Document:

ex10-1.htm

Exhibit 10.1

 

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of November 8, 2012, by and between Tel-Instrument Electronics Corp., a New Jersey corporation with its headquarters located at One Branca Road, East Rutherford, NJ 07073 (the “Company”), and the subscriber identified on the signature page hereto (the “Subscriber”).

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

WHEREAS, the parties hereto desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to Subscriber, and Subscriber shall purchase, in the aggregate, that number of shares of common stock, par value $.10 per share, of the Company (the “Common Stock”)  as is set forth on the signature page hereto (the “Shares”) at an aggregate purchase price (the “Purchase Price”) of Three and 35/100 United States Dollars (US$3.35) (the “Securities”).

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

1.           Purchase and Sale.   Upon the terms and subject to the conditions set forth in this Agreement, the Company hereby agrees to sell, assign, transfer and deliver to Subscriber, and Subscriber hereby agrees to purchase and accept delivery from the Company, the Shares free of all liens, pledges, mortgages, security interests, charges, restrictions, adverse claims or other encumbrances of any kind or nature whatsoever (“Encumbrances”), for the consideration specified herein (such consideration, on a per share basis, the “Share Price”).  The Subscriber shall have the right to participate in any issuance by the Company of any warrants occurring less than six months after the purchase and sale of the Common Stock hereunder (other than an Exempt Issuance as defined below), related to any prospective equity or indebtedness transaction, or a combination thereof (a “Subsequent Financing”), in an amount that would allow the Subscriber to maintain its percentage of beneficial ownership of the then-outstanding shares of the Common Stock on a fully-diluted basis (the “Participation Amount”), on the same terms, conditions and price provided for in the Subsequent Financing. “Exempt Issuance” means the issuance of: (i) warrants issued in the ordinary course of the business to an existing lender that is not related to a subsequent financing.

2.           Subscriber Representations and Warranties.  Subscriber hereby represents and warrants to and agrees with the Company that:

(a)           Standing of Subscriber.  If Subscriber is an entity, such Subscriber is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation.  If Subscriber is a natural person, such Subscriber is not a minor and has the legal capacity to enter into this Agreement;

 

  

  

  

(b)           Authorization and Power.  Subscriber has the requisite power and authority to enter into and perform this Agreement and to purchase the Shares.  The execution, delivery and performance of this Agreement by Subscriber and, if Subscriber is an entity, the consummation by Subscriber of the transactions contemplated hereby have been duly authorized by all necessary company action, and no further consent or authorization of Subscriber, its board of directors or similar governing body, or stockholders is required, as applicable.  This Agreement has been duly authorized, executed and delivered by Subscriber and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of Subscriber, enforceable against Subscriber in accordance with the terms thereof;

(c)           No Conflicts.  If Subscriber is an entity, the execution, delivery and performance of this Agreement and the consummation by Subscriber of the transactions contemplated hereby do not and will not result in a violation of Subscriber’s charter documents, bylaws or other organizational documents, as applicable;

(d)           Information on Subscriber.  Such Subscriber is an “accredited investor,” as such term is defined in Rule 501(a) of Regulation D promulgated by the Commission under the Securities Act and affirmed by Subscriber in the completed Purchaser Questionnaire attached hereto as Exhibit A, 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 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.  Subscriber is able to bear the risk of such investment for an indefinite period and to afford a partial or complete loss thereof.  Subscriber is not required to be registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended;

(e)           Purchase of Shares.  Subscriber will purchase the Shares for its own account for investment and not with a view toward, or for resale in connection with, the public sale or any distribution thereof in violation of the Securities Act or any applicable state securities law, and has no direct or indirect arrangement or understandings with any other person or entity to distribute or regarding the distribution of such Shares;

(f)           Compliance with Securities Act.   Subscriber understands and agrees that the Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities laws by reason of their issuance in a transaction that does not require registration under the Securities Act, and that such Shares must be held indefinitely unless a subsequent disposition is registered under the Securities Act or any applicable state securities laws or is exempt from such registration;

 

(g)           Legend.  The 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 (REASONABLY ACCEPTABLE TO THE COMPANY), IN AN ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.”

 

  

  

  

 

(i)           Communication of Offer.  Subscriber has a preexisting personal or business relationship with the Company or one or more of its directors, officers or control persons, and the offer to sell the Shares was directly communicated to Subscriber by the Company.  At no time was 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;

(i)           No Governmental Endorsement. 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 Shares or the suitability of the investment in the Shares, nor have such authorities passed upon or endorsed the merits of the offering of the Shares;

(j)           Receipt of Information.  Subscriber believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Shares.  Subscriber further represents that through its representatives it has had an opportunity to ask questions and receive answers from the Company; and

(k)           No Market Manipulation.  Subscriber and Subscriber’s 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 Shares or affect the price at which the Shares may be issued or resold.

