Document:

EXHIBIT
      10.1

    

    PACIFIC
      BIOMETRICS, INC.

    
      

      2005
        STOCK INCENTIVE PLAN

      

      SECTION
        1. PURPOSE

      

      The
        purpose of this Pacific Biometrics, Inc. 2005 Stock Incentive Plan (the
“Plan”)
        is to
        enhance the long-term stockholder value of Pacific Biometrics, Inc., a Delaware
        corporation (the “Company”),
        by
        offering opportunities to employees, directors, officers, consultants, agents,
        advisors and independent contractors of the Company and its Subsidiaries
        (as
        defined in Section 2) to participate in the Company’s growth and success, and to
        encourage them to remain in the service of the Company and its Subsidiaries
        and
        to acquire and maintain stock ownership in the Company.

      

      SECTION
        2. DEFINITIONS

      

      For
        purposes of the Plan, the following terms shall be defined as set forth
        below:

      

      “Award”
means
        an award or grant made pursuant to the Plan, including, without limitation,
        awards or grants of Options and Stock Awards, or any combination of the
        foregoing.

      

      “Board”
means
        the Board of Directors of the Company.

      

      “Cause”
means
        dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential
        information, trade secrets or other intellectual property, or conviction
        or
        confession (including a plea of no contest) of a crime punishable by law
        (except
        minor violations), or conduct that adversely affects the Company’s business or
        reputation, in each case as determined by the Plan Administrator in its sole
        discretion, and its determination as to whether an action constitutes Cause
        shall be conclusive and binding.

      

      “Code”
means
        the Internal Revenue Code of 1986, as amended from time to time.

      

      “Common
        Stock”
means
        the Company common stock, $.01 par value per share.

      

      “Corporate
        Transaction”
means
        any of the following events:

      

      (a) Consummation
        of any merger or consolidation of the Company in which the Company is not
        the
        continuing or surviving corporation, or pursuant to which shares of the Common
        Stock are converted into cash, securities or other property, if following
        such
        merger or consolidation the holders of the Company’s outstanding voting
        securities immediately prior to such merger or consolidation own less than
        50%
        of the outstanding voting securities of the surviving corporation;

      

      (b) Consummation
        of any sale, lease, exchange or other transfer in one transaction or a series
        of
        related transactions of all or substantially all of the Company’s assets other
        than a transfer of the Company’s assets to a majority-owned subsidiary
        corporation of the Company; or

      

      
        
           

        

        
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      (c) Approval
        by the holders of the Common Stock of any plan or proposal for the liquidation
        or dissolution of the Company.

      

      Ownership
        of voting securities shall take into account and shall include ownership
        as
        determined by applying Rule 13d-3(d)(1)(i) (as in effect on the date of adoption
        of the Plan) under the Exchange Act.

      

      “Disability”
means
        “disability” as that term is defined for purposes of Section 22(e)(3) of the
        Code. As of the date of adoption of this Plan, such terms means the inability
        to
        engage in any substantial gainful activity by reason of any medically
        determinable mental or physical impairment which can be expected to result
        in
        death or which has lasted or can be expected to last for a continuous period
        of
        not less than 12 months.

      

      “Employee”
means
        any person, including officers and directors, employed by the Company (or
        one of
        its parent corporations or subsidiary corporations), with the status of
        employment determined based upon such minimum number of hours or periods
        worked
        as shall be determined by the Plan Administrator in its discretion, subject
        to
        any requirements of the Code. For purposes of this provision, “parent
        corporation” and “subsidiary corporation” shall have the meanings attributed to
        those terms for purposes of Section 422 of the Code.

      

      “Exchange
        Act”
means
        the Securities Exchange Act of 1934, as amended.

      

      “Fair
        Market Value”
shall
        be the fair market value of the Common Stock, as of any date, as determined
        by
        the Plan Administrator as follows:

      

      (a) if
        the
        Common Stock is listed on any established stock exchange or a national market
        system, including without limitation the National Market tier of The Nasdaq
        Stock Market (“Nasdaq”),
        the
        Fair Market Value shall be the closing sales price for such stock (or if
        no
        sales were reported, the closing sales price on the last preceding trading
        date), as quoted on such system or exchange, or the system or exchange with
        the
        greatest volume of trading in Common Stock, for the last market trading day
        prior to the time of determination, as reported in The Wall Street Journal
        or
        such other source as the Plan Administrator deems reliable;

      

      (b) If
        the
        Common Stock is quoted on the Nasdaq system (but not on the National Market
        tier
        thereof), on the OTC Bulletin Board or regularly quoted by a recognized
        securities dealer but selling prices are not reported, its Fair Market Value
        shall be the closing sales price for such stock for the Common Stock on the
        Grant Date, as reported in The Wall Street Journal or such other source as
        the
        Plan Administrator deems reliable; or

      

      (c) In
        the
        absence of an established market for the Common Stock, the Fair Market Value
        shall be determined in good faith by the Plan Administrator.

      

      
        
           

        

        
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      “Grant
        Date”
means
        the date the Plan Administrator adopted the granting resolution or a later
        date
        designated in a resolution of the Plan Administrator as the date an Award
        is to
        be granted.

      

      “Holder”
means
        (a) the person to whom an Award is granted, (b) for a Holder who has
        died, the personal representative of the Holder’s estate, the person(s) to whom
        the Holder’s rights under the Award have passed by will or by the applicable
        laws of descent and distribution, or the beneficiary designated in accordance
        with Section 10, or (c) the person(s) to whom an Award has been transferred
        in accordance with Section 10.

      

      “Incentive
        Stock Option”
means
        an Option to purchase Common Stock granted under Section 7 with the intention
        that it qualify as an “incentive stock option” as that term is defined in
        Section 422 of the Code.

      

      “Nonqualified
        Stock Option”
means
        an Option to purchase Common Stock granted under Section 7 other than an
        Incentive Stock Option.

      

      “Option”
means
        the right to purchase Common Stock granted under Section 7.

      

      “Plan
        Administrator”
means
        the Board or any committee of the Board designated to administer the Plan
        under
        Section 3.1.

      

      “Restricted
        Stock”
means
        shares of Common Stock granted under Section 9, the rights of ownership of
        which
        are subject to restrictions prescribed by the Plan Administrator.

      

      “Securities
        Act”
means
        the Securities Act of 1933, as amended.

      

      “Stock
        Award”
means
        an Award granted under Section 9.

      

      “Subsidiary”
means
        any entity that is directly or indirectly controlled by the Company or in
        which
        the Company has a significant ownership interest, as determined by the Plan
        Administrator, and any entity that may become a direct or indirect parent
        of the
        Company.

      

      “Successor
        Corporation”
has
        the
        meaning set forth under Section 11.2.

