Document:

ex10_4.htm

    
      

    

    Exhibit
      10.4

    
      

      EMPLOYMENT
        AGREEMENT

      

      This
        EMPLOYMENT AGREEMENT (“Agreement”) is made as of March 30, 2007, by and between
        Baywood International, Inc., a Nevada corporation (the “Company”), and Thomas
        Pinkowski, an individual residing at 3703 Calle Fino Clarete San Clemente,
        California 92673 (“Employee”).

      

      W
        I T N E S S E T H:

      

      WHEREAS,
        Baywood Acquisition, Inc., a Nevada corporation and a wholly-owned subsidiary
        of
        the Company (“Buyer”), intends to purchase certain assets of Nutritional
        Specialties, Inc. d/b/a LifeTime® or LifeTime Vitamins®, a California
        corporation (“LifeTime”), pursuant to an Asset Purchase Agreement, of even date
        herewith, by and among the Company, Buyer, LifeTime and the LifeTime
        Representatives defined therein, including Employee (the “Asset Purchase
        Agreement”);

      

      WHEREAS,
        immediately prior to the closing of the transactions contemplated in the
        Asset
        Purchase Agreement (the “Closing”), Employee is employed as President of
        LifeTime;

      

      WHEREAS,
        this Agreement is to be effective upon the Closing;

      

      WHEREAS,
        the Company wishes to ensure that it will continue to have the benefits of
        Employee’s services after the Closing on the terms and conditions hereinafter
        set forth; and

      

      WHEREAS,
        Employee desires to work for the Company on the terms and conditions hereinafter
        set forth.

      

      NOW,
        THEREFORE, in consideration of the mutual covenants and agreements hereinafter
        set forth, the parties hereto hereby agree as follows:

      

      1.        
            Employment; Term.  The Company hereby
        employs Employee, and Employee hereby accepts employment with the Company,
        in
        accordance with and subject to the terms and conditions set forth
        herein.  The term of employment shall commence upon the Closing and
        shall continue for a period of five (5) years (the “Term”), unless earlier
        terminated in accordance with Section 5 hereof.

      

      2.         
           Employment.

      

      (a)           The
        Company hereby agrees to employ Employee as a Vice President and as President
        of
        Buyer for the Term.  Employee agrees to serve in such capacity and
        shall have primary responsibility for the operation of the business formerly
        conducted by LifeTime and such other duties, responsibilities and authority,
        commensurate with such position as shall be assigned to him by the Board
        of
        Directors (the “Board”) or the Chief Executive Officer of the
        Company.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b)           Employee
        shall devote Employee’s full business time and attention to Employee’s duties on
        the Company’s behalf.

      

      3.        
            Compensation.

      

      (a)           The
        Company shall pay Employee a base salary of Two Hundred Thousand Dollars
        ($200,000) per annum (the “Base Salary”), payable bi-weekly, in accordance with
        the Company’s then existing payroll practices and subject to all legally
        required or customary withholdings and other applicable
        taxes.  Executive shall be entitled to an increase in Base Salary of
        five percent (5%) per annum upon meeting performance standards reasonably
        established by the Board or otherwise based on performance as reasonably
        determined by the Board.

      

      (b)           Employee
        shall be entitled to receive an annual bonus award (“Annual Bonus”) based on the
        achievement of established financial goals as set forth
        below.  Employee’s Annual Bonus shall equal four percent (4%) of the
        net operating income of the Company for each fiscal year upon meeting
        performance standards reasonably established by the Board or otherwise based
        on
        performance as reasonably determined by the Board, commencing fiscal year
        2007.
        Notwithstanding the foregoing, the minimum Annual Bonus for fiscal year 2007
        shall be One Hundred Thousand Dollars ($100,000).  Subject to the
        terms of this Section 3(b), the Company shall have the right to offset against
        Employee’s Annual Bonus Twenty Thousand Dollars ($20,000) per annum for each
        year of the Term for a total amount of One Hundred Thousand Dollars ($100,000)
        in order for the Company to reimburse LifeTime the total principal amount
        payable under Employee’s Unsecured Promissory Note, dated December 10, 2004,
        payable to LifeTime in the principal amount of $100,000 (the
“Note”).  In the event this Agreement is terminated for any reason
        prior to the end of the Term, Employee shall promptly pay the Company the
        remaining principal balance of the Note.  Employee’s Annual Bonus
        shall be subject to review and approval each year by the Board.

      

      (c)           Upon
        the Closing, the Company shall grant to Employee, pursuant to the Company’s 2004
        Stock Option Plan (the “Plan”), options (the “Options”) to purchase five million
        (5,000,000) shares of Common Stock, par value $0.001 per share, of the Company
        (the “Common Stock”) at an exercise price equal to the Current Market Price (as
        hereinafter defined) on the date of grant.  The Options will vest as
        to 20% on the date of grant and as to an additional 20% on each anniversary
        date
        of the date of grant.  The Options will expire as to each vested
        portion if not exercised within five (5) years after the date of
        vesting.  Subject to the foregoing, the terms and provision of the
        Options shall be consistent with the Plan and all exhibits thereto.

      

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

      
        
          
          

        

        
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      (d)           In
        consideration of Employee’s agreements hereunder, the Company will issue and
        deliver to Employee promptly after the execution hereof, pursuant to the
        Plan, a
        restricted stock grant of two million (2,000,000) shares of Common Stock
        (the
“Restricted Shares”), on the following terms:

      

      (i)           The
        restrictions on Employee’s ownership of the Restricted Shares shall lapse
        on the following dates, provided Employee is an employee in good standing
        on
        each such date:

      

      
        
          	
                  400,000
                    shares

                	
                  December
                    31, 2007

                
	
                  400,000
                    shares

                	
                  December
                    31, 2008

                
	
                  400,000
                    shares

                	
                  December
                    31, 2009

                
	
                  400,000
                    shares

                	
                  December
                    31, 2010

                
	
                  400,000
                    shares

                	
                   December
                    31, 2011;

                

        

      

      

      (ii)           From
        and after the date of issuance,   but subject to the terms and
        conditions set forth in the agreement relating to the grant of the Restricted
        Shares, Employee shall have rights as a stockholder of the Company, including,
        but not limited to, voting rights, the right to receive dividends and the
        right
        to participate in any capital adjustment applicable to all holders of Common
        Stock (but not the right of an owner to sell or otherwise receive the value
        of
        the Restricted Shares); provided, however, that a distribution with
        respect to shares of Common Stock, other than a distribution in cash, shall
        be
        deposited with the Company and shall be subject to the same restrictions
        as the
        shares of Common Stock with respect to which such distribution was made;
        and

      

      (iii)           In
        all other respects the Restricted Shares shall be subject to the restrictions,
        terms and conditions of the Plan and the agreement relating to the grant
        of the
        Restricted Shares.

      

      4.      
              Benefits.

      

      (a)           The
        Company agrees to reimburse Employee for all reasonable out-of-pocket business
        expenses incurred by Employee in the normal course of business in connection
        with the performance of Employee’s duties under this Agreement in accordance
        with the Company’s policy as it may be amended from time to time.  The
        Company shall make such reimbursements within a reasonable amount of time
        after
        submission by Employee of vouchers, receipts, credit card bills or other
        documentation in accordance with the Company’s then applicable policies and
        procedures.  In addition, the Company shall pay Employee’s monthly
        business-related cellular telephone bill and business-related home high-speed
        Internet access bill.

      

      (b)           Employee
        shall be entitled to participate in any and all medical insurance, group
        health
        care programs, disability insurance, pension and other benefit plans which
        are
        made generally available by the Company to other similarly situated senior
        level
        employees of the Company performing similar functions as
        Employee.  The Company, in its sole discretion, may at any time amend
        or terminate its benefit plans or programs.