3.           Company Representations and Warranties.  The Company represents and warrants to, and agrees with, 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;

(b)           Authority; Enforceability.  This Agreement has been duly authorized, executed and delivered by the Company and is the valid and binding agreement of the Company, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, or principles of equity.  The Company has full corporate power and authority necessary to enter into and deliver this Agreement and to perform its obligations thereunder;

(c)           Capitalization and Additional Issuances.  The Company has authorized four million (4,000,000) shares of the Common Stock.  As of the date hereof, there are 2,795,549 shares of the Common Stock issued and outstanding.  All of the outstanding shares of the Common Stock are duly authorized and validly issued, fully paid and non-assessable and are not (and will not be) subject to preemptive or similar rights affecting the Common Stock.  As of the date hereof, except as described on Schedule 3(c) hereto, there are no (i) contracts to which the Company is a party obligating the Company to accelerate the vesting of any company equity award as a result of the transactions contemplated by this Agreement (whether alone or upon the occurrence of any additional or subsequent events), (ii) outstanding securities of the Company convertible into or exchangeable for shares of the Common Stock, (iii) outstanding options, warrants or other agreements or commitments to acquire from the Company, or obligations of the Company to issue, shares of capital stock of (or securities convertible into or exchangeable for shares of capital stock of) the Company or (iv) restricted shares, restricted stock units, stock appreciation rights, performance shares, profit participation rights, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any shares of capital stock of the Company, in each case that have been issued by the Company (the items in clauses (i), (ii) and (iii), together with the capital stock of the Company, being referred to collectively as “Company Securities”).  There are no outstanding contracts requiring the Company to repurchase, redeem or otherwise acquire any Company Securities and the Company is not a party to any voting agreement with respect to any Company Securities;

 

  

  

  

(d)           SEC Filings; Financial Statements; Absence of Undisclosed Liabilities.

                                           (i)           SEC Filings.  The Company has filed with the SEC all registration statements, prospectuses, reports, schedules, forms, statements and other documents (including exhibits and all other information incorporated by reference) required to be filed or furnished by it with the SEC since March 31, 2012 (the “Company SEC Documents”) and such Company SEC Documents when filed were true, correct and complete in all material respects.  As of their respective filing dates (or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing prior to the date hereof), each of the Company SEC Documents complied in all material respects with the applicable requirements of the Sarbanes-Oxley Act of 2002 (including the rules and regulations promulgated thereunder) and the Exchange Act, and the rules and regulations of the SEC thereunder applicable to such Company SEC Documents and did not, at the time it was filed (or, if amended, at the time (and taking into account the content) of such amendment), contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading;

                                           (ii)           Financial Statements.  Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto as of their respective dates; (ii) was prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto and, in the case of unaudited interim financial statements, as may be permitted by the SEC for Quarterly Reports on Form 10-Q); and (iii) fairly presented in all material respects the consolidated financial position of the Company at the respective dates thereof and the consolidated results of the Company’s operations and cash flows for the periods indicated therein, subject, in the case of unaudited interim financial statements, to normal and year-end audit adjustments as permitted by GAAP and the applicable rules and regulations of the SEC.  As of the date hereof, BDO, USA, LLP has not resigned or been dismissed as independent public accountants of the Company as a result of or in connection with any disagreements with the Company on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure;

                                           (iii)           No Undisclosed Liabilities.  Neither the Company nor any of its subsidiaries has any liability, indebtedness or obligation of any kind (whether accrued, absolute, contingent, matured, unmatured or otherwise, and whether or not required to be recorded or reflected on a balance sheet under GAAP) (“Liability”) except for Liabilities that (a) are reflected or recorded on the Company’s most recent balance sheet included in the Company SEC Documents (including in the notes thereto but only to the extent it is reasonably apparent that the disclosure in such notes is of a Liability required to be reflected on a balance sheet prepared in accordance with GAAP) contained in the Company SEC Documents or (b) are current Liabilities (within the meaning of GAAP) which were incurred since the date of such balance sheet in the ordinary course of business consistent with past practice;

 

  

  

  

(e)           Consents.  No consent, approval, authorization or order of any court, governmental agency or body having jurisdiction over the Company or of any other person is required for the execution by the Company of this Agreement and compliance and performance by the Company of its obligations hereunder, including, without limitation, the issuance of Shares and sale of the Shares;

