UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
Commission file number 33-10236
BAYWOOD INTERNATIONAL, INC.
(Exact Name of registrant as specified in charter)
------------------------------
Nevada 77-0125664
-------------- ----------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
14950 N. 83rd Place, Suite 1
Scottsdale, Arizona 85260
Address of Principal Executive Office) (Zip Code)
1996 Incentive Stock Option Plan
--------------------------------
(Full Title of the Plan)
(602) 951-3956
(Registrant's Telephone Number,Including Area Code)
Jon A. Titus, Esq., TITUS, BRUECKNER & BERRY, P.C.
Scottsdale Centre, Suite B-252, 7373 North Scottsdale Road
Scottsdale, Arizona 85253-3527
(Name and Address of Agent for Service)
(COPIES TO)
Jon A. Titus, Esq.
TITUS, BRUECKNER & BERRY, P.C.
Scottsdale Centre, Suite B-252
7373 North Scottsdale Road
Scottsdale, Arizona 85253-3527
(602) 483-9600
<TABLE>
<CAPTION>
Title of Amount to be Proposed maximum Proposed maximum Amount of
Securities to be registered offering price aggregate registration fee
registered per share(1) offering price(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 700,000 See (1) below $311,500 $100.00
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The price is calculated in accordance with Rules 457(h)(1) and 457(c) of the
Securities Act of 1933, as amended, solely for the purpose of calculating the
registration fee. The maximum offering price is calculated by multiplying
<PAGE>
the number of shares authorized to be issued under the Plan (500,000) by the
average bid and ask price as quoted on the OTC Bulletin Board on November 20,
1996 ($0.415), and by adding the aggregate price of Harvey Turner's option
shares (200,000 shares times an exercise price of $0.52 per share).
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Baywood International, Inc. (the "Registrant" or "Company") hereby incorporates
by reference into this Registration Statement the following documents
previously filed with the Securities and Exchange Commission (the
"Commission"):
a. The Company's Registration Statement on Form S-8, filed with the
Commission on July 24, 1995, Commission File Number 33-94902;
b. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995, as amended on Form 10-KSB/A;
c. The Company's Quarterly Report on Form 10-QSB for the fiscal quarter
ended September 30, 1996.
All reports and other documents filed pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act, as amended, after the date of this Registration Statement
and prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof.
ITEM 8. EXHIBITS
1. Opinion and Consent of Titus, Brueckner & Berry, P.C.
2. Baywood International, Inc. 1996 Incentive Stock Option Plan
3. Stock Option Agreement between Registrant and Harvey Turner
ITEM 9. UNDERTAKINGS
(a) Rule 415 Offering.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
<PAGE>
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Filing of Registration Statement on Form S-8.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, City of Scottsdale, State of Arizona, on November 21, 1996.
BAYWOOD INTERNATIONAL, INC.
By /s/ Harvey Turner
--------------------
Harvey Turner, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Signature and Title Date
------------------- ----
/s/ Harvey Turner 11/21/96
- ---------------------------------------- ---------
Harvey Turner
President, Chairman of the Board,
Director, and Chief Executive Officer
/s/ Neil Reithinger 11/21/96
- ---------------------------------------- ---------
Neil Reithinger
Secretary, Treasurer, Chief Financial
Officer, and Controller
/s/ Karl Rullich 11/21/96
- ---------------------------------------- ---------
Karl Rullich, Director
/s/ William Brin 11/21/96
- ---------------------------------------- ---------
William Brin, Director
/s/ Glen Holt 11/21/96
- ---------------------------------------- ---------
Glen Holt, Director
[LETTERHEAD]
November 20, 1996
Baywood International, Inc.
