$500,000.00

                           BAYWOOD INTERNATIONAL, INC.
                            BAYWOOD ACQUISITION, INC.

                                   10.0% NOTE

     Section 1.     General.

          FOR  VALUE RECEIVED, BAYWOOD INTERNATIONAL, INC., a Nevada corporation
("BAYWOOD  INTERNATIONAL"),  and BAYWOOD ACQUISITION, INC., a Nevada corporation
and  a  wholly  owned subsidiary of Baywood International ("BAYWOOD ACQUISITION"
and, together with Baywood International, the "COMPANY"), jointly and severally,
hereby  promises  to pay to the order of O. Lee Tawes, III, or his successors or
assigns (the "INVESTOR"), the principal sum of FIVE HUNDRED THOUSAND DOLLARS AND
ZERO CENTS ($500,000.00)), together with interest thereon at a rate equal to ten
percent  (10%)  per annum (a) computed on the basis of the actual number of days
elapsed and a year of 360 days comprised of twelve 30 day months and (b) payable
monthly  in arrears by the Company to the Investor with the first payment of any
accrued  interest due and payable on April 30, 2007 and each subsequent interest
payment  due  and payable on the last day of each calendar month commencing with
May  2007.

          Except  as  earlier  redeemed  in  accordance  with  Section 2(a), (i)
$83,333.34  of  the  principal amount, together with any then unpaid and accrued
interest  and  other  amounts  payable  hereunder,  shall  be due and payable on
February  28,  2008  (the  "FIRST  STATED MATURITY DATE") and (ii) any remaining
unpaid  principal amount, together with any then unpaid and accrued interest and
other  amounts payable hereunder, shall be due and payable on demand by Investor
at  any time after February 28, 2009 (the "SECOND STATED MATURITY DATE"; each of
the  First  Stated Maturity Date and the Second Stated Maturity Date is referred
to  hereunder  as  a "MATURITY DATE"), provided that the entire unpaid principal
amount,  together with any unpaid and accrued interest and other amounts payable
hereunder,  shall  be  due  and  payable (1) upon the occurrence of a Designated
Event  (defined  below)  and  (2)  at any time as a result of, and following, an
Event  of  Default  in  accordance  with  Section  3.

          All  payments required to be made hereunder shall be made in such coin
or  currency  of the United States of America as at the time of payment shall be
legal  tender  therein  for  the  payment of public and private debts.  Interest
shall  accrue on the unpaid balance of the principal amount of this Note and any
due  and  unpaid  interest from and including the date hereof to, but excluding,
the  date  on  which  the principal amount of, as well as any accrued and unpaid
interest  and  other  amounts  under,  this  Note  are  paid  in  full.

          Concurrent  with  the  issuance of this Note, Baywood International is
issuing  to  the  Investor  five-year  warrants to purchase shares of its common
stock,  $0.001  par  value  per  share  (the  "COMMON  STOCK").

     Section  2.     Redemption  and  Repayment  upon  Designated  Event.

          (a)     Optional  Redemption  by  the  Company.


<PAGE>
               (i)     The  Company  may,  upon  the  closing  of  a  Qualified
     Financing  (defined  below),  redeem  this  Note,  in  whole  or  in  part,
     without  premium  or  penalty,  by  paying  to  the Investor, upon five (5)
     business  days'  prior  written  notice  to  the  Investor of its intent to
     redeem, of the date of such closing, an amount equal to one hundred percent
     (100%)  of  the  principal  amount  of  the  portion  of this Note being so
     redeemed,  plus  any accrued and unpaid interest on this Note and any other
     amounts  due  and  payable hereunder. For purposes of this Note, "QUALIFIED
     FINANCING"  shall  mean the issuance of equity securities and/or securities
     convertible  or  exercisable  into equity securities (other than in Baywood
     International's  private  placement  of  Units  pursuant to the Amended and
     Restated Confidential Private Placement Memorandum dated March 12, 2007 and
     the  concurrent  Note  Financing  and  Bank Financing defined and described
     therein)  in  which  gross  proceeds  to  Baywood  International  and  its
     affiliates  are  equal  to  or  greater  than  $4,000,000.

               (ii)     At  any time after March 1, 2008, the Company may redeem
     this  Note,  in  whole  or  in  part,  without  premium  or  penalty,  upon
     giving  to the Investor at least two (2) business days prior written notice
     of  intent  to  redeem,  by  paying  to the Investor an amount equal to one
     hundred  percent (100%) of the principal amount of the portion of this Note
     being  so  redeemed,  plus any accrued and unpaid interest on this Note and
     any  other  amounts  due  and  payable  hereunder.

          Except  as  set forth above, the Company shall have no right to prepay
this  Note,  in  whole  or  in  part,  prior  to  the  applicable Maturity Date.

