SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT ("Agreement") is entered into by and among
Baywood International, Inc., a Nevada corporation ("BII"), ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ (BII, Pentopoulos and Schiaffino are
collectively referred to as the "Parties" or the "Shareholders") regarding the
formation and management of a company named Baywood Nutritionals, S.A.
("BNSA").
WHEREAS, the Shareholders desire to promote their mutual interests,
and those of BNSA, and to ensure the proper formation, continuity of management
and control of BNSA and for this purpose to provide restrictions upon the sale
and transfer of common stock of BNSA held by each Stockholder ("Shares"), to
provide BNSA and each Shareholder rights to purchase the shares from the other
Shareholders, and to require the purchase of the shares under certain
circumstances, on the terms and conditions hereinafter set forth;
AND WHEREAS, the Shareholders recognize that BNSA has not yet been
incorporated and that they are therefore not yet shareholders of BNSA, but
nonetheless desire to set forth, in this Agreement, the terms and conditions of
their rights and obligations to each other and BNSA which shall govern them upon
their becoming shareholders;
NOW, THEREFORE, in consideration of the mutual covenants contained and
the acts to be performed by the parties hereto, the receipt and sufficiency of
which is hereby acknowledged, it is agreed as follows:
1. Organization. The Parties will incorporate BNSA, within thirty (30)
days of the execution of this Agreement, as a corporation under Chilean law or
under such other jurisdiction as the Parties shall mutually agree.
2. Limited Grant of Non-Exclusive License for BII Name. BII will grant
BNSA a limited, non-exclusive license to use the name "Baywood" in Mexico,
Central America and South America (the "Territory") for its company name and
marketing purposes, but BII retains all other ownership rights to the Baywood
name. BNSA has paid no consideration for the use of BII's trademarks, logos,
copyrights, trade names, trade designations, patents, inventions, know-how, or
trade secrets (collectively, BII's "Proprietary Rights"), and nothing contained
in this Agreement shall give BNSA any interest in any of BII'S Proprietary
Rights. BII will not at any time during or after this Agreement assert or claim
any interest in or engage in any act or assist in any act that (i) may adversely
affect the validity or enforceability of any such Proprietary Rights or (ii)
result or lead to any infringement thereon.
3. Authorized and Outstanding Capital Stock. BNSA shall initially have
three shareholders, BII, Schiaffino and Pentopoulos. BNSA's articles of
incorporation shall authorize two classes of stock, as follows where the number
of authorized shares equals the number of outstanding shares:
Class Authorized Par Value
----- ---------- ---------
Common Stock 38,900 $0.01
Preferred Stock 61,100 $1.4742
a. Shareholder Interests. The name of the persons who shall
receive capital stock upon BNSA's formation, the number of shares of
each class to be issued and the price paid follows: by such persons
for the shares in cash at the time of issuance, shall be as
Number Total
of Subscription
Class Name Shares Price
----- ---- ------------
Common Stock ▇. ▇▇▇▇▇▇▇▇▇▇ 27,800 $278
Common Stock M.A. Pentopoulos 11,100 $111
------ ----
Total: 38,900 $389
Preferred Stock BII 40,700 $60,000
Preferred Stock M.A. Pentopoulos 20,400 $30,000
------ -------
61,100 $90,000
constituting all of the outstanding shares of Common and Preferred
Stock initially issued by BNSA in conjunction with its formation.
b. Conversion Rights. At the option of the holder thereof, each
share of Preferred Stock is convertible at any time into Common Stock
on the basis of one share of Preferred Stock for one share of Common
Stock.
c. Voting Rights. The holders of shares of Common and Preferred
Stock shall be entitled to one vote per share on all matters on which
BNSA's stockholders are entitled to vote, in addition to any voting
rights required by law. The votes per share of Preferred Stock shall
at all times be equal to the number of votes per share of Common
Stock.