      

      SECTION
        3. ADMINISTRATION

      

      3.1 Plan
        Administrator.
        The
        Plan shall be administered by the Board, or a committee or committees (which
        term includes subcommittees) appointed by, and consisting of two or more
        members
        of, the Board. If and so long as the Common Stock is registered under Section
        12(b) or 12(g) of the Exchange Act, the Board shall consider in selecting
        the
        Plan Administrator and the membership of any committee acting as Plan
        Administrator, with respect to any persons subject or likely to become subject
        to Section 16 of the Exchange Act, the provisions regarding (a) “outside
        directors” as contemplated by Section 162(m) of the Code, (b) “nonemployee
        directors” as contemplated by Rule 16b-3 under the Exchange Act, and
        (c) any requirements as to “independent directors” pursuant to rules of any
        securities exchange on which the Common Stock is quoted or listed for trading.
        The Board may delegate the responsibility for administering the Plan with
        respect to designated classes of eligible persons to different committees
        consisting of two or more members of the Board, subject to such limitations
        as
        the Board deems appropriate. Committee members shall serve for such term
        as the
        Board may determine, subject to removal by the Board at any time.

      

      
        
           

        

        
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      3.2 Administration
        and Interpretation by the Plan Administrator.
        Except
        for the terms and conditions explicitly set forth in the Plan, the Plan
        Administrator shall have exclusive authority, in its discretion, to determine
        all matters relating to Awards under the Plan, including the selection of
        individuals to be granted Awards, the type of Awards, the number of shares
        of
        Common Stock subject to an Award, all terms, conditions, restrictions and
        limitations, if any, of an Award and the terms of any document, agreement
        or
        instrument that evidences the Award. The Plan Administrator shall also have
        exclusive authority to interpret the Plan and may from time to time adopt,
        and
        change, rules and regulations of general application for the Plan’s
        administration. The Plan Administrator’s interpretation of the Plan and its
        rules and regulations, and all actions taken and determinations made by the
        Plan
        Administrator pursuant to the Plan, shall be conclusive and binding on all
        parties involved or affected. The Plan Administrator may delegate administrative
        duties to such of the Company’s officers as it so determines.

      

      3.3 Replacement
        of Options.
        Without
        limiting the authority granted to the Plan Administrator under Section 3.2,
        the
        Plan Administrator, in its sole discretion, shall have the authority, among
        other things, to (a) grant Options subject to the condition that Options
        previously granted at a higher or lower exercise price under the Plan be
        canceled or exchanged in connection with such grant (the number of shares
        covered by the new Options, the exercise price, the term and the other terms
        and
        conditions of the new Option, shall be determined in accordance with the
        Plan
        and may be different from the provisions of the canceled or exchanged Options),
        and (b) amend or modify outstanding and unexercised Options, with the
        consent of the Holder, to, among other things, reduce the exercise price
        per
        share, establish the exercise price at the then-current Fair Market Value
        or
        accelerate or defer the exercise date, vesting schedule or expiration date
        of
        any Option.

      

      SECTION
        4. STOCK SUBJECT TO THE PLAN

      

      4.1 Authorized
        Number of Shares.
        Subject
        to adjustment from time to time as provided in Section 11.1, a maximum of
        3,000,000 shares of Common Stock shall be available for issuance under the
        Plan.
        Shares issued under the Plan shall be drawn from authorized and unissued
        shares
        or shares now held or subsequently acquired by the Company.

      

      4.2 Reuse
        of Shares.
        Any
        shares of Common Stock that have been made subject to an Award that cease
        to be
        subject to the Award (other than by reason of exercise or payment of the
        Award
        to the extent it is exercised for or settled in shares) shall again be available
        for issuance in connection with future grants of Awards under the
        Plan.

      

      
        
           

        

        
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      SECTION
        5. ELIGIBILITY

      

      Awards
        may be granted under the Plan to those Employees, officers and directors
        of the
        Company and its Subsidiaries as the Plan Administrator from time to time
        selects. Awards may also be made to consultants, agents, advisors and
        independent contractors who provide services to the Company and its
        Subsidiaries, as the Plan Administrator from time to time selects. In granting
        Awards to consultants, agents, advisors and independent contractors, the
        Plan
        Administrator shall give consideration to the requirements set forth in the
        instructions to the use of Form S-8 registration statement under the Securities
        Act. A member of the Board may be eligible to participate in or receive or
        hold
        Awards under this Plan; provided, however, that no member of the Board shall
        vote with respect to the granting of an Award to himself or
        herself.

      

      SECTION
        6. AWARDS

      

      6.1 Form
        and Grant of Awards.
        The
        Plan Administrator shall have the authority, in its sole discretion, to
        determine the type or types of Awards to be made under the Plan. Such Awards
        may
        include, but are not limited to, Incentive Stock Options, Nonqualified Stock
        Options and Stock Awards. Awards may be granted singly or in combination.
        An
        eligible person may receive one or more grants of Awards as the Plan
        Administrator shall from time to time determine, and such determinations
        may be
        different as to different Holders and may vary as to different grants, even
        when
        made simultaneously.

      

      6.2 Number
        of Shares.
        The
        maximum number of shares that may be issued pursuant to the grant of an Award
        shall be as established by the Plan Administrator. Provided, however, to
        the
        extent required for compliance with the exclusion from the limitation on
        deductibility of compensation under Section 162(m) of the Code, the Plan
        Administrator shall not grant Awards to any person in any one fiscal year
        of the
        Company in an amount that exceeds, in the aggregate, 1,000,000 shares of
        Common
        Stock (subject to adjustment as provided in Section 11).

      

      6.3 Acquired
        Company Awards.
        Notwithstanding anything in the Plan to the contrary, the Plan Administrator
        may
        grant Awards under the Plan in substitution for awards issued under other
        plans,
        or assume under the Plan awards issued under other plans, if the other plans
        are
        or were plans of other acquired entities (“Acquired
        Entities”)
        (or
        the parent of the Acquired Entity) and the new Award is substituted, or the
        old
        award is assumed, by reason of a merger, consolidation, acquisition of property
        or of stock, reorganization or liquidation (the “Acquisition
        Transaction”).
        In
        the event that a written agreement pursuant to which the Acquisition Transaction
        is completed is approved by the Board and said agreement sets forth the terms
        and conditions of the substitution for or assumption of outstanding awards
        of
        the Acquired Entity, said terms and conditions shall be deemed to be the
        action
        of the Plan Administrator without any further action by the Plan Administrator,
        except as may be required for compliance with Rule 16b-3 under the Exchange
        Act,
        and the persons holding such Awards shall be deemed to be Holders.

      

      
        
           

        

        
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      SECTION
        7. AWARDS OF OPTIONS

      

      7.1 Grant
        of Options.
        The
        Plan Administrator is authorized under the Plan, in its sole discretion,
        to
        issue Options as Incentive Stock Options or as Nonqualified Stock Options,
        which
        shall be appropriately designated.

      

      7.2 Option
        Exercise Price.
        The
        exercise price for shares purchased under an Option shall be as determined
        by
        the Plan Administrator, but shall not be less than 100% of the Fair Market
        Value
        of the Common Stock on the Grant Date.