          (b)     Repayment  upon  Occurrence  of  Designated  Event.  Upon  the
occurrence  of  one  or  more  Designated  Events,  the Company shall pay to the
Investor  an  amount  equal  to  the entire outstanding principal amount of this
Note,  plus accrued and unpaid interest and any other amounts payable hereunder.
A  "DESIGNATED  EVENT"  shall  mean  any  of  the  following:

               (i)     any  acquisition  by  an  individual  or  legal entity or
     "group"  (as  described  in  Rule  13d-5(b)(1)  promulgated  under  the
     Securities  Exchange  Act  of  1934,  as  amended  (the "EXCHANGE ACT"), of
     effective  control  (whether  through  legal  or  beneficial  ownership, by
     contract  or  otherwise)  of in excess of fifty percent (50%) of the voting
     securities  of  Baywood  International;  or

               (ii)     any  merger  or  consolidation  or  merger  of  Baywood
     International  or  any  subsidiary  of  Baywood  International  in one or a
     series  of  related transactions with or into another entity as a result of
     which  Baywood International ceases to be exist or as a result of which the
     Common  Stock  ceases  to  be  a  class  of securities registered under the
     Exchange  Act,  other  than (1) a merger solely for the purpose of changing
     Baywood  International's  jurisdiction  of incorporation and resulting in a
     reclassification,  conversion  or  exchange of outstanding shares of Common
     Stock  solely into shares of common stock of the surviving entity and (2) a
     merger  or  consolidation  pursuant  to  which  holders  of  Baywood
     International's  capital  stock  immediately prior to such transaction have
     the  right  to  exercise,  directly or indirectly, 50% or more of the total
     voting  power of all shares of the capital stock entitled to vote generally
     in elections of directors of the continuing or surviving entity immediately
     after  giving  effect  to  such  issuance;  or


                                        2
<PAGE>
               (iii)     any sale, lease, license or other disposition of all or
     substantially  all  of  the  assets,  or  any substantial asset, of Baywood
     International  in  one  or  a  series  of  transactions;  or

               (iv)     any  execution  by Baywood International of an agreement
     to  which  Baywood  International  is  a  party  or  by  which it is bound,
     providing  for  any of the events set forth in clause (i), (ii) or (iii) of
     this  Section  2(b);  or

               (v)     any  liquidation,  dissolution  or  winding up of Baywood
     International  or  Baywood  Acquisition,  whether  involuntary  or
     involuntary.

     Section  3.     Defaults.

     The  occurrence  of  any  of  the  following  shall constitute an "EVENT OF
DEFAULT"  under  this  Note:

          (a)     The  Company  shall  fail to pay when due (i) any principal or
     interest  payment  hereof  or  (ii)  any  other  payment required under the
     terms  of  this Note, and such payment shall not have been made within five
     (5)  days  after  written  notice  thereof  is delivered to the Company; or

          (b)     The  Company  shall  fail  to  observe  or  perform  any other
     covenant,  obligation,  condition  or  agreement  contained  in  this  Note
     (other  than  those  specified  in  Section  3(a))  and  such failure shall
     continue  for  twenty  (20)  business  days after written notice thereof is
     delivered  to  the  Company;  or

          (c)     Any representation or warranty contained in this Note shall be
     false,  incorrect,  incomplete  or  misleading  in  any  material  respect
     when  made  or  furnished;  or

          (d)     Either  Baywood International or Baywood Acquisition shall (i)
     fail  to  make  any  payment  when  due  under  the  terms  of  any  bond,
     debenture, note, other evidence of indebtedness or preferred security to be
     paid  by it(excluding this Note, which default is addressed by Section 3(a)
     above,  but  including  any  other  evidence  of  indebtedness  of  Baywood
     International  and  Baywood  Acquisition  to the Investor) and such failure
     shall continue beyond any period of grace provided with respect thereto, or
     (ii)  default in the observance or performance of any other agreement, term
     or condition contained in any such bond, debenture, note, other evidence of
     indebtedness  or  preferred  security,  and  the  effect of such failure or
     default  set  forth  in (i) or (ii) above is to cause, or permit the holder
     thereof  to  cause,  amounts in an aggregate amount of One Hundred Thousand
     Dollars  ($100,000)  or more to become due prior to its stated due date; or

          (e)     Either  Baywood International or Baywood Acquisition shall (i)
     apply  for  or  consent  to  the  appointment  of  a  receiver,  trustee,
     liquidator  or  custodian  of itself or of all or a substantial part of its
     property,  (ii)  be  unable,  or admit in writing its inability, to pay its
     debts  generally  as  they  mature, (iii) make a general assignment for the
     benefit  of its or any of its creditors, (iv) be dissolved or liquidated in
     full  or in part, (v) commence a voluntary case or other proceeding seeking
     liquidation,  reorganization  or other relief with respect to itself or its
     debts  under  any  bankruptcy,  insolvency  or  other  similar  law  now or


                                        3
<PAGE>
     hereafter  in  effect  or  consent  to  any  such  relief  or  to  the
     appointment  of  or taking possession of its property by any official in an
     involuntary case or other proceeding commenced against it, or (vi) take any
     action  for  the  purpose  of  effecting  any  of  the  foregoing;  or

          (f)     Proceedings  for  the  appointment  of  a  receiver,  trustee,
     liquidator  or  custodian  of  Baywood  International  or  Baywood
     Acquisition  or of all or a substantial part of the property thereof, or an
     involuntary  case  or other proceedings seeking liquidation, reorganization
     or  other  relief  with  respect  to  Baywood  International  or  Baywood
     Acquisition  or the debts thereof under any bankruptcy, insolvency or other
     similar  law now or hereafter in effect shall be commenced and an order for
     relief  entered  or  such  proceeding  shall not be dismissed or discharged
     within  forty-five  (45)  days  of  commencement;  or

          (g)     One or more judgments for the payment of money in an amount in
     excess  of  One  Hundred  Thousand  Dollars  ($100,000)  in  the aggregate,
     outstanding  at  any  one  time,  shall  be  rendered  against  Baywood
     International or Baywood Acquisition and the same shall remain undischarged
     for  a  period  of  thirty  (30)  days  during which execution shall not be
     effectively  stayed,  or  any  judgment,  writ,  assessment,  warrant  of
     attachment,  or  execution  or  similar  process  shall be issued or levied
     against  a  substantial  part  of  the property of Baywood International or
     Baywood  Acquisition  and such judgment, writ, or similar process shall not
     be released, stayed, vacated or otherwise dismissed within thirty (30) days
     after  issue  or  levy.