14950 North 83rd Place
Suite 1
Scottsdale, Arizona 85260
Re: Registration of Shares on Amended Form S-8
Dear Sirs:
Our firm represents Baywood International, Inc., a Nevada corporation
(the "Company"), in connection with the Company's registration of seven hundred
thousand (700,000) shares of Common Stock, $.001 par value (the "Common Stock"),
to be issued by the Company from time to time upon the exercise of stock options
pursuant to the Company's 1996 Incentive Stock Option Plan (the "Plan"), and at
the times specified in the Stock Option Agreement by and between the Company and
Harvey Turner (the "Turner Agreement").
In this connection, we have examined originals or copies (certified or
otherwise) of such documents, corporate and other records, certificates and
other papers which we deemed necessary for the purpose of this opinion. Based on
such examination, it is our opinion that the shares of the Common Stock
registered under the Registration Statement on Form S-8 (the "Registration
Statement") will, when issued pursuant to the Plan or the Turner Agreement, be
legally issued, fully paid and non-assessable.
In giving our opinion, we have assumed without investigation the
authenticity of any document or instrument submitted to us as an original, the
conformity to the original of any document or instrument submitted to us as a
copy, and the genuineness of all signatures on such originals or copies. Our
opinion is subject to the qualification that no opinion is expressed as to the
application of any individual state's securities or Blue Sky laws.
This Opinion is furnished by us as counsel to you and is solely for
your benefit, to be used as an exhibit to the Registration Statement. Neither
this Opinion nor copies hereof may be otherwise relied upon by, delivered to, or
quoted in whole or in part to any governmental agency or other person without
our prior written consent.
<PAGE>
Baywood International, Inc.
November 20, 1996
Page 2
Subject to the above qualifications, we consent to the use of our
Opinion in connection with the above-referenced registration.
Very truly yours,
TITUS, BRUECKNER & BERRY, P.C.
/s/ Jon A. Titus
Jon A. Titus
JAT:lmc
EXHIBIT "A"
Baywood International, Inc.
1996 INCENTIVE STOCK OPTION PLAN
1. Purpose. The purpose of the Plan is to advance the interests of
Baywood International, Inc. (the "Company") by encouraging and enabling the
acquisition of a financial interest in the Company by key employees through
options granted under the Plan. Management believes that this Plan will aid the
Company in attracting and retaining key employees upon whose judgment, interest
and special efforts the Company is largely dependent for the successful conduct
of its operations and in competing effectively with other enterprises for the
services of new employees as may be needed for the continued success of the
Company. It is believed that the acquisition of such option grants will
stimulate the efforts of such key employees on behalf of the Company and
strengthen their desires to remain in the employ of the Company.
2. The Stock. The shares of stock (the "Stock") available for the grant
of options under the original Plan shall consist of 500,000 shares of Common
Stock of the Company or the number and kind of shares of stock or other
securities which shall be substituted for such shares or to which such shares
shall be adjusted as provided in Section 6 hereof. Such numbers of shares may be
set aside out of the authorized but unissued shares of Common Stock of the
Company not reserved for any other purposes or out of shares of Common Stock
held in or acquired for the treasury of the Company. All or any shares of Stock
subjected under this Plan to an option which, for any reason, terminates,
expires, or is cancelled unexercised as to such shares, may again be subjected
to an option under this Plan.
3. Administration. The Plan shall be administered on behalf of the
Board of Directors of the Company (the "Board") serving as the Compensation
Committee of the Board (the "Committee"). The Committee shall initially consist
of all the members of the Board of Directors, and such make-up shall continue
until the Board names additional or different members to the Committee.
The Committee shall determine, within the limits of the express
provisions of the Plan, the individuals to whom, and the time or times at which,
options shall be granted, the number of shares to be subject to each option, the
duration of each option, the option price under each option, and the time or
times within which (during the term of the option) all or portions of each
option may be exercised. In making such determinations, the Committee may take
into account the nature of the services rendered by such individuals or classes
of individuals, their present and potential contributions to the Company's
success, and such other factors as the Committee in its discretion shall deem
relevant. Each employee to whom an option is granted shall enter into a written
agreement ("Option Agreement") with the Company setting forth the terms and
conditions of the option granted to him, which agreement shall contain such
terms and conditions consistent with the Plan as the Committee shall approve.
