BAYWOOD INTERNATIONAL, INC.
BAYWOOD ACQUISITION, INC.
8% SUBORDINATED PROMISSORY NOTE
$350,000.00
March 30, 2007
FOR
VALUE RECEIVED, the undersigned, BAYWOOD INTERNATIONAL, INC. and
BAYWOOD ACQUISITION, INC., each a Nevada corporation located at
14950 North 83rd
Place, Suite
1, Scottsdale, Arizona
85260 (each, a "Company" and together, the
"Companies"), hereby,
jointly and severally, promise to pay to the order of
THOMAS PINKOWSKI,
an individual residing at 3703 Calle Fino Clarete San
Clemente, California 92673 ("Holder"), in lawful money of the
United States, the
principal amount
of Three Hundred Fifty Thousand
Dollars ($350,000), 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 (the "Note") is being
----
delivered by
the Companies to
Holder in partial consideration for the purchase
of the Purchased
Assets and the LifeTime Business (as such terms are defined in
that certain
Asset Purchase
Agreement, of even date herewith, by and among the
Companies, LifeTime
and the LifeTime Representatives defined therein, including
Holder (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. The
principal amount of this Note shall be payable in
-------
eight equal
quarterly installments
of Forty-Three Thousand Seven Hundred Fifty
Dollars ($43,750)
each on the last day
of March, June, September and December,
commencing June
30, 2007 through March 31, 2009. Accrued interest shall be
payable in
arrears on each such installment payment date and at maturity.
3.
Prepayment. This
Note may be prepaid in whole or in part at
any
----------
time or from time to
time without premium or penalty or discount, together with
accrued interest
to the date of payment on the principal amount prepaid.
4.
Right to Offset.
-----------------
(a)
Subject to the terms of the Asset Purchase Agreement, the
Companies
shall have
the right to offset
against this Note any and all damages sustained
by either or both of them caused by or resulting
from any default, breach or
violation by
LifeTime or any of the LifeTime
Representatives of any of their
representations,
warranties, covenants
or agreements set forth in the Asset
Purchase
Agreement.
<PAGE>
(b)
All
amounts which the Companies shall be entitled to offset as
provided above
shall by applied, first, to all interest
then accrued on this
Note, and thereafter,
to the outstanding principal amount hereof in the inverse
order of the quarterly maturities hereof.
(c)
This
Note shall be held in escrow for the period, and
under the
terms and conditions, set forth in that
certain Escrow Agreement, of even date
herewith, by and among the Companies, LifeTime, the LifeTime
Representatives and
Meltzer, Lippe,
Goldstein & Breitstone, LLP, as escrow agent (the "Escrow
Agreement").
5.
Subordination. The
payment of this Note shall be subordinate
and
-------------
junior in right of payment to the prior payment of
senior debt pursuant to a
Subordination Agreement of even date herewith, by and among
Vineyard Bank, N.A.,
the Companies
and the LifeTime Representatives, including Holder.
6. Events
of Default; Remedies.
------------------------------
6.1
The occurrence
of any one or more of the following
events
shall constitute
an Event of Default hereunder:
(a)
Default by the
Companies in the payment of the principal
of or interest on this Note when and as the same
shall become due and payable
and such default shall continue for fifteen (15) days after written
notice
thereof from
Holder; or
(b) (i) Commencement by either Company of a voluntary
case
under the federal bankruptcy laws (as now of
hereafter in effect); (ii) either
Company applying
for or consenting to the appointment of, or the taking
of
possession by,
a receiver, custodian, trustee or
liquidator of itself or of a
substantial part of its assets; (iii) either Company making a
general assignment
for the benefit of creditors; or (iv) the failure of either Company
generally to
pay its debts as they become due; or
(c)
The entry of a decree
or order by any court of competent
jurisdiction in respect of either Company granting (i) relief in
any involuntary
case under the federal
bankruptcy laws (as now or hereafter in effect); or (ii)
appointment of
a trustee, receiver,
custodian or liquidator for either Company
or for a substantial part of its assets, and such case or
proceeding shall
continue undismissed
or unstayed for a period of one hundred twenty (120)
consecutive days.
6.2
Upon
the happening of any Event of Default hereunder,
the
entire principal
sum and all interest
thereon, at the option of Holder, may be
declared and thereupon
shall become immediately due and payable. In such event
the Companies
shall be responsible to pay all of
Holder's reasonable costs of
collection, including
attorney's
fees.
7.
Notices. All notices
and other communications required or permitted
-------
under this
Note shall be made in accordance with the
provisions of the Asset
Purchase Agreement.
The Companies waive presentment for payment, notice of
non-payment, protest,
demand, notice of protest, notice of
2
<PAGE>
intent to accelerate, notice of acceleration and dishonor, diligence in
enforcement and
indulgences
of any kind.
8.
Amendment;
Waiver. This Note may
not be amended or modified except
-----------------
by an instrument in writing duly executed by the Companies and Holder.
No
failure or
delay on the part of Holder in the
exercise of any power, right or
privilege hereunder
shall operate as a
waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude
other or further
exercise thereof
or of any other right, power privilege. All rights and
remedies existing
hereunder are cumulative to, and not exclusive of, any rights
or remedies
otherwise available.
