by the Company or the complete and timely performance by the Company of its obligations under the Transaction Documents.  Except as disclosed in the Reports, there is no pending or, to the best knowledge of the Company, basis for or threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates which litigation if adversely determined would have a Material Adverse Effect.


 




  





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(i)           No Market Manipulation.  The Company and its Affiliates have not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Securities or affect the price at which the Securities may be issued or resold.







(j)           Information Concerning Company.  The Reports and Other Written Information contain all material information relating to the Company and its operations and financial condition as of their respective dates which information is required to be disclosed therein.   Since December 31, 2011, and except as disclosed in the Reports or modified in Other Written Information or in the Schedules hereto, there has been no Material Adverse Effect relating to the Company. The Reports and Other Written Information including the financial statements included therein do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, taken as a whole, not misleading in light of the circumstances and when made.







(k)           Solvency.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).







(l)           Defaults.  The Company is not in violation of its articles of incorporation or bylaws.   The Company is (i) not in default under or in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a Material Adverse Effect, (ii) not in default with respect to any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters which default would have a Material Adverse Effect, or (iii) not in violation of any statute, rule or regulation of any governmental authority which violation would have a Material Adverse Effect.







(m)           No Integrated Offering.   Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security of the Company nor solicited any offers to buy any security of the Company under circumstances that would cause the offer of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of the Bulletin Board.  No prior offering will impair the exemptions relied upon in this Offering or the Company’s ability to timely comply with its obligations hereunder.  Neither the Company nor any of its Affiliates will take any action or suffer any inaction or conduct any offering other than the transactions contemplated hereby that may be integrated with the offer or issuance of the Securities or that would impair the exemptions relied upon in this Offering or the Company’s ability to timely comply with its obligations hereunder.







(n)           No General Solicitation.  Neither the Company, nor any of its Affiliates, nor to its knowledge, any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Securities.







(o)           No Undisclosed Liabilities.  The Company has no liabilities or obligations which are material, individually or in the aggregate, other than those incurred in the ordinary course of the Company’s business since December 31, 2011, and which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, except as disclosed in the Reports or in Schedule 5(o).


 




  





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(p)           No Undisclosed Events or Circumstances.  Since December 31, 2011, except as disclosed in the Reports, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the Reports.







(q)           Dilution.   The Company’s executive officers and directors understand the nature of the Securities being sold hereby and recognize that the issuance of the Securities will have a potential dilutive effect on the equity holdings of other holders of the Company’s equity or rights to receive equity of the Company.  The board of directors of the Company has concluded, in its good faith business judgment, that the issuance of the Securities is in the best interests of the Company.  The Company specifically acknowledges that its obligation to issue the Conversion Shares upon conversion of the Notes and the Warrant Shares upon exercise of the Warrants is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other stockholders of the Company or parties entitled to receive equity of the Company.







(r)           No Disagreements with Accountants and Lawyers.  There are no material disagreements of any kind presently existing, or reasonably anticipated by the Company to arise between the Company and the accountants and lawyers previously and presently employed by the Company, including but not limited to disputes or conflicts over payment owed to such accountants and lawyers, nor have there been any such disagreements during the two years prior to the Closing Date.







(s)           Investment Company.   Neither the Company nor any Affiliate of the Company is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.







(t)           Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is  in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.







(u)           Reporting Company/Shell Company.  The Company is a publicly-held company subject to reporting obligations pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “1934 Act”).  Pursuant to the provisions of the 1934 Act, the Company has timely filed all reports and other materials required to be filed thereunder with the Commission during the preceding twelve months.  The Company is not a “shell company” nor a “former shell company” as those terms are employed in Rule 144 under the 1933 Act.







(v)           Listing.  The Company’s Common Stock is quoted on the OTC Bulletin Board (“Bulletin Board”) under the symbol IVFH.  The Company has not received any pending oral or written notice that its Common Stock is not eligible nor will become ineligible for quotation on the Bulletin Board nor that its Common Stock does not meet all requirements for the continuation of such quotation.


 




  





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(w)           DTC Status.   The Company’s transfer agent is a participant in and the Common Stock is eligible for transfer pursuant to the Depository Trust Company Automated Securities Transfer Program. The name, address, telephone number, fax number, contact person and email address of the Company transfer agent is set forth on Schedule 5(w) hereto.







(x)           Anti-Takeover.  The Company and its Board of Directors will have taken as of the Closing Date all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Certificate of Incorporation (or similar charter documents) or the laws of its jurisdiction of incorporation that are or could become applicable to the Subscribers as a result of the Subscribers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Notes, Warrants, Conversion Shares and Warrant Shares and the Subscribers’ ownership of the Notes, Warrants, Conversion Shares and Warrant Shares.







(y)           Correctness of Representations.  The Company represents that the foregoing representations and warranties are true and correct as of the date hereof in all material respects, and, unless the Company otherwise notifies the Subscribers prior to the Closing Date, shall be true and correct in all material respects as of the Closing Date; provided, that, if such representation or warranty is made as of a different date, in which case such representation or warranty shall be true as of such date.







(z)           Survival.  The foregoing representations and warranties shall survive the Closing Date.







6.           Regulation D Offering.  The offer and issuance of the Securities to the Subscribers is being made pursuant to the exemption from the registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder.  On the Closing Date, the Company will provide an opinion reasonably acceptable to the Subscribers from the Company’s legal counsel opining on the availability of an exemption from registration under the 1933 Act as it relates to the offer and issuance of the Securities and other matters reasonably requested by Subscribers.  A form of the legal opinion is annexed hereto as Exhibit E.  The Company will provide, at the Company’s expense, to the Subscribers and the Company’s transfer agent, such other legal opinions, if any, as are reasonably necessary in each Subscriber’s opinion for the issuance and resale of Common Stock issuable upon conversion of the Notes and exercise of Warrants, Conversion Shares and Warrant Shares pursuant to an effective registration statement, Rule 144 under the 1933 Act or an exemption from registration.







7.1.           Conversion of Notes.







(a)           Upon the conversion of a Note or part thereof, the Company shall, at its own cost and expense, take all necessary action, including obtaining and delivering an opinion of counsel to assure that the Company’s transfer agent shall issue stock certificates in the name of a Subscriber (or its permitted nominee) or such other persons as designated by Subscriber and in such denominations to be specified at conversion representing the number of shares of Common Stock issuable upon such conversion.  The Company warrants that no instructions other than these instructions have been or will be given to the transfer agent of the Company’s Common Stock and that the certificates representing such shares shall contain no legend other than the legend set forth in Section 4(h).  If and when a Subscriber sells the Conversion Shares, assuming (i) a registration statement including such Conversion Shares for registration has been filed with the Commission, is effective and the prospectus, as supplemented or amended, contained therein is current and (ii) Subscriber or its agent confirms in writing to the transfer agent that Subscriber has complied with the prospectus delivery requirements, the Company will reissue the Conversion Shares without restrictive legend and the Conversion Shares will be free-trading, and freely transferable.  In the event that the Conversion Shares are sold in a manner that complies with an exemption from registration, the Company will promptly instruct its counsel to issue to the transfer agent an opinion permitting removal of the legend, provided that Subscriber delivers reasonably requested representations in support of such opinion.


 




  





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(b)           Each Subscriber will give notice of its decision to exercise its right to convert its Note, interest, or part thereof by telecopying, or otherwise delivering a completed Notice of Conversion (a form of which is annexed as Exhibit A to the Note) to the Company via confirmed telecopier transmission or otherwise pursuant to Section 13(a) of this Agreement.  Subscriber will not be required to surrender the Note until the Note has been fully converted or satisfied.  Each date on which a Notice of Conversion is telecopied to the Company in accordance with the provisions hereof by 6 PM Eastern Time (“ET”) (or if received by the Company after 6 PM ET, then the next business day) shall be deemed a “Conversion Date.”  The Company will itself or cause the Company’s transfer agent to transmit the Company’s Common Stock certificates representing the Conversion Shares issuable upon conversion of the Note to Subscriber via express courier for receipt by Subscriber within five business days after the Conversion Date (such fifth day being the “Delivery Date”).  In the event the Conversion Shares are electronically transferable, then delivery of the Shares must be made by electronic transfer provided request for such electronic transfer has been made by the Subscriber.   A Note representing the balance of the Note not so converted will be provided by the Company to Subscriber if requested by Subscriber, provided Subscriber delivers the original Note to the Company.







(c)           The Company understands that a delay in the delivery of the Conversion Shares in the form required pursuant to Section 7.1 hereof later than the Delivery Date could result in economic loss to the Subscribers.  As compensation to Subscribers for such loss, the Company agrees to pay (as liquidated damages and not as a penalty) to each applicable Subscriber for late issuance of Conversion Shares in the form required pursuant to Section 7.1 hereof upon Conversion of the Note, the amount of $100 per business day after the Delivery Date for each $10,000 of Note principal amount and interest (and proportionately for other amounts) being converted of the corresponding Conversion Shares which are not timely delivered.  The Company shall pay any payments incurred under this Section upon demand.  Furthermore, in addition to any other remedies which may be available to the Subscribers, in the event that the Company fails for any reason to effect delivery of the Conversion Shares on or before the Delivery Date, the Subscriber will be entitled to revoke all or part of the relevant Notice of Conversion by delivery of a notice to such effect to the Company whereupon the Company and Subscriber shall each be restored to their respective positions immediately prior to the delivery of such notice, except that the damages payable in connection with the Company’s default shall be payable through the date notice of revocation or rescission is given to the Company.