d. Distributions. The holders of shares of both Common and
Preferred Stock shall be entitled to share ratably in all dividends
and other distributions, when and if declared by the Board of
Directors in their sole discretion, except that (i) the Board of
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Directors of BNSA shall have discretion to allocate up to 10.0% of
distributions pursuant to an incentive compensation plan, and (ii)
shares of Preferred Stock shall, with respect to dividend rights,
rights on redemption and rights on liquidation, winding up and
dissolution, have preference over and rank prior to shares of Common
Stock and in the event that amounts payable upon such events of
distribution are not paid in full, the holders of Preferred Stock
shall share ratably in the payment of dividends or other
distributions, including accumulations, if any, in accordance with the
sums which would be payable on such shares if all dividends were
declared or discharged and paid in full.
e. Redemption of Preferred Stock. BNSA may, at its option,
from a date that is 10 years after the original date of issuance,
redeem all or any portion of the outstanding shares of Preferred Stock
unless restricted by the laws of the country. The redemption price
shall be [$1.4742] per share plus the payment of all accrued and
unpaid dividends on the shares so redeemed and shall be paid only in
cash.
4. Board of Directors. The Shareholders agree that upon formation, the
Board of Directors shall initially consist of the following three persons: ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇. BII,
Pentopoulos and Schiaffino shall have a power of appointment of at least one
member each of the Board of Directors for five years or until such earlier date
as any of such parties ceases to be a Shareholder. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, or such
other person as BII shall designate, shall be the Chairman of the Board of
Directors for the first five years. The Shareholders agree to vote their Shares
in such a manner as to elect and reelect directors and the Chairman in order to
effect the purposes of this paragraph.
5. Management: Schiaffino Employment Agreement. Among other officers
which are required to be appointed by the jurisdiction of formation or which the
Board of Directors, in its sole discretion deems necessary or in BNSA's best
interest, the Board of Directors will appoint a General Manager, who will
initially be Schiaffino. Upon formation, BNSA will enter into an Employment
Agreement with Schiaffino, substantially in the form attached as Exhibit "A,"
under which Schiaffino will direct all of BNSA's operations, will receive an
initial annual salary of $36,000 and will covenant not to compete with BNSA for
six months after she ceases to be an employee of BNSA, provided that BNSA, at
its election, makes payments to her, during such non-competition period, of the
salary she was receiving at the time she ceased to be employed. The Shareholders
specifically acknowledge that BNSA will not enter any Employment Agreement with
Pentopoulos or grant him any compensation, unless otherwise determined by the
Board of Directors.
6. Two Year Right of Repurchase - shares Held By Schiaffino. If,
pursuant to the terms of her Employment Agreement, or otherwise, Schiaffino
ceases to be employed by BNSA, Schiaffino will immediately offer to BII and
Pentopoulos, pro rata in proportion to their holdings, that portion of her
Shares which corresponds to the following schedule:
3
Months After Shares
Inception of Required to
Employment Resell
---------- ------
Less than 3 16,700
3 to 6 14,612
6 to 9 12,525
9 to 12 10,437
12 to 15 8,350
15 to 18 6,263
18 to 21 2,087
21 to 24 none
BII and Pentopoulos shall have sixty (60) days after the date that
Schiaffino ceases to be employed by BNSA to purchase Schiaffino's Shares. BII
and Pentopoulos shall have the right to purchase the number of Schiaffino's
shares pro rata according to the relative number of Shares in each of their own
names as shown on the books of BNSA. Neither BII and Pentopoulos may elect to
purchase less than all of the Shares offered. However, BII and Pentopoulos may
waive their right to pro rata purchase and may act together in purchasing all of
the Shares of the Offering Shareholder or if either BII or Pentopoulos elects
not to purchase its or his pro rata portion, the other may purchase all of the
Shares offered.
7. BII Purchase Right to Raise its Holdings to 51.0% of Outstanding
Shares. From 24 months after BNSA's formation and thereafter, as long as BII
remains a Shareholder, BII shall have the right to purchase from Pentopoulos
and/or Schiaffino, on a pro rata basis and at fair market value, an additional
10.3% of BNSA's outstanding voting shares or such other number of voting Shares
as is necessary to increase BII's total holdings to 51.0% of BNSA's total
outstanding shares of voting Common and Preferred Stock. Pentopoulos and
Schiaffino shall have the option to receive, as payment for their BNSA Shares so
purchased, either cash or the fair market value equivalent of unregistered,
restricted BII Common Stock, subject to the availability of an exemption from
registration for, and their entry into Subscription Agreements acceptable to
BII's Board of Directors for, the issuance of the restricted BII Common Stock.
