BUSINESS LOAN AGREEMENT

<TABLE>
<CAPTION>
Principal      Loan Date    Maturity    Loan No    Call / Coll  Account  Officer  Initials
<S>            <C>         <C>         <C>         <C>          <C>      <C>      <C>
1,500,000.00  03-20-2007  04-01-2010  8613586980           98   135869      601
</TABLE>


  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.

      Any item above containing "***" has been omitted due to text length
                                  limitations.

Borrower:  Baywood  International,  Inc.    Lender:  Vineyard  Bank,  N.A.
           Baywood  Acquisition,  Inc.               Anaheim  Business  Banking
           14950  North  83rd  Place                 500 North State College
           Scottsdale,  AZ  85260                    Boulevard, Suite 530
                                                     Orange,  CA  92868


THIS  BUSINESS LOAN AGREEMENT dated March 20, 2007, is made and executed between
Baywood  International,  Inc.;  and  Baywood  Acquisition, Inc. ("Borrower") and
Vineyard Bank, N.A.  ("Lender") on the following terms and conditions.  Borrower
has  received  prior commercial loans from Lender or has applied to Lender for a
commercial  loan  or  loans  or  other financial accommodations, including those
which  may  be  described  on any exhibit or schedule attached to this Agreement
("Loan").  Borrower understands and agrees that:  (A)  in granting, renewing, or
extending  any  Loan,  Lender  is  relying  upon  Borrower's  representations,
warranties,  and  agreements as set forth in this Agreement;  (B)  the granting,
renewing,  or  extending  of any Loan by Lender at all times shall be subject to
Lender's  sole  judgment  and  discretion; and  (C)  all such Loans shall be and
remain  subject  to  the  terms  and  conditions  of  this  Agreement.

TERM.  This  Agreement  shall  be  effective  as  of  March  20, 2007, and shall
continue  in full force and effect until such time as all of Borrower's Loans in
favor  of  Lender  have been paid in full, including principal, interest, costs,
expenses, attorneys' fees, and other fees and charges, or until such time as the
parties  may  agree  in  writing  to  terminate  this  Agreement.

CONDITIONS  PRECEDENT  TO EACH ADVANCE.  Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment  to Lender's satisfaction of all of the conditions set forth in this
Agreement  and  in  the  Related  Documents.

     Loan  Documents.  Borrower  shall  provide  to  Lender  the  following
     documents  for  the Loan: (1) the Note; (2) Security Agreements granting to
     Lender  security  interests in the Collateral; (3) financing statements and
     all other documents perfecting Lender's Security Interests; (4) evidence of
     insurance as required below; (5) subordinations; (6) together with all such
     Related  Documents  as  Lender  may  require  for the Loan; all in form and
     substance  satisfactory  to  Lender  and  Lender's  counsel.

     Borrower's  Authorization.  Borrower  shall  have  provided  in  form  and
     substance  satisfactory  to  Lender  properly  certified  resolutions, duly
     authorizing  the execution and delivery of this Agreement, the Note and the
     Related  Documents.  In  addition,  Borrower shall have provided such other
     resolutions,  authorizations,  documents  and  instruments as Lender or its
     counsel,  may  require.

     Payment  of  Fees  and  Expenses.  Borrower  shall  have paid to Lender all
     fees,  charges,  and  other  expenses  which  are  then  due and payable as
     specified  in  this  Agreement  or  any  Related  Document.

     Representations  and  Warranties.  The  representations  and warranties set
     forth  in  this Agreement, in the Related Documents, and in any document or
     certificate  delivered to Lender under this Agreement are true and correct.

     No  Event  of  Default.  There  shall  not exist at the time of any Advance
     a condition which would constitute an Event of Default under this Agreement
     or  under  any  Related  Document.

MULTIPLE  BORROWERS.  This  Agreement has been executed by multiple obligors who
are referred to in this Agreement individually, collectively and interchangeably
as  "Borrower."  Unless specifically stated to the contrary, the word "Borrower"
as  used  in  this  Agreement, including without limitation all representations,
warranties and covenants, shall include all Borrowers.  Borrower understands and
agrees  that,  with or without notice to any one Borrower, Lender may  (A)  make
one or more additional secured or unsecured loans or otherwise extend additional
credit  with  respect  to  any  other  Borrower;  (B)  with respect to any other
Borrower  alter,  compromise, renew, extend, accelerate, or otherwise change one
or more times the time for payment or other terms of any indebtedness, including
increases  and  decreases  of  the  rate  of  interest on the indebtedness;  (C)
exchange,  enforce,  waive,  subordinate,  fail  or  decide  not to perfect, and
release  any  security, with or without the substitution of new collateral;  (D)
release,  substitute,  agree  not  to  sue,  or  deal  with  any  one or more of
Borrower's  or  any other Borrower's sureties, endorsers, or other guarantors on
any terms or in any manner Lender may choose;  (E)  determine how, when and what
application  of  payments  and  credits  shall be made on any indebtedness;  (F)
apply  such  security  and direct the order or manner of sale of any Collateral,
including  without  limitation,  any non-judicial sale permitted by the terms of
the controlling security agreement or deed of trust, as Lender in its discretion
may  determine;  (G)  sell,  transfer,  assign or grant participations in all or
any  part  of  the  Loan;  (H)  exercise  or  refrain from exercising any rights
against  Borrower  or  others,  or  otherwise  act  or refrain from acting;  (I)
settle  or compromise any indebtedness; and  (J)  subordinate the payment of all
or  any  part  of any of Borrower's indebtedness to Lender to the payment of any
liabilities  which  may  be  due  Lender  or  others.

REPRESENTATIONS  AND WARRANTIES.  Borrower represents and warrants to Lender, as
of  the  date  of  this  Agreement,  as of the date of each disbursement of loan
proceeds,  as of the date of any renewal, extension or modification of any Loan,
and  at  all  times  any  Indebtedness  exists:

     ORGANIZATION.  Baywood  International,  Inc.  is  a  corporation for profit
     which  is, and at all times shall be, duly organized, validly existing, and
     in  good  standing  under and by virtue of the laws of the State of Nevada.
     Baywood  International, Inc. is duly authorized to transact business in all
     other states in which Baywood International, Inc. is doing business, having
     obtained  all  necessary  filings,  governmental licenses and approvals for
     each  state  in  which  Baywood  International,  Inc.  is  doing  business.
     Specifically,  Baywood  International,  Inc. is, and at all times shall be,
     duly  qualified as a foreign corporation in all states in which the failure
     to  so  qualify  would  have  a  material adverse effect on its business or
     financial  condition.  Baywood  International,  Inc. has the full power and
     authority to own its properties and to transact the business in which it is
     presently  engaged  or presently proposes to engage. Baywood International,
     Inc.  maintains  an office at 14950 North 83rd Place, Scottsdale, AZ 85260.
     Unless Baywood International, Inc. has designated otherwise in writing, the
     principal  office  is the office at which Baywood International, Inc. keeps
     its  books  and  records  including  its records concerning the Collateral.
     Baywood  International,  Inc. will notify Lender prior to any change in the
     location  of  Baywood


<PAGE>
     International,  Inc.'s  state  of  organization  or  any  change in Baywood
     International, Inc.'s name. Baywood International, Inc. shall do all things
     necessary  to  preserve and to keep in full force and effect its existence,
     rights  and  privileges,  and  shall  comply  with  all regulations, rules,
     ordinances,  statutes,  orders  and  decrees  of  any  governmental  or
     quasi-governmental  authority or court applicable to Baywood International,
     Inc.  and  Baywood  International,  Inc.'s  business  activities.