9.
Severability. If
any provision hereof
shall for any reason be held
------------
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality, or
unenforceability
shall not affect any
other provisions hereof,
and this Note shall be construed as if such
invalid, illegal or unenforceable
provision has
never been contained herein.
10.
Assignment. This
Note may not be
assigned, pledged, negotiated or
----------
transferred by
Holder and shall inure solely to the benefit of Holder.
11.
Governing Law; Waiver
of Jury Trial. This
Note is made under, and
------------------------------------
shall be construed and enforced in accordance with, the
internal laws of the
State of Arizona, without regard to principles of conflicts of laws. The
Companies irrevocably
waive, to the maximum
extent permitted by law, any right
they may have to a trial by jury in respect of any litigation
directly or
indirectly at
any time arising out of, under or in
connection with this Note.
[SIGNATURE PAGE FOLLOWS]
3
<PAGE>
IN
WITNESS WHEREOF, the undersigned have caused this Note to be
executed as
of the 30th day of March, 2007.
BAYWOOD INTERNATIONAL,
INC.
By: /s/ Neil
Reithinger
------------------------------
Name: Neil
Reithinger
Title: President & C.E.O.
BAYWOOD ACQUISITION,
INC.
By: /s/ Neil
Reithinger
------------------------------
Name: Neil
Reithinger
Title: President
4
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Date Principal
Interest Amount Adjustment
Adjustment
Principal
Interest
of Offset to Principal
to Interest
Balance
Balance
Installment
---- ---------
-------- --------- ------------ ----------- --------- --------
<S>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
Total amount of principal and interest due on March 31, 2009:
------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
BAYWOOD INTERNATIONAL, INC.
BAYWOOD ACQUISITION, INC.
8% SUBORDINATED PROMISSORY NOTE
$175,000.00
March 30, 2007
FOR
VALUE RECEIVED, the undersigned, BAYWOOD INTERNATIONAL, INC. and
BAYWOOD ACQUISITION, INC., each a Nevada corporation located at
14950 North 83rd
Place, Suite
1, Scottsdale, Arizona
85260 (each, a "Company" and together, the
"Companies"), hereby,
jointly and severally, promise to pay to the order of
CHARLES UNG,
an individual residing at 210 Crescent Glen Drive, Glendora,
California
91741("Holder"), in lawful money of the United States, the
principal
amount of One Hundred Seventy Five Thousand
Dollars ($175,000), 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 (the "Note") is being
----
delivered by
the Companies to
Holder in partial consideration for the purchase
of the Purchased
Assets and the LifeTime Business (as such terms are defined in
that certain
Asset Purchase
Agreement, of even date herewith, by and among the
Companies, LifeTime
and the LifeTime Representatives defined therein, including
Holder (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. The
principal amount of this Note shall be payable in
-------
eight equal quarterly
installments of Twenty One Thousand Eight Hundred Seventy
Five Dollars
($21,875) each on the last day of March, June, September
and
December, commencing
June 30, 2007 through March 31, 2009.
Accrued interest
shall be payable in arrears on each such installment payment date and
at
maturity.
3.
Prepayment. This
Note may be prepaid in whole or in part at
any
----------
time or from time to
time without premium or penalty or discount, together with
accrued interest
to the date of payment on the principal amount prepaid.
4.
Right to Offset.
-----------------
(a)
Subject to the terms of the Asset Purchase Agreement, the
Companies
shall have
the right to offset
against this Note any and all damages sustained
by either or both of them caused by or resulting
from any default, breach or
violation by
LifeTime or any of the LifeTime
Representatives of any of their
representations,
warranties, covenants
or agreements set forth in the Asset
Purchase
Agreement.
<PAGE>
(b)
All
amounts which the Companies shall be entitled to offset as
provided above
shall by applied, first, to all interest
then accrued on this
Note, and thereafter,
to the outstanding principal amount hereof in the inverse
order of the quarterly maturities hereof.
(c)
This
Note shall be held in escrow for the period, and
under the
terms and conditions, set forth in that
certain Escrow Agreement, of even date
herewith, by and among the Companies, LifeTime, the LifeTime
Representatives and
Meltzer, Lippe,
Goldstein & Breitstone, LLP, as escrow agent (the "Escrow
Agreement").
5.
Subordination. The
payment of this Note shall be subordinate
and
-------------
junior in right of payment to the prior payment of
senior debt pursuant to a
Subordination Agreement of even date herewith, by and among
Vineyard Bank, N.A.,
the Companies
and the LifeTime Representatives, including Holder.
6.
Events of Default; Remedies.
------------------------------
6.1
The occurrence
of any one or more of the following
events
shall constitute
an Event of Default hereunder:
(a) Default
by the Companies in
the payment of the principal of
or interest
on this Note when and as the same shall
become due and
payable and
such default shall continue for fifteen
(15) days after
written notice
thereof from Holder; or
(b) (i) Commencement
by either Company of a voluntary case under
the federal
bankruptcy
laws (as now of hereafter in effect);
(ii)
either Company
applying for or consenting to the
appointment of, or
the taking
of possession by, a receiver, custodian, trustee or
liquidator of
itself or of a substantial part of its
assets; (iii)
either Company
making a general assignment for the benefit of
creditors; or (iv) the
failure of either Company generally to pay its
debts as they become due; or
(c) The entry of a decree or order by any court of
competent
jurisdiction in
respect of either
Company granting (i) relief in any
involuntary case
under the federal bankruptcy laws (as now or
hereafter in
effect); or (ii) appointment of a trustee,
receiver,
custodian or
liquidator for either
Company or for a substantial part
of its assets, and
such case or proceeding shall continue undismissed
or unstayed for a period of one hundred twenty (120) consecutive
days.