      
        
          
          

        

        
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      (c)           Employee
        shall receive an automobile allowance of Nine Hundred Dollars ($900) per
        month.

      

      (d)           The
        Company shall maintain, at its expense, key man life insurance (the “Policy”) on
        the life of Employee for the benefit of the Company with a benefit of Five
        Million Dollars ($5,000,000).  Employee’s signature to this Agreement
        constitutes Employee’s written consent to being insured under the Policy and
        that the Company may continue such life insurance coverage after Employee’s
        employment with the Company terminates, regardless of the cause of such
        termination.  Employee shall make all necessary applications, submit
        to physical examinations and otherwise cooperate with the Company with respect
        to the purchase of the Policy.

      

      (e)           The
        Company shall match Employee’s contributions, if any, made to the Company’s
        401(k) plan, dollar for dollar, up to Ten Thousand Dollars ($10,000) per
        annum.

      

      (f)           Employee
        shall be entitled to three (3) weeks paid vacation per annum, at a time or
        times
        to be determined in consultation with the Chief Executive Officer of the
        Company.  Vacation not taken or used shall be deferred or paid in cash
        to the extent, if at all, consistent with the Company’s employment polices in
        effect from time to time.

      

      (g)           Employee
        shall be entitled to such other benefits as are generally available to other
        similarly situated senior level employees of the Company performing similar
        functions as Employee.

      

      5.     
              Termination.  Employee’s
        employment hereunder may be terminated under the following
        circumstances:

      

      (a)           Death.  Employee’s
        employment hereunder shall terminate immediately upon Employee’s
        death.

      

      (b)           Disability.  The
        Company may terminate Employee’s employment hereunder at any time after Employee
        becomes “Disabled.”  For purposes of this Agreement, Employee shall be
“Disabled” upon the earlier of (i) the date Employee becomes entitled to receive
        disability benefits under the Company’s long-term disability plan or (ii)
        Employee’s inability to perform the essential functions of the duties and
        responsibilities contemplated under this Agreement for a period of more than
        ninety (90) consecutive days or for more than one hundred twenty (120) days
        in
        any 270-day period due to physical or mental incapacity or impairment, as
        determined in the reasonable judgment of a physician licensed in the State
        of
        California, selected by the Company.  Such termination shall become
        effective five (5) business days after the Company gives written notice of
        such
        termination to Employee or to his legal representative, in accordance with
        Section 9 hereof.

      
        
          
          

        

        
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      (c)           Termination
        by the Company without Cause.  The Company may terminate
        Employee’s employment hereunder without Cause (as hereinafter defined) at any
        time after providing written notice to Employee.

      

      (d)           Termination
        by the Company for Cause.  The Company may terminate Employee’s
        employment hereunder for Cause at any time after providing written notice
        to
        Employee, which notice shall provide in reasonable detail the reason(s) for
        such
        termination.  For purposes of this Agreement, “Cause” shall mean any
        of the following: (i) Employee’s willful or intentional failure or refusal to
        perform or observe any of Employee’s significant duties, responsibilities or
        obligations set forth in, or as contemplated under, this Agreement where
        such
        failure or refusal shall not have ceased or been remedied within thirty (30)
        days following written warning from the Company, provided that such obligation
        to provide written warning and the related right to cure shall not apply
        to (x)
        such matters as are not curable, or (y) repeated violations of this clause
        (i);
        (ii) acts or omissions by Employee involving Employee’s gross negligence related
        to the discharge of Employee’s duties; (iii) any act or failure to act by
        Employee constituting fraud or involving a knowing, willful or intentional
        misrepresentation, theft, embezzlement, dishonesty or moral turpitude
        (collectively, “Fraud”); (iv) conviction of (or a plea of
nolocontendere to) an offense which is a felony in the
        jurisdiction involved or which is a misdemeanor in the jurisdiction involved
        but
        which involves Fraud; (v) any willful or intentional act or omission by Employee
        which is intended to or which materially injures the reputation, business
        or
        business relationships of the Company, or Employee’s reputation or business
        relationships; (vi) alcoholism, drug abuse or other substance abuse having
        a
        material adverse effect on the performance of Employee’s duties hereunder; or
        (vii) Employee’s willful or intentional failure or refusal to comply with any
        reasonable and lawful request or direction of the Company not contrary to
        the
        provisions of this Agreement, where such failure or refusal shall not have
        ceased or been remedied within thirty (30) days following written warning
        from
        the Company, provided that such obligation to provide written warning and
        the
        related right to cure shall not apply to (x) such matters as are not curable,
        or
        (y) repeated violations of this clause (vii).

      

      (e)           Termination
        by Employee for Good Reason.  Employee may terminate Employee’s
        employment hereunder at any time for either of the following reasons (a
        termination for “Good Reason”):  (i) the Company’s breach of any
        material provision of this Agreement, which shall continue unremedied for
        thirty
        (30) days after written notice by Employee to the Company, or (ii)  if
        Employee is relieved by the Company of primary responsibility for the operations
        of the  business formerly conducted by LifeTime, except (x) for Cause,
        or (y) if Employee is given other duties of substantially the same
        responsibility and importance to the Company.

      

      (f)           Other
        Termination by Employee.  Employee may terminate Employee’s
        employment hereunder at any time, other than for Good Reason, after providing
        thirty (30) days-prior written notice to the Company.

      
        
          
          

        

        
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      6.      
              Compensation Following Termination Prior
        to the End of the Term.  In the event that Employee’s employment
        hereunder is terminated prior to the end of the Term, Employee shall be entitled
        only to the following compensation and benefits upon such
        termination:

      

      (a)           Termination
        by Reason of Death or Disability.  In the event that Employee’s
        employment is terminated by reason of Employee’s death or Disability,
        respectively, the Company shall pay the following amounts to Employee (or
        Employee’s spouse or estate, as applicable):

      

      (i)           Any
        accrued but unpaid Base Salary (as determined pursuant to Section 3(a) hereof)
        for services rendered to the date of termination.

      

      (ii)           Any
        accrued but unpaid expenses required to be reimbursed pursuant to Section
        4(a)
        hereof.

      

      (iii)           A
        pro rata share, based on the portion of the fiscal year in which Employee
        was
        employed at the time of his death or Disability, of the Annual Bonus to which
        Employee would have been entitled had Employee remained employed by the Company
        through the end of the then current fiscal year (as determined pursuant to
        Section 3(b) hereof).  Such amount shall be paid as soon as reasonably
        practicable following the calculation thereof at the end of such fiscal
        year.

      

      Except
        as
        otherwise specifically provided herein, in the event Employee’s employment is
        terminated pursuant to this Section 6(a), the benefits to which Employee
        may be
        entitled upon such termination pursuant to the plans, programs and arrangements
        referred to in Section 4(b) hereof shall be determined and paid in accordance
        with the terms of such plans, programs and arrangements.

      

      (b)           Termination
        by the Company for Cause or by Employee without Good Reason.  In
        the event that Employee’s employment hereunder is terminated by the Company for
        Cause or by Employee without Good Reason, the Company shall pay the following
        amounts to Employee:

      

      (i)           Any
        accrued but unpaid Base Salary (as determined pursuant to Section 3(a) hereof)
        for services rendered to the date of termination.

      

      (ii)           Any
        accrued but unpaid expenses required to be reimbursed pursuant to Section
        4(a)
        hereof.

      

      (c)           Termination
        by the Company Without Cause or by Employee for Good Reason.  (A)
        In the event that Employee’s employment hereunder is terminated by the Company
        without Cause or by Employee for Good Reason, the Company shall pay the
        following amounts to Employee:

      
        
          
          

        

        
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      (i)           Any
        accrued but unpaid Base Salary (as determined pursuant to Section 3(a) hereof)
        for services rendered to the date of termination.

      

      (ii)           Any
        accrued but unpaid expenses required to be reimbursed pursuant to Section
        4(a)
        hereof.