Pentopoulos and Schiaffino acknowledge that, if they elect to receive BII shares
as payment for their BNSA Shares pursuant to this paragraph, there shall be no
registration rights associated with the shares.
8. Restrictions on Disposition of Shares. Each Shareholder shall hold
all shares that he or she may now own or hereafter acquire in his or her own
name and only in his or her own name. The shares of Common and Preferred Stock
held by Pentopoulos and Schiaffino but not those held by BII, shall be
non-transferrable for two years from the date of issuance. Except as hereinafter
expressly provided, from two years after BNSA's formation and thereafter, no
transfer of any shares that are owned or acquired by the Shareholders shall be
made upon the books of BNSA or be of any effect as against BNSA or any
Shareholders, and no Shareholder shall sell, assign, pledge, encumber,
hypothecate or otherwise transfer any Shares, either voluntarily,
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involuntarily, or by operation of law, and any attempt so to do shall be void
and of no force or effect, unless and until such Shareholder (including his or
her heirs, assigns or legal representatives and all persons succeeding to or
standing in his or her place or holding under him or her, whether by his or her
act or by operation of law, and hereinafter called the "Offering Shareholder")
shall first receive written consent from all other Shareholders or shall first
offer to the other Shareholders, the shares that the offering shareholder
desires to sell, assign, pledge, encumber, hypothecate, or otherwise transfer to
each proposed buyer or transferee in the following manner:
a. Notice of Proposed Sale. The Offering Shareholder shall
notify BNSA and all of the other Shareholders in writing of his or her
desire to sell Shares, with the notice setting forth (i) the number of
shares he or she proposes to sell, (ii) a statement that he or she has
received a bona fide offer to purchase the shares and that he or she
is willing to accept the offer, (iii) the name and address of the
offeror and the terms of the offer, and (iv) an offer ("Offer") to
sell the shares to BNSA, unless restricted by the laws of the country,
or to the other Shareholders of BNSA at the same price and on the same
terms as have been offered to the offering shareholder.
b. Notice of Proposed Transfer Other Than Sale. The Offering
Shareholder shall notify BNSA and all of the other Shareholders in
writing of his or her desire to transfer shares by way of gift,
pledge, hypothecation, assignment, or in any manner other than
pursuant to a bona fide offer to purchase, with the notice setting
forth (i) the number of shares he or she proposes to transfer, (ii) a
statement of the manner in which he or she proposes to make the
transfer, accompanied by copies of any related agreements, deeds of
gift, trust instruments, loan or hypothecation agreements, or
otherwise, (iii) the name and address of the proposed transferee, and
(iv) an Offer to sell the shares to BNSA unless restricted by the laws
of the country or, should BNSA decline to accept the Offer, to the
other Shareholders of BNSA, at fair market value.
c. Right of Refusal. BNSA shall have thirty (30) days after
the receipt of the notice within which to accept the Offer which Offer
shall be in writing unless restricted by the laws of the country. BNSA
must give written notice to all Shareholders of its intent either to
purchase or not to purchase the Shares. If BNSA rejects the Offer, or
if the Offer is not accepted before the termination of the thirty (30)
day period, the Offer shall automatically be extended to the other
Shareholders, who shall have thirty (30) days after notification by
BNSA of its intent to reject the Offer or after the initial thirty
(30) day period, whichever is earlier, within which to accept it.
Subject to BNSA's right to purchase the Shares, each Shareholder shall
have the right to purchase the number of shares of the Offering
Shareholder equal to the ratio of the number of shares standing in his
or her name as shown on the books of BNSA to the aggregate number of
shares standing in the names of all of the Shareholders exercising
their rights to purchase. Neither BNSA nor the other Shareholders may
elect to purchase less than all of the shares offered. However, BNSA
and the other Shareholders may act together in purchasing all of the
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shares of the Offering Shareholder. If the Offer is accepted, BNSA or
the other Shareholders, as the case may be, shall have the later of
(i) twenty (20) days after receipt of notice of the acceptance of all
the shares offered or (ii) such time frame as set forth in the Offer,
within which to purchase the Shares.