      

      7.3 Term
        of Options.
        The
        term of each Option shall be as established by the Plan Administrator or,
        if not
        so established, shall be 10 years from the Grant Date.

      

      7.4 Vesting
        / Exercisability of Options.
        The
        Plan Administrator shall establish and set forth in each agreement that
        evidences an Option the time at which or the installments in which, if any,
        the
        Option shall vest and become exercisable. In the absence of a defined vesting
        schedule in the agreement evidencing the Option, the Option covered by such
        agreement will vest and become exercisable quarterly over a period of three
        years from the Grant Date, with 1/12 of the Option vesting and becoming
        exercisable on each quarterly anniversary of the Grant Date. The Plan
        Administrator, in its absolute discretion, may waive or accelerate any vesting
        requirement contained in outstanding and unexercised Options.

      

      7.5 Exercise
        of Options.
        Options
        shall be exercised in accordance with the following terms and
        conditions:

      

      (a) Procedure.
        To the
        extent that an Option has vested and is currently exercisable, an Option
        may be
        exercised from time to time by written notice to the Company, in accordance
        with
        procedures established by the Plan Administrator, setting forth the number
        of
        shares with respect to which the Option is being exercised and accompanied
        by
        payment in full of the exercise price. The Plan Administrator may determine
        at
        any time that an Option may not be exercised as to less than 100 shares at
        any
        one time (or the lesser number of remaining shares covered by the Option).
        Only
        whole shares shall be issued pursuant to the exercise of any
        Option.

      

      (b) Payment
        of Exercise Price.

      

      (1) The
        exercise price for shares purchased under an Option shall be paid in full
        to the
        Company by delivery of consideration equal to the product of the Option exercise
        price and the number of shares being purchased. Such consideration must be
        paid
        in any combination of cash and/or bank-certified or cashier’s check (or personal
        check if determined acceptable by the Plan Administrator in its sole
        discretion), either at the time the Option is granted or within three days
        after
        notice of exercise is tendered to the Company.

      

      
        
           

        

        
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      (2) In
        addition, to the extent permitted by the Plan Administrator in its sole
        discretion, the exercise price for shares purchased under an Option may be
        paid,
        either singly or in combination with one or more of the alternative forms
        of
        payment authorized by this Section 7.5, by (y) delivery of a full-recourse
        promissory note or (z) such other consideration as the Plan Administrator
        may permit. The terms of any such promissory note, including the interest
        rate,
        terms of and security for repayment, and maturity, will be subject to the
        Plan
        Administrator’s discretion. Any such promissory note shall bear interest at a
        rate specified by the Plan Administrator but in no case less than the rate
        required to avoid imputation of interest (taking into account any exceptions
        to
        the imputed interest rules) for federal income tax purposes.

      

      (3) If
        and so
        long as the Common Stock is registered under Section 12 of the Exchange Act,
        then, to the extent permitted by applicable laws and regulations (including,
        but
        not limited to, federal tax and securities laws and regulations) and unless
        the
        Plan Administrator determines otherwise, an Option also may be exercised
        by
        (a) delivery of shares of Common Stock (which shares, if tendered by an
        affiliate of the Company, shall have been held by the Holder for at least
        six
        months) having a Fair Market Value equal to the aggregate exercise price
        (such
        payment in stock may occur in the context of a single exercise of an option
        or
        successive and simultaneous exercises, sometimes referred to as “pyramiding,”
which provides that, rather than physically exchanging certificates for a
        series
        of exercises, bookkeeping entries will be made pursuant to which the Holder
        is
        permitted to retain his existing stock certificate and a new stock certificate
        is issued for the net shares), or (b) delivery of a properly executed
        exercise notice together with irrevocable instructions to (i) a brokerage
        firm acceptable to the Company to deliver promptly to the Company the aggregate
        amount of sale or loan proceeds to pay the Option exercise price and any
        withholding tax obligations that may arise in connection with such exercise,
        and
        (ii) the Company to deliver the certificates for such purchased shares
        directly to such brokerage firm, all in accordance with the requirements
        of the
        Federal Reserve Board.

      

      7.6 Rights
        as Stockholder.
        Until
        the issuance (as evidenced by the appropriate entry on the books of the Company
        or of a duly authorized transfer agent of the Company) of the stock certificate
        evidencing such shares, no right to vote or receive dividends or any other
        rights as a stockholder shall exist with respect to shares of Common Stock
        acquired on exercise of an Option, notwithstanding the exercise of the Option.
        The Company shall issue (or cause to be issued) such stock certificate promptly
        upon proper exercise of the Option and payment in full of the aggregate exercise
        price. In the event that the exercise of an Option is treated in part as
        the
        exercise of a Nonqualified Stock Option (pursuant to the provisions of Section
        8.1), the Company shall issue a stock certificate evidencing the shares treated
        as acquired upon the exercise of an Incentive Stock Option and a separate
        stock
        certificate evidencing the shares treated as acquired upon the exercise of
        a
        Nonqualified Stock Option, and shall identify each such certificate accordingly
        in its stock transfer records. No adjustment will be made for a dividend
        or
        other right for which the record date is prior to the date the stock certificate
        is issued, except as provided in Section 11 of this Plan.

      

      7.7 Post-Termination
        Exercises.
        The
        Plan Administrator shall establish and set forth in each agreement that
        evidences an Option whether the Option will continue to be exercisable, and
        the
        terms and conditions of such exercise, if a Holder ceases to be employed
        by, or
        to provide services to, the Company or its Subsidiaries, which provisions
        may be
        waived or modified by the Plan Administrator at any time. If not so established
        in the instrument evidencing the Option, the Option will be exercisable
        according to the following terms and conditions, which may be waived or modified
        by the Plan Administrator at any time.

      

      
        
           

        

        
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      (a) Termination
        other than Death, Disability or Cause.
        In case
        of termination of the Holder’s employment or services other than by reason of
        death, Disability or Cause, the Holder may exercise his or her Options at
        any
        time prior to the expiration of three months after the date the Holder ceases
        to
        be an Employee, director, officer, consultant, agent, advisor or independent
        contractor of the Company or a Subsidiary (but in no event later than the
        remaining term of the Option), but only if and to the extent the Holder was
        entitled to exercise the option at the date of such termination. A transfer
        of
        employment or services between or among the Company and its Subsidiaries
        shall
        not be considered a termination of employment or services. The effect of
        a
        Company-approved leave of absence on the terms and conditions of an Option
        shall
        be determined by the Plan Administrator, in its sole discretion.

      

      (b) Disability.
        In case
        of termination of the Holder’s employment or services by reason of the Holder’s
        Disability, the Holder (or personal representative) may exercise his or her
        Options at any time prior to the expiration of one year after the date of
        such
        termination (but in no event later than the remaining term of the Option),
        but
        only if and to the extent the Holder was entitled to exercise the option
        at the
        date of such termination.