      

      (iii)           Base
        Salary for a period of twelve (12) months from the date of
        termination.

      

      (iv)           A
        pro rata share, based on such period of the fiscal year in which Employee
        was
        employed, of the Annual Bonus to which Employee would have been entitled
        had
        Employee remained employed by the Company through the end of the then current
        fiscal year (as determined pursuant to Section 3(b) hereof); provided,
        however, that Employee shall be entitled to the entire Annual Bonus to which
        Employee would have been entitled had Employee remained employed by the Company
        through the end of the then current fiscal year if, at the time of termination
        of Employee’s employment pursuant to this Section 6(c), Employee was employed by
        the Company for at least the first six (6) months of such fiscal
        year.   Such amount shall be paid as soon as reasonably
        practicable following the calculation thereof at the end of such fiscal
        year.

      

      (B)           Notwithstanding
        the foregoing, the Company shall have no obligation to make any further payments
        pursuant to Section 6(c)(A)(iii) or 6(c)(A)(iv) hereof in the event that
        Employee breaches any of his obligations set forth in Section 7
        hereof.

      

      (C)           Except
        as otherwise specifically provided herein, in the event Employee’s employment is
        terminated pursuant to this Section 6(c), the benefits to which Employee
        may be
        entitled upon such termination pursuant to the plans, programs and arrangements
        referred to in Section 4(b) hereof shall be determined and paid in accordance
        with the terms of such plans, programs and arrangements.

      

      
        	
                 

              	
                (d)

              	
                General.

              

      

      

      In
        the
        event that Employee’s employment is terminated for any reason, Employee shall
        cease to be an employee of the Company for all purposes, and, except as may
        be
        provided under this Agreement or under the terms of any incentive compensation,
        employee benefit or fringe benefit plan applicable to Employee at the time
        of
        Employee’s termination prior to the end of the Term, shall have no right to
        receive any other compensation, employee benefits or perquisites, or to
        participate in any other plan, arrangement or benefit, with respect to any
        future period after such termination.  In the event that Employee’s
        employment is terminated for any reason, the Company’s payment of salary and
        other amounts specifically provided for in the applicable previous paragraph
        of
        this Section 6 shall constitute complete satisfaction of all payment obligations
        of the Company to Employee pursuant to this Agreement, and Employee’s rights set
        out in this Section 6 shall constitute Employee’s sole and exclusive rights and
        remedies as a result of any actual or constructive termination of his employment
        hereunder.

      
        
          
          

        

        
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      7.       
             Non-Competition and Non-Solicitation;
        Non-Disclosure of Proprietary Information; Surrender of Records; Company
        Property.

      

      (a)           General.
        Employee acknowledges that the Company would not consummate the transactions
        contemplated by the Asset Purchase Agreement without the assurance that Employee
        will not engage in any of the activities prohibited by this Section 7 for
        the
        periods set forth below.  Employee agrees to restrict Employee’s
        actions as provided for in this Section 7.  Employee understands that
        the provisions of this Section 7 may limit Employee’s ability to earn a
        livelihood in a business similar to the business of the Company but nevertheless
        agrees and hereby acknowledges that the consideration provided under the
        Asset
        Purchase Agreement and this Agreement, including any amounts provided under
        Section 3 hereof, are sufficient to justify the restrictions contained in
        such
        provisions.  In consideration thereof, and in light of Employee’s
        education, skills and abilities, Employee agrees that Employee will not assert
        in any forum that the provisions of this Section 7 prevent Employee from
        earning
        a living or otherwise are void or unenforceable or should be held void or
        unenforceable.

      

      (b)           Non-Competition  Employee
        acknowledges and recognizes the highly competitive nature of the Company’s
        business and that Employee’s position with the Company and access to the
        Company’s confidential records and proprietary information renders Employee
        special and unique.  In consideration of payments made and to be made
        by the Company to Employee pursuant to this Agreement and the Asset Purchase
        Agreement (including, without limitation, pursuant to Section 3 hereof),
        Employee agrees that (A) during the Term  or (B) in the event
        Employee’s employment is terminated prior to the end of the Term, until the
        later of (x) three (3) years from the Closing Date (as defined below) or
        (y) one
        (1) year from the termination of this Agreement, Employee will not, directly
        or
        indirectly, in the United States or any other place in which the Company
        then
        does business, engage in, or be affiliated in any manner with any individual,
        partnership, venture, unincorporated association, organization, syndicate,
        corporation, limited liability company, or other entity, trust and trustee,
        executor, administrator or other legal or personal representative, or any
        government or agency or political subdivision thereof (any of the foregoing,
        a
“Person”) engaged in, the business of manufacturing, marketing, distributing
        and/or selling (A) neutraceutical products, including but not limited to
        dietary
        supplements and pharmaceuticals; (B) any other product categories the Company
        is
        actively manufacturing, marketing, distributing and/or selling as of the
        date of
        termination or expiration of this Agreement; or (C) any other product categories
        manufactured, marketed, distributed and/or sold by the Company during the
        Term.  As used in this Agreement, “Closing Date” means the date on
        which the Closing actually occurs.

      

      (c)           Non-Solicitation.  In
        further consideration of the payments made and to be made by the Company
        to
        Employee pursuant to this Agreement and the Asset Purchase Agreement (including,
        without limitation, pursuant to Section 3 hereof), Employee agrees that (A)
        during the Term  or (B) in the event Employee’s employment is
        terminated prior to the end of the Term, until the later of (x) three (3)
        years
        from the Closing Date or (y) one (1) year from the termination of this
        Agreement, Employee shall not, directly or indirectly, on his own behalf
        or on
        behalf of any Person, (A) advise or encourage any employee, agent, consultant,
        representative, customer, licensor, vendor or supplier of the Company to
        terminate his, her or its relationship with the Company, or (B) solicit or
        attempt to solicit or participate in the solicitation of or employ or otherwise
        engage any employee, agent, consultant or representative of the Company,
        or
        otherwise encourage any such person to become an employee, agent, representative
        or consultant of or to any other Person.

      
        
          
          

        

        
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      (d)           Extension
        of Restrictions.  Notwithstanding the foregoing, the Company shall
        have the right, but not the obligation, to require Employee to remain subject
        to
        the restrictions set forth in Sections 7(b) and 7(c) hereof for a period
        of one
        year following the expiration of the Term, in which case the Company shall
        pay
        Employee an amount equal to one-half of Employee’s Base Salary during the last
        year of his employment, payable in accordance with Section 3
        hereof.

      

      (e)           Proprietary
        Information.  Employee acknowledges that during the course of
        Employee’s employment with the Company Employee will necessarily have access to
        and make use of proprietary information and confidential records of the
        Company.  Employee covenants that Employee shall not, during the Term
        or any time thereafter (irrespective of the circumstances under which Employee’s
        employment with the Company terminates), directly or indirectly, use for
        Employee’s own purpose or for the benefit of any person or entity other than the
        Company, nor otherwise disclose, any proprietary information of which Employee
        has knowledge to any person or entity, unless such disclosure has been
        authorized in writing by the Company or is otherwise required by
        law.  Employee acknowledges and understands that the term “proprietary
        information” includes, but is not limited to, patents, copyrights and trade
        secrets, including, without limitation: (i) the proprietary software products,
        programs, applications and processes utilized by or on behalf of the Company
        to
        the extent such information is unique to the Company or is not known to others
        outside the Company; (ii) the name and/or address of any customer, licensor
        or
        vendor of the Company, to the extent confidential, or any proprietary
        information concerning the transactions or relations of any customer of the
        Company with the Company or any of its principals, directors, employees or
        agents; (iii) any proprietary information concerning any product, technology
        or
        procedure employed by or on behalf of the Company but not generally known
        to its
        customers or competitors, or under development by or being tested by or on
        behalf of the Company but not at the time offered generally to customers;
        (iv)
        any information which is generally regarded and treated as confidential or
        proprietary in any line of business engaged in by or on behalf of the Company;
        (v) information belonging to customers or affiliates of the Company or any
        other
        individual or entity which the Company has agreed to hold in confidence
        (provided that Employee has knowledge of the Company’s duty to hold such
        third-party information in confidence); and (vi) all written, graphic or
        other
        material relating to or containing any of the foregoing.  The term
“proprietary information” shall not include information generally available to
        or known by the public or in the industry, or information that is or becomes
        available to Employee on a non-confidential basis from a source other than
        the
        Company or the Company’s stockholders, principals, directors, officers,
        employees or agents (other than as a breach of any obligation of
        confidentiality).

