$500,000.00
BAYWOOD INTERNATIONAL, INC.
BAYWOOD ACQUISITION, INC.
10.0% NOTE
Section 1. General.
FOR VALUE RECEIVED, BAYWOOD INTERNATIONAL, INC., a Nevada corporation
("BAYWOOD INTERNATIONAL"), and BAYWOOD ACQUISITION, INC., a Nevada corporation
and a wholly owned subsidiary of Baywood International ("BAYWOOD ACQUISITION"
and, together with Baywood International, the "COMPANY"), jointly and severally,
hereby promises to pay to the order of ▇. ▇▇▇ ▇▇▇▇▇, III, or his successors or
assigns (the "INVESTOR"), the principal sum of FIVE HUNDRED THOUSAND DOLLARS AND
ZERO CENTS ($500,000.00)), together with interest thereon at a rate equal to ten
percent (10%) per annum (a) computed on the basis of the actual number of days
elapsed and a year of 360 days comprised of twelve 30 day months and (b) payable
monthly in arrears by the Company to the Investor with the first payment of any
accrued interest due and payable on April 30, 2007 and each subsequent interest
payment due and payable on the last day of each calendar month commencing with
May 2007.
Except as earlier redeemed in accordance with Section 2(a), (i)
$83,333.34 of the principal amount, together with any then unpaid and accrued
interest and other amounts payable hereunder, shall be due and payable on
February 28, 2008 (the "FIRST STATED MATURITY DATE") and (ii) any remaining
unpaid principal amount, together with any then unpaid and accrued interest and
other amounts payable hereunder, shall be due and payable on demand by Investor
at any time after February 28, 2009 (the "SECOND STATED MATURITY DATE"; each of
the First Stated Maturity Date and the Second Stated Maturity Date is referred
to hereunder as a "MATURITY DATE"), provided that the entire unpaid principal
amount, together with any unpaid and accrued interest and other amounts payable
hereunder, shall be due and payable (1) upon the occurrence of a Designated
Event (defined below) and (2) at any time as a result of, and following, an
Event of Default in accordance with Section 3.
All payments required to be made hereunder shall be made in such coin
or currency of the United States of America as at the time of payment shall be
legal tender therein for the payment of public and private debts. Interest
shall accrue on the unpaid balance of the principal amount of this Note and any
due and unpaid interest from and including the date hereof to, but excluding,
the date on which the principal amount of, as well as any accrued and unpaid
interest and other amounts under, this Note are paid in full.
Concurrent with the issuance of this Note, Baywood International is
issuing to the Investor five-year warrants to purchase shares of its common
stock, $0.001 par value per share (the "COMMON STOCK").
Section 2. Redemption and Repayment upon Designated Event.
(a) Optional Redemption by the Company.
(i) The Company may, upon the closing of a Qualified
Financing (defined below), redeem this Note, in whole or in part,
without premium or penalty, by paying to the Investor, upon five (5)
business days' prior written notice to the Investor of its intent to
redeem, of the date of such closing, an amount equal to one hundred percent
(100%) of the principal amount of the portion of this Note being so
redeemed, plus any accrued and unpaid interest on this Note and any other
amounts due and payable hereunder. For purposes of this Note, "QUALIFIED
FINANCING" shall mean the issuance of equity securities and/or securities
convertible or exercisable into equity securities (other than in Baywood
International's private placement of Units pursuant to the Amended and
Restated Confidential Private Placement Memorandum dated March 12, 2007 and
the concurrent Note Financing and Bank Financing defined and described
therein) in which gross proceeds to Baywood International and its
affiliates are equal to or greater than $4,000,000.
(ii) At any time after March 1, 2008, the Company may redeem
this Note, in whole or in part, without premium or penalty, upon
giving to the Investor at least two (2) business days prior written notice
of intent to redeem, by paying to the Investor an amount equal to one
hundred percent (100%) of the principal amount of the portion of this Note
being so redeemed, plus any accrued and unpaid interest on this Note and
any other amounts due and payable hereunder.
Except as set forth above, the Company shall have no right to prepay
this Note, in whole or in part, prior to the applicable Maturity Date.
(b) Repayment upon Occurrence of Designated Event. Upon the
occurrence of one or more Designated Events, the Company shall pay to the
Investor an amount equal to the entire outstanding principal amount of this
Note, plus accrued and unpaid interest and any other amounts payable hereunder.
