Document:

ex10-3.htm

    Exhibit 10.3

     

    SUBSCRIPTION
AGREEMENT

     

     

    THIS SUBSCRIPTION AGREEMENT
(this “Agreement”), is
dated as of December 31, 2008, by and between Innovative Food Holdings, Inc., a
Florida corporation (the “Company”), and Alpha Capital
Anstalt (“Subscriber”).

    

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

     

    WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Subscriber, as provided herein, and the Subscriber
shall purchase for $200,000 (the "Purchase Price") of principal
amount of promissory notes of the Company (“Note” or “Notes”), a form of which is
annexed hereto as Exhibit
A, convertible into shares of the Company's Common Stock, $0.0001 par
value (the "Common
Stock") at a per share conversion price set forth in the Note (“Conversion Price”); and share
purchase warrants (the “Warrants”), in the form
annexed hereto as Exhibit
B, to purchase shares of Common Stock (the “Warrant Shares”) (the “Offering”).  The
Notes, shares of Common Stock issuable upon conversion of the Notes (the “Shares” or “Conversion Shares”), the
Warrants and the Warrant Shares are collectively referred to herein as the
"Securities";
and

     

    WHEREAS, the aggregate
proceeds of the sale of the Notes and the Warrants contemplated hereby shall be
held in escrow pursuant to the terms of a Funds Escrow Agreement to be executed
by the parties substantially in the form attached hereto as Exhibit C (the “Escrow
Agreement”).

     

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

     

    1.           Closing
Date.   The “Closing Date” shall be the
date that the Purchase Price is transmitted by wire transfer or otherwise
credited to or for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place at the offices of Grushko
& Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
upon the satisfaction or waiver of all conditions to closing set forth in this
Agreement.   Subject to the satisfaction or waiver of the terms
and conditions of this Agreement, on the Closing Date, Subscriber shall purchase
and the Company shall sell to Subscriber a Note in the Principal Amount of
$200,000 and Warrants as described in Section 2 of this Agreement.

    

    2.           Warrants.  On
the Closing Date, the Company will issue and deliver Class B Warrants to the
Subscriber.  One Class B Warrant will be issued for each Share which
would be issued on the Closing Date assuming the complete conversion of the Note
on the Closing Date at the Conversion Price.  The exercise price of
such Class B Warrant shall be $0.011 per Warrant Share, subject to reduction as
described in the Class B Warrant.  Upon exercise of a Class B Warrant,
the holder of the Class B Warrant shall receive one Warrant
Share.  The Class B Warrants shall be exercisable until five years
after the Closing Date.

    

    3.           Security
Interest.   The Subscriber has been granted a security
interest in the assets of the Company and Subsidiaries (as defined in
Section 5(a) of this Agreement), including ownership of the Subsidiaries
and in the assets of the Subsidiaries, which security interest was memorialized
in a “Security and Pledge
Agreement” dated February 24, 2005, as amended on August 25,
2005.   The Subsidiaries guaranteed the Company’s obligations
under the Transaction Documents as defined in Section 5(c) memorialized in a
Security and Pledge Agreement dated February 24, 2005 and in a “Guaranty” dated February 24,
2005, as amended on August 25, 2005.  The Subscriber appointed a
Collateral Agent to represent it in connection with the security interests to be
granted to the Subscriber. The appointment of the Collateral Agent in connection
with the Security Agreement was pursuant to a “Collateral Agent Agreement”
dated February 24, 2005, as amended on August 25, 2005.  The Notes and
all sums due under the Notes and the Transaction Documents (as defined in
Section 5(c) below) are included in the term “Obligations” as defined in the
Security Agreements and are secured by the Collateral (as defined in the
Security Agreements) in the same manner and having the same priority as granted
to the Subscriber pursuant to the Security Agreements.  The
Subsidiaries by signing this Agreement consent and agree that the Guarantees
provided by them on or about February 24, 2005 and August 25, 2005, include as
guaranteed obligations all sums which may become due to the Subscriber under the
Transaction Documents (as defined in Section 5(c)).  The Company will
execute such other agreements, documents and financing statements reasonably
requested by the Subscriber, affirm such security agreement which may be filed
at the Company’s expense with the jurisdictions, states and counties designated
by the Subscriber herein.  The Company will also execute all such
documents reasonably necessary in the opinion of the Subscriber to memorialize
and further protect the security interest described herein.

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

    

    (a)           Organization and Standing of
the Subscriber.  Subscriber is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.

    

    (b)           Authorization and
Power.  Subscriber has the
requisite power and authority to enter into and perform this Agreement and the
other Transaction Documents and to purchase the Note being sold to it
hereunder.  The execution, delivery and performance of this Agreement
and the other Transaction Documents by Subscriber and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action, and no further consent or authorization of
Subscriber or its Board of Directors or stockholders is
required.  This Agreement and the other Transaction Documents have
been duly authorized, executed and when delivered by Subscriber and constitute,
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.  The execution, delivery and performance of
this Agreement and the other Transaction Documents and the consummation by
Subscriber of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of Subscriber’s charter
documents, bylaws or other organizational documents, (ii) conflict with nor
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, nor (iii) result in a violation of any law, rule,
or regulation, or any order, judgment or decree of any court or governmental
agency applicable to Subscriber or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on Subscriber).  Subscriber is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement and the other
Transaction Documents  nor to purchase the Securities in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, Subscriber is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company
herein.

    

    (d)           Information on
Company.   Subscriber has been furnished with or has had
access at the EDGAR Website of the Commission to the Company's Form 10-KSB filed
on July 31, 2008 for the fiscal year ended December 31, 2007, and the financial
statements included therein for the year ended December 31, 2007, together with
all subsequent filings made with the Commission available at the EDGAR website
until five days before the Closing Date (hereinafter referred to collectively as
the "Reports").  In
addition, Subscriber may have received in writing from the Company such other
information concerning its operations, financial condition and other matters as
Subscriber has requested in writing, identified thereon as OTHER WRITTEN
INFORMATION (such other information is collectively, the "Other Written Information"),
and considered all factors Subscriber deems
material in deciding on the advisability of investing in the
Securities.