      
        
          
          

        

        
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      (f)           Confidentiality
        and Surrender of Records.  Employee shall not, during the Term or
        any time thereafter (irrespective of the circumstances under which Employee’s
        employment with the Company terminates), except as required by law or as
        is
        necessary for the performance of Employee’s duties hereunder, directly or
        indirectly, publish, make known or in any fashion disclose any confidential
        records to, or permit any inspection or copying of confidential records by,
        any
        Person, and Employee shall not retain, and shall deliver promptly to the
        Company, any of the same following termination of Employee’s employment for any
        reason or upon request by the Company.  The term “confidential
        records” means all correspondence, memoranda, files, manuals, books, designs,
        sketches, lists, financial, operating or marketing records, magnetic tape,
        or
        electronic or other media or equipment for records of any kind which may
        be in
        Employee’s possession or under Employee’s control or accessible to Employee
        which may contain any proprietary information.  All confidential
        records shall be and remain the sole property of the Company during the Term
        and
        thereafter.

      

      (g)           Disclosure
        Required by Law.  In the event Employee is required by law or
        court order to disclose any proprietary information or confidential records
        of
        the Company, Employee shall provide the Company with prompt written notice
        so
        that the Company may seek a protective order or other appropriate remedy,
        and if
        such protective order or other remedy is not obtained, Employee shall furnish
        only that portion of the proprietary information that is legally required
        as
        determined by counsel to the Company.

      

      (h)           No
        Other Obligations.  Employee represents and warrants to the
        Company that Employee is not precluded or limited in Employee’s ability to
        undertake or perform the duties described herein by any contract, agreement,
        or
        restrictive covenant.  Employee covenants that Employee shall not
        employ the trade secrets or proprietary information of any other Person in
        connection with Employee’s employment by the Company.

      

      (i)           Confidentiality
        of this Agreement.  Employee agrees to keep confidential the terms
        of this Agreement, to the extent public disclosure is not made by the Company
        as
        provided below.  This provision does not prohibit Employee from
        providing this information as required by law or to his attorneys, accountants
        or business advisors for purposes of obtaining legal, tax or business advice;
        provided, however, that Employee shall be responsible for breaches of the
        confidentiality restrictions contained herein by such persons as if Employee
        had
        breached such restrictions.  The Company shall not disclose the terms
        of this Agreement except as necessary in the ordinary course of its business,
        as
        required by law or as required by any governmental or quasi-governmental
        entity
        or any self regulatory organization.

      

      (j)           Company
        Property.  All rights (if any) in reports, materials, inventions,
        processes, discoveries, improvements, modifications, know-how or trade secrets
        conceived, developed or otherwise made by Employee during the Term, alone
        or
        with others, and in any way relating to the present or future products or
        business of the Company (collectively, the “Developments”), shall be the sole
        property of the Company.  Employee agrees to, and hereby does, assign
        to the Company for no consideration all of Employee’s right, title and interest
        in and to all Developments.  Employee agrees that all such
        Developments that are copyrightable shall constitute works made for hire
        under
        the copyright laws of the United States and Employee hereby assigns to the
        Company all copyrights and other proprietary rights Employee may have in
        any
        such Developments to the extent that they might not be considered works made
        for
        hire.  Employee shall make and maintain adequate and current written
        records of all Developments, and shall disclose all Developments fully and
        in
        writing to the Company promptly after development of the same, and at any
        time
        upon request.

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (k)           Enforcement.  Employee
        acknowledges and agrees that, by virtue of Employee’s position, Employee’s
        services, and access to and use of proprietary information and confidential
        records, any violation by Employee of any of the undertakings contained in
        this
        Section 7 would cause the Company immediate, substantial and irreparable
        injury
        for which it has no adequate remedy at law.  Accordingly, Employee
        agrees that in the event of a breach by Employee of any said undertakings,
        the
        Company will be entitled to seek temporary and permanent injunctive relief
        in
        any court of competent jurisdiction (without the need to post any bond and
        without proving that damages would be inadequate).  Rights and
        remedies provided for in this Section 7 are cumulative and shall be in addition
        to rights and remedies otherwise available to the parties hereunder or under
        applicable law.

      

      8.     
              No Third Party Rights.  The
        parties do not intend the benefits of this Agreement to inure to any person
        or
        entity not a party to this Agreement (other than to the spouse or estate
        of
        Employee in the case of death or Disability of Employee, in which case such
        spouse or estate shall be entitled to only those rights set forth in Section
        6(a) hereof).  Notwithstanding anything contained in this Agreement,
        this Agreement shall not be construed as creating any right, claim or cause
        of
        action against any party by any person or entity not a party to this Agreement
        (other than the spouse or estate of Employee in the case of the death or
        Disability of Employee, in which case such spouse or estate shall be entitled
        to
        only those rights set forth in Section 6(a) hereof).

      

      9.     
              Notices.  Unless otherwise
        provided herein, any notice required or permitted under this Agreement shall
        be
        given in writing and shall be deemed to have been duly given upon personal
        delivery to the party to be notified or three (3) days after being mailed
        by
        United States certified or registered mail, postage prepaid, return receipt
        requested or one (1) day after being sent by Federal Express or other recognized
        overnight delivery to the following respective addresses, or at such other
        address as each may specify by notice to the other:

      

      Notice
        to
        the Company:

      

      Baywood
        International, Inc.

      14950
        North 83rd
        Place, Suite 1

      Scottsdale,
        Arizona 85260

      Attention:
        Neil Reithinger, President & CEO

      Facsimile:
        (480) 483-2168

      

      With
        a
        copy to:

      

      Meltzer,
        Lippe, Goldstein & Breitstone, LLP

      190
        Willis Avenue

      Mineola,
        New York  11501

      Attention:
        David I. Schaffer, Esq.

      Facsimile:
        (516) 747-0653

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      Notice
        to
        Employee:

      

      Thomas
        Pinkowski

      3703
        Calle Fino Clarete

      San
        Clemente, California 92673

      Facsimile:
        (949) 218-2524

      

      With
        a
        copy to:

      

      Stradling
        Yocca Carlson & Ruth

      660
        Newport Center Drive, Suite 1600

      Newport
        Beach, California 92660

      Attention:  Mark
        L. Skaist, Esq.

      Facsimile:
        (949) 823-5117

      

      10.           Assignability;
        Binding Effect.  This Agreement is a personal contract calling for
        the provision of unique services by Employee, and Employee’s obligations
        hereunder may not be sold, transferred, assigned, pledged or
        hypothecated.  In the event of any attempted assignment or transfer of
        obligations hereunder by Employee contrary to the provisions hereof, the
        Company
        will have no further liability for payments hereunder.  The rights and
        obligations of the Company hereunder will be binding upon and inure to the
        benefit of the successors and assigns of the Company.

