THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
     ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
   MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
    EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
   LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
  NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
                   THE REGISTRATION REQUIREMENTS OF THE LAWS.


                           BAYWOOD INTERNATIONAL, INC.
                            BAYWOOD ACQUISITION, INC.

                   8% CONVERTIBLE SUBORDINATED PROMISSORY NOTE


$100,000.00                                               March 30, 2007


     FOR  VALUE RECEIVED, the undersigned, BAYWOOD INTERNATIONAL, INC., a Nevada
corporation  ("Baywood") and BAYWOOD ACQUISITION, INC., a Nevada corporation and
a wholly-owned subsidiary of Baywood ("Buyer"), each located at 14950 North 83rd
Place,  Suite  1,  Scottsdale,  Arizona  85260  (each  of  Baywood and Buyer may
sometimes  be referred to herein as a "Company", and together, the "Companies"),
hereby,  jointly and severally, promise to pay to the order of THOMAS PINKOWSKI,
an individual residing at 3703 Calle Fino Clarete San Clemente, California 92673
("Holder"),  in  lawful  money of the United States, the principal amount of One
Hundred  Thousand  Dollars  ($100,000),  together  with  interest  on the unpaid
principal  amount  hereof, from  the date hereof until the outstanding principal
amount hereof shall be paid in full, at the rate of eight percent (8%) per annum
computed  on  the  basis  of  a  365-day  year.

     1.     Note.  This  subordinated  promissory  note  (this  "Note") is being
            ----
delivered  by  the Companies to Holder in partial consideration for the purchase
of  the Purchased Assets and the LifeTime Business (as such terms are defined in
that  certain  Asset Purchase Agreement, of even date herewith, by and among the
Companies,  LifeTime and the LifeTime Representatives defined therein, including
Holder  (the  "Asset Purchase Agreement")).  Unless otherwise stated herein, all
capitalized terms not defined herein shall have the meanings ascribed to them in
the  Asset  Purchase  Agreement.

     2.     Payment.  The  principal  amount  of  this  Note shall be payable in
            -------
eight  equal  quarterly  installments  of  TWELVE  THOUSAND FIVE HUNDRED DOLLARS
($12,500),  on  the  last day of March, June, September and December, commencing
June  30,  2007  through  March  31,  2009.  Accrued  interest


<PAGE>
shall  be  payable  in  arrears  on  each  such  installment payment date and at
maturity.  All payments shall be made in immediately available funds at Holder's
address  set  forth  in  the  Asset Purchase Agreement, or such other address as
Holder  may  designate  in  writing  to  the  Companies.

     3.     Prepayment.  Subject  to  Holder's prior right to convert all or any
            ----------
portion  of this Note into shares of Common Stock (hereafter defined), this Note
may  be  prepaid  in  whole  or in part at any time or from time to time without
premium  or  penalty  or discount, together with accrued interest to the date of
payment  on  the  principal  amount  prepaid.

     4.     Optional  Conversion  of  Note.
            -------------------------------

          4.1.     Conversion  Procedure.
                   ---------------------

               (a)     At  any  time Holder at his option may convert all or any
     portion  of  this  Note  into  the number of shares (rounded to the nearest
     share) of common stock, par value $0.001 per share, of Baywood (the "Common
     Stock"),  computed  by  dividing  the  principal  amount of this Note to be
     converted  together  with  the accrued interest on such principal amount by
     the  Conversion  Price  (hereafter  defined)  then  in  effect.

               (b)     Holder  shall  effect  a  conversion by surrendering this
     Note  accompanied  by  a  proper  assignment  thereof  to  the  Companies
     together  with  a completed and duly executed conversion notice in the form
     annexed  hereto.  Such  conversion of this Note will be deemed to have been
     effected as of the close of business on the date on which this Note and the
     duly  completed  exercise  notice  have  been  surrendered at the principal
     office of the Companies. At such time as such conversion has been effected,
     the  rights  of Holder to receive payments of principal and interest hereon
     will cease and Holder will be deemed to have become the holder of record of
     the  shares  of  Common  Stock represented thereby. Provisions of this Note
     that  apply to conversion of all of this Note also apply to conversion of a
     portion  of  it.

               (c)     As  soon as possible after a conversion has been effected
     (but  in  any  event  within  five  (5)  days  after  the surrender of this
     Note  and the conversion notice to the Company), the Companies will deliver
     to  Holder:

                         (i)     a  certificate or certificates representing the
     number  of  shares  of  Common  Stock issuable by reason of such conversion
     in  the  name of Holder in such denomination or denominations as Holder has
     specified;  and

                        (ii)     a  new  duly  executed  Note  for the principal
     amount  of  this  Note  which  was delivered to the Companies in connection
     with  such  conversion  but  which  was  not  converted.

               (d)     The  issuance  of certificates for shares of Common Stock
     upon  conversion  of  this  Note  will be made without charge to Holder for
     any  issuance  tax  in respect thereof or other cost incurred by Baywood in
     connection  with  such  conversion  and  the


                                        2
<PAGE>
     related  issuance  of  shares  of  Common  Stock.  Baywood  represents  and
     warrants  that upon conversion of this Note, the Common Stock issuable with
     respect  to  such  conversion  will  be  validly  issued,  fully  paid  and
     nonassessable.

               (e)     The  Companies  will  not  close  their  respective books
     against  the  transfer  of  this  Note  or  of  Common  Stock  issued  or
     issuable  upon  conversion of this Note in any manner which interferes with
     the timely conversion of this Note. Baywood will from time to time take all
     such  action  as may be necessary to assure that the par value per share of
     the  Common  Stock  acquirable upon conversion of this Note is at all times
     equal  to  or  less  than  the  Conversion  Price  then  in  effect.

               (f)     This  Note,  when  delivered  for  conversion,  shall  be
     cancelled  by  the  Companies.

          4.2     Conversion  Price.
                  -----------------

               (a)     The  initial  Conversion  Price  will  be $0.05 per share
     during  the  first  twelve  (12)  months  from  the  date hereof, $0.08 per
     share for months twelve (12) through twenty-four (24) from the date hereof,
     and  $0.10  per share thereafter until the payment in full of this Note. In
     order  to  prevent dilution of the conversion rights granted hereunder, the
     Conversion  Price  will be subject to adjustment from time to time pursuant
     to  this  Section  4.2.

               (b)     Reorganization,  Reclassification,  Merger  or  Sale.  In
                       ----------------------------------------------------
     case  Baywood  shall  effect  a  reorganization,  shall  merge  with  or
     consolidate  into another corporation, or shall sell, transfer or otherwise
     dispose  of  all  or  substantially all of its property, assets or business
     and, pursuant to the terms of such reorganization, merger, consolidation or
     disposition  of  assets,  shares  of stock or other securities, property or
     assets  of  Baywood, successor or transferee or an affiliate thereof are to
     be  received  by or distributed to the holders of Common Stock, then Holder
     shall  be provided with written notice from Baywood informing Holder of the
     terms  of  such  reorganization,  merger,  consolidation  or disposition of
     assets  and  of  the  record  date  thereof  for  any distribution pursuant
     thereto,  at least ten (10) days in advance of such record date, and Holder
     shall  have,  in  addition  to the rights provided for herein, the right to
     receive, at Holder's election, either (i) upon conversion of this Note, the
     number  of  shares  of  stock  or  other  securities, property or assets of
     Baywood, successor, transferee or affiliate thereof or cash receivable upon
     or as a result of such reorganization, merger, consolidation or disposition
     of  assets  by  a  holder of the number of shares of Common Stock for which
     this  Note  is  convertible  immediately  prior  to  such event or (ii) the
     securities  into  which this Note is converted upon, or as a result of such
     reorganization,  merger,  consolidation  or  disposition  of  assets.  The
     provisions  of this paragraph (b) of this Section 4.2 shall similarly apply
     to  successive  reorganizations, mergers, consolidations or dispositions of
     assets.

