UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K
 

 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  July 15, 2009

INVO BIOSCIENCE, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
 
333-147330
 
20-4036208
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
100 Cummings Center, Suite 421E,  Beverly, MA  
01915
(Address of principal executive offices)
(Zip Code)
 
(978) 878-9505
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
     
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
     
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
     
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
   
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 FR 240.13e-4(c))
 
 

 
Item 1.01.
Entry into a Material Definitive Agreement.
 
The information set forth under Item 2.03 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 1.01.
 
Item 2.03.
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
 
On June 5, 2009, INVO Bioscience, Inc. (“we,” the “Company” or “IVOB”) commenced a private placement offering of convertible promissory notes (the “Notes”) for an aggregate principal amount of up to $500,000 (the “Bridge Offering”).  On July 15, 2009, IVOB consummated the initial closing of the Bridge Offering in the total principal amount of $100,000 to one accredited investor (the “Initial Investor”). IVOB expects to consummate additional closings for the Bridge Offering over the next 60 to 90 days, although no assurances can be made that the remaining amount of the Bridge Offering will be consummated.
 
Each Note bears interest, payable in shares of common stock, at a rate equal to 9-12% per annum from the date of issuance of the Note until paid in full on the Maturity Date (defined below). The Initial Investor’s Note has a 12% interest rate. All outstanding principal and accrued interest under each Note is payable on the first to occur of (i) one year following the original issue date (as defined below), or (ii) the follow-on financing of at least $2,500,000 (the “Maturity Date”). IVOB can pre-pay the Note at any time without penalty or premium. The Notes are secured and carry detachable Common Stock purchase warrants.  The Notes rank junior to the Company’s SBA $50,000 Century Bank Line of Credit Loan and shall rank senior in all respects to all other existing and future indebtedness of the Company.
 
The Notes are convertible into IVOB Common Stock (“Common Stock”) at a conversion price of $0.10 per common stock share. The Investor has the option to convert all or any portion of the principal amount of the Note outstanding at any time, together with any accrued and unpaid interest hereunder into shares of Common Stock at the conversion price. Additionally under the Purchase Agreement (the “Purchase Agreement”), effective as of July 15, 2009, by and among IVOB and the Initial Investor, as additional consideration for the investment in the Notes, IVOB issued a warrant to  purchase the number of shares of Common Stock equal to 100% of the quotient of the principal amount of the Note issued to such Investor divided by the Conversion Price, as set forth in such Note, which the Conversion (of the note) Price initially shall equal $0.10 per share and the exercise price of the Warrants shall equal $0.20 per share.  The Purchase Agreement also includes certain negative covenants of the Company, including, without limitation, limitations on:  incurring additional indebtedness and liens, transactions with affiliates and payment of dividends.

The Company engaged Hallmark Investments, Inc. (“Hallmark”) to act as its placement agent on an exclusive basis in connection with this private placement.  Hallmark, if successful in assisting IVOB in securing the Bridge Offering will be compensated the following placement fee; a cash payment equal to ten percent (10%) of the gross proceeds raised and five (5) year Common Stock Purchase Warrants equal to ten percent (10%) of the number of shares of common stock underlying any debt placed by Hallmark, as more fully described in the Offering Document. The Company also agreed to pay the expenses of Hallmark. The Common Stock Purchase Warrants will have features identical to the Warrants issued to the investors.

 The description above summarizes the material terms of the Note, Purchase Agreement, Warrant Purchase Agreement and Hallmark Investments Agreement. The description above is qualified in its entirety by the text of the forms of the Agreements filed as exhibits to this Current Report on Form 8-K as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated into this Current Report on Form 8-K by reference.
 
The securities sold in this transaction have not been registered under the Securities Act of 1933, as amended (the “Act”) and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Act. IVOB believes that the issuance of the foregoing securities was exempt from registration under Section 4(2) of the Act as transactions not involving a public offering.  The facts relied upon to claim the exemption include: (i) the purchaser represented that he purchased shares from the Company for investment and not with a view to distribution to the public; (ii) the certificate issued for unregistered securities contains a legend stating that the securities have not been registered under the Securities Act and setting forth the restrictions on the transferability and the sale of the securities; (iii) the purchaser represented that he is an accredited investor and sophisticated and is familiar with our business activities; and (iv) the purchaser was given full and complete access to any corporate information requested by them.
 
Item 3.02.
Unregistered Sales of Equity Securities.
 
The information set forth under Item 2.03 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 3.02.
 
Item 9.01.
Financial Statements and Exhibits
 
(d) Exhibits
 
10.1
 
10.2
 
10.3
 
10.4
 
 

 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
INVO Bioscience, Inc.
 
       
Date: July 17, 2009 
By:
/s/ Robert Bowdring         
 
   
Robert Bowdring
 
   
Chief Financial Officer
 
       
 
 
 
 
 
 
Exhibit Index
 
10.1
   
10.2
   
10.3
   
10.4
   
 
 
 

 
 

Exhibit 10.1
 
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
 
 
 No. HM -1 
 Principal Amount       $ 100,000
 
  Original Issue Date:  July __, 2009
 
 
INVO BIOSCIENCE, INC.
 
12% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
 
FOR VALUE RECEIVED, the Company promises to pay to the order of ______or its registered assigns (the “Investor” ), in United States Dollars, the principal sum of  $100,000, on the first to occur of (i) one (1) year following the Original Issue Date (as defined below), or (ii) the follow on financing of at least $2,500,000 (as defined below), (in each case, the “Maturity Date” ), and to pay interest to the Investor on the principal amount of this Note outstanding in accordance with the provisions hereof.  All holders of Notes are referred to collectively, as the “Investors.”   The Company shall have the right to prepay this Note, in part or in whole, at any time and from time to time, without any prepayment penalty or other fee.  In the event that the Maturity Date occurs on a date that is not a Business Day (as defined below), then all payments due on such date shall be payable on the next succeeding Business Day.
 
So long as this Note remains outstanding, it is subject to the following additional provisions:
 
1.   Definitions .                                In addition to the terms defined elsewhere in this Note: (a) capitalized terms that are used but not otherwise defined herein have the meanings given to such terms in the Purchase Agreement, dated as of July __, 2009, among the Company and the Investors identified therein (the “Purchase Agreement” ), and (b) the following terms have the meanings indicated below:
 
“Bankruptcy Event” means any of the following events:  (a) the Company commences a proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company; (b) there is commenced against the Company any such case or proceeding described in the foregoing clause (a) that is not dismissed within sixty (60) days after commencement; (c) by an order of a court of competent jurisdiction, the Company is adjudicated insolvent or bankrupt; (d) a custodian or receiver has been appointed for all or any substantial part of its to the Company’s property, and such custodian or receiver is not discharged or stayed within sixty (60) days from the appointment date thereof; (e) under applicable law, the Company makes a general assignment for the benefit of creditors; (f) the Company calls in writing a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Company, by any act or failure to act, expressly in writing indicates its consent to or approval of any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
 
“Business Day” means any day except Saturday, Sunday and any day that is a federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
 
     “Common Stock” means the common stock of the Company, $0.0001 par value per share, and any securities into which such common stock may hereafter be reclassified.
 
“Conversion Date” means the date a Conversion Notice together with the Conversion Schedule is actually received by the Company in proper and completed form in accordance with Section 6(a) of the Note.
 
“Conversion Notice” means a written notice in the form attached hereto as Exhibit A .
 
“Conversion Price” means $.10 per share.
 
“Default” means any event or condition which constitutes an Event of Default or that upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
 

     
   “Event of Default” means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
 
(i)   any default in the payment, when the same becomes due and payable, of principal under or interest in respect of this Note;
 
(ii)   the Company experiences, an event of default (which has not been cured in accordance with the terms thereof and is continuing) and acceleration of payment obligations under, any currently existing or hereafter arising material agreement, debenture (other than a Note) or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any Indebtedness or under any long term leasing or factoring arrangement, if the aggregate amount of the obligations and liabilities of the Company under the Indebtedness in such default exceeds  $100,000 (each of the foregoing, a “Material Debt Agreement” );
 
(iii)           the occurrence of a Bankruptcy Event; or
 
(iv)           any breach of any material covenant, agreement or representation and/or warranty in any of the Transaction Documents (as described in the Purchase Agreement)
 
“Follow-On-Financing” shall mean the offer and sale of securities of the Company.
 
“Fundamental Transaction” means the occurrence of any of the following in one or a series of related transactions: (i) the Company effects any merger or consolidation of the Company with or into another Person (other than a reincorporation and/or similar transaction), (ii) the Company effects any sale of all or substantially all its assets, (it being understood that a sale (but not a license (unless the license results in the Company business and/or revenues resulting substantially from licensing revenues)) of any patents related to the Company’s technology shall constitute a Fundamental Transaction) .or (iii) any Person acquires at least 50.01% of the issued and outstanding voting stock of the Company.
 
“Indebtedness” of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, Notes, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services (other than unsecured accounts payable incurred in the ordinary course of business and no more than ninety (90) days past the date of the invoice therefor), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all obligations of such Person in respect of interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements that exceed amounts necessary to hedge the Company’s cross-currency exposure, (h) all obligations of such Person as an account party in respect of letters of credit and bankers’ acceptances, and (i) the Indebtedness of any partnership in which such Person is a general partner.
 
“Original Issue Date” has the meaning set forth on the face of this Note.
 
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
 
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.
 
“Underlying Shares” means the Common Stock issuable upon conversion of the Notes.
 
“Warrants” means the Common Stock purchase warrants issued pursuant to the Purchase Agreement.
 
“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
 

 
2.   Interest .
 
(a)           The Company shall pay interest in cash in United States dollars to the Investor on the aggregate unconverted and then outstanding principal amount of this Note at the rate of twelve percent (12%) per annum.  All interest shall accrue and be payable on the maturity date, the interest will be payable in common stock shares.  Interest shall be compounding and shall be calculated on the basis of a 360-day year for the actual number of days elapsed and shall accrue daily commencing on the Original Issue Date.
 
(b)            Maximum Rate . In the event that it is determined that, under the laws relating to usury applicable to the Company or the indebtedness evidenced by this Note (the “Applicable Usury Laws” ), the interest charges and fees payable by the Company in connection herewith or in connection with any other document or instrument executed and delivered in connection herewith cause the effective interest rate applicable to the indebtedness evidenced by this Note to exceed the maximum rate allowed by law (the “Maximum Rate” ), then such interest shall be recalculated for the period in question and any excess over the Maximum Rate paid with respect to such period shall be credited, without further agreement or notice, to the principal amount outstanding hereunder to reduce said balance by such amount with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Investor had agreed to accept such extra payment(s) as a premium-free prepayment. All such deemed prepayments shall be applied to the principal balance payable at maturity. In no event shall any agreed-to or actual exaction as consideration for this Note exceed the limits imposed or provided by Applicable Usury Laws in the jurisdiction in which the Company is resident applicable to the use or detention of money or to forbearance in seeking its collection in the jurisdiction in which the Company is resident and any funds received in excess of such limits shall be so applied as provided herein or held in trust.
 
3.   Registration of Notes .  The Company shall register the Note upon records maintained by the Company for that purpose (the “Note Register” ) in the name of each record Investor thereof from time to time. The Company may deem and treat the registered Investor of this Note as the absolute owner hereof for the purpose of any conversion hereof or any payment of interest hereon, and for all other purposes, absent actual notice to the contrary from such record Investor.
 