- 1 -
<PAGE>
Subject to the express provisions of the Plan, the Committee may
interpret the Plan, prescribe, amend, and rescind rules and regulations relating
to it, determine the terms and provisions of the respective Option Agreements
(which need not be identical), and make all other determinations necessary or
advisable for the administration of the Plan.
The determination of the Committee on the matters referred to in this
Section 3 shall be conclusive.
4. Eligibility. Options may be granted only to key employees of the
Company and/or a subsidiary thereof. The term "subsidiary" shall mean any
corporation which the Company controls either directly or indirectly through
ownership of fifty percent (50%) or more of the total combined voting power of
all classes of stock of such corporation.
5. Grant, Terms and Conditions of Options. Options may be granted at
any time and from time to time prior to the termination of the Plan. The day on
which the Committee approves the granting of an option shall for all purposes of
this Plan be considered the date on which such option is granted. Except as
hereinafter provided, Options granted pursuant to the Plan shall be subject to
the following terms and conditions:
(a) Price. The purchase price of the shares of Stock shall be
determined by the Committee. In no event shall the initial exercise price of an
option be less than the fair market value of such Stock on the date of grant.
The term "fair market value" shall mean as applied to the Stock on any day as
shall be determined in good faith by the Committee without regard to any
restriction other than a restriction which, by its terms, never lapses. The
purchase price shall be paid in full on the date of exercise, in cash, by check
or in such other consideration (including stock of the Company) as expressly
permitted by the terms of the particular option.
(b) Withholding of Taxes. The Company's obligation to deliver
shares of Stock pursuant to this Plan shall be subject to applicable federal,
state and local tax withholding requirements.
(c) Duration of Options. Options may be granted for terms of
up to but not exceeding ten (10) years from the date the particular option is
granted.
(d) Cancellation of Options. In the event the market value of
Stock subject to option under the Plan shall be less than the option price for
such Stock, the Committee may, in its discretion and with the consent of the
optionee, cancel such options and grant new options consistent with the terms of
the Plan.
(e) Limitation on Grant of Options. The aggregate fair market
value (determined as of the time the option is granted) of the Stock as to which
options are exercisable for the first time by an eligible employee during any
calendar year (under the Plan and under
- 2 -
<PAGE>
any other stock option plan of the Company or any subsidiary of the Company)
shall not exceed One Hundred Thousand Dollars ($100,000).
(f) Transferability of Options. No option granted to an
employee under the Plan shall be transferable by such employee, other than by
will or the laws of descent and distribution, and all such options shall be
exercisable, during such employee's lifetime, only by such employee.
6. Adjustment in Number of Shares and in Option Price. In the event
there is any change in the shares of the Company's Common Stock through the
declaration of stock dividends or a stock split-up, or through recapitalization,
resulting in share split-ups, or combinations or exchange of shares, or
otherwise, the number of shares of the Stock available for option, as well as
the shares subject to any option and the option price thereof, shall be
appropriately adjusted by the Committee.
7. Amendment. The Board may alter or amend the Plan and may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option in the manner and to the extent it shall deem desirable to carry the
Plan into effect without further action on the part of the stockholders of the
Company; but the Board may not without the approval of the Company's
stockholders make any alteration or amendment thereof which (a) makes any change
in the class of eligible employees as defined in Section 4 hereof; (b) increases
the total number of shares of Stock for which options may be granted under the
Plan; (c) extends the terms of the Plan or the maximum option period provided
under the Plan; or (d) decreases the minimum option price provided in Section 5
hereof.
The Committee may, with the consent of the grantee, amend an option or
otherwise modify an option in any manner, provided that the terms of the amended
option are consistent with the principles of this Plan.