      

      11.           Entire
        Agreement; Amendment; Waiver.  This Agreement constitutes the
        entire agreement between the parties hereto with respect to the subject matter
        hereof and supersedes all other prior agreements and understandings, both
        written and oral, between the parties with respect to the subject matter
        hereof.  This Agreement shall not be modified or amended except by a
        written instrument duly executed by each of the parties hereto.  Any
        waiver of any term or provision of this Agreement shall be in writing signed
        by
        the party charged with giving such waiver.  Waiver by either party
        hereto of any breach hereunder by the other party shall not operate as a
        waiver
        of any other breach, whether similar to or different from the breach
        waived.  No delay on the part of the Company or Employee in the
        exercise of any of their respective rights or remedies shall operate as a
        waiver
        thereof, and no single or partial exercise by the Company or Employee of
        any
        such right or remedy shall preclude other or further exercise
        thereof.

      

      12.           Severability.  If
        any term or provision of this Agreement shall be held to be invalid or
        unenforceable for any reason, such term or provision shall be ineffective
        to the
        extent of such invalidity or unenforceability without invalidating the remaining
        terms and provisions hereof, and this Agreement shall be construed as if
        such
        invalid or unenforceable term or provision had not been contained
        herein.

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      13.           Survivability.  The
        provisions of this Agreement, which by their terms call for performance
        subsequent to termination of Employee’s employment hereunder, or of this
        Agreement, shall survive such termination.

      

      14.           Counterparts
        and Headings.  This Agreement may be executed in any number of
        counterparts, each of which shall be deemed an original and all which together
        shall constitute one and the same instrument.  Facsimile signatures
        shall be given the same legal effect as original signatures.  All
        headings are inserted for convenience of reference only and shall not affect
        the
        meaning or interpretation of this Agreement.

      

      15.           Governing
        Law. This Agreement shall be construed in accordance with the internal laws
        of the State of Arizona, without regard to principles of conflicts of
        laws.

      

      16.           Waiver
        of Jury Trial.  Each party hereto irrevocably waives, to the
        fullest extent permitted by law, all rights to trial by jury in any action,
        proceeding or counterclaim (whether based upon contract, tort or otherwise)
        arising out of or relating to this Agreement or any of the transactions
        contemplated hereby.

      

       

      [Signature
        Page Follows]

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be
        duly executed and delivered as of the day and year first above
        written.

      

      

      
        
          	 	 	
                  BAYWOOD
                    INTERNATIONAL, INC.

                
	 	 	 
	 	 	 
	 	
                  By:

                	
                  /s/
                    Neil Reithinger

                
	 	 	
                  Name:
                    Neil Reithinger

                
	 	 	
                  Title:
                    President & C.E.O.

                
	 	 	 
	 	 	 
	 	 	
                  EMPLOYEE

                
	 	 	 
	 	 	 
	 	 	
                  /s/
                    Thomas Pinkowski

                
	 	 	
                  THOMAS
                    PINKOWSKI

                

        

      

       

    

     

    14ex10_5.htm

    
      

    

    Exhibit
      10.5

    
      

      

      MANUFACTURING
        AND SUPPLY AGREEMENT

      

      This
        Manufacturing and Supply Agreement (this “Agreement”) is effective as of
        the 30th day of March, 2007 (the “Effective Date”), by and between
        Baywood International, Inc., a Nevada corporation (“Customer”), and NHK
        Laboratories, Inc., a California corporation (“Supplier”).  In
        consideration of the mutual covenants contained herein and for other good
        and
        valuable consideration, the receipt and sufficiency of which are hereby
        acknowledged, the parties agree as follows:

      

      
        	
                1.

              	
                MANUFACTURE
                  OF PRODUCTS; ORDERS;
                  SHIPMENT

              

      

       

      1.1    Manufacture
        of Products.  Supplier agrees to manufacture for, and to
        sell and deliver to, Customer, such number of the products described on Appendix
        A, as the same may be amended from time to time by mutual agreement (the
        “Products”), and having the product specifications for such Products set
        forth on Appendix B, as the same may be amended from time to time by mutual
        agreement (the “Product Specifications”), as Customer may order pursuant
        to this Agreement.  Customer shall have no obligation to order any
        Products.  Supplier shall manufacture, handle, package, label and ship
        the Products in strict conformity with (a) all applicable Product
        Specifications and (b) all applicable laws and
        regulations.  Subject to the terms and conditions of this Agreement,
        Supplier shall be Customer’s exclusive supplier of the Products.

       

      1.2    Purchase
        Orders.  Customer shall order the Products by written
        purchase orders of Customer that shall specify (i) the quantity of the
        Products, (ii) the addresses to which the Products are to be delivered; and
        (iii) the shipment date for the Products.  Supplier shall accept
        all purchase orders that comply with the terms and conditions of this Agreement,
        and use commercially reasonable efforts to accept all other purchase
        orders.  All purchase orders and invoices for Products are subject to
        the terms and conditions of this Agreement, which terms and conditions shall
        supersede any and all conflicting terms and conditions on Customer’s order form
        in effect from time to time.  All orders by Customer shall be subject
        to Supplier's approval and acceptance, and no order shall be binding on Supplier
        until accepted in writing by a duly authorized officer or employee of
        Supplier.

       

      1.3    Shipment.  All
        Products delivered by Supplier shall be suitably packed and labeled for
        shipment. All shipments shall be F.C.A (as defined in Incoterms 2000) Supplier’s
        facilities.  Customer may change the delivery address for the Products
        ordered, at any time prior to shipment of such Products at no additional
        charge,
        provided that Customer shall reimburse Supplier for any additional storage
        or
        freight costs incurred as a result of any such change.  No early
        shipment of Products is permitted without Customer’s consent. Supplier shall
        promptly notify Customer in writing describing any delay in Product
        delivery.  Once approved and accepted, orders may be cancelled in
        whole or in part or deliveries deferred by Customer only with the prior written
        consent of Supplier and only upon such terms as will reimburse Supplier for
        any
        loss in connection therewith.  Customer shall pay a reasonable charge
        for such cancellation or delay which shall cover the expense of any direct
        and
        indirect commitments Supplier has made to any third party, including any
        of its
        suppliers, and further providing a reasonable allowance for overhead and
        profit.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                2.

              	
                PRICE
                  AND PAYMENT; RIGHT TO
                  MANUFACTURE

              

      

       

      2.1    Price
        and Payment.  The unit prices for the Products shall be
        as set forth in the applicable purchase order, and shall be in U.S. dollars,
        inclusive of all costs associated with Supplier’s manufacture, packaging and
        shipment of the Products.  Supplier shall issue invoices to Customer
        no sooner than the shipment date for such Products, and Customer shall pay
        all
        such invoices within forty-five (45) days of receipt of the invoice or the
        applicable Products, whichever is later.  In the event that Supplier’s
        invoices to Customer are not paid when due, Customer agrees to pay an amount
        equal to 1.5% of the invoice(s) total for each month past the due date on
        which
        payment was due.  Customer further agree to pay reasonable attorney’s
        fees and costs incurred in connection with any legal action to collect any
        invoice(s) not paid when due in which Supplier is the successful
        party.

       

      2.2    Right
        of Manufacture.  Subject to the terms of this Section
        2.2, Customer agrees to purchase the Products exclusively from Supplier as
        long
        as Supplier is not in default under this Agreement.  If Customer
        receives an offer from a Qualifying Third-Party (as defined below) to provide
        any of the Products at a per-item cost lower than that currently offered
        by
        Supplier (a “Third Party Offer”), Supplier shall have the right to match
        the terms of such Third Party Offer for a period of ten (10) days from
        Supplier’s receipt of the terms of such Third Party Offer from
        Customer.  In the event Supplier agrees to match the Third Party
        Offer, Customer and Supplier shall enter into an amendment to this Agreement
        to
        conform to the terms of the Third Party Offer, except for such terms which
        are
        less favorable to Customer.  If Supplier does not agree to match the
        Third Party Offer, Customer shall be free to enter into an agreement with
        such
        Qualifying Third Party to purchase the Product or Products in quantities
        and at
        the prices contained in the Third Party Offer and on payment terms no less
        favorable than those in the Third Party Offer, and this Agreement shall remain
        in full force and effect as to any other Products and purchases.  For
        purposes of this Agreement, “Qualifying Third Party” shall mean a contract
        manufacturer registered with the U.S. Food and Drug Administration and holding
        GMP certification.