4.   Registration of Transfers and Exchanges .  The Company shall register the transfer of any portion of this Note in the Note Register upon surrender of this Note to the Company at its address for notice set forth herein. Upon any such registration or transfer, a new Note, in substantially the form of this Note (any such new note, a “New Note” ), evidencing the portion of this Note so transferred shall be issued to the transferee and a New Note evidencing the remaining portion of this Note not so transferred, if any, shall be issued to the transferring Investor. The acceptance of the New Note by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Note.  The Company agrees that its prior consent is not required for the transfer of any portion of this Note; provided , however , that the Company shall be entitled to reasonable written assurance, including an opinion of counsel reasonably acceptable to the Company that such transfer complies with applicable federal and state securities laws.  This Note is exchangeable for an equal aggregate principal amount of Note of different authorized denominations, as requested by the Investor surrendering the same. No service charge or other fee will be imposed in connection with any such registration of exchange.
 
5.   Conversion .  All or any portion of the principal amount of this Note outstanding at any time, together with any accrued and unpaid interest hereunder, shall be convertible into shares of Common Stock at the Conversion Price, at the option of the Investor.  The Investor may effect conversions under this Section 5 by delivering to the Company a Conversion Notice together with a schedule in the form of Schedule 1 attached hereto (the “Conversion Schedule” ).  If the Investor is converting less than all of the principal amount represented by this Note, the Company shall honor such conversion and shall no later than three (3) Business Days thereafter, deliver to the Investor a Conversion Schedule indicating the principal amount which has not been converted and a new Note in the principal amount not so converted.
 
6.   Mechanics of Conversion .
 
(a)   The number of Underlying Shares issuable upon any conversion hereunder shall equal (i) the outstanding principal amount of this Note to be converted, together with any accrued but unpaid interest upon such principal amount being converted, divided by (ii) the Conversion Price in effect on the Conversion Date.
 
(b)    Conversion Price adjustment, if the Company issues new stock within twenty-four months (24) of executing this note at a price point below the conversion price as outlined in this document, then the conversion price will be automatically modified to reflect the new lower price per share.
 
(c)   The Company shall no later than ten (10) Business Days following the Conversion Date promptly issue or cause to be issued and cause to be delivered to or upon the written order of the Investor and in such name or names as the Investor may designate in the Conversion Notice, a certificate for the Underlying Shares issuable upon such conversion.  The Investor, or any Person so designated by the Investor in the Conversion Notice to receive Underlying Shares, shall be deemed to have become holder of record of such Underlying Shares as of such Conversion Date.
 
(d)   The Investor must deliver the original Note (or a lost note certificate) in order to effect a conversion hereunder.
 

 
7.   Events of Default .
 
(a)   At any time or times following the occurrence and during the continuance of an Event of Default, the Required Investors may elect to declare, by written notice to the Company (an “Event Notice” ), all or any portion of the outstanding principal amount of this Note, due and payable.
 
(b)   Subject to Section 7(a) above, in connection with any Event of Default, the Investor need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind (other than the Event Notice), and the Investor may immediately enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Any such declaration may be rescinded and annulled by the Investor at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereto.
 
8.   Ranking .  This Note ranks junior to the SBA $50,000 Century Bank Line of Credit Loan. This Note, together with all other Notes now or hereafter issued pursuant to the Transaction Documents, shall rank senior in all respects to all existing and hereafter created Indebtedness of the Company.
 
9.   Reservation of Underlying Shares .  Until the Maturity Date, commencing as of the date of the Offering, the Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Underlying Shares as required hereunder, the number of Underlying Shares which are then issuable and deliverable upon the conversion of (and otherwise in respect of) this entire Note, free from preemptive rights or any other contingent purchase rights of persons other than the Investor.  Assuming due and proper conversion of this Note, the Company covenants that all Underlying Shares so issuable and deliverable shall, upon issuance in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.
 
10.   Certain Adjustments .  The Conversion Price is subject to adjustment from time to time as set forth in this Section 10 .
 
(a)   Stock Dividends and Splits .  If the Company, at any time following the Offering and while this Note is outstanding: (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.
 
(b)   Pro Rata Distributions .  If the Company, at any time following the Offering and while this Note is outstanding, distributes to all holders of Common Stock any security, asset(s) or other property of the Company (in each case, “Distributed Property” ), then upon any conversion of this Note, the Investor shall be entitled to receive, in addition to the Underlying Shares otherwise issuable upon such conversion, the Distributed Property that the Investor would have been entitled to receive in respect of such number of Underlying Shares had the Investor been the record holder of such Underlying Shares immediately prior to the record date for any distribution of Distributed Property.  Notwithstanding the foregoing, this Section 10(b) shall not apply to any distribution of rights or securities in respect of adoption by the Company of a shareholder rights plan, which events shall be covered by Section 10(a) .
 
(c)   Reclassifications; Share Exchanges .  At any time following the Offering and while this Note is outstanding, in case of any reclassification of the Common Stock, or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property (other than compulsory share exchanges which constitute Change of Control transactions), the Investors of the Notes then outstanding shall have the right thereafter to convert such shares only into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such reclassification or share exchange, and the Investors shall be entitled upon such event to receive such amount of securities, cash or property as a holder of the number of shares of Common Stock of the Company into which such shares of Notes could have been converted immediately prior to such reclassification or share exchange would have been entitled. This provision shall similarly apply to successive reclassifications or share exchanges.
 
(d)   Calculations .  All calculations under this Section 10 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.
 
(e)   Notice of Adjustments .  Upon the occurrence of each adjustment pursuant to this Section 10, the Company at its expense will promptly compute such adjustment in accordance with the terms hereof and prepare a certificate describing in reasonable detail such adjustment and the transactions giving rise thereto, including all facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Investor.
 
(f)   Notice of Corporate Events .  If, at any time while this Note is outstanding, the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, (ii) authorizes and publicly approves, or enters into any agreement contemplating or solicits shareholder approval for any Fundamental Transaction, or, (iii) issues Additional Stock (hereafter defined) (iii) publicly authorizes in writing the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Investor a notice describing the material terms and conditions of such transaction, at least 20 calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.
 

 
11.   Fractional Shares .  The Company shall not be required to issue or cause to be issued fractional Underlying Shares on conversion of this Note. If any fraction of an Underlying Share would, except for the provisions of this Section, be issuable upon conversion of this Note or payment of interest hereon, the number of Underlying Shares to be issued will be rounded to the nearest whole share.
 
12.   Notices .  Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (New York City time) on a Business Day, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Company, to100 Cummings Center, Suite 421E, Beverly, MA 01915, facsimile:  978-878-9505, attention: Chief Financial Officer, (ii) if to the Placement Agent, to Hallmark Investments, Inc. 420 Lexington Avenue, 8 th Floor, New York, NY  10170, facsimile: (212) 661-2055 and (iii) if to the Investor, to the address or facsimile number appearing on the Company's shareholder records or such other address or facsimile number as the Investor may provide to the Company in accordance with this Section.
 
13.   Miscellaneous .
 
(a)   This Note shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns that are permitted pursuant to this Note.
 
(b)   Subject to Section 13(a) , above, nothing in this Note shall be construed to give to any person or corporation other than the Company and the Investor any legal or equitable right, remedy or cause under this Note. This Note shall inure to the sole and exclusive benefit of the Company and the Investor.
 
(c)   All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by, construed and enforced solely and exclusively in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all Proceedings shall be commenced exclusively in the state and federal courts sitting in the County, City and State of New York, (the “New York Courts” ).  Each party hereto hereby irrevocably agrees and submits to the exclusive jurisdiction of the New York Courts for any Proceeding, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any New York Court or that a New York Court is an inconvenient forum for such Proceeding.  Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding 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 Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal Proceeding.  The prevailing party in a Proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.
 
(d)   The headings herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
 
(e)   In case any one or more of the provisions of this Note shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Note shall not in any way be affected or impaired thereby.
 
(f)   No provision of this Note may be waived or amended except (i) in accordance with the requirements set forth in the Purchase Agreement, and (ii) in a written instrument signed, in the case of an amendment, by the Company and the Investor or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.
 
(g)   To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or Proceeding that may be brought by any Investor in order to enforce any right or remedy under the Notes. Notwithstanding any provision to the contrary contained in the Notes, it is expressly agreed and provided that the total liability of the Company under the Notes for payments in the nature of interest shall not exceed the Maximum Rate, and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Notes exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Notes is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate of interest applicable to the Notes from the effective date forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Investor with respect to indebtedness evidenced by the Notes, such excess shall be applied by such Investor to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Investor’s election.
 
(h)           All rights and benefits, including, but not limited to, the right to receive notice of certain events set forth in the Purchase Agreement, are expressly incorporated by reference into this Note as if made directly in this Note.
 

    
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
 
INVO BIOSCIENCE, INC
 
By:           
 
           Name: Kathleen T. Karloff
 
           Title: Chief Executive Officer
 
Name of Investor:
 
Principal Amount of This Note:  $100,000
 
 
 
 

 
EXHIBIT A
 
CONVERSION NOTICE
 
 (To be Executed by the Registered Investor
 
in order to convert Notes)
 
The undersigned hereby elects to convert the principal amount of Note indicated below, into shares of Common Stock of INVO Bioscience, Inc., as of the date written below. If shares are to be issued in the name of a Person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Investor for any conversion, except for such transfer taxes, if any. All terms used in this notice shall have the meanings set forth in the Note.
 

 
Conversion calculations:
 
Date to Effect Conversion
 
 
 
 
Principal amount of Note owned prior to conversion
 
 
 
 
 
Principal amount of Note to be Converted
 

 
 
 
 
 
Aggregate amount of Interest to be Converted
 
 
 
 
 
Principal amount of Note remaining after Conversion
 

 
 
 
 
Number of shares of Common Stock to be Issued
 
 
$0.10 per Common Stock share
 
 
Applicable Conversion Price
 
 
 
 
 
Name of Investor
 
 
By:
   
 
 
Name:
 
 
Title:
 


 
Schedule 1
 
INVO Bioscience, Inc.
 
10% Senior Secured Convertible Promissory Notes
 
CONVERSION SCHEDULE
 
This Conversion Schedule reflects conversions made under the above referenced Notes.
 
Dated:

Date of Conversion
Amount of Conversion (Including Interest)
Aggregate Principal Amount Remaining Subsequent to Conversion
Applicable Conversion Price
     
$0.10
       
       
       
       
       
       
       
       
       
       
       
       
       
       

 
 
 
 
 
 


EXHIBIT 10.2
 
PURCHASE AGREEMENT
 
This Purchase Agreement (this “Agreement” ) is dated as of July __, 2009, by and among INVO Bioscience, Inc., a Nevada corporation (the “Company” ), and the investors identified on the signature pages hereto (each an “Investor” and, collectively, the “Investors” ).
 
WHEREAS , subject to the terms and conditions set forth in this Agreement, the Company desires to borrow certain sums from each of the Investors and, in consideration thereof issue certain convertible notes and warrants to each of the Investors, and each Investor, severally and not jointly, desires to make a loan to the Company and accept such notes and warrants from the Company, all pursuant to the terms set forth herein.
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows:
 
ARTICLE I.
DEFINITIONS
 
Definitions .  In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1:
 
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144.
 
“Bankruptcy Event” means any of the following events:  (a) the Company  commences a proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company; (b) there is commenced against the Company any such case or proceeding described in the foregoing clause (a) that is not dismissed within sixty (60) days after commencement; (c) by an order of a court of competent jurisdiction, the Company is adjudicated insolvent or bankrupt; (d) a custodian or receiver has been appointed for all or any substantial part of its to the Company’s property, and such custodian or receiver is not discharged or stayed within sixty (60) days from the appointment date thereof; (e) under applicable law, the Company makes a general assignment for the benefit of creditors; (f) the Company calls in writing a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Company, by any act or failure to act, expressly in writing indicates its consent to or approval of any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
 
 “Business Day” means any day except Saturday, Sunday and any day that is a federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
 
“Closing” means each closing of the purchase and sale of Notes and Warrants contemplated by Section 2.1 .
 