(f)           No Violation or Conflict.  Neither the issuance and sale of the Shares nor the performance of the Company’s obligations under this Agreement 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 charter or bylaws of the Company or (b) any decree, judgment, order or determination applicable to the Company of any court, governmental agency or body having jurisdiction over the Company or over the properties or assets of the Company or (c) any contract, agreement, instrument or undertaking to which the Company or any subsidiary is a party; or

(ii)           result in the creation or imposition of any lien, charge or encumbrance upon the Shares except in favor of Subscriber as described herein;

(g)           The Shares.  Upon issuance, the Shares:

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

(ii)           shall have been duly and validly issued, fully paid and non-assessable; and

(iii)           will not subject the holders thereof to personal liability by reason of being such holders;

(h)           Litigation.  There is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or investigation before or by any court, governmental agency or body having jurisdiction over the Company including, without limitation, any such that would affect the execution by the Company or the complete and timely performance by the Company of its obligations under this Agreement.  Except as disclosed in Company SEC Documents, the Company has not, since March 31, 2012, been a party to any material litigation, arbitration or other proceeding;

(i)           No General Solicitation.  Neither the Company, nor any of its affiliates, nor any person or entity 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 Securities Act) in connection with the offer or sale of the Shares;

(j)           Investment Company. The Company is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended; and

(k)           Listing and Maintenance Requirements.  The Company is, except as disclosed on Schedule 3(k) hereto, in compliance with the listing and maintenance requirements for continued listing or quotation of the Company Common Stock on the trading market on which the Company Common Stock is currently listed or quoted.  The issuance and sale of the Shares under this Agreement does not contravene the rules and regulations of the trading market on which the Company Common Stock is currently listed or quoted, and no approval of the stockholders of the Company is required for the Company to issue and deliver to the Subscribers the Shares contemplated by this Agreement.

 

  

  

  

4.           Broker’s Commission/Finder’s Fee.  Each party hereto represents to the other that there are no parties entitled to receive fees, commissions, finder’s fees, due diligence fees or similar payments in connection with the consummation of the transactions contemplated hereby.  Each party hereto 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 the indemnifying party’s actions.

5.           Covenants Regarding Indemnification.  Each party hereto agrees to indemnify, hold harmless, reimburse and defend the other party and the other party’s officers, directors, agents, counsel, affiliates, members, managers, control persons, and principal shareholders, as applicable, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the indemnified party or any such person which results, arises out of or is based upon (i) any breach of any representation or warranty by the indemnifying party in this Agreement or (ii) any breach or default in performance by the indemnifying party of any covenant or undertaking to be performed by the indemnifying party.

6.           Rule 144.  Pursuant to Rule 144 and subject to Section 7 hereof, each Subscriber acknowledges that before a Subscriber may sell any restricted securities in the marketplace, such Subscriber must hold them for at least six months.  The holding period begins when the securities were purchased and fully paid for by such subscriber.

7.           Reporting Status.  Until the date on which the Investors shall have sold all of the Registrable Securities (as defined below), the Company shall use its reasonable best efforts to timely file all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act.

8.           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 or facsimile, addressed as set forth on the signature pages hereto 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 on the signature page hereto (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.

 

  

  

  

(b)           Entire Agreement; Assignment.  This Agreement constitutes 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 hereto.  Neither the Company nor Subscriber has relied on any representations not contained or referred to in this Agreement and the documents delivered herewith.

(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.

(d)           Law Governing this Agreement.  This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey without regard to principles of conflicts of laws. Any action brought by either party hereto against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New Jersey or in the federal courts located in the state of New Jersey.  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 hereto 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.

(e)           Severability. 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 hereto hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement 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.

(f)           Captions.  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.

[Remainder of Page Intentionally Left Blank]

  

  

  

 

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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.

TEL-INSTRUMENTS ELECTRONICS CORP.

a New Jersey corporation

By:           [s] Jeffrey O’Hara                                

Name: Jeffrey O’Hara

Title:   President and Chief Executive Officer

Address:  One Branca Road

East Rutherford, NJ 07073

Facsimile No.:  (201) 933-7340

Dated: November 8, 2012

 

	
SUBSCRIBER

	 
	
Name of Subscriber: 

[Subscriber]

	 
	 	 
	
Address:

	 
	  	 
	 	 
	
Fax No.:

	 
	 	 
	
Taxpayer ID# (if applicable):

	 
	 	 
	
/s/ [Subscriber]

	 
	
(Signature)

	 
	
By:

	 
	 	 
	
Dated: November 8, 2012

	 
	
Number of Shares: 149,534

	 
	
Aggregate Purchase Price: $500,000.00

     (No. Shares x purchase price per Share)

	 

 

[Signature Page to Subscription Agreement]

 

  

  

  

 

Schedule 3(c)

The Company has a total of 400,992 stock options, warrants stock subscriptions, and warrants outstanding with a weighted average purchase price of approximately $5.33 per share.