d. Waiver of Restrictions. BNSA, by a resolution signed by all
members of it Board of Directors may, in any particular instance or
for any particular period, waive or modify any one or more of the
foregoing provisions in any manner not rendering the same more onerous
to the Offering Shareholder.
e. Effect of Consent. If written consent pursuant to this Section
is granted, or if the option to purchase is not exercised by BNSA or
the other Shareholders, the Offering Shareholder shall have the right
for a period of one-hundred and twenty (120) days after (i) the
consent; (ii) the failure to exercise the purchase option; (iii) the
written notification by BNSA and the other Shareholders of their
rejection of the Offer; or (iv) until the expiration of the Offer,
whichever first occurs, to sell, transfer, or otherwise dispose of the
Shares, but only for consideration not less than, and on terms no more
favorable to the buyer or transferee than, those specified in the
Offer, and provided that the shares so transferred shall remain
subject to the restrictions in this Agreement and the transferee
thereof shall be bound by the terms and conditions of this Agreement.
Any transfer not made in accordance with the terms of this Section
shall automatically be deemed null and void, At the request of BNSA,
any transferee, and the spouse of the transferee, if any, shall
execute and deliver an appropriate written instrument acknowledging
that the transferee, the spouse of the transferee, and the shares
owned beneficially or of record by the transferee are subject to and
bound by all of the terms and conditions of this Agreement. After the
expiration of such one-hundred and twenty (120) day period, the shares
and any offer for such shares shall be subject to all terms and
restrictions set forth herein.
9. Right of Purchase Upon 51% or More Change in Control of BII
a. Offer. The undersigned agree that upon a change of 51.0% or
more of the direct or beneficial ownership of BII, BII shall
immediately submit to BNSA, through the Board of Directors, a written
offer to sell all of the shares then standing in BII's name for cash
at fair market and in accordance with Section 8.
b. Time of Offer. If the offer specified in paragraph a. is not
actually made, the offer shall be deemed to have been made and
received fifteen (15) days after BNSA acquires actual knowledge of the
occurrence of the change in control of BII. BNSA shall notify all
other Shareholders of the occurrence of the change in control of BII
immediately thereafter.
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c. Right to Purchase. After a change in control of BII has
occurred, BNSA, unless restricted by the laws of the country, shall
have thirty (30) days after the determination of the fair market value
of the shares and in accordance with Section 8. BNSA must give written
notice to all Shareholders of its intent to accept or reject the
offer. If BNSA rejects the offer, the offer shall automatically be
extended to the other Shareholders who shall have thirty (30) days
within which to accept it. Each Shareholder shall have the right to
purchase the number of shares equal to the ratio of the number of
shares standing in his or her name as shown on the books of BNSA to
the aggregate number of shares standing in the names of all of the
Shareholders exercising their rights to purchase. If the other
Shareholders do not exercise the right to purchase, then BII may
retain its shares despite the occurrence of the change in control of
BII, but subject to all other provisions of this Agreement. Neither
BNSA nor the other Shareholders may accept less than all of the shares
offered. BNSA and the other Shareholders may act together in
purchasing all of the shares of the Offering Shareholder, If the offer
is accepted, BNSA or the other Shareholders, as the case may be, shall
have twenty (20) days after the date of acceptance within which to
purchase the shares for cash.
10. Purchase and Sale Upon Death or Dissolution of Shareholder. BNSA,
unless restricted by the laws of the country, and each of the Shareholders agree
that upon the death or dissolution of a Shareholder, BNSA or the other
Shareholders shall purchase, and the deceased Shareholder's spouse or the estate
of the deceased Shareholder or the Shareholder in liquidation shall sell, all of
the shares owned by the Shareholder and his or her spouse at the time of his or
her death, at fair market value and in accordance with Section 8.
a. Payment. BNSA shall pay the purchase price under this
Section 3 in cash within one hundred twenty (120) days after the date
of the Shareholder's death or dissolution.
b. Life Insurance Proceeds. Notwithstanding the foregoing, if
BNSA is the beneficiary of life insurance on the life of any
Shareholder, on the death of that Shareholder the proceeds of the
insurance up to the full purchase price shall be applied within ninety
(90) days after the proceeds are received by BNSA toward purchase of
the shares that BNSA is obligated to purchase. Until payment of any
insurance proceeds is made, any such proceeds received by BNSA may
only be invested in the form of time certificates of deposit or
savings accounts in national banking institutions during the interim
period before payment is made. The balance of any life insurance
proceeds after being applied for the purchase of the shares shall be
retained by BNSA.