“Closing Date” means the Business Day immediately following the date on which all of the conditions set forth in Section 2.1(d) and Section 2.1(e) have been satisfied for a Closing, or such other date as the parties may agree.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, $0.001 par value per share, and any securities into which such common stock may hereafter be reclassified.
 
 “Common Stock Equivalents” means any securities of the Company which entitle the holder thereof to acquire Common Stock at any time, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.
 
“Contemplated Transactions” means the transactions contemplated by this Agreement and the other Transaction Documents.
 

 
“Contingent Liability” means, as to any Person, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing or agreeing to pay or become responsible for any Debt or obligation of any other Person in any manner, whether directly or indirectly, including without limitation any obligation of such Person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt, (b) to purchase property or services for the purpose of assuring the owner of such Debt of its payment, or (c) to maintain the solvency, working capital, equity, cash flow, fixed charge or other coverage ratio, or any other financial condition of the primary obligor so as to enable the primary obligor to pay any Debt or to comply with any agreement relating to any Debt or obligation.
 
“Debt” of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments issued by such Person, (iii) all obligations of such Person as lessee which (y) are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback transactions, (iv) all reimbursement obligations of such Person in respect of letters of credit or other similar instruments, (v) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person and (vi) all Debt of others guaranteed by such Person.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“GAAP” means U.S. generally accepted accounting principles.
 
“Investment Amount” means, with respect to each Investor, the investment amount indicated below such Investor’s signature page to this Agreement, which investment amount shall be at least $50,000 (unless reduced in the sole discretion of the Company) and shall be in increments of $50,000 (unless reduced in the sole discretion of the Company).
 
“Lien” means any lien, charge, encumbrance, security interest, right of first refusal or other restrictions of any kind.
 
 “Material Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company or (iii) a material and adverse impairment to the Company's ability to timely perform its obligations under any Transaction Document; provided, however , that any effect to the extent resulting from changes in general economic, regulatory, legal or political conditions or changes generally affecting the securities or financial markets, or those generally effecting the software, payment services or stored value card industries in which the Company operates, shall not constitute, in and of itself or themselves and shall not be taken into account in determining whether there has been or will be, a Material Adverse Effect.
 
“New York Courts” means the state and federal courts sitting in the City, County and State of New York.
 
“Notes” means the 12% senior secured convertible notes issuable by the Company to the Investors at Closing in the Form of Exhibit A .
 
“Offering” means the offering contemplated by the Transaction Documents.
 
“Permitted Liens” means:  (a) Liens for taxes, assessments or governmental charges not delinquent or being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with GAAP are maintained on the books of the Company; (b) Liens arising out of deposits in connection with workers’ compensation, unemployment insurance, old age pensions or other social security or retirement benefits legislation; (c) deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds, and other obligations of like nature arising in the ordinary course of business of the Company; (d) Liens imposed by law, such as mechanics’, workers’, material mens’, carriers’ or other like liens arising in the ordinary course of business of the Company which secure the payment of obligations which are not past due or which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP are maintained on the books of the Company or the applicable Subsidiary; (e) Liens existing on the Closing Date, and specified on Schedule 3.1(z) ; (f) purchase money security interests or Liens for the purchase of fixed assets to be used in the business of the Company, securing solely the fixed assets so purchased and the proceeds thereof; (g) capitalized leases which do not violate any provision of this Agreement; (h) Liens of commercial depository institutions, arising in the ordinary course of business, constituting a statutory or common law right of setoff against amounts on deposit with such institution; and (i) rights of way, zoning restrictions, easements and similar encumbrances affecting the Company’s real property which do not materially interfere with the use of such property.
 
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
 
Placement Agent ” means Hallmark Securities, Inc.
 
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.
 

 
“Required Investors” means one or more Investors representing, collectively, greater than seventy five (75%) of the aggregate principal amount of all Notes, including any issued hereunder then outstanding.
 
“Restricted Payment” means, with respect to any Person, (a) any direct or indirect distribution, dividend or other payment on account of any equity interest in, or shares of capital stock or other securities of, such Person and (b) any management, consulting or other similar fees, or any interest thereon, payable by such Person to any Affiliate of such Person (other than the Company), or to any other Person, other than an employee, third party consultant, finder or placement agent or other third party; provided , however, that Restricted Payments shall not include any arms length consulting agreements with consultants of the Company.
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
 
“Securities” means the Notes, the Warrants and the Shares.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Shares” means the shares of Common Stock issuable upon conversion of the Notes (the Underlying Shares) and exercise of the Warrants.
 
“Transaction Documents” means this Agreement, the Notes and the Warrants.
 
“Underlying Shares” means the Common Stock issuable upon conversion of the Notes.
 
“Warrants” means the Common Stock purchase warrants, in the form of Exhibit B , issuable to each Investor at the Closing.
 

 
ARTICLE II.
PURCHASE AND SALE
 
2.1   Closings .
 
(a)   Subject to the terms and conditions set forth in this Agreement, at each Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company, the Notes and the Warrants (collectively, the “Units” ) representing such Investor’s Investment Amount.  All Closings shall take place at the offices of, Hallmark Investments, Inc. 420 Lexington Avenue, 8 th Floor, New York, NY  10170 or at such location or time as the parties may agree.
 
(b)   At each Closing, the Company shall deliver or cause to be delivered to each Investor the following (the “Company Deliverables” ):
 
(i)   Notes in the aggregate principal amount of the Investment Amount indicated below such Investor’s name on its signature page of this Agreement, registered in the name of such Investor;
 
(ii)   Warrants, registered in the name of such Investor, pursuant to which such Investor shall have the right to acquire the number of Warrant Shares of Common Stock equal to 100% of the quotient of the principal amount of the Note issued to such Investor in accordance with Section 2.1(b) (i) (without regard to any exercise restrictions contained there under) divided by the Conversion Price, as set forth in such Note, which the Conversion (of the note) Price initially shall equal $.10 per share.  For the avoidance of doubt, assuming the current Exercise Price of $.10, the Warrant Price is $.20 per share, an Investment Amount of $50,000 would result in a Warrant being issued for the purchase of up 500,000 Warrant Shares ($50,000/$0.10 Conversion price) at a warrant purchase price of $.20 per share (such price subject to adjustment as provided in the Warrant). The exercise of the associated warrants and purchase of 500,000 shares of common stock would cost $100,000;
 
(iii)   resolutions of the Company authorizing the execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the Contemplated Transactions, including, without limitation, the issuance of the Notes and the Warrants and the reservation for issuance and issuance of Shares, duly executed by the Board of Directors of the Company; and
 
(iv)   a certificate executed by a duly authorized officer of the Company certifying that (i) all representations and warranties made by the Company and information furnished by the Company in any schedules to this Agreement, are true and correct in all material respects as of the Closing Date, (ii) all covenants, agreements and obligations required by this Agreement to be performed or complied with by the Company, prior to or at the Closing, have been performed or complied with and (iii) the items referenced in Sections 2.1(d)(i) (iii) and (iv) are true and correct as of the Closing Date.
 
(c)   At each Closing, each Investor shall deliver or cause to be delivered to the Company the Investment Amount indicated below such Investor’s name on its signature page of this Agreement, in United States dollars and in immediately available funds, by wire transfer (or check) to an account designated in writing by the Company for such purpose (the “Investor Deliverables” ).
 
(d)   Conditions Precedent to the Obligations of an Investor to Purchase Notes and Warrants .  The obligation of each Investor to acquire Notes and Warrants and make loans at each Closing is subject to the satisfaction or waiver by such Investor, at or before each Closing, of each of the following conditions:
 
(i)   Representations and Warranties .  The representations and warranties of the Company contained in the Transaction Documents shall be true and correct as of the date when made and as of such Closing Date as though made on and as of such date;
 
(ii)   Performance .  The Company shall have performed, satisfied and complied with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing;
 
(iii)   Officer’s Certificate .  The officer’s certificate described in Section 2.1(b) (IV) hereof shall have been delivered;
 
(iv)   No Injunction .  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the Contemplated Transactions; and
 
(v)   Company Deliverables .  The Company shall have delivered the Company Deliverables in accordance with Section 2.1(b) .
 
(e)   Conditions Precedent to the Obligations of the Company to sell Notes and Warrants .  The obligation of the Company to sell Notes and Warrants at each Closing is subject to the satisfaction or waiver by the Company, at or before each Closing, of each of the following conditions:
 
(i)   Representations and Warranties .  The representations and warranties of each Investor contained herein shall be true and correct as of the date when made and as of the Closing Date as though made on and as of such date;
 

 
(ii)   Performance .  Each Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by such Investor at or prior to the Closing;
 
(iii)   No Injunction .  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the Contemplated Transactions; and
 
(iv)   Investors Deliverables .  Each Investor shall have delivered its Investor Deliverables in accordance with Section 2.1(c) .
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
3.1   Representations and Warranties of the Company .  The Company hereby makes the following representations and warranties to each Investor:
 
(a)           The Company is a corporation, duly organized, validly existing and in good standing under the laws of the State of New York with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation of any of the provisions of its certificate of incorporation, by-laws or other organizational or charter documents, each as amended through each closing date (the “ Internal Documents ”).   The Company is duly qualified to conduct business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not result in a Material Adverse Effect. The term “knowledge” as used herein with respect to the Company” shall mean the knowledge of the Company’s chief executive officer, Joseph Barboza, including, but not limited to, items which a reasonable person in the same situation would be aware of.  The Company does not have any subsidiaries.
 
(b)           The Company has the requisite corporate power and authority to enter into the Transaction Documents and to consummate the Contemplated Transactions and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the Contemplated Transactions have been duly authorized by all necessary action on the part of the Company and no further corporate or shareholder action is required in connection therewith. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally.
 
(c)           The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the Contemplated Transactions, do not and will not (i) conflict with or violate any provision of the Company’s Internal Documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) under any material agreement, and/or under any shareholder agreement, security agreement, credit agreement or facility or other instrument evidencing a Company debt or other securities of the Company, to which the Company is a party or of which it is an issuer (collectively, the “Material Securities Agreements” ) or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject.
 
(d)           The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or any Person in connection with the execution, delivery and performance by the Company of the Transaction Documents and the Contemplated Transactions, other than the filing with the Commission of a Form D and applicable Blue Sky filings.
 
(e)           The Company possesses all licenses, certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits would not have or reasonably be expected to result in a Material Adverse Effect (“ Material Permits ”).  The Company has not received any notice of any Proceeding relating to the revocation or modification of any Material Permit.
 
(f)           The Company owns its property and assets free and clear of all mortgages, liens, loans, pledges, security interests, claims, equitable interests, charges, and encumbrances, except such encumbrances and liens which arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in compliance in all material respects with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims, or encumbrances.
 
(g)           The Company owns, or possesses adequate rights or licenses to use all trademarks, trade names, service marks, service mark, service names, patents, patent rights, copyrights, inventions, trade secrets and other intellectual property (collectively, the IP Rights ) necessary to conduct its business as now conducted, other than any IP Rights the lack of which would not reasonably be expected to have a Material Adverse Effect.  The Company does not have any knowledge of any infringement by the Company of any IP Rights of others, and no claim, action or proceeding has been made or brought against, or to the Company's knowledge, has been threatened against, the Company regarding any IP Rights, except where such infringement, claim, action or proceeding would not reasonably be expected to have either individually or in the aggregate a Material Adverse Effect. The Company is not aware that any of its employees, officers, or consultants are obligated under any contract (including licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would interfere with the use of such employee’s, officer’s, or consultant’s commercially reasonable efforts to promote the interests of the Company or that would conflict with the Company’s business as conducted.  Neither the execution nor delivery of the Transaction Documents, the performance of the Contemplated Transactions, nor the carrying on of the Company’s business by the employees of the Company, as is presently conducted, nor the conduct of the Company’s business, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant, or instrument under which any of such employees, officers or consultants are now obligated.
 