7.2.           Mandatory Redemption at Subscriber’s Election.  In the event (i) the Company is prohibited from issuing Conversion Shares, (ii) upon the occurrence of any other Event of Default (as defined in the Note, this Agreement or any other Transaction Document), that continues beyond any applicable cure period, (iii) a Change in Control (as defined below) occurs, or (iv) upon the liquidation, dissolution or winding up of the Company or any Subsidiary, then at the Subscriber's election, the Company must pay to each Subscriber not later than ten (10) days after request by such Subscriber, a sum of money determined by multiplying up to the outstanding principal amount of the Note designated by each such Subscriber by, at Subscriber’s election, the greater of (i) 115%, or (ii) a fraction the numerator of which is the highest closing price of the Common Stock for the thirty days preceding the date demand is made by Subscriber pursuant to this Section 7.2 and the denominator of which is the lowest applicable conversion price during such thirty (30) day period, plus accrued but unpaid interest and any other amounts due under the Transaction Documents ("Mandatory Redemption Payment"). The Mandatory Redemption Payment must be received by each Subscriber on the same date as the Conversion Shares otherwise deliverable or within ten (10) days after request, whichever is sooner ("Mandatory Redemption Payment Date"). Upon receipt of the Mandatory Redemption Payment, the corresponding Note principal, interest and other amounts will be deemed paid and no longer outstanding.  The Subscriber may rescind the election to receive a Mandatory Redemption Payment at any time until such payment is actually received.  Liquidated damages calculated pursuant to Section 7.1(c) hereof, that have been paid or accrued for the ten (10) day period prior to the actual receipt of the Mandatory Redemption Payment by such Subscriber shall be credited against the Mandatory Redemption Payment provided the balance of the Mandatory Redemption Payment is timely paid.  For purposes of this Section 7.2, “Change in Control” shall mean (i) the Company  becoming a Subsidiary of another entity (other than a corporation formed by the Company for purposes of reincorporation in another U.S. jurisdiction), (ii) the sale, lease or transfer of substantially all the assets of the Company or any material Subsidiary, or (iii) a business transaction or reorganization as a result of which the shareholders of the Company immediately prior to the transaction or reorganization hold less than a majority of the voting interests of the surviving corporation or other entity after the transaction or reorganization, or any similar corporate or other reorganization on or after the Closing Date.  The foregoing notwithstanding, Subscriber may demand and receive from the Company the amount stated above or any other greater amount which Subscriber is entitled to receive or demand pursuant to the Transaction Documents.


 




  





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7.3.           Maximum Conversion.  A Subscriber shall not be entitled to convert on a Conversion Date that amount of a Note nor may the Company make any payment including principal, interest, or liquidated or other damages by delivery of Conversion Shares in connection with that number of Conversion Shares which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by such Subscriber and its Affiliates on a Conversion Date or payment date, and (ii) the number of Conversion Shares issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a calculation date, which would result in beneficial ownership by Subscriber and its Affiliates of more than 9.99% of the outstanding shares of Common Stock of the Company on such Conversion Date.  For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder.  Subject to the foregoing, the Subscriber shall not be limited to aggregate conversions of only 9.99% and aggregate conversions by the Subscriber may exceed 9.99%.  The Subscriber shall have the authority to determine whether the restriction contained in this Section 7.3 will limit any conversion of a Note and the extent such limitation applies and to which convertible or exercisable instrument or part thereof such limitation applies.  The Subscriber may increase to not more than 9.99%, the permitted beneficial ownership amount upon and effective after 61 days prior written notice to the Company.  Subscriber may allocate which of the equity of the Company deemed beneficially owned by Subscriber shall be included in the 9.99% amount described above and which shall be allocated to the excess above 9.99%.







7.4.           Injunction Posting of Bond.  In the event a Subscriber shall elect to convert a Note or part thereof, or exercise a Warrant, the Company may not refuse conversion or exercise based on any claim that Subscriber or any one associated or affiliated with Subscriber has been engaged in any violation of law, or for any other reason, unless, a final non-appealable injunction from a court made on notice to Subscriber, restraining and or enjoining conversion of all or part of such Note or exercise of such Warrant shall have been sought and obtained by the Company or the Company has posted a surety bond for the benefit of Subscriber in the amount of 120% of the greater of the outstanding principal and accrued but unpaid interest of the Note, or aggregate purchase price of the Conversion Shares, or 120% of the aggregate exercise price of the Warrants which are sought to be subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to Subscriber to the extent the judgment or decision is in Subscriber’s favor.


 




  





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7.5.           Buy-In.   In addition to any other rights available to Subscribers, if the Company fails to deliver to a Subscriber Conversion Shares by the Delivery Date and if after the Delivery Date Subscriber or a broker on Subscriber’s behalf purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by Subscriber of the Common Stock which Subscriber was entitled to receive upon such conversion (a “Buy-In”), then the Company shall pay to Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) Subscriber’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the aggregate principal and/or interest amount of the Note for which such conversion request was not timely honored together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty).  For example, if a Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of Note principal and/or interest, the Company shall be required to pay Subscriber $1,000 plus interest. Subscriber shall provide the Company written notice and evidence indicating the amounts payable to Subscriber in respect of the Buy-In.







8.           Fees.







(a)           Broker’s Commission.   The Company on the one hand, and each Subscriber (for himself only) on the other hand, agrees to indemnify the other against and hold the other harmless from any and all liabilities to any persons claiming brokerage commissions or similar fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby and arising out of such party’s actions.  The Company represents that there are no parties entitled to receive fees, commissions, finder’s fees, due diligence fees or similar payments in connection with the Offering.  Anything in this Agreement to the contrary notwithstanding, each Subscriber is providing indemnification only for such Subscriber’s own actions and not for any action of any other Subscriber.  The liability of the Company and each Subscriber’s liability hereunder is several and not joint.  The Company represents that to the best of its knowledge there are no other parties entitled to receive fees, commissions, or similar payments in connection with the Offering.







(b)           Subscriber’s Legal Fees.   The Company shall pay to Grushko & Mittman, P.C., a cash fee of $16,000 (“Legal Fees”) (of which $5,000 has been paid prior to Closing) as reimbursement for services rendered in connection with the transactions described in the Transaction Documents. The Legal Fees will be payable out of funds held pursuant to the Escrow Agreement.  Grushko & Mittman, P.C. will be reimbursed at Closing by the Company for all lien searches, filing fees, and reasonable printing and shipping costs for the closing statements to be delivered to Subscribers.







9.           Covenants of the Company.  The Company covenants and agrees with the Subscribers as follows:







(a)           Stop Orders.  Subject to the prior notice requirement described in Section 9(n), the Company will advise the Subscribers, within twenty-four hours after it receives notice of issuance by the Commission, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose.  The Company will not issue any stop transfer order or other order impeding the sale, resale or delivery of any of the Securities, except as may be required by any applicable federal or state securities laws provided at least five (5) days prior notice of such instruction is given to the Subscribers.


 




  





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(b)           Listing/Quotation.  The Company shall promptly secure the quotation or listing of the Conversion Shares and Warrant Shares upon each national securities exchange, or automated quotation system upon which the Company’s Common Stock is quoted or listed and upon which such Conversion Shares and Warrant Shares are or become eligible for quotation or listing (subject to official notice of issuance) and shall maintain same so long as any Notes and Warrants are outstanding.  The Company will maintain the quotation or listing of its Common Stock on the NYSE Amex Equities, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq Global Select Market, Bulletin Board, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock (the “Principal Market”), and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market, as applicable. Subject to the limitation set forth in Section 9(n), the Company will provide Subscribers with copies of all notices it receives notifying the Company of the threatened and actual delisting of the Common Stock from any Principal Market.  As of the date of this Agreement and the Closing Date, the Bulletin Board is the Principal Market.







(c)           Market Regulations.  If required, the Company shall notify the Commission, the Principal Market and applicable state authorities, in accordance with their requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Subscribers and promptly provide copies thereof to the Subscribers.







(d)           Filing Requirements.  From the date of this Agreement and until the last to occur of (i) all the Conversion Shares are eligible to be transferred or sold by the Subscribers pursuant to a registration statement or pursuant to Rule 144(b)(1)(i); (ii) none of the Notes are outstanding, or (iii) twelve (12) months from the last conversion of a Note (the date of such latest occurrence being the “End Date”), the Company will (A) comply in all respects with its reporting and filing obligations under the 1934 Act, (B) voluntarily comply with all reporting requirements that are applicable to an issuer with a class of shares registered pursuant to Section 12(g) of the 1934 Act even if the Company is not subject to such reporting requirements sufficient to permit Subscriber to be able to resell the Conversion Shares and Warrant Shares pursuant to Rule 144(b)(i), and (C) comply with all requirements related to any registration statement filed pursuant to this Agreement.  The Company will use its commercially reasonable best efforts not to take any action or file any document (whether or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said acts until the End Date.  Until the End Date, the Company will continue the listing or quotation of the Common Stock on a Principal Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market.  The Company agrees to timely file a Form D with respect to the Securities if required under Regulation D and to provide a copy thereof to each Subscriber promptly after such filing.