11. Shareholders' Duties Upon Divorce. Each Shareholder agrees that if
any Shareholder shall become divorced, the Shareholder first will have the
option of purchasing his or her divorced spouse's interest in the Shares as may
be determined by the governing jurisdiction of the Shareholders place of
residence at fair market value and upon such terms and conditions as may be
agreed and in accordance with Section 8 unless such divorced spouse has at or
before
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divorce transferred his or her interest in the shares to the Shareholder or to a
trust under the terms of which disposition of the shares can be made only under
the terms of this Agreement with the Shareholder having the sole and exclusive
right to vote such shares for all purposes whatsoever during his or her
lifetime. If the Shareholder does not exercise his or her right to purchase such
shares, the other Shareholders shall have such right according to the same terms
and conditions.
12. Where Repurchase Illegal. If BNSA shall not be permitted under
applicable law to purchase the shares as provided for or required by any Section
of this Agreement, each Shareholder agrees to vote or to sign a consent
resolution to authorize BNSA to purchase shares under this Agreement to the
maximum extent permitted by law. The Shareholders further agree to take all
proper action, to the extent permitted by law, to enable BNSA to carry out its
obligation to purchase the shares pursuant to the terms of this Agreement.
Notwithstanding the foregoing, no Shareholder shall be required to make
additional capital contributions to BNSA.
13. Restrictions on Successors. Any transferee of Shares, whether by
gift, sale, bequest, inheritance, foreclosure, execution, or otherwise, shall
automatically be deemed to be a party to this Agreement, without the execution
of any additional instruments, and shall be bound by the terms and conditions of
this Agreement as if such transferee were an original party hereto.
14. Restrictive Legend. The undersigned hereby acknowledges and
consents to the placement of the following restrictive legends on the stock
certificates or other document(s), if any, evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT
HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION,
THE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED, EXCEPT UPON DEIIVERY TO BNSA OF AN
OPINION OF COUNSEL SATISFACTORY TO COUNSEL FOR BNSA THAT
REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE
SUBMISSION TO BNSA OF SUCH OTHER EVIDENCE AS MAY BE
SATISFACTORY TO THE OFFICERS AND/OR DIRECTORS TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED
THEREUNDER.
NOTICE IS HEREBY GIVEN THAT THE SALE, ASSIGNMENT, TRANSFER
PLEDGE OR OTHER DISPOSITION OF THE SHARES OF CAPITAL STOCK
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CERTAIN
RESTRICTIVE AGREEMENT BETWEEN THE CORPORATION AND THE
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STOCKHOLDERS, A COPY OF WHICH AGREEMENT IS ON FILE IN THE
OFFICE OF THE SECRETARY OF THE CORPORATION.
15. Right of First Refusal to Provide Additional Financing. The
Shareholders shall have a first right of refusal to provide any additional
financing to BNSA on a pro rata basis according to their existing equity
ownership percentages before BNSA enters into any agreement to obtain such
financing from a third party, provided however, that the Board of Directors
determines that the financing offered by the Shareholder or Shareholders is on
terms no less favorable to BNSA than financing that could be obtained from an
independent third party lender or lenders.
16. No Joint Venture. BII's sole relationship with BNSA is that of a
Shareholder, licensor and potential creditor and BNSA disclaims any partnership,
joint venture, employment or other relationship with the BII, Pentopoulos or
Schiaffino and vice versa.