6.2
Upon the happening of any Event of Default hereunder,
the
entire principal
sum and all interest
thereon, at the option of Holder, may be
declared and thereupon
shall become immediately due and payable. In such event
the Companies
shall be responsible to pay all of
Holder's reasonable costs of
collection, including
attorney's
fees.
7.
Notices. All notices
and other communications required or permitted
-------
under this
Note shall be made in accordance with the
provisions of the Asset
Purchase Agreement.
The Companies
2
<PAGE>
waive presentment for payment, notice of non-payment, protest,
demand, notice of
protest, notice
of intent to accelerate, notice of
acceleration and dishonor,
diligence in
enforcement
and indulgences of any kind.
8.
Amendment;
Waiver. This Note may
not be amended or modified except
-----------------
by an instrument in writing duly executed by the Companies and Holder.
No
failure or
delay on the part of Holder in the
exercise of any power, right or
privilege hereunder
shall operate as a
waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude
other or further
exercise thereof
or of any other right, power privilege. All rights and
remedies existing
hereunder are cumulative to, and not exclusive of, any rights
or remedies
otherwise available.
9.
Severability. If
any provision hereof
shall for any reason be held
------------
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality, or
unenforceability
shall not affect any
other provisions hereof,
and this Note shall be construed as if such
invalid, illegal or unenforceable
provision has
never been contained herein.
10.
Assignment. This
Note may not be
assigned, pledged, negotiated or
----------
transferred by
Holder and shall inure solely to the benefit of Holder.
11.
Governing Law; Waiver
of Jury Trial. This
Note is made under, and
------------------------------------
shall be construed and enforced in accordance with, the
internal laws of the
State of Arizona, without regard to principles of conflicts of laws. The
Companies irrevocably
waive, to the maximum
extent permitted by law, any right
they may have to a trial by jury in respect of any litigation
directly or
indirectly at
any time arising out of, under or in
connection with this Note.
[SIGNATURE PAGE FOLLOWS]
3
<PAGE>
IN WITNESS
WHEREOF, the undersigned have caused this Note to be
executed as of the 30th day of March, 2007.
BAYWOOD INTERNATIONAL,
INC.
By: /s/ Neil
Reithinger
------------------------------
Name: Neil
Reithinger
Title: President & C.E.O.
BAYWOOD ACQUISITION,
INC.
By: /s/ Neil
Reithinger
------------------------------
Name: Neil
Reithinger
Title: President
4
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Date Principal
Interest Amount Adjustment Adjustment Principal Interest
of Offset to Principal
to Interest
Balance
Balance
Installment
---- ---------
-------- --------- ------------ ----------- --------- --------
<S>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
Total amount of principal and interest due on March 31, 2009:
------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
BAYWOOD INTERNATIONAL, INC.
BAYWOOD ACQUISITION, INC.
8% SUBORDINATED PROMISSORY NOTE
$175,000.00
March 30, 2007
FOR
VALUE RECEIVED, the undersigned, BAYWOOD INTERNATIONAL, INC. and
BAYWOOD ACQUISITION, INC., each a Nevada corporation located at
14950 North 83rd
Place, Suite
1, Scottsdale, Arizona
85260 (each, a "Company" and together, the
"Companies"), hereby,
jointly and severally,
promise to pay to the order of M.
AMIRUL KARIM,
an individual residing at 12921Berkhamsted Street,
Cerritos,
California 90703-7235
("Holder"),
in lawful money of the United States,
the
principal amount
of One Hundred Seventy Five Thousand Dollars ($175,000),
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 (the "Note") is being
----
delivered by
the Companies to
Holder in partial consideration for the purchase
of the Purchased
Assets and the LifeTime Business (as such terms are defined in
that certain
Asset Purchase
Agreement, of even date herewith, by and among the
Companies, LifeTime
and the LifeTime Representatives defined therein, including
Holder (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. The
principal amount of this Note shall be payable in
-------
eight equal quarterly
installments of Twenty One Thousand Eight Hundred Seventy
Five Dollars
($21,875) each on the last day of March, June, September
and
December, commencing
June 30, 2007 through March 31, 2009.
Accrued interest
shall be payable in arrears on each such installment payment date and
at
maturity.
3.
Prepayment. This
Note may be prepaid in whole or in part at
any
----------
time or from time to
time without premium or penalty or discount, together with
accrued interest
to the date of payment on the principal amount prepaid.
4.
Right to Offset.
-----------------
(a)
Subject to the terms of the Asset Purchase Agreement, the
Companies
shall have
the right to offset
against this Note any and all damages sustained
by either or both of them caused by or resulting
from any default, breach or
violation by
LifeTime or any of the LifeTime
Representatives of any of their
representations,
warranties, covenants
or agreements set forth in the Asset
Purchase
Agreement.