A "DESIGNATED EVENT" shall mean any of the following:
(i) any acquisition by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), of
effective control (whether through legal or beneficial ownership, by
contract or otherwise) of in excess of fifty percent (50%) of the voting
securities of Baywood International; or
(ii) any merger or consolidation or merger of Baywood
International or any subsidiary of Baywood International in one or a
series of related transactions with or into another entity as a result of
which Baywood International ceases to be exist or as a result of which the
Common Stock ceases to be a class of securities registered under the
Exchange Act, other than (1) a merger solely for the purpose of changing
Baywood International's jurisdiction of incorporation and resulting in a
reclassification, conversion or exchange of outstanding shares of Common
Stock solely into shares of common stock of the surviving entity and (2) a
merger or consolidation pursuant to which holders of Baywood
International's capital stock immediately prior to such transaction have
the right to exercise, directly or indirectly, 50% or more of the total
voting power of all shares of the capital stock entitled to vote generally
in elections of directors of the continuing or surviving entity immediately
after giving effect to such issuance; or
2
(iii) any sale, lease, license or other disposition of all or
substantially all of the assets, or any substantial asset, of Baywood
International in one or a series of transactions; or
(iv) any execution by ▇▇▇▇▇▇▇ International of an agreement
to which Baywood International is a party or by which it is bound,
providing for any of the events set forth in clause (i), (ii) or (iii) of
this Section 2(b); or
(v) any liquidation, dissolution or winding up of Baywood
International or Baywood Acquisition, whether involuntary or
involuntary.
Section 3. Defaults.
The occurrence of any of the following shall constitute an "EVENT OF
DEFAULT" under this Note:
(a) The Company shall fail to pay when due (i) any principal or
interest payment hereof or (ii) any other payment required under the
terms of this Note, and such payment shall not have been made within five
(5) days after written notice thereof is delivered to the Company; or
(b) The Company shall fail to observe or perform any other
covenant, obligation, condition or agreement contained in this Note
(other than those specified in Section 3(a)) and such failure shall
continue for twenty (20) business days after written notice thereof is
delivered to the Company; or
(c) Any representation or warranty contained in this Note shall be
false, incorrect, incomplete or misleading in any material respect
when made or furnished; or
(d) Either Baywood International or Baywood Acquisition shall (i)
fail to make any payment when due under the terms of any bond,
debenture, note, other evidence of indebtedness or preferred security to be
paid by it(excluding this Note, which default is addressed by Section 3(a)
above, but including any other evidence of indebtedness of Baywood
International and Baywood Acquisition to the Investor) and such failure
shall continue beyond any period of grace provided with respect thereto, or
(ii) default in the observance or performance of any other agreement, term
or condition contained in any such bond, debenture, note, other evidence of
indebtedness or preferred security, and the effect of such failure or
default set forth in (i) or (ii) above is to cause, or permit the holder
thereof to cause, amounts in an aggregate amount of One Hundred Thousand
Dollars ($100,000) or more to become due prior to its stated due date; or
(e) Either Baywood International or Baywood Acquisition shall (i)
apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its
debts generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated in
full or in part, (v) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law now or
3
hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vi) take any
action for the purpose of effecting any of the foregoing; or
(f) Proceedings for the appointment of a receiver, trustee,
liquidator or custodian of Baywood International or Baywood
Acquisition or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization
or other relief with respect to Baywood International or Baywood
Acquisition or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged
within forty-five (45) days of commencement; or
(g) One or more judgments for the payment of money in an amount in
excess of One Hundred Thousand Dollars ($100,000) in the aggregate,
outstanding at any one time, shall be rendered against Baywood
International or Baywood Acquisition and the same shall remain undischarged
for a period of thirty (30) days during which execution shall not be
effectively stayed, or any judgment, writ, assessment, warrant of
attachment, or execution or similar process shall be issued or levied
against a substantial part of the property of Baywood International or
Baywood Acquisition and such judgment, writ, or similar process shall not
be released, stayed, vacated or otherwise dismissed within thirty (30) days
after issue or levy.
Section 4. Rights of Investor Upon Default.