               (c)     Subdivision  or  Combination of Common Stock.  If Baywood
                       --------------------------------------------
     declares  a  dividend  or  other  distribution  payable in shares of Common
     Stock  or  any  shares  of  a class or series convertible into Common Stock
     (together  with  the  Common  Stock,  "Securities")  or


                                        3
<PAGE>
     subdivides  its  outstanding  shares  of  Common Stock into a larger number
     or  combines  its outstanding shares of Common Stock into a smaller number,
     then  the  Conversion  Price  in effect immediately prior to such dividend,
     other  distribution,  subdivision or combination, as the case may be, shall
     forthwith  be  adjusted  to  that  price  determined  by  multiplying  the
     Conversion  Price  by  a  fraction  (i) the numerator of which shall be the
     total  number  of  outstanding  shares  of such Common Stock and Securities
     immediately  prior  to  such  dividend,  other distribution, subdivision or
     combination  and (ii) the denominator of which shall be the total number of
     outstanding  shares  of  such  Common  Stock  and Securities (including the
     number  of  shares  of Common Stock into which such newly issued Securities
     are then convertible), immediately after such dividend, other distribution,
     subdivision  or  combination.

               (d)     In case Baywood shall distribute to the holders of Common
     Stock  evidences  of  indebtedness  issued  by  Baywood,  or  assets
     (excluding  cash  dividends) then, in each such case, immediately following
     the  record date fixed for the determination of the holders of Common Stock
     entitled  to  receive  such  distribution,  the  Conversion Price in effect
     thereafter  shall  be  determined  by  multiplying  the Conversion Price in
     effect  immediately  prior  to  such  record  date  by  a  fraction (i) the
     numerator  of  which  shall  be an amount equal to the remainder of (A) the
     Current  Market  Price  (as hereafter defined) of one share of Common Stock
     less  (B) the fair value (as determined in good faith by Baywood's board of
     directors)  of  the  evidences  of indebtedness or assets so distributed in
     respect  of  one  share  of  Common Stock, as the case may be, and (ii) the
     denominator  of  which  shall  be  the Current Market Price of one share of
     Common  Stock.  Such adjustment shall be made on the date such distribution
     is  made,  and  shall  become  effective  at the opening of business on the
     business  day  following  the  record  date  for  the  determination  of
     stockholders  entitled  to  such  distribution.

          For  purposes  of  this  Note,  "Current  Market  Price" on any day of
     determination  means  the  closing  price  of  a  share  of Common Stock on
     the  over-the-counter  bulletin board as reported by the National Quotation
     Bureau  Incorporated, or a similar generally accepted reporting service, or
     if  not so available, in such manner as furnished by any Nasdaq member firm
     of  the National Association of Securities Dealers, Inc. selected from time
     to time by the board of directors of Baywood for that purpose, or if not so
     available,  a  price  determined in good faith by the board of directors of
     Buyer  as being equal to the fair market value thereof, as the case may be.

               (e)     Notice  of  Adjustment.  Whenever  the  Conversion  Price
                       ----------------------
     shall  be  adjusted  as  provided  in  this  Section  4.2,  Baywood  shall
     forthwith  send  by  first  class  mail,  postage  prepaid to Holder at his
     address  as  shown  in the records of Baywood a statement, certified by the
     chief  financial  officer of Baywood, showing in detail the facts requiring
     such adjustment and the Conversion Price that shall be in effect after such
     adjustment.

          4.3     Reservation  of  Common  Stock.  Baywood  shall  at  all times
                  ------------------------------
     reserve  and  keep  available  for  issuance  upon  the  conversion of this
     Note  such  number of its authorized but unissued shares of Common Stock as
     will  be  sufficient  to  permit  the  conversion  in  full  of  this


                                        4
<PAGE>
     Note,  and  upon  such  issuance  such  shares  of  Common  Stock  will  be
     validly  issued,  fully  paid and nonassessable. The transfer agent for any
     shares  of Baywood's capital stock issuable upon the exercise of any of the
     rights  of purchase aforesaid, will be authorized and directed at all times
     to  reserve  such  number  of authorized shares of Common Stock as shall be
     requisite  for  such purpose. Baywood will keep a copy of this Note on file
     with  the  transfer  agent  for  the Common Stock and with every subsequent
     transfer  agent for any shares of Baywood's capital stock issuable upon the
     exercise  of the rights of purchase represented by the foregoing conversion
     rights.  Baywood  will  supply  the transfer agent with duly executed stock
     certificates  for issue against exercise of the foregoing conversion rights
     and  will provide or otherwise make available any cash which may be payable
     in  lieu  of  fractional  shares  as  provided  hereinabove.

          4.4     No  Voting  Rights;  Limitations of Liability.  This Note will
                  ----------------------------------------------
     not  entitle  Holder  to  any  voting  rights  or  other  rights  as  a
     stockholder  of  Baywood.  No  provision  of  this  Note, in the absence of
     affirmative  action  by Holder to purchase Common Stock, and no enumeration
     in  this  Note of the rights or privileges of Holder, will give rise to any
     liability  of  such  Holder  for  the  Conversion  Price  of  Common  Stock
     acquirable  by  exercise  hereof  or  as  a  stockholder  of  Baywood.

     5.     Subordination.  The  payment  of  this Note shall be subordinate and
            -------------
     junior  in  right  of  payment  to  the  prior  payment  of  senior  debt
     pursuant  to  a Subordination Agreement of even date herewith, by and among
     Vineyard  Bank,  N.A.,  the  Companies  and  the  LifeTime Representatives,
     including  Holder.

     6.     Events  of  Default;  Remedies.
            ------------------------------

          6.1     The  occurrence  of  any  one  or more of the following events
shall  constitute  an  Event  of  Default  hereunder:

               (a)     Default  by the Companies in the payment of the principal
     of  or  interest  on  this  Note  when and as the same shall become due and
     payable and such default shall continue for fifteen (15) days after written
     notice  thereof  from  Holder;  or

               (b)     (i)  Commencement  by  either Company of a voluntary case
     under  the  federal  bankruptcy  laws  (as  now  of  hereafter  in effect);
     (ii)  either  Company  applying for or consenting to the appointment of, or
     the  taking  of possession by, a receiver, custodian, trustee or liquidator
     of  itself  or  of  a  substantial part of its assets; (iii) either Company
     making  a  general  assignment  for  the  benefit of creditors; or (iv) the
     failure of either Company generally to pay its debts as they become due; or

               (c)     The  entry of a decree or order by any court of competent
     jurisdiction  in  respect  of  either  Company  granting  (i) relief in any
     involuntary  case under the federal bankruptcy laws (as now or hereafter in
     effect);  or  (ii)  appointment  of  a  trustee,  receiver,  custodian  or
     liquidator  for  such  Company or for a substantial part of its assets, and
     such  case


                                        5
<PAGE>
     or  proceeding  shall  continue  undismissed  or  unstayed  for a period of
     one  hundred  twenty  (120)  consecutive  days.