17. Customer Records.
a. Shareholder's Obligations Regarding Customer Records. Each
undersigned Shareholder acknowledges that the list of BNSA's customers
or clients as it may exist from time to time is a valuable, special
and unique asset of BNSA's business. The Shareholder shall not, during
or after his association with BNSA, divulge, furnish or make
accessible to anyone (other than in the regular course of BNSA's
business) any names, addresses or telephone numbers of those
individuals who conduct business with BNSA. In addition, the contents
of customers' files or portfolios, or any other such information shall
be kept confidential during and after the Shareholder's association
with BNSA. All original records and all copies thereof of those
customers who do business with BNSA, including names, or any other
such information, as well as all other secrets and confidential
information of BNSA shall remain the property of BNSA during and after
the Shareholders association with BNSA.
b. Injunctive Relief for Breach, In the event of a breach or
threatened breach by the Shareholder of the provisions of this
section, BNSA shall be entitled to an injunction restraining the
Shareholder from disclosing, in whole or in part, the list of BNSA's
customers, any names, addresses or telephone numbers of those
individuals who conduct business with BNSA, or from rendering any
services to any person, firm, partnership, joint venture, association,
or other entity to whom such information, in whole or in part, has
been disclosed or is threatened to be disclosed. Nothing herein shall
be construed as prohibiting BNSA from pursuing any other remedies
available to BNSA for such breach or threatened breach, including the
recovery of damages from the Shareholder.
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18. Confidential Information.
a. Shareholder's Obligations Regarding Confidential Information.
Shareholder has in the past and may in the future develop, obtain or
learn about confidential information which is the property of BNSA or
which BNSA is under obligation not to disclose. Shareholder agrees to
use his best efforts and the utmost diligence to guard and protect
said information, to treat such information as confidential, and
Shareholder agrees that the Shareholder will not, during or after the
period of his association with BNSA, use for Shareholder or others, or
divulge to others any of said confidential information which
Shareholder may develop, obtain or learn about during or as a result
of his association with HNSA, unless authorized to do so by BNSA in
writing. Shareholder further agrees that if Shareholder ceases to be a
Shareholder or to have any other association with BNSA, Shareholder
will not take, but will leave with BNSA or return to BNSA, all
documents, records and papers and all matters of whatever nature which
bears or may bear BNSA's confidential information or which is in any
way related, directly or indirectly to BNSA.
b. Definition of Confidential Information, For the purposes of
this Agreement, the term "confidential information" shall include but
not be limited to the following: customer lists; product designs;
pricing policies; marketing strategies; business contacts; business
plans; computer software, including all rights under licenses and
other contracts relating thereto; source code and all documents
relating thereto; all intellectual property including without
limitation all trademarks, trademark registrations and applications,
service marks, copyrights, patents, trade secrets, proprietary
marketing information and know-how; books and records including lists
of customers; credit reports; sales records; price lists; sales
literature; advertising material; manuals; processes; technology;
designs; statistics data; techniques; or any information of whatever
nature which gives to BNSA an opportunity to obtain an advantage over
its competitors who do not know or use it, but it is understood that
said terms do not include knowledge, skills or information which is
common to the trade or profession of the Shareholder. "Confidential
information" shall not include: (i) information that has become
publicly available other than through a breach of this Agreement; or
(ii) information required to be disclosed by a court of competent
jurisdiction, to the extent specifically ordered by such court.
c. Contact with Customers and Third Parties. Upon Shareholder's
transfer of all of his shares of BNSA or his termination of
association with BNSA, BII, Pentopoulos and Schiaffino agree that for
a period of (18) months from the date of termination of association
that they shall not contact directly or indirectly any of BNSA's
customers or companies with which it does business, or is affiliated
with in any way, or any third parties which have any direct or
indirect business dealings with Company in the area of dietary food
supplements.
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d. Injunctive Relief for Breach. In the event of a breach or
threatened breach by the Shareholder of the provisions of this section,
BNSA shall be entitled to an injunction restraining the Shareholder
from disclosing, in whole or in part, any confidential information, or
from rendering any services to any person, firm, partnership, joint
venture, association, or other entity to whom such confidential
information, in whole or in part, has been disclosed. Nothing herein
shall be construed as prohibiting BNSA from pursuing any other remedies
available to BNSA for such breach or threatened breach, including the
recovery of damages from the Shareholder.