       

      
        	
                3.

              	
                WARRANTY,
                  SERVICE AND TECHNICAL
                  SUPPORT

              

      

       

      3.1    Products
        Warranty.  Supplier hereby warrants and covenants that
        all Products, and all materials and components incorporated therein which
        are
        sourced or provided by Supplier, and supplied by Supplier under this Agreement
        shall:  (i) conform with all applicable Product Specifications and all
        applicable laws and regulations; (ii) be of good and merchantable quality,
        free
        from defects in materials and workmanship; (iii) be fit for their intended
        purposes; (iv) not be adulterated or misbranded in any way.  All
        Products covered by terms and conditions stated herein shall be subject to
        the
        standard manufacturing and commercial variations and practices of
        Supplier.  Products manufactured by Supplier may have permissible
        variations and deviations as stated in the USP24 and NF19 <1161> which
        states “...each unit shall be not less than 90% and not more than 110% of the
        theoretically calculated weight for each unit.”  Said permissible
        variations and/or deviations shall apply to net and gross weights of goods
        or
        products, and shall also apply to active ingredient
        potencies.  Supplier reserves the right to ship overages and underages
        of weight, length, size, and/or quantity in accordance with Suppliers’s standard
        practices, but not to exceed 10% of Customer’s original amount ordered under
        purchase order.  EXCEPT AS STATED IN THIS AGREEMENT, SUPPLIER IS
        PROVIDING NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND WHETHER STATUTORY
        OR OTHERWISE, WITH RESPECT TO THE PRODUCTS INCLUDING, BUT NOT LIMITED TO,
        ANY
        WARRANTIES ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE.  THIS
        SECTION 3 STATES THE ENTIRE LIABILITY OF SUPPLIER WITH RESPECT TO THE WARRANTY
        GIVEN HEREIN.

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      3.2           Inspection
        Period.  Within thirty (30) days from the date of receipt
        by Customer of any Products (the “Inspection Period”), Customer may
        reject and return to Supplier any Products which fail to meet the applicable
        Product Specifications (“Defective Products”), or all of a given lot of
        Products if the lot contains a statistically
        significant sample of Defective Products as determined by
        the application of the square root of lot size plus one sampling
        rule.  Unless otherwise agreed to in writing by Supplier, the Products
        covered hereunder may be inspected or tested by Customer only at the place
        of
        manufacture or at any qualified third party testing facility or at such other
        place or done in accordance with any reasonable conditions and rules specified
        by Supplier.  Customer further must notify Supplier of any claimed
        rejection of Products so tested by any reseller of Customer within ten (10)
        calendar days after their receipt of such reseller’s claim by
        Customer.  All analytical and/or physical test protocols must adhere
        to standards established by the United States Pharmacoepia 24 (hereinafter
        referred to as “USP24”) or higher, National Formulary 19 (hereinafter referred
        to as “NF19”) or higher and/or another standard which is agreed to in writing by
        Supplier.  Thereafter, Customer shall be deemed to have waived and
        further to be prohibited from asserting any rejection or seeking the return
        of
        any such goods or products.

      

      3.3           Replacement
        of Defective Products by Supplier.  In the case of such
        rejection during the Inspection Period, Supplier shall, at Customer’s option:
        (i) replace the Defective Products with new Products and ship the
        replacement Products to Customer, at Supplier’s expense, as soon as reasonably
        practicable following Supplier’s receipt of the Defective Products; or
        (ii) provide a full refund to Customer for such Defective
        Products.  All replacement Products furnished by Supplier pursuant to
        this Section 3.3 shall be at no charge to Customer, and Supplier shall bear,
        or
        promptly credit or reimburse Customer for, all shipping costs in connection
        therewith.  In addition to the foregoing, Supplier shall, at its sole
        expense, perform and complete a Root Cause Analysis within thirty (30) days
        after such Defective Products are identified.  Upon completion of each
        Root Cause Analysis, Supplier shall promptly implement a corrective action
        plan
        to prevent further Defective Products and shall communicate to Customer,
        in
        writing, the results of the Root Cause Analysis and the corresponding corrective
        action plan.

      

      3.4    Warranty
        Claim Disputes.  If Supplier determines that a Product
        returned, pursuant to Section 3.2 hereof is not a Defective Product, Supplier
        may notify Customer in writing of such determination (a “Warranty Claim
        Dispute”); provided, however, that a Warranty Claim Dispute
        must be received by Customer no later than thirty (30) days after the earlier
        of
        Supplier’s receipt of the returned Product or warranty claim
        report.  Each Warranty Claim Dispute shall contain all information
        necessary for Customer to evaluate its validity.  Warranty Claim
        Disputes containing insufficient information may be rejected by
        Customer.  Within thirty (30) days of receipt of a Warranty Claim
        Dispute, Customer shall evaluate the validity of the Warranty Claim Dispute,
        and
        shall accept or reject the Warranty Claim Dispute by written notice to
        Supplier.  If Customer accepts a Warranty Claim Dispute, Customer
        shall promptly reimburse Supplier for the costs (if any) of the replacements
        and
        related shipping costs incurred by Supplier in connection with the Product
        subject to the Warranty Claims Dispute.  If Customer rejects a
        Warranty Claim Dispute, Customer shall have the right to refer the Warranty
        Claim Dispute to an independent party for testing.  The decision of
        the independent party shall be final and binding.  The cost of testing
        will be borne by the party whose contention is not upheld by the independent
        party.  A Warranty Claim Dispute shall not relieve Supplier of its
        obligations under Sections 3.1 and 3.3 hereof.  The procedures for
        Warranty Claim Disputes shall also apply in the event of a recall by
        Customer.

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      3.5           RMA
        Procedure.  All Defective Products returned to Supplier
        by Customer in accordance with this Agreement shall  include a Return
        Merchandise Authorization Number (a “RMA Number”) on the outside
        packaging of such returned Defective Product.  Supplier shall issue
        RMA Numbers upon request from Customer.  Supplier shall provide
        Customer with a designated telephone number for the purpose of providing
        RMA
        Numbers.

       

      
        	
                4.

              	
                TERM
                  AND TERMINATION This Agreement shall
                  commence on the Effective Date and continue for an initial term
                  of three
                  (3) years.  This Agreement shall automatically renew for two (2)
                  additional one (1) year terms, unless a party provides the other
                  party
                  notice of its intent to terminate this Agreement at least three
                  (3) months
                  prior to the end of the then current term.  Either party may, at
                  its option, terminate this Agreement, if the other party has breached
                  any
                  provision of this Agreement and has failed to cure such breach
                  within
                  thirty (30) days of delivery of written notice describing the
                  breach.  Notwithstanding the foregoing, either party may
                  terminate this Agreement, without opportunity to cure, if the other
                  party
                  files for bankruptcy or similar action or is in breach of its
                  confidentiality obligations hereunder.  Termination of this
                  Agreement, for whatever reason, shall not affect the obligations
                  of either
                  party that exist as of the date of expiration or
                  termination.  Upon termination of this Agreement for any reason
                  other than the default of Supplier, unless Customer purchases all
                  of the
                  Products on order, either finished or in progress, all costs incurred
                  by
                  Supplier with respect to such orders in process which Supplier
                  cannot
                  resell to its other customers (including without limitation shipping
                  and
                  delivery costs, packaging, label design, and cost of raw, work-in-process
                  and finished product with respect to the Product) shall be borne
                  by
                  Customer.

              

      

       

      
        	
                5.