(h)           All of the Securities have been duly and validly authorized and, when issued, delivered and sold in accordance with this Agreement and the applicable Transaction Documents against full payment therefor, will be duly and validly issued, fully paid, and nonassessable, free and clear of all liens, pledges and other encumbrances, and not subject to any preemptive or other similar rights.
 

 
        (i)           There is no Proceeding pending or, to the knowledge of the Company, currently threatened against or affecting the Company, or any of its respective properties which is reasonably likely to affect or challenge the legality, validity or enforceability of any of the Transaction Documents, the Contemplated Transactions and/or the Securities offered thereunder.
 
(j)           Since April 1, 2009, there (i) has been no event, occurrence or development that has had a Material Adverse Effect, (ii) the Company has not incurred any material liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made payment or distribution of any dividend or distribution of cash or other property to its holders of Common Stock (or other securities) or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock (or other securities), and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to the Company’s stock option plan.
 
(k)            Insurance.   The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company is engaged.  The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business on terms consistent with market for the Company’s and such respective lines of business.
 
(l)            Transactions with Affiliates and Employees.   None of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company  (other than for services as employees, officers and directors), 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.
 
(m)           The Company is not required to pay any brokerage or finder’s fees or commissions to any person including, but not limited to, any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other person with respect to the Offering, other than the Placement Agent.
 
(n)           Assuming the accuracy of the Investor’s representations and warranties set forth in this Agreement, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Investor as contemplated hereby.
 
(o)           The Company is not, and is not an Affiliate of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended.
 
(p)           As of the Closing Date, other than as set forth in Schedule 3.1(p) , the Company has no Debt.   Schedule 3.1(p) sets forth all Debt, the holders thereof, the terms and whether such Debt is secured by a Lien or otherwise.
 
(q)           As of the date of this Agreement, except as set forth on Schedule 3.1(q) , no indebtedness of the Company is senior to and or pari passu to the Notes in right of payment or otherwise, including without limitation, with respect to interest or upon liquidation or dissolution.
 
(r)           Neither the Company, nor, to the knowledge of the Company, any of its Affiliates nor any Person acting on the Company’s behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Units.
 
(s)           Neither the Company, nor, to the knowledge of the Company, any of their Affiliates nor any Person acting on the Company’s behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Securities under the Securities Act or cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated.
 
(t)           The Company has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, except when the failure to do so would not have a Material Adverse Effect, and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations otherwise due and payable, except those being contested in good faith and has set aside on its books reserves in accordance with GAAP reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax.  To the Company’s knowledge, none of the Company’s tax returns are presently being audited by any taxing authority.
 
(u)           Neither the sale of any of any Securities by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. Without limiting the foregoing, the Company is not (a) a person whose property or interests in property are blocked pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) to the Company’s knowledge, engaged in any dealings or transactions, or is otherwise associated, with any such Person. The Company is in compliance with the anti-money laundering requirements of the USA Patriot Act of 2001 (signed into law October 26, 2001).
 

 
Each Investor acknowledges and agrees that the Company has not made or makes any representations or warranties with respect to the Contemplated Transactions other than those specifically set forth in this Section 3.1 .
 
3.2   Representations and Warranties of the Investors .  Each Investor hereby, for itself and for no other Investor, represents and warrants to the Company as follows:
 
(a)   Organization; Authority .  Such Investor (if other than an individual) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the Contemplated Transactions and otherwise to carry out its obligations thereunder. The execution, delivery and performance by such Investor of the Contemplated Transactions have been duly authorized by all necessary corporate or, if such Investor is not a corporation, such partnership, limited liability company or other applicable like action, on the part of such Investor.  This Agreement has been duly executed by such Investor, and when delivered by such Investor in accordance with terms hereof, will constitute the valid and legally binding obligation of such Investor, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
 
(b)   Investment Intent .  Such Investor is acquiring the Securities as principal for its own account for investment purposes only and not with a view to or for distributing or reselling such Securities or any part thereof, without prejudice, however, to such Investor's right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws.
 
(c)   Investor Status .  The Investor is an “accredited investor” as defined in Rule 501(a) under the Securities Act.
 
(d)   General Solicitation .  Such Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.
 
(e)   Access to Information .  Such Investor acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities offered hereby and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.
 
(f)   Independent Investment Decision .  Such Investor has independently evaluated the merits of its decision to purchase Securities pursuant to this Agreement, and such Investor confirms that it has not relied on the advice of any other Investor’s business and/or legal counsel in making such decision.
 
The Company acknowledges and agrees that no Investor has made or makes any representations or warranties with respect to the Contemplated Transactions other than those specifically set forth in this Section 3.2 .
 
 
 
 
 
 
 
 
 
 
 
 
 

 
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 
4.1   Transfer Restrictions .
 
(a)           The Securities may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of the Securities other than pursuant to an effective registration statement, to the Company, to an Affiliate of an Investor or in connection with a pledge as contemplated in Section 4.1(b) , the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.
 
(b)   Certificates evidencing the Securities will contain the following legend, until such time as they are not required :
 
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OR EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
 
The Company acknowledges and agrees that an Investor may from time to time pledge, and/or grant a security interest in some or all of the Securities pursuant to a bona fide margin agreement in connection with a bona fide margin account and, if required under the terms of such agreement or account, such Investor may transfer pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection with the pledge, but such legal opinion may be required in connection with a subsequent transfer following default by the Investor transferee of the pledge.  No notice shall be required of such pledge.
 
4.2   Integration .  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Investors, or that would be integrated with the offer or sale of the Securities.
 
4.3   Reservation of Shares .  The Company shall maintain a reserve from its duly authorized shares of Common Stock to comply with its conversion and exercise obligations under the Notes and Warrants, respectively.  If on any date the Company would be, if notice of conversion were to be delivered on such date, precluded from issuing the number of Shares, issuable upon conversion and exercise in full of the Notes and Warrants, respectively, due to the unavailability of a sufficient number of authorized but unissued or reserved shares of Common Stock, then the Board of Directors of the Company (the “ Board ”) shall promptly prepare and mail to the stockholders of the Company proxy materials or other applicable materials requesting authorization to amend the Company’s certificate of incorporation or other organizational document to increase the number of shares of Common Stock which the Company is authorized to issue so as to provide enough shares of Common Stock for the full issuance of all of the Shares.  In connection therewith, the Board shall (a) adopt proper resolutions authorizing such increase, (b) recommend to  promptly and duly obtain stockholder approval to carry out such resolutions (and hold a special meeting of the stockholders as soon as practicable, but in any event not later than the 60th day after delivery of the proxy or other applicable materials relating to such meeting) and (c) within five Business Days of obtaining such stockholder authorization, file an appropriate amendment to the Company’s certificate of incorporation or other organizational document to evidence such increase.
 
4.4   Use of Proceeds .  The Company will use the net proceeds from the sale of the Securities hereunder for working capital purposes and not to redeem any Common Stock.
 
 
 

 
ARTICLE V.
NEGATIVE COVENANTS
 
The Company hereby agrees that, from and after the date hereof until the date that the Notes have either been repaid in their entirety and/or converted entirely into Underlying Shares, the Company shall be bound according to the restrictions set forth in each of the following negative covenants, unless any such restriction shall have been expressly waived in writing by the Required Investors.
 
5.1  Restrictions on Certain Amendments .  The Company will not amend the rights and privileges granted under the Notes, to adversely affect the rights or privileges granted under the Notes.
 
5.2  Restricted Payment .  Other than with respect to payments set forth on Schedule 5.2 , the Company shall not make any Restricted Payment.
 
5.3  Debt .  The Company shall not, without obtaining the prior written consent of the Required Investors, which shall not be unreasonably withheld, create, incur, assume, become or be liable in any manner in respect of, or suffer to exist, any Debt, except (a) Debt in existence on the date hereof (which may not be increased, or if repaid, in whole or in part, loaned again), as shown on Schedule 3.1(p) , (b) trade payables incurred and paid in the ordinary course of business, (c) Contingent Liabilities in existence on the date hereof, as shown on Schedule 5.3(c ), (d) Contingent Liabilities resulting from the endorsement of negotiable instruments for collection in the ordinary course of business or (e) securities sold in the Follow-On-Offering (collectively (a) through (e) shall be referred to as “Permitted Indebtedness” ).
 
5.4  Liens .  The Company shall not create or suffer to exist any Lien upon any of its properties, except Permitted Liens.
 
5.5  Amendment of Organizational Documents .  The Company shall not permit any amendment to its certificate of incorporation so as to directly or indirectly adversely affect the rights or privileges granted under the Notes and/or Warrants.
 
5.6 Business .  The Company shall not change the nature of its business as now conducted.
 
5.7  Transactions with Affiliates .  The Company shall not, directly or indirectly, pay any funds to or for the account of, make any investment (whether by acquisition of stock or indebtedness, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect any transaction in connection with any joint enterprise or other joint arrangement with, any Affiliate, except, on terms no less favorable than terms that could be obtained by the Company from a Person that is not an Affiliate of the Company upon negotiation at arms' length, as determined in good faith by the Board; provided , that no determination of the Board  shall be required with respect to any such transactions entered into in the ordinary course of business.
 
5.8  Limitation on Restrictions .  The Company shall not enter into, or suffer to exist, any agreement with any Person which prohibits or limits its ability to pay Debt owed to the Investors.
 
5.9  Payment of Cash Dividend .  The Company agrees, so long as any of the Notes are outstanding, not to declare, pay or make any provision for any cash dividend or distribution with respect to the Common Stock (or other capital stock), without first obtaining the approval of the Required Investors.
 
 

 
 
 
 
 
 
 

 
ARTICLE VI.
MISCELLANEOUS
 
6.1   Fees and Expenses .  The Company shall pay its and the Placement Agent’s fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents.  The Company shall pay all stamp and other taxes and duties levied in connection with the sale of the Notes.
 
6.2   Entire Agreement .  The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
 
6.3   Notices .  Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (New York City time) on a Business Day, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as follows:
 
  I f to the Company:
INVO Bioscience, Inc.
  100 Cummings Center, Suite 421E
  Beverly, MA 01915
  Attention: Chief Financial Officer
 
With a copy to (which shall not constitute notice):
    Scott Museles, Esq.
    Shulman Rogers Gandal Pordy & Ecker PA
    11921 Rockville Pike, 3 rd Floor
    Rockville, MD 20852
    Fax:  301-230-2891
 
  If to the Placement Agent:
 Hallmark Investments, Inc.
  420 Lexington Avenue, 8 th Floor
  New York, New York 10170
    Attention:  Edward Taylor
Fax:
212-661-2055
 
If to an Investor:
To the address set forth under such Investor's name
 
 
on the signature pages hereof;
 
or such other address as may be designated in writing hereafter, in the same manner, by such Person.
 
6.4 Amendments; Waivers; No Additional Consideration .  No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and the Required Investors except as set forth below and except that the conditions precedent set forth in Section 2.1(b) and Section 2.2(b) may only be waived by each Investor to be bound by such waiver.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.  No consideration shall be offered or paid to any Investor to amend or consent to a waiver or modification of any provision of any Transaction Document unless the same consideration is also offered to all Investors who then hold Notes.
 

 
6.5   Construction .  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.  This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.
 
6.6   Successors and Assigns .  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns if expressly permitted pursuant to and in accordance with this Agreement.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors. Any Investor may assign any or all of its rights under this Agreement to any Person to whom such Investor assigns or transfers any Notes, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Investors,” and completes all necessary documentation required by the Company to ensure compliance with all federal and state securities laws.
 