(e)           Use of Proceeds.   The proceeds of the Offering will be substantially employed by the Company for the purposes set forth on Schedule 9(e) hereto.  Except as described on Schedule 9(e), the Purchase Price may not and will not be used for accrued and unpaid officer and director salaries, nor payment of financing related debt nor redemption of outstanding notes or equity instruments of the Company nor non-trade payables outstanding on the Closing Date.







(f)           Reservation.   Not later than sixty (60) days after the Closing Date, the Company undertakes to reserve on behalf of Subscribers from its authorized but unissued Common Stock, a number of shares of Common Stock equal to 150% of the amount of Common Stock necessary to allow Subscribers to be able to convert all of the Notes (including interest that would accrue thereon through the Maturity Date (as defined in the Notes)) and 100% of the amount of Warrant Shares issuable upon exercise of the Warrants (“Required Reservation”).   Failure to have sufficient shares reserved pursuant to this Section 9(f) at any time shall be a material default of the Company’s obligations under this Agreement and an Event of Default under the Notes.  Without waiving the foregoing requirement, if at any time Notes and Warrants are outstanding the Company has reserved on behalf of the Subscribers less than 125% of the amount necessary for full conversion of the outstanding Note principal and interest at the conversion price in effect on every such date and 100% of the Warrant Shares issuable upon exercise of outstanding Warrants (“Minimum Required Reservation”), the Company will promptly reserve the Minimum Required Reservation, or if there are insufficient authorized and available shares of Common Stock to do so, the Company will take all action necessary to increase its authorized capital to be able to fully satisfy its reservation requirements hereunder, including the filing of a preliminary proxy with the Commission not later than fifteen (15) days after the first day the Company has reserved less than the Minimum Required Reservation.  The Company agrees to provide notice to the Subscribers not later than five days after the date the Company has less than the Minimum Required Reservation reserved on behalf of the Subscribers.


 




  





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(g)           DTC Program.  From and after the Closing Date and thereafter at all times that Notes or Warrants are outstanding, the Company will employ as the transfer agent for the Common Stock, Conversion Shares and Warrant Shares a participant in the Depository Trust Company Automated Securities Transfer Program and use its best efforts to cause the Common Stock to be transferable pursuant to such program.







(h)           Taxes.   From the date of this Agreement and until the End Date, the Company will promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Company; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Company will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefore.







(i)           Insurance.  As reasonably necessary as determined by the Company, from the date of this Agreement and until the End Date, the Company will keep its assets which are of an insurable character insured by financially sound and reputable insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in the Company’s line of business and location, in amounts and to the extent and in the manner customary for companies in similar businesses similarly situated and located and to the extent available on commercially reasonable terms.







(j)           Books and Records.  From the date of this Agreement and until the End Date, the Company will keep true records and books of account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with generally accepted accounting principles applied on a consistent basis.







(k)           Governmental Authorities.   From the date of this Agreement and until the End Date, the Company shall duly observe and conform in all material respects to all valid requirements of governmental authorities relating to the conduct of its business or to its properties or assets except where failure to do so would not have a Material Adverse Effect.







(l)           Intellectual Property.  From the date of this Agreement and until the End Date, the Company shall maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to use intellectual property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business, unless it is sold for value.







(m)           Properties.  From the date of this Agreement and until the End Date, the Company will use commercially reasonable best efforts to keep its properties in good repair, working order and condition, reasonable wear and tear excepted, and from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto; and the Company will at all times comply with each provision of all leases and claims to which it is a party or under which it occupies or has rights to property if the breach of such provision could reasonably be expected to have a Material Adverse Effect.  The Company will not abandon any of its assets except for those assets which have negligible or marginal value or for which it is reasonably prudent to do so under the circumstances.


 




  





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(n)           Confidentiality/Public Announcement.   From the date of this Agreement and until the End Date, the Company agrees that except in connection with a Form 8-K, Form 10-Q, Form 10-K and the registration statement or statements regarding the Subscribers’ Securities or in correspondence with the Commission regarding same, it will not disclose in writing publicly or privately the identity of the Subscribers unless expressly agreed to in writing by Subscribers or only to the extent required by law.  Not later than four (4) business days after the Closing Date, the Company will file on Form 8-K describing the Offering as required by the 1934 Act.  The Form 8-K will disclose the amount of Common Stock outstanding immediately after the Closing.  Upon  delivery by the Company to the Subscribers after the Closing Date of any notice or information, in writing, electronically or otherwise, and while a Note, Conversion Shares or Warrants are held by Subscribers, 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 or Subsidiaries, the Company  shall within four (4) business days after any such delivery publicly disclose such  material,  nonpublic  information on a Report on Form 8-K.  In the event that the Company believes that a notice or communication to Subscribers contains material, nonpublic information relating to the Company or Subsidiaries, except as required to be delivered in connection with this Agreement, the Company shall so indicate to Subscribers prior to delivery of such notice or information.  Subscribers will be granted five days to notify the Company that Subscriber elects not to receive such information.   In the case that Subscriber elects not to receive such information, the Company will not deliver such information to Subscribers.  In the absence of any such Company indication, Subscribers shall be allowed to presume that all matters relating to such notice and information do not constitute material, nonpublic information relating to the Company or Subsidiaries.







           (o)           Non-Public Information.  The Company covenants and agrees that except for the Reports, Other Written Information and schedules and exhibits to this Agreement and the Transaction Documents, which information the Company undertakes to publicly disclose on the Form 8-K described in Section 9(n) above, neither it nor any other person acting on its behalf will at any time provide any Subscriber or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Subscriber, its agent or counsel shall have agreed in writing to accept such information as described in Section 9(n) above.  The Company understands and confirms that the Subscribers shall be relying on the foregoing representations in effecting transactions in securities of the Company.  The Company agrees that any information known to Subscriber not already made public by the Company may be made public and disclosed by the Subscriber.







(p)           Negative Covenants.   So long as a Note is outstanding, without the consent of a Majority in Interest [as defined in Section 14(j)] and except as approved by the shareholders at a meeting of shareholders held on January 25, 2012, the Company will not and will not permit any of its Subsidiaries to directly or indirectly:







(i)           create, incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, security title, mortgage, security deed or deed of trust, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction) (each, a “Lien”) upon any of its property, whether now owned or hereafter acquired except for:   (a) Liens imposed by law for taxes that are not yet due or are being contested in good faith and for which adequate reserves have been established in accordance with generally accepted accounting principles; (b) carriers’, warehousemen’s, mechanic’s, material men’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith and by appropriate proceedings; (c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) Liens created with respect to the financing of the purchase of new property in the ordinary course of the Company’s business up to the amount of the purchase price of such property;  (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property; (g) Liens of the Other Secured Parties existing prior to the Closing Date  (each of (a) through (g), a “Permitted Lien”);


 




  





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                                            (ii)           amend its certificate of incorporation, bylaws or its charter documents so as to materially and adversely affect any rights of the Subscribers;







(iii)           repay, repurchase or offer to repay, repurchase or otherwise acquire or make any dividend or distribution in respect of any of its Common Stock, preferred stock, or other equity securities other than to the extent permitted or required under the Transaction Documents;







(iv)           except as set forth on Schedule 9(p)(iv), engage in any transactions with any officer, director, employee or any Affiliate of the Company, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $50,000 other than (i) for payment of salary, or fees for services rendered, pursuant to and on the terms of a written contract in effect at least five days prior to the Closing Date, a copy of which has been provided to the Subscriber at least four days prior to the Closing Date, which contracts may be extended on terms customary and reasonable within the marketplace, (ii) reimbursement for authorized expenses incurred on behalf of the Company, (iii) for other employee benefits, including stock option agreements under any stock option plan of the Company disclosed in the Reports, or (iv) other transactions disclosed in the Reports; or







(v)           pay or redeem any financing related debt or past due obligations or securities outstanding as of the Closing Date, or past due obligations, provided the Company is current with its payment obligations to the Subscribers.


 


(q)           Offering Restrictions.   Subject to the consent of a Majority in Interest, for so long as the Notes are outstanding, the Company will not enter into or exercise any Equity Line of Credit or similar agreement, nor issue nor agree to issue any floating or Variable Priced Equity Linked Instruments nor any of the foregoing or equity with price reset rights (collectively, the “Variable Rate Restrictions”).   For purposes hereof, “Equity Line of Credit” shall include any transaction involving a written agreement between the Company and an investor or underwriter whereby the Company has the right to “put” its securities to the investor or underwriter over an agreed period of time and at an agreed price or price formula, and “Variable Priced Equity Linked Instruments” shall include: (A) any debt or equity securities which are convertible into, exercisable or exchangeable for, or carry the right to receive additional shares of Common Stock either (1) at any conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security, or (2) with a fixed conversion, exercise or exchange price that is subject to being reset at some future date at any time after the initial issuance of such debt or equity security due to a change in the market price of the Company’s Common Stock since date of initial issuance, and (B) any amortizing convertible security which amortizes prior to its maturity date, where the Company is required or has the option to (or any investor in such transaction has the option to require the Company to) make such amortization payments in shares of Common Stock which are valued at a price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security (whether or not such payments in stock are subject to certain equity conditions).