     Baywood  Acquisition,  Inc.  is  a  corporation for profit which is, and at
     all  times shall be, duly organized, validly existing, and in good standing
     under  and  by  virtue  of  the  laws  of  the  State  of  Nevada.  Baywood
     Acquisition,  Inc.  is  duly  authorized  to transact business in all other
     states  in  which  Baywood  Acquisition,  Inc.  is  doing  business, having
     obtained  all  necessary  filings,  governmental licenses and approvals for
     each  state  in  which  Baywood  Acquisition,  Inc.  is  doing  business.
     Specifically, Baywood Acquisition, Inc. is, and at all times shall be, duly
     qualified as a foreign corporation in all states in which the failure to so
     qualify  would  have a material adverse effect on its business or financial
     condition.  Baywood  Acquisition,  Inc. has the full power and authority to
     own  its  properties  and to transact the business in which it is presently
     engaged  or  presently  proposes  to  engage.  Baywood  Acquisition,  Inc.
     maintains an office at 14950 North 83rd Place, Scottsdale, AZ 85260. Unless
     Baywood  Acquisition,  Inc.  has  designated  otherwise  in  writing,  the
     principal office is the office at which Baywood Acquisition, Inc. keeps its
     books  and records including its records concerning the Collateral. Baywood
     Acquisition, Inc. will notify Lender prior to any change in the location of
     Baywood  Acquisition, Inc.'s state of organization or any change in Baywood
     Acquisition,  Inc.'s  name.  Baywood  Acquisition, Inc. shall do all things
     necessary  to  preserve and to keep in full force and effect its existence,
     rights  and  privileges,  and  shall  comply  with  all regulations, rules,
     ordinances,  statutes,  orders  and  decrees  of  any  governmental  or
     quasi-governmental  authority  or  court applicable to Baywood Acquisition,
     Inc.  and  Baywood  Acquisition,  Inc.'s  business  activities.

     ASSUMED  BUSINESS  NAMES.  Borrower  has  filed  or  recorded all documents
     or  filings  required by law relating to all assumed business names used by
     Borrower.  Excluding the name of Borrower, the following is a complete list
     of  all  assumed  business  names under which Borrower does business: None.

     AUTHORIZATION.  Borrower's  execution,  delivery,  and  performance of this
     Agreement  and  all  the Related Documents have been duly authorized by all
     necessary  action  by  Borrower  and  do  not  conflict  with,  result in a
     violation  of,  or  constitute  a  default  under  (1) any provision of (a)
     Borrower's articles of incorporation or organization, or bylaws, or (b) any
     agreement  or  other  instrument  binding  upon  Borrower  or  (2) any law,
     governmental  regulation,  court decree, or order applicable to Borrower or
     to  Borrower's  properties.

     FINANCIAL  INFORMATION.  Each  of  Borrower's  financial  statements
     supplied  to  Lender  truly  and  completely disclosed Borrower's financial
     condition  as  of the date of the statement, and there has been no material
     adverse  change in Borrower's financial condition subsequent to the date of
     the  most  recent  financial  statement supplied to Lender. Borrower has no
     material  contingent  obligations  except  as  disclosed  in such financial
     statements.

     LEGAL  EFFECT.  This  Agreement  constitutes,  and  any  instrument  or
     agreement  Borrower is required to give under this Agreement when delivered
     will  constitute  legal,  valid,  and  binding  obligations  of  Borrower
     enforceable  against  Borrower  in  accordance with their respective terms.

     PROPERTIES.  Except  as  contemplated  by  this  Agreement or as previously
     disclosed in Borrower's financial statements or in writing to Lender and as
     accepted  by  Lender,  and  except  for  property  tax  liens for taxes not
     presently  due  and  payable,  Borrower  owns  and has good title to all of
     Borrower's properties free and clear of all Security Interests, and has not
     executed  any  security  documents or financing statements relating to such
     properties.  All  of  Borrower's  properties are titled in Borrower's legal
     name,  and  Borrower  has not used or filed a financing statement under any
     other  name  for  at  least  the  last  five  (5)  years.

     HAZARDOUS  SUBSTANCES.  Except  as  disclosed  to  and  acknowledged  by
     Lender  in  writing,  Borrower represents and warrants that: (1) During the
     period  of  Borrower's  ownership of the Collateral, there has been no use,
     generation,  manufacture,  storage,  treatment,  disposal,  release  or
     threatened  release  of  any  Hazardous  Substance by any person on, under,
     about  or  from any of the Collateral. (2) Borrower has no knowledge of, or
     reason  to  believe  that there has been (a) any breach or violation of any
     Environmental  Laws;  (b)  any  use,  generation,  manufacture,  storage,
     treatment,  disposal,  release  or  threatened  release  of  any  Hazardous
     Substance  on,  under,  about or from the Collateral by any prior owners or
     occupants  of  any  of  the  Collateral;  or  (c)  any actual or threatened
     litigation  or  claims  of any kind by any person relating to such matters.
     (3)  Neither Borrower nor any tenant, contractor, agent or other authorized
     user  of  any  of  the  Collateral shall use, generate, manufacture, store,
     treat,  dispose  of  or release any Hazardous Substance on, under, about or
     from  any  of  the  Collateral; and any such activity shall be conducted in
     compliance with all applicable federal, state, and local laws, regulations,
     and  ordinances,  including  without  limitation  all  Environmental  Laws.
     Borrower  authorizes  Lender and its agents to enter upon the Collateral to
     make such inspections and tests as Lender may deem appropriate to determine
     compliance  of  the  Collateral  with  this  section  of the Agreement. Any
     inspections  or tests made by Lender shall be at Borrower's expense and for
     Lender's  purposes  only  and  shall  not  be  construed  to  create  any
     responsibility  or  liability  on  the part of Lender to Borrower or to any
     other person. The representations and warranties contained herein are based
     on  Borrower's  due diligence in investigating the Collateral for hazardous
     waste and Hazardous Substances. Borrower hereby (1) releases and waives any
     future  claims  against  Lender  for indemnity or contribution in the event
     Borrower becomes liable for cleanup or other costs under any such laws, and
     (2)  agrees  to indemnify, defend, and hold harmless Lender against any and
     all  claims,  losses,  liabilities,  damages, penalties, and expenses which
     Lender may directly or indirectly sustain or suffer resulting from a breach
     of  this  section  of  the  Agreement  or  as  a  consequence  of  any use,
     generation,  manufacture,  storage, disposal, release or threatened release
     of a hazardous waste or substance on the Collateral. The provisions of this
     section of the Agreement, including the obligation to indemnify and defend,
     shall  survive  the  payment  of  the  Indebtedness  and  the  termination,
     expiration  or  satisfaction of this Agreement and shall not be affected by
     Lender's  acquisition  of any interest in any of the Collateral, whether by
     foreclosure  or  otherwise.

     LITIGATION  AND  CLAIMS.  No  litigation,  claim,  investigation,
     administrative  proceeding  or  similar  action (including those for unpaid
     taxes)  against  Borrower  is pending or threatened, and no other event has
     occurred  which  may  materially  adversely  affect  Borrower's  financial
     condition or properties, other than litigation, claims, or other events, if
     any,  that  have  been  disclosed to and acknowledged by Lender in writing.

     TAXES.  To  the  best  of  Borrower's  knowledge,  all  of  Borrower's  tax
     returns and reports that are or were required to be filed, have been filed,
     and all taxes, assessments and other governmental charges have been paid in
     full,  except  those presently being or to be contested by Borrower in good
     faith  in  the  ordinary course of business and for which adequate reserves
     have  been  provided.