Outstanding Stock Options

	
·  

	
138,100 (Average Exercise Price of $5.41)

 

Outstanding Warrants

	
·  

	
136,920 warrants at $6.70 under 9 year warrant, dated September 10, 2010

	
·  

	
10,416 warrants at $6.70 under 5 year warrant, dated September 10, 2010

	
·  

	
70,000 warrants at $3.35 under warrant expiring September 10, 2019, dated July 26, 2012

Outstanding Stock Subscriptions

	
·  

	
55,556 shares at $3.60, expiring December 31, 2012. Expected to be exercised in conjunction with this equity fund raising

  

  

  

 

Schedule 3(k)

The Company is currently below the $4 million minimum net worth requirement for listing on the NYSE Amex stock exchange and has been placed on a watch list by the NYSE Amex.ex10-1.htm

 

EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

AGREEMENT made as of the 1st day of January, 2013, by and between Innovative Food Holdings, Inc., a Florida corporation with its principal offices at 3845 Beck Blvd., Suite 805, Naples, FL (the “Corporation” or “IVFH”), and Sam Klepfish (the “Executive”).

 

W I T N E S S E T H:

 

In consideration of the mutual covenants contained herein, the parties hereto agree as follow:

 

1. Employment.  The Corporation hereby employs the Executive as an executive of the Corporation, and the Executive agrees to serve the Corporation as such, upon the terms and conditions set forth in this Agreement for the period commencing as of the date hereof and, unless Executive's employment under the Agreement is otherwise terminated in accordance with the provisions hereof, ending on December 31, 2015.

 

2. Duties.  (a)  The Executive shall serve as the Chief Executive Officer of the Corporation and its subsidiary companies, with such duties and authority as are generally incident to such positions, or in such other management position as the Corporation shall determine. Without limiting the generality of the foregoing, the Executive shall serve as the Chief Executive Officer, with such duties and authority as are generally incident to such position, or in such other management position as the Corporation shall determine. Without limiting the generality of the foregoing, the Executive shall manage the overall strategic direction and operations of the corporation.  In performing his duties hereunder, the Executive shall be subject to the direction of the Corporation's Board of Directors, but shall not be required to relocate to any location in order to perform his duties hereunder.

 

   (b)  The Executive agrees that he will devote substantially his business time and attention to the affairs of the Corporation, (including subsidiaries) that he will use his best efforts to promote the business and interests of the Corporation, and that he will not engage, directly or indirectly, in any other business or occupation during the term of employment hereunder.  It is understood, however, that the foregoing will not prohibit the Executive from engaging in personal investment activities for himself and his family that do not interfere with the performance of his duties hereunder.

 

3. Compensation. (a) The Corporation will pay the Executive for all services to be rendered by the Executive hereunder (including, without limitation, all services to be rendered by him as an officer of the Corporation and its subsidiaries and affiliates) an annual base salary (hereinafter referred to as the "Base Salary") at the rate of: (i) $198,312 per annum from the date hereof through December 31, 2013, (ii) $223,987 per annum from January 1, 2014 through December 31, 2014, and (iii) $260,075 per annum  from January 1, 2015 through December 31, 2015. The cash portion of Base Salary for each year shall be payable in equal, weekly installments in accordance with customary payroll practices for executives of the Corporation.  Included in Base Salary is an additional $27,937 in restricted stock units (“RSU”) or stock for 2013, $24,875 RSU for 2014 and $13,688 RSU for 2015.  The RSU or stock for 2013 shall be issued on January 1, 2013 and be priced at the lower of the closing price of the Corporation’s common stock on the date the Board of Directors approves this Agreement or on January 3, 2013, provided that in no event shall the price be less than $0.25 per share.  For 2014 and 2015 the RSU or stock shall be issued on January 1 of each such year based upon the average closing trading price of the Corporation’s common stock over the 30 trading days prior to the date of grant.  As permitted by law, Executive may receive any portion of the cash Base Salary in the form of stock or RSU by delivering notice to the Corporation, from to time, at a valuation based upon the average closing price of the Corporation’s common stock over the 30 trading days ended on a trading date that is five trading days prior to Executive’s notice.

