Document:

CERTIFICATE OF DESIGNATION
                                       OF
               SERIES I 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
                                       OF
                           BAYWOOD INTERNATIONAL, INC.

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                       Pursuant to Section 78.1955 of the
                             Nevada Revised Statutes
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     Baywood International, Inc., a corporation organized and existing under the
laws of the State of Nevada (the "Company"), hereby certifies that the following
resolutions  were  adopted by the Board of Directors of the Company on March 27,
2007  pursuant  to authority of the Board of Directors as required by the Nevada
Revised  Statutes:

     RESOLVED, that pursuant to the authority granted to and vested in the Board
of  Directors  of  the  Company  (the  "Board  of  Directors" or the "Board") in
accordance with the provisions of its Certificate of Incorporation, the Board of
Directors  hereby  authorizes  a  series  of the Company's previously authorized
Preferred  Stock, par value $0.001 per share (the "Preferred Stock"), and hereby
states  the  designation  and  number  of shares, and fixes the relative rights,
preferences,  privileges,  powers  and  restrictions  thereof  as  follows:

     Series  I  8%  Cumulative  Convertible  Preferred  Stock:

                                    ARTICLE 1
                                   DEFINITIONS

     The  terms  defined  in this Article 1 whenever used in this Certificate of
Designation  have  the  following  respective  meanings:

     "Affiliate"  has  the meaning ascribed to such term in Rule 12b-2 under the
Exchange  Act.

     "Board"  or  "Board  of  Directors"  means  the  Board  of Directors of the
Company.

     "Business  Day" means a day other than Saturday, Sunday or any day on which
banks  located  in  the  State of New York are authorized or obligated to close.

     "Capital  Shares"  or "Capital Stock" means the Common Shares and any other
shares  of  any other class or series of capital stock, whether now or hereafter
authorized  and  however  designated, which have the right to participate in the
distribution  of  earnings  and  assets  (upon  dissolution,  liquidation  or
winding-up)  of  the  Company.

<PAGE>
     "Common Shares" or "Common Stock" means shares of common stock, par value $
0.001  per  share,  of  the  Company.

      "Conversion  Date" means any day on which (i) all or any portion of shares
of  the  Series  I  Preferred  Stock  are  converted and (ii) accrued and unpaid
dividends  are  converted  in lieu of cash in accordance with Section 6.1(a), in
accordance  with  the  provisions  hereof.

     "Conversion  Notice"  means a written notice of conversion substantially in
the  form  annexed  hereto  as  Annex  I.

     "Conversion  Price"  has  the  meaning  set  forth  in  Section  6.3.

     "Conversion  Price  Floor"  has the meaning set forth in Section 6.4(a)(i).

     "Conversion  Share"  means  a  share  of Common Stock issuable upon (i) the
conversion  of  any  Series I Preferred Stock and (ii) the conversion of accrued
and  unpaid  dividends  in  lieu  of  cash.

     "Company"  means Baywood International, Inc., a Nevada corporation, and any
successor  or  resulting  corporation  by  way of merger, consolidation, sale or
exchange  of  all  or  substantially  all of the Company's assets, or otherwise.

     "Current  Market Price" means on any date of determination the closing sale
price  (or  if no closing sale price is reported, the average of the closing bid
and closing ask prices or, if there is more than one in either case, the average
of  the  average  closing  bid  and closing ask prices) as reported in composite
transactions  for  the  principal United States securities exchange on which the
Common  Stock  is traded at such time or, if the Common Stock is not listed on a
United  States  national  or  regional  securities  exchange, as reported on the
Over-The-Counter  Bulletin  Board,  or, if not so reported, as determined by the
Board  in  its  good  faith  discretion.

     "Dividend  Period"  means  the period commencing on and including the Issue
Date  or,  if a dividend has previously been paid, the day after the immediately
preceding Dividend Payment Due Date, and ending on and including the immediately
subsequent  Dividend  Payment  Due  Date.

     "Dividend  Payment  Due  Date"  means  March  31, June 30, September 30 and
December  31  of  each  year.

     "Dividend  Rate"  means eight percent (8%) per annum, subject to adjustment
as  set  forth  in  Section  6.4(a)(i), computed on the basis of a 365-day year.

     "Exchange  Act"  means  the  Securities  Exchange  Act of 1934, as amended.

     "Issue  Date"  means, as to any share of Series I Preferred Stock, the date
of  issuance  of  such  share.

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<PAGE>
     "Liquidation  Event"  has  the  meaning  set  forth  in  Section  5.1.

     "Liquidation  Preference"  means,  with  respect to a share of the Series I
Preferred  Stock,  cash,  property or securities valued as to (i) securities, at
the  Current  Market  Price,  (ii)  property,  as  determined  in the good faith
discretion  of  the Board, and (ii) cash at the face value thereof, in an amount
equal  to the sum of (x) the Stated Value for such outstanding share of Series I
Preferred  Stock  (as  adjusted  for  any stock dividends, stock combinations or
stock  splits  with respect to such share) plus (y) the aggregate of all accrued
                                           ----
and  unpaid dividends on such share of Series I Preferred Stock through the date
of  the  payment  of  the  Liquidation  Preference.

     "Mandatory  Conversion  Date"  has the meaning set forth in Section 6.2(c).

     "Outstanding",  when used with reference to Common Shares or Capital Shares
(collectively,  "Shares"),  means,  on any date of determination, all issued and
outstanding  Shares,  and  includes  all  such  Shares  issuable  in  respect of
outstanding  scrip or any certificates representing fractional interests in such
Shares;  provided, however, that any such Shares directly or indirectly owned or
held by or for the account of the Company or any Subsidiary of the Company shall
not  be  deemed  "Outstanding"  for  purposes  hereof.