6.7   No Third-Party Beneficiaries .  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
 
6.8   Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced, exclusively and solely, in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the Transaction Documents, and/or the Contemplated Transactions (whether brought against a party hereto or its respective Affiliates, employees or agents) shall be commenced exclusively in the New York Courts.  Each party hereto hereby irrevocably submits to the exclusive and sole jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any Contemplated Transactions (including with respect to the enforcement of the any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum.  Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding 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 manner permitted by law.  Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any Proceeding arising out of or relating to this Agreement or the Contemplated Transactions.  If either party shall commence a Proceeding in connection with a Transaction Document, then the prevailing party in such Proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.
 
6.9   Survival .  The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Securities for a period of one (1) year.
 
6.10   Execution .  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.
 
6.11   Severability .  If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
 
6.12   Replacement of Securities .  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity (which shall not include a surety bond), if requested.  The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.  If a replacement certificate or instrument evidencing any Securities is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.
 
6.13   Remedies .  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, nothing contained herein shall limit the right of each of the Investors and the Company to seek specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
 
6.14   Payment Set Aside .  To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
 

 
6.15   Independent Nature of Investors' Obligations and Rights .  The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document.  The decision of each Investor to purchase Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor.  Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the Contemplated Transactions.  Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents.  Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.  The Company acknowledges that each of the Investors has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.
 
6.16   Limitation of Liability .  Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that the liability of an Investor arising directly or indirectly, under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of the assets of such Investor, and that no trustee, officer, other investment vehicle or any other Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest of such a Investor shall be personally liable for any liabilities of such Investor.
 
6.17  Notice of Certain Events .  The Company shall provide each holder of Notes with express written notice of any of the following events/items no later than five (5) Business Days after the occurrence of any such event/item in the manner set forth herein:
 
(i)           any Event of Default pursuant to the Notes;
 
(ii)           any event of default (or an event that with notice and/or the lapse of time and/or both, would constitute an event of default) under or pursuant to any Material Securities Agreement or Material Debt Agreement (as defined in Notes), or any other material agreement of the Company; and
 
(iii)           a Bankruptcy Event.
 
[IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS PURCHASE AGREEMENT TO BE DULY EXECUTED BY THEIR RESPECTIVE AUTHORIZED SIGNATORIES AS OF THE DATE FIRST INDICATED ABOVE.
 
INVO BIOSCIENCE, INC.
 
By:_______________________________________
 
     Name: Kathleen T. Karloff
 
     Title: Chief Executive Officer
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGES FOR INVESTORS FOLLOW]
 
 
 
 
 
 
 

 
IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
 

NAME OF INVESTOR

____________


By:                                                                           
Name:
Title:

Investment Amount: $ ___,000

Tax ID No.:                                                                           


ADDRESS FOR NOTICE

c/o:                                                                           

Street:                                                                           

City/State/Zip:                                                                           

Attention:                                                                           

Tel:           

Fax:           


DELIVERY INSTRUCTIONS
(if different from above)

c/o:                                                                           

Street:                                                                           

City/State/Zip:                                                                           

Attention:                                                                           

Tel:           
 

 

 
SCHEDULE 3.1 (p)

OUTSTANDING INDEDEBTEDNESS

Creditor/Debt Holder                                                                                          Principal Amount


SBA Century Bank Line of Credit                                                                                    $50,000
Claude Ranoux Note                                                                                                          $96,000
Kathleen Karloff Notes                                                                                                      $88,000



 
 
\
 
 
 
 
 
 
 
 
 
 
 
 

 
SCHEDULE 3.1 (q)

OUTSTANDING SENIOR INDEDEBTEDNESS

Creditor/Debt Holder                                                                                          Principal Amount


SBA Century Bank Line of Credit                                                                                     $50,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
SCHEDULE 5.3

CONTINGENT LIABILITIES

 
NONE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
Exhibit 10.3

WARRANT NO.  HM:1


NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTEREDWITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
 


WARRANT TO PURCHASE SHARES OF COMMON STOCK OF
INVO BIOSCIENCE, INC.

 
 New York, New York 
 July__, 2009
 

                                                                     


This is to Certify that, for value received, __________(the “ Holder ”), is entitled to purchase, subject to the provisions of this Warrant, from INVO Bioscience, Inc., a Nevada corporation (the “ Company ”), at any time on or after date hereof (the “ Original Issuance Date ”), and not later than 5:00 p.m. Eastern Standard Time, _______________, 2014 (the “ Expiration Date ”), _________shares of common stock, $.0001 par value per share, of the Company (the “ Common Stock ”) at an initial purchase price per share (the “ Exercise Price ”) equal to $.20 (Twenty Cents), subject to adjustment as provided elsewhere herein.  The shares of the Company's Common Stock issuable upon the exercise of this Warrant are called herein the “ Warrant Shares .” The Holder hereof may exercise this Warrant as to all or any portion of the Warrant Shares which such Holder shall have the right to acquire hereunder.

This Warrant is one of a series (collectively the “ Warrants ”) issued in connection with the Company’s private placement offering (the “ Offering ”) of its units (the “ Units ”), each Unit consisting of a (i) 12% Senior Secured Convertible Promissory Note (the “ Notes ”) and (ii) a Warrant.  The terms and conditions of the Offering are described in greater detail in the  Purchase Agreement, dated July __, 2009, as amended or supplemented from time to time (the “ Purchase Agreement ”).  All capitalized terms used without definition in this Warrant, except where expressly otherwise indicate, shall have the meanings ascribed to such terms in the Purchase Agreement.

(a)            Exercise of Warrant . This Warrant may be exercised by presentation and surrender hereof to the Company with the Form of Payment Exercise attached hereto as Annex A .  The Warrant shall be deemed to have been exercised when (i) the Company has received this Warrant, together with a completed Exercise Notice, and (ii) the Company has received payment in the amount of the applicable Exercise Price in accordance with this Section (a), notwithstanding that certificates representing such Warrant Shares shall not then be actually delivered to the Holder. If the stock transfer books of the Company shall be closed on the date of receipt of this Warrant, the Exercise Notice and the Exercise Price as aforesaid, the Holder shall be deemed to be the holder of such shares of Common Stock on the next succeeding day on which the stock transfer books of the Company shall be opened.  If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Warrant Shares purchasable hereunder. In the event this Warrant shall not be exercised on or before five (5) years after the date of issue, this Warrant shall become void and all rights hereunder shall cease.  Each date of exercise of this Warrant shall be referred to as an “ Exercise Date .”  Notwithstanding anything to the contrary provided herein or elsewhere upon exercise of this Warrant, the Company shall issue certificates representing the Warrant Shares no later than ten (10) Business Days (as defined in the Purchase Agreement) following exercise (three (3) business days if the Company is either subject to the reporting requirements of the Federal Securities Laws or the Common Stock is quoted or traded on any trading medium).

(1)            Method of Payment.   The Holder at its option may use any combination of the payment methods set forth in the following paragraphs (A) and (B):

(A)            Payment Exercise .  Payment of the Exercise Price for the number of Warrant Shares purchased shall be made in cash, by money order, certified or bank cashier's check or wire transfer (in each case in lawful currency of the United States of America).


 
(B)            Conversion Exercise .  As an alternative to payment in the manner provided in paragraph (1)(A) above, the Holder may, in lieu of payment of such Exercise Price, elect not to receive all of such Warrant Shares but only to receive that number of such Warrant Shares as shall be determined in accordance with the following formula:

X = Y*(A-B)
A

Where:

X =             the number of Warrant Shares to be issued to the Holder pursuant to this paragraph (B);

Y =             the number of Warrant Shares for which this Warrant is being exercised as of the applicable Exercise Date;

A =             the Fair Market Value as of the applicable Exercise Date of a share of the Stock constituting such Warrant Shares; and

B =             the Exercise Price in effect as of the applicable Exercise Date of a share of the Stock constituting such Warrant Shares.

The Holder may elect to exercise this Warrant as to the number of Warrant Shares computed in the manner set forth in this paragraph (B) by surrendering this Warrant to the Company at its principal office, together with (i) a properly completed and duly executed notice of exercise using the Form of Conversion Exercise attached hereto as Annex B , which notice shall specify the number of Warrant Shares for which this Warrant is then being exercised, the number of such Warrant Shares that the Holder is electing not to receive and the aggregate Fair Market Value of such number of Warrant Shares that the Holder is electing not to receive, (ii) if requested by the Company, a duly executed instrument or certificate, in form and substance satisfactory to the Company, pursuant to which the Holder makes such representations and warranties to the Company and provides or confirms such information concerning the Holder, as the Company may reasonably request (including, without limitation, such representations and warranties and such information as may be required in order to confirm compliance with applicable securities laws), and (iii) if applicable, the payment of any transfer taxes required to be paid by the Holder. Payment of such transfer taxes shall be made in cash, by money order, certified or bank cashier's check or wire transfer (in each case in lawful currency of the United States of America).

Fair Market Value ” shall mean (i) the last reported sale price per share of Common Stock on the Nasdaq National Market System or any national securities exchange in which such Common Stock is quoted or listed, as the case may be, on the date immediately preceding the Exercise Date or, if no such sale price is reported on such date, such price on the next preceding business day in which such price was reported, (ii) if the Common Stock is not quoted or listed on the Nasdaq National Market, Nasdaq Small Cap Market or any national securities exchange, then the closing bid price or last sale price, as the case may be, on the NASD Bulletin Board, the Pink Sheets or any other trading or quotation medium, (iii) if the Common Stock is not traded and/or quoted as provided in subsection (ii) of this paragraph, the fair market value of a share of Common Stock, as determined in good faith by mutual agreement of the Board of Directors of the Company (the “ Board ”) and Holders of the then issued and outstanding Warrants representing no less than 75% of the Warrant Shares held (the “ Required Holders .

(2)            Expenses of Issuance .  The Company shall issue the Warrant Shares upon exercise of this Warrant without charge to Holder for any issuance tax or other cost incurred by the Company in connection with such exercise and the related issuance of the Warrant Shares.  Each of the Warrant Shares shall, upon payment of the Exercise Price therefor, be fully paid and nonassessable and free from all liens, and charges and/or pre-emptive or similar rights with respect to the issuance thereof.

(3)            Withholding Taxes .  Holder shall satisfy any federal, state, local or foreign withholding tax obligations arising from the exercise of the Warrant or the subsequent disposition of the Shares.

(b)            Reservation of Warrant Shares . The Company agrees that at all times there shall be authorized and reserved for issuance upon exercise of this Warrant such number of Warrant Shares as shall be required for issuance or delivery upon exercise of this Warrant.

(c)            Fractional Shares . This Warrant shall be exercisable in such manner as not to require the issuance of fractional shares or scrip representing fractional shares. If, as a result of adjustment in the Exercise Price or the number of Warrant Shares to be received upon exercise of this Warrant fractional shares would be issuable, no such fractional shares shall be issued. In lieu thereof the Company shall pay the Holder an amount in cash equal to the Fair Market Value of one share of Common Stock.

(d)            Exchange or Assignment of Warrant . Holder may sell, assign, transfer, pledge, hypothecate, encumber or otherwise dispose of, voluntarily or involuntarily, directly or indirectly (each, a “ Transfer ”) this Warrant (or a portion thereof), to any person (each, a “ Permitted Transferee ”); provided, however, that (x) any such Permitted Transferee shall have agreed in writing to be bound by the terms of this Agreement with respect to the Warrant Shares and (y) any transfer to a Permitted Transferee shall not be in violation of applicable federal or state securities laws.  Any permitted assigned of the Warrant shall be completed with a Form of Assignment attached hereto as Annex C .


 
(e)            Rights of the Holder; Limitation on Liability . The Holder shall not, prior to exercise of this Warrant, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant.  No provision hereof, in absence of an affirmative action by the Holder to purchase the Warrant Shares, and no enumeration herein of rights or privileges by the Holder, shall give rise to any liability of the Holder for the Exercise Price of the Warrant Shares.