It is intended that this Plan will comply with the requirements of
Section 16(b) under the 1934 Act and Rule 16b-3 thereunder, as applicable during
the term of the Plan. Should such requirements change, as interpreted by the
Committee and its counsel, the Board may amend this Plan or the Committee may
amend any rules or practices adopted hereunder accordingly, without the
necessity for stockholder approval, consistent with applicable law.
8. Effective Date and Termination of Plan. All provisions of this Plan
are effective as of July 30, 1996. This Plan shall terminate on the earliest of
(a) the date when all shares of the Stock shall have been acquired through
exercise of options granted under the Plan; (b) ten (10) years after the date of
adoption of the Plan by the Board on July 30, 1996; or (c) such earlier date as
the Board may determine. Any option outstanding under the Plan at the time of
its termination shall remain in effect in accordance with its terms and
conditions and those of the Plan.
- 3 -
<PAGE>
9. Use of Proceeds. The proceeds from the sale of Stock pursuant to the
Plan will be used for general corporate purposes.
10. Governing Law. The Plan shall be governed by and interpreted
according to the laws of the State of Arizona.
Date of Adoption by Board of Directors: July 30, 1996.
- 4 -
STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of this 30th day of July,
1996, by and between BAYWOOD INTERNATIONAL, INC., a Nevada corporation (the
"Corporation") and Harvey Turner ("Mr. Turner").
A. The Corporation has entered into an EMPLOYMENT AGREEMENT with Mr.
Turner which includes certain stock options as set forth in this Stock Option
Agreement; and
B. The grant of options in this Stock Option Agreement are subject to
shareholder approval at the Corporation's 1996 Annual Meeting. Failing
shareholder approval of the options at the Annual Meeting, the present Stock
Option Agreement will be voided, and thereupon the Corporation and Mr. Turner
will negotiate alternative compensation of equivalent value to him.
The Corporation and Mr. Turner agree as follows:
1. Option Grant. Pursuant to a resolution of the Board of Directors on
July 30, 1996 an Employment Agreement was entered between Mr. Turner and the
Corporation and Mr. Turner was granted options to purchase Two Hundred Thousand
(200,000) shares of the Corporation's Common Stock, $0.001 par value (the
"Stock") as follows: One Hundred Thousand (100,000) shares of the Corporation's
Common Stock at a price of Fifty Two Cents ($0.52) per share exercisable
immediately and until April 18, 2006 (the "First Option") and One Hundred
Thousand (100,000) shares of the Corporation's Common Stock at a price of Fifty
Two Cents ($0.52) per share exercisable on April 19, 1997 and until April 18,
2007 (the "Second Option") (collectively, the "Options").
2. Agreement Defined. The Options granted are separate from the options
described in the 1996 Incentive Stock Option Plan, but are nonetheless subject
to the same terms and conditions of the Corporation's 1996 Incentive Stock
Option Plan (the "Plan") and such additional terms and conditions as are set
forth in this Stock Option Agreement (collectively the "Agreement"). The terms
of the Plan are incorporated by reference in this Agreement and govern the
granting, holding and exercise of the options as though herein set forth in
full, except that where the terms set forth herein differ from the terms in the
Plan, the terms set forth herein shall control. A copy of the Plan is attached
as Exhibit A.
3. Procedure to Exercise. The Options may be exercised only in
accordance with Paragraphs 4-11 below, by delivery to the Corporation (in care
of its Secretary) at the principal offices of the Corporation, presently located
at 14950 North 83rd Place, Suite 1, Scottsdale, Arizona 85260 written
irrevocable notice of exercise in the form attached to this Agreement as Exhibit
B, specifying the number of shares with respect to which the Options are being
exercised, together with payment of the exercise price for those shares in cash
or by check. Any other form of exercise or tender may be refused by the
Corporation, acting through the Board or otherwise, in its discretion.
<PAGE>
4. Vesting. The First Option shall vest and become exercisable
immediately upon shareholder approval at the 1996 Annual Meeting following the
execution of this Agreement. The Second Option shall vest and become exercisable
on April 19, 1997, subject to Mr. Turner's continued employment until such date.