      

      (c) Death.
        In the
        event of the death of a Holder, any Options held may be exercised at any
        time on
        or prior to the expiration of one year after the date of death (but in no
        event
        later than the remaining term of the Option), but only if and to the extent
        the
        Holder was entitled to exercise the option at the date of his or her death,
        and
        only by the Holder’s personal representative (if then subject to administration
        as part of the Holder’s estate) or by the person(s) to whom the Holder’s rights
        under the Option shall have passed by will or by the applicable laws of descent
        and distribution or by Holder’s Permitted Transferee.

      

      (d) Cause.
        In case
        of termination of the Holder’s employment or services for Cause, all Options
        held by Holder or his or her Permitted Transferee shall automatically terminate
        upon first notification to the Holder of such termination, unless the Plan
        Administrator determines otherwise. If a Holder’s employment or services with
        the Company are suspended pending an investigation of whether the Holder
        shall
        be terminated for Cause, all the Holder’s rights under any Option likewise shall
        be suspended during the period of investigation.

      

      7.8 Waiver
        or Extension of Time Periods.
        The
        Plan Administrator shall have the authority, prior to or within the times
        specified in this Section 7 for the exercise of any such Option, to extend
        such
        time period or waive in its entirety any such time period to the extent that
        such time period expires prior to the expiration of the term of such option.
        In
        addition, the Plan Administrator may modify or eliminate the time periods
        specified in this Section 7 with respect to particular Option grants. However,
        no Incentive Stock Option may be exercised after the expiration of ten years
        from the date such option is granted. If a Holder holding an Incentive Stock
        Option exercises such Option, by express permission of the Plan Administrator,
        after the expiration of the time periods specified in this Section 7, the
        Option
        will no longer be treated as an Incentive Stock Option under the Code and
        shall
        automatically be converted into a Nonqualified Stock Option.

      

      
        
           

        

        
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      7.9 Termination
        of Options.
        Any
        portion of an Option that is not vested and exercisable on the date of
        termination of the Holder’s employment or services shall terminate on such date,
        unless the Plan Administrator determines otherwise. In addition, to the extent
        that any Options of any Holder whose employment or services have terminated
        shall not have been exercised within the limited periods prescribed in this
        Section 7, the Options and all further rights to purchase shares pursuant
        to
        such Options shall cease and terminate at the expiration of such
        period.

      

      SECTION
        8. INCENTIVE STOCK OPTION LIMITATIONS

      

      To
        the
        extent required by Section 422 of the Code, Incentive Stock Options shall
        be
        subject to the following additional terms and conditions:

      

      8.1 Limitation
        on Amount of Grants to any one Holder.
        To the
        extent that a Holder is granted Incentive Stock Options that in the aggregate
        (together with all other Incentive Stock Options granted by the Company or
        Subsidiaries to such Holder under this Plan and any other stock option plans
        of
        the Company) entitle the Holder to purchase, in any calendar year during
        which
        such Options first become exercisable, Common Stock having a Fair Market
        Value
        (determined as of the Grant Date) in excess of $100,000, such portion of
        the
        Options in excess of $100,000 shall be treated as a Nonqualified Stock Option.
        In the event the Holder holds two or more such Options that become exercisable
        for the first time in the same calendar year, such limitation shall be applied
        on the basis of the order in which such Options are granted.

      

      8.2 Grants
        to 10% Stockholders.
        Incentive Stock Options may be granted to a person who, at the time the option
        is granted, owns more than ten percent (10%) of the total combined voting
        power
        of all classes of stock of the Company or any Subsidiary only
        if
        (a) the exercise price per share shall not be less than 110% of the Fair
        Market Value of the Common Stock on the Grant Date, and (b) the Option term
        shall not exceed five years from the Grant Date. The determination of 10%
        ownership shall be made by the Plan Administrator in accordance with Section
        422
        of the Code.

      

      8.3 Eligible
        Persons.
        Only
        persons who are Employees may receive Incentive Stock Options. Persons who
        are
        not Employees may not be granted Incentive Stock Options and will only be
        eligible to receive Nonqualified Stock Options.

      

      8.4 Term.
        The
        term of an Incentive Stock Option shall not exceed 10 years.

      

      8.5 Exercisability.
        To
        qualify for Incentive Stock Option tax treatment, an Option designated as
        an
        Incentive Stock Option must be exercised within three months after termination
        of employment for reasons other than death, except that, in the case of
        termination of employment due to Disability, such Option must be exercised
        within one year after such termination. Employment shall not be deemed to
        continue beyond the first 90 days of a leave of absence unless the Holder’s
        reemployment rights are guaranteed by statute or contract.

      

      
        
           

        

        
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      8.6 Taxation
        of Incentive Stock Options.
        In
        order to obtain certain tax benefits afforded to Incentive Stock Options
        under
        Section 422 of the Code, the Holder must hold the shares issued upon the
        exercise of an Incentive Stock Option for (a) at least two years after the
        Grant Date of the Incentive Stock Option and (b) at least one year from the
        date of exercise. The Plan Administrator may require a Holder to give the
        Company prompt notice of any disposition of shares acquired upon exercise
        of an
        Incentive Stock Option which occurs prior to the expiration of such holding
        periods. A Holder may be subject to the alternative minimum tax at the time
        of
        exercise of an Incentive Stock Option.

      

      SECTION
        9. STOCK AWARDS

      

      9.1 Grant
        of Stock Awards.
        The
        Plan Administrator is authorized to make Awards of Common Stock on such terms
        and conditions and subject to such restrictions, if any (which may be based
        on
        continuous service with the Company or the achievement of performance goals)
        as
        the Plan Administrator shall determine, in its sole discretion, which terms,
        conditions and restrictions shall be set forth in the instrument evidencing
        the
        Award. The terms, conditions and restrictions that the Plan Administrator
        shall
        have the power to determine shall include, without limitation, the manner
        in
        which shares subject to Stock Awards are held during the periods they are
        subject to restrictions, the circumstances under which forfeiture of Restricted
        Stock shall occur by reason of termination of the Holder’s services, and the
        purchase price, if any.

      

      9.2 Issuance
        of Shares.
        Upon
        the satisfaction of any terms, conditions and restrictions prescribed in
        respect
        to a Stock Award, or upon the Holder’s release from any terms, conditions and
        restrictions of a Stock Award, as determined by the Plan Administrator, the
        Company shall release, as soon as practicable, to the Holder or, in the case
        of
        the Holder’s death, to the personal representative of the Holder’s estate or as
        the appropriate court directs, the appropriate number of shares of Common
        Stock.

      

      9.3 Waiver
        of Restrictions.
        Notwithstanding any other provisions of the Plan, the Plan Administrator
        may, in
        its sole discretion, waive the forfeiture period and any other terms, conditions
        or restrictions on any Restricted Stock under such circumstances (including
        the
        death or Disability of Holder, or material change in the Holder’s circumstances
        after the date of the Award) and subject to such terms and conditions (including
        forfeiture of the shares) as the Plan Administrator shall deem
        appropriate.