     LIEN  PRIORITY.  Unless  otherwise  previously  disclosed  to  Lender  in
     writing,  Borrower has not entered into or granted any Security Agreements,
     or  permitted  the  filing  or  attachment  of any Security Interests on or
     affecting  any  of the Collateral directly or indirectly securing repayment
     of  Borrower's Loan and Note, that would be prior or that may in any way be
     superior  to  Lender's  Security  Interests  and  rights  in  and  to  such
     Collateral.

     BINDING  EFFECT.  This  Agreement,  the  Note,  all Security Agreements (if
     any),  and  all  Related Documents are binding upon the signers thereof, as
     well as upon their successors, representatives and assigns, and are legally
     enforceable  in  accordance  with  their  respective  terms.

AFFIRMATIVE  COVENANTS.  Borrower covenants and agrees with Lender that, so long
as  this  Agreement  remains  in  effect,  Borrower  will:

     NOTICES  OF  CLAIMS  AND  LITIGATION.  Promptly inform Lender in writing of
     (1) all material adverse changes in Borrower's financial condition, and (2)
     all  existing  and  all  threatened  litigation,  claims,  investigations,
     administrative  proceedings  or  similar  actions affecting Borrower or any
     Guarantor which could materially affect the financial condition of Borrower
     or  the  financial  condition  of  any  Guarantor.

     FINANCIAL  RECORDS.  Maintain  its  books  and  records  in accordance with
     GAAP, applied on a consistent basis, and permit Lender to examine and audit
     Borrower's  books  and  records  at  all  reasonable  times.

     FINANCIAL  STATEMENTS.  Furnish  Lender  with  the  following:

          ANNUAL  STATEMENTS.  As  soon  as  available,  but  in  no event later
          than  ninety  (90)  days after the end of each fiscal year, Borrower's
          balance  sheet  and  income statement for the year ended, audited by a
          certified  public  accountant  satisfactory  to  Lender.

          INTERIM  STATEMENTS.  As  soon  as  available,  but  in no event later
          than thirty (30) days after the end of each fiscal quarter, Borrower's
          balance  sheet  and  profit  and  loss statement for the period ended,
          compiled  by  a  certified  public  accountant satisfactory to Lender.

          TAX  RETURNS.  As  soon  as  available,  but  in  no  event later than
          thirty  (30)  days  after  the  applicable  filing  date  for  the tax
          reporting  period  ended,  Federal and other governmental tax returns,
          prepared  by  a  tax  professional  satisfactory  to  Lender.

          ADDITIONAL  REQUIREMENTS.

          ACCOUNTS  RECEIVABLE  AGING  AND  ACCOUNTS  PAYABLE  AGING. As soon as
          available,  but  in no event later than thirty (30) days after the end
          of  each  quarter, Borrowers shall deliver to Lender a detailed aging,
          by total and by customer, of Borrower's Accounts of which shall be set
          forth in a form and shall contain such information as is acceptable to
          Lender.

     All  financial  reports  required  to  be  provided  under  this  Agreement
     shall  be  prepared in accordance with GAAP, applied on a consistent basis,
     and  certified  by  Borrower  as  being  true  and  correct.

     ADDITIONAL  INFORMATION.  Furnish  such  additional  information  and
     statements,  as  Lender  may  request  from  time  to  time.

     FINANCIAL  COVENANTS  AND  RATIOS.  Comply  with  the  following  covenants
     and  ratios:

          MINIMUM  INCOME  AND  CASH  FLOW  REQUIREMENTS.  Borrower shall comply
          with  the  following  cash  flow  ratio  requirements:

               DEBT  SERVICE  COVERAGE  RATIO.  Maintain  a  ratio  of  Debt
               Service  Coverage  in  excess  of  1.200 TO 1.000. The term "Debt
               Service  Coverage  Ratio" means Borrower's Earnings/Income before
               Interest,  Taxes,  Depreciation and Amortization (EBITDA) divided
               by  Borrower's  Current  Portion  of Long Term Indebtedness. This
               coverage  ratio  will  be  evaluated  as  of  Semi-Annually.

          OTHER  REQUIREMENTS.

          TANGIBLE  NET  WORTH  REQUIREMENTS.  Maintain  a  minimum Tangible Net
          Worth  of not less than $5,500,000.00. Tangible Net Worth Requirements
          are  based  on  tangible  net  worth  plus  subordinated  debt.

          Except  as  provided  above,  all  computations  made  to  determine
          compliance  with the requirements contained in this paragraph shall be
          made  in  accordance  with  generally  accepted accounting principles,
          applied on a consistent basis, and certified by Borrower as being true
          and  correct.

     INSURANCE.  Maintain  fire  and  other  risk  insurance,  public  liability
     insurance,  and  such other insurance as Lender may require with respect to
     Borrower's  properties and operations, in form, amounts, coverages and with
     insurance companies acceptable to Lender. Borrower, upon request of Lender,
     will  deliver  to  Lender from time to time the policies or certificates of
     insurance  in  form  satisfactory  to  Lender,  including stipulations that
     coverages  will  not  be  cancelled or diminished without at least ten (10)
     days  prior  written  notice  to  Lender.  Each insurance policy also shall
     include  an endorsement providing that coverage in favor of Lender will not
     be  impaired  in any way by any act, omission or default of Borrower or any
     other  person.  In  connection  with  all policies covering assets in which
     Lender holds or is offered a security interest for the Loans, Borrower will
     provide  Lender  with  such  lender's loss payable or other endorsements as
     Lender  may  require.

     INSURANCE  REPORTS.  Furnish  to  Lender,  upon  request of Lender, reports
     on  each  existing  insurance policy showing such information as Lender may
     reasonably  request,  including  without  limitation the following: (1) the
     name  of  the insurer; (2) the risks insured; (3) the amount of the policy;
     (4)  the  properties  insured;  (5) the then current property values on the
     basis  of  which insurance has been obtained, and the manner of determining
     those  values; and (6) the expiration date of the policy. In addition, upon
     request  of  Lender  (however  not more often than annually), Borrower will
     have  an  independent  appraiser  satisfactory  to  Lender  determine,  as
     applicable,  the  actual  cash value or replacement cost of any Collateral.
     The  cost  of  such  appraisal  shall  be  paid  by  Borrower.

     SUBORDINATION.  Prior  to  disbursement  of  any  Loan proceeds, deliver to
     Lender  subordination  agreements on Lender's forms, executed by Borrower's
     creditors named below, subordinating all of Borrower's indebtedness to such
     creditors, or such lesser amounts as may be agreed to by Lender in writing,
     and  any security interests in collateral securing that indebtedness to the
     Loans  and  security  interests  of  Lender.

<TABLE>
<CAPTION>
                    NAME OF CREDITOR   TOTAL AMOUNT OF DEBT
                    -----------------  ---------------------
<S>                                    <C>
                    JSH PARTNERS       $        2,000,000.00
                    TOM PINKOWSKI      $          350,000.00
                    TOM PINKOWSKI      $          100,000.00
                    CHARLES UNG        $          175,000.00
                    CHARLES UNG        $          250,000.00
                    M. AMIRUL KARIM    $          175,000.00
                    M. AMIRUL KARIM    $          250,000.00
                    JOHN TALTY         $          500,000.00
                    O. LEE TAWES, III  $          500,000.00
</TABLE>


<PAGE>
     OTHER  AGREEMENTS.  Comply  with  all  terms  and  conditions  of all other
     agreements,  whether  now  or  hereafter existing, between Borrower and any
     other  party  and  notify  Lender  immediately in writing of any default in
     connection  with  any  other  such  agreements.