     Section  4.     Rights  of  Investor  Upon  Default.

          Upon  the  occurrence or existence of any Event of Default (other than
an Event of Default referred to in Sections 3(f) or 3(g) hereof) and at any time
thereafter during the continuance of such Event of Default, the Investor may, by
written  notice  to  the Company, declare all outstanding amounts payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest  or  any  other  notice  of  any kind, all of which are hereby expressly
waived,  anything  contained  herein  to the contrary notwithstanding.  Upon the
occurrence  or  existence  of any Event of Default described in Sections 3(f) or
3(g)  hereof, immediately and without notice, all outstanding amounts payable by
the  Company  hereunder  shall automatically become immediately due and payable,
without  presentment,  demand,  protest  or any other notice of any kind, all of
which  are  hereby  expressly  waived, anything contained herein to the contrary
notwithstanding.  In  addition to the foregoing remedies, upon the occurrence or
existence  of  any  Event of Default, the Investor may exercise any other right,
power or remedy permitted to it by law, either by suit in equity or by action at
law,  or  both.

     Section  5.     Joint  and  Several  Obligations;  Defenses.

          Baywood  International  and  Baywood  Acquisition  are  jointly  and
severally  liable  to  the  Investor  with respect to all obligations under this
Note,  and  each  of  them  hereby  waives  any right to require the Investor to
proceed  against  either one of them.  The Investor may, in its sole discretion,
elect  to  proceed against Baywood International or Baywood Acquisition, or both
of  them, to enforce its rights hereunder.  The obligations of the Company under
this  Note  shall  not be subject to set-off, counterclaim or recoupment for any
reason.


                                        4
<PAGE>
     Section  6.     Exchange  or  Replacement  of  Notes.

          (a)     The  Investor  may,  at  its  option,  in  person  or  by duly
authorized attorney, surrender this Note for exchange, at the principal business
office  of  Baywood International, and receive in exchange therefore, a new Note
in  the  same  principal  amount as the unpaid principal amount of this Note and
bearing  interest at the same annual rate as this Note, each such new Note to be
dated  as of the date of this Note and to be in such principal amount as remains
unpaid  and  payable  to  such  person or persons, or order, as the Investor may
designate  in  writing.

          (b)     Upon  receipt  by  the  Company  of reasonable evidence of the
loss,  theft,  destruction, or mutilation of this Note and (in the case of loss,
theft  or  destruction)  of an indemnity reasonably satisfactory to it, and upon
surrender  and cancellation of this Note, if mutilated, the Company will deliver
a new Note of like tenor in lieu of this Note.  Any Note delivered in accordance
with  the  provisions  of  this  Section 6 shall be dated as of the date of this
Note.

     Section  7.     Attorneys'  and  Collection  Fees.

          In  the  event of any default or failure by the Company to comply with
any  covenant,  obligation,  condition  or  agreement  contained  in  this  Note
(including  an  Event  of  Default), the Company agrees to pay all of Investor's
reasonable  attorneys'  and  other  fees  and  expenses incurred with respect to
enforcing  Investor's  rights  hereunder.

     Section  8.     Waivers.

          The  Company  hereby waives presentment, demand for payment, notice of
dishonor,  notice of protest and all other notices or demands in connection with
the  delivery, acceptance, performance or default of this Note.  No delay by the
Investor in exercising any power or right hereunder shall operate as a waiver of
any  power  or  right,  nor shall any single or partial exercise of any power or
right  preclude  other  or further exercise thereof, or the exercise thereof, or
the  exercise  of any other power or right hereunder or otherwise; and no waiver
whatsoever  or  modification of the terms hereof shall be valid unless set forth
in  writing  by  the  Investor  and  then  only to the extent set forth therein.

     Section  9.     Representations  by  Baywood  International  and  Baywood
Acquisition.

          Each  of  Baywood  International  and  Baywood  Acquisition  hereby
represents  and  warrants  to  the  Investor  that  (a) it is a corporation duly
organized,  validly existing and in good standing under the laws of its state of
incorporation,  (b)  the  execution, delivery and performance by it of this Note
(i)  requires no action by or in respect of, consent or approval of or filing or
recording with, any governmental or regulatory body, instrumentality, authority,
agency  or  official or any other person or entity, (ii) does not conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default  under  or  result  in  any  violation  of, the terms of its articles or
certificate  of  incorporation or its By-laws, (iii) subject to the execution of
the  Subordination  Agreement described below, will not result in a violation or
breach of (or give rise to any right of termination, revocation, cancellation or
acceleration  under  or increased payments under), or constitute a default (with
or  without  due  notice  or  lapse  of  time  or  both)  under,  or