      

      SECTION
        10. ASSIGNABILITY

      

      No
        Option
        granted under the Plan may be assigned or transferred by the Holder other
        than
        by will or by the applicable laws of descent and distribution, and, during
        the
        Holder’s lifetime, such Awards may be exercised only by the Holder.
        Notwithstanding the foregoing, and to the extent permitted by Section 422
        of the
        Code, the Plan Administrator, in its sole discretion, may permit such
        assignment, transfer and exercisability and may permit a Holder of such Awards
        to designate a beneficiary who may exercise the Award or receive compensation
        under the Award after the Holder’s death; provided, however, that any Award so
        assigned or transferred shall be subject to all the same terms and conditions
        contained in the instrument evidencing the Award.

      

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

      SECTION
        11. ADJUSTMENTS

      

      11.1 Adjustments
        Upon Changes in Capitalization.
        In the
        event that, at any time or from time to time, a stock dividend, stock split,
        spin-off, combination or exchange of shares, recapitalization, merger,
        consolidation, distribution to stockholders other than a normal cash dividend,
        or other similar change in the Company’s corporate or capital structure results
        in (a) the outstanding shares of Common Stock, or any securities exchanged
        therefor or received in their place, being exchanged for a different number
        or
        class of securities of the Company or of any other corporation, or (b) new,
        different or additional securities of the Company or of any other corporation
        being received by the holders of shares of Common Stock, then the Plan
        Administrator shall make proportional adjustments in (i) the maximum number
        and kind of securities subject to the Plan as set forth in Section 4.1, and
        (ii) the number and kind of securities that are subject to any outstanding
        Award and the per share price of such securities (but without any change
        in the
        aggregate price to be paid therefor). The determination by the Plan
        Administrator as to the terms of any of the foregoing adjustments shall be
        conclusive and binding. Notwithstanding the foregoing, a Corporate Transaction
        shall not be governed by this Section 11.1 but shall be governed by Section
        11.2.

      

      11.2 Adjustments
        upon a Corporate Transaction.
        Except
        as otherwise provided in the instrument that evidences the Award, in the
        event
        of any Corporate Transaction, each Award that is at the time outstanding
        shall
        automatically accelerate so that each such Award shall, immediately prior
        to the
        specified effective date for the Corporate Transaction, become 100% vested
        and
        exercisable. Such Award shall not so accelerate, however, if and to the extent
        that such Award is, in connection with the Corporate Transaction, either
        to be
        assumed by the successor corporation or parent thereof (the “Successor
        Corporation”)
        or to
        be replaced with a comparable award for the purchase of shares of the capital
        stock of the Successor Corporation. The determination of Award comparability
        shall be made by the Plan Administrator, and its determination shall be
        conclusive and binding. All outstanding Awards shall terminate and cease
        to
        remain outstanding immediately following the consummation of the Corporate
        Transaction, except to the extent assumed by the Successor
        Corporation.

      

      11.3 Further
        Adjustment of Awards.
        Subject
        to Section 11.2, the Plan Administrator shall have the discretion, exercisable
        at any time before a sale, merger, consolidation, reorganization, liquidation
        or
        change in control of the Company, as defined by the Plan Administrator, to
        take
        such further action as it determines to be necessary or advisable, and fair
        and
        equitable to Holders, with respect to Awards. Such authorized action may
        include
        (but shall not be limited to) establishing, amending or waiving the type,
        terms,
        conditions or duration of, or restrictions on, Awards so as to provide for
        earlier, later, extended or additional time for exercise, lifting restrictions
        and other modifications, and the Plan Administrator may take such actions
        with
        respect to all Holders, to certain categories of Holders or only to individual
        Holders. The Plan Administrator may take such action before or after granting
        Awards to which the action relates and before or after any public announcement
        with respect to such sale, merger, consolidation, reorganization, liquidation
        or
        change in control that is the reason for such action.

      

      
        
           

        

        
          -11-

          
            

          

        

        
           

        

      

      11.4 No
        Fractional Shares.
        In the
        event of any adjustment in the number of shares covered by any Award, any
        fractional shares resulting from such adjustment shall be disregarded and
        each
        such option shall cover only the number of full shares resulting from such
        adjustment.

      

      11.5 Determination
        of Plan Administrator to be Final.
        All
        adjustments made pursuant to this Section 11 shall be made by the Plan
        Administrator and its determination as to what adjustments shall be made,
        and
        the extent thereof, shall be final, binding and conclusive.

      

      11.6 Limitations.
        The
        grant of Awards will in no way affect the Company’s right to adjust, reclassify,
        reorganize or otherwise change its capital or business structure or to merge,
        consolidate, dissolve, liquidate or sell or transfer all or any part of its
        business or assets.

      

      SECTION
        12. WITHHOLDING

      

      The
        Company may require the Holder to pay to the Company the amount of any
        withholding taxes that the Company is required to withhold with respect to
        the
        grant, vesting or exercise of any Award. Upon exercise of an Award, the Holder
        shall, upon notification of the amount due and prior to or concurrently with
        the
        delivery of the certificates representing the shares, pay to the Company
        all
        amounts necessary to satisfy applicable federal, state and local withholding
        tax
        requirements or shall otherwise make arrangements satisfactory to the Company
        for such requirements. Subject to the Plan and applicable law, the Plan
        Administrator may, in its sole discretion, permit the Holder to satisfy
        withholding obligations, in whole or in part, by paying cash, by electing
        to
        have the Company withhold shares of Common Stock or by transferring shares
        of
        Common Stock to the Company, in such amounts as are equivalent to the Fair
        Market Value of the withholding obligation. The Company shall have the right
        to
        withhold from any Award or any shares of Common Stock issuable pursuant to
        an
        Award or from any cash amounts otherwise due or to become due from the Company
        to the Holder an amount equal to such taxes. The Company may also deduct
        from
        any Award any other amounts due from the Holder to the Company or a
        Subsidiary.

      

      SECTION
        13. LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES

      

      To
        assist
        a Holder (other than any Holder who is an officer or a director of the Company)
        in acquiring shares of Common Stock pursuant to an Award granted under the
        Plan,
        the Plan Administrator, in its sole discretion, may authorize, either at
        the
        Grant Date or at any time before the acquisition of Common Stock pursuant
        to the
        Award, (a) the extension of a full-recourse loan to the Holder by the Company,
        (b) the payment by the Holder of the purchase price, if any, of the Common
        Stock
        in installments, or (c) the guarantee by the Company of a loan obtained by
        the
        Holder from a third party. The terms of any loans, installment payments or
        loan
        guarantees, including the interest rate and terms of and security for repayment,
        will be subject to the Plan Administrator’s discretion. The maximum credit
        available is the purchase price, if any, of the Common Stock acquired, plus
        the
        maximum federal and state income and employment tax liability that may be
        incurred in connection with the acquisition.