     LOAN  PROCEEDS.  Use  all  Loan  proceeds  solely  for  Borrower's business
     operations,  unless  specifically  consented  to  the contrary by Lender in
     writing.

     TAXES,  CHARGES  AND  LIENS.  Pay  and  discharge  when  due  all  of  its
     indebtedness and obligations, including without limitation all assessments,
     taxes,  governmental  charges,  levies and liens, of every kind and nature,
     imposed  upon  Borrower or its properties, income, or profits, prior to the
     date  on  which  penalties  would  attach,  and  all lawful claims that, if
     unpaid,  might  become  a lien or charge upon any of Borrower's properties,
     income,  or profits. Borrower may withhold any such payment or may elect to
     contest  any  lien  if  Borrower is in good faith conducting an appropriate
     proceeding  to  contest  the  obligation  to  pay.

     PERFORMANCE.  Perform  and  comply,  in  a  timely  manner, with all terms,
     conditions,  and  provisions  set  forth  in this Agreement, in the Related
     Documents, and in all other instruments and agreements between Borrower and
     Lender.  Borrower shall notify Lender immediately in writing of any default
     in  connection  with  any  agreement.

     OPERATIONS.  Maintain  executive  and  management  personnel  with
     substantially  the  same  qualifications  and  experience  as  the  present
     executive and management personnel; provide written notice to Lender of any
     change  in executive and management personnel; conduct its business affairs
     in  a  reasonable  and  prudent  manner.

     ENVIRONMENTAL  STUDIES.  Promptly  conduct  and  complete,  at  Borrower's
     expense, all such investigations, studies, samplings and testings as may be
     requested  by  Lender  or  any  governmental  authority  relative  to  any
     substance,  or any waste or by-product of any substance defined as toxic or
     a  hazardous substance under applicable federal, state, or local law, rule,
     regulation,  order  or  directive,  at  or  affecting  any  property or any
     facility  owned,  leased  or  used  by  Borrower.

     COMPLIANCE  WITH  GOVERNMENTAL  REQUIREMENTS.  Comply  in  all  material
     respects  with  all  laws, ordinances, and regulations, now or hereafter in
     effect,  of  all  governmental  authorities  applicable  to  the conduct of
     Borrower's  properties,  businesses  and  operations,  and  to  the  use or
     occupancy  of  the  Collateral, including without limitation, the Americans
     With  Disabilities  Act.  Borrower  may contest in good faith any such law,
     ordinance,  or  regulation  and  withhold compliance during any proceeding,
     including  appropriate  appeals, so long as Borrower has notified Lender in
     writing  prior  to  doing  so  and  so  long  as, in Lender's sole opinion,
     Lender's  interests  in  the  Collateral  are  not  jeopardized. Lender may
     require  Borrower  to  post  adequate security or a surety bond, reasonably
     satisfactory  to  Lender,  to  protect  Lender's  interest.

     INSPECTION.  Permit  employees  or  agents  of  Lender  at  any  reasonable
     time to inspect any and all Collateral for the Loan or Loans and Borrower's
     other  properties  and  to examine or audit Borrower's books, accounts, and
     records and to make copies and memoranda of Borrower's books, accounts, and
     records.  If  Borrower  now  or at any time hereafter maintains any records
     (including  without  limitation  computer  generated  records  and computer
     software  programs for the generation of such records) in the possession of
     a third party, Borrower, upon request of Lender, shall notify such party to
     permit  Lender  free  access to such records at all reasonable times and to
     provide Lender with copies of any records it may request, all at Borrower's
     expense.

     COMPLIANCE  CERTIFICATES.  Unless  waived  in  writing  by  Lender, provide
     Lender  at  least annually, with a certificate executed by Borrower's chief
     financial  officer,  or  other  officer  or  person  acceptable  to Lender,
     certifying  that  the  representations  and  warranties  set  forth in this
     Agreement  are  true  and  correct  as  of  the date of the certificate and
     further  certifying  that,  as  of the date of the certificate, no Event of
     Default  exists  under  this  Agreement.

     ENVIRONMENTAL  COMPLIANCE  AND  REPORTS.  Borrower  shall  comply  in  all
     material  respects with any and all Environmental Laws; not cause or permit
     to exist, as a result of an intentional or unintentional action or omission
     on  Borrower's  part  or  on the part of any third party, on property owned
     and/or  occupied  by  Borrower, any environmental activity where damage may
     result  to  the environment, unless such environmental activity is pursuant
     to  and  in  compliance  with  the  conditions  of  a  permit issued by the
     appropriate federal, state or local governmental authorities; shall furnish
     to  Lender  promptly and in any event within thirty (30) days after receipt
     thereof a copy of any notice, summons, lien, citation, directive, letter or
     other  communication  from  any  governmental  agency  or  instrumentality
     concerning  any  intentional  or  unintentional  action  or  omission  on
     Borrower's  part  in  connection with any environmental activity whether or
     not  there  is  damage  to  the environment and/or other natural resources.

     ADDITIONAL  ASSURANCES.  Make,  execute  and  deliver  to  Lender  such
     promissory  notes,  mortgages,  deeds  of  trust,  security  agreements,
     assignments,  financing  statements,  instruments,  documents  and  other
     agreements  as  Lender  or its attorneys may reasonably request to evidence
     and  secure  the  Loans  and  to  perfect  all  Security  Interests.

LENDER'S  EXPENDITURES.  If  any  action  or  proceeding is commenced that would
materially  affect  Lender's  interest in the Collateral or if Borrower fails to
comply  with  any provision of this Agreement or any Related Documents after any
period  of  notice  and  opportunity to cure set forth herein, including but not
limited  to Borrower's failure to discharge or pay when due any amounts Borrower
is  required  to discharge or pay under this Agreement or any Related Documents,
Lender  on Borrower's behalf may (but shall not be obligated to) take any action
that  Lender  deems  appropriate,  including  but  not limited to discharging or
paying  all  taxes, liens, security interests, encumbrances and other claims, at
any  time  levied or placed on any Collateral and paying all costs for insuring,
maintaining  and  preserving  any Collateral.  All such expenditures incurred or
paid  by  Lender  for  such purposes will then bear interest at the rate charged
under the Note from the date incurred or paid by Lender to the date of repayment
by  Borrower.  All  such expenses will become a part of the Indebtedness and, at
Lender's  option, will  (A)  be payable on demand;  (B)  be added to the balance
of  the  Note  and  be  apportioned  among  and  be payable with any installment
payments  to become due during either  (1)  the term of any applicable insurance
policy;  or  (2)  the  remaining  term  of  the  Note;  or  (C)  be treated as a
balloon  payment  which  will  be  due  and  payable  at  the  Note's  maturity.

NEGATIVE  COVENANTS.  Borrower  covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:


<PAGE>
     INDEBTEDNESS  AND  LIENS.  (1) Except for trade debt incurred in the normal
     course  of  business  and  indebtedness  to  Lender  contemplated  by  this
     Agreement,  create,  incur  or  assume  indebtedness  for  borrowed  money,
     including  capital  leases,  (2)  sell, transfer, mortgage, assign, pledge,
     lease,  grant  a security interest in, or encumber any of Borrower's assets
     (except  as  allowed  as Permitted Liens), or (3) sell with recourse any of
     Borrower's  accounts,  except  to  Lender.