                                        5
<PAGE>
result  in  the  creation of any lien, mortgage, charge, encumbrance or security
interest  of  any  kind  upon  any  of its properties or assets under any of the
terms,  conditions  or  provisions  of  any  note,  bond,  mortgage,  indenture,
contract, agreement, obligation, instrument, offer, commitment, understanding or
other arrangement or of any license, waiver, exemption, order, franchise, permit
or concession to which it is a party or by which any of its properties or assets
may  be  bound,  and  (iv)  does not conflict with, or result in a breach of the
terms,  conditions  or provisions of, or constitute a default under or result in
any  violation of, any judgment, order, decree, statute, law, regulation or rule
applicable to it, any applicable law, rule, regulation, order, writ, judgment or
decree  of  any  court  or  governmental  or  regularity  body, instrumentality,
authority, agency, or official or any agreement, document or instrument to which
it  is  a  party  or by which it or any of its property or assets is bound or to
which  it  or  any  of  its  property  or  assets  is subject, and (c) this Note
constitutes  the  legal,  valid  and  binding  obligation  of  each  of  Baywood
International  and  Baywood  Acquisition  and  is  enforceable  against  it  in
accordance  with  its terms, except as such enforceability may be limited by (i)
applicable  bankruptcy,  insolvency or similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether  such  enforceability  is  considered in a proceeding equity or at law.)

     Section  10.     Ranking.

          This  Note  is  a  subordinated  and junior in right of payment to the
Company's  indebtedness  to  Vineyard  Bank  N.A.  ("VINEYARD"),  pursuant  to a
Subordination Agreement among the Company, the Investor and Vineyard and entered
into  concurrent  with  the  issuance  of  this  Note.

     Section  11.     Amendments.

          This  Note  may  not be amended without the express written consent of
both  Baywood  International  and  the  Investor.

     Section  12.     Governing  Law.

          All  questions  concerning the construction, validity, enforcement and
interpretation  of  this Note shall be governed by and construed and enforced in
accordance  with  the  internal laws of the State of New York, without regard to
the  principles  of  conflicts of law thereof.  Each party agrees that all legal
proceedings  concerning  the  interpretations,  enforcement  and  defense of the
transactions  contemplated  by  this  Note  shall  be commenced in the state and
federal  courts  sitting in the City of New York, Borough of Manhattan (the "NEW
YORK  COURTS").  Each  party  hereto hereby irrevocably submits to the exclusive
jurisdiction  of  the  New  York  Courts  for  the  adjudication  of any dispute
hereunder  or in connection herewith or with any transaction contemplated hereby
or  discussed  herein  (including with respect to the enforcement of this Note),
and  hereby  irrevocably waives, and agrees not to assert in any suit, action or
proceeding,  any  claim that it is not personally subject to the jurisdiction of
any  such  court, or such New York Courts are improper or inconvenient venue for
such  proceeding.  Each  party  hereby  irrevocably  waives  personal service of
process  and  consents  to  process  being  served  in  any such suit, action or
proceeding  by  mailing  a  copy  thereof  via  registered  or certified mail or
overnight  delivery  (with evidence of delivery) to such party at the address in
effect  for  notices  to  it  under this Note and agrees that such service shall
constitute  good  and sufficient service of process and notice thereof.  Nothing
contained  herein  shall  be  deemed  to  limit  in  any  way  any


                                        6
<PAGE>
right to serve process in any manner permitted by law.  Each party hereto hereby
irrevocably  waives,  to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this  Note  or  the  transactions  contemplated  hereby.

     Section  13.     Successors  and  Assigns.

          The  rights and obligations of the Company and the Investor under this
Note  shall  be  binding  upon  and  benefit  the  successors,  assigns,  heirs,
administrators  and  transferees of the parties.  Notwithstanding the foregoing,
neither  this Note nor any of the rights, interests or obligations hereunder may
be  assigned,  by  operation  of  law  or otherwise, in whole or in part, by the
Company,  without  the  prior  written  consent  of  the  Investor.

     Section  14.     Notices.

          All  notices,  requests, demands and other communications to any party
hereunder  shall  be  in writing and shall be given to such party at its address
set  forth  below  or  such other address as such party may hereafter specify by
notice  to  the  other  party  listed  below:

          (a)     If to the Company:    Baywood International, Inc.
                                        14950 North 83rd Plaza
                                        Suite 1
                                        Scottsdale, Arizona 85260
                                        Attention: President

          (b)     If to the Investor:   O. Lee Tawes, III
                                        c/o Northeast Securities, Inc.
                                        100 Wall Street, NY, NY 10005

Each such notice, request, demand or other communication shall be effective when
delivered  at  the  address  specified in this Section 14.  Further, any notice,
request,  demand  or  other  communication  to  either  Baywood International or
Baywood  Acquisition,  or  both  of them, shall be effective if delivered to the
person  noted  in  clause  (a)  above.

     Section  15.     Entire  Agreement.

          This  Note constitutes the full and entire understanding and agreement
between  the  parties  with  regard  to  the  subjects  hereto  and  thereof.

     Section  16.     Headings.

          The  headings  used in this Note are used for convenience only and are
not  to  be  considered  in  construing  or  interpreting  this  Note.


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                                        7
<PAGE>

     IN WITNESS WHEREOF, each of Baywood International and Baywood Acquisition
has caused this Note to be duly executed by its duly authorized officer as of
the date indicated below.

                                        BAYWOOD INTERNATIONAL, INC.
Date:  March 30, 2007

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


                                        BAYWOOD ACQUISITION, INC.