          6.2     Upon  the  happening  of  any  Event of Default hereunder, the
entire  principal  sum and all interest thereon, at the option of Holder, may be
declared  and thereupon shall become immediately due and payable.  In such event
the  Companies  shall  be responsible to pay all of Holder's reasonable costs of
collection,  including  attorney's  fees.

     7.     Notices.  All notices and other communications required or permitted
            -------
under  this  Note  shall  be made in accordance with the provisions of the Asset
Purchase  Agreement.  The  Companies  waive  presentment  for payment, notice of
non-payment, protest, demand, notice of protest, notice of intent to accelerate,
notice of acceleration and dishonor, diligence in enforcement and indulgences of
any  kind.

     8.      Amendment; Waiver.  This Note may not be amended or modified except
             -----------------
by  an  instrument  in  writing  duly  executed  by the Companies and Holder. No
failure  or  delay  on the part of Holder in the exercise of any power, right or
privilege  hereunder  shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise  thereof  or  of  any  other  right,  power  privilege.  All rights and
remedies  existing hereunder are cumulative to, and not exclusive of, any rights
or  remedies  otherwise  available.

     9.     Severability.  If  any provision hereof shall for any reason be held
            ------------
to  be  invalid,  illegal  or  unenforceable  in  any  respect, such invalidity,
illegality,  or  unenforceability  shall not affect any other provisions hereof,
and  this  Note  shall be construed as if such invalid, illegal or unenforceable
provision  has  never  been  contained  herein.

     10.     Assignment.  This  Note  may  be  assigned,  pledged, negotiated or
             ----------
transferred  by  Holder and shall inure to the benefit of Holder, its successors
and  assigns.

     11.     Governing  Law  Waiver of Jury Trial.  This Note is made under, and
             ------------------------------------
shall  be  construed  and  enforced in accordance with, the internal laws of the
State  of  Arizona,  without  regard  to  principles  of conflicts of laws.  The
Companies  irrevocably  waive, to the maximum extent permitted by law, any right
they  may  have  to  a  trial  by  jury in respect of any litigation directly or
indirectly  at  any  time arising out of, under or in connection with this Note.

                            [Signature Page Follows]


                                        6
<PAGE>
          IN  WITNESS  WHEREOF,  the  undersigned  have  caused  this Note to be
executed as of the 30th day of March, 2007.


                                             BAYWOOD  INTERNATIONAL,  INC.


                                        By:  /s/ Neil Reithinger
                                             ------------------------------
                                             Name:  Neil Reithinger
                                             Title: President & C.E.O.


                                             BAYWOOD  ACQUISITION,  INC.


                                        By:  /s/ Neil Reithinger
                                             ------------------------------
                                             Name:  Neil Reithinger
                                             Title: President


                                        7
<PAGE>
                           [FORM OF CONVERSION NOTICE]
Baywood International, Inc.
Baywood Acquisition, Inc.
14950 North 83rd Place, Suite 1
Scottsdale, Arizona 85260

     The undersigned Holder of the 8% Subordinated Convertible Note of the
Companies dated March __, 2007 hereby irrevocably exercises its option to
convert [$_______] of unpaid principal and [$_______] of accrued interest on the
Note into shares of Common Stock of Baywood International, Inc., in accordance
with the terms of the Note. The undersigned hereby delivers the Note to the
Companies for such conversion. The undersigned hereby instructs the Companies to
convert the amount of money specified above into shares of Common Stock at the
Conversion Price in accordance with Section 4.2 of the Note. The undersigned
directs that the Common Stock issuable and certificates therefor deliverable
upon conversion be issued in the name of and delivered to the undersigned unless
otherwise indicated below. If the full unpaid amount of the Note is not being
converted, the undersigned also hereby instructs the Companies to deliver a new
Note to the undersigned in the amount which is not being converted. All
capitalized terms not defined herein shall have the meanings ascribed to them in
the Note.

Dated:
      -------------------------------------------------

Signature:
          ---------------------------------------------

Print Name:
           --------------------------------------------

Information for Issuance of Stock and Delivery of Stock Certificates:

Name:
     --------------------------------------------------

Address:
        -----------------------------------------------


----------------------------------------

No. of shares to be issued:
                           ----------------------------

Amount of new Note to be issued:
                                -----------------------


                                        8
<PAGE>
 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
     ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
   MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
    EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
   LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
  NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
                   THE REGISTRATION REQUIREMENTS OF THE LAWS.


                           BAYWOOD INTERNATIONAL, INC.
                            BAYWOOD ACQUISITION, INC.

                   8% CONVERTIBLE SUBORDINATED PROMISSORY NOTE


$250,000.00                                               March 30, 2007


     FOR  VALUE RECEIVED, the undersigned, BAYWOOD INTERNATIONAL, INC., a Nevada
corporation  ("Baywood") and BAYWOOD ACQUISITION, INC., a Nevada corporation and
a wholly-owned subsidiary of Baywood ("Buyer"), each located at 14950 North 83rd
Place,  Suite  1,  Scottsdale,  Arizona  85260  (each  of  Baywood and Buyer may
sometimes  be referred to herein as a "Company", and together, the "Companies"),
hereby,  jointly  and  severally, promise to pay to the order of CHARLES UNG, an
individual  residing  at  210  Crescent  Glen  Drive, Glendora, California 91741
("Holder"),  in  lawful  money of the United States, the principal amount of Two
Hundred  Fifty Thousand Dollars ($250,000), together with interest on the unpaid
principal  amount  hereof, from  the date hereof until the outstanding principal
amount hereof shall be paid in full, at the rate of eight percent (8%) per annum
computed  on  the  basis  of  a  365-day  year.

     1.     Note.  This  subordinated  promissory  note  (this  "Note") is being
            ----
delivered  by  the Companies to Holder in partial consideration for the purchase
of  the Purchased Assets and the LifeTime Business (as such terms are defined in
that  certain  Asset Purchase Agreement, of even date herewith, by and among the
Companies,  LifeTime and the LifeTime Representatives defined therein, including
Holder  (the  "Asset Purchase Agreement")).  Unless otherwise stated herein, all
capitalized terms not defined herein shall have the meanings ascribed to them in
the  Asset  Purchase  Agreement.

     2.     Payment.  The  principal  amount  of  this  Note shall be payable in
            -------
eight  equal  quarterly  installments  of  THIRTY ONE THOUSAND TWO HUNDRED FIFTY
DOLLARS  ($31,250),  on  the  last  day  of March, June, September and December,
commencing  June  30,  2007  through  March  31,  2009.


<PAGE>
Accrued  interest  shall  be payable in arrears on each such installment payment
date and at maturity.  All payments shall be made in immediately available funds
at  Holder's  address  set  forth in the Asset Purchase Agreement, or such other
address  as  Holder  may  designate  in  writing  to  the  Companies.