     "Person" means an individual, a corporation, a partnership, an association,
a limited liability company, an unincorporated business organization, a trust or
other entity or organization, and any government or political subdivision or any
agency  or  instrumentality  thereof.

     "Qualified  IPO"  means  a  firm  commitment  underwritten  public offering
pursuant  to  an  effective  registration  statement  under  the Securities Act,
covering  the  offer  and  sale  by the Company of Common Stock which results in
aggregate  gross  proceeds  to  the Company of not less than Ten Million Dollars
($10,000,000)  at a per share valuation at least equal to 250% of the Conversion
Price  in  effect  at  the  time  of  conversion.

     "SEC"  means  the  United  States  Securities  and  Exchange  Commission.

     "Securities  Act"  means  the  Securities  Act  of  1933,  as  amended.

     "Series  I Preferred Shares" or "Series I Preferred Stock" means the shares
of  Series  I  8%  Cumulative Convertible Preferred Stock of the Company or such
other  convertible  preferred stock of the Company as may be exchanged therefor.

     "Stated  Value"  has  the  meaning  set  forth  in  Article  2.

     "Subsidiary"  means  any  entity  of  which  securities  or other ownership
interests  having  ordinary  voting  power  to  elect a majority of the board of
directors  or  other  persons performing similar functions are owned directly or
indirectly  by  the  Company.

     "Warrants"  means  the Warrants for the Purchase of Shares of Common Stock,
issued  or  to  be issued by the Company to holders of Series I Preferred Stock,
and  any

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<PAGE>
warrants  issued as a consequence of the exercise or transfer of any warrants in
whole  or  in  part.

     All  references  to "cash" or "$" herein mean currency of the United States
of  America.

                                    ARTICLE 2
                             DESIGNATION AND AMOUNT

     The  designation  of this series, which consists of one million (1,000,000)
shares of Preferred Stock, shall be Series I 8% Cumulative Convertible Preferred
Stock  and  the  stated  value shall be Ten Dollars ($10) per share (the "Stated
Value").

                                    ARTICLE 3
                                      RANK

     The  Series  I Preferred Stock shall rank senior to any other Capital Stock
of  the  Company  and  shall  rank junior to all outstanding indebtedness of the
Company.

                                    ARTICLE 4
                                    DIVIDENDS

     4.1     Each  holder  of  the Series I Preferred Stock shall be entitled to
receive,  out of funds legally available for the payment of dividends, dividends
payable in cash at the Dividend Rate on the Stated Value of each share of Series
I  Preferred  Stock  on and as of each Dividend Payment Due Date with respect to
each  Dividend  Period.  Dividends  on  the  Series  I  Preferred Stock shall be
cumulative  from  the  date  of  issue,  whether or not declared for any reason,
including  if  such declaration is prohibited under any outstanding indebtedness
or  borrowings  of  the  Company  or  any  of  its  Subsidiaries,  or  any other
contractual  provision  binding  on  the Company or any of its Subsidiaries, and
whether  or  not there shall be funds legally available for the payment thereof.

     4.2     Each  dividend  shall be payable on each Dividend Payment Due Date,
commencing  June 30, 2007 or the Dividend Payment Due Date immediately following
the  Issue Date, as applicable, to the holders of record of shares of the Series
I  Preferred  Stock,  as  they appear on the stock records of the Company at the
close  of  business  on such record date, not more than thirty (30) days or less
than ten (10) days preceding the payment dates thereof, as shall be fixed by the
Board  of  Directors.  Accrued and unpaid dividends for any past Dividend Period
shall  be  paid  to holders of record upon the occurrence of a Liquidation Event
and  upon  conversion  of shares of Series I Preferred Stock, unless a holder of
record  chooses  to convert such accrued and unpaid dividends in lieu of cash in
accordance  with  Section  6.1(a).

                                    ARTICLE 5
                             LIQUIDATION PREFERENCE

     5.1     Upon the occurrence of any Liquidation Event, no distribution shall
be  made  to  the  holders  of any shares of Capital Stock of the Company unless
prior  thereto,

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the  holders  of  shares of Series I Preferred Stock, subject to this Article 5,
shall  have  received  the  Liquidation  Preference  with respect to each share.

For  purposes  hereof,  the term "Liquidation Event" means (i)(a) an acquisition
after  the date hereof by an individual or legal entity or "group" (as described
in  Rule  13d-5(b)(1)  promulgated  under the Exchange Act) of effective control
(whether  through legal or beneficial ownership of Capital Stock of the Company,
by  contract  or  otherwise)  of  in excess of fifty percent (50%) of the voting
securities of the Company, (b) the merger or consolidation of the Company or any
Subsidiary  in  one  or  a  series  of related transactions with or into another
entity as a result of which the Company  ceases to exist or as a result of which
the  Common  Stock  ceases  to  be  a  class  of securities registered under the
Exchange  Act,  other  than  (i) a merger solely for the purpose of changing the
jurisdiction  of  incorporation  of  the  Company  and  resulting  in  a
reclassification,  conversion  or exchange of outstanding shares of Common Stock
solely  into shares of common stock of the surviving entity, or (ii) a merger or
consolidation  pursuant  to  which  holders  of the Capital Stock of the Company
immediately  prior  to  such transaction have the right to exercise, directly or
indirectly,  fifty percent (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 person immediately after giving effect to such issuance,
(c)  the  sale,  lease, license or other disposition of all or substantially all
the assets or any substantial asset of the Company in one or a series of related
transactions,  or  (d) the execution by the Company of an agreement to which the
Company  is a party or by which it is bound, providing for any of the events set
forth  above  in  (a),  (b)  or  (c),  or (iii) any liquidation, dissolution, or
winding  up  of  the  Company,  whether  voluntary  or  involuntary.