    

    (e)           Information on
Subscriber.   Subscriber is, and will be at the time of
the conversion of the Notes and exercise of the Warrants, an "accredited investor", as such
term is defined in Regulation D promulgated by the Commission under the 1933
Act, is experienced in investments and business matters, has made investments of
a speculative nature and has purchased securities of United States
publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable 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 has the authority and is duly and legally
qualified to purchase and own the Securities.  Subscriber is able to
bear the risk of such investment for an indefinite period and to afford a
complete loss thereof.  The information set forth on the signature
page hereto regarding Subscriber is
accurate.

    

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

    

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

    

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

    

    "THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, NOR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."

    

    (i)           Note and Warrant
Legend.  The Note  and Warrant shall bear the
following legend:

     

    " NEITHER THE ISSUANCE AND
SALE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE [CONVERTIBLE –OR-EXERCISABLE] HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (j)           Communication of
Offer.  The offer to sell the Securities was directly
communicated to 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.

    

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

    

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

    

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

    

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

     

    5.           Company Representations and
Warranties.  The Company represents and warrants to and agrees
with Subscriber that:

     

    (a)           Due
Incorporation.  The Company is a corporation or other entity
duly incorporated or organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has the
requisite corporate power to own its properties and to carry on its business as
presently conducted.  The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a Material Adverse Effect.  For purposes of
this Agreement, a “Material
Adverse Effect” shall mean a material adverse effect on the financial
condition, results of operations, prospects, properties or business of the
Company and its Subsidiaries taken as a whole.  For purposes of this
Agreement, “Subsidiary”
means, with respect to any entity at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which more than 30% of
(i) the outstanding capital stock having (in the absence of contingencies)
ordinary voting power to elect a majority of the board of directors or other
managing body of such entity, (ii) in the case of a partnership or limited
liability company, the interest in the capital or profits of such partnership or
limited liability company or (iii) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such
trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity.  As of the Closing Date, all of the
Company’s Subsidiaries are identified on Schedule 5(a).

     

    (b)           Outstanding
Stock.  All issued and outstanding shares of capital stock and
equity interests in the Company have been duly authorized and validly issued and
are fully paid and non-assessable.

     

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

     

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

     

    (e)           Consents.  No
consent, approval, authorization or order of any court, governmental agency or
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, the OTC Bulletin Board (the “Bulletin Board”) or the
Company's shareholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation, the
issuance and sale of the Securities.  The Transaction Documents and
the Company’s performance of its obligations thereunder has been unanimously
approved by the Company’s Board of Directors.

     

    (f)           No Violation or
Conflict.  Assuming the representations and warranties of the
Subscriber in Section 4 are true and correct, neither the issuance and sale of
the Securities nor the performance of the Company’s obligations under this
Agreement and all other agreements entered into by the Company relating thereto
by the Company will:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

               (iv)          result
in the triggering of any piggy-back or other registration rights of any person
or entity holding securities of the Company or having the right to receive
securities of the Company.

     

    (g)           The
Securities.  The Securities upon issuance:

     

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

    

    (ii)          have
been, or will be, duly and validly authorized and on the dates of issuance of
the Conversion Shares upon conversion of the Note, and the Warrant Shares upon
exercise of the Warrants, such Shares and Warrant Shares will be duly and
validly issued, fully paid and non-assessable and if registered pursuant to the
1933 Act and resold pursuant to an effective registration statement or exempt
from registration will be free trading, unrestricted and
unlegended;

     

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

     

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

     

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

     

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

     

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

     

    (j)           Information Concerning
Company.   Except in connection with current
correspondence with the SEC regarding the SEC’s November 27, 2008 comment letter
to the Company, the Reports and Other Written Information contain all material
information relating to the Company and its operations and financial condition
as of their respective dates which information is required to be disclosed
therein.   Since December 31, 2007 and except as modified in the
Other Written Information or in the Schedules hereto, there has been no Material
Adverse Event relating to the Company's business, financial condition or
affairs. The Reports and Other Written Information including the financial
statements included therein do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, taken as a whole, not misleading in light of the
circumstances when made.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    (l)           No Integrated
Offering.   Neither the Company, nor any of its
Affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security of the Company nor solicited
any offers to buy any security of the Company under circumstances that would
cause the offer of the Securities pursuant to this Agreement to be integrated
with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of the Bulletin Board.  No prior offering
will impair the exemptions relied upon in this Offering or the Company’s ability
to timely comply with its obligations hereunder.  Neither the Company
nor any of its Affiliates will take any action or steps that would cause the
offer or issuance of the Securities to be integrated with other offerings which
would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder.  The Company
will not conduct any offering other than the transactions contemplated hereby
that may be integrated with the offer or issuance of the Securities that would
impair the exemptions relied upon in this Offering or the Company’s ability to
timely comply with its obligations hereunder.

     

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

     

    (n)           No Undisclosed
Liabilities.  The Company has no liabilities or obligations
which are material, individually or in the aggregate, other than those incurred
in the ordinary course of the Company businesses since December 31, 2007 and
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed in the Reports or on Schedule 5(n).

     

    (o)           No Undisclosed Events or
Circumstances.  Since December 31, 2007, except as disclosed in
the Reports, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.

     

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

     

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

    

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

    

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

    

    (t)           Reporting Company/Shell
Company.  The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934
Act") and has a class of Common Stock registered pursuant to Section
12(g) of the 1934 Act.  Pursuant to the provisions of the 1934 Act,
except for the Form 10-K for the year ended December 31, 2007, the Company has
timely filed all reports and other materials required to be filed thereunder
with the Commission during the preceding twelve months.  As of the
Closing Date, the Company is not a “shell company” nor a “former shell company”
as those terms are employed in Rule 144 under the 1933 Act.

    

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

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (w)           Company Predecessor and
Subsidiaries.  The Company makes each of the representations
contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (l), (o), (p),
(q), (s), (t) and (u) of this Agreement, as same relate or could be applicable
to each Subsidiary.  All representations made by or relating to the
Company of a historical or prospective nature and all undertakings described in
Sections 9(g) through 9(l) shall relate, apply and refer to the Company and its
successors.  The Company represents that it owns all of the equity of
the Subsidiaries and rights to receive equity of the Subsidiaries identified on
Schedule 5(a), free and
clear of all liens, encumbrances and claims, except as set forth on Schedule 5(a).  No
person or entity other than the Company has the right to receive any equity
interest in the Subsidiaries.

