ACCREDITED INVESTOR
SUBSCRIPTION AGREEMENT
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Board of Directors
BAYWOOD INTERNATIONAL, INC.
00000 Xxxxx 00xx Xxxxx
Xxxxx 0
Xxxxxxxxxx, Xxxxxxx 00000
Gentlemen:
The undersigned hereby subscribes for 120,000 pre-split shares (the
"Shares") of Class "C" Preferred Stock, $1.00 par value, of Baywood
International, Inc. (the "Company") such Shares to be fully paid, nonassessable,
and issuable upon acceptance of this subscription by the Company's Board of
Directors, upon the Company's filing of a certificate setting forth the voting
powers, designations, preferences, limitations, restrictions and relative rights
of the Shares and upon the effectiveness of the conversion of the 800,000
pre-split preferred shares previously issued to me on May 8, 1996 into validly
issued and outstanding pre-split Class "C" Preferred Shares. I understand that
you will rely upon the following information to determine whether the Shares are
exempt from registration under the Securities Act of 1933, as amended (the
"Act") and comparable provisions of state securities laws.
ALL INFORMATION CONTAINED IN THIS SUBSCRIPTION AGREEMENT WILL BE TREATED
CONFIDENTIALLY. However, it is agreed that you may present this and any
supporting documents to such parties as you deem appropriate if called upon to
establish that the proposed offer and sale of the Shares is exempt from
registration under the Act or meets the requirements of applicable state
securities laws.
I. AGREEMENT TO DEFER AND ALTER PRIOR PREFERRED SHARE RIGHTS
WHEREAS, on May 8, 1996 the Company issued 800,000 pre-split preferred
shares to me in a private placement with the right to convert such shares to
Common stock or redeem the shares for cash on May 8, 1997 provided that certain
conditions were met regarding the average share price of the Company's Common
shares;
WHEREAS, on May 5, 1997, Management and my authorized representative
reached a verbal agreement to terminate any redemption right and to defer any
conversion right on such previously-issued pre-split preferred shares until May
8, 1998 and to provide me with a stock dividend of 120,000 additional pre-split
Shares with special conversion rights based upon the price of the Company's
Common Stock on May 8, 1998 (the "Deferment Transaction");
WHEREAS, Management has confirmed the Deferment Transaction in a letter to
me dated May 5, 1997;
THEREFORE, the Company, upon acceptance of this subscription by its Board
of Directors, and I agree as follows:
A. Merger of Rights for all 920,000 Pre-Split Preferred Shares. Upon the
Company's acceptance of this Subscription Agreement, the voting powers,
designations, preferences, limitations, restrictions and relative rights of the
800,000 pre-split preferred shares which were issued to me on May 8, 1996 and
represented by preferred certificate number 8 will be terminated, and will
automatically be converted into and assume the identical voting powers,
designations, preferences, limitations, restrictions and relative rights of the
120,000 pre-split Shares issued pursuant to this Subscription Agreement. Such
800,000 pre-split shares and 120,000 pre-split Shares shall be designated Class
"C" Preferred Shares and shall equally share all the characteristics and
privileges of such Class "C" Preferred Shares.
B. Description of Class "C" Pre-Split Preferred Shares. The 120,000
pre-split preferred share dividend to be issued pursuant to this Subscription
Agreement and the 800,000 pre-split preferred shares previously issued to me on
May 8, 1996, upon the merger of rights described in Section A above, shall have
the following powers, designations, preferences, limitations, restrictions and
relative rights:
1. Conversion Privileges. On May 8, 1998, at Shareholder's option,
the Class "C" pre-split Preferred Shares are convertible into
pre-split or post-split Common stock of Baywood as follows:
a. Average Price; Reverse Split. "Average Price," as used
herein, shall mean the average share price of Baywood's
Common Shares for the three months prior to May 8, 1998.
"Reverse Split" shall mean the reverse 1 for 2 1/2split of
the Company's common stock approved by the Company's
shareholders on April 10, 1997, but which shall not become
effective until the Company files Articles of Domestication
in the Office of the Arizona Corporation Commission.
b. Average Price Less than $1.00. If the Average Price is less
than $1.00, the Class "C" Preferred Shares shall be
convertible into:
(i) (Pre-Split) that number of pre-split Common Shares which
is equal to the number which results from $920,000 divided
by the Average Price if the Reverse Split is not yet
effective; or
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(ii) (Post-Split) that number of post-split Common Shares
which is equal to the number which results from $368,000
divided by the Average Price if the Reverse Split has
already become effective.
c. Average Price of $1.00 or Greater. If the Average Price is
$1.00 or more, the 920,000 pre-split Class "C" Preferred
Shares shall be convertible:
(i) (Pre-Split) on a one-for-one (1:1) basis into pre-split
Common Shares, such that Shareholder shall receive a total
of 920,000 Common Shares if the Reverse Split is not yet
effective; or
(ii) (Post-Split) on a one-for-two and one half (1:2 1/2)
basis into post-split Common Shares, such that Shareholder
shall receive a total of 368,000 post-split Common Shares if
the Reverse Split has already become effective.