5. Transfer. The Options are not transferable other than by will or the
laws of descent and distribution and are exercisable, during Mr. Turner's
lifetime, only by Mr. Turner. Mr. Turner may not assign or otherwise transfer or
encumber his Options or any interest in his Options to any person in any way.
6. Termination. Notwithstanding any other provision of this Agreement
(other than Paragraph 11 below), the Options, to the extent not previously
exercised, shall automatically terminate and be of no further force or effect as
to all remaining shares of Stock as of five o'clock p.m., M.S.T., on April 18,
2006, with respect to the First Option and on April 18, 2007, with respect to
the Second Option.
7. Exercise Upon Termination of Employment. In the event Mr. Turner
leaves the employment of the Corporation for any reason whatsoever, including
termination by Mr. Turner's voluntary resignation or at the direction of the
Corporation, with or without cause, or upon death or Permanent Disability, then,
at Mr. Turner's option, or the option of his personal representative, Mr. Turner
or his personal representative may exercise the Options to the extent not
previously exercised or expired, such exercise to occur no later than sixty (60)
days following Mr. Turner's last day of employment with the Corporation or the
date of Mr. Turner's death or Permanent Disability, as applicable, and the
Corporation (or its nominee) shall have the right (but not the obligation) to
purchase any shares of Stock acquired pursuant to exercise of options under the
Plan held by Mr Turner and shares acquired pursuant to exercise of the Options
(along with shares acquired pursuant to this sentence) at a price equal to the
Appraised Value per share of such Stock, determined in accordance with Paragraph
9. The Corporation (or its nominee) shall exercise this right to repurchase the
shares of Stock, if at all, within six (6) months following the date of the
termination of Mr. Turner's employment with the Corporation by delivering
written notice of exercise to Mr. Turner or his personal representative. Payment
on such exercise by the Corporation shall be made in not more than five equal
annual installments of principal and accrued interest (at an annual interest
rate, adjusted on a daily basis, equal to the prime rate of interest publicly
announced as such from time to time by Bank One in Phoenix, Arizona due
commencing on the Corporation's (or its nominee's) purchase and on the next four
(4) anniversaries of such purchase. The date for consummating such purchase
shall be the sixtieth (60th) day following delivery of the Corporation's notice
of exercise, provided that such date may be extended by Mr. Turner or his
personal representative by written notice to a date not later than the earlier
of ten (10) days after all holding periods under Section 422A of the Internal
Revenue Code expire or consummation of a transaction (e.g., merger,
consolidation, stock sale) pursuant to which the holder of Mr. Turner's shares
would be entitled to receive consideration of any kind.
2
<PAGE>
8. Transfer and Right of First Refusal. In the event any shares of
Stock acquired pursuant to exercise of Options hereunder or any interest
therein, are to be transferred, voluntarily or involuntarily (including, without
limitation, any sale, encumbrance, foreclosure or transfer in lieu thereof, or
by operation of law, any division of marital property on account of divorce or
legal separation being deemed a "transfer" for purposes hereof, but excluding
transfers to which Paragraph 7 hereof applies), the Corporation (or its nominee)
shall have a right of first refusal as follows: Mr. Turner (or the holder of
such shares if not Mr. Turner) shall give the Corporation advance written notice
detailing all the terms of the proposed transfer. The Corporation (or its
nominees) shall have the right (but not the obligation), exercisable upon
delivery to the transferring shareholder of written notice of acceptance within
thirty (30) days following receipt of the notice of proposed transfer described
in the preceding sentence, to repurchase all or any of such shares on the terms
and conditions set forth in such notice; provided that the per share purchase
price shall be the lesser of (i) the price, plus the Appraised Value of any
non-cash consideration (determined in accordance with the procedures specified
in Paragraph 9 below) (or, if applicable, 110% of the loan amount), stated in
the notice or (ii) the Appraised Value of the shares, determined in accordance
with Paragraph 9 (and shall be the Appraised Value, determined in accordance
with Paragraph 9, in the event of a transfer not involving any consideration);
and provided further than the purchase price shall be payable, at the election
of the Corporation (or its nominees), either on the terms set forth in the