      

      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

      SECTION
        14. SECURITIES REGULATIONS

      

      14.1 Compliance
        with Laws.
        Shares
        shall not be issued with respect to an Award granted under this Plan unless
        the
        adoption of this Plan, the grant and exercise of such Award and the issuance
        and
        delivery of such shares pursuant thereto shall comply with all relevant
        provisions of law, including, without limitation, any applicable state
        securities laws, the Securities Act, the Exchange Act, the rules and regulations
        promulgated thereunder, and the requirements of any stock exchange, national
        market system, over the counter system, or any electronic bulletin board,
        upon
        which the Common Stock may then be listed, quoted or traded, and shall further
        be subject to the approval of counsel for the Company with respect to such
        compliance. Inability of the Company to obtain from any regulatory body having
        jurisdiction the authority deemed by the Company’s counsel to be necessary for
        the lawful issuance and sale of any shares hereunder shall relieve the Company
        of any liability in respect of the nonissuance or sale of such shares as
        to
        which such requisite authority shall not have been obtained. In addition,
        notwithstanding anything in the Plan to the contrary, the Board, in its sole
        discretion, may bifurcate the Plan so as to restrict, limit or condition
        the use
        of any provision of the Plan to Holders who are officers or directors subject
        to
        Section 16 of the Exchange Act without so restricting, limiting or conditioning
        the Plan with respect to other Holders.

      

      14.2 Representations
        by Holder.
        With
        respect to the exercise of an Option or any other receipt of Common Stock
        pursuant to an Award under the Plan, the Company may require the Holder to
        represent and warrant at the time of such exercise or receipt that the shares
        are being purchased or received only for Holder’s own account investment and
        without any present intention to sell or distribute such shares, if, in the
        opinion of counsel for the Company, such representation is required by any
        relevant provision of the laws referred to in Section 14.1 above. At the
        option
        of the Company, a stop transfer order against any shares of stock may be
        placed
        on the official stock books and records of the Company, and a legend indicating
        that the stock may not be pledged, sold or otherwise transferred unless an
        opinion of counsel was provided (concurred in by counsel for the Company)
        stating that such transfer is not in violation of any applicable law or
        regulation, may be stamped on the stock certificate in order to assure exemption
        from registration. The Plan Administrator may also require such other action
        or
        agreement by the Holder as may from time to time be necessary to comply with
        the
        federal and state securities laws.

      

      14.3 No
        Registration Required.
        The
        Company shall be under no obligation to any Holder to register for offering
        or
        resale or to qualify for exemption under the Securities Act, or to register
        or
        qualify under state securities laws, any shares of Common Stock, security
        or
        interest in a security paid or issued under, or created by, the Plan, or
        to
        continue in effect any such registrations or qualifications if made. The
        Company
        may issue certificates for shares with such legends and subject to such
        restrictions on transfer and stop-transfer instructions as counsel for the
        Company deems necessary or desirable for compliance by the Company with federal
        and state securities laws.

      

      
        
           

        

        
          -13-

          
            

          

        

        
           

        

      

      SECTION
        15. AMENDMENT AND TERMINATION OF PLAN

      

      15.1 Amendment
        of Plan.
        The
        Board may modify or amend the Plan in such respects as it shall deem advisable
        or in order to conform to any changes in law or regulation applicable thereto,
        or in other respects; provided,
        however,
        that,
        to the extent required for compliance with Section 422 of the Code or any
        applicable law or regulation, the Board may not, without further approval
        by the
        stockholders of the Company, effect any amendment that will (a) increase
        the total number of shares as to which Awards may be granted under the Plan,
        (b) modify the class of persons eligible to receive Awards, or
        (c) change the terms of the Plan which causes the Plan to lose its
        qualification as an incentive stock option plan under Section 422(b) of the
        Code, or (d) otherwise require stockholder approval under any applicable
        law, regulation or rule of any stock exchange.

      

      The
        Plan
        shall comply with the requirements of, and shall be operated, administered,
        and
        interpreted in accordance with, a good faith interpretation of Code
        Section 409A and Section 885 of the American Jobs Creation Act of 2004
        (the “AJCA”) to the extent applicable. If any provision of the Plan is
        inconsistent with the restrictions imposed by Code Section 409A, that
        provision shall be deemed to be amended to the extent necessary to reflect
        the
        new restrictions imposed by Code Section 409A. Any Award granted under the
        Plan prior to issuance of definitive guidance from the Internal Revenue Service
        or the Department of Treasury with regard to any issue related to Code
        Section 409A shall be subject to the condition that the Plan Administrator
        may make such changes to the Award as necessary or appropriate in the Plan
        Administrator’s discretion to reflect the restrictions imposed by Code
        Section 409A, without the consent of the Participant.

      

      15.2 Termination
        of Plan.
        The
        Board may suspend or terminate the Plan at any time. The Plan will have no
        fixed
        expiration date; provided, however, that no Incentive Stock Options may be
        granted more than 10 years after the earlier of the Plan’s adoption by the Board
        and approval by the stockholders.

      

      15.3 Consent
        of Holder.
        The
        amendment or termination of the Plan shall not, without the consent of the
        Holder of any Award under the Plan, impair or diminish any rights or obligations
        under any Award theretofore granted under the Plan. Any change or adjustment
        to
        an outstanding Incentive Stock Option shall not, without the consent of the
        Holder, be made in a manner so as to constitute a “modification” that would
        cause such Incentive Stock Option to fail to continue to qualify as an Incentive
        Stock Option.

      

      SECTION
        16. GENERAL

      

      16.1 Award
        Agreements.
        Each
        Award granted under the Plan shall be evidenced by a written agreement that
        shall contain such terms, conditions, limitations and restrictions as the
        Plan
        Administrator shall deem advisable and that are not inconsistent with the
        Plan.
        In addition, all such agreements evidencing Options shall include or incorporate
        by reference the following terms and conditions: number of shares, exercise
        price, vesting schedule, term and termination.

      

      
        
           

        

        
          -14-

          
            

          

        

        
           

        

      

      16.2 No
        Rights to Continued Employment or Service.
        Nothing
        in this Plan or any Award granted pursuant hereto, or any action of the Plan
        Administrator taken under the Plan, shall confer upon any Holder any right
        to be
        retained in the employment or service of the Company or any Subsidiary, or
        to
        remain a director thereof or a consultant thereto, or to interfere in anyway
        with the right of the Company or any Subsidiary, in its sole discretion,
        to
        terminate such Holder’s employment or service at any time or to remove the
        Holder as a director or consultant at any time.

      

      16.3 No
        Rights as a Stockholder.
        No
        Option shall entitle the Holder to any cash dividend, voting or other right
        of a
        stockholder unless and until the date of issuance under the Plan of the shares
        that are the subject of such Option, free of all applicable
        restrictions.