Upon the occurrence or existence of any Event of Default (other than
an Event of Default referred to in Sections 3(f) or 3(g) hereof) and at any time
thereafter during the continuance of such Event of Default, the Investor may, by
written notice to the Company, declare all outstanding amounts payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein to the contrary notwithstanding. Upon the
occurrence or existence of any Event of Default described in Sections 3(f) or
3(g) hereof, immediately and without notice, all outstanding amounts payable by
the Company hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein to the contrary
notwithstanding. In addition to the foregoing remedies, upon the occurrence or
existence of any Event of Default, the Investor may exercise any other right,
power or remedy permitted to it by law, either by suit in equity or by action at
law, or both.
Section 5. Joint and Several Obligations; Defenses.
Baywood International and Baywood Acquisition are jointly and
severally liable to the Investor with respect to all obligations under this
Note, and each of them hereby waives any right to require the Investor to
proceed against either one of them. The Investor may, in its sole discretion,
elect to proceed against Baywood International or Baywood Acquisition, or both
of them, to enforce its rights hereunder. The obligations of the Company under
this Note shall not be subject to set-off, counterclaim or recoupment for any
reason.
4
Section 6. Exchange or Replacement of Notes.
(a) The Investor may, at its option, in person or by duly
authorized attorney, surrender this Note for exchange, at the principal business
office of Baywood International, and receive in exchange therefore, a new Note
in the same principal amount as the unpaid principal amount of this Note and
bearing interest at the same annual rate as this Note, each such new Note to be
dated as of the date of this Note and to be in such principal amount as remains
unpaid and payable to such person or persons, or order, as the Investor may
designate in writing.
(b) Upon receipt by the Company of reasonable evidence of the
loss, theft, destruction, or mutilation of this Note and (in the case of loss,
theft or destruction) of an indemnity reasonably satisfactory to it, and upon
surrender and cancellation of this Note, if mutilated, the Company will deliver
a new Note of like tenor in lieu of this Note. Any Note delivered in accordance
with the provisions of this Section 6 shall be dated as of the date of this
Note.
Section 7. Attorneys' and Collection Fees.
In the event of any default or failure by the Company to comply with
any covenant, obligation, condition or agreement contained in this Note
(including an Event of Default), the Company agrees to pay all of Investor's
reasonable attorneys' and other fees and expenses incurred with respect to
enforcing Investor's rights hereunder.
Section 8. Waivers.
The Company hereby waives presentment, demand for payment, notice of
dishonor, notice of protest and all other notices or demands in connection with
the delivery, acceptance, performance or default of this Note. No delay by the
Investor in exercising any power or right hereunder shall operate as a waiver of
any power or right, nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof, or the exercise thereof, or
the exercise of any other power or right hereunder or otherwise; and no waiver
whatsoever or modification of the terms hereof shall be valid unless set forth
in writing by the Investor and then only to the extent set forth therein.
Section 9. Representations by Baywood International and Baywood
Acquisition.
Each of Baywood International and Baywood Acquisition hereby
represents and warrants to the Investor that (a) it is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, (b) the execution, delivery and performance by it of this Note
(i) requires no action by or in respect of, consent or approval of or filing or
recording with, any governmental or regulatory body, instrumentality, authority,
agency or official or any other person or entity, (ii) does not conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default under or result in any violation of, the terms of its articles or
certificate of incorporation or its By-laws, (iii) subject to the execution of
the Subordination Agreement described below, will not result in a violation or
breach of (or give rise to any right of termination, revocation, cancellation or
acceleration under or increased payments under), or constitute a default (with
or without due notice or lapse of time or both) under, or
5
result in the creation of any lien, mortgage, charge, encumbrance or security
interest of any kind upon any of its properties or assets under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
contract, agreement, obligation, instrument, offer, commitment, understanding or
other arrangement or of any license, waiver, exemption, order, franchise, permit
or concession to which it is a party or by which any of its properties or assets
may be bound, and (iv) does not conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under or result in
any violation of, any judgment, order, decree, statute, law, regulation or rule
applicable to it, any applicable law, rule, regulation, order, writ, judgment or
decree of any court or governmental or regularity body, instrumentality,
authority, agency, or official or any agreement, document or instrument to which
it is a party or by which it or any of its property or assets is bound or to
which it or any of its property or assets is subject, and (c) this Note
constitutes the legal, valid and binding obligation of each of Baywood
International and Baywood Acquisition and is enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding equity or at law.)