transferor's notice or in up to five equal annual installments of principal and
accrued interest (at an annual interest rate, adjusted on a daily basis, equal
to the prime rate of interest publicly announced as such from time to time by
Bank One in Phoenix, Arizona) due commencing on the Corporation's (or its
nominee's) purchase and on the next four (4) anniversaries of such purchase. The
date for consummating such purchase shall be the sixtieth (60th) day following
delivery of the Corporation's (or its nominees') notice of exercise, provided
that such date may be extended by the transferring shareholder by written notice
to a date not later than the earlier of ten (10) days after all holding periods
under Section 422A of the Code expire. Failure by the Corporation (or its
nominees) (without default by the transferring shareholder) to close such
purchase within the above 60-day period shall give the transferring shareholder
the right to transfer such shares or interest therein on the terms and to the
person described in the notice during the 60 days following expiration of the
original 60-day period; provided that the shares or interest therein to be
transferred shall for all purposes remain subject to this Agreement. If the
transferring shareholder fails to close the proposed transfer on those terms
within such second 60-day period, the proposed transfer shall again be subject
to the terms of this Paragraph 8. Notwithstanding the foregoing, such shares may
be transferred or retransferred without invoking this right of first refusal
between Mr. Turner and trusts of which Mr. Turner and/or Mr. Turner's spouse are
the sole beneficiaries by giving prior written notice certifying such a transfer
is to be made; provided that following any such transfer, such shares shall
remain subject to this right of first refusal and all the other provisions of
this Agreement. For so long as the Corporation's right to repurchase the Stock
as set forth in this Paragraph 8 remains effective, neither Mr. Turner, nor Mr.
Turner's personal representative(s), devisee(s), heir(s), successor(s), or
assignee(s) shall sell, assign or otherwise transfer any shares of Stock or
interest therein without obtaining the written agreement of the purchaser,
assignee or transferee that the shares remain subject to this
3
<PAGE>
repurchase right, and Mr. Turner agrees that certificates evidencing the Stock
may be legended to reflect the foregoing restrictions.
9. Appraised Value. "Appraised Value" of a share shall mean the market
value of the share. If no market value exists, "Appraised Value" shall mean that
value determined pursuant to the remainder of this Paragraph 9. The Appraised
Value may be mutually agreed upon by the selling and acquiring parties of the
shares of Stock. If the parties cannot mutually agree on the Appraised Value of
a share of Stock within ten (10) days after delivery of a written notice of
exercise of a purchase right or obligation hereunder, then the Appraised Value
of a share of Stock shall be equal to the fair market value of such share as
determined as of the date of termination of Mr. Turner's employment with the
Corporation and in the following manner: the fair market value shall be
determined by a Board of Arbitration comprised of three (3) members, one of whom
shall be selected by the selling party and another of whom shall be selected by
the acquiring party. The third arbiter shall be appointed by the two arbiters so
selected. If either side fails to select an arbiter within fifteen (15) days
after written request to do so, then the other party's arbiter shall
unilaterally establish the Appraised Value in a written opinion. The decision of
the majority of said arbiters, or of the single arbiter if applicable, shall be
binding upon the parties hereto. If no two arbiters agree upon a single fair
market value, it shall be the arithmetic average of the values determined by the
two arbiters whose estimates are closest in value, which average value shall be
binding upon the parties hereto. The arbiters shall render a written decision
and shall conduct all proceedings pursuant to the Uniform Arbitration Act as
adopted in the State of Arizona and to the then existing rules of the American
Arbitration Association governing commercial transactions to the extent such
rules are not inconsistent with such Act and this Agreement. Costs of
arbitration shall be borne as determined by the arbiters. In determining the
Appraised Value, no value shall be placed on the good will or name of the
Corporation (except that good will may be valued at an amount not exceeding its
unamortized cost to the extent it represents a cost to the Corporation, and all
shares shall be valued equally, i.e., without regard to majority or minority
status of such shares.