      

      16.4 No
        Trust or Fund.
        The
        Plan is intended to constitute an “unfunded” plan. Nothing contained herein
        shall require the Company to segregate any monies or other property, or shares
        of Common Stock, or to create any trusts, or to make any special deposits
        for
        any immediate or deferred amounts payable to any Holder, and no Holder shall
        have any rights that are greater than those of a general unsecured creditor
        of
        the Company.

      

      16.5 Severability.
        If any
        provision of the Plan or any Award is determined to be invalid, illegal or
        unenforceable in any jurisdiction, or as to any person, or would disqualify
        the
        Plan or any Award under any law deemed applicable by the Plan Administrator,
        such provision shall be construed or deemed amended to conform to applicable
        laws, or, if it cannot be so construed or deemed amended without, in the
        Plan
        Administrator’s determination, materially altering the intent of the Plan or the
        Award, such provision shall be stricken as to such jurisdiction, person or
        Award, and the remainder of the Plan and any such Award shall remain in full
        force and effect.

      

      SECTION
        17. EFFECTIVE DATE

      

      This
        Plan
        shall become effective on the date of its adoption by the Board and Awards
        Options may be granted immediately thereafter, but no Option may be exercised
        under the Plan unless and until the Plan shall have been approved by the
        stockholders within 12 months after the date of adoption of the Plan by the
        Board of Directors. If such approval is not obtained within such period the
        Plan
        and any Options granted shall be null and void.

      

      Adopted
        by the Board of Directors on October 5, 2005 and approved by the Company’s
        stockholders on December 1, 2005.

      

      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

      PLAN
        ADOPTION AND AMENDMENTS/ADJUSTMENTS

      

      

      

      
        	
                Date
                  of Adoption/

                Amendment/Adjustment

              	
                 

                Section

              	
                 

                Effect
                  of Amendment

              	
                Date
                  of

                Stockholder
                  Approval

              
	
                 

              	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                 

              	
                 

              

      

      

      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

      APPENDIX
        A FOR CALIFORNIA RESIDENTS

      TO
        PACIFIC BIOMETRICS, INC.

      2005
        STOCK INCENTIVE PLAN

      

      

      This
        Appendix to the Pacific Biometrics, Inc. 2005 Stock Incentive Plan (the “Plan”)
        shall have application only to participants who are residents of the State
        of
        California. Capitalized terms contained herein shall have the same meanings
        given to them in the Plan, unless otherwise provided in this Appendix.
Notwithstanding
        any provision contained in the Plan to the contrary and to the extent required
        by applicable law, the following terms and conditions shall apply to all
        Awards
        granted to residents of the State of California, until such time as the Common
        Stock becomes a “listed security” under the Securities
        Act:

      

      1. Nonqualified
        Stock Options shall have an exercise price that is not less than 100% of
        the
        Fair Market Value of the stock at the time the Option is granted, as determined
        by the Board, except that the exercise price shall be 110% of the Fair Market
        Value in the case of any person who owns stock possessing more than 10% of
        the
        total combined voting power of all classes of stock of the Company or its
        parent
        or subsidiary corporations.

      

      2. The
        purchase price for any Stock Awards that may be purchased under the Plan
        (“Stock
        Purchase Rights”) shall be at least 100% of the Fair Market Value of the Common
        Stock at the time the Participant is granted the Stock Purchase Right or
        at the
        time the purchase is consummated. Notwithstanding the foregoing, the purchase
        price shall be 100% of the Fair Market Value of the Common Stock at the time
        the
        Participant is granted the Stock Purchase Right or at the time the purchase
        is
        consummated in the case of any person who owns stock possessing more than
        10% of
        the total combined voting power of all classes of stock of the Company or
        its
        parent or subsidiary corporations.

      

      3. Options
        shall have a term of not more than ten years from the date the Option is
        granted.

      

      4. Awards
        shall be nontransferable other than by will or the laws of descent and
        distribution. Notwithstanding the foregoing, and to the extent permitted
        by
        Section 422 of the Code, the Plan Administrator, in its discretion, may permit
        distribution of an Option to an inter vivos or testamentary trust in which
        the
        Option is to be passed to beneficiaries upon the death of the trustor (settlor),
        or by gift to “immediate family” as that term is defined in Rule 16a-1(e) of the
        Exchange Act.

      

      5. Options
        shall become exercisable at the rate of at least 20% per year over five years
        from the date the Option is granted, subject to reasonable conditions such
        as
        continued employment. However, in the case of an Option granted to officers,
        directors or consultants of the Company or any of its affiliates, the Option
        may
        become fully exercisable, subject to reasonable conditions such as continued
        employment, at any time or during any period established by the Company or
        any
        of its affiliates.

      

      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      

      6. Unless
        employment is terminated for Cause, the right to exercise an Option in the
        event
        of termination of employment, to the extent that the Participant is otherwise
        entitled to exercise an Option on the date employment terminates, shall
        be:

      

      a. at
        least
        six months from the date of termination of employment if termination was
        caused
        by death or Disability; and

      

      b. at
        least
        30 days from the date of termination if termination of employment was caused
        by
        other than death or Disability;

      

      c. but
        in no
        event later than the remaining term of the Option.

      

      7. No
        Award
        may be granted to a resident of California more than ten years after the
        earlier
        of the date of adoption of the Plan and the date the Plan is approved by
        the
        stockholders.

      

      8. Any
        Award
        exercised before stockholder approval is obtained shall be rescinded if
        stockholder approval is not obtained within 12 months before or after the
        Plan
        is adopted. Such shares shall not be counted in determining whether such
        approval is obtained.

      

      9. The
        Company shall provide annual financial statements of the Company to each
        California resident holding an outstanding Award under the Plan. Such financial
        statements need not be audited and need not be issued to key employees whose
        duties at the Company assure them access to equivalent information.

      

      10. Any
        right
        of repurchase on behalf of the Company in the event of a Participant’s
        termination of employment shall be at a purchase price that is (a) not less
        than
        the Fair Market Value of the securities upon termination of employment, and
        the
        right to repurchase shall be exercised for cash or cancellation of purchase
        money indebtedness for the shares within 90 days of termination of employment
        (or in the case of securities issued upon exercise of Options after the date
        of
        termination, within 90 days after the date of the exercise), and the right
        shall
        terminate when the Company’s securities become publicly traded; or (b) at the
        original purchase price, provided that the right to repurchase at the original
        purchase price lapses at the rate of at least 20% of the shares per year
        over
        five years from the date the Option or Stock Purchase Right is granted (without
        respect to the date the Option or Stock Purchase Right was exercised or became
        exercisable) and the right to repurchase shall be exercised for cash or
        cancellation of purchase money indebtedness for the shares within 90 days
        of
        termination of employment (or in the case of securities issued upon exercise
        of
        Options after the date of termination, within 90 days after the date of the
        exercise). In addition to the restrictions set forth in clauses (a) and (b),
        the
        securities held by an officer, director or consultant of the Company or an
        affiliate of the Company may be subject to additional or greater
        restrictions.