Section 10. Ranking.
This Note is a subordinated and junior in right of payment to the
Company's indebtedness to Vineyard Bank N.A. ("VINEYARD"), pursuant to a
Subordination Agreement among the Company, the Investor and Vineyard and entered
into concurrent with the issuance of this Note.
Section 11. Amendments.
This Note may not be amended without the express written consent of
both Baywood International and the Investor.
Section 12. Governing Law.
All questions concerning the construction, validity, enforcement and
interpretation of this Note shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Note shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "NEW
YORK COURTS"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of this Note),
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, or such New York Courts are improper or inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Note and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any
6
right to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Note or the transactions contemplated hereby.
Section 13. Successors and Assigns.
The rights and obligations of the Company and the Investor under this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. Notwithstanding the foregoing,
neither this Note nor any of the rights, interests or obligations hereunder may
be assigned, by operation of law or otherwise, in whole or in part, by the
Company, without the prior written consent of the Investor.
Section 14. Notices.
All notices, requests, demands and other communications to any party
hereunder shall be in writing and shall be given to such party at its address
set forth below or such other address as such party may hereafter specify by
notice to the other party listed below:
(a) If to the Company: Baywood International, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
(b) If to the Investor: ▇. ▇▇▇ ▇▇▇▇▇, III
c/o Northeast Securities, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇
Each such notice, request, demand or other communication shall be effective when
delivered at the address specified in this Section 14. Further, any notice,
request, demand or other communication to either Baywood International or
Baywood Acquisition, or both of them, shall be effective if delivered to the
person noted in clause (a) above.
Section 15. Entire Agreement.
This Note constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereto and thereof.
Section 16. Headings.
The headings used in this Note are used for convenience only and are
not to be considered in construing or interpreting this Note.
[REMAINDER OF ▇▇▇▇ LEFT INTENTIONALLY BLANK]
7
IN WITNESS WHEREOF, each of Baywood International and Baywood Acquisition
has caused this Note to be duly executed by its duly authorized officer as of
the date indicated below.
BAYWOOD INTERNATIONAL, INC.
Date: March 30, 2007
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President & C.E.O.
BAYWOOD ACQUISITION, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
8
$500,000.00
BAYWOOD INTERNATIONAL, INC.
BAYWOOD ACQUISITION, INC.
10.0% NOTE
Section 1. General.
FOR VALUE RECEIVED, BAYWOOD INTERNATIONAL, INC., a Nevada corporation
("BAYWOOD INTERNATIONAL"), and BAYWOOD ACQUISITION, INC., a Nevada corporation
and a wholly owned subsidiary of Baywood International ("BAYWOOD ACQUISITION"
and, together with Baywood International, the "COMPANY"), jointly and severally,
hereby promises to pay to the order of ▇▇▇▇ ▇▇▇▇▇, or his successors or assigns
(the "INVESTOR"), the principal sum of FIVE HUNDRED THOUSAND DOLLARS AND ZERO
CENTS ($500,000.00)), together with interest thereon at a rate equal to ten
percent (10%) per annum (a) computed on the basis of the actual number of days
elapsed and a year of 360 days comprised of twelve 30 day months and (b) payable
monthly in arrears by the Company to the Investor with the first payment of any
accrued interest due and payable on April 30, 2007 and each subsequent interest
payment due and payable on the last day of each calendar month commencing with
May 2007.
Except as earlier redeemed in accordance with Section 2(a), (i)
$83,333.34 of the principal amount, together with any then unpaid and accrued
interest and other amounts payable hereunder, shall be due and payable on
February 28, 2008 (the "FIRST STATED MATURITY DATE") and (ii) any remaining
unpaid principal amount, together with any then unpaid and accrued interest and
other amounts payable hereunder, shall be due and payable on demand by Investor
at any time after February 28, 2009 (the "SECOND STATED MATURITY DATE"; each of
the First Stated Maturity Date and the Second Stated Maturity Date is referred
to hereunder as a "MATURITY DATE"), provided that the entire unpaid principal
amount, together with any unpaid and accrued interest and other amounts payable
hereunder, shall be due and payable (1) upon the occurrence of a Designated
Event (defined below) and (2) at any time as a result of, and following, an
Event of Default in accordance with Section 3.