<PAGE>
(b)
All
amounts which the Companies shall be entitled to offset as
provided above
shall by applied, first, to all interest
then accrued on this
Note, and thereafter,
to the outstanding principal amount hereof in the inverse
order of the quarterly maturities hereof.
(c)
This
Note shall be held in escrow for the period, and
under the
terms and conditions, set forth in that
certain Escrow Agreement, of even date
herewith, by and among the Companies, LifeTime, the LifeTime
Representatives and
Meltzer, Lippe,
Goldstein & Breitstone, LLP, as escrow agent (the "Escrow
Agreement").
5.
Subordination. The
payment of this Note shall be subordinate
and
-------------
junior in right of payment to the prior payment of
senior debt pursuant to a
Subordination Agreement of even date herewith, by and among
Vineyard Bank, N.A.,
the Companies
and the LifeTime Representatives, including Holder.
6.
Events of Default; Remedies.
------------------------------
6.1
The occurrence
of any one or more of the following
events
shall constitute
an Event of Default hereunder:
(a) Default
by the Companies in
the payment of the principal of
or interest
on this Note when and as the same shall
become due and
payable and
such default shall continue for fifteen
(15) days after
written notice
thereof from Holder; or
(b) (i) Commencement
by either Company of a voluntary case under
the federal
bankruptcy
laws (as now of hereafter in effect);
(ii)
either Company
applying for or consenting to the
appointment of, or
the taking
of possession by, a receiver, custodian, trustee or
liquidator of
itself or of a substantial part of its
assets; (iii)
either Company
making a general assignment for the benefit of
creditors; or (iv) the
failure of either Company generally to pay its
debts as they become due; or
(c) The entry of a decree or order by any court of
competent
jurisdiction in
respect of either
Company granting (i) relief in any
involuntary case
under the federal bankruptcy laws (as now or
hereafter in
effect); or (ii) appointment of a trustee,
receiver,
custodian or
liquidator for either
Company or for a substantial part
of
its assets, and such
case or proceeding shall continue undismissed
or unstayed for a period of one hundred twenty (120) consecutive
days.
6.2
Upon the happening of any Event of Default hereunder,
the
entire principal
sum and all interest
thereon, at the option of Holder, may be
declared and thereupon
shall become immediately due and payable. In such event
the Companies
shall be responsible to pay all of
Holder's reasonable costs of
collection, including
attorney's
fees.
7.
Notices. All notices
and other communications required or permitted
-------
under this
Note shall be made in accordance with the
provisions of the Asset
Purchase Agreement.
The Companies
2
<PAGE>
waive presentment for payment, notice of non-payment, protest,
demand, notice of
protest, notice
of intent to accelerate, notice of
acceleration and dishonor,
diligence in
enforcement
and indulgences of any kind.
8.
Amendment; Waiver.
This Note may not be
amended or modified except
------------------
by an instrument in writing duly executed by the Companies and Holder.
No
failure or
delay on the part of Holder in the
exercise of any power, right or
privilege hereunder
shall operate as a
waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude
other or further
exercise thereof
or of any other right, power privilege. All rights and
remedies existing
hereunder are cumulative to, and not exclusive of, any rights
or remedies
otherwise available.
9.
Severability. If
any provision hereof
shall for any reason be held
------------
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality, or
unenforceability
shall not affect any
other provisions hereof,
and this Note shall be construed as if such
invalid, illegal or unenforceable
provision has
never been contained herein.
10.
Assignment. This
Note may not be
assigned, pledged, negotiated or
----------
transferred by
Holder and shall inure solely to the benefit of Holder.
11.
Governing Law; Waiver
of Jury Trial. This
Note is made under, and
------------------------------------
shall be construed and enforced in accordance with, the
internal laws of the
State of Arizona, without regard to principles of conflicts of laws. The
Companies irrevocably
waive, to the maximum
extent permitted by law, any right
they may have to a trial by jury in respect of any litigation
directly or
indirectly at
any time arising out of, under or in
connection with this Note.
[SIGNATURE PAGE FOLLOWS]
3
<PAGE>
IN WITNESS
WHEREOF, the undersigned have caused this Note to be
executed as of the 30th day of March, 2007.
BAYWOOD INTERNATIONAL,
INC.
By: /s/ Neil
Reithinger
------------------------------
Name: Neil
Reithinger
Title: President & C.E.O.
BAYWOOD ACQUISITION,
INC.
By: /s/ Neil
Reithinger
------------------------------
Name: Neil
Reithinger
Title: President
4
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Date Principal
Interest Amount Adjustment
Adjustment
Principal
Interest
of Offset to Principal
to Interest
Balance
Balance
Installment
---- ---------
-------- --------- ------------ ----------- --------- --------
<S>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
---- ---------
-------- --------- ------------ ----------- --------- --------
Total amount of principal and interest due on March 31, 2009:
------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
NEITHER THE
SECURITIES REPRESENTED
HEREBY NOR THE SECURITIES ISSUABLE UPON THE
EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE
"SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS AND MAY
NOT BE
OFFERED, SOLD,
PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER
THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN
OPINION OF
COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH
SECURITIES, WHICH
COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS
WARRANT OR
SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE
SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
BAYWOOD INTERNATIONAL, INC.