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


                                        8
<PAGE>
                                                                     $500,000.00

                           BAYWOOD INTERNATIONAL, INC.
                            BAYWOOD ACQUISITION, INC.

                                   10.0% NOTE

     Section 1.     General.

          FOR  VALUE RECEIVED, BAYWOOD INTERNATIONAL, INC., a Nevada corporation
("BAYWOOD  INTERNATIONAL"),  and BAYWOOD ACQUISITION, INC., a Nevada corporation
and  a  wholly  owned subsidiary of Baywood International ("BAYWOOD ACQUISITION"
and, together with Baywood International, the "COMPANY"), jointly and severally,
hereby  promises to pay to the order of John Talty, or his successors or assigns
(the  "INVESTOR"),  the  principal sum of FIVE HUNDRED THOUSAND DOLLARS AND ZERO
CENTS  ($500,000.00)),  together  with  interest  thereon at a rate equal to ten
percent  (10%)  per annum (a) computed on the basis of the actual number of days
elapsed and a year of 360 days comprised of twelve 30 day months and (b) payable
monthly  in arrears by the Company to the Investor with the first payment of any
accrued  interest due and payable on April 30, 2007 and each subsequent interest
payment  due  and payable on the last day of each calendar month commencing with
May  2007.

          Except  as  earlier  redeemed  in  accordance  with  Section 2(a), (i)
$83,333.34  of  the  principal amount, together with any then unpaid and accrued
interest  and  other  amounts  payable  hereunder,  shall  be due and payable on
February  28,  2008  (the  "FIRST  STATED MATURITY DATE") and (ii) any remaining
unpaid  principal amount, together with any then unpaid and accrued interest and
other  amounts payable hereunder, shall be due and payable on demand by Investor
at  any time after February 28, 2009 (the "SECOND STATED MATURITY DATE"; each of
the  First  Stated Maturity Date and the Second Stated Maturity Date is referred
to  hereunder  as  a "MATURITY DATE"), provided that the entire unpaid principal
amount,  together with any unpaid and accrued interest and other amounts payable
hereunder,  shall  be  due  and  payable (1) upon the occurrence of a Designated
Event  (defined  below)  and  (2)  at any time as a result of, and following, an
Event  of  Default  in  accordance  with  Section  3.

          All  payments required to be made hereunder shall be made in such coin
or  currency  of the United States of America as at the time of payment shall be
legal  tender  therein  for  the  payment of public and private debts.  Interest
shall  accrue on the unpaid balance of the principal amount of this Note and any
due  and  unpaid  interest from and including the date hereof to, but excluding,
the  date  on  which  the principal amount of, as well as any accrued and unpaid
interest  and  other  amounts  under,  this  Note  are  paid  in  full.

          Concurrent  with  the  issuance of this Note, Baywood International is
issuing  to  the  Investor  five-year  warrants to purchase shares of its common
stock,  $0.001  par  value  per  share  (the  "COMMON  STOCK").

     Section  2.     Redemption  and  Repayment  upon  Designated  Event.

          (a)     Optional  Redemption  by  the  Company.


<PAGE>
               (i)     The  Company  may,  upon  the  closing  of  a  Qualified
     Financing  (defined  below),  redeem  this  Note,  in  whole  or  in  part,
     without  premium  or  penalty,  by  paying  to  the Investor, upon five (5)
     business  days'  prior  written  notice  to  the  Investor of its intent to
     redeem, of the date of such closing, an amount equal to one hundred percent
     (100%)  of  the  principal  amount  of  the  portion  of this Note being so
     redeemed,  plus  any accrued and unpaid interest on this Note and any other
     amounts  due  and  payable hereunder. For purposes of this Note, "QUALIFIED
     FINANCING"  shall  mean the issuance of equity securities and/or securities
     convertible  or  exercisable  into equity securities (other than in Baywood
     International's  private  placement  of  Units  pursuant to the Amended and
     Restated Confidential Private Placement Memorandum dated March 12, 2007 and
     the  concurrent  Note  Financing  and  Bank Financing defined and described
     therein)  in  which  gross  proceeds  to  Baywood  International  and  its
     affiliates  are  equal  to  or  greater  than  $4,000,000.

               (ii)     At  any time after March 1, 2008, the Company may redeem
     this  Note,  in  whole  or  in  part,  without  premium  or  penalty,  upon
     giving  to the Investor at least two (2) business days prior written notice
     of  intent  to  redeem,  by  paying  to the Investor an amount equal to one
     hundred  percent (100%) of the principal amount of the portion of this Note
     being  so  redeemed,  plus any accrued and unpaid interest on this Note and
     any  other  amounts  due  and  payable  hereunder.

          Except  as  set forth above, the Company shall have no right to prepay
this  Note,  in  whole  or  in  part,  prior  to  the  applicable Maturity Date.