     3.     Prepayment.  Subject  to  Holder's prior right to convert all or any
            ----------
portion  of this Note into shares of Common Stock (hereafter defined), this Note
may  be  prepaid  in  whole  or in part at any time or from time to time without
premium  or  penalty  or discount, together with accrued interest to the date of
payment  on  the  principal  amount  prepaid.

     4.     Optional  Conversion  of  Note.
            -------------------------------

          4.1.     Conversion  Procedure.
                   ---------------------

               (a)     At  any  time Holder at his option may convert all or any
     portion  of  this  Note  into  the number of shares (rounded to the nearest
     share) of common stock, par value $0.001 per share, of Baywood (the "Common
     Stock"),  computed  by  dividing  the  principal  amount of this Note to be
     converted  together  with  the accrued interest on such principal amount by
     the  Conversion  Price  (hereafter  defined)  then  in  effect.

               (b)     Holder  shall  effect  a  conversion by surrendering this
     Note  accompanied  by  a  proper  assignment  thereof  to  the  Companies
     together  with  a completed and duly executed conversion notice in the form
     annexed  hereto.  Such  conversion of this Note will be deemed to have been
     effected as of the close of business on the date on which this Note and the
     duly  completed  exercise  notice  have  been  surrendered at the principal
     office of the Companies. At such time as such conversion has been effected,
     the  rights  of Holder to receive payments of principal and interest hereon
     will cease and Holder will be deemed to have become the holder of record of
     the  shares  of  Common  Stock represented thereby. Provisions of this Note
     that  apply to conversion of all of this Note also apply to conversion of a
     portion  of  it.

               (c)     As  soon as possible after a conversion has been effected
     (but  in  any  event  within  five  (5)  days  after  the surrender of this
     Note  and the conversion notice to the Company), the Companies will deliver
     to  Holder:

                         (i)     a  certificate or certificates representing the
     number  of  shares  of  Common  Stock issuable by reason of such conversion
     in  the  name of Holder in such denomination or denominations as Holder has
     specified;  and

                        (ii)     a  new  duly  executed  Note  for the principal
     amount  of  this  Note  which  was delivered to the Companies in connection
     with  such  conversion  but  which  was  not  converted.

               (d)     The  issuance  of certificates for shares of Common Stock
     upon  conversion  of  this  Note  will be made without charge to Holder for
     any  issuance  tax  in respect thereof or other cost incurred by Baywood in
     connection  with  such  conversion  and  the


                                        2
<PAGE>
     related  issuance  of  shares  of  Common  Stock.  Baywood  represents  and
     warrants  that upon conversion of this Note, the Common Stock issuable with
     respect  to  such  conversion  will  be  validly  issued,  fully  paid  and
     nonassessable.

               (e)     The  Companies  will  not  close  their  respective books
     against  the  transfer  of  this  Note  or  of  Common  Stock  issued  or
     issuable  upon  conversion of this Note in any manner which interferes with
     the timely conversion of this Note. Baywood will from time to time take all
     such  action  as may be necessary to assure that the par value per share of
     the  Common  Stock  acquirable upon conversion of this Note is at all times
     equal  to  or  less  than  the  Conversion  Price  then  in  effect.

               (f)     This  Note,  when  delivered  for  conversion,  shall  be
     cancelled  by  the  Companies.

          4.2     Conversion  Price.
                  -----------------

               (a)     The  initial  Conversion  Price  will  be $0.05 per share
     during  the  first  twelve  (12)  months  from  the  date hereof, $0.08 per
     share for months twelve (12) through twenty-four (24) from the date hereof,
     and  $0.10  per share thereafter until the payment in full of this Note. In
     order  to  prevent dilution of the conversion rights granted hereunder, the
     Conversion  Price  will be subject to adjustment from time to time pursuant
     to  this  Section  4.2.

               (b)     Reorganization,  Reclassification,  Merger  or  Sale.  In
                       ----------------------------------------------------
     case  Baywood  shall  effect  a  reorganization,  shall  merge  with  or
     consolidate  into another corporation, or shall sell, transfer or otherwise
     dispose  of  all  or  substantially all of its property, assets or business
     and, pursuant to the terms of such reorganization, merger, consolidation or
     disposition  of  assets,  shares  of stock or other securities, property or
     assets  of  Baywood, successor or transferee or an affiliate thereof are to
     be  received  by or distributed to the holders of Common Stock, then Holder
     shall  be provided with written notice from Baywood informing Holder of the
     terms  of  such  reorganization,  merger,  consolidation  or disposition of
     assets  and  of  the  record  date  thereof  for  any distribution pursuant
     thereto,  at least ten (10) days in advance of such record date, and Holder
     shall  have,  in  addition  to the rights provided for herein, the right to
     receive, at Holder's election, either (i) upon conversion of this Note, the
     number  of  shares  of  stock  or  other  securities, property or assets of
     Baywood, successor, transferee or affiliate thereof or cash receivable upon
     or as a result of such reorganization, merger, consolidation or disposition
     of  assets  by  a  holder of the number of shares of Common Stock for which
     this  Note  is  convertible  immediately  prior  to  such event or (ii) the
     securities  into  which this Note is converted upon, or as a result of such
     reorganization,  merger,  consolidation  or  disposition  of  assets.  The
     provisions  of this paragraph (b) of this Section 4.2 shall similarly apply
     to  successive  reorganizations, mergers, consolidations or dispositions of
     assets.

               (c)     Subdivision  or  Combination of Common Stock.  If Baywood
                       --------------------------------------------
     declares  a  dividend  or  other  distribution  payable in shares of Common
     Stock  or  any  shares  of  a class or series convertible into Common Stock
     (together  with  the  Common  Stock,  "Securities")  or


                                        3
<PAGE>
     subdivides  its  outstanding  shares  of  Common Stock into a larger number
     or  combines  its outstanding shares of Common Stock into a smaller number,
     then  the  Conversion  Price  in effect immediately prior to such dividend,
     other  distribution,  subdivision or combination, as the case may be, shall
     forthwith  be  adjusted  to  that  price  determined  by  multiplying  the
     Conversion  Price  by  a  fraction  (i) the numerator of which shall be the
     total  number  of  outstanding  shares  of such Common Stock and Securities
     immediately  prior  to  such  dividend,  other distribution, subdivision or
     combination  and (ii) the denominator of which shall be the total number of
     outstanding  shares  of  such  Common  Stock  and Securities (including the
     number  of  shares  of Common Stock into which such newly issued Securities
     are then convertible), immediately after such dividend, other distribution,
     subdivision  or  combination.