      

      
        
           

        

        
          -18-Exhibit
      10.1

     

    B&D
      FOOD CORPORATION PREFERRED SHARE
      SUBSCRIPTION AGREEMENT

     

     

    THIS
      SUBSCRIPTION AGREEMENT (this "Agreement") is made as of September 28, 2008,
      by
      and among B&D Food Corporation, a corporation organized under the laws
      of Delaware ("BDFC"), and Daniel Ollech, Jacques Ollech and Mark Radom,
      each an individual residing in Israel (the "Purchasers"). 

     

    Whereas,
      Livorno
      Investments S.A., the predecessor to the Purchasers (“Livorno”), has lent BDFC
      U.S. $10,000,000 pursuant to a promissory note dated July 8, 2005, as amended
      by
      the amendment to the promissory note dated May 7, 2007 and the second amendment
      to the promissory note dated September 28, 2008 (the “Note”); 

     

    Whereas,
      Livorno
      and the Purchasers have entered into a transfer agreement pursuant to which
      Livorno transferred its right, title and interest in, under and to the Note
      to
      the Purchasers in accordance with their respective ownership interests in
      Livorno;

     

    Whereas,
      each of
      the Purchasers wishes to convert the outstanding principal and interest thereon
      into preferred shares of BDFC; and

     

    Whereas,
      BDFC
      has authorized the issuance of preferred shares in a board of directors’
resolution dated the date hereof (the “Board of Directors’ Resolution) pursuant
      to the Amendment to the Certificate of Incorporation of BDFC dated July 5,
      2005.

     

    Now,
      therefore,
      in
      consideration of the mutual premises and covenants contained herein, and
      intending to be legally bound, the parties hereto agree as follows:

     

    
      	1.	
              Issuance,
                Conversion and Rights of Series A Preferred
                Shares.

            

    

     

    
      	
            	1.1	
              Issuance
                of Series A Preferred Shares.
                Pursuant to the authority granted to BDFC in its Board of Directors’
                Resolution based on the Amendment to the Certificate of Incorporation
                dated July 5, 2005, BDFC hereby issues to the Purchasers an aggregate
                of
                373,595,592 shares of its preferred stock (the “Series A Preferred
                Shares”).

            

    

     

    
      	
            	1.2	
              Conversion
                of Principal and Interest under the Note.
                Subject to the terms and conditions hereof, BDFC hereby transfers
                the
                Series A Preferred Shares to Purchasers in exchange for each of the
                Purchasers cancelling its respective share of the Note (it being
                understood that the transactions contemplated hereby will result
                in all of
                Purchasers’ principal and accrued interest under the Note being converted
                into the Series A Preferred Shares).

            

    

     

    
      	
            	1.3	
              Rights
                of Series A Preferred Shares.
                The Series A Preferred Shares will have the following
                rights:

            

    

     

    
      	 	
              ·

            	
              Cumulative
                dividend of U.S. $100,000 (it being understood that BDFC has no obligation
                to declare and pay any dividends, but that Purchasers shall receive
                with a
                right of first priority pro rata to their ownership in Livorno U.S.
                $100,000 for every full calendar
                year

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    that
      elapses before BDFC declares and pays a dividend prior to BDFC paying any
      dividends to holders of its common shares);

     

    
      	 	
              ·

            	
              Conversion
                at the option of each of the Purchasers upon 45 days’ written notice into
                one share of BDFC’s common stock for each share of Series A Preferred
                Shares to be converted (it being understood that BDFC shall take
                any
                action necessary to effect a conversion into shares of common stock
                promptly upon receiving written notice from a Purchaser);
                and

            

    

     

    
      	 	
              ·

            	
              Priority
                in distributions in the event of a liquidation or winding down of
                BDFC’s
                business.

            

    

     

    
      	2.	
              Closing
                Dates; Delivery.

            

    

     

    
      	
            	2.1	
              Closing.
                Subject to the satisfaction (or waiver) of the conditions to the
                closing
                contained in Section 6 of this Agreement, the purchase and sale of
                the
                Series A Preferred Shares shall take place at 10:00 a.m. local time
                on a
                date to be mutually agreed amongst the parties hereto, but, in any
                event,
                no later than September 30, 2008 (the "Closing").
                

            

    

     

    
      	
            	2.2	
              Delivery.
                At Closing, BDFC and the Purchasers will sign this Agreement and
                BDFC will
                deliver to each of the Purchasers a certificate reflecting his ownership
                of the Series A Preferred Shares.

            

    

     

    
      	3.	
              Additional
                Agreements and Covenants of the Parties.
                The parties hereto agree as
                follows:

            

    

     

    
      	
            	3.1	
              Further
                Assurances.
                Each party hereto agrees to execute, on request, all other documents
                and
                instruments as the other party shall reasonably request, and to take
                any
                actions, which are reasonably required or desirable to carry out
                obligations imposed under, and affect the purposes of, this Agreement.
                

            

    

     

    
      	
            	3.2	
              Miscellaneous.

            

    

     

    
      	
            	3.2.1	
              Expenses.
                Each party hereto will pay its own expenses in connection with the
                transactions contemplated hereby.

            

    

     

    
      	
            	3.2.2	
              Governing
                Law and Jurisdiction.
                This Agreement shall be governed by, and be construed in accordance
                with,
                the laws of the State of New York (without giving effect to the
                conflicts of laws provisions thereof). The parties agree that any
                disputes
                arising hereunder shall be submitted to the non-exclusive jurisdiction
                of
                the courts of the State of New
                York.

            

    

     

    
      	
            	3.2.3	
              Successors
                and Assigns.
                The provisions hereof shall inure to the benefit of and be binding
                upon
                the successors, assigns, heirs, executors and administrators of the
                parties hereto.

            

    

     

    
      	
            	3.2.4	
              Entire
                Agreement; Amendments.
                

            

    

     

    
      	
            	3.2.4.1	
              Entire
                Agreement.
                This Agreement constitutes the full and entire understanding and
                agreement
                between the parties with regard to the subjects hereof and thereof,
                and
                supersedes any and all prior and contemporaneous agreements,
                understandings, discussions and
                correspondence.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
            	3.2.4.2	
              Amendments.
                This Agreement may be amended or modified only with the prior written
                consent of all parties hereto.

            

    

     

    
      	
            	3.2.4.3	
              Severability. 
                In the event that any one or more of the provisions of this Agreement
                shall be deemed unenforceable by any court of competent jurisdiction
                for
                any reason whatsoever, the remainder of his Agreement shall remain
                enforceable and in full effect. 

            

    

     

     

     

     

     

     

     

    IN
      WITNESS WHEREOF, the parties have executed this Agreement as of the day and
      year
      first above written.

     

     

    B&D
      Food Corporation 

     

     

     

    
      

    

    Daniel
      Ollech

     

     

    
      
        

      

    

    Jacques
      Ollech

     

     

    
      

    

    Mark
      Radom

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