          (b)     Repayment  upon  Occurrence  of  Designated  Event.  Upon  the
     occurrence  of  one  or  more  Designated  Events, the Company shall pay to
     the  Investor an amount equal to the entire outstanding principal amount of
     this  Note,  plus accrued and unpaid interest and any other amounts payable
     hereunder.  A  "DESIGNATED  EVENT"  shall  mean  any  of  the  following:

               (i)     any  acquisition  by  an  individual  or  legal entity or
     "group"  (as  described  in  Rule  13d-5(b)(1)  promulgated  under  the
     Securities  Exchange  Act  of  1934,  as  amended  (the "EXCHANGE ACT"), of
     effective  control  (whether  through  legal  or  beneficial  ownership, by
     contract  or  otherwise)  of in excess of fifty percent (50%) of the voting
     securities  of  Baywood  International;  or

               (ii)     any  merger  or  consolidation  or  merger  of  Baywood
     International  or  any  subsidiary  of  Baywood  International  in one or a
     series  of  related transactions with or into another entity as a result of
     which  Baywood International ceases to be exist or as a result of which the
     Common  Stock  ceases  to  be  a  class  of securities registered under the
     Exchange  Act,  other  than (1) a merger solely for the purpose of changing
     Baywood  International's  jurisdiction  of incorporation and resulting in a
     reclassification,  conversion  or  exchange of outstanding shares of Common
     Stock  solely into shares of common stock of the surviving entity and (2) a
     merger  or  consolidation  pursuant  to  which  holders  of  Baywood
     International's  capital  stock  immediately prior to such transaction have
     the  right  to  exercise,  directly or indirectly, 50% or more of the total
     voting  power of all shares of the capital stock entitled to vote generally
     in elections of directors of the continuing or surviving entity immediately
     after  giving  effect  to  such  issuance;  or


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<PAGE>
               (iii)     any sale, lease, license or other disposition of all or
     substantially  all  of  the  assets,  or  any substantial asset, of Baywood
     International  in  one  or  a  series  of  transactions;  or

               (iv)     any  execution  by Baywood International of an agreement
     to  which  Baywood  International  is  a  party  or  by  which it is bound,
     providing  for  any of the events set forth in clause (i), (ii) or (iii) of
     this  Section  2(b);  or

               (v)     any  liquidation,  dissolution  or  winding up of Baywood
     International  or  Baywood  Acquisition,  whether  involuntary  or
     involuntary.

     Section  3.     Defaults.

     The  occurrence  of  any  of  the  following  shall constitute an "EVENT OF
DEFAULT"  under  this  Note:

          (a)     The  Company  shall  fail to pay when due (i) any principal or
     interest  payment  hereof  or  (ii)  any  other  payment required under the
     terms  of  this Note, and such payment shall not have been made within five
     (5)  days  after  written  notice  thereof  is delivered to the Company; or

          (b)     The  Company  shall  fail  to  observe  or  perform  any other
     covenant,  obligation,  condition  or  agreement  contained  in  this  Note
     (other  than  those  specified  in  Section  3(a))  and  such failure shall
     continue  for  twenty  (20)  business  days after written notice thereof is
     delivered  to  the  Company;  or

          (c)     Any representation or warranty contained in this Note shall be
     false,  incorrect,  incomplete  or  misleading  in  any  material  respect
     when  made  or  furnished;  or

          (d)     Either  Baywood International or Baywood Acquisition shall (i)
     fail  to  make  any  payment  when  due  under  the  terms  of  any  bond,
     debenture, note, other evidence of indebtedness or preferred security to be
     paid  by it(excluding this Note, which default is addressed by Section 3(a)
     above,  but  including  any  other  evidence  of  indebtedness  of  Baywood
     International  and  Baywood  Acquisition  to the Investor) and such failure
     shall continue beyond any period of grace provided with respect thereto, or
     (ii)  default in the observance or performance of any other agreement, term
     or condition contained in any such bond, debenture, note, other evidence of
     indebtedness  or  preferred  security,  and  the  effect of such failure or
     default  set  forth  in (i) or (ii) above is to cause, or permit the holder
     thereof  to  cause,  amounts in an aggregate amount of One Hundred Thousand
     Dollars  ($100,000)  or more to become due prior to its stated due date; or

          (e)     Either  Baywood International or Baywood Acquisition shall (i)
     apply  for  or  consent  to  the  appointment  of  a  receiver,  trustee,
     liquidator  or  custodian  of itself or of all or a substantial part of its
     property,  (ii)  be  unable,  or admit in writing its inability, to pay its
     debts  generally  as  they  mature, (iii) make a general assignment for the
     benefit  of its or any of its creditors, (iv) be dissolved or liquidated in
     full  or in part, (v) commence a voluntary case or other proceeding seeking
     liquidation,  reorganization  or other relief with respect to itself or its
     debts  under  any  bankruptcy,  insolvency  or  other  similar  law  now or


                                        3
<PAGE>
     hereafter  in  effect  or  consent  to  any  such  relief  or  to  the
     appointment  of  or taking possession of its property by any official in an
     involuntary case or other proceeding commenced against it, or (vi) take any
     action  for  the  purpose  of  effecting  any  of  the  foregoing;  or

          (f)     Proceedings  for  the  appointment  of  a  receiver,  trustee,
     liquidator  or  custodian  of  Baywood  International  or  Baywood
     Acquisition  or of all or a substantial part of the property thereof, or an
     involuntary  case  or other proceedings seeking liquidation, reorganization
     or  other  relief  with  respect  to  Baywood  International  or  Baywood
     Acquisition  or the debts thereof under any bankruptcy, insolvency or other
     similar  law now or hereafter in effect shall be commenced and an order for
     relief  entered  or  such  proceeding  shall not be dismissed or discharged
     within  forty-five  (45)  days  of  commencement;  or

          (g)     One or more judgments for the payment of money in an amount in
     excess  of  One  Hundred  Thousand  Dollars  ($100,000)  in  the aggregate,
     outstanding  at  any  one  time,  shall  be  rendered  against  Baywood
     International or Baywood Acquisition and the same shall remain undischarged
     for  a  period  of  thirty  (30)  days  during which execution shall not be
     effectively  stayed,  or  any  judgment,  writ,  assessment,  warrant  of
     attachment,  or  execution  or  similar  process  shall be issued or levied
     against  a  substantial  part  of  the property of Baywood International or
     Baywood  Acquisition  and such judgment, writ, or similar process shall not
     be released, stayed, vacated or otherwise dismissed within thirty (30) days
     after  issue  or  levy.