               (d)     In case Baywood shall distribute to the holders of Common
     Stock  evidences  of  indebtedness  issued  by  Baywood,  or  assets
     (excluding  cash  dividends) then, in each such case, immediately following
     the  record date fixed for the determination of the holders of Common Stock
     entitled  to  receive  such  distribution,  the  Conversion Price in effect
     thereafter  shall  be  determined  by  multiplying  the Conversion Price in
     effect  immediately  prior  to  such  record  date  by  a  fraction (i) the
     numerator  of  which  shall  be an amount equal to the remainder of (A) the
     Current  Market  Price  (as hereafter defined) of one share of Common Stock
     less  (B) the fair value (as determined in good faith by Baywood's board of
     directors)  of  the  evidences  of indebtedness or assets so distributed in
     respect  of  one  share  of  Common Stock, as the case may be, and (ii) the
     denominator  of  which  shall  be  the Current Market Price of one share of
     Common  Stock.  Such adjustment shall be made on the date such distribution
     is  made,  and  shall  become  effective  at the opening of business on the
     business  day  following  the  record  date  for  the  determination  of
     stockholders  entitled  to  such  distribution.

          For  purposes  of  this  Note,  "Current  Market  Price" on any day of
     determination  means  the  closing  price of a share of Common Stock on the
     over-the-counter  bulletin  board  as  reported  by  the National Quotation
     Bureau  Incorporated, or a similar generally accepted reporting service, or
     if  not so available, in such manner as furnished by any Nasdaq member firm
     of  the National Association of Securities Dealers, Inc. selected from time
     to time by the board of directors of Baywood for that purpose, or if not so
     available,  a  price  determined in good faith by the board of directors of
     Buyer  as being equal to the fair market value thereof, as the case may be.

               (e)     Notice  of  Adjustment.  Whenever  the  Conversion  Price
                       ----------------------
     shall  be  adjusted  as  provided  in  this  Section  4.2,  Baywood  shall
     forthwith  send  by  first  class  mail,  postage  prepaid to Holder at his
     address  as  shown  in the records of Baywood a statement, certified by the
     chief  financial  officer of Baywood, showing in detail the facts requiring
     such adjustment and the Conversion Price that shall be in effect after such
     adjustment.

          4.3     Reservation  of  Common  Stock.  Baywood  shall  at  all times
                  ------------------------------
     reserve  and  keep  available  for  issuance  upon  the  conversion of this
     Note  such  number of its authorized but unissued shares of Common Stock as
     will  be  sufficient  to  permit  the  conversion  in  full  of  this


                                        4
<PAGE>
     Note,  and  upon  such  issuance  such  shares  of  Common  Stock  will  be
     validly  issued,  fully  paid and nonassessable. The transfer agent for any
     shares  of Baywood's capital stock issuable upon the exercise of any of the
     rights  of purchase aforesaid, will be authorized and directed at all times
     to  reserve  such  number  of authorized shares of Common Stock as shall be
     requisite  for  such purpose. Baywood will keep a copy of this Note on file
     with  the  transfer  agent  for  the Common Stock and with every subsequent
     transfer  agent for any shares of Baywood's capital stock issuable upon the
     exercise  of the rights of purchase represented by the foregoing conversion
     rights.  Baywood  will  supply  the transfer agent with duly executed stock
     certificates  for issue against exercise of the foregoing conversion rights
     and  will provide or otherwise make available any cash which may be payable
     in  lieu  of  fractional  shares  as  provided  hereinabove.

          4.4     No  Voting  Rights;  Limitations of Liability.  This Note will
                  ----------------------------------------------
     not  entitle  Holder  to  any  voting  rights  or  other  rights  as  a
     stockholder  of  Baywood.  No  provision  of  this  Note, in the absence of
     affirmative  action  by Holder to purchase Common Stock, and no enumeration
     in  this  Note of the rights or privileges of Holder, will give rise to any
     liability  of  such  Holder  for  the  Conversion  Price  of  Common  Stock
     acquirable  by  exercise  hereof  or  as  a  stockholder  of  Baywood.

     5.     Subordination.  The  payment  of  this Note shall be subordinate and
            -------------
     junior  in  right  of  payment  to  the  prior  payment  of  senior  debt
     pursuant  to  a Subordination Agreement of even date herewith, by and among
     Vineyard  Bank,  N.A.,  the  Companies  and  the  LifeTime Representatives,
     including  Holder.

     6.     Events  of  Default;  Remedies.
            ------------------------------

          6.1     The  occurrence  of  any  one  or more of the following events
shall  constitute  an  Event  of  Default  hereunder:

               (a)     Default  by the Companies in the payment of the principal
     of  or  interest  on  this  Note  when and as the same shall become due and
     payable and such default shall continue for fifteen (15) days after written
     notice  thereof  from  Holder;  or

               (b)     (i)  Commencement  by  either Company of a voluntary case
     under  the  federal  bankruptcy  laws  (as  now  of  hereafter  in effect);
     (ii)  either  Company  applying for or consenting to the appointment of, or
     the  taking  of possession by, a receiver, custodian, trustee or liquidator
     of  itself  or  of  a  substantial part of its assets; (iii) either Company
     making  a  general  assignment  for  the  benefit of creditors; or (iv) the
     failure of either Company generally to pay its debts as they become due; or

               (c)     The  entry of a decree or order by any court of competent
     jurisdiction  in  respect  of  either  Company  granting  (i) relief in any
     involuntary  case under the federal bankruptcy laws (as now or hereafter in
     effect);  or  (ii)  appointment  of  a  trustee,  receiver,  custodian  or
     liquidator  for  such  Company or for a substantial part of its assets, and
     such  case


                                        5
<PAGE>
     or  proceeding  shall  continue  undismissed  or  unstayed  for a period of
     one  hundred  twenty  (120)  consecutive  days.

          6.2     Upon  the  happening  of  any  Event of Default hereunder, the
entire  principal  sum and all interest thereon, at the option of Holder, may be
declared  and thereupon shall become immediately due and payable.  In such event
the  Companies  shall  be responsible to pay all of Holder's reasonable costs of
collection,  including  attorney's  fees.

     7.     Notices.  All notices and other communications required or permitted
            -------
under  this  Note  shall  be made in accordance with the provisions of the Asset
Purchase  Agreement.  The  Companies  waive  presentment  for payment, notice of
non-payment, protest, demand, notice of protest, notice of intent to accelerate,
notice of acceleration and dishonor, diligence in enforcement and indulgences of
any  kind.

     8.      Amendment; Waiver.  This Note may not be amended or modified except
             -----------------
by  an  instrument  in  writing  duly  executed  by the Companies and Holder. No
failure  or  delay  on the part of Holder in the exercise of any power, right or
privilege  hereunder  shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise  thereof  or  of  any  other  right,  power  privilege.  All rights and
remedies  existing hereunder are cumulative to, and not exclusive of, any rights
or  remedies  otherwise  available.

     9.     Severability.  If  any provision hereof shall for any reason be held
            ------------
to  be  invalid,  illegal  or  unenforceable  in  any  respect, such invalidity,
illegality,  or  unenforceability  shall not affect any other provisions hereof,
and  this  Note  shall be construed as if such invalid, illegal or unenforceable
provision  has  never  been  contained  herein.

     10.     Assignment.  This  Note  may  be  assigned,  pledged, negotiated or
             ----------
transferred  by  Holder and shall inure to the benefit of Holder, its successors
and  assigns.

     11.     Governing  Law  Waiver of Jury Trial.  This Note is made under, and
             ------------------------------------
shall  be  construed  and  enforced in accordance with, the internal laws of the
State  of  Arizona,  without  regard  to  principles  of conflicts of laws.  The
Companies  irrevocably  waive, to the maximum extent permitted by law, any right
they  may  have  to  a  trial  by  jury in respect of any litigation directly or
indirectly  at  any  time arising out of, under or in connection with this Note.