    

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

     

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

     

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

    

                          7.1.           Conversion of
Note.

    

    (a)           Upon
the conversion of a Note or part thereof, the Company shall, at its own cost and
expense, take all necessary action, including obtaining and delivering, an
opinion of counsel to assure that the Company's transfer agent shall issue stock
certificates in the name of Subscriber (or its permitted nominee) or such other
persons as designated by Subscriber and in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon such
conversion.  The Company warrants that no instructions other than
these instructions have been or will be given to the transfer agent of the
Company's Common Stock and that the certificates representing such shares shall
contain no legend other than the legend set forth in Section 4(h).  If
and when Subscriber sells the Shares, assuming (i) a registration statement
including such Shares for registration, filed with the Commission is effective
and the prospectus, as supplemented or amended, contained therein is current and
(ii) Subscriber or its agent confirms in writing to the transfer agent that
Subscriber has complied with the prospectus delivery requirements, the Company
will reissue the Shares without restrictive legend and the Shares will be
free-trading, and freely transferable.  In the event that the Shares
are sold in a manner that complies with an exemption from registration, the
Company will promptly instruct its counsel to issue to the transfer agent an
opinion permitting removal of the legend indefinitely, if pursuant to Rule
144(b)(1)(i) of the 1933 Act, or for 90 days if pursuant to the other provisions
of Rule 144 of the 1933 Act, provided that Subscriber delivers all reasonably
requested representations in support of such opinion.

    

    (b)           Subscriber
will give notice of its decision to exercise its right to convert the Note,
interest, or part thereof by telecopying, or otherwise delivering a completed
Notice of Conversion (a form of which is annexed as Exhibit A to the Note) to the
Company via confirmed telecopier transmission or otherwise pursuant to Section
13(a) of this Agreement.  Subscriber will not be required to surrender
the Note until the Note has been fully converted or satisfied.  Each
date on which a Notice of Conversion is telecopied to the Company in accordance
with the provisions hereof by 6 PM Eastern Time (“ET”) (or if received by the
Company after 6 PM ET, then the next business day) shall be deemed a “Conversion
Date.”  The Company will itself or cause the Company’s transfer
agent to transmit the Company's Common Stock certificates representing the
Conversion Shares issuable upon conversion of the Note to Subscriber via express
courier for receipt by Subscriber within three (3) business days after the
Conversion Date (such third day being the "Delivery Date").  In
the event the Conversion Shares are electronically transferable, then delivery
of the Shares must be made by
electronic transfer provided request for such electronic transfer has been made
by the Subscriber.   A Note representing the balance of the Note
not so converted will be provided by the Company to Subscriber if requested by
Subscriber, provided Subscriber delivers the original Note to the
Company.

    

    (c)           The
Company understands that a delay in the delivery of the Conversion Shares in the
form required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
described in Section 7.2 hereof, respectively, later than the Delivery Date or
the Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber.  As compensation to Subscriber for
such loss, the Company agrees to pay (as liquidated damages and not as a
penalty) to Subscriber for late issuance of Conversion Shares in the form
required pursuant to Section 7.1 hereof upon Conversion of the Note, the amount
of $100 per business day after the Delivery Date for each $10,000 of Note
principal amount and interest (and proportionately for other amounts) being
converted of the corresponding Conversion Shares which are not timely
delivered.  The Company shall pay any payments incurred under this
Section upon demand.  Furthermore, in addition to any other remedies
which may be available to the Subscriber, in the event that the Company fails
for any reason to effect delivery of the Conversion Shares within seven (7)
business days after the Delivery Date or make payment within seven (7) business
days after the Mandatory Redemption Payment Date (as defined in Section 7.2
below), Subscriber will be entitled to revoke all or part of the relevant Notice
of Conversion or rescind all or part of the notice of Mandatory Redemption by
delivery of a notice to such effect to the Company whereupon the Company and
Subscriber shall each be restored to their respective positions immediately
prior to the delivery of such notice, except that the damages payable in
connection with the Company’s default shall be payable through the date notice
of revocation or rescission is given to the Company.

    

    7.2.           Mandatory Redemption at
Subscriber’s Election.  In the event (i) the Company is
prohibited from issuing Conversion Shares, (ii) upon the occurrence of any other
Event of Default (as defined in the Note or in this Agreement), that continues
for more than thirty (30) business days, (iii) a Change in Control (as defined
below), or (iv) of the liquidation, dissolution or winding up of the Company,
then at the Subscriber's election, the Company must pay to the Subscriber ten
(10) business days after request by Subscriber (“Calculation Period”), a sum of
money determined by multiplying up to the outstanding principal amount of the
Note designated by Subscriber by 120%, plus accrued but unpaid interest and any
other amounts due under the Transaction Documents ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by
Subscriber not later than ten (10) business days after request ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal, interest and other amounts will be deemed paid and
no longer outstanding.  The Subscriber may rescind the election to
receive a Mandatory Redemption Payment at any time until such payment is
actually received.  Liquidated damages calculated pursuant to Section
7.1(c) hereof, that have been paid or accrued for the ten day period prior to
the actual receipt of the Mandatory Redemption Payment by Subscriber shall be
credited against the Mandatory Redemption Payment.  For purposes of
this Section 7.2, “Change in
Control” shall mean (i) the Company no longer having a class of shares
publicly traded or listed on a Principal Market (as defined in Section 9(b)
hereto), (ii) the Company  becoming a Subsidiary of another entity
(other than a corporation formed by the Company for purposes of reincorporation
in another U.S. jurisdiction), (iii) a majority of the board of directors of the
Company as of the Closing Date no longer serving as directors of the Company
except due to natural causes, and (iv) the sale, lease or transfer of
substantially all the assets of the Company or its Subsidiaries.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.3.           Maximum
Conversion.  Subscriber shall not be entitled to convert on a
Conversion Date that amount of the Note nor may the Company make any payment
including principal, interest, or liquidated or other damages by delivery of
Conversion Shares in connection with that number of Conversion Shares which
would be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by Subscriber and its Affiliates on a Conversion Date or
payment date, and (ii) the number of Conversion Shares issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a calculation date, which would result in beneficial ownership
by Subscriber and its Affiliates of more than 4.99% of the outstanding shares of
Common Stock of the Company on such Conversion Date.  For the purposes
of the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Rule 13d-3 thereunder.  Subject to the foregoing, the
Subscriber shall not be limited to aggregate conversions of only 4.99% and
aggregate conversions by the Subscriber may exceed 4.99%.  The
Subscriber may increase the permitted beneficial ownership amount up to 9.99%
upon and effective after 61 days prior written notice to the
Company.  Subscriber may allocate which of the equity of the Company
deemed beneficially owned by Subscriber shall be included in the 4.99% amount
described above and which shall be allocated to the excess above
4.99%.