     CONTINUITY  OF  OPERATIONS.  (1)  Engage  in  any  business  activities
     substantially  different than those in which Borrower is presently engaged,
     (2)  cease  operations,  liquidate, merge, transfer, acquire or consolidate
     with  any  other  entity,  change  its  name,  dissolve or transfer or sell
     Collateral out of the ordinary course of business, or (3) pay any dividends
     on  Borrower's stock (other than dividends payable in its stock), provided,
     however that notwithstanding the foregoing, but only so long as no Event of
     Default  has occurred and is continuing or would result from the payment of
     dividends  (a) Borrower may pay regularly scheduled dividends on its Series
     I  Cumulative  Convertible  Preferred  Stock,  and  (b)  if  Borrower  is a
     "Subchapter  S  Corporation"  (as  defined  in the Internal Revenue Code of
     1986,  as  amended),  Borrower  may  pay cash dividends on its stock to its
     shareholders  from  time  to  time  in  amounts  necessary  to  enable  the
     shareholders  to pay income taxes and make estimated income tax payments to
     satisfy  their  liabilities  under federal and state law which arise solely
     from  their status as Shareholders of a Subchapter S Corporation because of
     their ownership of shares of Borrower's stock, or purchase or retire any of
     Borrower's  outstanding  shares  or  alter  or  amend  Borrower's  capital
     structure.

     LOANS,  ACQUISITIONS  AND  GUARANTIES.  (1)  Loan,  invest  in  or  advance
     money  or  assets  to any other person, enterprise or entity, (2) purchase,
     create  or  acquire  any interest in any other enterprise or entity, or (3)
     incur  any  obligation  as  surety  or guarantor other than in the ordinary
     course  of  business.

     AGREEMENTS.  Borrower  will  not  enter  into  any agreement containing any
     provisions  which  would  be  violated  or  breached  by the performance of
     Borrower's  obligations  under  this  Agreement  or in connection herewith.

CESSATION  OF  ADVANCES.  If  Lender has made any commitment to make any Loan to
Borrower,  whether  under  this  Agreement  or under any other agreement, Lender
shall  have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A)  Borrower  or  any Guarantor is in default under the terms of this Agreement
or  any  of  the  Related  Documents or any other agreement that Borrower or any
Guarantor  has  with  Lender;  (B)  Borrower  or  any  Guarantor  dies,  becomes
incompetent  or  becomes  insolvent,  files  a petition in bankruptcy or similar
proceedings,  or  is  adjudged a bankrupt;  (C)  there occurs a material adverse
change  in  Borrower's  financial  condition,  in the financial condition of any
Guarantor,  or  in  the  value of any Collateral securing any Loan; or  (D)  any
Guarantor  seeks,  claims  or otherwise attempts to limit, modify or revoke such
Guarantor's  guaranty  of  the  Loan  or  any  other  loan  with  Lender.

RIGHT  OF  SETOFF.  To the extent permitted by applicable law, Lender reserves a
right  of  setoff  in  all  Borrower's  accounts  with Lender (whether checking,
savings,  or  some  other  account).  This  includes all accounts Borrower holds
jointly  with  someone  else  and  all accounts Borrower may open in the future.
However,  this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law.  Borrower authorizes Lender, to the
extent  permitted  by  applicable law, to charge or setoff all sums owing on the
Indebtedness  against  any  and  all  such  accounts.

DEFAULT.  Each  of the following shall constitute an Event of Default under this
Agreement:

     PAYMENT  DEFAULT.  Should  Borrower  fail  to  make  any  payment  when due
     under  this  Note  within  10  days  of  each  payment  date.

     OTHER  DEFAULTS.  Borrower  fails  to  comply  with or to perform any other
     term,  obligation,  covenant or condition contained in this Agreement or in
     any  of  the  Related  Documents  or to comply with or to perform any term,
     obligation,  covenant or condition contained in any other agreement between
     Lender  and  Borrower.

     DEFAULT  IN  FAVOR  OF  THIRD  PARTIES.  Borrower  or  any Grantor defaults
     under  any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that  may  materially affect any of Borrower's or any Grantor's property or
     Borrower's  or  any  Grantor's  ability to repay the Loans or perform their
     respective obligations under this Agreement or any of the Related Documents
     after  any  period  of notice and opportunity to cure provided for therein.

     FALSE  STATEMENTS.  Any  warranty,  representation  or  statement  made  or
     furnished  to  Lender  by  Borrower  or  on  Borrower's  behalf  under this
     Agreement  or  the Related Documents is false or misleading in any material
     respect,  either  now  or at the time made or furnished or becomes false or
     misleading  at  any  time  thereafter.

     INSOLVENCY.  The  dissolution  or  termination  of  Borrower's existence as
     a going business, the insolvency of Borrower, the appointment of a receiver
     for  any  part  of  Borrower's  property, any assignment for the benefit of
     creditors,  any  type  of  creditor  workout,  or  the  commencement of any
     proceeding  under  any bankruptcy or insolvency laws by or against Borrower
     and in the case of any proceeding against Borrower, or the appointment of a
     receiver not consented to by Borrower, such proceeding or appointment shall
     not  be  dismissed  within  60  days.

     DEFECTIVE  COLLATERALIZATION.  This  Agreement  or  any  of  the  Related
     Documents  ceases  to be in full force and effect (including failure of any
     collateral  document  to  create a valid and perfected security interest or
     lien)  at  any  time  and  for  any  reason.

     CREDITOR  OR  FORFEITURE  PROCEEDINGS.  Commencement  of  foreclosure  or
     forfeiture  proceedings,  whether  by  judicial  proceeding,  self-help,
     repossession  or  any  other  method, by any creditor of Borrower or by any
     governmental agency against any collateral securing the Loan. This includes
     a  garnishment  of  any of Borrower's accounts, including deposit accounts,
     with  Lender.  However, this Event of Default shall not apply if there is a
     good  faith dispute by Borrower as to the validity or reasonableness of the
     claim  which  is  the basis of the creditor or forfeiture proceeding and if
     Borrower  gives  Lender  written  notice  of  the  creditor  or  forfeiture
     proceeding  and  deposits  with  Lender  monies  or  a  surety bond for the
     creditor  or  forfeiture  proceeding, in an amount determined by Lender, in
     its  sole discretion, as being an adequate reserve or bond for the dispute.

     EVENTS  AFFECTING  GUARANTOR.  Any  of  the  preceding  events  occurs with
     respect  to  any Guarantor of any of the Indebtedness or any Guarantor dies
     or  becomes  incompetent,  or  revokes  or  disputes  the  validity  of, or
     liability under, any Guaranty of the Indebtedness. In the event of a death,
     Lender,  at  its  option,  may,  but  shall  not be required to, permit the
     Guarantor's  estate to assume unconditionally the obligations arising under
     the guaranty in a manner satisfactory to Lender, and, in doing so, cure any
     Event  of  Default.

     CHANGE  IN  OWNERSHIP.  Any  change  in  ownership  of  twenty-five percent
     (25%)  or  more  of  the  common  stock  of  Borrower,  calculated  on  a
     fully-diluted  basis.

     ADVERSE  CHANGE.  A  material  adverse  change  occurs  in  Borrower's
     financial  condition,  or  Lender  believes  the  prospect  of  payment  or
     performance  of  the  Loan  is  impaired.

     RIGHT  TO  CURE.  If  any  default,  other  than a default on Indebtedness,
     is  curable  and  if  Borrower or Grantor, as the case may be, has not been
     given


<PAGE>
     a  notice  of a similar default within the preceding twelve (12) months, it
     may  be  cured  if Borrower or Grantor, as the case may be, after receiving
     written  notice  from  Lender  demanding cure of such default: (1) cure the
     default  within  fifteen  (15)  days; or (2) if the cure requires more than
     fifteen  (15)  days,  immediately  initiate  steps  which  Lender  deems in
     Lender's  sole  discretion  to  be  sufficient  to  cure  the  default  and
     thereafter  continue  and  complete  all  reasonable  and  necessary  steps
     sufficient  to  produce  compliance  as  soon  as  reasonably  practical.