                            [Signature Page Follows]


                                        6
<PAGE>

          IN  WITNESS  WHEREOF,  the  undersigned  have  caused  this Note to be
executed as of the 30th day of March, 2007.


                                             BAYWOOD  INTERNATIONAL,  INC.


                                        By:  /s/ Neil Reithinger
                                             ------------------------------
                                             Name:  Neil Reithinger
                                             Title: President & C.E.O.


                                             BAYWOOD  ACQUISITION,  INC.


                                        By:  /s/ Neil Reithinger
                                             ------------------------------
                                             Name:  Neil Reithinger
                                             Title: President


                                        7
<PAGE>
                           [FORM OF CONVERSION NOTICE]
Baywood International, Inc.
Baywood Acquisition, Inc.
14950 North 83rd Place, Suite 1
Scottsdale, Arizona 85260

     The undersigned Holder of the 8% Subordinated Convertible Note of the
Companies dated March __, 2007 hereby irrevocably exercises its option to
convert [$_______] of unpaid principal and [$_______] of accrued interest on the
Note into shares of Common Stock of Baywood International, Inc., in accordance
with the terms of the Note. The undersigned hereby delivers the Note to the
Companies for such conversion. The undersigned hereby instructs the Companies to
convert the amount of money specified above into shares of Common Stock at the
Conversion Price in accordance with Section 4.2 of the Note. The undersigned
directs that the Common Stock issuable and certificates therefor deliverable
upon conversion be issued in the name of and delivered to the undersigned unless
otherwise indicated below. If the full unpaid amount of the Note is not being
converted, the undersigned also hereby instructs the Companies to deliver a new
Note to the undersigned in the amount which is not being converted. All
capitalized terms not defined herein shall have the meanings ascribed to them in
the Note.

Dated:
      ----------------------------------------------

Signature:
          ------------------------------------------

Print Name:
           -----------------------------------------

Information for Issuance of Stock and Delivery of Stock Certificates:

Name:
     -----------------------------------------------

Address:
        --------------------------------------------


------------------------------------

No. of shares to be issued:
                           -------------------------

Amount of new Note to be issued:
                                --------------------


                                        8
<PAGE>
 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
     ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
   MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
    EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
   LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
  NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
                   THE REGISTRATION REQUIREMENTS OF THE LAWS.


                           BAYWOOD INTERNATIONAL, INC.
                            BAYWOOD ACQUISITION, INC.

                   8% CONVERTIBLE SUBORDINATED PROMISSORY NOTE


$250,000.00                                                March 30, 2007


     FOR  VALUE RECEIVED, the undersigned, BAYWOOD INTERNATIONAL, INC., a Nevada
corporation  ("Baywood") and BAYWOOD ACQUISITION, INC., a Nevada corporation and
a wholly-owned subsidiary of Baywood ("Buyer"), each located at 14950 North 83rd
Place,  Suite  1,  Scottsdale,  Arizona  85260  (each  of  Baywood and Buyer may
sometimes  be referred to herein as a "Company", and together, the "Companies"),
hereby,  jointly  and severally, promise to pay to the order of M. AMIRUL KARIM,
an  individual  residing  at  12921  Berkhamsted  Street,
Cerritos,  California  90703-7235  ("Holder"),  in  lawful  money  of the United
States,  the  principal amount of Two Hundred Fifty Thousand Dollars ($250,000),
together  with  interest  on  the unpaid principal amount hereof, from  the date
hereof  until  the outstanding principal amount hereof shall be paid in full, at
the  rate  of  eight  percent  (8%) per annum computed on the basis of a 365-day
year.

     1.     Note.  This  subordinated  promissory  note  (this  "Note") is being
            ----
delivered  by  the Companies to Holder in partial consideration for the purchase
of  the Purchased Assets and the LifeTime Business (as such terms are defined in
that  certain  Asset Purchase Agreement, of even date herewith, by and among the
Companies,  LifeTime and the LifeTime Representatives defined therein, including
Holder  (the  "Asset Purchase Agreement")).  Unless otherwise stated herein, all
capitalized terms not defined herein shall have the meanings ascribed to them in
the  Asset  Purchase  Agreement.

     2.     Payment.  The  principal  amount  of  this  Note shall be payable in
            -------
eight  equal  quarterly  installments  of  THIRTY ONE THOUSAND TWO HUNDRED FIFTY
DOLLARS  ($31,250),  on  the  last  day  of March, June, September and December,
commencing  June  30,  2007  through  March  31,  2009.


<PAGE>
Accrued  interest  shall  be payable in arrears on each such installment payment
date and at maturity.  All payments shall be made in immediately available funds
at  Holder's  address  set  forth in the Asset Purchase Agreement, or such other
address  as  Holder  may  designate  in  writing  to  the  Companies.

     3.     Prepayment.  Subject  to  Holder's prior right to convert all or any
            ----------
portion  of this Note into shares of Common Stock (hereafter defined), this Note
may  be  prepaid  in  whole  or in part at any time or from time to time without
premium  or  penalty  or discount, together with accrued interest to the date of
payment  on  the  principal  amount  prepaid.

     4.     Optional  Conversion  of  Note.
            -------------------------------

          4.1.     Conversion  Procedure.
                   ---------------------

               (a)     At  any  time Holder at his option may convert all or any
     portion  of  this  Note  into  the number of shares (rounded to the nearest
     share) of common stock, par value $0.001 per share, of Baywood (the "Common
     Stock"),  computed  by  dividing  the  principal  amount of this Note to be
     converted  together  with  the accrued interest on such principal amount by
     the  Conversion  Price  (hereafter  defined)  then  in  effect.

               (b)     Holder  shall  effect  a  conversion by surrendering this
     Note  accompanied  by  a  proper  assignment  thereof  to  the  Companies
     together  with  a completed and duly executed conversion notice in the form
     annexed  hereto.  Such  conversion of this Note will be deemed to have been
     effected as of the close of business on the date on which this Note and the
     duly  completed  exercise  notice  have  been  surrendered at the principal
     office of the Companies. At such time as such conversion has been effected,
     the  rights  of Holder to receive payments of principal and interest hereon
     will cease and Holder will be deemed to have become the holder of record of
     the  shares  of  Common  Stock represented thereby. Provisions of this Note
     that  apply to conversion of all of this Note also apply to conversion of a
     portion  of  it.

               (c)     As  soon as possible after a conversion has been effected
     (but  in  any  event  within  five  (5)  days  after  the surrender of this
     Note  and the conversion notice to the Company), the Companies will deliver
     to  Holder:

                         (i)     a  certificate or certificates representing the
     number  of  shares  of  Common  Stock issuable by reason of such conversion
     in  the  name of Holder in such denomination or denominations as Holder has
     specified;  and

                        (ii)     a  new  duly  executed  Note  for the principal
     amount  of  this  Note  which  was delivered to the Companies in connection
     with  such  conversion  but  which  was  not  converted.