 




  





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(r)           Seniority.   Except for Permitted Liens, until the Notes are fully satisfied or converted, without written consent of a Majority in Interest, the Company and Subsidiaries shall not grant nor allow any security interest to be taken in any assets of the Company or any Subsidiary or any Subsidiary’s assets; nor issue or amend any debt, equity or other instrument which would give the holder thereof directly or indirectly, a right in any equity or assets of the Company or any Subsidiary or any right to payment equal to or superior to any right of the Subscribers as holders of the Notes in or to such equity, assets or payment, nor issue or incur any debt not in the ordinary course of business.







(s)           Notices.   For so long as the Subscribers hold any Notes or Warrants, the Company will maintain a United States address and United States fax number for notice purposes under the Transaction Documents.







(t)           Transactions with Insiders.  So long as the Notes are outstanding without a consent of a Majority in Interest, the Company shall not, and shall cause each of its Subsidiaries not to, enter into, materially amend, materially modify or materially supplement, or permit any Subsidiary to enter into, materially amend, materially modify or materially supplement, any agreement, transaction, commitment, or arrangement relating to the sale, transfer or assignment of any of the Company’s tangible or intangible assets with any of its Insiders (as defined below)(or any persons who were Insiders at any time during the previous two (2) years), or any Affiliates (as defined below) thereof, or with any individual related by blood, marriage, or adoption to any such individual.  “Affiliate” for purposes of this Section 9(t) means, with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a ten percent (10%) or more equity interest in that person or entity, (ii) has ten percent (10%) or more common ownership with that person or entity, (iii) controls that person or entity, or (iv) shares common control with that person or entity.  “Control” or “Controls” for purposes of the Transaction Documents means that a person or entity has the power, direct or indirect, to conduct or govern the policies of another person or entity.  For purposes hereof, “Insiders” shall mean any officer, director or manager of the Company, including but not limited to the Company’s president, chief executive officer, chief financial officer and chief operations officer, and any of their affiliates or family members.







(u)           Stock Splits.  For so long as the Notes are outstanding, the Company undertakes and covenants that without the consent of a Majority in Interest, the Company will not effectuate any stock splits of the Common Stock except as approved by the shareholders of the Company at a meeting of shareholders held January 25, 2012.







(v)           Notice of Event of Default.  The Company agrees to notify Subscriber of the occurrence of an Event of Default (as defined and employed in the Transaction Documents) not later than five (5) business days after any of the Company’s officers or directors becomes aware of such Event of Default.







(w)           Further Registration Statements.   The Company will not, without the consent of a Majority in Interest, file with the Commission or with state regulatory authorities any registration statements, shares reserved for outside securities counsel, or amend any already filed registration statement to increase the amount of Common Stock registered therein, or reduce the price of which such company securities are registered therein, until the expiration of the “Exclusion Period,” which shall be defined as the sooner of (i) the date all of the Registrable Securities (as defined in Section 11.1) have been registered in an effective registration statement that has been effective for not less than six months, or (ii) until all the Conversion Shares and Warrant Shares may be resold by the Subscribers pursuant to a registration statement or Rule 144b(1)(i), without regard to volume limitations.  The Exclusion Period will be tolled or reinstated, as the case may be, during the pendency of an Event of Default as defined in the Note.


 




  





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10.           Covenants of the Company Regarding Indemnification.







(a)           The Company agrees to indemnify, hold harmless, reimburse and defend the Subscribers, the Subscribers’ officers, directors, agents, counsel, Affiliates, members, managers, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Subscribers or any such person which results, arises out of or is based upon (i) any material misrepresentation by Company or breach of any representation or warranty by Company in this Agreement or in any Exhibits or Schedules attached hereto in any Transaction Document, or other agreement delivered pursuant hereto or in connection herewith, now or after the date hereof; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by the Company of any covenant or undertaking to be performed by the Company hereunder, or any other agreement entered into by the Company and Subscribers relating hereto.







(b)           In no event shall the liability of the Subscribers or permitted successor hereunder or under any Transaction Document or other agreement delivered in connection herewith be greater in amount than the dollar amount of the net proceeds actually received by such Subscriber or successor upon the sale of Registrable Securities (as defined herein).







11.           Additional Post-Closing Obligations.







11.1.           Piggy-Back Registrations.   If at any time after the Closing Date there is not an effective registration statement covering all of the Conversion Shares and Warrant Shares and the Company determines to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities, but excluding Forms S-4 or S-8 and similar forms which do not permit such registration, then the Company shall send to each holder of any of the Securities written notice of such determination and, if within fifteen calendar days after receipt of such notice, any such holder shall so request in writing, the Company shall include in such registration statement all or any part of the Conversion Shares such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and any cutbacks in  accordance with guidance provided by the Securities and Exchange Commission (including, but not limited to, Rule 415).  The obligations of the Company under this Section may be waived by any holder of any of the Securities entitled to registration rights under this Section 11.1. The holders whose Conversion Shares and Warrant Shares are included or required to be included in such registration statement are granted the same rights, benefits, liquidated or other damages and indemnification granted to other holders of securities included in such registration statement.  In no event shall the liability of any holder of Securities or permitted successor in connection with any Conversion Shares and Warrant Shares included in any such registration statement be greater in amount than the dollar amount of the net proceeds actually received by such Subscriber upon the sale of the Conversion Shares and Warrant Shares sold pursuant to such registration or such lesser amount in proportion to all other holders of Securities included in such registration statement. All expenses incurred by the Company in complying with Section 11, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the NASD, transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts, counsel fees and selling commissions applicable to the sale of registrable securities are called "Selling Expenses."  The Company will pay all Registration Expenses in connection with the registration statement under Section 11.  Selling Expenses in connection with each registration statement under Section 11 shall be borne by the holder and will be apportioned among such holders in proportion to the number of Shares included therein for a holder relative to all the Securities included therein for all selling holders, or as all holders may agree.


 




  





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11.2.           Unlegended Shares and 144 Sales.







(a)           Delivery of Unlegended Shares.  Within three (3) business days (such third (3rd) day being the “Unlegended Shares Delivery Date”) after the day on which the Company has received (i) a notice that Conversion Shares, Warrant Shares or any other Common Stock held by Subscriber has been sold pursuant to a registration statement or Rule 144 under the 1933 Act, (ii) a representation that the prospectus delivery requirements, or the requirements of Rule 144, as applicable and if required, have been satisfied, (iii) the original share certificates representing the shares of Common Stock that have been sold, and (iv) in the case of sales under Rule 144, customary representation letters of the Subscriber and, if required, Subscriber’s broker regarding compliance with the requirements of Rule 144, the Company at its expense, (y) shall deliver, and shall cause legal counsel selected by the Company to deliver to its transfer agent (with copies to Subscriber) an appropriate instruction and opinion of such counsel, directing the delivery of shares of Common Stock without any legends including the legend set forth in Section 4(h) above (the “Unlegended Shares”); and (z) cause the transmission of the certificates representing the Unlegended Shares together with a legended certificate representing the balance of the submitted Common Stock certificate, if any, to the Subscriber at the address specified in the notice of sale, via express courier, by electronic transfer or otherwise on or before the Unlegended Shares Delivery Date.







(b)           DWAC.   In lieu of delivering physical certificates representing the Unlegended Shares, upon request of a Subscriber, so long as the certificates therefor do not bear a legend and the Subscriber is not obligated to return such certificate for the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the Unlegended Shares by crediting the account of Subscriber’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission system, if such transfer agent participates in such DWAC system.  Such delivery must be made on or before the Unlegended Shares Delivery Date.







(c)           Late Delivery of Unlegended Shares.   The Company understands that a delay in the delivery of the Unlegended Shares pursuant to Section 11.2 hereof later than the Unlegended Shares Delivery Date could result in economic loss to a Subscriber.  As compensation to a Subscriber for such loss, the Company agrees to pay late payment fees (as liquidated damages and not as a penalty) to the Subscriber for late delivery of Unlegended Shares in the amount of $100 per business day after the Unlegended Shares Delivery Date for each $10,000 of purchase price of the Unlegended Shares subject to the delivery default.  If during any 360 day period, the Company fails to deliver Unlegended Shares as required by this Section 11.2 for an aggregate of thirty days, then each Subscriber or assignee holding Securities subject to such default may, at its option, require the Company to redeem all or any portion of the Unlegended Shares subject to such default at a price per share equal to the greater of (i) 115% of the Purchase Price paid by the Subscriber for the Unlegended Shares that were not timely delivered, or (ii) a fraction in which the numerator is the highest closing price of the Common Stock during the aforedescribed thirty day period and the denominator of which is the lowest conversion price or exercise price, as the case may be, during such thirty day period, multiplied by the price paid by Subscriber for such Common Stock (“Unlegended Redemption Amount”).  The Company shall pay any payments incurred under this Section in immediately available funds upon demand.


 




  





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(d)           Injunction.  In the event a Subscriber shall request delivery of Unlegended Shares as described in Section 11.2 and the Company is required to deliver such Unlegended Shares pursuant to Section 11.2, the Company may not refuse to deliver Unlegended Shares based on any claim that such Subscriber or any one associated or affiliated with such Subscriber has not complied with Subscriber’s obligations under the Transaction Documents, or for any other reason, unless, an injunction or temporary restraining order from a court, on notice, restraining and or enjoining delivery of such Unlegended Shares shall have been sought and obtained by the Company and the Company has posted a surety bond for the benefit of such Subscriber in the amount of the greater of (i) 125% of the amount of the aggregate purchase price of the Common Stock which is subject to the injunction or temporary restraining order, (ii) the closing price of the Common Stock on the trading day before the issue date of the injunction multiplied by the number of Unlegended Shares to be subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s favor.