(f)            Adjustment of Exercise Rights . The Exercise Price or the number of Warrant Shares to be received upon the exercise of this Warrant, or both shall be subject to adjustment from time to time as follows:

(l)   Dividends .  In case any additional shares of Common Stock or any obligation or stock convertible into or exchangeable for shares of Common Stock (such convertible or exchangeable obligations or stock being hereinafter called “ Convertible Securities ”) shall be issued as a dividend on the outstanding shares of any class of stock of the Company, the Exercise Price then in effect shall be decreased proportionately and the number of Warrant Shares then exercisable hereunder shall be increased proportionately. Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment in the Exercise Price in the case of the issuance at any time or from time to time of any Warrant Shares pursuant to any exercise of this Warrant.

(2)   Effect of “Split-ups” and “Split-down” and Certain Dividends . In case at any time or from time to time the Company shall subdivide as a whole, by reclassification, by the issuance of a stock dividend on the Common Stock payable in Common Stock, or otherwise, the number of shares of Common Stock then outstanding into a greater number of shares of Common Stock, with or without par value, the Exercise Price then in effect shall be reduced proportionately, and the number of Warrant Shares then exercisable hereunder shall be increased proportionately. In case at any time or from time to time the Company shall consolidate as a whole, by reclassification or otherwise, the number of shares of Common Stock then outstanding into a lesser number of shares of Common Stock, with or without par value, the Exercise Price then in effect shall be increased proportionately and the number of Warrant Shares then exercisable hereunder shall be decreased proportionately.

(3)   Effect of Merger or Consolidation . In case the Company shall enter into any consolidation with or merger into any other corporation wherein the Company is not the surviving corporation, or sell or convey its property as an entirety or substantially as an entirety and in connection with such consolidation, merger, sale or conveyance shares of stock or other securities shall be issuable or deliverable in exchange for the Common Stock of the Company, the Holder of any Warrant shall thereafter be entitled to purchase pursuant to such Warrant (in lieu of the number of Warrant Shares which such Holder would have been entitled to purchase immediately prior to such consolidation, merger, sale or conveyance) the shares of stock or other securities to which such number of Warrant Shares would have been entitled at the time of such consolidation, merger sale or conveyance, at an aggregate Exercise Price equal to that which would have been payable if such number of Warrant Shares had been purchased immediately prior thereto. In case of any such consolidation, merger, sale or conveyance, appropriate provision (as determined by resolution of the Board of Directors of the Company with the approval of the Holder) shall be made with respect to the rights and interests thereafter of the Holder of this Warrant, to the end that all the provisions of this Warrant (including adjustment provisions) shall thereafter be applicable, as nearly as reasonably practicable, in relation to such stock or other securities.

(4)   Reorganization and Reclassification . In case of any capital reorganization or any reclassification of the capital stock of the Company (except as provided in Subsection (2) of this Section (f)); the Holder of this Warrant shall thereafter be entitled to purchase pursuant to such Warrant (in lieu of the number of Warrant Shares which such Holder would have been entitled to purchase immediately prior to such reorganization or reclassification) the shares of stock of any class or classes or other securities or property to which the holder of such number of Warrant Shares would have been entitled at the time of such reorganization or reclassification, at an aggregate Exercise Price equal to that which would have been payable if such number of Warrant Shares had been purchased immediately prior to such reorganization or reclassification, appropriate provision (as determined by resolution of the Board of Directors of the Company with the approval of the Holder) shall be made with respect to the rights and interest thereafter of this Warrant (including adjustment provisions) shall thereafter be applicable, as nearly as reasonably practicable, in relation to such stock or other securities or property.

(5)   Distributions . In case the Company shall make any distribution of its assets to holders of its Common Stock as a liquidation or partial liquidation dividend or by way of return of capital, or other than as a dividend payable out of earnings or any surplus legally available for dividends under the laws of the State of New York, then the Holder of this Warrant who thereafter exercises the same as herein provided after the date of record for the determination of those holders of Common Stock entitled to such distribution of assets, shall be entitled to receive, in exchange for the Exercise Price paid hereunder, in addition to the Warrant Shares so purchased, the amount of such assets (or at the option of the Company, a sum equal to the value thereof at the time of such distribution to holders of Common Stock, as such value is determined by the Board of Directors of the Company in good faith), which would have been payable to such Holder had he been the holder of record of such Warrant Shares on the record date for the determination of those entitled to such distribution.

(6)   Dissolution or Liquidation . In case the Company shall liquidate or wind up its affairs, the Holder of this Warrant shall be entitled, upon the exercise thereof, to receive, in lieu of the Warrant Shares which it would have been entitled to receive, the same kind and amount of assets as would have been issued, distributed or paid to it upon any such dissolution, liquidation or winding up with respect to such Warrant Shares had it been the holder of record of such Warrant Shares on the record date for the determination of those entitled to receive any such liquidating distribution; provided, however, that all rights under this Warrant shall terminate on a date fixed by the Company, such date to be not earlier than the date of commencement of proceedings for dissolution, liquidation or winding up and not later than thirty (30) days after such commencement date, unless the Holder shall have, prior to such termination date, exercised this Warrant. Notice of such termination of rights under this Warrant shall be given to the last registered Holder hereof, as the same shall appear on the books of the Company, by mail at least thirty (30) days prior to such termination date. In the event of such notice, the Holder may exercise this Warrant prior to the fifth anniversary hereof.
 

 
(g)            Limitations on Transfer of Warrant Shares .  The Warrant Shares issuable pursuant hereto have not been registered under the Act. Accordingly, by acceptance hereof the Holder agrees that:

(l)   It will acquire the Warrant Shares issuable pursuant hereto to be held as an investment and that it will not attempt to sell, distribute or dispose of the same except pursuant to this agreement and:

(A) pursuant to a registration statement filed and rendered effective under the Act; or

(B) pursuant to a specific exemption from registration under the Act.

(2)   There shall appear on the certificate or certificates evidencing any Warrant Shares issued pursuant hereto a legend as follows:

“THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.”
 
(h)            Notices . All notices, payments, requests and demands and other communications required or permitted under this Warrant shall be deemed to have been duly given, delivered and made if in writing and if served either by personal delivery to the party for whom it is intended or by being deposited, postage prepaid, certified or registered mail return receipt requested to the address shown below or such other address as may be designated in writing hereafter by such party:

 
If to the Company:
 
  INVO Bioscience, Inc.
 
100 Cummings Center, Suite 421E
 
Beverly, MA 01915
  Attention: Chief Financial Officer

 
With a copy to (which shall not constitute notice):
 
  Scott Museles, Esq.
  Shulman Rogers Gandal Pordy & Ecker PA
  11921 Rockville Pike, 3 rd Floor
  Rockville, MD 20852
  Fax:  301-230-2891
 


If to the Holder , to the address for such Holder as set forth on the corporate records of the Company.

(i)            Governing Law; Jurisdiction; WAIVER OF JURY TRIAL .
 
(1)           All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by, construed and enforced solely and exclusively in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all Proceedings (as defined in the Notes) shall be commenced exclusively in the state and federal courts sitting in the County, City and State of New York, (the “New York Courts” ).  Each party hereto hereby irrevocably agrees and submits to the exclusive jurisdiction of the New York Courts for any Proceeding, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any New York Court or that a New York Court is an inconvenient forum for such Proceeding.  Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding 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 Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.   The prevailing party in a Proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.
 

 
(2)            EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 

(j)            Further Assurances . The parties agree to execute, acknowledge and deliver any and all such other documents and to take any and all such of the action as may, in the reasonable opinion of either of the parties hereto be necessary or convenient to efficiently carry out any or all of the purposes of this Warrant.

(k)            Severability . Each and all provisions of this Warrant deemed to be prohibited by law or otherwise held invalid shall be ineffective only to the extent of such prohibition or invalidity and shall not invalidate or otherwise render ineffective any or all of the remaining provisions of this Warrant.

(l)            Parties in Interest. Assignment . The Company may assign any and all of its rights under this Agreement to its successors, and this Agreement shall inure to the benefit of, and be binding on, the successors of the Company.  Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon the Holder and his heirs, executors, administrators, successors and assigns.

(n)            Entire Agreement .  This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supercedes in its entirety all prior undertakings and agreements of the Company and the Holder with respect to the subject matter hereof, and may not be modified adversely to the Holder interest except by means of a writing signed by the Company and the Holder.

(o)            Piggy-Back Registration Rights .

(1)           At anytime and from time to time, if the Company proposes to file a registration statement with the Securities and Exchange Commission (“ SEC ”) with respect to any firmly underwritten offering of any securities of any class of its equity securities for its own account or for the account of a holder(s) of securities of the Company (a “ Requesting Stockholder ”), the Company shall, each time it intends to file a registration statement, give prompt written notice to the Holder of this Warrant at least 20 days prior to the initial filing of the registration statement relating to such offering (the “ Registration Statement ”), and shall include for resale all of the Warrant Shares issued or issuable upon exercise of this Warrant in such Registration Statement.  If, however, the underwriter for such offering (in either case, the “ managing underwriter ”) delivers a notice (a “ Cutback Notice ”) in accordance with paragraph (2) below, then the Company shall follow the procedures set forth in paragraph (2) below for reducing such Warrant Shares in such Registration Statement. The managing underwriter may deliver one or more Cutback Notices at any time prior to the execution of the underwriting agreement for such underwritten offering.

               (2) If the proposed underwritten offering is an underwritten offering by the Company on a primary basis (a “ Primary Registration ”), the Warrant Shares may be excluded in the event and to the extent recommended by the managing underwriter, pursuant to a Cutback Notice stating that, in its opinion, the number of securities to be offered for the account of the Company (“ Company Shares ”), plus the Warrant Shares that the Holders have requested to be sold therein, plus the securities (the “ Other Share s ”) that selling stockholders (other than the Holders) exercising similar piggy-back registration rights with respect to such offering (“ Other Selling Stockholders ”) propose to sell therein, exceeds the maximum number of shares specified by the managing underwriter in such Cutback Notice that may be distributed without having a material adverse effect on the price, timing or distribution of the Company Shares. Such maximum number of shares that may be so sold, excluding the Company Shares, are referred to as the “ Includible Shares .” If the managing underwriter delivers such Cutback Notice, the Company shall be entitled to include all of the Company Shares in the Underwritten Offering in priority to the inclusion of any “ Other Shares ” or Warrant Shares and the Holders shall be entitled to include the Warrant Shares in priority to any Other Shares. Each requesting Holder shall then be entitled to include in such offering up to its pro rata portion of the Includible Shares, based on the number of securities requested to be sold by the Holders.

(3)  Notwithstanding anything to the contrary provided herein or elsewhere (i) if any Warrant Shares are not included in a Registration Statement as provided in paragraph (1) above, then the Company shall file and cause to be declared effective a new Registration Statement covering the resale of such excluded Warrant Shares no later than six (6) months following the effective date of the Registration Statement that the Warrant Shares were excluded from, (ii) the Company shall pay all costs and expenses of the preparation of all Registration Statements and (iii) the Company shall provide the Holder with all materials and take all actions necessary and/or required to allow such Holder to sell its Warrant Shares pursuant to a Registration Statement (including, but not limited to causing each such Registration Statement to remain effective until all Warrant Shares are sold).
 
           IN WITNESS WHEREOF, the Company has caused this instrument to be signed as of the July __, 2009.



INVO BIOSCIENCE, INC.


By: ________________________
       Kathleen T. Karloff
 
Its: Chief Financial Officer
 

 
ANNEX A

FORM OF PAYMENT EXERCISE


(To be executed upon cash payment exercise of Warrant)


To:  INVO BIOSCIENCE, INC.