     Section  4.     Rights  of  Investor  Upon  Default.

          Upon  the  occurrence or existence of any Event of Default (other than
an Event of Default referred to in Sections 3(f) or 3(g) hereof) and at any time
thereafter during the continuance of such Event of Default, the Investor may, by
written  notice  to  the Company, declare all outstanding amounts payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest  or  any  other  notice  of  any kind, all of which are hereby expressly
waived,  anything  contained  herein  to the contrary notwithstanding.  Upon the
occurrence  or  existence  of any Event of Default described in Sections 3(f) or
3(g)  hereof, immediately and without notice, all outstanding amounts payable by
the  Company  hereunder  shall automatically become immediately due and payable,
without  presentment,  demand,  protest  or any other notice of any kind, all of
which  are  hereby  expressly  waived, anything contained herein to the contrary
notwithstanding.  In  addition to the foregoing remedies, upon the occurrence or
existence  of  any  Event of Default, the Investor may exercise any other right,
power or remedy permitted to it by law, either by suit in equity or by action at
law,  or  both.

     Section  5.     Joint  and  Several  Obligations;  Defenses.

          Baywood  International  and  Baywood  Acquisition  are  jointly  and
severally  liable  to  the  Investor  with respect to all obligations under this
Note,  and  each  of  them  hereby  waives  any right to require the Investor to
proceed  against  either one of them.  The Investor may, in its sole discretion,
elect  to  proceed against Baywood International or Baywood Acquisition, or both
of  them, to enforce its rights hereunder.  The obligations of the Company under
this  Note  shall  not be subject to set-off, counterclaim or recoupment for any
reason.


                                        4
<PAGE>
     Section  6.     Exchange  or  Replacement  of  Notes.

          (a)     The  Investor  may,  at  its  option,  in  person  or  by duly
authorized attorney, surrender this Note for exchange, at the principal business
office  of  Baywood International, and receive in exchange therefore, a new Note
in  the  same  principal  amount as the unpaid principal amount of this Note and
bearing  interest at the same annual rate as this Note, each such new Note to be
dated  as of the date of this Note and to be in such principal amount as remains
unpaid  and  payable  to  such  person or persons, or order, as the Investor may
designate  in  writing.

          (b)     Upon  receipt  by  the  Company  of reasonable evidence of the
loss,  theft,  destruction, or mutilation of this Note and (in the case of loss,
theft  or  destruction)  of an indemnity reasonably satisfactory to it, and upon
surrender  and cancellation of this Note, if mutilated, the Company will deliver
a new Note of like tenor in lieu of this Note.  Any Note delivered in accordance
with  the  provisions  of  this  Section 6 shall be dated as of the date of this
Note.

     Section  7.     Attorneys'  and  Collection  Fees.

          In  the  event of any default or failure by the Company to comply with
any  covenant,  obligation,  condition  or  agreement  contained  in  this  Note
(including  an  Event  of  Default), the Company agrees to pay all of Investor's
reasonable  attorneys'  and  other  fees  and  expenses incurred with respect to
enforcing  Investor's  rights  hereunder.

     Section  8.     Waivers.

          The  Company  hereby waives presentment, demand for payment, notice of
dishonor,  notice of protest and all other notices or demands in connection with
the  delivery, acceptance, performance or default of this Note.  No delay by the
Investor in exercising any power or right hereunder shall operate as a waiver of
any  power  or  right,  nor shall any single or partial exercise of any power or
right  preclude  other  or further exercise thereof, or the exercise thereof, or
the  exercise  of any other power or right hereunder or otherwise; and no waiver
whatsoever  or  modification of the terms hereof shall be valid unless set forth
in  writing  by  the  Investor  and  then  only to the extent set forth therein.

     Section  9.     Representations  by  Baywood  International  and  Baywood
Acquisition.

          Each  of  Baywood  International  and  Baywood  Acquisition  hereby
represents  and  warrants  to  the  Investor  that  (a) it is a corporation duly
organized,  validly existing and in good standing under the laws of its state of
incorporation,  (b)  the  execution, delivery and performance by it of this Note
(i)  requires no action by or in respect of, consent or approval of or filing or
recording with, any governmental or regulatory body, instrumentality, authority,
agency  or  official or any other person or entity, (ii) does not conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default  under  or  result  in  any  violation  of, the terms of its articles or
certificate  of  incorporation or its By-laws, (iii) subject to the execution of
the  Subordination  Agreement described below, will not result in a violation or
breach of (or give rise to any right of termination, revocation, cancellation or
acceleration  under  or increased payments under), or constitute a default (with
or  without  due  notice  or  lapse  of  time  or  both)  under,  or