(e)           Buy-In.   In addition to any other rights available to Subscriber, if the Company fails to deliver to a Subscriber Unlegended Shares as required pursuant to this Agreement and after the Unlegended Shares Delivery Date the Subscriber, or a broker on the Subscriber’s behalf, purchases (in an open market transaction or otherwise) shares of common stock to deliver in satisfaction of a sale by such Subscriber of the shares of Common Stock which the Subscriber was entitled to receive from the Company (a “Buy-In”), then the Company shall promptly pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber’s total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased exceeds (B) the aggregate purchase price of the shares of Common Stock delivered to the Company for reissuance as Unlegended Shares together with interest thereon at a rate of 15% per annum accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty).  For example, if a Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase price of shares of Common Stock delivered to the Company for reissuance as Unlegended Shares, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written notice indicating the amounts payable to the Subscriber in respect of the Buy-In.







                                (f)           144 Default.   At any time commencing six months after the Closing Date, in the event the Subscriber is not permitted to sell any of the Conversion Shares or Warrant Shares without any restrictive legend or if such sales are permitted but subject to volume limitations or further restrictions on resale as a result of the unavailability to Subscriber of Rule 144(b)(1)(i) under the 1933 Act or any successor rule (a “144 Default”), for any reason including but not limited to failure by the Company to file quarterly, annual or any other filings required to be made by the Company by the required filing dates (provided that any filing made within the time for a valid extension shall be deemed to have been timely filed), or the Company’s failure to make information publicly available which would allow Subscriber’s reliance on Rule 144 in connection with sales of Conversion Shares or Warrant Shares, except due to a change in current applicable securities laws or because the Subscriber is an Affiliate (as defined under Rule 144) of the Company, then the Company shall pay such Subscriber as liquidated damages and not as a penalty for each thirty days (or such lesser pro-rata amount for any period less than thirty days) an amount equal to two percent (2%) of the purchase price of the Conversion Shares and Warrant Shares subject to such 144 Default.  Liquidated Damages shall not be payable pursuant to this Section 11.2(f) in connection with Shares for such times as such Shares may be sold by the holder thereof without any legend or volume or other restrictions pursuant to Section 144(b)(1)(i) of the 1933 Act or pursuant to an effective registration statement.


 




  





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12.           (a)           Favored Nations Provision.  Other than in connection with (i) full or partial consideration in connection with a bona fide strategic merger, acquisition, consolidation or purchase of substantially all of the securities or assets of a corporation or other entity so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights, (ii) the Company’s issuance of securities in connection with bona fide strategic license agreements and other bona fide partnering arrangements so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights, (iii) the Company’s issuance of Common Stock or the issuances or grants of options to purchase Common Stock to employees, directors, and consultants, pursuant to plans approved by the Company’s shareholders and described in Schedule 5(d) as such plans are constituted on the Closing Date, (iv) securities upon the exercise or exchange of or conversion of any securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement on the unamended terms disclosed in the Reports and which securities are also described on Schedule 12(a), (v) as a result of the exercise of Warrants or conversion of Notes which are granted or issued pursuant to this Agreement on the unamended terms in effect on the Closing Date, and (vi) any securities issued as compensation to any employee or director of the Company approved by the Company’s board of directors, including pursuant to employment contracts and provided all such issuances of securities are at a price per share or conversion or exercise price per share which is greater than the Conversion Price in effect at such time or the exercise price in effect at such time (collectively, the foregoing (i) through (vi) are “Excepted Issuances”), if at any time the Notes or Warrants are outstanding, the Company shall agree to or issue (the “Lower Price Issuance”) any Common Stock or securities convertible into or exercisable for shares of Common Stock (or modify any of the foregoing which may be outstanding) to any person or entity at a price per share or conversion or exercise price per share which shall be less than the Conversion Price in effect at such time, or if less than the Warrant exercise price in effect at such time, without the consent of the Subscribers, then the Conversion Price and Warrant exercise price shall automatically be reduced to such other lower price.  The average Conversion Price of the Conversion Shares and average exercise price in relation to the Warrant Shares shall be calculated separately for the Conversion Shares and Warrant Shares.    Common Stock issued or issuable by the Company for no consideration or for consideration that cannot be determined at the time of issue will be deemed issuable or to have been issued for $0.0001 per share of Common Stock.  For purposes of the issuance and adjustments described in this paragraph, the issuance of any security of the Company carrying the right to convert such security into shares of Common Stock or any warrant, right or option to purchase Common Stock shall result in the issuance of the additional shares of Common Stock upon the sooner of the agreement to or actual issuance of such convertible security, warrant, right or options and again at any time upon any subsequent issuances of shares of Common Stock upon exercise of such conversion or purchase rights if such issuance is at a price lower than the Conversion Price or Warrant exercise price in effect upon such issuance.  The rights of Subscribers set forth in this Section 12(a) are in addition to any other rights the Subscribers have pursuant to this Agreement, the Notes, Warrants, any other Transaction Document, and any other agreement referred to or entered into in connection herewith or to which Subscribers and Company are parties.







(b)           Right of First Offer.  Until twelve (12) months following the Closing Date, the Subscribers shall be given not less than fifteen (15) days prior written notice of any proposed offer by the Company of its common stock or other securities or equity linked debt obligations (“Other Offering”), except in connection with the Excepted Issuances described in Section 12(a)(i) through (iv) and Section 12(a)(vi).  If Subscribers elect to exercise their rights pursuant to this Section 12(b), the Subscribers shall have the right during the fifteen (15) days following receipt of the notice, to purchase in the aggregate up to all of such offered common stock, debt or other securities in accordance with the terms and conditions set forth in the notice, relative to each other in proportion to the amount of Note Principal issued to them on the Closing Date.  Subscribers who participate in such Other Offering shall be entitled at their option to purchase, in proportion to each other, the amount of such Other Offering that could have been purchased by Subscribers who do not exercise their rights hereunder until up to the entire Other Offering is purchased by Subscribers.  In the event such terms and conditions are modified during the notice period, Subscribers shall be given prompt notice of such modification and shall have the right during the fifteen (15) days following the notice of modification to exercise such right.


 




  





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(c)           Maximum Exercise of Rights.   In the event the exercise of the rights described in Section 12(a) and Section 12(b) would or could result in the issuance of an amount of Common Stock of the Company that would exceed the maximum amount that may be issued to a Subscriber calculated in the manner described in Section 7.3 of this Agreement, then the issuance of such additional shares of Common Stock of the Company to such Subscriber will be deferred in whole or in part until such time as such Subscriber is able to beneficially own such Common Stock without exceeding the applicable maximum amount set forth calculated in the manner described in Section 7.3 of this Agreement and such Subscriber notifies the Company accordingly.







13.           Waiver and Consent.  To the extent the terms, conditions and rights granted to Subscribers in connection with this Offering and these Transaction Documents conflict with or trigger rights of the Other Secured Parties (as defined in Section 3 herein and which are the same Subscribers herein), including anti-dilution and reset rights, same were waived and consented to, as applicable, pursuant to a Consent and Waiver Agreement dated May 11, 2012.  Additionally, consent was given to include Subscribers as Secured Parties to the Security and Pledge Agreements, to include their interests in the Obligations and pari-passu in properties to their specific obligation amounts and of equal priority with each other in relation to the Obligations.







14.           Miscellaneous.







(a)           Notices.  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, 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 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: (i) if to the Company, to: Innovative Food Holdings, Inc., 3845 Beck Boulevard, Suite 805, Naples, FL 34114, Attn: Sam Klepfish, CEO, facsimile: (516) 858-0503, with a copy by facsimile only to: Howard Rhine, Esq., Feder Kaszovitz  LLP, 845 Third Avenue, New York, NY 10022-1200, facsimile: (212) 888-7776, and (ii) if to the Subscribers, to: the addresses and fax numbers indicated on Schedule 1 hereto, and to: Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581, facsimile: (212) 697-3575.







 (b)           Entire Agreement; Assignment.  This Agreement and other documents delivered in connection herewith represent the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by both parties.  Neither the Company nor the Subscribers has relied on any representations not contained or referred to in this Agreement and the documents delivered herewith.   No right or obligation of the Company shall be assigned without prior notice to and the written consent of the Subscribers.







(c)           Counterparts/Execution.  This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.  This Agreement may be executed by facsimile transmission, PDF, electronic signature or other similar electronic means with the same force and effect as if such signature page were an original thereof.


 




  





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(d)           Law Governing this Agreement.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York.  The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The parties executing this Agreement and other agreements referred to herein or delivered in connection herewith on behalf of the Company agree to submit to the in personam jurisdiction of such courts and hereby irrevocably waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.  In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.  Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.







(e)           Specific Enforcement, Consent to Jurisdiction.  The Company and Subscribers acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.  Subject to Section 14(d) hereof, the Company and each Subscriber hereby irrevocably waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction in New York of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.







(f)           Damages.   In the event the Subscriber is entitled to receive any liquidated or other damages pursuant to the Transactions Documents, the Subscriber may elect to receive the greater of actual damages or such liquidated damages.  In the event the Subscriber is granted rights under different sections of the Transaction Documents relating to the same subject matter or which may be exercised contemporaneously, or pursuant to which damages or remedies are different, Subscriber is granted the right in Subscriber’s absolute discretion to proceed under such section as Subscriber elects.