The undersigned hereby irrevocably elects to exercise the right of purchase represented by the attached Warrant for, and to exercise thereunder, _______ shares of Common Stock, $.0001 par value per share (“ Common Stock ”), of INVO Bioscience, Inc., a Nevada corporation, and tenders herewith payment of $__________, representing the aggregate purchase price for such shares based on the price per share provided for in such Warrant.  Such payment is being made in accordance with Section (a) of the attached Warrant.

Please issue a certificate or certificates for such shares of Common Stock in the following name or names and denominations and deliver such certificate or certificates to the person or persons listed below at their respective addresses set forth below:

Dated:                                                   
 

                                                               
(Name)


                                                             
(Address)

If said number of shares of Common Stock shall not be all the shares of Common Stock issuable upon exercise of the attached Warrant, a new Warrant is to be issued in the name of the undersigned for the balance remaining of such shares of Common Stock less any fraction of a share of Common Stock paid in cash.


Dated:                                                    


                                                              
NOTE:  The above signature should correspond exactly with the name on the face of the attached Warrant or with the name of the assignee appearing in the assignment form below.
 
 
 
 

 
ANNEX B

FORM OF CONVERSION EXERCISE


(To be executed upon conversion or net issue exercise of Warrant)


To: INVO BIOSCIENCE, INC.

The undersigned hereby irrevocably elects to exercise the right of purchase represented by the attached Warrant for, and to exercise thereunder, _______ shares of Common Stock, par value $0.0001 per share (the “ Exercise Shares ”) of INVO Bioscience, Inc., a Nevada corporation (the “ Company ”).  The aggregate Exercise Price (as defined in the attached Warrant) to purchase all such Exercise Shares is $__________.  Pursuant to Section (a), paragraph (B) of the attached Warrant, the undersigned hereby elects, in lieu of paying in cash such aggregate Exercise Price, to surrender the right to receive _______ of the Exercise Shares (the “ Surrendered Warrant Shares ”).  The aggregate Fair Market Value of the Surrendered Warrant Shares is $____________.  The net number of Exercise Shares issuable by the Company (after giving effect to the surrender by the undersigned of the Surrendered Warrant Shares) in connection with such exercise shall be __________ shares (the “ Net Issue Exercise Shares ”).

Please issue a certificate or certificates for the Net Issue Exercise Shares in the following name or names and denominations and deliver such certificate or certificates to the person or persons listed below at their respective addresses set forth below:
 
                                                             
(Name)


                                                             
(Address)
If the sum of the Net Issue Exercise Shares and the Surrendered Warrant Shares shall not be all the Warrant Shares issuable upon exercise of the attached Warrant, a new Warrant is to be issued in the name of the undersigned for the balance remaining of such Warrant Shares (less any fraction of a Warrant Share paid in cash).

 
Dated:                                                    


                                                              
NOTE:  The above signature should correspond exactly with the name on the face of the attached Warrant or with the name of the assignee appearing in the assignment form below.
 
 

 
 

 
ANNEX C

FORM OF ASSIGNMENT


(To be executed upon assignment of Warrant)


For value received, _____________________________________ hereby sells, assigns and transfers unto _________________ the attached Warrant [__% of the attached Warrant], together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ___________________________ attorney to transfer said Warrant [said percentage of said Warrant] on the books of INVO Bioscience, Inc., a Nevada corporation, with full power of substitution in the premises.

If not all of the attached Warrant is to be so transferred, a new Warrant is to be issued in the name of the undersigned for the balance of said Warrant.




Dated:  ____________, ____

                                                     
NOTE:  The above signature should correspond exactly with the name on the face of the attached Warrant.

 
 
 

 

Exhibit 10.4
______________Hallmark Investments, Inc._______________
420 Lexington Avenue, 8 th Floor, New York, NY 10170
Tel: (212) 661-2277   (866) 542-5562    Fax: 212 661-2055
 


 
June 5, 2009 
 

Ms. Kathleen T. Karloff, CEO
INVO Bioscience, Inc.
100 Cummings Center, suite 421E
Beverly MA 01915
 
Dear Ms. Karloff:
 
This letter agreement (this “Agreement”) confirms our understanding that INVO Bioscience, Inc., a Nevada corporation, and its affiliates, (the “Company”), have engaged Hallmark Investments, Inc., (the “Placement Agent”) to act as a Placement Agent on an exclusive basis in connection with a private placement by the Company or its affiliates of debt and/or equity securities (the “Securities”) on a “best efforts” basis of up to an aggregate offering of approximately Five Hundred Thousand Dollars ($500,000.00) (the “Private Placement”). This Agreement shall be effective for a period commencing June 1, 2009 and ending on August 31, 2009.

 
Section 1.                             Appointment and Acceptance.
 
The Company hereby appoints the Placement Agent Placement Agent on an exclusive basis in connection with the Private Placement of the Securities.  The Placement Agent accepts such appointment, subject to the terms and conditions of this letter agreement.
 
The Placement Agent agrees that in its capacity hereunder it will use commercially reasonable efforts to arrange the Private Placement. In no event shall the Placement Agent be obligated to purchase the Securities for its own account or for the accounts of its customers .


Section 2.                            The Transaction
 
The parties contemplate that an initial offering of a maximum of approximately $500,000.00 of debt and /or equity  securities will be offered in the Private Placement. Upon commencement, the Private Placement shall continue through August 31, 2009.

The Placement Agent envisions the following terms:
 
A 10% Senior Secured Convertible Note, (“the Note” or “the Notes”), with detachable Common Stock Purchase Warrants.  Interest on the Notes will be paid in Shares of Common Stock.  Each Note entitles the Note holder to convert the Notes into Common Stock of the Company at  of $.10 per Share The Notes mature upon the earlier of one (1) year or the completion of a follow-on-financing by the Company of a minimum of $2,500,000 dollars.  The warrants are exercisable at a 100% premium to the conversion pricing of the Notes at 100% coverage.
 
The Placement Agent will assist in negotiating the terms and conditions for a successful completion of the Private Placement; provided, however, that the Company, in its sole discretion, must approve any such terms and conditions. To facilitate the Private Placement, the Company shall prepare and deliver to the Placement Agent any offering documents or other information to be used in the Private Placement.

 

 
Section 3.                            Fees and Expenses.
 
As compensation to the Placement Agent for its services hereunder, the Company agrees that the Company and the Placement Agent shall determine whether more than one closing shall be necessary. If there is more than one closing, at each closing the Gross proceeds shall be paid into an escrow account (the Escrow Account). The Company agrees that immediately upon the closing of a sale of the Securities the Escrow Agent shall make disbursements from the Escrow Account as follows:
 
  (i)
  to the Placement Agent a placement fee consisting of the following: a cash payment equal to ten percent (10%) of the gross proceeds raised (as defined below), in a sale of equity securities, and  
 
  (ii)
  As part of the Placement Agent’s compensation hereunder, the Company shall issue to the Placement Agent, at each closing hereunder, five (5) year Common Stock Purchase Warrants equal to ten percent (10%) of the number of shares of common stock underlying any debt and/or equity securities sold by the Placement Agent, as more fully described in the Offering Document. The Common Stock Purchase Warrants shall be exercisable at the same price as the shares of common stock underlying the debt and/or equity securities sold by the Placement Agent. And, The Common Stock Purchase Warrants will have features identical to the shares of common stock underlying the debt and/or equity securities sold by the Placement Agent. The Placement Agent may designate that the Placement Agent’s Common Stock or Preferred Stock be issued in varying amounts to its officers, agents, consultants and affiliates and not to the Placement Agent. 
 
The amounts payable or securities deliverable pursuant to subparts (i), and (ii) above shall be referred to as the “Placement Fee.”
 
The Company hereby agrees to complete the following and pay the expenses associated therewith, in addition to a non-refundable retainer of fifteen thousand dollars ($15,000.00), which, at this time, the Company does not have and where there is little or no prospect that the Company will have the retainer amount available until such time as the Placement Agent raises this amount, and more, from its investor clients. It is therefore expressly agreed that the retainer amount of $15,000.00 will be paid to the Placement Agent by the Company from the first monies raised by the Placement Agent but that such payment will in no way diminish or be credited to the Company against the 10% commission fee for which the Company is obligated to the Placement Agent. The $15,000.00  retainer fee will be paid by the Company as soon as that amount is raised by the Placement Agent.
 
  (i)
  the preparation and printing of the Offering Documents, and any supplements or amendments thereto, including the cost of all copies thereof;
 
  (ii)
  the issuance, sale, transfer and delivery of the Securities, including any transfer or other taxes payable thereon and the fees of any transfer agent or registrar;
 
  (iii)
  the registration or qualification of the Securities or the securing of an exemption therefrom under state or foreign "blue sky" or securities laws, including without limitation, filing fees payable in the jurisdictions in which such registration or qualification or exemption therefrom is sought and disbursements in connection
 
Such Placement Fee will be payable in the respect of each sale of Securities only if such sale has been arranged by the Placement Agent or its Co-Placement Agents or Selected Dealers. Gross proceeds raised shall include only cash consideration received by the Company for the purchase of the Securities and shall not include the cash received by the Company upon the exercise of warrants or other convertible securities, if any.  In no event shall the Company be obligated to issue and sell any Securities unless the Company shall have executed and delivered an investor subscription agreement pertaining to such sale setting forth the terms of such sale of Securities and (ii) the aggregate gross proceeds raised in connection with the Private Placement exceeds any minimum set forth in the Offering.  Additionally, the Company shall have complete and absolute discretion in determining the terms of the Private Placement and whether or not to sell Securities to any potential purchaser presented by the Placement Agent.
 
Gross proceeds shall include only cash consideration received by the Company for the purchase of the Securities and shall not include the cash received by the Company upon the exercise of warrants or other convertible securities, if any.
 
The Company and the Placement Agent acknowledge and agree that, in the course of performing services hereunder, the Placement Agent may introduce the Company to third parties who may, directly or indirectly through other third parties, be interested in providing debt or equity financing to the Company (a “ Financing” ) in addition to the Private Placement.
 
The Company agrees that if during the terms of this agreement or within eighteen (18) months year from the effective date of the termination of this Agreement, the Company or any party to whom the Company was introduced by the Placement Agent  in connection with its services for the Company hereunder proposes a Financing involving the Company and the Placement Agent is not engaged as the Company’s financial advisor, agent, and/or investment banker in connection with such Financing, then, if any such Financing is consummated, the Company shall pay to the Placement Agent the following fees:
 
  (i)
  a cash fee of eight percent (8%) of the amount of capital raised, invested or committed; and
 
  (ii)
  issue to the Placement Agent, at each closing hereunder, five year Common Stock Purchase Warrants equal to eight percent (8%) of the number of shares of common stock underlying any debt and/or equity securities issued the amount of capital raised, invested or committed The Placement Agent may designate that the Placement Agent’s Common Stock or Preferred Stock be issued in varying amounts to its officers and agents and not to the Placement Agent. 
 

 
Such fees shall be payable to the Placement Agent in cash immediately at the closing or closings of the Financing to which it relates.  Any Financing to be provided to the Company by the Placement Agent or underwriter shall be provided pursuant to a separate agency or underwriting agreement between the Company and the Placement Agent which agreement shall contain the terms set forth in Section 3 hereof and such other customary terms, conditions, agreements, covenants, representations and warrants as the parties may agree upon.
 
All cash fees and expenses paid by the Company to the Placement Agent in Section 3 above shall be in United States currency. 