 

  

  

  

  

 (b) Executive shall also be entitled to receive an annual bonus (the “Bonus”) pursuant to the schedule below. The Bonus shall be payable in cash, stock, RSU or a combination of stock, RSU and cash, at the discretion of Executive, with such decision to be made by Executive prior to the payment of the Bonus. The equity component shall be valued based upon the average closing price of the Corporation’s common stock over the 30 trading days ended on December 31 of the year for which the Bonus is being calculated, but under no circumstance will be below $0.25 per share. All Bonuses paid in stock or RSU at the Executive’s request shall be held by the Corporation until reaching certain milestones to be determined by the Company’s CEO. All calculations with respect to the Base Salary and Bonus shall be based upon the Corporation’s financial statements and available financial information and Cash EBITDA calculations as determined by the CEO, working together when necessary, with the Corporation’s outside accountants and the Corporation’s principal accounting officer and shall be completed no later than February 1 of the following year. The Bonus for each year, if earned, shall be payable in full on or before by the following February 27th.

The Bonus shall be payable according to the following schedule:

	
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If the Corporation’s common stock is listed, traded or quoted on The New York Stock Exchange or NASDAQ, Executive shall receive an $75,000 cash bonus.

	
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Executive will receive 5% of the equity owned by IVFH, of any Food Hatch portfolio company

	
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Executive will receive 5% of any carry owned by Food Hatch .

	
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If the Corporation spins off a subsidiary, Executive shall receive 2.5% of company spun off.

	
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If the aggregate revenues of all the entities acquired by the Corporation following the date hereof exceeds $3 million, Executive shall receive a $45,000 cash bonus.

	
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If the aggregate revenues of all the entities acquired by the Corporation following the date hereof exceeds $5 million, Executive shall receive a $75,000 cash bonus.

	
·  

	
If the aggregate revenues of all the entities acquired by the Corporation following the date hereof exceeds $15 million, Executive shall receive a $120,000 cash bonus.

	
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Cash bonus of 2% of pretax cash operating profits

	
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If the Corporation raises equity or equity related financing Executive shall receive a bonus equal to 2.5% (in cash) of equity raised.

	
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If the Corporation raises debt financing Executive shall receive a bonus equal to 1% (in cash) of debt raised.

	
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An amount equal to 25% of all EBITDA related bonuses paid to the Corporation’s President as per the President’s employment agreement, payable on the same terms as the President’s bonus, except for the President’s priority in receiving his bonuses.

	
·  

	
If the value of the Corporation’s shares traded on a daily basis for any 30 trading days within any 3 month period equals or exceeds $10,000 Executive shall receive a $10,000 cash bonus, if such trading equals or exceeds $25,000 Executive shall receive a $25,000 cash bonus, and if such trading equals or exceeds $100,000 Executive shall receive a $150,000 cash bonus.  Each of these bonuses may only be earned once during the term of this Agreement.

The above notwithstanding, the Corporation’s obligation to pay such cash Bonuses is limited such that the Bonuses shall only be paid in cash if the Corporation will have at least $600,000 in cash after payment of the Bonus to Executive.  In the event the Corporation has insufficient cash to make the required Bonus payments, the Corporation shall inform Executive of the amount of cash available for distribution and Executive shall have five business days to determine if he wants to change his previous allocation of the form of Bonus payment as between cash and stock.  Within two business days thereafter, the Corporation shall distribute such available cash (i.e. cash above $600,000) to Executive.  Going forward, in such situations, the Corporation shall determine, within three business days following the end of each month, its cash on hand and if it exceeds $600,000 the excess cash shall be distributed to Executive within two business days thereof.  This process shall continue until the cash portion of the Bonus is paid in full.  While any portion of the cash portion of the Bonus remains unpaid, Executive may change his cash/stock/RSU allocation of the Bonus.  For purposes of this Agreement, the term “cash” shall mean cash and cash equivalents as described on the Corporation’s balance sheet.

  

  

  

Stock Options

On the effective date of this Agreement, Executive shall also receive the following stock options:

 

	
·  

	
A 4 year Option to purchase 100,000 shares of the Corporation’s common stock at an exercise price of $0.40 per share, of which 50,000 options vest on December 31, 2014 and the balance on December 31, 2015.

	
·  

	
A 5 year Option to purchase 100,000 shares of the Corporation’s common stock at an exercise price of $0.57 per share, all of which options vests on December 31, 2014.

	
·  

	
 A 5 year option to purchase 125,000 shares of the Corporation’s common stock at an exercise price of $1.60 per share, one-half of which vests on December 31, 2013 and the balance on December 31, 2014.