(g)           Maximum Payments.   Nothing contained herein or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law.  In the event that the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Subscribers and thus refunded to the Company.  The Company agrees that it may not and actually waives any right to challenge the effectiveness or applicability of this Section 14(g).


 




  





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(h)           Calendar Days.   All references to “days” in the Transaction Documents shall mean calendar days unless otherwise stated.  The terms “business days” and “trading days” shall mean days that the New York Stock Exchange is open for trading for three or more hours.  Time periods shall be determined as if the relevant action, calculation or time period were occurring in New York City.  Any deadline that falls on a non-business day in any of the Transaction Documents shall be automatically extended to the next business day and interest, if any, shall be calculated and payable through such extended period.







(i)           Captions: Certain Definitions.  The captions of the various sections and paragraphs of this Agreement have been inserted only for the purposes of convenience; such captions are not a part of this Agreement and shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions of this Agreement.  As used in this Agreement the term “person” shall mean and include an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization and a government or any department or agency thereof.







(j)           Consent.   As used in this Agreement and the Transaction Documents and any other agreement delivered in connection herewith, “Consent of the Subscribers” or similar language means the consent of holders of more than seventy-five percent (75%) of the outstanding Principal Amount of Notes on the date consent is requested (such Subscribers being a “Majority in Interest”).  A Majority in Interest may consent to take or forebear from any action permitted under or in connection with the Transaction Documents, modify any Transaction Documents or waive any default or requirement applicable to the Company, Subsidiaries or Subscribers under the Transaction Documents provided the effect of such action does not waive any accrued interest or damages and further provided that the relative rights of the Subscribers to each other remains unchanged.







(k)           Severability.  In the event that any term or provision of this Agreement shall be finally determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by an authority having jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability: (i) by or before that authority of the remaining terms and provisions of this Agreement, which shall be enforced as if the unenforceable term or provision were deleted, or (ii) by or before any other authority of any of the terms and provisions of this Agreement.







(l)           Successor Laws.  References in the Transaction Documents to laws, rules, regulations and forms shall also include successors to and functionally equivalent replacements of such laws, rules, regulations and forms.  A successor rule to Rule 144(b)(1)(i) shall include any rule that would be available to a non-Affiliate of the Company for the sale of Common Stock not subject to volume restrictions and after a six month holding period.







(m)           Maximum Liability.   In no event shall the liability of the Subscribers or permitted successor hereunder or under any Transaction Document or other agreement delivered in connection herewith be greater in amount than the dollar amount of the net proceeds actually received by such Subscriber or successor upon the sale of Conversion Shares.


 




  





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(n)           Independent Nature of Subscribers.     The Company acknowledges that the obligations of each Subscriber under the Transaction Documents are several and not joint with the obligations of any other Subscriber, and no Subscriber shall be responsible in any way for the performance of the obligations of any other Subscriber under the Transaction Documents. The Company acknowledges that each Subscriber has represented that the decision of each Subscriber to purchase Securities has been made by such Subscriber independently of any other Subscriber and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company which may have been made or given by any other Subscriber or by any agent or employee of any other Subscriber, and no Subscriber or any of its agents or employees shall have any liability to any other Subscriber (or any other person) relating to or arising from any such information, materials, statements or opinions.  The Company acknowledges that nothing contained in any Transaction Document, and no action taken by any Subscriber pursuant hereto or thereto shall be deemed to constitute the Subscribers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Subscribers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  The Company acknowledges that it has elected to provide all Subscribers with the same terms and Transaction Documents for the convenience of the Company and not because Company was required or requested to do so by the Subscribers.  The Company acknowledges that such procedure with respect to the Transaction Documents in no way creates a presumption that the Subscribers are in any way acting in concert or as a group with respect to the Transaction Documents or the transactions contemplated thereby.







(o)           Equal Treatment.   No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered and paid to all the Subscribers and their permitted successors and assigns.







(p)           Adjustments.   The conversion price, Warrant exercise price, amount of Conversion Shares and Warrant Shares, trading volume amounts, price/volume amounts and similar figures in the Transaction Documents shall be equitably adjusted and as otherwise described in this Agreement, the Notes and Warrants.







[-SIGNATURE PAGES FOLLOW-]


 


 


 




  





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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)







Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a binding agreement between us.







INNOVATIVE FOOD HOLDINGS, INC.


a Florida corporation






















By: _________________________________


      Name:


      Title:







Dated: May ___, 2012


















	
SUBSCRIBER

	
PURCHASE


PRICE

	
PRINCIPAL


AMOUNT OF


NOTE

	
WARRANTS


	
ALPHA CAPITAL ANSTALT


Pradafant 7


9490 Furstentums


Vaduz, Lichtenstein


Fax No.: 011-42-32323196


 


Taxpayer ID# (if applicable): ________________


or Social Security #


 


 


_________________________________________


(Signature)


By:


 

	
$1,080,000.00

	
$1,200,000.00

	
Class E Warrants – 23,000,000


 


Class F Warrants – 12,000,000


 


Class G Warrants – 15,000,000


 


Class H Warrants – 25,000,000







 




  





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LIST OF EXHIBITS AND SCHEDULES


 




	 	
Exhibit A

	
Form of Note


	 	
Exhibit B1

	
Form of Class E Warrant


	 	
Exhibit B2

	
Form of Class F Warrant


	 	
Exhibit B3

	
Form of Class G Warrant


	 	
Exhibit B4

	
Form of Class H Warrant


	 	
Exhibit C

	
Escrow Agreement


	 	
Exhibit D

	
Form of Subsidiary Guaranty


	 	
Exhibit E

	
Form of Legal Opinion


	 	  	  
	 	
Schedule 1

	
List of Subscribers


	 	
Schedule 5(a)

	
Subsidiaries


	 	
Schedule 5(b)

	
Outstanding Stock


	 	
Schedule 5(d)

	
Capitalization and Additional Issuances


	 	
Schedule 5(w)

	
Transfer Agent


	 	
Schedule 9(e)

	
Use of Proceeds


	 	
Schedule 9(p)(iv)

	
Transactions with Principals


	 	
Schedule 12(a)

	
Excepted Issuances







 




  





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SCHEDULE 1















	
SUBSCRIBERS

	
PURCHASE PRICE

	
PRINCIPAL AMOUNT OF NOTE

	
WARRANTS


	
ALPHA CAPITAL ANSTALT


Pradafant 7


9490 Furstentums


Vaduz, Lichtenstein


Fax No.: 011-42-32323196

	
$1,080,000.00

	
$1,200,000

	
Class E Warrants – 23,000,000


 


Class F Warrants – 12,000,000


 


Class G Warrants – 15,000,000


 


Class H Warrants – 25,000,000







 


 


 




  





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Schedule 5(a)







SUBSIDIARIES


 




	
Subsidiary

	
Jurisdiction


	  	  
	
Food Innovations, Inc.

	
Delaware


	
Food New Media Group, Inc.

	
New York


	
4 The Gourmet, Inc. (d/b/a For The Gourmet, Inc.)

	
Delaware


	
Gourmet Foodservice Group, Inc.

	
Delaware


	
Artisan Specialty Foods, Inc.

	
Delaware



















  





30











  






 


Schedule 5(b)


 


OUTSTANDING STOCK












10 million shares were issued in the name of Pasta Italiana in anticipation of the closing of their acquisition by the Company.  The deal never closed and the transfer agent refuses to void the shares without the consent of Pasta Italiana.







735,643 extra shares were inadvertently issued upon the conversion of a note.  The recipient is aware of the error and is cooperating with the Company in returning the shares for cancellation.



















  





31











  






 


SCHEDULE 5(d) – Capitalization and Additional Issuances


 



	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	
Shares issued

	  	  	  	  	  	  	
             293,692,189


	
Shares issued, not outstanding:

	  	  	  	  	  	  	  
	  	
Issued in error to  Joel Gold

	  	  	  	
               (720,443)

	  	  	  
	  	
Shares issued to Pasta, to be cancelled

	  	  	  	
          (10,000,000)

	  	  	  
	  	
Shares purchased and held in treasury

	  	  	  	
                 (15,200)

	  	  	  
	
Total shares issued, not outstanding

	  	  	  	  	  	  	
             (10,735,643)


	
Shares outstanding

	  	  	  	  	  	  	
             282,956,546


	  	  	  	  	  	  	  	  	  
	
Shares to be issued:

	  	  	  	  	  	  	  
	  	
Solomon Mayer - director comp

	  	  	  	
                 250,000

	  	  	  
	  	
Hank Cohn - director comp

	  	  	  	
                 250,000

	  	  	  
	  	
Sam Klepfish  - bonus

	  	  	  	
                 910,000

	  	  	  
	  	
Justin Wiernasz - bonus

	  	  	  	
                 966,000

	  	  	  
	  	
Sam Klepfish  - bonus

	  	  	  	
              2,856,757

	  	  	  
	  	
Justin Wiernasz - bonus

	  	  	  	
              2,856,757

	  	  	  
	  	
Justin Wiernasz - bonus

	  	  	  	
              3,000,000

	  	  	  
	  	
R. Ferrone - satisfaction of debt

	  	  	  	
              1,525,916

	  	  	  
	  	
C. Ferrone - satisfaction of debt

	  	  	  	
              1,525,916

	  	  	  
	  	