     5.2     If,  upon  any Liquidation Event, the remaining assets and funds of
the  Company  legally  available  for  payments  of  the aggregate amount of all
Liquidation  Preferences  payable  in  respect of outstanding shares of Series I
Preferred  Stock  (after  payment  of  requisite  liquidation  distributions  or
payments  to  holders  of  shares of any class or series of Capital Stock of the
Company  with  a  liquidation preference senior to the Series I Preferred Stock)
shall  be  insufficient  to  make payment in full of all Liquidation Preferences
payable  with  respect  to  outstanding  shares  of Series I Preferred Stock and
shares  of  any  class  or  series  of  Capital Stock of the Company at the time
outstanding  with a liquidation preference on parity with the Series I Preferred
Stock  then all such remaining assets and funds of the Company legally available
for  distribution  shall  be distributed among the holders of Series I Preferred
Stock  at  the time outstanding and the holders of shares of any class or series
of  Capital  Stock  of  the  Company at the time outstanding, with a liquidation
preference  on  parity with the Series I Preferred Stock, pro rata in proportion
                                                          --- ----
to  the  full  amounts  to  which they would otherwise be respectively entitled.

     5.3     If,  upon  any Liquidation Event, the remaining assets and funds of
the  Company  legally  available  for  payments  of  the aggregate amount of all
Liquidation Preferences payable in respect of shares of Series I Preferred Stock
outstanding and shares of any class or series of Capital Stock of the Company on
parity with the Series I Preferred Stock outstanding (after payment of requisite
liquidation  distributions  or  payments  to  holders  of shares of any class or
series  of  Capital  Stock  of  the  Company  with

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<PAGE>
a  liquidation  preference  senior  to the Series I Preferred Stock) shall be in
excess  of  the  amounts  necessary  to  make payment in full of all Liquidation
Preferences  available  with respect to outstanding shares of Series I Preferred
Stock  and  outstanding  shares  of  any class or series of Capital Stock of the
Company on parity with the Series I Preferred Stock, then all such excess assets
and  funds remaining and legally available for distribution shall be distributed
among  the holders of shares of Series I Preferred Stock at the time outstanding
and  the  holders  of  the Common Stock, pro rata in proportion to the number of
                                         --- ----
shares  of  Common  Stock  then owned or into which shares of Series I Preferred
Stock  would  then  be  convertible.

                                    ARTICLE 6
                 CONVERSION OF PREFERRED STOCK; CONVERSION PRICE

     6.1     Voluntary  Conversion.
             ---------------------

          (a)     Each  share  of  Series I Preferred Stock may be converted, at
the  option  of  the holder thereof, at any time and from time to time into such
number  of  Common  Shares  as  shall be determined by dividing the Stated Value
plus,  if such holder chooses in his, her or its sole and absolute discretion to
convert  accrued  and  unpaid  dividends,  such  amount  of  accrued  and unpaid
dividends,  by  the  Conversion  Price (as hereinafter defined) in effect at the
time  of  conversion, and initially each share may be converted into two hundred
(200) Common Shares.  In the event a holder of record does not choose to convert
accrued  and  unpaid  dividends, such holder shall receive cash in the amount of
accrued  and  unpaid  dividends  in  accordance  with  Section  6.1(b).

          (b)     In  order  for a holder of Series I Preferred Stock to convert
such  shares  into  shares  of  Common  Stock,  such  holder shall surrender the
certificate or certificates representing such shares of Series I Preferred Stock
to  be converted, at the office of the transfer agent for the Series I Preferred
Stock  together  with  a  Conversion  Notice.  If  required  by  the  Company,
certificates  surrendered  for  conversion shall be endorsed or accompanied by a
written  instrument  or  instruments  of  transfer,  in form satisfactory to the
Company,  duly executed by the registered holder or its attorney duly authorized
in  writing.  As promptly as practicable after receipt of the Conversion Notice,
the  Company  shall  (i)  issue  the  Common  Stock  issued  upon  conversion in
accordance  with  the  provisions of this Article 6, and (ii) cause to be mailed
for  delivery  by  overnight  courier  to  such  holder  (x)  a  certificate  or
certificate(s)  representing  the number of Common Shares to which the Holder is
entitled  by virtue of such conversion, (y) cash, as provided in Section 6.6, in
respect  of any fraction of a Common Share issuable upon such conversion and (z)
if  such holder does not convert accrued and unpaid dividends in accordance with
Section  6.1(a),  cash  in  the amount of accrued and unpaid dividends as of the
Conversion  Date.  Such  conversion shall be deemed to have been effected at the
time at which the Conversion Notice indicates and at such time the rights of the
holder  of  the  Preferred  Stock with regard to the Series I Preferred Stock so
converted, as such, shall cease and the Person or Persons in whose name or names
the  Common  Stock  issued  upon conversion shall be issuable shall be deemed to
have  become  the  holder  or holders of record of the Common Shares represented
thereby and all voting and other rights associated with the beneficial ownership
of  such  Common Shares shall at such time vest with such Person or Persons. The
Conversion  Notice  shall  constitute  a  contract  between

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<PAGE>
the  holder and the Company, whereby the holder shall be deemed to subscribe for
the  number  of  Common  Shares  which  it will be entitled to receive upon such
conversion  and,  in  payment and satisfaction of such subscription (and for any
cash  adjustment  to which it is entitled pursuant to Section 6.6), to surrender
the  Series  I  Preferred  Stock  and  to release the Company from all liability
thereon.  No  cash  payment  aggregating less than $1.00 shall be required to be
given  unless  specifically  requested  by  the  holder.

     6.2     Mandatory Conversion.
             --------------------

          (a)     Each  share of Series I Preferred Stock then outstanding shall
automatically  be  converted  into  such  number  of  Common  Shares as shall be
determined by dividing the Stated Value by the Conversion Price in effect at the
time  of  conversion,  upon  the  closing  of  a  Qualified  IPO.