                                        5
<PAGE>
result  in  the  creation of any lien, mortgage, charge, encumbrance or security
interest  of  any  kind  upon  any  of its properties or assets under any of the
terms,  conditions  or  provisions  of  any  note,  bond,  mortgage,  indenture,
contract, agreement, obligation, instrument, offer, commitment, understanding or
other arrangement or of any license, waiver, exemption, order, franchise, permit
or concession to which it is a party or by which any of its properties or assets
may  be  bound,  and  (iv)  does not conflict with, or result in a breach of the
terms,  conditions  or provisions of, or constitute a default under or result in
any  violation of, any judgment, order, decree, statute, law, regulation or rule
applicable to it, any applicable law, rule, regulation, order, writ, judgment or
decree  of  any  court  or  governmental  or  regularity  body, instrumentality,
authority, agency, or official or any agreement, document or instrument to which
it  is  a  party  or by which it or any of its property or assets is bound or to
which  it  or  any  of  its  property  or  assets  is subject, and (c) this Note
constitutes  the  legal,  valid  and  binding  obligation  of  each  of  Baywood
International  and  Baywood  Acquisition  and  is  enforceable  against  it  in
accordance  with  its terms, except as such enforceability may be limited by (i)
applicable  bankruptcy,  insolvency or similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether  such  enforceability  is  considered in a proceeding equity or at law.)

     Section  10.     Ranking.

          This  Note  is  a  subordinated  and junior in right of payment to the
Company's  indebtedness  to  Vineyard  Bank  N.A.  ("VINEYARD"),  pursuant  to a
Subordination Agreement among the Company, the Investor and Vineyard and entered
into  concurrent  with  the  issuance  of  this  Note.

     Section  11.     Amendments.

          This  Note  may  not be amended without the express written consent of
both  Baywood  International  and  the  Investor.

     Section  12.     Governing  Law.

          All  questions  concerning the construction, validity, enforcement and
interpretation  of  this Note shall be governed by and construed and enforced in
accordance  with  the  internal laws of the State of New York, without regard to
the  principles  of  conflicts of law thereof.  Each party agrees that all legal
proceedings  concerning  the  interpretations,  enforcement  and  defense of the
transactions  contemplated  by  this  Note  shall  be commenced in the state and
federal  courts  sitting in the City of New York, Borough of Manhattan (the "NEW
YORK  COURTS").  Each  party  hereto hereby irrevocably submits to the exclusive
jurisdiction  of  the  New  York  Courts  for  the  adjudication  of any dispute
hereunder  or in connection herewith or with any transaction contemplated hereby
or  discussed  herein  (including with respect to the enforcement of this Note),
and  hereby  irrevocably waives, and agrees not to assert in any suit, action or
proceeding,  any  claim that it is not personally subject to the jurisdiction of
any  such  court, or such New York Courts are improper or inconvenient venue for
such  proceeding.  Each  party  hereby  irrevocably  waives  personal service of
process  and  consents  to  process  being  served  in  any such suit, action or
proceeding  by  mailing  a  copy  thereof  via  registered  or certified mail or
overnight  delivery  (with evidence of delivery) to such party at the address in
effect  for  notices  to  it  under this Note and agrees that such service shall
constitute  good  and sufficient service of process and notice thereof.  Nothing
contained  herein  shall  be  deemed  to  limit  in  any  way  any


                                        6
<PAGE>
right to serve process in any manner permitted by law.  Each party hereto hereby
irrevocably  waives,  to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this  Note  or  the  transactions  contemplated  hereby.

     Section  13.     Successors  and  Assigns.

          The  rights and obligations of the Company and the Investor under this
Note  shall  be  binding  upon  and  benefit  the  successors,  assigns,  heirs,
administrators  and  transferees of the parties.  Notwithstanding the foregoing,
neither  this Note nor any of the rights, interests or obligations hereunder may
be  assigned,  by  operation  of  law  or otherwise, in whole or in part, by the
Company,  without  the  prior  written  consent  of  the  Investor.

     Section  14.     Notices.

          All  notices,  requests, demands and other communications to any party
hereunder  shall  be  in writing and shall be given to such party at its address
set  forth  below  or  such other address as such party may hereafter specify by
notice  to  the  other  party  listed  below:

          (a)     If to the Company:    Baywood International, Inc.
                                        14950 North 83rd Plaza
                                        Suite 1
                                        Scottsdale, Arizona 85260
                                        Attention: President

          (b)     If to the Investor:   John Talty
                                        c/o Seix Advisors
                                        10 Upper Saddle River, NJ 07458

Each such notice, request, demand or other communication shall be effective when
delivered  at  the  address  specified in this Section 14.  Further, any notice,
request,  demand  or  other  communication  to  either  Baywood International or
Baywood  Acquisition,  or  both  of them, shall be effective if delivered to the
person  noted  in  clause  (a)  above.

     Section  15.     Entire  Agreement.

          This  Note constitutes the full and entire understanding and agreement
between  the  parties  with  regard  to  the  subjects  hereto  and  thereof.

     Section  16.     Headings.

          The  headings  used in this Note are used for convenience only and are
not  to  be  considered  in  construing  or  interpreting  this  Note.

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<PAGE>
     IN  WITNESS  WHEREOF, each of Baywood International and Baywood Acquisition
has  caused  this  Note to be duly executed by its duly authorized officer as of
the  date  indicated  below.

                                        BAYWOOD INTERNATIONAL, INC.
Date:  March 30, 2007

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


                                        BAYWOOD ACQUISITION, INC.

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


                                       8