     

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

    

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

    

    7.6           Adjustments.   The
Conversion Price, Warrant exercise price and amount of Shares issuable upon
conversion of the Notes and Warrant Shares issuable upon exercise of the
Warrants shall be equitably adjusted and as otherwise described in this
Agreement, the Notes and Warrants.

     

    7.7.          Redemption.    The
Note shall not be redeemable or callable by the Company, except as described in
the Note.

    

    8.           Legal
Fees.  The Company shall pay to Grushko & Mittman, P.C., a
fee of $10,000 (“Subscriber’s
Legal Fees”) as
reimbursement for services rendered to the Subscribers in connection with this
Agreement and the purchase and sale of the Notes and Warrants (the “Offering”).   The
Subscriber’s Legal Fees and expenses (to the extent known as of the Closing)
will be payable out of funds held pursuant to the Escrow
Agreement.  Grushko & Mittman, P.C. will be reimbursed at Closing
for all lien searches, filing fees, and printing and shipping costs for the
closing statements to be delivered to Subscribers.

     

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

     

    (a)           Stop
Orders.  The Company will advise the Subscriber, within
twenty-four hours after it receives notice of issuance by the Commission, any
state securities commission or any other regulatory authority of any stop order
or of any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.  The Company will not issue any stop
transfer order or other order impeding the sale, resale or delivery of any of
the Securities, except as may be required by any applicable federal or state
securities laws and unless contemporaneous notice of such instruction is given
to the Subscriber.

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d)           Filing
Requirements.  From the date of this Agreement and until the
last to occur of (i) two (2) years after the Closing Date, (ii) until all the
Shares have been resold or transferred by all the Subscriber pursuant to a
registration statement or pursuant to Rule 144(b)(1)(i), or (iii) the Note and
Warrants are no longer outstanding (the date of such latest occurrence being the
“End Date”), the Company
will (A) cause its Common Stock to continue to be registered under Section 12(b)
or 12(g) of the 1934 Act, (B) comply in all respects with its reporting and
filing obligations under the 1934 Act, (C) voluntarily comply with all reporting
requirements that are applicable to an issuer with a class of shares registered
pursuant to Section 12(g) of the 1934 Act, if the Company is not subject to such
reporting requirements, and (D) comply with all requirements related to any
registration statement filed pursuant to this Agreement.  The Company
will use its best efforts not to take any action or file any document (whether
or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under said acts until the End Date.  Until the
End Date, the Company will continue the listing or quotation of the Common Stock
on a Principal Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Principal Market.  The Company agrees to timely file a Form D with
respect to the Securities if required under Regulation D and to provide a copy
thereof to Subscriber promptly after such filing.

     

    (e)           Use of
Proceeds.   The proceeds of the Offering will be employed
by the Company for expenses of the Offering and general working
capital.  Except as described on Schedule 9(e), the Purchase
Price may not and will not be used for accrued and unpaid officer and director
salaries, payment of financing related debt, redemption of outstanding notes or
equity instruments of the Company nor non-trade obligations outstanding on a
Closing Date.  For so long as any Note is outstanding, the Company
will not prepay any financing related debt obligations, except equipment
payments, nor redeem any equity instruments of the Company without the prior
consent of the Subscriber.

     

    (f)           Reservation.   Following
the increase in the authorized capital of the Company which the Company
undertakes to promptly complete as soon as there are 425,000,000 shares issued
and outstanding, the Company undertakes to reserve on behalf of Subscriber from
its authorized but unissued Common Stock, a number of shares of Common Stock
equal to 150% of the amount of Common Stock necessary to allow Subscriber to be
able to convert the Note and 100% of the amount of Warrant Shares issuable upon
exercise of the Warrants (“Required
Reservation”).   Failure to have sufficient shares
reserved pursuant to this Section 9(f) at any time shall be a material default
of the Company’s obligations under this Agreement and an Event of Default under
the Note.  If following the increase in the authorized capital of the
Company, at any time Notes and Warrants are outstanding the Company has
insufficient Common Stock reserved on behalf of the Subscriber in  an
amount equal to at least 140% of the amount necessary for full conversion of all
the outstanding Notes and 100% of the Warrant Shares (“Minimum Required
Reservation”), the Company will promptly take all action necessary to
increase its authorized capital to be able to fully satisfy its reservation
requirements hereunder, including the filing of a preliminary proxy with the
Commission not later than fifteen days after the first day the Company has less
than the Minimum Required Reservation.  The Company agrees to provide
notice to the Subscriber not later than three days after the date the Company
has less than the Minimum Required Reservation reserved on behalf of the
Subscribers.

     

    (g)           DTC
Program.  At all times that Notes or Warrants are outstanding,
the Company will employ as the transfer agent for the Common Stock, Shares and
Warrant Shares a participant in the Depository Trust Company Automated
Securities Transfer Program.

     

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

     

    (i)           Insurance.  From
the date of this Agreement and until the End Date, the Company will keep its
assets which are of an insurable character insured by insurers deemed to be
financially sound and reputable against loss or damage by fire, explosion and
other risks customarily insured against by companies in the Company’s line of
business and location, in amounts sufficient to prevent the Company from
becoming a co-insurer and not in any event less than one hundred percent (100%)
of the insurable value of the property insured less reasonable deductible
amounts; and the Company will maintain, with financially sound and reputable
insurers, insurance against other hazards and risks and liability to persons and
property to the extent and in the manner customary for companies in similar
businesses similarly situated and located and to the extent available on
commercially reasonable terms.

     

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

     

    (k)           Governmental
Authorities.   From the date of this Agreement and until
the End Date, the Company shall duly observe and conform in all material
respects to all valid requirements of governmental authorities relating to the
conduct of its business or to its properties or assets.