Warrants for the Purchase
of
Shares of Common Stock, Par Value $0.001 Per Share
No. W-46
THIS
CERTIFIES that, for consideration, the receipt and sufficiency of
which are hereby acknowledged, and other value
received, Thomas Pinkowski, an
individual (the
"Holder") is entitled to subscribe for, and purchase
from,
BAYWOOD INTERNATIONAL,
INC., a Nevada corporation (the "Company"), upon
the
terms and conditions set forth herein, at any time or
from time to time on or
after the date hereof (the "Initial Exercise Date")
until 5:00 P.M. New York
City local
time on the fifth anniversary of the Initial
Exercise Date (the
"Exercise Period"),
up to an aggregate of 350,000 shares
of common stock, par
value $0.001
per share (the "Common Stock"), of the
Company. This Warrant is
initially exercisable
at $0.05 per share; provided, however, that upon
the
-------- -------
occurrence of
any of the events specified in Section 5 hereof, the
rights
granted by
this Warrant,
including the exercise price and the number of shares
of Common Stock to be
received upon such exercise, shall be adjusted as therein
specified. The
term "Exercise Price"
shall mean, depending on the context, the
initial exercise
price (as set forth
above) or the adjusted exercise price per
share.
As
used herein, the term "this Warrant" shall mean and include this
Warrant
and any Warrant or Warrants hereafter issued as a consequence of
the exercise or
transfer of
this Warrant in whole or in part. Each share of Common
Stock
issuable upon the exercise hereof shall be hereinafter referred to
as a "Warrant
Share".
<PAGE>
1.
This
Warrant may be
exercised during the Exercise Period, either in
whole or in part, by
the surrender of this Warrant (with the completed Election
to Exercise
in the form set forth in Schedule 1
attached hereto and forming a
----------
part hereof,
duly executed) to the Company at its office at 1490
North 83rd
Place, Suite
1, Scottsdale, Arizona 852601, or at such other place as is
designated in
writing by the
Company, together with payment of an amount equal
to the product of the
Exercise Price and the number of Warrant Shares for which
this Warrant
is being exercised in the form of, at
the Holder's option, (A) a
certified or bank cashier's check payable to the Company, or (B) a
wire transfer
of funds to an account designated by the Company. If this Warrant is not
registered in
the name of the initial registered Holder, an assignment
evidencing the assignment of this Warrant to the current Holder, in
the form set
forth in Schedule 2 attached hereto and forming part hereof, shall
also be
-----------
presented to
the Company at the time of exercise.
2.
Upon
each exercise of the Holder's rights to purchase Warrant
Shares, the
Holder shall be deemed to be the holder of
record of the Warrant
Shares,
notwithstanding that
the transfer books of the Company
shall then be
closed or certificates representing the Warrant Shares with respect to
which
this Warrant
was exercised shall not then have been
actually delivered to the
Holder. As
soon as practicable after each such
exercise of this Warrant, the
Company shall
issue and deliver to the Holder a certificate or
certificates
representing the
Warrant Shares
issuable upon such exercise, registered in the
name of the Holder or
its designee. If this Warrant should be exercised in part
only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a Warrant evidencing the right of the Holder to
purchase the
balance of
the aggregate number of Warrant Shares
purchasable hereunder as to
which this
Warrant has not been exercised or assigned.
3.
Any
Warrants issued upon the transfer or exercise in
part of this
Warrant shall
be numbered and shall be registered in a
warrant register (the
"Warrant Register") as
they are issued. The
Company shall be entitled to treat
the registered
holder of any Warrant on the Warrant
Register as the owner in
fact thereof for all purposes, and shall not be bound to recognize
any equitable
or other claim to, or interest in, such Warrant on the part of any
other person,
and shall not be liable for any registration
of transfer of Warrants which are
registered or
to be registered in the name of a
fiduciary or the nominee of a
fiduciary unless
made with the actual
knowledge that a fiduciary or nominee is
committing a
breach of trust in requesting such
registration or transfer, or
with the knowledge of such facts that its
participation therein amounts to bad
faith. This Warrant
shall be transferable on the books of the Company only upon
delivery thereof, duly endorsed by the Holder or by his duly
authorized attorney
or representative, or
accompanied by proper evidence of succession, assignment,
or authority to
transfer, together with an assignment evidencing the assignment
of this Warrant, in the form set forth in Schedule 2 attached
hereto and forming
----------
a part hereof. In all cases of transfer by an attorney, executor,
administrator,
guardian, or
other legal representative, duly authenticated
evidence of his,
her, or its authority
shall be produced. Upon any registration of transfer, the
Company shall deliver
a new Warrant or Warrants to the person entitled thereto.
This Warrant may be
exchanged, at the option of the Holder thereof, for another
Warrant, or
other Warrants of different denominations, of like tenor and
representing in
the aggregate the right to purchase a like
number of Warrant
Shares (or
portions thereof), upon surrender to the Company or its duly
authorized agent.