19. Representations and Warranties of Pentopoulos and Schiaffino.
Pentopoulos, Schiaffino and BIL warrant and represent the following, each of
which constitutes a condition precedent to the Parties entry into the Agreement:
a, that all information provided to BNSA regarding their prior
experience, education, litigation and bankruptcy history and credit
worthiness is complete and accurate, including all information
included in the due diligence questionnaire provided.
b. they have no relationship with, or have terminated any
relationship with, any client or product in the Territory which is
competitive to that portion of BII's product line which BNSA intends
to market;
c. they have the ability, expertise and capacity to market BII's
products on BNSA's behalf to the full extent of BII's requirements as
contemplated by the form of "Distribution and Licensing Agreement"
attached as Exhibit "B."
d. they understand that ▇▇▇ is solely a shareholder of BNSA and
is not the issuer of, nor makes any representation to them regarding
the advisability of investing in BNSA, that BII's operations are
totally separate from those of BII and that they do not, by investing
in BII, have any claim or interest whatsoever in BII;
e. they (i) have adequate means of providing for their current
needs and possible contingencies, and have no need for liquidity of
their investment in the Shares, (ii) can bear the economic risk of
losing the entire amount of my investment in the Shares, and (iii)
have such knowledge and experience in business and financial affairs
that they are capable of evaluating the relative risks and merits of
an investment in the shares or they are being advised by others with
such knowledge and experience that they together are capable of making
such evaluation.
f. the addresses set forth below are their true and correct
addresses, and they have no present intention of becoming a resident
of any other state or jurisdiction.
g. they have not utilized the services of a "Purchaser
Representative, as defined in Regulation D promulgated under the
Securities Act.
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h. they acknowledge that they: (i) have received and thoroughly
reviewed, and are all documents, records and books pertaining to BNSA,
financial and otherwise, and that all such documents have been made
available or delivered to them.
i. in deciding to invest in the Shares, they have relied solely
upon their own investigation and determinations, or upon the advice of
their own legal counsel, accountants or other financial advisers with
respect to the tax and other consequences involved in purchasing
shares and specifically acknowledge that they have been encouraged to
seek the advice of such independent professionals.
j. they have had an opportunity to ask questions of and receive
answers concerning the terms and conditions of their proposed
investment in the Shares, and the proposed operatl0ns of BNSA.
k. they understand the risks implicit in the structure and
operation of BNSA, and that among other things that BNSA does not
intend to make distributions of earnings, but rather will reinvest
profits, and that their ability to redeem shares is severely limited.
1. other than as set forth in this Agreement, no person or entity
has made any representation or warranty whatsoever with respect to any
matter or thing concerning BNSA and the shares that they will receive.
m. they understand that no shares have been registered under the
Securities Act, nor have they been registered pursuant to the
provisions of the securities or other laws of applicable
jurisdictions, and are subject to substantial restrictions on transfer
as provided in this Agreement.
n. the shares for which they subscribe are being acquired solely
for their own accounts, for investment and are not being purchased
with a view to or for their resale or distribution. In order to induce
BNSA to sell shares to them, BNSA will have no obligation to recognize
the ownership, beneficial or otherwise, of the shares by anyone but
me.
o. they are aware that the shares are an extremely speculative
investment which involves a high degree of risk; and their interest in
the shares is not readily transferable; it may not be possible for
them to liquidate their investment in the Shares.
p. they understand that no federal or state agency, including
the Securities and Exchange Commission or the securities regulatory
agency of any state, has approved or disapproved the Shares, passed
upon or endorsed the merits of the shares being acquired or made any
finding or determination as to the fairness of the shares for
investment.
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q. the foregoing representations and warranties are true and
accurate as of the date hereof, shall be true and accurate as of the
date of the delivery of the funds to BNSA and shall survive such
delivery. If, in any respect, such representations and warranties are
not true and accurate prior to delivery of the funds, they will give
written notice of that fact to BNSA, specifying which representations
and warranties are not true and accurate and the reasons therefor.
20. Distribution and Licensing Agreement. BNSA and BII shall enter a
Distribution and Licensing Agreement in the form attached as Exhibit "B."
21. Indemnification. The undersigned agree to indemnify and hold
harmless BNSA, its officers, directors, shareholders, employees, agents,
attorneys and affiliates from and against all damages, losses, costs and
expenses (including reasonable attorneys' fees) which they may incur by reason
of the failure of the undersigned to fulfill any of the terms or conditions of
this Agreement, or by reason of any breach of the representations and warranties
made by the undersigned herein or in any document provided by the undersigned to
BNSA. BNSA agrees to fully indemnify each of the undersigned for any liability
which each of the undersigned incurs related to BNSA, Pentopoulos, Schiaffino,
or the Agreement. BII agrees to indemnify BNSA, Pentopoulos, and Schiaffino from
liability for products liability claims relating to the products BII licenses to
BNSA.