 
Section 4.                             Information
 
In connection with the Placement Agent’s engagement, the Company will furnish the Placement Agent with all information concerning the Company as the Company and the Placement Agent may reasonably agree and will provide the Placement Agent with reasonable access to the company’s officers, directors, employees, accountants, counsel and other representatives.  The Company acknowledges and confirms that the Placement Agent (I) will rely solely on such information in the performance of the services contemplated by this engagement without assuming any responsibility for independent investigation or verification thereof, (ii) assumes no responsibility for the accuracy or completeness of such information or any other information regarding the Company and (iii) will not make any appraisal of any assets of the Company.
 
The Company will be solely responsible for the contents of the offering documents (subject to review by counsel to the Placement Agent) or other offering document used in connection with the Private Placement (as such private placement memorandum or other
document may be amended or supplemented and including any information incorporated herein by reference, the “Private Placement Memorandum”) and any and all other written communications provided by the Company to any actual or prospective purchaser of the Securities.

The Placement Agent shall not make any changes to the offering documents, and except in connection with performing the services contemplated by and with the consent of the Company, the Placement Agent shall keep the offering documents confidential and shall not distribute it or any other materials related to Private Placement.
 
 
The Company represents and warrants that the Offering Memorandum and such other communications will not, as of the date of any delivery by the Placement Agent to a perspective purchaser and as of the time of sale of any Securities pursuant to the Private Placement contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading.  If at any time prior to the completion of the offer and sale of the Securities or the closing date of any such sale an event occurs as a result of which the Offering Memorandum (as then supplemented or amended) would include any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, the Company, will promptly notify the Placement Agent of such event and the Placement Agent will promptly suspend solicitations of prospective purchasers of the Securities and distribution of the Offering Memorandum until such time as the Company shall prepare (and the Company agrees that, if it shall have notified the Placement Agent to suspend solicitations after the Company has accepted orders from prospective purchasers, it will promptly prepare) a supplement or amendment to the Offering Memorandum which corrects such statement(s) or omission(s).  Each party hereto shall be responsible for violations of their respective agents and advisors of the obligations set forth in this agreement.

 
Section 5.
Exemption from Registration; Restrictions on Offer and Sale of Same or Similar Securities
 
It is understood that the offer and sale of the Securities will be exempt from the registration requirements of The Securities Act of 1933, as amended (the “Act”).  The Company will not, directly or indirectly, makes any offer or sale of Securities or of securities of the same or of similar class as the Securities if as a result the offer and sale of Securities contemplated hereby would fail to be entitled to the exemption from the registration requirements of the Act.
 
The Placement Agent will not, directly or indirectly, make any offer of Securities, if as a result the offer of Securities contemplated hereby would fail to be entitled to the exemption from the registration requirements of the Act.  In addition, the Placement Agent will solicit offers only for the Securities and will not, directly or indirectly make any offer of securities of the same or similar class of the securities.
 
A.  
Additional Restrictions on the Company and the Placement Agent
 

 
In connection with all offers and sales of the securities:
 
  (a)
  The Company will not offer or sell the Securities by means of any form of general solicitation or general advertising.  The Placement Agent will not offer the Securities by means of any form of general solicitations or general advertising.
 
(b)
  The Company will not offer or sell the Securities to any person who is not an “accredited investor” as the term is defined in Section 501(a) or Regulation D of the Securities Act of 1933, as amended (“Regulation D”).  The Placement Agent will not offer the Securities to any person who is not a “qualified client” as defined in Regulation D.

(c)
  The Company will exercise reasonable care to ensure that purchasers of the Securities are not underwriters within the meaning of Section 2(11) of the Act and, without limiting the foregoing, that such purchases will comply with Rule 502(d) under the Act.

B.  
Compliance With Securities Laws, Broker/Dealer Regulations And Relevant Self-Regulation Organizations.

The company will make such notice filings and pay such fees under the securities laws of such jurisdictions in the United States as the Company may reasonably determine, in each case to the extent required under Section 18( c ) (2) of the Act, and in such other jurisdictions as required by applicable law
 
The Placement Agent hereby represents and warrants that it is (1) registered as a broker or dealer as required under Section 15(a)(1) of the Securities and Exchange Act of 1934, (the “Exchange Act”), (2) it is a (a) associated with a broker/dealer, which is a person other than a natural person, and (b) registered with the National Association of Securities Dealers as a registered representative or (3) exempt from the regulation requirement of Section 15(a)(1) of the Exchange Act and applicable state laws.

 
Section 6.                             Term and   Termination .
 
 This Agreement shall be effective for the period commencing June 1, 2009 and ending August 31, 2009.
  
No termination of the Placement Agent’s engagement hereunder shall affect (I) the Company’s obligation to reimburse the Placement Agent for expenses as provided herein or (ii) the provisions of Sections 3 and 9 of this letter agreement.


Section 7.                             General .

In connection with this engagement, the Placement Agent is acting as an independent contractor and not in any other capacity, with duties owing solely to the Company.  All aspects of the relationship created by this agreement shall be governed by and construed in accordance with the laws of the state of New York, applicable to contracts made and to be performed therein.  Each of the Placement Agent and the Company waives all right to trial by jury in any action, suit proceeding or counter claim (whether based upon contract tort or otherwise) relating to or arising out of the engagement of the Placement Agent pursuant to, or the performance by the Placement Agent of the services contemplated by, this agreement.  All actions and proceedings arising out of or relating to this letter agreement shall be heard and determined exclusively in any New York State court or federal court sitting in the state of New York to whose jurisdiction the company and the Placement Agent hereby irrevocably submit.  The Company and the Placement Agent irrevocably waive any defense or objection to the New York forum designated above.
 
This letter agreement contains the entire agreement of the parties with respect to the subject matter hereof and supersedes and takes precedence over all prior agreements or understandings, whether oral or written, between the Placement Agent and the Company.  The invalidity or enforceability of any provision of the letter agreement shall not affect the validity or enforceability of any other provisions of this agreement, which shall remain in full force and effect.
 
We are delighted that you have accepted this engagement and look forward to working with you on this assignment. Please confirm that the foregoing is in accordance with your understanding by signing and returning to us the enclosed duplicate of this agreement.
 

 
Section 8.                             Governing Law; Jurisdiction; Waiver of Jury Trail.
 
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be fully performed therein, with disregard to conflicts of law principles.  The Company irrevocably submits to the exclusive jurisdiction of any court of the State of New York or the United States District Court for the Southern District of the State of New York for the purpose of any suit, action or other proceeding arising out of this Agreement, or any of the agreements or transactions contemplated hereby, which is brought by or against the Company.  All notices provided hereunder shall be given in writing and either delivered personally or by overnight courier service or sent by certified mail, return receipt requested, or by facsimile transmission, if to Hallmark Investments, Inc., 420 Lexington Avenue, New York, NY 10170, Attn: Edward Taylor, Managing Partner, Fax No.: (212) 661-2055, and if to the Company, to the address, set forth on the first page of this Agreement: Ms. Kathleen T. Karloff, CEO, INVO Bioscience, Inc., 100 Cummings Center, suite E421, Beverly, MA 01915: Fax No.: (978) 878-9505. The parties hereby expressly waive all right to trail by jury in any suit, action or proceeding arising under this Agreement.
 
Section 9.                            Indemnification Provisions
 
The Company agrees to indemnify and hold harmless the Placement Agent and any indemnified parties identified herein from and against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements, and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise (including, without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing, pursing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Indemnified Party is a party))(collectively, “ Losses” ), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, the Placement Agent acting for the Company, including, without limitation, any act or omission by the Placement Agent in connection with its acceptance of or the performance or non-performance of its obligations under the Agreement between the Company and the Placement Agent to which these indemnification provisions are attached and form a part (the “ Agreement” ), any breach by the Company of any representation, warranty, covenant or agreement contained in the Agreement (or in any instrument, document or agreement relating thereto, including any Agency Agreement), or the enforcement by Placement Agent of its rights under the Agreement or these indemnification provisions, except to the extent that and such Losses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the gross negligence or willful misconduct of the Indemnified Party seeking indemnification hereunder.  The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for its connection with the engagement of the Placement Agent by the Company or for any other
reason, except to the extent that any such liability is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from such Indemnified Party’s gross negligence or willful misconduct.
 
These Indemnification Provisions shall extend to the following persons (collectively, the “Indemnified Parties” ):  the Placement Agent, its present and former affiliated entities, managers, members, officers, employees, consultants, advisors, legal counsel, agents and controlling persons (within the meaning of the federal securities laws), and the officers, directors, partners stockholders, members, managers, employees, legal counsel, agents and controlling persons of any of them.  These indemnification provisions shall be in addition to any liability, which the Company may otherwise have to any Indemnified Party.  If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Party proposes to demand indemnification, it shall notify the Company with reasonable promptness; provided, however, that any failure by an Indemnified party to notify the Company shall not relieve the Company from its obligations hereunder.  An Indemnified Party shall have the right to retain counsel of its own choice to represent it, and the fees, expenses and disbursements of such counsel shall be borne by the Company.  Any such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by the Company.  The Company shall be liable for any settlement of any claim against any Indemnified Party made with the Company’s written consent.  The Company shall not, without the prior written consent of the Placement Agent settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent (I) includes, as an unconditional term thereof, the giving by the claimant to all of the Indemnified Parties of an unconditional release from all liability in respect of such claim, and (ii) does not contain any factual or legal admission by or with respect to an Indemnified Party or an adverse statement with respect to the character, professionalism, expertise of any of the Indemnified Party or any action or inaction of any Indemnified Party. 
 
In order to provide for just and equitable contribution, if a claim or indemnification pursuant to these indemnification provisions Is made but is found in a final judgment by a court competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then the Company shall contribute to the Losses to which any Indemnified Party may be subject to in accordance with the relative benefits received by the Company and its stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified Party, on the other hand and (ii) if (and only if) the allocation provided in clause (I) of this sentence is not permitted by applicable law, in such proportion as to reflect not only the relative benefits, but also the relative fault of the Company, on the one hand, and the Indemnified Party, on the other hand, in connection with statements, acts or omissions which results in such Losses as well as any relevant equitable considerations.  No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for fraudulent misrepresentation.  The relative benefits received (or anticipated to be received) by the Company and its stockholders, subsidiaries and affiliates shall be deemed to be equal to the aggregate consideration payable or receivable by such parties in connection with the transaction or transactions to which the Agreement relates relative to the amount of fees actually received by the Placement Agent in connection with such transaction or transactions.  Notwithstanding the foregoing, in no event shall the amount contributed by all Indemnified Parties exceed the amount of fees previously received by Placement Agent pursuant to the Agreement.
 
Neither termination nor completion of the Agreement shall affect these Indemnified Provisions which shall remain operative and in full force and effect. The Indemnified Provisions shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnified Parties and their respective successors, assigns, heirs and personal representatives.


 
Section 10.                         Notices
 
All notices provided hereunder shall be given in writing and either delivered personally or by overnight courier service or sent by certified , return receipt requested, or by facsimile transmission, if to Hallmark Investments, Inc., 420 Lexington Avenue, New York, NY 10170, Attn: Edward Taylor, Managing Partner, Fax No.: (212) 661-2055, and if to the Company, to the address, set forth on the first page of this Agreement: Ms. Kathleen T. Karloff, CEO, INVO Bioscience, Inc., 100 Cummings Center, suite E421, Beverly, MA 01915: Fax No.: (978) 878-9505. -443-1989
 
Section 11.                          Invalidation of Prior Agreement

It is herby agreed by the parties hereto that the Agreement executed by the Company and the Placement Agent dated June 1, 2009 is deemed as null and void.
 
 
    Very truly yours,  
       
    Hallmark Investments, Inc.  
 
By:
/s/ Edward Taylor           
    Edward Taylor                
    Managing Partner          
       
 
ACCEPTED AND AGREED TO
AS OF THE DATE FIRST ABOVE WRITTEN
INVO Bioscience, Inc .
/s/ Kathleen Karloff       
By:  Kathleen T. Karloff 
Title: CEO