Notwithstanding
the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any
person if, in
the opinion
of counsel to the Company, such transfer
<PAGE>
does not comply with the provisions of the Securities Act
and the rules and
regulations
thereunder.
4.
(a)
The
Company shall at all times reserve and keep
available
out of its authorized and unissued Common Stock, solely for the
purpose of
providing for
the exercise of the Warrants, such number of
shares of Common
Stock as shall, from time to time, be sufficient therefor. The
Company covenants
that all Warrant Shares which may be issued upon
the exercise of the purchase
rights represented
by this Warrant will, upon exercise
of the purchase rights
represented by this
Warrant, be duly authorized, validly issued, fully paid and
non-assessable and
free from all taxes, liens and charges in
respect of the
issue thereof
(other than taxes in respect of any transfer occurring
contemporaneously with
such issue), without any personal liability attaching to
the ownership
thereof and will not
be issued in violation of any preemptive or
similar rights of
stockholders. The Company further covenants that its issuance
of this Warrant shall
constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue
the necessary
certificates for
the Warrant Shares upon the exercise of the
purchase rights
under this
Warrant. The Company
will take all such reasonable action as may be
necessary to
assure that such Warrant Shares may be
issued as provided herein
without violation of any applicable law or regulation, or of any
requirements of
the trading
market upon which the Common Stock may be listed.
(b)
The
transfer agent for the Common Stock and every subsequent
transfer agent for any of the Company's securities issuable upon
the exercise of
this Warrant
shall be irrevocably authorized and directed at all times to
reserve such
number of authorized securities as shall be required for such
purpose. The
Company shall keep a copy of this Warrant on file with the
transfer agent for the Common Stock and with every subsequent
transfer agent for
shares of the Company's securities issuable
upon the exercise of this Warrant.
The Company
shall supply such transfer agent with duly
executed certificates
representing the
Common Stock or other securities for such purposes.
5.
(a)
The
Exercise Price for the Warrants in effect
from time to
time, and the number of shares of Common Stock issuable
upon exercise of the
Warrants, shall
be subject to adjustment, as follows: in the
event that the
Company shall
at any time after the date hereof (A)
declare a dividend on the
outstanding Common
Stock payable in
shares of its capital stock, (B) subdivide
the outstanding
Common Stock, (C)
combine (including by way of a reverse stock
split) the
outstanding
Common Stock into a smaller number of shares,
or (D)
issue any shares of its capital stock by
reclassification of the Common Stock
(including any
such reclassification in connection with a consolidation or
merger in which the
Company is the continuing corporation), then, in each case,
the Exercise
Price per Warrant Share in effect at the
time of the record date
for the determination of stockholders entitled to receive such dividend or
distribution or
of the effective date of such subdivision, combination,
or
reclassification shall
be adjusted so that it
shall equal the price determined
by multiplying
such Exercise Price by
a fraction, the numerator of which shall
be the number of shares of Common Stock
outstanding immediately prior to such
action, and
the denominator of which shall be the number of
shares of Common
Stock outstanding
after giving effect to
such action. Such adjustment shall be
made successively
whenever any event
listed above shall occur and shall become
effective at
the close of business
<PAGE>
on such record date or at the close of business on the date
immediately
preceding such
effective date, as applicable.
(b)
If the Company, at any time while this Warrant is outstanding,
shall distribute to all or substantially all holders of Common
Stock (and not to
the Holder)
evidence of its indebtedness or assets (including
cash and cash
dividends) or rights or warrants to subscribe for or purchase any
security other
than the Common Stock (which shall be subject to Section
5(a)), then in each
such case the Exercise Price shall be adjusted by multiplying the
Exercise Price
in effect immediately prior to the record date fixed for determination
of
stockholders entitled
to receive such distribution by a
fraction of which (i)
the denominator
shall be the Current Market Price per share of
Common Stock
determined as of the record date mentioned above and (ii) the
numerator shall be
such Current Market Price per share of Common Stock on such record
date less the
then per share fair market value at such record date of the
portion of such
evidence of indebtedness or assets (including cash and cash
dividends) or rights
or warrants
to subscribe for or purchase any security other
than the Common
Stock so distributed applicable to one outstanding
share of the Common Stock,
which fair
market value shall be reduced by the fair market value of
consideration, if
any, paid to the Company by holders of Common Stock in
exchange for
such evidence of indebtedness or assets
or rights or warrants so
distributed, in
each case as such fair
market value is determined by the Board
of Directors
of the Company in good faith.
In either case,
the adjustments
shall be described in a statement provided to the Holder of the
portion of
evidences of
indebtedness
or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security other
than the
Common Stock so
distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made
whenever any such distribution
is made and shall become effective
immediately after the record date mentioned
above.
(c)
Further, in
the event of any adjustment pursuant
to Section
5(a) or Section 5(b), the number of Warrant Shares
shall be adjusted to equal
the quotient of (i)
divided by (ii), where (i) equals the product of the number
of Warrant
Shares issuable upon
the exercise of this Warrant immediately prior
to such adjustment multiplied by the Exercise Price per Warrant Share
immediately prior
to such adjustment,
and where (ii) equals the Exercise Price
immediately following
such adjustment.
(d)
As used herein, the Current Market Price
per share of Common
Stock on any date
shall be deemed to be the average of the daily closing prices
for the 30 consecutive
trading days immediately preceding the date in question.