               (d)     The  issuance  of certificates for shares of Common Stock
     upon  conversion  of  this  Note  will be made without charge to Holder for
     any  issuance  tax  in respect thereof or other cost incurred by Baywood in
     connection  with  such  conversion  and  the


                                        2
<PAGE>
     related  issuance  of  shares  of  Common  Stock.  Baywood  represents  and
     warrants  that upon conversion of this Note, the Common Stock issuable with
     respect  to  such  conversion  will  be  validly  issued,  fully  paid  and
     nonassessable.

               (e)     The  Companies  will  not  close  their  respective books
     against  the  transfer  of  this  Note  or  of  Common  Stock  issued  or
     issuable  upon  conversion of this Note in any manner which interferes with
     the timely conversion of this Note. Baywood will from time to time take all
     such  action  as may be necessary to assure that the par value per share of
     the  Common  Stock  acquirable upon conversion of this Note is at all times
     equal  to  or  less  than  the  Conversion  Price  then  in  effect.

               (f)     This  Note,  when  delivered  for  conversion,  shall  be
     cancelled  by  the  Companies.

          4.2     Conversion  Price.
                  -----------------

               (a)     The  initial  Conversion  Price  will  be $0.05 per share
     during  the  first  twelve  (12)  months  from  the  date hereof, $0.08 per
     share for months twelve (12) through twenty-four (24) from the date hereof,
     and  $0.10  per share thereafter until the payment in full of this Note. In
     order  to  prevent dilution of the conversion rights granted hereunder, the
     Conversion  Price  will be subject to adjustment from time to time pursuant
     to  this  Section  4.2.

               (b)     Reorganization,  Reclassification,  Merger  or  Sale.  In
                       ----------------------------------------------------
     case  Baywood  shall  effect  a  reorganization,  shall  merge  with  or
     consolidate  into another corporation, or shall sell, transfer or otherwise
     dispose  of  all  or  substantially all of its property, assets or business
     and, pursuant to the terms of such reorganization, merger, consolidation or
     disposition  of  assets,  shares  of stock or other securities, property or
     assets  of  Baywood, successor or transferee or an affiliate thereof are to
     be  received  by or distributed to the holders of Common Stock, then Holder
     shall  be provided with written notice from Baywood informing Holder of the
     terms  of  such  reorganization,  merger,  consolidation  or disposition of
     assets  and  of  the  record  date  thereof  for  any distribution pursuant
     thereto,  at least ten (10) days in advance of such record date, and Holder
     shall  have,  in  addition  to the rights provided for herein, the right to
     receive, at Holder's election, either (i) upon conversion of this Note, the
     number  of  shares  of  stock  or  other  securities, property or assets of
     Baywood, successor, transferee or affiliate thereof or cash receivable upon
     or as a result of such reorganization, merger, consolidation or disposition
     of  assets  by  a  holder of the number of shares of Common Stock for which
     this  Note  is  convertible  immediately  prior  to  such event or (ii) the
     securities  into  which this Note is converted upon, or as a result of such
     reorganization,  merger,  consolidation  or  disposition  of  assets.  The
     provisions  of this paragraph (b) of this Section 4.2 shall similarly apply
     to  successive  reorganizations, mergers, consolidations or dispositions of
     assets.

               (c)     Subdivision  or  Combination of Common Stock.  If Baywood
                       --------------------------------------------
     declares  a  dividend  or  other  distribution  payable in shares of Common
     Stock  or  any  shares  of  a class or series convertible into Common Stock
     (together  with  the  Common  Stock,  "Securities")  or


                                        3
<PAGE>
     subdivides  its  outstanding  shares  of  Common Stock into a larger number
     or  combines  its outstanding shares of Common Stock into a smaller number,
     then  the  Conversion  Price  in effect immediately prior to such dividend,
     other  distribution,  subdivision or combination, as the case may be, shall
     forthwith  be  adjusted  to  that  price  determined  by  multiplying  the
     Conversion  Price  by  a  fraction  (i) the numerator of which shall be the
     total  number  of  outstanding  shares  of such Common Stock and Securities
     immediately  prior  to  such  dividend,  other distribution, subdivision or
     combination  and (ii) the denominator of which shall be the total number of
     outstanding  shares  of  such  Common  Stock  and Securities (including the
     number  of  shares  of Common Stock into which such newly issued Securities
     are then convertible), immediately after such dividend, other distribution,
     subdivision  or  combination.

               (d)     In case Baywood shall distribute to the holders of Common
     Stock  evidences  of  indebtedness  issued  by  Baywood,  or  assets
     (excluding  cash  dividends) then, in each such case, immediately following
     the  record date fixed for the determination of the holders of Common Stock
     entitled  to  receive  such  distribution,  the  Conversion Price in effect
     thereafter  shall  be  determined  by  multiplying  the Conversion Price in
     effect  immediately  prior  to  such  record  date  by  a  fraction (i) the
     numerator  of  which  shall  be an amount equal to the remainder of (A) the
     Current  Market  Price  (as hereafter defined) of one share of Common Stock
     less  (B) the fair value (as determined in good faith by Baywood's board of
     directors)  of  the  evidences  of indebtedness or assets so distributed in
     respect  of  one  share  of  Common Stock, as the case may be, and (ii) the
     denominator  of  which  shall  be  the Current Market Price of one share of
     Common  Stock.  Such adjustment shall be made on the date such distribution
     is  made,  and  shall  become  effective  at the opening of business on the
     business  day  following  the  record  date  for  the  determination  of
     stockholders  entitled  to  such  distribution.

          For  purposes  of  this  Note,  "Current  Market  Price" on any day of
     determination  means  the  closing  price of a share of Common Stock on the
     over-the-counter  bulletin  board  as  reported  by  the National Quotation
     Bureau  Incorporated, or a similar generally accepted reporting service, or
     if  not so available, in such manner as furnished by any Nasdaq member firm
     of  the National Association of Securities Dealers, Inc. selected from time
     to time by the board of directors of Baywood for that purpose, or if not so
     available,  a  price  determined in good faith by the board of directors of
     Buyer  as being equal to the fair market value thereof, as the case may be.

               (e)     Notice  of  Adjustment.  Whenever  the  Conversion  Price
                       ----------------------
     shall  be  adjusted  as  provided  in  this  Section  4.2,  Baywood  shall
     forthwith  send  by  first  class  mail,  postage  prepaid to Holder at his
     address  as  shown  in the records of Baywood a statement, certified by the
     chief  financial  officer of Baywood, showing in detail the facts requiring
     such adjustment and the Conversion Price that shall be in effect after such
     adjustment.

          4.3     Reservation  of  Common  Stock.  Baywood  shall  at  all times
                  ------------------------------
     reserve  and  keep  available  for  issuance  upon  the  conversion of this
     Note  such  number of its authorized but unissued shares of Common Stock as
     will  be  sufficient  to  permit  the  conversion  in  full  of  this


                                        4
<PAGE>
     Note,  and  upon  such  issuance  such  shares  of  Common  Stock  will  be
     validly  issued,  fully  paid and nonassessable. The transfer agent for any
     shares  of Baywood's capital stock issuable upon the exercise of any of the
     rights  of purchase aforesaid, will be authorized and directed at all times
     to  reserve  such  number  of authorized shares of Common Stock as shall be
     requisite  for  such purpose. Baywood will keep a copy of this Note on file
     with  the  transfer  agent  for  the Common Stock and with every subsequent
     transfer  agent for any shares of Baywood's capital stock issuable upon the
     exercise  of the rights of purchase represented by the foregoing conversion
     rights.  Baywood  will  supply  the transfer agent with duly executed stock
     certificates  for issue against exercise of the foregoing conversion rights
     and  will provide or otherwise make available any cash which may be payable
     in  lieu  of  fractional  shares  as  provided  hereinabove.