All of such options shall be granted using the Corporation’s standard form of stock option grant and shall be subject to the terms of such form and the terms of the Corporation’s 2011 Stock Option Plan.  In the event the issuance of such options would trigger the adjustment provisions of any of the Corporation’s outstanding notes or warrants with respect to conversion rates or exercise price or number of underlying securities, the above notwithstanding, the exercise price shall automatically increase to be the lowest possible price that would not so trigger any adjustments, except with the approval of all of such noteholders and warrantholders waiving the adjustments.

Stock Grant:

On the date hereof Executive shall be given a stock grant of 200,000 restricted shares or RSU which shall only vest if the 30 day average trading price of the Corporation’s common stock equals or exceeds $1.75 per share and has average volume of at least 25,000 shares per day for 30 consecutive trading days.

For 2013 and 2014 and 2015, the Corporation shall establish a separate account in which it will maintain Executive’s Bonus as if it was earned and payable. In the event it is determined that Executive is entitled to such additional Bonus, the accrued amount of funds in said account shall be delivered in a lump sum when such determination is made, but no later than February 27th  of each such year. In the event it is determined that Executive is not entitled to such funds, they shall be returned to the Corporation’s general working account.

If Executive leaves the employ of the Corporation before the Bonuses for the previous year are paid, he will forfeit any Bonus for such previous year.  Similarly, partial Bonuses shall not be calculated on a pro rata basis for any partial year worked.  To illustrate, if Executive leaves the employ of the Company in 2014, prior to the payment of any Bonus earned for 2013, Executive shall not receive any Bonus for 2013 or 2014.

Executive acknowledges and agrees that the Corporation will pay all bonuses earned by the Corporation’s president pursuant to the terms of his employment agreement with the Corporation prior to the payment of any Bonus to Executive.

 

  

  

  

 

Wherever Executive is to receive, or has the right to receive, stock as a Bonus or as Base Salary, Executive shall have the option to receive such equity in the form of restricted stock units or stock.

4. Expenses.  The Executive shall be entitled to reimbursement by the Corporation, in accordance with the Corporation's policies then applicable to executives at the Executive's level, against appropriate vouchers or other receipts for authorized travel, entertainment and other business expenses reasonably incurred by him in the performance of his duties hereunder.

 

5. Executive Benefits.  The Executive shall be entitled to participate in, and receive either personal or family health insurance of the highest tier of health insurance currently offered by the Corporation’s insurance provider, and all benefits currently offered to employees of the Corporation or the cash equivalent of such health insurance and other benefits including a life insurance policy up to one million dollars and a disability policy up to one hundred percent of disability coverage. The Corporation shall be responsible for paying 75% of the cost of such health insurance and benefits and shall pay, at the choice of the Executive, either through direct payments to the health insurance and benefit providers or through weekly direct cash payments to the Executive (in the cash amount of 75% of the cost of such personal or family health insurance and benefits had the executive participated in such personal or family health insurance plan and benefit plans).

 

6. Withholding.  All payments required to be made by the Corporation hereunder to the Executive shall be subject to the withholding of such amounts relating to taxes and other governmental assessments as the Corporation may reasonably determine it should withhold pursuant to any applicable law, rule or regulation.

  

7. Death; Permanent Disability; Termination.  (a)  Upon the death of the Executive during the term of this Agreement, this Agreement shall terminate.  If during the term of this Agreement the Executive fails because of illness or other incapacity to perform the services required to be performed by him hereunder for any consecutive period of more than 30 days, or for shorter periods aggregating more than 45 days in any consecutive twelve-month period (any such illness or incapacity being hereinafter referred to as “permanent disability”), then the Corporation, in its discretion, may at any time thereafter terminate this Agreement upon not less then 10 days’ written notice thereof to the Executive, and this Agreement shall terminate and come to an end upon the date set forth in said notice as if said date were the termination date of this Agreement; provided, however, that no such termination shall be effective if prior to the date set forth in such notice, the Executive’s illness or incapacity shall have terminated and he shall be physically and mentally able to perform the services required hereunder and shall have taken up and be performing such duties.  If there shall be any dispute as to whether the Executive has a permanent disability, the dispute shall be submitted to a panel of three physicians, one of whom shall be selected by each of the parties, and the third of whom shall be a physician selected by the first two.  The written decision of such panel shall be determinative of the issue as to whether the Executive has a permanent disability, and shall be binding upon both parties.

 

(b)           If the Executive’s employment shall be terminated by reason of his death or permanent disability, the Executive or his estate, as the case may be, shall be entitled to receive (i) any earned and unpaid Base Salary accrued through the date of termination, (ii) a pro rata portion of any Bonus which the Executive would otherwise have been entitled to receive pursuant to any bonus plan or arrangement for senior executives of the Corporation (such pro rata portion to be payable at the time such Bonus would otherwise have been payable to the Executive), and (iii) subject to the terms thereof, any benefits which may be due to the Executive on the date of termination under the provisions of any employee benefit plan, program or policy.