The closing
price for each day shall be the last
reported sales price regular
way or, in case no such reported sale
takes place on such day, the closing bid
price regular way, in
either case on the principal national securities exchange
(including, for purposes hereof, the Nasdaq National Market) on
which the Common
Stock is listed or
admitted to trading or, if the Common Stock is not listed or
admitted to
trading on any national securities
exchange, the highest reported
bid price for the Common Stock as furnished by the National
Association of
Securities Dealers,
Inc. through the Nasdaq SmallCap Market or a similar
organization if
the Nasdaq SmallCap Market is no longer reporting such
information. If, on any such date, the Common Stock is not listed
or admitted to
trading on
any national securities exchange and is not quoted on the
Nasdaq
SmallCap Market
or any similar
organization, the Current Market Price shall be
deemed to be the fair value of a share of Common Stock on such
<PAGE>
date, as determined in good faith by the Board of Directors of
the Company,
absent manifest
error.
(e)
All calculations
under this Section 5 shall be made to the
nearest cent
or to the nearest one-hundredth of a
share, as the case may be.
(f)
In any case in which this Section 5 shall require that
an
adjustment in the number of Warrant Shares be made effective as of
a record date
for a specified event, the Company may
elect to defer, until the occurrence of
such event,
issuing to the Holder, if the Holder
exercised this Warrant after
such record
date, the Warrant
Shares, if any, issuable upon such exercise over
and above the number
of Warrant Shares issuable upon such exercise on the basis
of the number of shares of Common Stock
outstanding or in effect prior to such
adjustment; provided,
however, that the Company shall deliver to
the Holder a
--------
-------
due bill or other appropriate instrument evidencing the Holder's right to
receive such
additional shares of Common Stock upon the occurrence of the
event
requiring such
adjustment.
(g)
Whenever there
shall be an adjustment as provided in this
Section 5,
the Company shall within 15 days thereafter cause
written notice
thereof to be sent in
accordance with Section 13 hereunder to the Holder, which
notice shall be accompanied by an officer's certificate setting
forth the number
of Warrant Shares
issuable and the Exercise Price thereof after such adjustment
and setting
forth a brief
statement of the facts requiring such adjustment and
the computation
thereof, which officer's certificate shall be conclusive
evidence of
the correctness of any such adjustment absent manifest
error.
(h)
The Company shall not be required to issue fractions of shares
of Common Stock or
other capital stock of the Company upon the exercise of this
Warrant. If
any fraction of a share of capital
stock would be issuable on the
exercise of
this Warrant (or specified portions thereof), the
Company shall
purchase such
fraction for an amount
in cash equal to the same fraction of the
Current Market
Price of such share of Common Stock on
the date of exercise of
this Warrant.
(i)
No adjustment in the Exercise Price per Warrant Share shall be
required if
such adjustment is less than $.005; provided,
however, that any
-------- -------
adjustments which by
reason of this Section 5 are not required to be made shall
be carried
forward and taken into account in any subsequent adjustment.
6.
(a)
In
case of any capital reorganization, other than
in the
cases referred
to in Sections 5(a) and (b) hereof, or the
consolidation or
merger of the Company with or into another
corporation (other than a merger or
consolidation in which
the Company is the continuing corporation and which does
not result in any
reclassification of the outstanding shares of Common Stock or
the conversion
of such outstanding
shares of Common Stock into shares of other
stock or other securities or property), or in the
case of any sale, lease, or
conveyance to
another corporation of the property and
assets of any nature of
the Company
as an entirety or
substantially as an entirety (such actions being
hereinafter
collectively referred
to as "Reorganizations"), there shall
thereafter be
deliverable upon
exercise of this Warrant (in lieu of the number
of Warrant
Shares theretofore deliverable) the number of shares of stock
or
other
<PAGE>
securities or
property to which a holder of the respective
number of Warrant
Shares which
would otherwise have been deliverable upon the
exercise of this
Warrant would
have been entitled upon such
Reorganization if this Warrant had
been exercised in full immediately prior to such Reorganization.
In case of any
Reorganization, appropriate adjustment, as determined in good faith
by the Board
of Directors of the
Company, shall be made in the application of the provisions
herein set forth with
respect to the rights and interests of the Holder so that
the provisions
set forth herein shall thereafter be
applicable, as nearly as
possible, in
relation to any shares or other property
thereafter deliverable
upon exercise
of this Warrant.
Any such
adjustment shall be made by, and set
forth in, a supplemental agreement between the Company, or any successor
thereto, and
the Holder, with respect to this Warrant, and shall for all
purposes hereof
conclusively
be deemed to be an appropriate adjustment.
The
Company shall
not effect any such Reorganization
unless, upon or prior to the
consummation thereof, the successor corporation, or, if the Company
shall be the
surviving corporation
in any such Reorganization and is not
the issuer of the
shares of stock or other securities or property to
be delivered to holders of
shares of the Common
Stock outstanding at the effective time thereof, then such
issuer, shall
assume by written instrument the obligation to
deliver to the
Holder such shares of
stock, securities, cash, or other property as such holder
shall be entitled to purchase in accordance with the
foregoing provisions. In
the event of sale, lease, or conveyance or other transfer of all or
substantially all of the assets of the Company as part of a plan
for liquidation
of the Company, all rights to exercise this Warrant shall
terminate 30 days
after the Company
gives written notice to the Holder and each registered holder
of a Warrant that such sale or conveyance or other transfer has been
consummated.