10. Permanent Disability. "Permanent Disability" means that Mr. Turner
(1) is under a legal decree of incapacity or disability pursuant to title 14 of
Arizona Revised Statutes or other applicable statutes the date of such decree
being deemed to be the date on which such disability occurred for purposes of
this agreement), or (2) submits any claim for disability insurance benefits or
for early distribution of the amounts from a qualified pension or profit-sharing
plan maintained by the Corporation on account of disability (the date of the
earliest of such claims shall be the date on which such disability shall be
deemed to have occurred), or (3) are determined to be disabled pursuant to a
Determination of Disability. A determination of Disability means a determination
that Mr. Turner, because of a medically determinable disease, injury, or other
mental or physical disability, is unable to perform substantially all of Mr.
Turner's regular duties and that such disability is determined or reasonably
expected to last at least twelve (12) months, based on then-available medical
information. The Determination of Disability will be based on the written
opinion of the physician regularly attending Mr. Turner. If the Corporation
disagrees with the opinion of such physician (the First Physician"), it may
engage at its own expense another physician (the "Second Physician") to examine
Mr. Turner. The Second Physician shall confer with the First Physician and, if
they together agree in writing
4
<PAGE>
that Mr. Turner is or is not disabled, their written opinion shall be conclusive
as to such disability. If the First and Second Physicians do not agree, they
shall choose a third consulting physician (the expense of which shall be borne
by the Corporation), and the written opinion of a majority of these three (3)
physicians shall be conclusive as to such disability. The date of any written
opinion which is conclusive to such disability is the date on which such
disability, if that is the conclusion, will be deemed to have occurred unless
the opinion expressly establishes the date of occurrence. In conjunction with
this Section, Mr. Turner consent to such examination, to furnish any medical
information requested by any examining physician, and to waive any applicable
physician-patient privilege that may arise because of such examination. All
physicians except the First Physician selected hereunder must be board-certified
in the specialty most closely related to the nature of the disability alleged to
exist.
11. Waiver or Extension of Expiration Dates. In its sole discretion,
the Board may waive or accelerate vesting of Options, or waive or extend
expiration dates, other than the final expiration date.
12. Reservation of Underlying Stock. The Corporation will reserve or
keep available at all times sufficient shares of its common stock to permit the
exercise of Mr. Turner's Options and all other options granted or to be granted
under the Plan.
13. Contemplated Registration on Form S-8. The Corporation
contemplates, upon approval of the Options by shareholders at the 1996 Annual
Meeting, that it will thereafter amend its registration statement on Form S-8 to
reflect the then-current status of all authorized options under all Corporation
plans and grants, including the Options set forth herein. If the Corporation is
successful in registering such Options, then paragraph 14 shall not apply,
except to such extent that shares acquired by an affiliate continue to be
subject to restrictions on resale under Rule 144 pursuant to the Securities
Exchange Act of 1933.
14. Effect if No Registration. If, however, the Corporation is not
successful in registering the Options under such registration statement on Form
S-8, then the common stock in the Corporation to be issued to Mr. Turner upon
exercise of the Options will not be registered under the Securities Act of 1933,
as amended (the "Act") or any applicable state securities laws, in reliance on
exemptions from registration thereunder. If in the opinion of counsel
satisfactory to the Corporation no exemption from registration is then
available, or if such issuance is otherwise in violation of applicable law at
the time purchase rights are exercised under this option, then the Corporation's
obligation to issue shares of its common stock upon exercise of the Options
shall terminate. If such an exemption is available in the opinion of such
counsel, and such issuance is not otherwise in violation of applicable law, Mr.