 

  

  

  

 

(c)           In the event the Corporation terminates this Agreement without Cause (as defined in Section 8), Executive shall be paid in a lump sum, on the date of termination, an amount equal to the Base Salary he would have earned hereunder for the six months following the date of termination.  In addition, the Executive shall be paid, no later than February 27th of the following year, the pro rata amount of any Bonus he would have been entitled to for the portion of the year he actually worked prior to when he was so terminated.  The Corporation shall have no other obligations to the Executive.

 

8.           Termination for Cause.  The Corporation may at any time during the term of this Agreement, by written notice, terminate the employment of the Executive for cause, the cause to be specified (in reasonable detail) in the notice.  For purposes of this Agreement, “cause” shall mean any malfeasance of the Executive in connection with the performance of any of his duties hereunder, including, without limitation, misappropriation of funds or property of the Corporation; wrongfully securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Corporation; any intentional act having the effect of injuring the reputation, business or business relationships of the Corporation; the failure, neglect or refusal to perform the Executive's duties hereunder in any material respect; the breach of any material covenants contained in this Agreement (provided, however, that the Executive shall be entitled to thirty days from the date on which the Corporation gives written notice of termination to cure such conduct or breach); conviction (or nolocontendere plea) in connection with a felony; or conviction (or nolo contendere plea) in connection with a misdemeanor involving moral turpitude.  Termination for cause shall be effective upon the giving of such notice or, where applicable, the expiration of the cure period without such a cure having been affected by Executive in all material respects; and the Executive shall be entitled to receive any earned and unpaid Base Salary accrued through the date of termination.  The Executive hereby disclaims any right to receive a pro rata portion of any Bonus with respect to the fiscal year in which such termination occurs or unpaid moving expense reimbursement.

 

9.           Insurance.  The Executive agrees that the Corporation may procure insurance on the life of the Executive, in such amounts as the Corporation may in its discretion determine, and with the Corporation named as the beneficiary under the policy or policies.  The Executive agrees that upon request from the Corporation he will submit to a physical examination and will execute such applications and other documents as may be required for the procurement of such insurance.  The Executive shall be granted the right to purchase such policy at its cash surrender value upon the termination of his employment hereunder.

 

10.           Non-Competition; Solicitation, Disparagement.  (a) The Executive agrees that during his employment with the Corporation and for a period of two years after Executive leaves the Corporation’s employ for any reason, he shall not, without the written consent of the Corporation, directly or indirectly, either individually or as an employee, agent, partner, shareholder, consultant, option holder, lender of money, guarantor or in any other capacity, participate in, engage in or have a financial interest or management position or other interest in any business, firm, corporation or other entity if it competes directly with any business operation conducted by the Corporation or its subsidiaries or affiliates or any successor or assign thereof at the time the Executive’s employment with the Corporation is terminated, nor will he solicit any other person to engage in any of the foregoing activities.  Participation in the operation of any business other than in connection with the operation of a business which is in direct competition with the Corporation or its subsidiaries or affiliates or any successor or assign thereof shall not be deemed to be a breach of this Section 10(a).  The foregoing provisions of this Section 10(a) shall not prohibit the ownership by the Executive (as the result of open market purchase) of 1% or less of any class of capital stock of a corporation which is regularly traded on a national securities exchange, on the NASDAQ System or on an over-the-counter system.

 

  

  

  

 

(b)           The Executive will not at any time during his employment with the Corporation and for a period of two years after the Executive leaves the Corporation’s employ for any reason, solicit (or assist or encourage the solicitation of) any employee of the Corporation or any of its subsidiaries or affiliates to work for the Executive or for any business, firm, corporation or other entity in which the Executive, directly or indirectly, in any capacity described in Section 10(a) hereof, participates or engages (or expects to participate or engage) or has (or expects to have) a financial interest or management position.

(c)           The Executive agrees during the term of this Agreement and for three years after its termination that he will not disparage the Corporation in any way, directly or indirectly, by spoken word, in writing, electronically, or otherwise.

 

(d)           If any of the covenants contained in this Section 10 or any part thereof, is held by a court of competent jurisdiction to be unenforceable because of the duration of such provision, the activity limited by or the subject of such provision and/or the area covered thereby, then the court making such determination shall construe such restriction so as to thereafter be limited or reduced to be enforceable to the greatest extent permissible by applicable law.

 

(e)    If the Executive is terminated without cause Sections 10(a) through (c) will be null and void.