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (n)           Confidentiality/Public
Announcement.   From the date of this Agreement and until
the End Date, the Company agrees that except in connection with a Form 8-K and
the registration statement or statements regarding the Subscriber’s securities
or in correspondence with the SEC regarding same, it will not disclose publicly
or privately the identity of the Subscriber unless expressly agreed to in
writing by a Subscriber or only to the extent required by law and then only upon
not less than three days prior notice to Subscriber.  In any event and
subject to the foregoing, the Company undertakes to file a Form 8-K describing
the Offering not later than the fourth business day after the Closing
Date.   Prior to the Closing Date, such Form 8-K will be provided
to Subscriber for Subscriber’s review and approval.  In the Form 8-K,
the Company will specifically disclose the amount of Common Stock outstanding
immediately after the Closing.  Upon  delivery by the
Company to the Subscriber after the Closing Date of any notice or information,
in writing, electronically or otherwise, and while a Note, Conversion Shares or
Warrants are held by Subscriber, unless the  Company has in good faith
determined that the matters relating to such notice do not
constitute material, nonpublic information relating to
the Company or Subsidiaries, the Company  shall within one
business day after any such delivery publicly disclose such 
material,  nonpublic  information on a
Report on Form 8-K.  In the event that
the Company believes that a notice or communication to
Subscriber contains material, nonpublic information relating to the Company or
Subsidiaries, the Company shall so indicate to Subscriber prior to delivery of
such notice or information.  Subscriber will be granted sufficient
time to notify the Company that Subscriber elects not to receive such
information.   In such case, the Company will not deliver such
information to Subscriber.  In the absence of any such
indication, Subscriber shall be allowed to presume that all matters
relating to such notice and information do not constitute material,
nonpublic information relating to the Company or
Subsidiaries.

     

               (o)           Non-Public
Information.  The Company covenants and agrees that except for
the Reports, Other Written Information and schedules and exhibits to this
Agreement and the Transaction Documents, which information the Company
undertakes to publicly disclose on the Form 8-K described in Section 9(n) above,
neither it nor any other person acting on its behalf will at any time provide
Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto
Subscriber shall have agreed in writing to accept such
information.  The Company understands and confirms that Subscriber
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.

    

    (p)           Negative
Covenants.   So long as a Note is outstanding, without the
consent of the Subscriber, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly:

    

    (i)           create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired except for:  (A) the
Excepted Issuances (as defined in Section 12 hereof), and (B) (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property; and (f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property (each of (a) through (f), a “Permitted Lien”).

    

                                                (ii)           amend
its certificate of incorporation, bylaws or its charter documents so as to
materially and adversely affect any rights of the Subscriber (an increase in the
amount of authorized shares and an increase in the number of directors will not
be deemed adverse to the rights of the Subscriber);

    

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

    

    (iv)           engage
in any transactions with any officer, director, employee or any Affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $100,000
other than (i) for payment of salary, or fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company, and (iii) for
other employee benefits, including stock option agreements under any stock
option plan of the Company; or

    

    (v)           prepay
or redeem any financing related debt or past due obligations outstanding as of
the Closing Date.

     

    
       

      The
Company agrees to provide Subscribers not less than ten (10) days notice prior
to becoming obligated to or effectuating a Permitted Lien or Excepted
Issuance.

       

      (q)           Further Registration
Statements.   Except for a registration statement filed
exclusively on behalf of the Subscriber, the Company will not, without the
consent of the Subscribers, file with the Commission or with state regulatory
authorities any registration statements or amend any already filed registration
statement to increase the amount of Common Stock registered therein, or reduce
the price of which such company securities are registered therein, (including
but not limited to Forms S-8), until the expiration of the “Exclusion Period,” which shall
be defined as the sooner of (i) the date all of the Registrable Securities [as
defined in Section 11.1(iv)] have been registered in an effective registration
statement, or (ii) until all the Conversion Shares and Warrant Shares have been
resold by the Subscriber pursuant to a registration statement or Rule
144b(1)(i), without regard to volume limitations.  The Exclusion
Period will be tolled or reinstated, as the case may be, during the pendency of
an Event of Default as defined in the Note.

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

    

     

    (s)           Seniority.   Except
for Permitted Liens, until the Notes are fully satisfied or converted, the
Company shall not grant any security interest to be taken in the assets of the
Company or any Subsidiary or any Subsidiary’s assets; nor issue any debt, equity
or other instrument which would give the holder thereof directly or indirectly,
a right in any assets of the Company or any Subsidiary or any right to payment
equal to or superior to any right of the holder of a Note in or to such assets
or payment, nor issue or incur any debt not in the ordinary course of
business.

     

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

     

    (u) 
       Transactions With
Insiders.  So long as the Note is outstanding, the Company
shall not, and shall cause each of its subsidiaries not to, enter into, amend,
modify or supplement, or permit any subsidiary to enter into, amend, modify or
supplement any agreement, transaction, commitment, or arrangement relating to
the sale, transfer or assignment of any of the Company’s tangible or intangible
assets with any of its Insiders (as defined below)(or any persons who were
Insiders at any time during the previous two (2) years), or any Affiliates (as
defined below) thereof, or with any individual related by blood, marriage, or
adoption to any such individual.  Affiliate for purposes of this
Section 9(v) means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity.  “Control” or
“Controls” for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.  For purposes hereof, “Insiders” shall mean any officer,
director or manager of the Company, including but not limited to the Company’s
president, chief executive officer, chief financial officer and chief operations
officer, and any of their affiliates or family members.

     

    10.           Covenants of the Company
Regarding Indemnification.

     

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

     

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

     

    (c)           The
procedures set forth in Section 11.6 shall apply to the indemnification set
forth in Section 10(a).