All payments required to be made hereunder shall be made in such coin
or currency of the United States of America as at the time of payment shall be
legal tender therein for the payment of public and private debts. Interest
shall accrue on the unpaid balance of the principal amount of this Note and any
due and unpaid interest from and including the date hereof to, but excluding,
the date on which the principal amount of, as well as any accrued and unpaid
interest and other amounts under, this Note are paid in full.
Concurrent with the issuance of this Note, Baywood International is
issuing to the Investor five-year warrants to purchase shares of its common
stock, $0.001 par value per share (the "COMMON STOCK").
Section 2. Redemption and Repayment upon Designated Event.
(a) Optional Redemption by the Company.
(i) The Company may, upon the closing of a Qualified
Financing (defined below), redeem this Note, in whole or in part,
without premium or penalty, by paying to the Investor, upon five (5)
business days' prior written notice to the Investor of its intent to
redeem, of the date of such closing, an amount equal to one hundred percent
(100%) of the principal amount of the portion of this Note being so
redeemed, plus any accrued and unpaid interest on this Note and any other
amounts due and payable hereunder. For purposes of this Note, "QUALIFIED
FINANCING" shall mean the issuance of equity securities and/or securities
convertible or exercisable into equity securities (other than in Baywood
International's private placement of Units pursuant to the Amended and
Restated Confidential Private Placement Memorandum dated March 12, 2007 and
the concurrent Note Financing and Bank Financing defined and described
therein) in which gross proceeds to Baywood International and its
affiliates are equal to or greater than $4,000,000.
(ii) At any time after March 1, 2008, the Company may redeem
this Note, in whole or in part, without premium or penalty, upon
giving to the Investor at least two (2) business days prior written notice
of intent to redeem, by paying to the Investor an amount equal to one
hundred percent (100%) of the principal amount of the portion of this Note
being so redeemed, plus any accrued and unpaid interest on this Note and
any other amounts due and payable hereunder.
Except as set forth above, the Company shall have no right to prepay
this Note, in whole or in part, prior to the applicable Maturity Date.
(b) Repayment upon Occurrence of Designated Event. Upon the
occurrence of one or more Designated Events, the Company shall pay to
the Investor an amount equal to the entire outstanding principal amount of
this Note, plus accrued and unpaid interest and any other amounts payable
hereunder. A "DESIGNATED EVENT" shall mean any of the following:
(i) any acquisition by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), of
effective control (whether through legal or beneficial ownership, by
contract or otherwise) of in excess of fifty percent (50%) of the voting
securities of Baywood International; or
(ii) any merger or consolidation or merger of Baywood
International or any subsidiary of Baywood International in one or a
series of related transactions with or into another entity as a result of
which Baywood International ceases to be exist or as a result of which the
Common Stock ceases to be a class of securities registered under the
Exchange Act, other than (1) a merger solely for the purpose of changing
Baywood International's jurisdiction of incorporation and resulting in a
reclassification, conversion or exchange of outstanding shares of Common
Stock solely into shares of common stock of the surviving entity and (2) a
merger or consolidation pursuant to which holders of Baywood
International's capital stock immediately prior to such transaction have
the right to exercise, directly or indirectly, 50% or more of the total
voting power of all shares of the capital stock entitled to vote generally
in elections of directors of the continuing or surviving entity immediately
after giving effect to such issuance; or
2
(iii) any sale, lease, license or other disposition of all or
substantially all of the assets, or any substantial asset, of Baywood
International in one or a series of transactions; or
(iv) any execution by ▇▇▇▇▇▇▇ International of an agreement
to which Baywood International is a party or by which it is bound,
providing for any of the events set forth in clause (i), (ii) or (iii) of
this Section 2(b); or
(v) any liquidation, dissolution or winding up of Baywood
International or Baywood Acquisition, whether involuntary or
involuntary.
Section 3. Defaults.