          4.4     No  Voting  Rights;  Limitations of Liability.  This Note will
                  ----------------------------------------------
     not  entitle  Holder  to  any  voting  rights  or  other  rights  as  a
     stockholder  of  Baywood.  No  provision  of  this  Note, in the absence of
     affirmative  action  by Holder to purchase Common Stock, and no enumeration
     in  this  Note of the rights or privileges of Holder, will give rise to any
     liability  of  such  Holder  for  the  Conversion  Price  of  Common  Stock
     acquirable  by  exercise  hereof  or  as  a  stockholder  of  Baywood.

     5.     Subordination.  The  payment  of  this Note shall be subordinate and
            -------------
     junior  in  right  of  payment  to  the  prior  payment  of  senior  debt
     pursuant  to  a Subordination Agreement of even date herewith, by and among
     Vineyard  Bank,  N.A.,  the  Companies  and  the  LifeTime Representatives,
     including  Holder.

     6.     Events  of  Default;  Remedies.
            ------------------------------

          6.1     The  occurrence  of  any  one  or more of the following events
shall  constitute  an  Event  of  Default  hereunder:

               (a)     Default  by the Companies in the payment of the principal
     of  or  interest  on  this  Note  when and as the same shall become due and
     payable and such default shall continue for fifteen (15) days after written
     notice  thereof  from  Holder;  or

               (b)     (i)  Commencement  by  either Company of a voluntary case
     under  the  federal  bankruptcy  laws  (as  now  of  hereafter  in effect);
     (ii)  either  Company  applying for or consenting to the appointment of, or
     the  taking  of possession by, a receiver, custodian, trustee or liquidator
     of  itself  or  of  a  substantial part of its assets; (iii) either Company
     making  a  general  assignment  for  the  benefit of creditors; or (iv) the
     failure of either Company generally to pay its debts as they become due; or

               (c)     The  entry of a decree or order by any court of competent
     jurisdiction  in  respect  of  either  Company  granting  (i) relief in any
     involuntary  case under the federal bankruptcy laws (as now or hereafter in
     effect);  or  (ii)  appointment  of  a  trustee,  receiver,  custodian  or
     liquidator  for  such  Company or for a substantial part of its assets, and
     such  case


                                        5
<PAGE>
     or  proceeding  shall  continue  undismissed  or  unstayed  for a period of
     one  hundred  twenty  (120)  consecutive  days.

          6.2     Upon  the  happening  of  any  Event of Default hereunder, the
entire  principal  sum and all interest thereon, at the option of Holder, may be
declared  and thereupon shall become immediately due and payable.  In such event
the  Companies  shall  be responsible to pay all of Holder's reasonable costs of
collection,  including  attorney's  fees.

     7.     Notices.  All notices and other communications required or permitted
            -------
under  this  Note  shall  be made in accordance with the provisions of the Asset
Purchase  Agreement.  The  Companies  waive  presentment  for payment, notice of
non-payment, protest, demand, notice of protest, notice of intent to accelerate,
notice of acceleration and dishonor, diligence in enforcement and indulgences of
any  kind.

     8.      Amendment; Waiver.  This Note may not be amended or modified except
             -----------------
by  an  instrument  in  writing  duly  executed  by the Companies and Holder. No
failure  or  delay  on the part of Holder in the exercise of any power, right or
privilege  hereunder  shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise  thereof  or  of  any  other  right,  power  privilege.  All rights and
remedies  existing hereunder are cumulative to, and not exclusive of, any rights
or  remedies  otherwise  available.

     9.     Severability.  If  any provision hereof shall for any reason be held
            ------------
to  be  invalid,  illegal  or  unenforceable  in  any  respect, such invalidity,
illegality,  or  unenforceability  shall not affect any other provisions hereof,
and  this  Note  shall be construed as if such invalid, illegal or unenforceable
provision  has  never  been  contained  herein.

     10.     Assignment.  This  Note  may  be  assigned,  pledged, negotiated or
             ----------
transferred  by  Holder and shall inure to the benefit of Holder, its successors
and  assigns.

     11.     Governing  Law  Waiver of Jury Trial.  This Note is made under, and
             ------------------------------------
shall  be  construed  and  enforced in accordance with, the internal laws of the
State  of  Arizona,  without  regard  to  principles  of conflicts of laws.  The
Companies  irrevocably  waive, to the maximum extent permitted by law, any right
they  may  have  to  a  trial  by  jury in respect of any litigation directly or
indirectly  at  any  time arising out of, under or in connection with this Note.

                            [SIGNATURE PAGE FOLLOWS]


                                        6
<PAGE>
          IN  WITNESS  WHEREOF,  the  undersigned  have  caused  this Note to be
executed as of the 30th day of March, 2007.


                                             BAYWOOD  INTERNATIONAL,  INC.


                                        By:  /s/ Neil Reithinger
                                             ------------------------------
                                             Name:  Neil Reithinger
                                             Title: President & C.E.O.


                                             BAYWOOD  ACQUISITION,  INC.


                                        By:  /s/ Neil Reithinger
                                             ------------------------------
                                             Name:  Neil Reithinger
                                             Title: President


                                        7
<PAGE>
                           [FORM OF CONVERSION NOTICE]
Baywood International, Inc.
Baywood Acquisition, Inc.
14950 North 83rd Place, Suite 1
Scottsdale, Arizona 85260

     The undersigned Holder of the 8% Subordinated Convertible Note of the
Companies dated March __, 2007 hereby irrevocably exercises its option to
convert [$_______] of unpaid principal and [$_______] of accrued interest on the
Note into shares of Common Stock of Baywood International, Inc., in accordance
with the terms of the Note. The undersigned hereby delivers the Note to the
Companies for such conversion. The undersigned hereby instructs the Companies to
convert the amount of money specified above into shares of Common Stock at the
Conversion Price in accordance with Section 4.2 of the Note. The undersigned
directs that the Common Stock issuable and certificates therefor deliverable
upon conversion be issued in the name of and delivered to the undersigned unless
otherwise indicated below. If the full unpaid amount of the Note is not being
converted, the undersigned also hereby instructs the Companies to deliver a new
Note to the undersigned in the amount which is not being converted. All
capitalized terms not defined herein shall have the meanings ascribed to them in
the Note.

Dated:
      ---------------------------------------------

Signature:
          -----------------------------------------

Print Name:
           ----------------------------------------

Information for Issuance of Stock and Delivery of Stock Certificates:

Name:
     ----------------------------------------------

Address:
        -------------------------------------------


---------------------------------------

No. of shares to be issued:
                           ------------------------

Amount of new Note to be issued:
                                -------------------


                                       8