          (b)     At  any  time  after  January  1,  2008, in the event that the
Current  Market  Price  shall  have  exceeded five hundred percent (500%) of the
Conversion Price in effect in any consecutive 30-day trading period, the Company
may  (but  is  not  required  to) cause the mandatory conversion of the Series I
Preferred  Stock  into shares of Common Stock as shall be determined by dividing
the  Stated  Value  of  each share of Series I Preferred Stock by the Conversion
Price  in  effect at the time of conversion.  Such right may be exercised by the
Company  only upon written notice to the holders of the Series I Preferred Stock
delivered  within  sixty (60) days of the end of such consecutive 30-day trading
period.

          (c)     All  holders  of  record of shares of Series I Preferred Stock
will  be  given  at least thirty (30) days prior written notice of the date (the
"Mandatory  Conversion  Date")  fixed  and  the  place  designated for mandatory
conversion  of  all  shares of Series I Preferred Stock pursuant to this Section
6.2.  Such  notice  will  be  sent by first class mail, postage prepaid, to each
registered  holder  of  Series  I  Preferred Stock at such holder's address last
shown on the records of the transfer agent for the Series I Preferred Stock.  On
or  before  the Mandatory Conversion Date, each holder of the shares of Series I
Preferred  Stock  shall  surrender  its certificate or certificates for all such
shares  to  the  Company at the place designated in such notice.  If required by
the  Company,  certificates  surrendered  for  conversion  shall  be endorsed or
accompanied  by  written  instrument  or  instruments  of  transfer,  in  form
satisfactory  to  the  Company,  duly  executed  by the registered holder or its
attorney  duly  authorized  in  writing.  On  and after the Mandatory Conversion
Date,  all  rights  with  respect  to the Series I Preferred Stock so converted,
including  the  rights,  if any, to receive notices and to vote, will terminate,
except  only  the  rights  of  the  holders  thereof,  upon  surrender  of their
certificate  or certificates therefor, to receive certificates for the number of
shares  of  Common  Stock  into  which  such  Series  I Preferred Stock has been
converted, and payment of any accrued but unpaid dividends thereon.  As promptly
as  practicable,  the  Company  shall  (i)  issue  the  Common Stock issued upon
conversion  in  accordance with the provisions of this Article 6, and (ii) cause
to  be mailed for delivery by overnight courier to such holder (x) a certificate
or  certificate(s)  representing the number of Common Shares to which the Holder
is  entitled by virtue of such conversion, (y) cash, as provided in Section 6.6,
in  respect  of any fraction of a Common Share issuable upon such conversion and
(z)  if  such  holder does not choose to convert accrued and unpaid dividends in
accordance  with  Section  6.1(a),

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<PAGE>
cash  in  the  amount  of  accrued  and  unpaid  dividends  as  of the Mandatory
Conversion  Date.

     6.3     Conversion  Price.  The initial conversion price shall be $0.04 per
             -----------------
share of Common Stock, and shall be subject to adjustment from time to time, and
such  conversion  price  as  adjusted  shall  be  likewise  subject  to  further
adjustment,  as  hereinafter set forth.  The Term "Conversion Price" shall mean,
as  of  any  time,  the conversion price of the Series I Preferred Stock at that
time,  as  specified  in  this Section 6.3 in case no adjustment shall have been
required,  or  such conversion price as adjusted pursuant to Section 6.4, as the
case  may  be.

     6.4     Effect  on  Conversion  Price  of  Certain  Events.
             --------------------------------------------------

     (a)     (i)     The  Conversion  Price  and  the number of shares of Common
Stock issuable upon conversion of the Series I Preferred Stock, shall be subject
to adjustment, as follows: in the event that the Company shall at any time after
the  date  hereof (A) declare a dividend on the outstanding Common Stock payable
in  shares of its Capital Stock, (B) subdivide the outstanding Common Stock, (C)
combine (including by way of a reverse stock split) the outstanding Common Stock
into a smaller number of shares, or (D) issue any shares of its Capital Stock by
reclassification  of  the  Common  Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation),  then, in each case, the Conversion Price in effect at the time of
the  record  date for the determination of stockholders entitled to receive such
dividend  or  distribution  or  of  the  effective  date  of  such  subdivision,
combination,  or  reclassification  shall be adjusted so that it shall equal the
price  determined  by  multiplying  such  Conversion  Price  by  a fraction, the
numerator  of  which  shall  be the number of shares of Common Stock outstanding
immediately  prior  to  such  action,  and the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur and shall become effective at the close of business on such record date or
at  the close of business on the date immediately preceding such effective date,
as  applicable.  Notwithstanding  the foregoing, in the event any dividend shall
not  be  paid  in full within ten (10) days from the applicable Dividend Payment
Due  Date,  then  for each Dividend Period or portion thereof that such dividend
shall  not be paid in full, (x) the Conversion Price shall be reduced by $0.0025
(  of  1 cent); provided, however that in no event shall the Conversion Price be
reduced  below  $0.03  per share of Common Stock (the "Conversion Price Floor");
provided,  further  that  the  amount of each reduction and the Conversion Price
Floor  shall be adjusted on the same basis as and in accordance with adjustments
to  the  Conversion  Price  pursuant  to  clauses  (A), (B), (C) and (D) of this
Section  6.4(a)(i),  and  (y) the Dividend Rate shall be increased by fifty (50)
basis  points  (  of  1%); provided, however that in no event shall the Dividend
Rate  exceed  ten  percent  (10%)  per  annum.