22. Miscellaneous.
a. Notices. All offers, exercises of options, acceptances, and
notices under this Agreement shall be in writing and shall be
considered to have been received when delivered personally, or when
deposited in the mail if sent by certified or registered mail, return
receipt requested, to the addresses set forth below, or to such other
addresses that may be specified in writing to all parties hereto.
b. Voting. No Shareholder may participate in any vote as an
officer, director, or Shareholder of BNSA involving the possible
acquisition by BNSA of any of his or her shares pursuant to this
Agreement.
c. Gender. All words used in any gender in this Agreement shall
extend to and include both genders and the neuter.
d. Governing Law. This Agreement is made and is intended to be
performed in the State of Arizona and it shall in all respects be
governed by and construed in accordance with the laws of that state.
e. Entire Contract. This Agreement and the exhibits attached
hereto set forth the entire agreement of the parties and supersedes
any and all previous oral or written agreements regarding the
transactions contemplated hereby.
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f. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Shareholders and their heirs, personal
representatives, and permitted successors, assigns, and transferees.
g. Further Instruments. A duly authorized officer of BNSA and the
Shareholders, their spouses or their representatives shall make,
execute and deliver any documents necessary to carry out this
Agreement.
h. Specific Performance. The parties agree that the shares are
unique property, that a remedy at law for non-performance of
obligations under this Agreement is not adequate and that such
obligations may be specifically enforced and that a petition for
specific performance may be made without the requirement of any bond
or indemnity.
i. Modification or Waiver. No modification of this Agreement
shall be deemed effective unless in writing and signed by the parties
hereto. No waiver shall be effective unless in writing and executed by
the party against whom enforcement of the waiver is sought. This
Agreement may be amended by written instrument signed by all living
Shareholders, provided, however that no such amendment shall affect
the rights and obligations of any deceased Shareholder.
j. Headings. The headings in this Agreement have been inserted
for convenience only and shall not affect the meaning or
interpretation of any provision in this Agreement.
k. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and
such counterparts together shall constitute one and the same
instrument.
1. Severability, If for any reason any provision of this
Agreement shall be determined by a court of competent jurisdiction to
be invalid, unenforceable, illegal, or inoperable, its invalidity
shall not affect the validity and effect of the other provisions
hereof.
m. Termination. This Agreement shall terminate and the shares
shall be released from the terms of this Agreement should any of the
following occur:
(i) Sale of all of the shares in BNSA to a third party; or
(ii) Written agreement of BNSA and the then living
Shareholders, provided, however, that no such termination shall
affect the rights and obligations of any Shareholder then
deceased; or
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(iii) Cessation of BNSA's business.
Upon termination of this Agreement for any of the reasons set forth
above, the shares held by each Shareholder shall be surrendered to
BNSA and BNSA shall issue new certificates for the same number of
Shares, but without the restrictive legend required herein.
n. Time of Essence. Time is of the essence of this Agreement.
o. Third Party Beneficiaries. Nothing in this Agreement, express
or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it,
nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third person to any party to this
Agreement.
p. Attorneys' Fees. BII' s attorneys will draft any necessary
documents relating to this Agreement and shall retain foreign counsel
as needed, all at BII's expense. If any litigation arises in
connection with this Agreement, any prevailing party to such
litigation shall be reimbursed by the other party or parties for all
costs and expenses of such litigation, including reasonable attorneys'
fees to be fixed by the court, and the amount of such costs and
expenses shall be added to the amount of such judgment. For purposes
of this paragraph, the term "prevailing party" shall mean, in the case
of the plaintiff, one who is successful in obtaining substantially all
of the relief sought by the plaintiff, and in the case of the
defendant, one who is successful in defeating substantially all of the
relief sought by the plaintiff.
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Dated this 12th day of May, 1998.
"BII"
Baywood International, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------- --------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
And Chief Executive Officer
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇ Walnut Creek, California 94596
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Faez
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Facsimile: ▇▇▇ (▇▇) ▇▇▇ ▇▇▇▇▇
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