    

    11.           Additional Post-Closing
Obligations.

    

    11.1.           Piggy-Back
Registrations.   If at any time until two years after the
Closing Date there is not an effective registration statement covering all of
the Shares and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the 1933 Act of any of its equity securities,
including on Form S-4 (as promulgated under the 1933 Act) or its then equivalent
form, but excluding Form S-8, then the Company shall send to each holder of any
of the Securities written notice of such determination and, if within fifteen
calendar days after receipt of such notice, any such holder shall so request in
writing, the Company shall include in such registration statement all or any
part of the Shares and Warrant Shares such holder requests to be registered,
subject to customary underwriter cutbacks applicable to all holders of
registration rights.  The obligations of the Company under this
Section may be waived by any holder of any of the Securities entitled to
registration rights under this Section 11.1. The holders whose Shares and
Warrant Shares are included or required to be included in such registration
statement are granted the same rights, benefits, liquidated or other damages and
indemnification granted to other holders of securities included in such
registration statement.  Notwithstanding anything to the contrary
herein, the registration rights granted hereunder to the holders of Securities
shall not be applicable for such times as such Shares and Warrant Shares may be
sold by the holder thereof without restriction pursuant to Section 144(b)(1) of
the 1933 Act.  In no event shall the liability of any holder of
Securities or permitted successor in connection with any Shares and Warrant
Shares included in any such registration statement be greater in amount than the
dollar amount of the net proceeds actually received by such Subscriber upon the
sale of the Shares and Warrant Shares sold pursuant to such registration or such
lesser amount applicable to other holders of Securities included in such
registration statement. All expenses incurred by the Company in complying with
Section 11, including, without limitation, all registration and filing fees,
printing expenses (if required), fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or “blue sky” laws, fees of the NASD, transfer taxes, and fees of
transfer agents and registrars, are called “Registration Expenses.” All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities are called "Selling Expenses."  The Company
will pay all Registration Expenses in connection with the registration statement
under Section 11.  Selling Expenses in connection with each
registration statement under Section 11 shall be borne by the holder and will be
apportioned among such holders in proportion to the number of Shares included
therein for a holder relative to all the Securities included therein for all
selling holders, or as all holders may agree.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    11.2.           Delivery of Unlegended
Shares.

    

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

     

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

    

    (c)           The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof later than two business days after the Unlegended
Shares Delivery Date could result in economic loss to a
Subscriber.  As compensation to a Subscriber for such loss, the
Company agrees to pay late payment fees (as liquidated damages and not as a
penalty) to the Subscriber for late delivery of Unlegended Shares in the amount
of $100 per business day after the Delivery Date for each $10,000 of purchase
price of the Unlegended Shares subject to the delivery default.  If
during any 360 day period, the Company fails to deliver Unlegended Shares as
required by this Section 11.2 for an aggregate of thirty (30) days, then each
Subscriber or assignee holding Securities subject to such default may, at its
option, require the Company to redeem all or any portion of the Shares, Warrant
Shares or other Common Stock subject to such default at a price per share, at
the Subscriber’s election, equal to the greater of (i) 120%, or (ii) a fraction
in which the numerator is the highest closing price of such Common Stock during
the aforedescribed thirty day period and the denominator of which is the Warrant
exercise price during such thirty day period, multiplied by the price paid by
Subscriber for such Common Stock (“Unlegended Redemption
Amount”).  The Company shall pay any payments incurred under
this Section in immediately available funds upon demand.

    

    (d)           
In addition to any other rights available to a Subscriber, if the Company fails
to deliver to a Subscriber Unlegended Shares as required pursuant to this
Agreement, within seven (7) business days after the Unlegended Shares Delivery
Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
open market transaction or otherwise) shares of common stock to deliver in
satisfaction of a sale by such Subscriber of the shares of Common Stock which
the Subscriber was entitled to receive from the Company (a "Buy-In"), then the Company
shall pay in cash to the Subscriber (in addition to any remedies available to or
elected by the Subscriber) the amount by which (A) the Subscriber's total
purchase price (including brokerage commissions, if any) for the shares of
common stock so purchased exceeds (B) the aggregate purchase price of the shares
of Common Stock delivered to the Company for reissuance as Unlegended
Shares together with interest thereon at a rate of 15% per annum accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty).  For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the
Buy-In.

    

    (e)           In
the event a Subscriber shall request delivery of Unlegended Shares as described
in Section 11.2 and the Company is required to deliver such Unlegended Shares
pursuant to Section 11.2, the Company may not refuse to deliver Unlegended
Shares based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law, or for
any other reason, unless, an injunction or temporary restraining order from a
court, on notice, restraining and or enjoining delivery of such Unlegended
Shares shall have been sought and obtained by the Company or at the Company’s
request or with the Company’s assistance, and the Company has posted a surety
bond for the benefit of such Subscriber in the amount of 120% of the amount of
the aggregate purchase price of the Common Stock which are subject to the
injunction or temporary restraining order, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber’s favor.

    

    11.3.           In
the event commencing six months after the Closing Date and ending twenty-four
months thereafter, the Subscriber is not permitted to resell any of the Shares
or Warrant Shares, without any restrictive legend or if such sales are permitted
but subject to volume limitations or further restrictions on resale as a result
of the unavailability to non-affiliate Subscribers of Rule 144(b)(1)(i) under
the 1933 Act or any successor rule (a “144 Default”), for any reason
except for Subscriber’s status as an Affiliate or “control person” of the
Company or change in current applicable securities laws, then the Company shall
pay such Subscriber as liquidated damages and not as a penalty an amount equal
to two percent (2%) for each thirty days (or such lesser pro-rata amount for any
period less than thirty days) thereafter of the purchase price of the Shares or
Warrant Shares by the Subscriber during the pendency of the 144
Default.  Liquidated Damages shall not be payable pursuant to this
Section 11.3 in connection with Shares for such times as such Shares may be sold
by the holder thereof without volume or other restrictions  pursuant
to Section 144(b)(1)(i) of the 1933 Act.