          (ii)     (A)     If  at  any  time  or  from  time  to  time after the
original  issuance  date  of the Series I Preferred Stock, the Company issues or
sells,  or  is  deemed  by the express provisions of this subsection (i) to have
issued  or  sold,  Additional  Shares  of Common Stock (as defined in subsection
(ii)(D)  below),  other  than  as a result of, or in connection with, any action
referenced  in  Section  6.4(a)(i)  hereof,  for  an  Effective  Price

                                        8
<PAGE>
(as  defined  in  subsection  (a)(ii)(D)  below)  less  than  the then effective
Conversion  Price,  then  in  each  such case the then existing Conversion Price
shall  be  reduced,  as  of the opening of business on the date of such issue or
sale,  to  a price determined by multiplying the then effective Conversion Price
by  a  fraction  (i) the numerator of which shall be (A) the number of shares of
Common  Stock  deemed  outstanding  (as defined below) immediately prior to such
issue or sale, plus (B) the number of shares of Common Stock which the aggregate
consideration  received (as defined in subsection (a)(ii)(B)) by the Company for
the  total  number of Additional Shares of Common Stock so issued would purchase
at  such  Conversion Price and (ii) the denominator of which shall be the number
of  shares  of  Common  Stock  deemed outstanding (as defined below) immediately
prior to such issue or sale plus the total number of Additional Shares of Common
Stock  so  issued.  For  the  purposes  of the preceding sentence, the number of
shares  of  Common Stock deemed to be outstanding as of a given date shall equal
the  number of shares of Common Stock actually outstanding.  No adjustment shall
be  made to the Conversion Price in an amount less than one percent per share of
Series  I  Preferred  Stock.  Any  adjustment otherwise required by this Section
6.4(a)(ii)(A)  that  is  not  required  to be made due to the preceding sentence
shall  be  included  in  any  subsequent  adjustment  to  the  Conversion Price.

               (B)     For  the  purpose of making any adjustment required under
this Section 6.4(a)(ii), the consideration received by the Company for any issue
or  sale  of securities shall (1) to the extent it consists of cash, be computed
at  the  net  amount  of  cash  received  by  the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by  the  Company  in connection with such issue or sale but without deduction of
any  expenses  payable by the Company, (2) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined in
good  faith  by  the  Board of Directors, and (3) if Additional Shares of Common
Stock, Convertible Securities (as defined in subsection (a)(ii)(C)) or rights or
options  to  purchase  either  Additional  Shares of Common Stock or Convertible
Securities  are  issued or sold together with other stock or securities or other
assets  of the Company for a consideration which covers both, be computed as the
portion  of  the  consideration so received that may be reasonably determined in
good  faith  by the Board of Directors to be allocable to such Additional Shares
of  Common  Stock,  Convertible  Securities  or  rights  or  options.

               (C)     For  the  purpose  of  the adjustment required under this
Section 6.4(a)(ii), if the Company issues or sells (i) stock or other securities
convertible into Additional Shares of Common Stock other than Series I Preferred
Stock  (such  convertible  stock  or  securities  being  herein  referred  to as
"Convertible  Securities"),  or  (ii)  rights  or  options  for  the purchase of
Additional  Shares  of  Common  Stock  or  Convertible  Securities,  and  if the
Effective  Price  of  such  Additional  Shares  of Common Stock is less than the
Conversion  Price, the Company shall be deemed to have issued at the time of the
issuance  of such rights or options or Convertible Securities the maximum number
of  Additional  Shares  of  Common  Stock  issuable  upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount  equal  to the total amount of the consideration, if any, received by the
Company  for  the  issuance of such rights or options or Convertible Securities,
plus,  in  the  case  of  such  rights  or  options,  the  minimum  amounts  of
consideration,  if  any,  payable  to  the  Company  upon  the

                                        9
<PAGE>
exercise of such rights or options, plus, in the case of Convertible Securities,
the minimum amounts of consideration, if any, payable to the Company (other than
by  cancellation  of  liabilities  or  obligations evidenced by such Convertible
Securities)  upon  the conversion thereof; provided, however that if in the case
of  Convertible  Securities  the minimum amounts of such consideration cannot be
ascertained,  but  are a function of antidilution or similar protective clauses,
the  Company  shall  be  deemed  to  have  received  the  minimum  amounts  of
consideration  without  reference to such clauses; provided, further that if the
minimum  amount  of  consideration  payable  to the Company upon the exercise or
conversion  of rights, options or Convertible Securities is reduced over time or
on  the occurrence or non-occurrence of specified events other than by reason of
antidilution  adjustments,  the  Effective Price shall be recalculated using the
figure  to  which  such  minimum  amount  of consideration is reduced; provided,
                                                                       ---------
further  that if the minimum amount of consideration payable to the Company upon
-------
the  exercise or conversion of such rights, options or Convertible Securities is
subsequently  increased,  the  Effective Price shall be again recalculated using
the  increased  minimum  amount of consideration payable to the Company upon the
exercise  or  conversion  of  such rights, options or Convertible Securities. No
further  adjustment  of  the  Conversion Price, as adjusted upon the issuance of
such rights, options or Convertible Securities, shall be made as a result of the
actual issuance of Additional Shares of Common Stock on the exercise of any such
rights  or  options or the conversion of any such Convertible Securities. If any
such  rights  or  options  or  the  conversion privilege represented by any such
Convertible  Securities  shall  expire  without having been fully exercised, the
Conversion  Price  as  adjusted  upon  the  issuance  of such rights, options or
Convertible  Securities  shall be readjusted to the Conversion Price which would
have  been  in  effect  had  an  adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or  rights  of  conversion  of  such Convertible Securities, and such Additional
Shares  of  Common  Stock,  if  any,  were  issued or sold for the consideration
actually  received by the Company upon such exercise, plus the consideration, if
any,  actually  received  by  the Company for the granting of all such rights or
options,  whether  or not exercised, plus the consideration received for issuing
or  selling  the  Convertible  Securities  actually  converted,  plus  the
consideration,  if  any,  actually  received  by  the  Company  (other  than  by
cancellation  of  liabilities  or  obligations  evidenced  by  such  Convertible
Securities)  on  the  conversion  of  such  Convertible  Securities.