 

11.           Inventions, Etc.  The Executive agrees that any and all systems, work-in-progress, inventions, discoveries, improvements, processes, compounds, formulae, patents, copyrights and trademarks, made, discovered or developed by him, solely or jointly with others, or otherwise, during the term of his employment by the Corporation, and which may be useful in or relate to any business of the Corporation and/or any subsidiary or affiliate of the Corporation shall be fully disclosed by the Executive to the Chief Executive Officer of the Corporation, and shall be the sole and absolute property of the Corporation, and the Corporation will be the sole and absolute owner thereof.  The Executive agrees that at all times, both during his employment and after the termination of his employment, he will keep all of the same secret from everyone except the Corporation and its duly authorized employees and will disclose the same to no one except as required in good faith in the course of his employment with the Corporation, or by law, or unless otherwise authorized in writing by the Chief Executive Officer of the Corporation.

 

12.           Trade Secrets, Etc.  The Executive agrees that he shall not, during or after the termination of this Agreement, divulge, furnish or make accessible to any person, firm, corporation or other business entity, any information, trade secrets, client lists, vendor lists, pricing information, technical data (with the exception of duplicatable technical data and code that does not compete with the Corporation or the Corporation’s business) or know-how relating to the business, business practices, methods, products, processes, equipment or other confidential or secret aspect of the business of the Corporation and/or any subsidiary or affiliate, except as may be required in good faith in the course of his employment with the Corporation or by law, without the prior written consent of the Corporation, unless such information shall become public knowledge (other than by reason of Executive’s breach of the provisions hereof).

 

13.           Acceptance by Executive and Corporation.  The Executive and the Corporation each accept all of the terms and provisions of this Agreement, and agree to perform all of the covenants on their respective parts to be performed hereunder.

 

14.           Equitable Remedies.  The Executive acknowledges that he has been employed for his unique talents and that his leaving the employ of the Corporation during the Term of this Agreement would seriously hamper the business of the Corporation and that the Corporation will suffer irreparable damage if any provisions of Sections 10, 11 or 12 hereof are not performed strictly in accordance with their terms or are otherwise breached.  The Executive hereby expressly agrees that the Corporation shall be entitled as a matter of right to injunctive or other equitable relief, in addition to all other remedies permitted by law, to prevent a breach or violation by the Executive and to secure enforcement of the provisions of Sections 10, 11 or 12 hereof.  Resort to such equitable relief, however, shall not constitute a waiver of any other rights or remedies that the Corporation may have.

 

  

  

  

 

15.           Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto and there are no other terms other than those contained herein.  No waiver, amendment or modification hereof shall be deemed valid unless in writing and signed by the parties hereto (or their permitted successors and assigns) and no discharge of the terms hereof shall be deemed valid unless by full performance of the parties hereto or by a writing signed by the parties hereto.  No waiver by the Corporation or any breach by the Executive or the Corporation of any provision or condition of this Agreement by either of them to be performed shall be deemed a waiver of a breach of a similar or dissimilar provision or condition at the same time or any prior or subsequent time.

 

16.           Severability.  In case any provision in this Agreement shall be declared invalid, illegal or unenforceable by any court of competent jurisdiction, the validity and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

17.           Notices.  All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be deemed to have been given at the following times: (i) when delivered if given by hand, or (ii) three business days after mailing in the United States enclosed in a registered or certified post-paid envelope, return receipt requested, and addressed to the addressee at the Company’s address listed above or to such changed addresses as such parties may fix by notice with a copy to:

Howard I. Rhine, Esq.

Feder Kaszovitz LLP

845 Third Avenue, 11th Floor

New York, NY  10022

provided, however, that any notice of change of address shall be effective only upon receipt.

 

18.           Successors and Assigns.  This Agreement is personal in its nature and neither of the parties hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder (except for an assignment or transfer by the Corporation to any of its affiliate or subsidiary entities); provided, however, that the provisions hereof shall inure to the benefit of, and be binding upon, any successor of the Corporation, whether by merger, consolidation, transfer of all or substantially all of the assets of the Corporation, or otherwise, and upon the Executive, his heirs, executors, administrators and legal representatives.

 

19.           Governing Law.  This Agreement and its validity, construction and performance shall be governed in all respects by the internal laws of the State of Florida without giving effect to any principles of conflict of laws.

 

20.           Headings.  The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of this Agreement.

 

21.           Counterparts.  This Agreement may be executed in two counterparts, each of which shall be deemed an original of this Agreement.

 

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IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and seals the day and year first above written.

 

 

Innovative Food Holdings, Inc.

By: _____________________________________                                                                          

Name:  Justin Wiernasz

Title:    President

_________________________________________

Sam Klepfish

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