    

    12.           (a)           Right of
Participation.  For so long as any amount remains outstanding
on the Note, the Subscriber shall be given not less than ten business days prior
written notice of any proposed sale by the Company of its Common Stock or other
securities or equity linked debt obligations, except in connection with (i) full
or partial consideration in connection with a strategic merger, acquisition,
consolidation or purchase of substantially all of the securities or assets of
corporation or other entity which holders of such securities or debt are not at
any time granted registration rights, (ii) the Company’s issuance of securities
in connection with strategic license agreements and other partnering
arrangements so long as such issuances are not for the purpose of raising
capital and which holders of such securities or debt are not at any time granted
registration rights, (iii) the Company’s issuance of Common Stock or the
issuances or grants of options to purchase Common Stock to employees, directors,
and consultants, pursuant to plans described on Schedule 5(d) as such plans
are constituted on the Closing Date and provided such issuances are not at a per
share price lower than the Conversion Price, (iv) securities upon the exercise
or exchange of or conversion of any securities exercisable or exchangeable for
or convertible into shares of Common Stock issued and outstanding on the date of
this Agreement and described on Schedule 5(d), and (v) as a
result of the exercise of Warrants or conversion of Notes which are granted or
issued pursuant to this Agreement (collectively the foregoing (i) through (v)
are “Excepted
Issuances”).  The Subscriber who exercise its rights pursuant
to this Section 12(a) shall have the right during the ten business days
following receipt of the notice to purchase in cash and/or by using the
outstanding balance due in connection with the Note, including principal,
interest, liquidated damages and any other amount then owing to such Subscriber
by the Company, in the aggregate, all of such offered Common Stock, debt or
other securities in accordance with the terms and conditions set forth in the
notice of sale.  In the event such terms and conditions are modified
during the notice period, Subscriber shall be given prompt notice of such
modification and shall have the right during the ten business days following the
notice of modification to exercise the right to participate in such
offering.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)           Favored Nations
Provision.   Other than in connection with the Excepted
Issuances, if at any time the Notes or Warrants are outstanding, the Company
shall agree to or issue (the “Lower Price Issuance”) any
Common Stock or securities convertible into or exercisable for shares of Common
Stock (or modify any of the foregoing which may be outstanding) to any person or
entity at a price per share or conversion or exercise price per share which
shall be less than the Conversion Price in effect at such time, or if less than
the Warrant exercise price in effect at such time, without the consent of the
Subscriber, then the Company shall issue, for each such occasion, additional
shares of Common Stock to the Subscriber respecting those Conversion Shares and
Warrants Shares that are then still owned by the Subscriber at the time of the
Lower Price Issuance so that the average per share purchase price of the Shares
or Warrant Shares purchased and owned by the Subscriber on the date of the Lower
Price Issuance is equal to such other lower price per share and the Conversion
Price and Warrant exercise price shall automatically be reduced to such other
lower price.  The average Purchase Price of the Conversion Shares and
average exercise price in relation to the Warrant Shares shall be calculated
separately for the Shares and Warrant Shares.  The delivery to
Subscriber of the additional shares of Common Stock shall be not later than the
closing date of the transaction giving rise to the requirement to issue
additional shares of Common Stock.  Subscriber is granted the
registration rights described in Section 11 hereof in connection with such
additional shares of Common Stock.  For purposes of the issuance and
adjustment described in this paragraph, the issuance of any security of the
Company carrying the right to convert such security into shares of Common Stock
or of any warrant, right or option to purchase Common Stock shall result in the
issuance of the additional shares of Common Stock upon the sooner of the
agreement to or actual issuance of such convertible security, warrant, right or
option and again at any time upon any subsequent issuances of shares of Common
Stock upon exercise of such conversion or purchase rights if such issuance is at
a price lower than the Conversion Price or Warrant exercise price in effect upon
such issuance.  Common Stock issued or issuable by the Company for no
consideration or for consideration that cannot be determined at the time of
issue will be deemed issuable or to have been issued for $0.0001 per share of
Common Stock.  The rights of Subscriber set forth in this Section 12
are in addition to any other rights the Subscriber has pursuant to this
Agreement, the Note, any Transaction Document, and any other agreement referred
to or entered into in connection herewith or to which Subscriber and Company are
parties.

     

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

     

    13.           Miscellaneous.

     

    (a)           Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: Innovative Food
Holdings, Inc., 1923 Trade Center Way, Suite #1, Naples, FL 34109, Attn: Sam
Klepfish, CEO, facsimile: (239) 596-0204, with a copy by facsimile only to:
Irving Rothstein, Esq., Feder, Kaszovitz, Isaacson, Weber, Skala, Bass &
Rhine LLP, 750 Lexington Avenue, New York, NY 10022-1200, facsimile: (212)
888-7776, and (ii) if to the Subscriber, to: the address and fax number
indicated on the signature page hereto, with an additional copy by facsimile
only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York,
New York 10176, facsimile: (212) 697-3575.

     

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

     

    (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
signature and delivered by electronic transmission.

     

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

     

    (e)           Specific Enforcement,
Consent to Jurisdiction.  The Company and Subscriber
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.  It is accordingly agreed
that the parties shall be entitled to seek an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which any of them may be entitled by law or
equity.  Subject to Section 13(d) hereof, the Company hereby
irrevocably waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
New York of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper.  Nothing in this Section shall affect or limit any right to
serve process in any other manner permitted by law.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (f)           Damages.   In
the event the Subscriber is entitled to receive any liquidated damages pursuant
to the Transactions Documents, the Subscriber may elect to receive the greater
of actual damages or such liquidated damages.

     

    (g)           Maximum
Payments.   Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law.  In the event that
the rate of interest or dividends required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Company to the Subscriber and thus
refunded to the Company.

     

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

     

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

     

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

     

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

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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.

    

    INNOVATIVE
FOOD HOLDINGS, INC.

    a Florida
corporation

    

    

    By:_________________________________

    Name:

    Title:

    

    Dated:
December ___, 2008

    

    

    

    
      
        
          
            
              	SUBSCRIBER	 	
                      PURCHASE
      PRICE AND NOTE PRINCIPAL

                    	 
	
                      ALPHA
      CAPITAL ANSTALT

                      Pradafant
      7

                      9490
      Furstentums

                      Vaduz,
      Lichtenstein

                      Fax:
      011-42-32323196

                       

                       

                      _________________________________________________________

                      (Signature)

                      By:

                       

                    	 	$	200,000.00ex10-4.htm

    Exhibit 10.4

     

    AMENDMENT, WAIVER AND
CONSENT

    

    This
Amendment, Waiver and Consent Agreement made effective January 1, 2009
(“Waiver”) among Innovative Food Holdings, Inc., a Florida corporation (the
“Company”), and the signators hereto who are Subscribers (“Subscribers”) under
certain Subscription Agreements with the Company dated February 24, 2005 and
August 25, 2005 (collectively, “Subscription Agreements”) as amended to include
certain Promissory Notes dated February 7, 2006 (Alpha Capital Anstalt -
$120,000, Whalehaven Capital Fund Limited - $30,000) and May 19, 2006 (Alpha
Capital Anstalt - $10,000), respectively, as amended, and related documents
(“Transaction Documents”).