(b) In
case of any reclassification or change of
the shares of
Common Stock issuable
upon exercise of this Warrant (other than a change in par
value or from a specified par value to no par value, or as a result of
a
subdivision or
combination, but
including any change in the shares into two or
more classes or series
of shares), or in case of any consolidation or merger of
another corporation
into the Company in which the Company is the
continuing
corporation and
in which there is a reclassification or change
(including a
change to the right to receive cash or other
property) of the shares of Common
Stock (other than a change in par value, or from no par value to a
specified par
value, or as a result
of a subdivision or combination, but including any change
in the shares into two or more classes or series of shares),
the Holder or
holders of this Warrant shall have the right thereafter to receive
upon exercise
of this Warrant solely the kind and amount of shares of stock and other
securities, property,
cash, or any combination thereof receivable
upon such
reclassification,
change, consolidation, or merger by a holder of the number of
Warrant Shares
for which this Warrant might have been exercised
immediately
prior to such reclassification, change,
consolidation, or merger. Thereafter,
appropriate provision
shall be made for adjustments which shall
be as nearly
equivalent as
practicable
to the adjustments in Section 5 hereof.
(c)
The above provisions of this Section 6 shall
similarly apply
to successive
reclassifications
and changes of shares of Common Stock
and to
successive
consolidations,
mergers, sales,
leases, or conveyances.
7.
In
case at any time the Company shall propose:
<PAGE>
(a)
to
pay any dividend or make any distribution
on shares of Common
Stock in shares of Common Stock or make any other distribution
(other than
regularly scheduled
cash dividends which
are not in a greater amount per share
than the most recent such cash dividend) to all holders of
Common Stock; or
(b)
to
issue any rights, warrants, or other
securities to all holders
of Common Stock entitling them to purchase any additional shares of
Common Stock
or any other rights, warrants, or other securities; or
(c)
to
effect any reclassification or change of
outstanding shares of
Common Stock
or any consolidation, merger, sale, lease, or conveyance of
property, as
described in Section 6 hereof; or
(d)
to
effect any liquidation, dissolution, or winding-up of the
Company; or
(e)
to
take any other action which would cause an
adjustment to the
Exercise Price
per Warrant Share; then, and in any
one or more of such cases,
the Company
shall give written notice thereof in accordance with
Section 13
hereunder at
least 15 days prior to (i) the date as of which
the holders of
record of shares of Common Stock to be entitled to
receive any such dividend,
distribution, rights,
warrants, or other
securities are to be determined, (ii)
the date on which any such reclassification, change
of outstanding shares of
Common Stock,
consolidation,
merger, sale, lease, conveyance of property,
liquidation,
dissolution, or winding-up is expected to become effective and
the
date as of which it is expected that holders of record of shares of
Common Stock
shall be entitled to
exchange their shares for securities or other property, if
any, deliverable
upon such reclassification, change of outstanding shares,
consolidation, merger,
sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which
would require
an adjustment
to the Exercise Price per Warrant Share.
8.
The
issuance of any shares
or other securities upon the exercise of
this Warrant and the
delivery of certificates or other instruments representing
such shares
or other securities
shall be made without charge to the Holder for
any tax or other charge in respect of such
issuance. The Company
shall not,
however, be
required to pay any tax which may be payable in
respect of any
transfer involved
in the issue and
delivery of any certificate in a name other
than that of the Holder, and the Company shall not be required
to issue or
deliver any
such certificate
unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such
tax or shall
have established to the satisfaction of the Company that such tax
has been paid.
9.
The
Company shall not amend its Articles of Incorporation, its
By-laws or participate in any reorganization, transfer of assets,
consolidation,
merger, dissolution,
issue or sale of
securities or any other voluntary action
for the purpose of avoiding or seeking to avoid the observance or
performance of
any of the terms to be
observed or performed by the Company pursuant to Section
5 hereof, but shall at all times in good
faith assist in carrying out all such
action as may be reasonably necessary or
appropriate in order to protect the
rights of the Holder against dilution or
other impairment as provided therein.
<PAGE>
10.
The
Company will (a) obtain and keep effective any and all permits,
consents and approvals of Federal or state governmental agencies
and authorities
and make all filings
under Federal and state securities laws, that are required
in connection
with the issuance and delivery of this
Warrant, the exercise of
this Warrant,
and the issuance and delivery of the
Warrant Shares issued upon
exercise of
this Warrant, and (b)
have the Warrant Shares, upon their issuance
and eligibility
for listing, listed on each securities exchange
on which the
Common Stock
are then listed.
11.
Unless registered,
the Warrant Shares issued on exercise of
the
Warrants shall
be subject to a stop transfer order and the certificate
or
certificates
representing the
Warrant Shares shall
bear the following legend:
THE
SECURITIES
REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE
SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT
THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE
SECURITIES LAWS,
OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE
HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH
COUNSEL AND