The occurrence of any of the following shall constitute an "EVENT OF
DEFAULT" under this Note:
(a) The Company shall fail to pay when due (i) any principal or
interest payment hereof or (ii) any other payment required under the
terms of this Note, and such payment shall not have been made within five
(5) days after written notice thereof is delivered to the Company; or
(b) The Company shall fail to observe or perform any other
covenant, obligation, condition or agreement contained in this Note
(other than those specified in Section 3(a)) and such failure shall
continue for twenty (20) business days after written notice thereof is
delivered to the Company; or
(c) Any representation or warranty contained in this Note shall be
false, incorrect, incomplete or misleading in any material respect
when made or furnished; or
(d) Either Baywood International or Baywood Acquisition shall (i)
fail to make any payment when due under the terms of any bond,
debenture, note, other evidence of indebtedness or preferred security to be
paid by it(excluding this Note, which default is addressed by Section 3(a)
above, but including any other evidence of indebtedness of Baywood
International and Baywood Acquisition to the Investor) and such failure
shall continue beyond any period of grace provided with respect thereto, or
(ii) default in the observance or performance of any other agreement, term
or condition contained in any such bond, debenture, note, other evidence of
indebtedness or preferred security, and the effect of such failure or
default set forth in (i) or (ii) above is to cause, or permit the holder
thereof to cause, amounts in an aggregate amount of One Hundred Thousand
Dollars ($100,000) or more to become due prior to its stated due date; or
(e) Either Baywood International or Baywood Acquisition shall (i)
apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its
debts generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated in
full or in part, (v) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law now or
3
hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vi) take any
action for the purpose of effecting any of the foregoing; or
(f) Proceedings for the appointment of a receiver, trustee,
liquidator or custodian of Baywood International or Baywood
Acquisition or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization
or other relief with respect to Baywood International or Baywood
Acquisition or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged
within forty-five (45) days of commencement; or
(g) One or more judgments for the payment of money in an amount in
excess of One Hundred Thousand Dollars ($100,000) in the aggregate,
outstanding at any one time, shall be rendered against Baywood
International or Baywood Acquisition and the same shall remain undischarged
for a period of thirty (30) days during which execution shall not be
effectively stayed, or any judgment, writ, assessment, warrant of
attachment, or execution or similar process shall be issued or levied
against a substantial part of the property of Baywood International or
Baywood Acquisition and such judgment, writ, or similar process shall not
be released, stayed, vacated or otherwise dismissed within thirty (30) days
after issue or levy.
Section 4. Rights of Investor Upon Default.
Upon the occurrence or existence of any Event of Default (other than
an Event of Default referred to in Sections 3(f) or 3(g) hereof) and at any time
thereafter during the continuance of such Event of Default, the Investor may, by
written notice to the Company, declare all outstanding amounts payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein to the contrary notwithstanding. Upon the
occurrence or existence of any Event of Default described in Sections 3(f) or
3(g) hereof, immediately and without notice, all outstanding amounts payable by
the Company hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein to the contrary
notwithstanding. In addition to the foregoing remedies, upon the occurrence or
existence of any Event of Default, the Investor may exercise any other right,
power or remedy permitted to it by law, either by suit in equity or by action at
law, or both.
Section 5. Joint and Several Obligations; Defenses.
Baywood International and Baywood Acquisition are jointly and
severally liable to the Investor with respect to all obligations under this
Note, and each of them hereby waives any right to require the Investor to
proceed against either one of them. The Investor may, in its sole discretion,
elect to proceed against Baywood International or Baywood Acquisition, or both
of them, to enforce its rights hereunder. The obligations of the Company under
this Note shall not be subject to set-off, counterclaim or recoupment for any
reason.
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Section 6. Exchange or Replacement of Notes.
(a) The Investor may, at its option, in person or by duly
authorized attorney, surrender this Note for exchange, at the principal business
office of Baywood International, and receive in exchange therefore, a new Note
in the same principal amount as the unpaid principal amount of this Note and
bearing interest at the same annual rate as this Note, each such new Note to be
dated as of the date of this Note and to be in such principal amount as remains
unpaid and payable to such person or persons, or order, as the Investor may
designate in writing.
(b) Upon receipt by the Company of reasonable evidence of the
loss, theft, destruction, or mutilation of this Note and (in the case of loss,
theft or destruction) of an indemnity reasonably satisfactory to it, and upon
surrender and cancellation of this Note, if mutilated, the Company will deliver
a new Note of like tenor in lieu of this Note. Any Note delivered in accordance
with the provisions of this Section 6 shall be dated as of the date of this
Note.
Section 7. Attorneys' and Collection Fees.