EFFECT  OF  AN  EVENT  OF  DEFAULT.  If any Event of Default shall occur, except
where  otherwise  provided  in  this  Agreement  or  the  Related Documents, all
commitments  and  obligations  of  Lender  under  this  Agreement or the Related
Documents  or  any  other  agreement  immediately  will terminate (including any
obligation  to  make  further  Loan Advances or disbursements), and, at Lender's
option,  all  Indebtedness  immediately will become due and payable, all without
notice  of  any kind to Borrower, except that in the case of an Event of Default
of  the  type  described in the "Insolvency" subsection above, such acceleration
shall  be  automatic  and  not optional.  In addition, Lender shall have all the
rights  and  remedies  provided in the Related Documents or available at law, in
equity,  or  otherwise.  Except  as  may be prohibited by applicable law, all of
Lender's rights and remedies shall be cumulative and may be exercised singularly
or  concurrently.  Election  by  Lender  to  pursue any remedy shall not exclude
pursuit  of  any  other  remedy, and an election to make expenditures or to take
action  to  perform an obligation of Borrower or of any Grantor shall not affect
Lender's  right  to  declare  a default and to exercise its rights and remedies.

MISCELLANEOUS  PROVISIONS.  The following miscellaneous provisions are a part of
this  Agreement:

     AMENDMENTS.  This  Agreement,  together  with  any  Related  Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters  set forth in this Agreement. No alteration of or amendment to this
     Agreement  shall  be  effective  unless  given in writing and signed by the
     party  or  parties  sought  to  be  charged  or  bound by the alteration or
     amendment.

     ARBITRATION.  LENDER  AND  BORROWER  AGREE  THAT  ALL  DISPUTES, CLAIMS AND
     CONTROVERSIES  BETWEEN  THEM WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE,
     ARISING  FROM  THIS  AGREEMENT  OR  OTHERWISE, INCLUDING WITHOUT LIMITATION
     CONTRACT  AND  TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE FINANCIAL
     SERVICES  RULES  OF  ENDISPUTE,  INC.,  D/B/A  J.A.M.S./ENDISPUTE  OR  ITS
     SUCCESSOR  IN EFFECT AT THE TIME THE CLAIM IS FILED, UPON REQUEST OF EITHER
     PARTY.  NO  ACT  TO  TAKE  OR  DISPOSE OF ANY COLLATERAL SHALL CONSTITUTE A
     WAIVER  OF  THIS ARBITRATION AGREEMENT OR BE PROHIBITED BY THIS ARBITRATION
     AGREEMENT.  THIS  INCLUDES, WITHOUT LIMITATION, OBTAINING INJUNCTIVE RELIEF
     OR  A  TEMPORARY RESTRAINING ORDER; INVOKING A POWER OF SALE UNDER ANY DEED
     OF  TRUST  OR  MORTGAGE;  OBTAINING A WRIT OF ATTACHMENT OR IMPOSITION OF A
     RECEIVER; OR EXERCISING ANY RIGHTS RELATING TO PERSONAL PROPERTY, INCLUDING
     TAKING  OR  DISPOSING  OF  SUCH  PROPERTY  WITH OR WITHOUT JUDICIAL PROCESS
     PURSUANT ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE. ANY DISPUTES, CLAIMS, OR
     CONTROVERSIES  CONCERNING  THE  LAWFULNESS OR REASONABLENESS OF ANY ACT, OR
     EXERCISE  OF  ANY  RIGHT, CONCERNING ANY COLLATERAL, INCLUDING ANY CLAIM TO
     RESCIND,  REFORM,  OR  OTHERWISE  MODIFY  ANY  AGREEMENT  RELATING  TO  THE
     COLLATERAL,  SHALL  ALSO BE ARBITRATED, PROVIDED HOWEVER THAT NO ARBITRATOR
     SHALL  HAVE  THE  RIGHT  OR  THE POWER TO ENJOIN OR RESTRAIN ANY ACT OF ANY
     PARTY.  BORROWER  AND  LENDER  AGREE  THAT  IN  THE  EVENT OF AN ACTION FOR
     JUDICIAL FORECLOSURE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION
     726,  OR ANY SIMILAR PROVISION IN ANY OTHER STATE, THE COMMENCEMENT OF SUCH
     AN  ACTION  WILL  NOT CONSTITUTE A WAIVER OF THE RIGHT TO ARBITRATE AND THE
     COURT  SHALL  REFER  TO  ARBITRATION  AS  MUCH  OF  SUCH  ACTION, INCLUDING
     COUNTERCLAIMS,  AS  LAWFULLY  MAY BE REFERRED TO ARBITRATION. JUDGMENT UPON
     ANY  AWARD  RENDERED  BY  ANY ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING
     JURISDICTION.  NOTHING  IN  THIS  AGREEMENT  SHALL  PRECLUDE ANY PARTY FROM
     SEEKING  EQUITABLE  RELIEF  FROM  A  COURT  OF  COMPETENT JURISDICTION. THE
     STATUTE  OF  LIMITATIONS,  ESTOPPEL,  WAIVER, LACHES, AND SIMILAR DOCTRINES
     WHICH  WOULD  OTHERWISE BE APPLICABLE IN AN ACTION BROUGHT BY A PARTY SHALL
     BE  APPLICABLE  IN  ANY  ARBITRATION PROCEEDING, AND THE COMMENCEMENT OF AN
     ARBITRATION  PROCEEDING  SHALL  BE DEEMED THE COMMENCEMENT OF AN ACTION FOR
     THESE  PURPOSES.  THE  FEDERAL  ARBITRATION  ACT  SHALL  APPLY  TO  THE
     CONSTRUCTION,  INTERPRETATION,  AND  ENFORCEMENT  OF  THIS  ARBITRATION
     PROVISION.

     ATTORNEYS'  FEES;  EXPENSES.  Borrower  agrees  to  pay  upon demand all of
     Lender's  reasonable costs and expenses, including Lender's attorneys' fees
     and Lender's legal expenses, incurred in connection with the enforcement of
     this  Agreement.  Lender  may hire or pay someone else to help enforce this
     Agreement,  and  Borrower  shall  pay  the  costs  and  expenses  of  such
     enforcement.  Costs and expenses include Lender's attorneys' fees and legal
     expenses  whether  or not there is a lawsuit, including attorneys' fees and
     legal  expenses  for bankruptcy proceedings (including efforts to modify or
     vacate  any  automatic  stay  or  injunction), appeals, and any anticipated
     post-judgment  collection services. Borrower also shall pay all court costs
     and  such  additional  fees  as  may  be  directed  by  the  court.

     CAPTION  HEADINGS.  Caption  headings  in  this  Agreement  are  for
     convenience purposes only and are not to be used to interpret or define the
     provisions  of  this  Agreement.