               (D)     "Additional Shares of Common Stock" shall mean all shares
of  Common  Stock  issued by the Company or deemed to be issued pursuant to this
Section 6.4(a)(ii), other than (1) shares of Common Stock issued upon conversion
of  the  Series  I  Preferred  Stock  or  exercise of the Warrants or in lieu of
accrued  but  unpaid  dividends in accordance with Section 6.1(a), (2) shares of
Common Stock issued as a result of, or in connection with, any action referenced
in  Section  6.4(a)(i)  hereof,  (3)  securities  issued upon the exercise of or
conversion of convertible securities, options or warrants issued and outstanding
on  the  date  of  this Certificate of Designation, provided, however, that such
securities  have  not  been  amended  since  the  date  of  this  Certificate of
Designation  to  increase  the  number  of  such  securities  or to decrease the
exercise  or  conversion  price  of  any  such  securities  (other  than  by the
antidilution  provisions thereof, if any), (4) issuances of equity securities to
employees,  consultants,  landlords  or  suppliers

                                       10
<PAGE>
of  or  to  the  Company  in  one  or more transactions approved by the Board of
Directors  or  in  mergers,  consolidations,  acquisitions,  joint  ventures  or
strategic  alliances  approved  by  the Board of Directors, and (5) issuances of
equity  securities  to  commercial banks or other lenders in connection with the
Company  obtaining  loan  financing  in one or more transactions approved by the
Board  of  Directors.  References  to  Common  Stock  in the subsections of this
clause  (D) above shall mean all shares of Common Stock issued by the Company or
deemed  to be issued pursuant to this Section 6.4(a)(ii).  The "Effective Price"
of  Additional  Shares  of  Common  Stock  shall mean the quotient determined by
dividing  the  total number of Additional Shares of Common Stock issued or sold,
or  deemed  to  have  been  issued  or  sold  by  the Company under this Section
6.4(a)(ii),  into  the  aggregate consideration received, or deemed to have been
received  by  the  Company  for such issue under this Section 6.4(a)(ii)(D), for
such  Additional  Shares  of  Common  Stock.

     (b)     If  the Company, at any time while any shares of Series I Preferred
Stock  are  outstanding, shall distribute to all or substantially all holders of
Common  Stock  (and  not to the holders of Series I Preferred Stock) evidence of
its  indebtedness  or  assets  (including  cash and cash dividends) or rights or
warrants  to  subscribe for or purchase any security other than the Common Stock
(which  shall  be  subject  to  Section  6.4(a)),  then  in  each  such case the
Conversion Price shall be adjusted by multiplying the Conversion Price in effect
immediately  prior  to  the  record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which (i) the denominator
shall be the Current Market Price per share of Common Stock determined as of the
record  date mentioned above and (ii) the numerator shall be such Current Market
Price per share of Common Stock on such record date less the then per share fair
market value at such record date of the portion of such evidence of indebtedness
or assets (including cash and cash dividends) or rights or warrants to subscribe
for  or  purchase  any  security  other  than  the  Common  Stock so distributed
applicable to one outstanding share of the Common Stock, which fair market value
shall  be reduced by the fair market value of consideration, if any, paid to the
Company by holders of Common Stock in exchange for such evidence of indebtedness
or assets or rights or warrants so distributed, in each case as such fair market
value  is  determined  by  the  Board of Directors of the Company in good faith.

     (c)     As  used herein, the Current Market Price per share of Common Stock
on  any  date  shall be deemed to be the average of the daily closing prices for
the 30 consecutive trading days immediately preceding the date in question.  The
closing  price  for  each day shall be the last reported sales price regular way
or, in case no such reported sale takes place on such day, the closing bid price
regular  way,  in  either  case  on  the  principal national securities exchange
(including, for purposes hereof, the Nasdaq National Market) on which the Common
Stock  is listed or admitted to trading or, if the Common Stock is not listed or
admitted  to  trading  on any national securities exchange, the highest reported
bid  price  for  the  Common  Stock  as furnished by the National Association of
Securities  Dealers,  Inc.  through  the  Nasdaq  SmallCap  Market  or a similar
organization  if  the  Nasdaq  SmallCap  Market  is  no  longer  reporting  such
information. If, on any such date, the Common Stock is not listed or admitted to
trading  on  any  national  securities  exchange and is not quoted on the Nasdaq
SmallCap  Market  or any similar organization, the Current Market Price shall be
deemed  to  be  the  fair  value  of  a  share  of

                                       11
<PAGE>
Common Stock on such date, as determined in good faith by the Board of Directors
of  the  Company,  absent  manifest  error.

     (d)     All  calculations  under  this  Section  6.4  shall  be made to the
nearest  cent  or  to  the nearest one-hundredth of a share, as the case may be.

     (e)     Whenever  there  shall be an adjustment as provided in this Section
6.4, the Company shall within 15 days thereafter cause written notice thereof to
be  sent  in  accordance  with Section 8.7 hereunder to the holder, which notice
shall  be  accompanied  by  an officer's certificate setting forth the number of
Conversion  Shares  issuable  and  the  Conversion  Price  thereof  after  such
adjustment  and  setting  forth  a  brief  statement of the facts requiring such
adjustment  and  the  computation  thereof, which officer's certificate shall be
conclusive  evidence  of  the correctness of any such adjustment absent manifest
error.
     (f)     The  Company  shall not be required to issue fractions of shares of
Common Stock or other Capital Stock of the Company upon the conversion of Series
I Preferred Stock. If any fraction of a share of Capital Stock would be issuable
on  the  conversion of Series I Preferred Stock (or specified portions thereof),
the Company shall purchase such fraction for an amount in cash equal to the same
fraction  of  the Current Market Price of such share of Common Stock on the date
of  conversion  of  Series  I  Preferred  Stock.