A. Ferrone - satisfaction of debt

	  	  	  	
              1,525,916

	  	  	  
	  	
Laura Ferrone - satisfaction of debt

	  	  	  	
              1,525,916

	  	  	  
	  	  	  	  	  	  	  	  	
               17,193,178


	
Stock options:

	  	  	
 Exercise

	  	  	  	  
	  	  	
 Issued

	
 Expire

	
 Price

	
  # Shares

	  	  	  
	  	
Gold

	
1/22/2008

	
3/31/2013

	
 $                     0.005

	
              5,000,000

	  	  	  
	  	
Ferrone

	
1/22/2008

	
3/31/2013

	
 $                     0.005

	
              5,000,000

	  	  	  
	  	
Klepfish

	
1/22/2008

	
3/31/2013

	
 $                     0.005

	
              5,000,000

	  	  	  
	  	
Wiernasz

	
1/22/2008

	
3/31/2013

	
 $                     0.005

	
              5,000,000

	  	  	  
	  	
Gold

	
12/31/2009

	
3/31/2015

	
 $                     0.008

	
              2,000,000

	  	  	  
	  	
Gold

	
12/31/2009

	
6/30/2015

	
 $                     0.010

	
              2,000,000

	  	  	  
	  	
Gold

	
12/31/2009

	
9/30/2015

	
 $                     0.009

	
              2,000,000

	  	  	  
	  	
Gold

	
12/31/2009

	
12/31/2015

	
 $                     0.010

	
              2,000,000

	  	  	  
	  	
Ferrone

	
12/31/2009

	
3/31/2015

	
 $                     0.008

	
              2,000,000

	  	  	  
	  	
Ferrone

	
12/31/2009

	
6/30/2015

	
 $                     0.010

	
              2,000,000

	  	  	  
	  	
Ferrone

	
12/31/2009

	
9/30/2015

	
 $                     0.009

	
              2,000,000

	  	  	  
	  	
Ferrone

	
12/31/2009

	
12/31/2015

	
 $                     0.010

	
              2,000,000

	  	  	  
	  	
Gold

	
12/31/2009

	
12/31/2014

	
 $                     0.007

	
              1,000,000

	  	  	  
	  	
Ferrone

	
12/31/2009

	
12/31/2014

	
 $                     0.007

	
              1,000,000

	  	  	  
	  	
Wiernasz

	
1/6/2010

	
3/31/2015

	
 $                     0.008

	
              2,000,000

	  	  	  
	  	
Wiernasz

	
1/6/2010

	
6/30/2015

	
 $                     0.010

	
              2,000,000

	  	  	  
	  	
Wiernasz

	
1/6/2010

	
9/30/2015

	
 $                     0.009

	
              2,000,000

	  	  	
 


	  	
Wiernasz

	
1/6/2010

	
12/31/2015

	
 $                     0.010

	
              2,000,000

	  	  	  
	  	
Mcdonald

	
3/31/2010

	
3/31/2015

	
 $                     0.008

	
                 625,000

	  	  	  
	  	
Mcdonald

	
3/31/2010

	
6/30/2015

	
 $                     0.010

	
                 625,000

	  	  	  
	  	
Mcdonald

	
3/31/2010

	
9/30/2015

	
 $                     0.009

	
                 625,000

	  	  	  
	  	
Mcdonald

	
3/31/2010

	
12/31/2015

	
 $                     0.010

	
                 625,000

	  	  	  
	  	
Klepfish

	
3/31/2011

	
3/31/2016

	
 $                     0.010

	
                 158,228

	  	  	  
	  	
Ferrone

	
3/31/2011

	
3/31/2016

	
 $                     0.010

	
                 158,228

	  	  	  
	  	
Gold

	
3/31/2011

	
3/31/2016

	
 $                     0.010

	
                 158,228

	  	  	  
	  	
Mayer

	
3/31/2011

	
3/31/2016

	
 $                     0.010

	
                 158,228

	  	  	  
	  	
Cohn

	
3/31/2011

	
3/31/2016

	
 $                     0.010

	
                 158,228

	  	  	  
	  	
Klepfish

	
6/30/2011

	
6/30/2016

	
 $                     0.010

	
                 156,250

	  	  	  
	  	
Ferrone

	
6/30/2011

	
6/30/2016

	
 $                     0.010

	
                 156,250

	  	  	  
	  	
Gold

	
6/30/2011

	
6/30/2016

	
 $                     0.010

	
                 156,250

	  	  	  
	  	
Mayer

	
6/30/2011

	
6/30/2016

	
 $                     0.010

	
                 156,250

	  	  	  
	  	
Cohn

	
6/30/2011

	
6/30/2016

	
 $                     0.010

	
                 156,250

	  	  	  
	  	
Klepfish

	
9/30/2011

	
9/30/2016

	
 $                     0.009

	
                 166,667

	  	  	  
	  	
Ferrone

	
9/30/2011

	
9/30/2016

	
 $                     0.009

	
                 166,667

	  	  	  
	  	
Gold

	
9/30/2011

	
9/30/2016

	
 $                     0.009

	
                 166,667

	  	  	  
	  	
Mayer

	
9/30/2011

	
9/30/2016

	
 $                     0.009

	
                 166,667

	  	  	  
	  	
Cohn

	
9/30/2011

	
9/30/2016

	
 $                     0.009

	
                 166,667

	  	  	  
	  	
Klepfish

	
12/31/2011

	
12/31/2016

	
 $                     0.007

	
                 208,333

	  	  	  
	  	
Ferrone

	
12/31/2011

	
12/31/2016

	
 $                     0.007

	
                 208,333

	  	  	  
	  	
Gold

	
12/31/2011

	
12/31/2016

	
 $                     0.007

	
                 208,333

	  	  	  
	  	
Mayer

	
12/31/2011

	
12/31/2016

	
 $                     0.007

	
                 208,333

	  	  	  
	  	
Cohn

	
12/31/2011

	
12/31/2016

	
 $                     0.007

	
                 208,333

	  	  	  
	  	
2012 Directors Compensation Plan  (Note A)

	  	  	  	  	  	  	  
	
Total stock options

	  	  	  	  	  	  	
               51,947,390


	  	  	  	  	  	  	  	  	  
	  	  	  	  	
 Exercise

	  	  	  	  
	
Warrants:

	
 Issued

	
 Expire

	
 Price

	
  # Shares

	  	  	  
	  	
Alpha (A)

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
            70,000,000

	  	  	  
	  	
Alpha (B)

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
            17,500,000

	  	  	  
	  	
Alpha (C )

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
            28,000,000

	  	  	  
	  	
Alpha

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
              5,652,174

	  	  	  
	  	
Osher

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
              2,536,232

	  	  	  
	  	
Assameka

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
              1,811,594

	  	  	  
	  	
Alpha

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
              1,413,043

	  	  	  
	  	
Osher

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
                 634,058

	  	  	  
	  	
Assameka

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
                 452,899

	  	  	  
	  	
Alpha

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
              2,260,870

	  	  	  
	  	
Osher

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
              1,014,493

	  	  	  
	  	
Assameka

	
2/25/2005

	
4/3/2015

	
 $                     0.005

	
                 724,637

	  	  	  
	  	
Alpha (A)

	
8/25/2005

	
4/3/2015

	
 $                     0.012

	
            24,000,000

	  	  	  
	  	
Alpha (B)

	
8/25/2005

	
4/3/2015

	
 $                     0.011

	
              6,000,000

	  	  	  
	  	
Alpha (C )

	
8/25/2005

	
4/3/2015

	
 $                     0.005

	
              2,400,000

	  	  	  
	  	
Alpha

	
8/25/2005

	
4/3/2015

	
 $                     0.012

	
              3,391,304

	  	  	  
	  	
Osher

	
8/25/2005

	
4/3/2015

	
 $                     0.012

	
              1,521,739

	  	  	  
	  	
Assameka

	
8/25/2005

	
4/3/2015

	
 $                     0.012

	
              1,086,957

	  	  	  
	  	
Alpha

	
8/25/2005

	
4/3/2015

	
 $                     0.011

	
                 847,826

	  	  	  
	  	
Osher

	
8/25/2005

	
4/3/2015

	
 $                     0.011

	
                 380,435

	  	  	  
	  	
Assameka

	
8/25/2005

	
4/3/2015

	
 $                     0.011

	
                 271,739

	  	  	  
	  	
Alpha

	
8/25/2005

	
4/3/2015

	
 $                     0.005

	
                 339,130

	  	  	  
	  	
Osher

	
8/25/2005

	
4/3/2015

	
 $                     0.005

	
                 152,174

	  	  	  
	  	
Assameka

	
8/25/2005

	
4/3/2015

	
 $                     0.005

	
                 108,696

	  	  	  
	  	
Asher (A)

	
8/25/2005

	
4/3/2015

	
 $                     0.012

	
              5,000,000

	  	  	  
	  	
Asher (B)

	
8/25/2005

	
4/3/2015

	
 $                     0.011

	
              1,250,000

	  	  	  
	  	
Asher ( C)

	
8/25/2005

	
4/3/2015

	
 $                     0.005

	
                 500,000

	  	  	  
	  	
Momona (A)

	
8/25/2005

	
4/3/2015

	
 $                     0.012

	
              5,000,000

	  	  	  
	  	
Momona (B)