              	
                REPRESENTATIONS
                  AND
                  WARRANTIES  Each
                  party represents and warrants to the other party that (i) it is
                  duly
                  organized and validly existing under the laws of its jurisdiction
                  of
                  incorporation or formation, and has full corporate power and authority
                  to
                  enter into this Agreement and to carry out the provisions hereof
                  and (ii)
                  this Agreement is legally binding upon it, enforceable in accordance
                  with
                  its terms.

              

      

       

      
        	
                6.

              	
                CONFIDENTIALITY

              

      

       

      
        	
                 

              	
                a.

              	
                Confidential
                  Information.  For purposes of this Agreement,
                  “Confidential Information” means any information disclosed by
                  either party to the other party, either directly or indirectly,
                  in
                  writing, orally or by inspection of tangible objects, which is
                  confidential, trade secret or proprietary to the disclosing party
                  or any
                  third party that has furnished it to the disclosing party.  The
                  parties agree during the term of this Agreement and all times thereafter
                  to use the Confidential Information of the disclosing party only
                  for its
                  performance under this Agreement, and to not to use the Confidential
                  Information for any other purpose.  Each party shall take at
                  least the same degree of care that it uses to protect its own most
                  highly
                  confidential and proprietary information of similar nature and
                  importance
                  (but in no event less than reasonable care) to protect the confidentiality
                  of the Confidential Information of the disclosing
                  party.

              

      

       

      
        	
                 

              	
                b.

              	
                Exclusions.  The
                  foregoing obligations in Section 5.1 shall not apply to any
                  Confidential Information to the extent the party receiving such
                  Confidential Information can prove such Confidential
                  Information:  (i) was publicly known prior to the time of
                  disclosure by the disclosing party; (ii) becomes publicly known
                  through no act or omission of the receiving party; (iii) was
                  rightfully known by the receiving party, without restriction, prior
                  to the
                  time of first disclosure by the disclosing party; (iv) was
                  independently developed by the receiving party without the use
                  of the
                  Confidential Information; or (v) was rightfully obtained by receiving
                  party, without restriction, from a third party who has the right
                  to make
                  such disclosure and without breach of any duty of confidentiality
                  to the
                  disclosing party.  In addition, a party receiving Confidential
                  Information may disclose such Confidential Information to the extent
                  such
                  party is required by law to disclose such Confidential
                  Information.

              

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      
        	
                7.

              	
                INDEMNIFICATION.
                  Supplier shall indemnify, hold harmless and defend Customer, its
                  successors and assigns, and their respective officers, directors,
                  employees and agents, from any and all claims, losses, liabilities,
                  damages, judgments, penalties, settlements, expenses and costs,
                  including
                  without limitation reasonable attorneys fees, professional fees
                  and court
                  costs brought by third parties arising out of or related to (i)
                  Supplier’s
                  negligence, willful misconduct or omission or breach of this Agreement,
                  and the warranties contained herein,
                  and (ii) the infringement or alleged infringement by any
                  of the
                  Products of the intellectual property rights of a third
                  party.  Customer shall promptly notify Supplier of any
                  claims.  Supplier shall not settle any claims without the prior
                  written approval of Customer, which approval shall not be unreasonably
                  withheld or delayed.  Customer shall have the right, but not the
                  obligation, to participate in the defense of any claim at its sole
                  expense
                  through counsel of its choosing without forfeiting, reducing or
                  otherwise
                  affecting Customer’s right to indemnification
                  hereunder.  Without limiting the generality of the foregoing
                  indemnity, in the event any Product is held to have infringed the
                  intellectual property rights of any third party, or Supplier is
                  prevented
                  from delivering such Product to Customer as a result of a claim
                  of such
                  infringement, then Supplier, as promptly as possible, will either
                  (a) take
                  such action as is necessary to make the Product non-infringing,
                  or (b)
                  substitute a comparable, non-infringing Product acceptable to Customer,
                  failing which Customer shall no longer have any obligation under
                  this
                  Agreement to purchase the infringing Product from
                  Supplier.

              

      

       

      
        	
                8.

              	
                LIMITATION
                  OF LIABILITY.  NEITHER PARTY WILL BE LIABLE
                  FOR SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL
                  DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT HOWEVER
                  ARISING, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
                  OF SUCH
                  DAMAGES.  Except for liability arising from Supplier’s breach of
                  its obligations under Section 7(ii), neither party’s liability arising out
                  of or relating to this Agreement shall exceed the aggregate amounts
                  payable to Supplier by Customer under this
                  Agreement.

              

      

       

      
        	
                9.

              	
                TITLE
                  AND OWNERSHIP OF PRODUCTS.  Supplier owns
                  and shall continue to at all times own title to: (i) all formulas,
                  recipes, other proprietary information and specifications, and
                  all
                  intellectual property rights, relating to the Products, (ii) the
                  brand
                  name of the Products (except for those of which are Customer trademarks),
                  and (iii) the label design and all associated intellectual property
                  rights
                  (other than any Customer trademarks).  Supplier may, at any
                  time, sell products with formulas, recipes and specifications similar
                  to
                  or exactly like the Products to other Supplier customers.
                  

              

      

       

      
        	
                10.

              	
                GENERAL
                  PROVISIONS

              

      

       

      
        	
                 

              	
                a.

              	
                Integration
                  / Modification.  This Agreement and the appendices
                  hereto are both a final expression of the parties’ Agreement and a
                  complete and exclusive statement with respect to all of its
                  terms.  This Agreement supersedes all prior and contemporaneous
                  agreements and communications, whether oral, written or otherwise,
                  concerning any and all matters contained herein.  This Agreement
                  may be modified or supplemented only in a writing signed by all
                  parties
                  hereto.

              

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                b.

              	
                Relationship
                  Between the Parties.  The relationship of the
                  parties shall be that of independent contractors.  Nothing
                  contained in this Agreement shall be construed to create a partnership,
                  joint venture or agency relationship between Customer and
                  Supplier.

              

      

       

      
        	
                 

              	
                c.

              	
                Insurance.  Supplier
                  shall obtain and keep in force a commercial general liability policy
                  with
                  coverage amounts not less than $2,000,000.  Supplier shall name
                  Customer as an additional insured on such policy or policies of
                  insurance.  Supplier shall, prior to the Effective Date of this
                  Agreement, deliver to Customer and thereafter keep current valid
                  certificates of insurance or copies of insurance binder evidencing
                  the
                  existence and amounts of the required
                  insurance.

              

      

       

      
        	
                 

              	
                d.

              	
                Non-Waiver.  The
                  failure of a party to insist upon strict performance of any provision
                  of
                  this Agreement or to exercise any right arising out of this Agreement
                  shall neither impair that provision or right nor constitute a waiver
                  of
                  that provision or right, in whole or in part, in that instance
                  or in any
                  other instance.

              

      

       

      
        	
                 

              	
                e.

              	
                Remedies.  Except
                  as otherwise expressly provided herein, no remedy in this Agreement
                  is
                  intended to be exclusive, but each shall be cumulative and in addition
                  to
                  any other remedy referred to herein or otherwise available at law,
                  equity
                  or otherwise.

              

      

       

      
        	
                 

              	
                f.

              	
                Assignment.  Customer
                  shall have the right to assign this Agreement without the consent
                  of
                  Supplier.  Supplier may not assign this Agreement without
                  Customer’s consent.  Any assignment, delegation or transfer, or
                  attempt at the same, in violation of the foregoing shall be void
                  and
                  without effect.

              

      

       

      
        	
                 

              	
                g.

              	
                No
                  Third Party Beneficiaries.  This Agreement is
                  neither expressly nor impliedly made for the benefit of any party
                  other
                  than those executing it.

              

      

       

      
        	
                 

              	
                h.