In the event of any default or failure by the Company to comply with
any covenant, obligation, condition or agreement contained in this Note
(including an Event of Default), the Company agrees to pay all of Investor's
reasonable attorneys' and other fees and expenses incurred with respect to
enforcing Investor's rights hereunder.
Section 8. Waivers.
The Company hereby waives presentment, demand for payment, notice of
dishonor, notice of protest and all other notices or demands in connection with
the delivery, acceptance, performance or default of this Note. No delay by the
Investor in exercising any power or right hereunder shall operate as a waiver of
any power or right, nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof, or the exercise thereof, or
the exercise of any other power or right hereunder or otherwise; and no waiver
whatsoever or modification of the terms hereof shall be valid unless set forth
in writing by the Investor and then only to the extent set forth therein.
Section 9. Representations by Baywood International and Baywood
Acquisition.
Each of Baywood International and Baywood Acquisition hereby
represents and warrants to the Investor that (a) it is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, (b) the execution, delivery and performance by it of this Note
(i) requires no action by or in respect of, consent or approval of or filing or
recording with, any governmental or regulatory body, instrumentality, authority,
agency or official or any other person or entity, (ii) does not conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default under or result in any violation of, the terms of its articles or
certificate of incorporation or its By-laws, (iii) subject to the execution of
the Subordination Agreement described below, will not result in a violation or
breach of (or give rise to any right of termination, revocation, cancellation or
acceleration under or increased payments under), or constitute a default (with
or without due notice or lapse of time or both) under, or
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result in the creation of any lien, mortgage, charge, encumbrance or security
interest of any kind upon any of its properties or assets under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
contract, agreement, obligation, instrument, offer, commitment, understanding or
other arrangement or of any license, waiver, exemption, order, franchise, permit
or concession to which it is a party or by which any of its properties or assets
may be bound, and (iv) does not conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under or result in
any violation of, any judgment, order, decree, statute, law, regulation or rule
applicable to it, any applicable law, rule, regulation, order, writ, judgment or
decree of any court or governmental or regularity body, instrumentality,
authority, agency, or official or any agreement, document or instrument to which
it is a party or by which it or any of its property or assets is bound or to
which it or any of its property or assets is subject, and (c) this Note
constitutes the legal, valid and binding obligation of each of Baywood
International and Baywood Acquisition and is enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding equity or at law.)
Section 10. Ranking.
This Note is a subordinated and junior in right of payment to the
Company's indebtedness to Vineyard Bank N.A. ("VINEYARD"), pursuant to a
Subordination Agreement among the Company, the Investor and Vineyard and entered
into concurrent with the issuance of this Note.
Section 11. Amendments.
This Note may not be amended without the express written consent of
both Baywood International and the Investor.
Section 12. Governing Law.
All questions concerning the construction, validity, enforcement and
interpretation of this Note shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Note shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "NEW
YORK COURTS"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of this Note),
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, or such New York Courts are improper or inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Note and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any
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right to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Note or the transactions contemplated hereby.
Section 13. Successors and Assigns.
The rights and obligations of the Company and the Investor under this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. Notwithstanding the foregoing,
neither this Note nor any of the rights, interests or obligations hereunder may
be assigned, by operation of law or otherwise, in whole or in part, by the
Company, without the prior written consent of the Investor.
Section 14. Notices.
All notices, requests, demands and other communications to any party
hereunder shall be in writing and shall be given to such party at its address
set forth below or such other address as such party may hereafter specify by
notice to the other party listed below:
(a) If to the Company: Baywood International, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
(b) If to the Investor: ▇▇▇▇ ▇▇▇▇▇
c/o Seix Advisors
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Each such notice, request, demand or other communication shall be effective when
delivered at the address specified in this Section 14. Further, any notice,
request, demand or other communication to either Baywood International or
Baywood Acquisition, or both of them, shall be effective if delivered to the
person noted in clause (a) above.
Section 15. Entire Agreement.
This Note constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereto and thereof.
Section 16. Headings.
The headings used in this Note are used for convenience only and are
not to be considered in construing or interpreting this Note.
[REMAINDER OF ▇▇▇▇ LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, each of Baywood International and Baywood Acquisition
has caused this Note to be duly executed by its duly authorized officer as of
the date indicated below.
BAYWOOD INTERNATIONAL, INC.
Date: March 30, 2007
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President & C.E.O.
BAYWOOD ACQUISITION, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
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