2. Redemption. Shareholder shall have no right to redeem the Class
"C" Preferred Shares.
3. Par Value. The Class "C" Preferred Shares shall have a par value
of $1.00 per share.
4. Distribution of Capital. In the event of dissolution, bankruptcy,
or termination of this corporation, the par value of all the
Class "C" Preferred Shares shall be paid in full before the
Common Stock or any part thereof or any dividend thereon is paid.
5. Voting Rights. The Shareholder of the Class "C" Preferred Shares
shall have no voting power.
6. Dividends. The Class "C" Preferred Shares shall be preferred both
as to dividends and assets and shall be entitled to receive out
of the surplus or net profits of the Company, in each fiscal
year, dividends at such rate or rates, as shall be determined by
the Board of Directors in connection with the issue of the
respective series of said stock and expressed in the stock
certificate therefor, before any dividends shall be paid upon the
Common Stock, but such dividends shall be noncumulative. No
dividends shall be paid, declared, or set apart for the payment
on the Common Stock of the Company, in any fiscal year, unless
the full dividends on the Class "C" Preferred Shares for such
year shall have been paid or provided for.
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II. REPRESENTATIONS AND WARRANTIES REGARDING SUBSCRIPTION
I understand that you will rely on the following information to confirm
that I am an "accredited investor" as defined in Regulation D promulgated under
the Act, that the Shares are exempt from registration under the Act and
comparable provisions of state securities laws and that I am qualified to be a
Purchaser.
1. Accredited Investor. I am an Accredited Investor because I fall within
one of the following categories:
(PLEASE CHECK ___ $1,000,000 Net Worth.
APPROPRIATE A natural person whose individual net worth, or joint
CATEGORY) net worth with that person's spouse, at the time of
his purchase exceeds $1,000,000.
___ $200,000/$300,000 Income.
A natural person who had an individual income in
excess of $200,000 (including contributions to
qualified employee benefit plans) or joint income
with such person's spouse in excess of $300,000 in
each of the two most recent years and who reasonably
expects to attain the same individual or joint levels
of income (including such contributions) in the
current year.
___ Director or Officer of Issuer
Any director or executive officer of the Company.
___ All Equity Owners In Entity Are Accredited.
An entity (i.e. corporation, partnership, trust, XXX,
etc.) in which all of the equity owners are
Accredited Investors as defined herein.
___ Corporation
A corporation not formed for the specific purpose of
acquiring the Interests offered, with total assets in
excess of $5,000,000.
___ Other Accredited Investor
Any natural person or entity which qualifies as an
accredited investor pursuant to Rule 501(a) of
Regulation D promulgated under the Act; specify basis
for qualification:
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2. Representations and Warranties. I represent and warrant to the Company
that:
(a) I (i) have adequate means of providing for my current needs and
possible contingencies, and I have no need for liquidity of my investment in the
Company, (ii) can bear the economic risk of losing the entire amount of my
investment in the Company, and (iii) have such knowledge and experience that I
am capable of evaluating the relative risks and merits of this investment. I
further affirmatively represent and warrant to the Company that my current net
worth exceeds $1,000,000 U.S. and that my annual income for the last two years
and the current year exceeds $300,000 U.S.
(b) I affirmatively represent and warrant to the Company that I am not
a resident or citizen of the United States of America. My true and correct
address residency and citizenship is set forth under my signature at the end of
this letter. I have the legal power and authority to enter into this
Subscription Agreement and make the representations and warranties herein
understanding fully that the Company is placing material reliance on my candor
and veracity.
(c) The Shares for which I subscribe are being acquired solely for my
own account, for investment and are not being purchased with a view to or for
their resale or distribution. In order to induce the Company to sell Shares to
me, the Company will have no obligation to recognize the ownership, beneficial
or otherwise, of the Shares by anyone but me.