	
8/25/2005

	
4/3/2015

	
 $                     0.011

	
              1,250,000

	  	  	  
	  	
Momona (C )

	
8/25/2005

	
4/3/2015

	
 $                     0.005

	
                 500,000

	  	  	  
	  	
Lane (A)

	
8/25/2005

	
4/3/2015

	
 $                     0.012

	
              2,000,000

	  	  	  
	  	
Lane (B)

	
8/25/2005

	
4/3/2015

	
 $                     0.011

	
                 500,000

	  	  	  
	  	
Lane (C )

	
8/25/2005

	
4/3/2015

	
 $                     0.005

	
                 200,000

	  	  	  
	  	
Alpha

	
5/19/2006

	
4/3/2015

	
 $                     0.005

	
                 300,000

	  	  	  
	  	
Alpha

	
3/4/2008

	
4/3/2015

	
 $                     0.012

	
              3,391,304

	  	  	  
	  	
Osher

	
3/4/2008

	
4/3/2015

	
 $                     0.012

	
              1,521,739

	  	  	  
	  	
Assameka

	
3/4/2008

	
4/3/2015

	
 $                     0.012

	
              1,086,957

	  	  	  
	  	
Alpha

	
3/4/2008

	
4/3/2015

	
 $                     0.011

	
                 847,826

	  	  	  
	  	
Osher

	
3/4/2008

	
4/3/2015

	
 $                     0.011

	
                 380,435

	  	  	  
	  	
Assameka

	
3/4/2008

	
4/3/2015

	
 $                     0.011

	
                 271,739

	  	  	  
	  	
Alpha

	
3/4/2008

	
4/3/2015

	
 $                     0.005

	
                 339,130

	  	  	  
	  	
Osher

	
3/4/2008

	
4/3/2015

	
 $                     0.005

	
                 152,174

	  	  	  
	  	
Assameka

	
3/4/2008

	
4/3/2015

	
 $                     0.005

	
                 108,696

	  	  	  
	  	
Alpha (A)

	
3/4/2008

	
4/3/2015

	
 $                     0.012

	
              2,000,000

	  	  	  
	  	
Alpha (B)

	
3/4/2008

	
4/3/2015

	
 $                     0.011

	
                 500,000

	  	  	  
	  	
Alpha (C )

	
3/4/2008

	
4/3/2015

	
 $                     0.005

	
                 200,000

	
 

	  	  
	  	
Alpha (A)

	
3/4/2008

	
4/3/2015

	
 $                     0.012

	
            24,000,000

	  	  	  
	  	
Alpha (B)

	
3/4/2008

	
4/3/2015

	
 $                     0.011

	
              6,000,000

	  	  	  
	  	
Alpha (C )

	
3/4/2008

	
4/3/2015

	
 $                     0.005

	
              2,400,000

	  	  	  
	  	
Pasta

	
9/15/2008

	
9/14/2013

	
 $                     0.012

	
              1,000,000

	  	  	  
	  	
Alpha

	
12/31/2008

	
4/3/2015

	
 $                     0.005

	
            40,000,000

	  	  	  
	
Total Warrants

	  	  	  	  	  	  	
             273,200,000


	  	  	  	  	  	  	  	  	  
	  	  	
Date of

	  	
Principal

	
Accrued

	
Conversion

	  	  
	  	  	
Note

	
Due Date

	
Amount

	
Interest

	
Rate

	
# shares

	  
	
Convertible Notes:

	  	  	  	  	  	  	  
	
29

	
Alpha

	
1/1/2009

	
10/3/2013

	
                  230,000

	
                 59,863

	
            0.005

	
         57,972,575

	  
	
28

	
Alpha

	
12/31/2008

	
10/3/2013

	
                             -

	
                 25,118

	
            0.005

	
           5,023,600

	  
	
2562

	
Alpha

	
2/25/2005

	
10/3/2013

	
                  263,500

	
               243,060

	
            0.005

	
       101,311,955

	  
	
2562

	
Alpha

	
8/25/2005

	
10/3/2013

	
                  100,000

	
                 79,360

	
            0.005

	
         35,872,085

	  
	
2562

	
Alpha

	
5/19/2006

	
10/3/2013

	
                    10,000

	
                 10,131

	
            0.005

	
           4,026,268

	  
	
2562

	
Alpha

	
2/7/2006

	
10/3/2013

	
                  120,000

	
               128,116

	
            0.005

	
         49,623,222

	  
	  	  	  	  	  	  	
 

	
 

	  
	
30A

	
Alpha

	
1/1/2009

	
10/3/2013

	
                    21,478

	
                   8,588

	
            0.005

	
           6,013,295

	  
	
30B

	
Osher

	
1/1/2009

	
10/3/2013

	
                       9,638

	
                   3,851

	
            0.005

	
           2,697,830

	  
	
30C

	
Assameka

	
1/1/2009

	
10/3/2013

	
                       6,884

	
                   2,755

	
            0.005

	
           1,927,736

	  
	
15C

	
Alpha

	
2/25/2005

	
10/3/2013

	
                    22,609

	
                   8,744

	
            0.005

	
           6,270,616

	  
	
15D

	
Osher

	
2/25/2005

	
10/3/2013

	
                    10,145

	
                   3,922

	
            0.005

	
           2,813,484

	  
	
15E

	
Assameka

	
2/25/2005

	
10/3/2013

	
                       7,246

	
                   2,801

	
            0.005

	
           2,009,374

	  
	
21A

	
Alpha

	
2/7/2006

	
10/3/2013

	
                    16,957

	
                 16,417

	
            0.005

	
           6,674,812

	  
	
21B

	
Osher

	
2/7/2006

	
10/3/2013

	
                       7,609

	
                   7,367

	
            0.005

	
           2,995,213

	  
	
21C

	
Assameka

	
2/7/2006

	
10/3/2013

	
                       5,435

	
                   5,261

	
            0.005

	
           2,139,181

	  
	
15F

	
Alpha

	
8/25/2005

	
10/3/2013

	
                    15,287

	
                   1,994

	
            0.005

	
           3,456,233

	  
	
15G

	
Osher

	
8/25/2005

	
10/3/2013

	
                       6,860

	
                       897

	
            0.005

	
           1,551,333

	  
	
15H

	
Assameka

	
8/25/2005

	
10/3/2013

	
                       4,900

	
                       638

	
            0.005

	
           1,107,524

	  
	
7B

	
Alpha

	
3/11/2004

	
10/3/2013

	
                    21,478

	
                 14,853

	
            0.005

	
           7,266,295

	  
	
7C

	
Osher

	
3/11/2004

	
10/3/2013

	
                       9,638

	
                   6,662

	
            0.005

	
           3,260,030

	  
	
7D

	
Assameka

	
3/11/2004

	
10/3/2013

	
                       6,884

	
                   4,762

	
            0.005

	
           2,329,136

	  
	  	  	  	  	  	  	  	
 

	  
	
2582

	
Momona

	
1/1/2009

	
10/3/2013

	
                    25,310

	
                   6,582

	
            0.005

	
           6,378,304

	  
	
2581

	
Asher Brand

	
8/25/2005

	
10/3/2013

	
                       5,000

	
                   6,841

	
            0.005

	
           2,368,134

	  
	
2582

	
Momona

	
8/25/2005

	
10/3/2013

	
                             -

	
                 10,024

	
            0.005

	
           2,004,800

	  
	  	  	  	  	  	  	  	
 

	  
	  	
Klepfish

	
various

	
on demand

	
                  130,500

	
                 32,069

	
            0.005

	
         32,513,744

	  
	
2580

	
Hou Hua

	
5/9/2005

	
10/12/2006

	
                    20,000

	
                 11,651

	
            0.005

	
           6,330,137

	  
	
2583

	
Lane Ventures

	
8/25/2005

	
10/3/2013

	
                    10,124

	
                   5,168

	
            0.005

	
           3,058,482

	  
	
2583

	
Lane Ventures

	
1/1/2009

	
10/3/2013

	
                       6,000

	
                   2,642

	
            0.005

	
           1,728,441

	  
	  	  	  	  	  	  	  	  	
             360,723,838


	  	  	  	  	  	  	  	  	  
	  	
Total shares outstanding and issuable

	  	  	  	  	  	  	
             986,020,952


	  	  	  	  	  	  	  	  	
 


	  	  	  	  	  	  	  	  	
 


	  	
 Note A:  The Company expect to issue options to its directors for services performed in 2012.

	  	  	  
	  	
 The number of options issuable to each of the Company's five directors will be calculated as follows:

	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	
 Note B:  The Company's Board of Directors adopted and its shareholders approved

	
 

	  	  	  	  
	  	
 2011 Stock Award and Incentive Plan containing 100 million shares.

	  	  	  	  	  
	  	  	  	  	  	  	  	  	  












  





32











  






 


Schedule 5(w)







TRANSFER AGENT












Paul Sullivan


Relationship Manager


Computershare


350 Indiana Street, Suite 750, Golden CO 80401


T:  303.262.0678


F:  312.601.2312


Paul.Sullivan@computershare.com














  





33











  






 


Schedule 9(e)







USE OF PROCEEDS












Purchase of all of the outstanding shares of Artisan Specialty Foods, Inc., an Illinois corporation.














  





34











  






 


Schedule 9(p)(iv)


 


TRANSACTIONS WITH PRINCIPALS












None.



















  





35