Turner (or his personal representative(s), devisee(s), or heir(s)) will deliver
to the Corporation as a condition precedent to giving notice of each exercise,
an investment letter agreement in form and substance satisfactory to the
Corporation to enable the Corporation to comply with the Act or other applicable
securities laws and which may, among other things, limit or condition the right
to dispose of shares of Stock acquired by exercise of the Options will be
permitted only if in the opinion of counsel satisfactory to the Corporation such
disposition is not in violation of the Act, any applicable state securities laws
or any other applicable law, regulation or rule, and Mr.
5
<PAGE>
Turner (or Mr. Turner's personal representative(s), devisee(s), or heirs(s))
deliver to the Corporation a letter agreement in form and substance satisfactory
to the Corporation whereby Mr. Turner's successor(s) or assign(s) agrees to be
bound by the terms and conditions of paragraphs 3-11 above and this Paragraph
14. Mr. Turner (and Mr. Turner's personal representative(s), devisee(s), or
heirs(s)) agree to pay all costs of obtaining any legal opinions and all costs
in connection with proposed exercise of the Options or dispositions of shares
acquired pursuant to the Options.
15. Taxes; Notice of Disposition. Mr. Turner agrees to pay to the
Corporation or to make arrangements satisfactory to the Committee to pay to the
Corporation, at such time as any income is recognized by Mr. Turner with respect
to the Options, any Federal, state, or local taxes of any kind required by law
to be withheld on such income by the Corporation. In the event of disposition or
other transfer by Mr. Turner of common stock issued to Mr. Turner upon exercise
of Mr. Turner's Options, Mr. Turner agree to provide to the Corporation promptly
written notice describing in reasonable detail the disposition or transfer,
including without limitation the sale price, if any, and date of transfer or
disposition.
16. Plan Amendments. The Board may effect certain amendments to the
Plan (within the limitations prescribed by the Plan) which may affect the terms
of the Options and the Board has the ultimate and conclusive authority to
interpret and administer the Plan and the Options.
17. Governing Law. The Agreement and the Options granted to Mr. Turner
hereunder are governed by, and shall be interpreted according to, the laws of
the State of Arizona.
18. Further Measures. Each party hereto agrees to do all such things
and take all such actions, and to make, execute and deliver such other documents
and instruments, as shall be reasonably requested to carry out the provisions,
intent and purposes of this Agreement.
19. Possible Tax Treatment. Section 422A of the Internal Revenue Code
of 1986, as amended, provides for advantageous tax treatment upon the
disposition of shares acquired pursuant to incentive stock options and such
treatment may apply to the Options Mr. Turner has been granted. However, in
order to qualify presently for such advantageous treatment Mr. Turner must make
no disposition of Corporation shares acquired by Mr. Turner pursuant to the
Options within two (2) years from the date of grant of the Options nor within
one (1) year after the shares of the Stock are transferred to Mr. Turner.
Although the foregoing holding period requirements do not represent a term or
condition of the Options, Mr. Turner may find that it is in Mr. Turner's best
interests to comply with them. Because the tax effect may vary depending on Mr.
Turner's personal circumstances, and the tax law may change from time to time,
it is strongly recommended that Mr. Turner consult with tax counsel or a tax
advisor in order to realize any available tax benefits associated with this
Options. This paragraph 18 is for Mr. Turner's information purposes only and
does not constitute a warranty by the Corporation as to any tax treatment
applicable to the Options.
6
<PAGE>
20. Not an Employment Agreement. This letter only grants the Options
described above and is not an employment agreement or a promise or assurance of
continued employment for any period of time including any period of time
necessary to permit full exercise of the Options under Paragraph 1 above.
The parties have executed this Agreement the day and year first
above-written.
The "Corporation" "Mr. Turner"
BAYWOOD INTERNATIONAL, INC.
a Nevada Corporation
By: /s/ Georgia Aadland /s/ Harvey Turner
----------------------------- ---------------------
Its Secretary
-----------------------------
7