     CONSENT  TO  LOAN  PARTICIPATION.  Borrower  agrees  and  consents  to
     Lender's  sale  or  transfer,  whether  now  or  later,  of  one  or  more
     participation  interests  in  the  Loan  to one or more purchasers, whether
     related  or unrelated to Lender. Lender may provide, without any limitation
     whatsoever,  to  any  one  or more purchasers, or potential purchasers, any
     information  or knowledge Lender may have about Borrower or about any other
     matter  relating  to  the  Loan,  and  Borrower hereby waives any rights to
     privacy  Borrower  may  have  with  respect  to  such  matters.  Borrower
     additionally waives any and all notices of sale of participation interests,
     as  well  as all notices of any repurchase of such participation interests.
     Borrower  also  agrees  that  the  purchasers  of  any  such  participation
     interests  will  be  considered as the absolute owners of such interests in
     the  Loan  and  will  have  all  the rights granted under the participation
     agreement or agreements governing the sale of such participation interests.
     Borrower  further  waives  all rights of offset or counterclaim that it may
     have  now  or  later  against  Lender  or  against  any purchaser of such a
     participation  interest  and  unconditionally  agrees that either Lender or
     such  purchaser  may  enforce  Borrower's  obligation  under  the  Loan
     irrespective  of the failure or insolvency of any holder of any interest in
     the  Loan.  Borrower  further  agrees  that  the  purchaser  of  any  such
     participation  interests  may  enforce  its  interests  irrespective of any
     personal  claims  or  defenses  that  Borrower  may  have  against  Lender.

     GOVERNING  LAW.  THIS  AGREEMENT  WILL  BE  GOVERNED  BY  FEDERAL  LAW
     APPLICABLE  TO  LENDER AND, TO THE EXTENT NOT PREEMPTED BY FEDERAL LAW, THE
     LAWS  OF  THE  STATE  OF  CALIFORNIA WITHOUT REGARD TO ITS CONFLICTS OF LAW
     PROVISIONS.  THIS  AGREEMENT  HAS  BEEN  ACCEPTED BY LENDER IN THE STATE OF
     CALIFORNIA.

     JOINT  AND  SEVERAL  LIABILITY.  All  obligations  of  Borrower  under this
     Agreement  shall be joint and several, and all references to Borrower shall
     mean  each  and every Borrower. This means that each Borrower signing below
     is responsible for all obligations in this Agreement. Where any one or more
     of  the parties is a corporation, partnership, limited liability company or
     similar  entity,  it is not necessary for Lender to inquire into the powers
     of  any  of  the  officers,  directors,  partners, members, or other agents
     acting  or  purporting  to  act on the entity's behalf, and any obligations
     made  or  created  in  reliance  upon the professed exercise of such powers
     shall  be  guaranteed  under  this  Agreement.

     NO  WAIVER  BY  LENDER.  Lender  shall  not  be  deemed  to have waived any
     rights  under  this  Agreement  unless  such waiver is given in writing and
     signed  by Lender. No delay or omission on the part of Lender in exercising
     any  right  shall  operate  as a waiver of such right or any other right. A
     waiver  by  Lender  of a provision of this Agreement shall not prejudice or
     constitute a waiver of Lender's right otherwise to demand strict compliance


<PAGE>
     with  that  provision  or  any  other provision of this Agreement. No prior
     waiver by Lender, nor any course of dealing between Lender and Borrower, or
     between  Lender  and  any  Grantor,  shall  constitute  a  waiver of any of
     Lender's  rights or of any of Borrower's or any Grantor's obligations as to
     any  future  transactions. Whenever the consent of Lender is required under
     this  Agreement,  the  granting  of  such consent by Lender in any instance
     shall  not constitute continuing consent to subsequent instances where such
     consent  is  required  and  in  all  cases  such  consent may be granted or
     withheld  in  the  sole  discretion  of  Lender.

     NOTICES.  Any  notice  required  to  be given under this Agreement shall be
     given  in  writing,  and  shall  be effective when actually delivered, when
     actually received by telefacsimile (unless otherwise required by law), when
     deposited  with  a  nationally recognized overnight courier, or, if mailed,
     when  deposited  in  the  United  States mail, as first class, certified or
     registered  mail  postage prepaid, directed to the addresses shown near the
     beginning  of  this Agreement. Any party may change its address for notices
     under  this Agreement by giving formal written notice to the other parties,
     specifying that the purpose of the notice is to change the party's address.
     For  notice  purposes, Borrower agrees to keep Lender informed at all times
     of  Borrower's  current  address.  Unless otherwise provided or required by
     law,  if there is more than one Borrower, any notice given by Lender to any
     Borrower  is  deemed  to  be  notice  given  to  all  Borrowers.

     SEVERABILITY.  If  a  court  of  competent jurisdiction finds any provision
     of this Agreement to be illegal, invalid, or unenforceable as to any person
     or  circumstance,  that  finding  shall  not  make  the offending provision
     illegal,  invalid, or unenforceable as to any other person or circumstance.
     If  feasible,  the offending provision shall be considered modified so that
     it  becomes legal, valid and enforceable. If the offending provision cannot
     be  so modified, it shall be considered deleted from this Agreement. Unless
     otherwise  required by law, the illegality, invalidity, or unenforceability
     of  any provision of this Agreement shall not affect the legality, validity
     or  enforceability  of  any  other  provision  of  this  Agreement.

     SUBSIDIARIES  AND  AFFILIATES  OF  BORROWER.  To  the extent the context of
     any  provisions  of  this Agreement makes it appropriate, including without
     limitation any representation, warranty or covenant, the word "Borrower" as
     used  in  this  Agreement  shall include all of Borrower's subsidiaries and
     affiliates.  Notwithstanding  the foregoing however, under no circumstances
     shall  this  Agreement  be  construed to require Lender to make any Loan or
     other  financial  accommodation  to  any  of  Borrower's  subsidiaries  or
     affiliates.

     SUCCESSORS  AND  ASSIGNS.  All  covenants  and  agreements  by or on behalf
     of Borrower contained in this Agreement or any Related Documents shall bind
     Borrower's  successors and assigns and shall inure to the benefit of Lender
     and its successors and assigns. Borrower shall not, however, have the right
     to  assign  Borrower's rights under this Agreement or any interest therein,
     without  the  prior  written  consent  of  Lender.

     SURVIVAL  OF  REPRESENTATIONS  AND  WARRANTIES.  Borrower  understands  and
     agrees  that  in making the Loan, Lender is relying on all representations,
     warranties,  and  covenants  made  by  Borrower in this Agreement or in any
     certificate  or other instrument delivered by Borrower to Lender under this
     Agreement or the Related Documents. Borrower further agrees that regardless
     of  any  investigation made by Lender, all such representations, warranties
     and covenants will survive the making of the Loan and delivery to Lender of
     the  Related  Documents, shall be continuing in nature, and shall remain in
     full  force  and effect until such time as Borrower's Indebtedness shall be
     paid  in  full,  or  until this Agreement shall be terminated in the manner
     provided  above,  whichever  is  the  last  to  occur.

     TIME  IS  OF  THE  ESSENCE.  Time  is  of the essence in the performance of
     this  Agreement.

DEFINITIONS.  The following capitalized words and terms shall have the following
meanings  when  used  in  this  Agreement.  Unless  specifically  stated  to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the  United  States  of  America.  Words  and  terms  used in the singular shall
include  the  plural,  and the plural shall include the singular, as the context
may require.  Words and terms not otherwise defined in this Agreement shall have
the  meanings  attributed  to  such  terms  in  the  Uniform  Commercial  Code.
Accounting  words  and  terms not otherwise defined in this Agreement shall have
the  meanings  assigned to them in accordance with generally accepted accounting
principles  as  in  effect  on  the  date  of  this  Agreement:

     ADVANCE.  The  word  "Advance"  means  a  disbursement  of Loan funds made,
     or  to  be made, to Borrower or on Borrower's behalf on a line of credit or
     multiple  advance  basis  under the terms and conditions of this Agreement.

     AGREEMENT.  The  word  "Agreement"  means  this Business Loan Agreement, as
     this  Business Loan Agreement may be amended or modified from time to time,
     together  with  all  exhibits  and schedules attached to this Business Loan
     Agreement  from  time  to  time.