(d) I have received and read, and am familiar with the Articles of
Incorporation, Bylaws and general corporate records of the Company. I have
reviewed the Company's annual, quarterly and current reports on file with the
Securities and Exchange Commission on Forms 10-KSB, 10-QSB and 8-K and
amendments thereto. I confirm that all documents, records and books pertaining
to this investment as I have or could have requested, have been made available
for inspection by my attorney, accountant, and me. Specifically, Section B of
this Subscription Agreement sets forth the description of the powers,
designations, preferences, limitations, restrictions and relative rights of the
Shares I am acquiring, which shall govern the existing preferred shares which
were previously issued to me and which conditions I have read and approved.
(e) I and my advisor(s) have had a reasonable opportunity to ask
questions of and receive answers from the principals and management of the
Company concerning the Company's affairs generally and the terms and conditions
of my proposed investment in the Shares and all such questions have been
answered to my full satisfaction. No oral representations have been made or oral
information furnished to me or my advisor(s) in connection with the Shares which
were in any way inconsistent with the publicly available filings of the Company.
I am also aware that no state or Federal agency has reviewed or endorsed the
Shares and that the Company has a limited prior financial or operating history.
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(f) My interest in the Company is based primarily on what I understand
of the concept of its business (which understanding may be mistaken or flawed),
and not on its assets, liabilities or results to date.
(g) No person or entity has made any representation or warranty
whatsoever with respect to any matter or thing concerning the Company and this
offering, and I am purchasing the Shares based solely upon my own investigation
and evaluation.
(h) I understand that no Shares have been registered under the Act,
nor have they been registered pursuant to the provisions of the securities or
other laws of applicable jurisdictions.
(i) I am aware of the following:
(i) The Shares are a speculative investment which involve a high
degree of risk; and
(ii) My interest in the Shares is not readily transferable; it
may not be possible for me to liquidate my investment in the Shares.
(j) I understand the nature of this investment, and am aware and
familiar with the proposed business operations of the Company, and further
understand that the Shares are restricted securities within the meaning of the
Act, and that any future sale of such Shares will be regulated by this Act.
The foregoing representations and warranties are true and accurate as of
the date hereof, shall be true and accurate as of each date of delivery of funds
to the Company and shall survive such delivery. If, in any respect, such
representations and warranties are not true and accurate prior to delivery of
any funds, I will give written notice of that fact to the Company, specifying
which representations and warranties are not true and accurate and the reasons
therefor.
3. Transferability. I understand that I may sell or otherwise transfer my
Shares only if registered under the Act or with the favorable opinion of counsel
to the Company to the effect that such sale or other transfer may be made in the
absence of registration under the Act and that such transfer will not result in
a violation of any applicable federal or state law, rule or regulation. I have
no right to cause the Company to register the Shares. The certificates
representing my Shares will be legended to reflect this restriction, and stop
transfer instructions will apply.
4. Indemnification. I understand the meaning and legal consequences of the
representations and warranties contained in Paragraph 2 hereof, and I will
indemnify and hold harmless the Company, its officers and directors involved in
the offer or sale of the Shares to me, as well as each of the officers,
directors, employees and agents and other controlling persons of each of them,
from and against any and all loss, damage or liability due to or arising
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out of my failure to fulfill any of the terms or conditions of this Subscription
Agreement, or a breach of any representation or warranty of mine contained in
this Subscription Agreement.
5. Miscellaneous.
(a) This Subscription Agreement shall be governed by and construed in
all respects in accordance with the substantive law of the State of Arizona.
(b) This Subscription Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all parties.
(c) I agree not to transfer or assign this Subscription Agreement, or
any of my interest herein, and further agree that the transfer or assignment of
the Shares acquired pursuant hereto shall be made only in accordance with this
Subscription Agreement and all applicable laws.
(d) I agree that I may not cancel, terminate or revoke this
Subscription Agreement or any agreement made hereunder and that this
Subscription Agreement shall survive my death or disability and shall be binding
upon my heirs, executors, administrators, successors and assigns.
(e) Upon receipt of a written request from the Company, I agree to
provide such information and to execute and deliver such documents as reasonably
may be necessary to comply with any and all laws, regulations, rules and
ordinances to which the Company is subject.
DATED THIS October 30, 1997 ADDRESS:
00/X Xxxxx X, Xxxxx 0,
Xxxxxxxxx Xxxxxxxxxx Xxxxxx
/s/ Xxxxx Xxx 00 Xxx Xxxx Xxxx, Xxxxx Xxx, Xxxx Xxxx
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Xxxxx Xxx
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REVIEWED AND ACCEPTED THIS 12TH DAY OF NOVEMBER, 1997 AS AUTHORIZED BY THE BOARD
OF DIRECTORS BY:
BAYWOOD INTERNATIONAL, INC.
BY: /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx, President and Chairman
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