     6.6     Taxes.  The  Company  will pay all stock transfer taxes (other than
             -----
taxes based upon income) and other governmental charges that may be imposed with
respect  to  the  issue or delivery of shares of Common Stock upon conversion of
shares of Series I Preferred Stock, excluding any tax or other charge imposed in
connection  with  any  transfer  involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series I Preferred
Stock  so  converted  were  registered.

     6.7     Return.  All  shares  of  the  Series  I  Preferred Stock converted
             ------
pursuant  to  this Section 6, or otherwise acquired by the Company in any manner
whatsoever,  shall  be  returned  to  the  pool  of the Company's authorized but
unissued  shares  of undesignated preferred stock; and the Company may from time
to time take such appropriate corporate action as may be necessary to reduce the
number  of  authorized  shares  of  Series  I  Preferred  Stock  accordingly.

     6.8     Reserve.  The Company shall at all times reserve and keep available
             -------
out  of  its  authorized  but  unissued  shares  of Common Stock, solely for the
purpose of effecting the conversion of the Series I Preferred Stock, such number
of its shares of Common Stock as shall from time to time be sufficient to effect
the  conversion of all outstanding Series I Preferred Stock.  The Company shall,
from  time  to  time, subject to and in accordance with applicable law, increase
the  authorized  shares  of Common Stock if at any time the number of authorized
shares  of Common Stock remaining unissued shall not be sufficient to permit the
conversion  at  such  time  of  all  then  outstanding Series I Preferred Stock.

     6.9     Avoidance.  The  Company  shall  not  amend  this  Certificate  of
             ---------
Designation,  its  Articles  of Incorporation, its By-laws or participate in any
reorganization,  transfer  of

                                       12
<PAGE>
assets,  consolidation,  merger, dissolution, issue or sale of securities or any
other  voluntary  action  for  the  purpose  of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed by the
Company  pursuant to this Section 6, but shall at all times in good faith assist
in carrying out all such action as may be reasonably necessary or appropriate in
order  to  protect the rights of the holders of Series I Preferred Stock against
dilution  or  other  impairment  as  provided  herein.

                                    ARTICLE 7
                                  VOTING RIGHTS

     Except as otherwise provided by the Nevada Revised Statutes, each holder of
shares  of  Series  I  Preferred  Stock shall be entitled to the number of votes
equal to the number of shares of Common Stock into which such shares of Series I
Preferred  Stock  may  be  converted  at the record date for any vote, and shall
(except  as  otherwise  expressly  provided  herein  or as required by law) have
voting  rights  and  powers  equal to the voting rights and powers of the Common
Stock,  voting  together  with  the  Common Stock as a single class and shall be
entitled to notice of any shareholder's meeting in accordance with the bylaws of
the  Company.  Fractional  votes  shall  not,  however,  be  permitted  and  any
fractional voting rights resulting from the above formula (after aggregating all
shares  into which shares of Series I Preferred Stock held by each holder may be
converted)  shall  be  rounded  upward  to the nearest whole number.  Holders of
shares  of  Series  I  Preferred  Stock shall not have cumulative voting rights.

                                    ARTICLE 8
                                  MISCELLANEOUS

     8.1     Loss,  Theft,  Destruction  of  Preferred  Stock.  Upon  receipt of
             ------------------------------------------------
evidence  satisfactory  to  the  Company  of  the  loss,  theft,  destruction or
mutilation  of  a  certificate  or  certificates representing shares of Series I
Preferred  Stock  and,  in the case of any such loss, theft or destruction, upon
receipt  of indemnity or security reasonably satisfactory to the Company, or, in
the  case  of  any  such  mutilation,  upon  surrender  and cancellation of such
certificate(s), the Company shall make, issue and deliver, in lieu of such lost,
stolen,  destroyed  or mutilated certificate(s), new certificate(s) representing
shares  of  Series I Preferred Stock of like tenor. The Series I Preferred Stock
shall  be  held and owned upon the express condition that the provisions of this
Section  8.1  are  exclusive  with  respect  to  the  replacement  of mutilated,
destroyed,  lost  or  stolen certificate(s) and shall preclude any and all other
rights  and  remedies  notwithstanding  any law or statute existing or hereafter
enacted  to  the  contrary  with  respect  to  the  replacement  of  negotiable
instruments  or  other  securities  without  the  surrender  thereof.

     8.2     Who  Deemed  Absolute  Owner.  The  Company  may deem the Person in
             ----------------------------
whose  name  the  Series I Preferred Stock shall be registered upon the registry
books  of  the  Company  to  be,  and may treat it as, the absolute owner of the
Series  I  Preferred  Stock for the purpose of receiving payment of dividends on
the Series I Preferred Stock, for the conversion of the Series I Preferred Stock
and  for all other purposes, and the Company shall not be affected by any notice
to  the  contrary.  All  such  payments  and  such conversion shall be valid and
effectual  to  satisfy  and  discharge  the  liability  upon  the

                                       13
<PAGE>
Series  I  Preferred  Stock  to  the  extent  of  the sum or sums so paid or the
conversion  so  made.

     8.3     Permits,  Consents  and Approvals.  The Company will (a) obtain and
             ---------------------------------
keep  effective  any and all permits, consents and approvals of Federal or state
governmental  agencies  and  authorities  and make all filings under Federal and
state  securities  laws,  that  are  required in connection with the issuance of
Series  I  Preferred  Stock, the conversion of Series I Preferred Stock, and the
issuance  and delivery of the Conversion Shares issued upon conversion of Series
I  Preferred  Stock, and (b) have the Conversion Shares, upon their issuance and
eligibility  for listing, listed on each securities exchange on which the Common
Stock  are  then  listed.