     BORROWER.  The  word  "Borrower"  means  Baywood  International,  Inc.; and
     Baywood Acquisition, Inc. and includes all co-signers and co-makers signing
     the  Note  and  all  their  successors  and  assigns.

     COLLATERAL.  The  word  "Collateral"  means  all  property  and  assets
     granted  as  collateral  security  for  a  Loan,  whether  real or personal
     property, whether granted directly or indirectly, whether granted now or in
     the  future,  and  whether  granted  in  the  form  of a security interest,
     mortgage,  collateral  mortgage,  deed  of  trust, assignment, pledge, crop
     pledge,  chattel  mortgage,  collateral  chattel  mortgage,  chattel trust,
     factor's  lien,  equipment  trust,  conditional  sale, trust receipt, lien,
     charge,  lien or title retention contract, lease or consignment intended as
     a  security  device,  or  any  other  security or lien interest whatsoever,
     whether  created  by  law,  contract,  or  otherwise.

     ENVIRONMENTAL  LAWS.  The  words  "Environmental  Laws"  mean  any  and all
     state,  federal  and local statutes, regulations and ordinances relating to
     the  protection  of  human  health  or  the  environment, including without
     limitation  the  Comprehensive  Environmental  Response,  Compensation, and
     Liability  Act  of  1980,  as  amended,  42  U.S.C.  Section  9601, et seq.
     ("CERCLA"),  the Superfund Amendments and Reauthorization Act of 1986, Pub.
     L.  No.  99-499  ("SARA"),  the  Hazardous Materials Transportation Act, 49
     U.S.C.  Section  1801, et seq., the Resource Conservation and Recovery Act,
     42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of
     the  California  Health  and  Safety Code, Section 25100, et seq., or other
     applicable  state  or  federal laws, rules, or regulations adopted pursuant
     thereto.

     EVENT  OF  DEFAULT.  The  words  "Event  of Default" mean any of the events
     of  default  set  forth  in  this  Agreement in the default section of this
     Agreement.

     GAAP.  The  word  "GAAP"  means  generally  accepted accounting principles.

     GRANTOR.  The  word  "Grantor"  means  each  and  all  of  the  persons  or
     entities  granting  a  Security  Interest  in  any Collateral for the Loan,
     including  without  limitation  all  Borrowers  granting  such  a  Security
     Interest.

     GUARANTOR.  The  word  "Guarantor"  means  any  guarantor,  surety,  or
     accommodation  party  of  any  or  all  of  the  Loan.

     GUARANTY.  The  word  "Guaranty"  means  the  guaranty  from  Guarantor  to
     Lender, including without limitation a guaranty of all or part of the Note.


<PAGE>
     HAZARDOUS SUBSTANCES. The words "Hazardous Substances" mean materials that,
     because  of  their  quantity,  concentration  or  physical,  chemical  or
     infectious characteristics, may cause or pose a present or potential hazard
     to  human  health or the environment when improperly used, treated, stored,
     disposed of, generated, manufactured, transported or otherwise handled. The
     words  "Hazardous  Substances"  are  used  in their very broadest sense and
     include  without  limitation  any  and  all  hazardous or toxic substances,
     materials  or  waste  as defined by or listed under the Environmental Laws.
     The  term  "Hazardous  Substances"  also  includes,  without  limitation,
     petroleum  and  petroleum by-products or any fraction thereof and asbestos.

     INDEBTEDNESS.  The  word  "Indebtedness"  means  the indebtedness evidenced
     by  the  Note  or  Related  Documents, including all principal and interest
     together  with  all  other  indebtedness  and  costs and expenses for which
     Borrower  is  responsible  under this Agreement or under any of the Related
     Documents.

     LENDER.  The  word  "Lender"  means  Vineyard  Bank,  N.A.,  its successors
     and  assigns.

     LOAN.  The  word  "Loan"  means  any  and  all  loans  and  financial
     accommodations  from  Lender to Borrower whether now or hereafter existing,
     and  however  evidenced,  including  without  limitation  those  loans  and
     financial  accommodations  described  herein or described on any exhibit or
     schedule  attached  to  this  Agreement  from  time  to  time.

     NOTE.  The  word  "Note"  means  the  Note  executed  by  Baywood
     International,  Inc.; and Baywood Acquisition, Inc. in the principal amount
     of  $1,500,000.00  dated  March  20,  2007,  together with all renewals of,
     extensions  of,  modifications  of, refinancings of, consolidations of, and
     substitutions  for  the  note  or  credit  agreement.

     PERMITTED  LIENS.  The  words  "Permitted  Liens"  mean  (1)  liens  and
     security  interests  securing  Indebtedness owed by Borrower to Lender; (2)
     liens  for  taxes,  assessments,  or  similar charges either not yet due or
     being  contested  in  good  faith;  (3)  liens  of  materialmen, mechanics,
     warehousemen,  or  carriers,  or  other  like liens arising in the ordinary
     course  of  business and securing obligations which are not yet delinquent;
     (4)  purchase  money  liens or purchase money security interests upon or in
     any  property  acquired  or  held  by  Borrower  in  the ordinary course of
     business  to  secure indebtedness outstanding on the date of this Agreement
     or  permitted  to  be incurred under the paragraph of this Agreement titled
     "Indebtedness and Liens"; (5) liens and security interests which, as of the
     date  of  this Agreement, have been disclosed to and approved by the Lender
     in  writing;  and  (6)  those  liens  and  security  interests which in the
     aggregate  constitute  an immaterial and insignificant monetary amount with
     respect  to  the  net  value  of  Borrower's  assets.

     RELATED  DOCUMENTS.  The  words  "Related  Documents"  mean  all promissory
     notes,  credit  agreements,  loan  agreements,  environmental  agreements,
     guaranties, security agreements, mortgages, deeds of trust, security deeds,
     collateral  mortgages, and all other instruments, agreements and documents,
     whether  now  or  hereafter existing, executed in connection with the Loan.

     SECURITY  AGREEMENT.  The  words  "Security  Agreement"  mean  and  include
     without  limitation  any  agreements,  promises,  covenants,  arrangements,
     understandings  or  other  agreements, whether created by law, contract, or
     otherwise,  evidencing,  governing,  representing,  or  creating a Security
     Interest.

     SECURITY  INTEREST.  The  words  "Security  Interest"  mean,  without
     limitation,  any  and all types of collateral security, present and future,
     whether  in  the  form  of  a  lien, charge, encumbrance, mortgage, deed of
     trust,  security  deed,  assignment, pledge, crop pledge, chattel mortgage,
     collateral chattel mortgage, chattel trust, factor's lien, equipment trust,
     conditional sale, trust receipt, lien or title retention contract, lease or
     consignment  intended  as  a security device, or any other security or lien
     interest  whatsoever  whether  created  by  law,  contract,  or  otherwise.


<PAGE>
BORROWER  ACKNOWLEDGES  HAVING  READ  ALL  THE  PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT  AND  BORROWER  AGREES  TO ITS TERMS.  THIS BUSINESS LOAN AGREEMENT IS
DATED  MARCH  20,  2007.

BORROWER:


BAYWOOD  INTERNATIONAL,  INC.

BY:  /s/ Neil Reithinger
     ---------------------------------------------
NEIL REITHINGER, PRESIDENT OF BAYWOOD INTERNATIONAL, INC.


BAYWOOD  ACQUISITION,  INC.

BY:  /s/ Neil Reithinger
     ---------------------------------------------
NEIL REITHINGER, PRESIDENT OF BAYWOOD ACQUISITION, INC.


LENDER:

VINEYARD  BANK,  N.A.

BY:
     ---------------------------------------------
AUTHORIZED  SIGNER