    

    WHEREAS, the Company is currently
contemplating an additional financing of an aggregate $200,000 (“New
financing”).

    

    NOW THEREFORE, in consideration of the
promises and mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby consent and agree as follows:

    

    1.           All
capitalized terms herein shall have the meanings ascribed to them in the
Transaction Documents (as defined in the Subscription Agreements).

    

    2.           Provided
the New Financing takes place, pursuant to the terms and conditions of the
Transaction Documents, the undersigned waive the rights granted to them pursuant
to Section 12(a) – Right of First Refusal, Section 12(b) – Offering
Restrictions, and Section 12(c) – Favored Nation Provision, of the Subscription
Agreement only to the extent such rights relate to the New Financing, Section
3.4(b)D of the Notes and Section 3.4 of the Warrants.

    

    3.           The
undersigned consent to the amendment of the Security and Pledge Agreements and
Guarantys to include the Subscribers to the New Financing as parties thereto to
share in the security interest in the Collateral pari passu with the undersigned
based upon the principal amount of the Notes owed to the undersigned and to the
Subscribers in the New Financing and authorize the Collateral Agent to make
additional filings at the discretion of the Collateral Agent to memorialize the
security interest to be granted to the Subscribers to the New
Financing.

    

    4.           Annexed
hereto is Amended Schedule A to the Security and Pledge Agreements and
Collateral Agent Agreement.

    

    5.           The
Notes are amended as follows:  The Maturity Date shall be January 1,
2010 except that the Maturity Date of the Notes issued to Alpha Capital Anstalt
and Whalehaven Capital Fund Limited on August 25, 2005 in the amounts of
$120,000 and $30,000, respectively, shall be April 16, 2009.

    

    6.           Section
1.3 of the Alpha Capital Anstalt and Whalehaven Capital Fund Limited August 25,
2005 Notes described in Section 5 above shall be deleted in its entirety and
replaced with the following:

    

    “1.3.           Default Interest
Rate.   Following the occurrence and during the
continuance of an Event of Default, which, if susceptible to cure is not cured
within fifteen (15) days, otherwise then from the first date of such occurrence,
the annual interest rate on this Note shall (subject to Section 6.7)
automatically be increased to fifteen percent (15%), and all outstanding
obligations under this Note, including unpaid interest, shall continue to accrue
interest from the date of such Event of Default at such interest rate applicable
to such obligations until such Event of Default is cured or
waived.  The foregoing notwithstanding, on the Maturity Date, interest
payable on this Note shall continue to accrue on the outstanding Principal
Amount at the Interest Rate (8%), unless Holder notifies Borrower in writing
that an Event of Default has occurred.”

    

    7.           The
Company acknowledges that the Liquidated Damages as described in Section 11.4 of
the Subscription Agreement have accrued and are due and owing to
Subscribers.  The Lenders agree to accept as full satisfaction of all
sums due as Liquidated Damages, Convertible Notes convertible into the Company’s
Common Stock at a Conversion Price equal to $.005 in the principal amounts as
more fully described on Schedule A hereto.  The Company undertakes to
deliver these Notes to Subscribers within three days of execution of this
Agreement.

    

    8.           Upon
delivery of the Notes described in Section 6 above, Subscribers waive all future
Liquidated Damages that may accrue, if any.

    

    9.           Although
the parties acknowledge that the Notes are in default, upon full satisfaction of
the Company’s required deliveries herein, the Subscribers consent and agree that
the Notes will no longer be in default.

    

    10.           Subscribers
do not waive any interest due and owing on the Notes including but not limited
to the interest due and owing at the Default Interest Rate.  The
foregoing notwithstanding, Subscribers agree that commencing on the date of this
Agreement, interest will cease to accrue at the Default Interest Rate unless and
until such time an Event of Default occurs, at which time, interest will again
begin to accrue at the Default Interest Rate.

    

    11.           All
other terms of the Transaction Documents shall remain unamended and in full
force and effect.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    IN WITNESS WHEREOF, the parties hereby
execute this Amendment as of the date first written above.

    

    INNOVATIVE FOOD HOLDINGS INC.

    

    

    

    

    By:
_______________________________________

    

    

    

    “SUBSCRIBERS”

    

    

    

    

    _________________________________________                             ________________________________________

    ALPHA
CAPITAL
ANSTALT                                                                       WHALEHAVEN
CAPITAL FUND LIMITED

    

    

    

    _________________________________________                              ________________________________________

    ASHER
BRAND                                                                                           
    MOMONA CAPITAL

    

    

    

    

    _________________________________________

    LANE
VENTURES, INC.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
A

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  	SUBSCRIBERS	 	
                                          CONVERTIBLE
      NOTES – LIQUIDATED DAMAGES

                                        	 
	
                                          ALPHA
      CAPITAL ANSTALT

                                          Pradafant
      7

                                          9490
      Furstentums

                                          Vaduz,
      Lichtenstein

                                          Fax:
      011-42-32323196

                                        	 	$	230,000.00	 
	 	 	 	 	 
	
                                          WHALEHAVEN
      CAPITAL FUND LIMITED

                                          560
      Sylvan Ave

                                          Englewood
      Cliffs NJ 07632

                                          (201)
      408-5123

                                        	 	$	38,000.00	 
	 	 	 	 	 
	
                                          ASHER
      BRAND

                                          30
      Olympia Lane

                                          Monsey,
      New York 10952

                                          Fax:
      (212) 586-8244

                                        	 	$	25,310.00	 
	 	 	 	 	 
	
                                          MOMONA
      CAPITAL

                                          3
      Martha Road

                                          Monsey,
      New York 10952

                                          Fax:
      (212) 586-8244

                                        	 	$	25,310.00	 
	 	 	 	 	 
	
                                          LANE
      VENTURES, INC.

                                          120
      Park Street

                                          Woodmere,
      New York 11598

                                          Fax:
      (212) 586-8244

                                        	 	$	10,124.00

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