     8.4     Subsequent  Transfer  Agent.      Promptly  upon the appointment of
             ----------------------------
any  subsequent  transfer  agent  of  the  Common Stock, or any other securities
issuable  upon  the  conversion  of  Series  I Preferred Stock, the Company will
deliver  to  the  holder  a statement setting forth the name and address of such
subsequent  transfer  agent.

     8.5     Withholding.  To the extent required by applicable law, the Company
             -----------
may  withhold  amounts for or on account of any taxes imposed or levied by or on
behalf of any taxing authority in the United States having jurisdiction over the
Company  from  any  payments  made  pursuant  to  the  Series I Preferred Stock.

     8.6     Amendments.  No  amendment, modification or waiver shall be binding
             ----------
or  effective  with respect to this Certificate of Designation without the prior
written  consent  of  the  holders of two-thirds of the Series I Preferred Stock
outstanding  at  the  time  such  action  is taken and provided, further that no
change in the terms hereof may be accomplished by merger or consolidation of the
Company  with  another corporation or entity unless the Company has obtained the
prior  written  consent  of  the holders of two-thirds of the Series I Preferred
Stock  then  outstanding.

     8.7      Headings.  The  headings  of  the  Articles  and  Sections of this
              --------
Certificate  of  Designation  are  inserted  for  convenience  only  and  do not
constitute  a  part  of  this  Certificate  of  Designation.

     8.8     Severability.  If any provision of this Certificate of Designation,
             ------------
or  the  application  thereof  to  any  person or entity or any circumstance, is
invalid  or  unenforceable,  (i)  a  suitable  and  equitable provision shall be
substituted  therefor  in  order  to  carry  out,  so  far  as  may be valid and
enforceable,  the intent and purpose of such invalid or unenforceable provision,
and (ii) the remainder of this Certificate of Designation and the application of
such provision to other persons, entities or circumstances shall not be affected
by  such  invalidity  or  unenforceability,  nor  shall  such  invalidity  or
unenforceability affect the validity or enforceability of such provision, or the
application  thereof,  in  any  other  jurisdiction.

     8.9     Notices.     All  notices  that are required or permitted hereunder
shall  be  in  writing  and shall be sufficient if personally delivered, sent by
facsimile  in  the  case of notice to the Company only, or sent by registered or
certified  mail  or  Federal  Express  or  other nationally recognized overnight
delivery  service.  Any  notices  shall  be  deemed

                                       14
<PAGE>
given  upon the earlier of the date when received at, the day when delivered via
facsimile  or  the third day after the date when sent by registered or certified
mail  or the day after the date when sent by Federal Express to, the address set
forth below, unless such address is changed by notice to the other party hereto:

     if to the Company:

     Baywood International, Inc.
     14950 North 83rd Place
     Suite 1
     Scottsdale, Arizona 85260
     Attention:  Chief Executive Officer
     Facsimile: (480) 483-2168

     if  to  the  holder:  As  set  forth  in  the  register  of  the  Company.

The  Company or the holder by notice to the other party may designate additional
or  different  addresses  as  shall  be  furnished  in  writing  by  such party.

                            [SIGNATURE PAGE FOLLOWS]

                                       15
<PAGE>
     IN  WITNESS WHEREOF, the Company has caused this Certificate of Designation
to  be  executed  by  its  duly  authorized  officers  as  of  March  30,  2007.

                                        BAYWOOD  INTERNATIONAL,  INC.

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

                                             BAYWOOD  ACQUISITION,  INC.

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

                                       16
<PAGE>
ANNEX I

                           FORM OF CONVERSION NOTICE

TO:  Baywood  International,  Inc.
     14950  North  83rd  Place,  Suite  1
     Scottsdale,  Arizona  85260

     The  undersigned owner of Series I 8%Cumulative Convertible Preferred Stock
(the  "Series  I  Preferred  Stock")  issued by Baywood International, Inc. (the
"Company")  hereby irrevocably exercises its option to convert __________ shares
of  the  Series  I Preferred Stock into shares of common stock, par value $0.001
per  share  ("Common Stock"), of the Company in accordance with the terms of the
Certificate  of  Designation.  The  undersigned  hereby instructs the Company to
convert  the  number  of  shares of the Series I Preferred Stock specified above
[and  $ _________ in  accrued  and unpaid dividends] into shares of Common Stock
issued  upon  conversion  in  accordance with the provisions of Article 6 of the
Certificate  of  Designation.  The  undersigned  directs  that  the Common Stock
issuable  and  certificates  therefore  deliverable  upon  conversion  and  the
recertificated  Series  I  Preferred  Stock,  if  any, not being surrendered for
conversion  hereby,  together  with  any  check in payment for fractional Common
Stock  [or  payment of dividends], be issued in the name of and delivered to the
undersigned  unless  a  different  name has been indicated below. So long as the
Series  I Preferred Stock shall have been surrendered for conversion hereby, the
conversion pursuant hereto shall be deemed to have been effected at the date and
time specified below, and at such time the rights of the undersigned as a holder
of  the  Series I Preferred Stock shall cease and the Person or Persons in whose
name or names the Common Stock issued upon conversion shall be issuable shall be
deemed  to  have  become  the  holder  or holders of record of the Common Shares
represented  thereby  and  all  voting  and  other  rights  associated  with the
beneficial  ownership  of  such  Common Shares shall at such time vest with such
Person  or  Persons.

All  capitalized  terms used and not defined herein have the respective meanings
assigned  to  them  in  the  Certificate  of  Designation.

Date  and  time:___________________________

___________________________
       Signature

Fill  in  for  registration  of  Series  I  Preferred  Stock:

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

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

----------------------------------------
Please  print  name  and  address  (including  zip  code)

                                       17BUSINESS 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

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