Exhibit 10.9
THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE “LAWS”). THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE LAWS, OR (II)
AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE
EXCEPTION TO OR EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
LAWS.
BAYWOOD INTERNATIONAL,
INC.
8% CONVERTIBLE
SUBORDINATED
PROMISSORY NOTE
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$100,000
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September 9, 2008
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FOR VALUE RECEIVED, the undersigned,
BAYWOOD INTERNATIONAL, INC. , a Nevada corporation (“
Baywood ”), located at 14950 North 83 rd
Place, Suite 1, Scottsdale, Arizona 85260, hereby promises to pay
to the order of SKAE BEVERAGE INTERNATIONAL, LLC , with an
address at 60 Dutch Hill Road #9, Orangeburg, New York (“
Company ”), in lawful money of the United States, the
principal amount of One Hundred Thousand Dollars ($100,000)
together with interest on the unpaid principal amount hereof, from
the date hereof until the outstanding principal amount hereof shall
be paid in full, at the rate of eight percent (8%) per annum
computed on the basis of a 365-day year.
1.
Note . This subordinated promissory note (this
“ Note ”) is being delivered by Baywood to
Company in partial consideration for the purchase of the Purchased
Assets and the Company Business (as such terms are defined in that
certain Asset Purchase Agreement, of dated September 9, 2008
herewith, by and among Baywood, Baywood New Leaf Acquisition, Inc.,
a wholly owned subsidiary of Baywood, Eric Skae and Company
(the “ Asset Purchase Agreement ”)).
Unless otherwise stated herein, all capitalized terms not
defined herein shall have the meanings ascribed to them in the
Asset Purchase Agreement.
2.
Payment .
(a)
The principal amount of this Note along
with any accrued but unpaid interest shall be payable in a single
lump sum on the fifth (5th) anniversary of the date hereof.
(b)
Accrued interest during the twelve (12)
month period following the date hereof shall be due and payable in
arrears on the first anniversary of the date hereof.
(c)
Accrued interest during the forty-eight
(48) months following the first anniversary of the date hereof
shall be payable in arrears in quarterly installments on each
three-month anniversary of the first anniversary of the date
hereof.
(d)
All payments shall be made in immediately
available funds at Company’s address set forth in the Asset
Purchase Agreement, or such other address as Company or its
transferee or assignee may designate in writing to Baywood.
Unless otherwise directed, Company hereby directs that
payments shall be made to the order of Eric Skae, 42 Delongis
Court, Sparkill, NY 10976.
3.
Optional Conversion of
Note.
3.1.
Conversion Procedure
.
(a)
At any time from and after September 8,
2009 Company at its option may convert all or any portion of this
Note into the number of shares (rounded to the nearest share) of
common stock, par value $0.001 per share, of Baywood (the “
Common Stock ”), computed by dividing the principal
amount of this Note to be converted together with the accrued
interest on such principal amount by the Conversion Price
(hereafter defined) then in effect.
(b)
Company shall effect a conversion by
surrendering this Note accompanied by a proper assignment thereof
to Baywood together with a completed and duly executed conversion
notice in the form annexed hereto. Such conversion of this
Note will be deemed to have been effected as of the close of
business on the date on which this Note and the duly completed
exercise notice have been surrendered at the principal office of
Baywood. At such time as such conversion has been effected,
the rights of Company to receive payments of principal and interest
hereon will cease and Company will be deemed to have become the
holder of record of the shares of Common Stock represented thereby.
Provisions of this Note that apply to conversion of all of
this Note also apply to conversion of a portion of it.
(c)
As soon as possible after a conversion
has been effected (but in any event within five (5) days after the
surrender of this Note and the conversion notice to Baywood),
Baywood will deliver to Company:
(i)
a certificate or certificates
representing the number of shares of Common Stock issuable by
reason of such conversion in the name of Company in such
denomination or denominations as Company has specified;
and
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(ii)
a new duly executed Note for the
principal amount of this Note which was delivered to Baywood in
connection with such conversion but which was not
converted.
(d)
The issuance of certificates for shares
of Common Stock upon conversion of this Note will be made without
charge to Company for any issuance tax in respect thereof or other
cost incurred by Baywood in connection with such conversion and the
related issuance of shares of Common Stock. Baywood
represents and warrants that upon conversion of this Note, the
Common Stock issuable with respect to such conversion will be
validly issued, fully paid and nonassessable.
(e)
Baywood will not close their respective
books against the transfer of this Note or of Common Stock issued
or issuable upon conversion of this Note in any manner which
interferes with the timely conversion of this Note. Baywood
will from time to time take all such action as may be necessary to
assure that the par value per share of the Common Stock acquirable
upon conversion of this Note is at all times equal to or less than
the Conversion Price then in effect.
(f)
This Note, when delivered for conversion
and upon delivery of the stock certificate contemplated by clause
(c)(i) above along with any replacement note for the balance due
and payable hereunder, shall be cancelled by Baywood.
3.2
Conversion Price
.
(a)
Initial Conversion Price
. The initial Conversion Price will
be $1.50 per share. In order to prevent dilution of the
conversion rights granted hereunder, the Conversion Price will be
subject to adjustment from time to time pursuant to this Section
4.2.
(b)
Reorganization, Reclassification,
Merger or Sale . In case
Baywood shall effect a reorganization, shall merge with or
consolidate into another corporation, or shall sell, transfer or
otherwise dispose of all or substantially all of its property,
assets or business and, pursuant to the terms of such
reorganization, merger, consolidation or disposition of assets,
shares of stock or other securities, property or assets of Baywood,
successor or transferee or an affiliate thereof are to be received
by or distributed to the holders of Common Stock, then Company
shall be provided with written notice from Baywood informing
Company of the terms of such reorganization, merger, consolidation
or disposition of assets and of the record date thereof for any
distribution pursuant thereto, at least ten (10) days in advance of
such record date, and Company shall have, in addition to the rights
provided for herein, the right to receive, at Company’s
election, either (i) upon conversion of this Note, the number of
shares of stock or other securities, property or assets of Baywood,
successor, transferee or affiliate thereof or cash receivable upon
or as a result of such reorganization, merger, consolidation or
disposition of assets by a holder of the number of shares of Common
Stock for which this Note is convertible immediately prior to such
event or (ii) the securities into which this Note is converted
upon, or as a result of such reorganization, merger, consolidation
or disposition of assets. The provisions of this
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paragraph (b) of this Section 4.2 shall
similarly apply to successive reorganizations, mergers,
consolidations or dispositions of assets.
(c)
Subdivision or Combination of Common
Stock . If Baywood
declares a dividend or other distribution payable in shares of
Common Stock or any shares of a class or series convertible into
Common Stock (together with the Common Stock, “
Securities ”) or subdivides its outstanding shares of
Common Stock into a larger number or