              	
                Severability.  If,
                  for any reason, any part of this Agreement is adjudicated invalid,
                  unenforceable or illegal by a court of competent jurisdiction,
                  such
                  adjudication shall not affect or impair, in whole or in part, the
                  validity, enforceability or legality of any remaining portions
                  of this
                  Agreement.  All remaining portions shall remain in full force
                  and effect as if the original Agreement had been executed without
                  the
                  invalidated, unenforceable or illegal
                  part.

              

      

       

      
        	
                 

              	
                i.

              	
                Notices.  Any
                  notice to be given under this Agreement shall be in writing and
                  shall be
                  presumptively deemed given (i) when personally delivered;
                  (ii) when sent by facsimile, with confirmation of receipt;
                  (iii) one (1) day after having been sent by commercial overnight
                  courier with written verification of receipt; or (iv) five (5) days
                  after having been sent by registered or certified mail, return
                  receipt
                  requested, proper postage prepaid.  All such notices shall be
                  addressed to the receiving party at the address or addresses set
                  forth
                  below or at such other addresses as either party may specify from
                  time to
                  time by written notice in accordance
                  herewith.

              

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      
        
          
            
              	
                      If
                        to Supplier, notices must be addressed to:

                    	
                      With
                        a copy to:

                    
	 	 
	
                      NHK
                        Laboratories, Inc.

                    	
                      Olsen
                        Kim & Braker LLP

                    
	
                      12230
                        E. Florence Ave.

                    	
                      12424
                        Wilshire Blvd., Suite 1120

                    
	
                      Santa
                        Fe Springs, CA  90670-3806

                    	
                      Los
                        Angeles, CA 90025

                    
	
                      Attention:
                        Shafiel Ahmed

                    	
                      Attention:  Jeffrey
                        L. Braker, Esq.

                    
	
                      Fax:
                        (562) 204-0683

                    	
                      Fax:  (310)
                        826-8411

                    
	 	 
	
                      If
                        to Customer, notices must be addressed to:

                    	
                      With
                        a copy to:

                    
	 	 
	
                      Baywood
                        International, Inc.

                    	
                      Meltzer,
                        Lippe, Goldstein & Breitstone, LLP

                    
	
                      14950
                        North 83rd
                        Place, Suite
                        1

                    	
                      190
                        Willis Avenue

                    
	
                      Scottsdale,
                        AZ  85260

                    	
                      Mineola,
                        NY  11501

                    
	
                      Attention:
                        Neil Reithinger, President & C.E.O.

                    	
                      Attention:  David
                        I. Schaffer, Esq.

                    
	
                      Fax:
                        (480) 483-2168

                    	
                      Fax:  (516)
                        747-0653

                    

            

          

        

      

      

      
        	
                 

              	
                j.

              	
                Force
                  Majeure.  Neither party shall be liable for the
                  failure or delay in performance of any obligation under this Agreement
                  by
                  reason of any event beyond such party’s reasonable control, including
                  without limitation Acts of God, fire, flood, earthquake or other
                  natural
                  forces, war, civil unrest, actions or decrees of governmental bodies,
                  accident, casualty, freight
                  embargoes.

              

      

       

      
        	
                 

              	
                k.

              	
                Choice
                  of Law, Forum and Jurisdiction.  THIS AGREEMENT IS
                  MADE WITHIN THE STATE OF CALIFORNIA AND SHALL BE GOVERNED BY AND
                  CONSTRUED
                  IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
                  REGARD TO
                  ITS CONFLICT OF LAWS PRINCIPLES.  THE PARTIES AGREE THAT THE
                  UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE
                  OF GOODS
                  SHALL NOT APPLY TO THIS AGREEMENT.  THE PARTIES HERETO HEREBY
                  IRREVOCABLY AND UNCONDITIONALLY:  (i) AGREE THAT ANY AND
                  ALL ACTIONS, SUITS OR OTHER LEGAL PROCEEDINGS, WHETHER OR NOT ARISING
                  UNDER THIS AGREEMENT AND REGARDLESS OF THE LEGAL THEORY UPON WHICH
                  THE
                  CLAIMS ARE BASED, MAY BE BROUGHT AGAINST THE OTHER PARTY ONLY IN
                  THE
                  COURTS OF THE STATE CALIFORNIA FOR THE COUNTY OF ORANGE OR THE
                  SOUTHERN
                  DIVISION OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT
                  OF
                  CALIFORNIA, AND CONSENT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS
                  IN
                  ANY SUCH LEGAL PROCEEDING; (ii) AGREE THAT SERVICE OF PROCESS IN ANY
                  SUCH LEGAL PROCEEDING SHALL BE EFFECTED IN ACCORDANCE WITH THE
                  STATUTES OF
                  CALIFORNIA AND THE UNITED STATES, AS APPROPRIATE; AND (iii) WAIVE ANY
                  OBJECTION EITHER PARTY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF
                  ANY SUCH
                  LEGAL PROCEEDING IN SUCH
                  COURTS.

              

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                l.

              	
                Jury
                  Waiver.  TO THE EXTENT PERMITTED BY LAW, THE
                  PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
                  IN ANY
                  ACTION, SUIT OR OTHER LEGAL PROCEEDING BETWEEN THEM, WHETHER OR
                  NOT
                  ARISING UNDER THIS AGREEMENT, AND REGARDLESS OF THE LEGAL THEORY
                  UPON
                  WHICH THE CLAIMS ARE BASED.

              

      

       

      
        	
                 

              	
                m.

              	
                Attorney
                  Fees.  In the event any litigation or other
                  proceeding is brought by either party arising out of or relating
                  to this
                  Agreement, the prevailing party in such litigation or other proceeding
                  shall be entitled to recover from the other party all reasonable
                  costs,
                  attorney fees, professional fees and other expenses incurred by
                  such
                  prevailing party in such litigation or
                  proceeding.

              

      

       

      
        	
                 

              	
                n.

              	
                Ambiguities.  Ambiguities
                  and uncertainties in this Agreement, if any, shall not be interpreted
                  against either party, regardless of which party may be deemed to
                  have
                  caused the ambiguity or uncertainty to
                  exist.

              

      

       

      
        	
                 

              	
                o.

              	
                Counterparts.  This
                  Agreement may be executed in one or more counterparts, each of
                  which shall
                  be deemed an original document and all of which together shall
                  be deemed
                  one instrument.

              

      

       

      
        	
                 

              	
                p.

              	
                Further
                  Assurances.  Each party to this Agreement shall, at
                  its own expense, furnish, execute, and deliver all documents and
                  take all
                  actions as may reasonably be required to effect the terms and purposes
                  of
                  this Agreement.

              

      

       

      
        	
                 

              	
                q.

              	
                Survival.  In
                  addition to any term which expressly provides for survival beyond
                  the term
                  hereof, Sections 2.1 (to the extent applicable), 3, 5, 6, 7, 8,
                  10(k) and
                  10(l) shall survive expiration or termination of this
                  Agreement.

              

      

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the Parties, intending to be bound hereby, have executed
        this
        Agreement as of the date first set forth above.

      

      
        
          
            
              	
                      Baywood
                        International, Inc.

                    	 	
                      NHK
                        Laboratories, Inc.

                    
	 	 	 	 	 
	 	 	 	 	 
	
                      By:

                    	
                      /s/
                        Neil Reithinger

                    	 	
                      By:

                    	
                      /s/
                        M. Amirul Karim

                    
	 	 	 	 	 
	
                      Name:

                    	
                      Neil
                        Reithinger

                    	 	
                      Name:

                    	
                      M.
                        Amirul Karim

                    
	 	 	 	 	 
	
                      Title:

                    	
                      President
                        & C.E.O.

                    	 	
                      Title:

                    	
                      President

                    

            

          

        

      

      

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

      

       

      APPENDIX A

      PRODUCTS

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      APPENDIX B

      PRODUCT
        SPECIFICATIONS

    

     

     

    11

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