Document:

ex10_11.htm

    
      

    

    Exhibit
      10.11

    BUSINESS
      LOAN AGREEMENT

    

    
      	
              Principal

            	
              Loan
                Date

            	
              Maturity

            	
              Loan
                No

            	
              Call
                / Coll

            	
              Account

            	
              Officer

            	
              Initials

            
	
              $2,000,000.00

            	
              07-09-2007

            	
              07-09-2009

            	
              8613586982

            	
              98

            	
              135869

            	
              601

            	 

    

    

    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.

              Nutritional
                Specialties, Inc.

              14950
                North 83rd Place

              Scottsdale,
                AZ  85260

            	
              Lender:

            	
              Vineyard
                Bank, N.A.

              Anaheim
                Business Banking

              500
                North State College Boulevard, Suite 530

              Orange,
                CA  92868

            

    

    

    

    THIS
      BUSINESS LOAN AGREEMENT dated July 9, 2007, is made and executed between Baywood
      International, Inc.; and Nutritional Specialties, 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 July 9, 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)  guaranties;  (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 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.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Nutritional
      Specialties, 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.  Nutritional Specialties, Inc. is
      duly authorized to transact business in all other states in which Nutritional
      Specialties, Inc. is doing business, having obtained all necessary filings,
      governmental licenses and approvals for each state in which Nutritional
      Specialties, Inc. is doing business.  Specifically, Nutritional
      Specialties, 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.  Nutritional Specialties, 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.  Nutritional
      Specialties, Inc. maintains an office at 14950 North 83rd Place, Scottsdale,
      AZ  85260.  Unless Nutritional Specialties, Inc. has
      designated otherwise in writing, the principal office is the office at which
      Nutritional Specialties, Inc. keeps its books and records including its records
      concerning the Collateral.  Nutritional Specialties, Inc. will notify
      Lender prior to any change in the location of Nutritional Specialties, Inc.'s
      state of organization or any change in Nutritional Specialties, Inc.'s
      name.  Nutritional Specialties, 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 Nutritional Specialties, Inc. and Nutritional Specialties, 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:

    

    
      	
              Borrower

            	 	
              Assumed
                Business Name

            	 	
              Filing
                Location

            	 	
              Date

            
	 	 	 	 	 	 	 
	
              Nutritional
                Specialties, Inc.

            	 	
              LIFETIME

            	 	
              Maricopa
                County

            	 	
              05-07-2007

            

    

    

    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:

    

    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, Borrower
      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.

    

    Guarantors'
      annual, signed and dated financial statement to be submitted as of June 30
      of
      each year end, self-prepared.

    

    Guarantors'
      annual tax returns, including all K-1 schedules to be submitted no later than
      thirty (30) days after filing, or in the case of extensions (copies also to
      be
      provided), no later than six (6) months after first filing due
      date.

    

    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.

    

    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.

    

    Guaranties.  Prior
      to disbursement of any Loan proceeds, furnish executed guaranties of the Loans
      in favor of Lender, executed by the guarantor named below, on Lender's forms,
      and in the amount and under the conditions set forth in those
      guaranties.

    

    
      	
              Name
                of Guarantor

            	 	
              Amount

            	 
	 	 	 	 
	
              Orrie
                Lee Tawes, III

            	 	$	
              2,000,000.00

            	 

    

    

    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.

    

    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 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.

    

    Environmental
      Compliance and Reports.  Borrower shall comply in all
      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,
      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:

    

    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, 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.  Borrower fails to make any payment when due under
      the Loan.

    

    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.

    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.

    

    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.

    

    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 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.

    

    BORROWER'S
      CONSENT TO USE PHOTOGRAPHS. Borrower irrevocably grants to Lender the
      right to create, distribute, transmit, publish, copy or otherwise exploit,
      either in print, electronic, digital or in any other medium now known or later
      discovered, photographs, images, illustrations, graphics or other
      representations or depictions of the Property (collectively "the Photographs"),
      for advertising, publicity, marketing or other promotional purposes of
      Lender.  Borrower understands and agrees that Lender may use and
      exploit the Photographs without identifying the Property as their subject or
      the
      Borrower as the owner or the developer of the Property. Borrower releases and
      discharges Lender and its agents, representatives, and assignees from any claim
      or cause of action, now known or later discovered, for, among other things,
      right of publicity, arising out of the use and exploitation of the
      Photographs.

    

    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 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 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 Nutritional Specialties,
      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.

    

    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
      Nutritional Specialties, Inc. in the principal amount of $2,000,000.00 dated
      July 9, 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.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    BORROWER
      ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT
      AND
      BORROWER AGREES TO ITS TERMS.  THIS BUSINESS LOAN AGREEMENT IS DATED
      JULY 9, 2007.

    

    
      	
              BORROWER:

            	 
	 	 	 
	 	 	 
	
              BAYWOOD
                INTERNATIONAL, INC.

            	 
	 	 	 
	
              By:

            	
              /s/
                Neil Reithinger

            	 
	
              Neil
                Reithinger, President of Baywood International,
                Inc.

            	 
	 	 	 
	 	 	 
	
              NUTRITIONAL
                SPECIALTIES, INC.

            	 
	 	 	 
	
              By:

            	
              /s/
                Neil Reithinger

            	 
	
              Neil
                Reithinger, President of Nutritional Specialties,
                Inc.

            	 
	 	 
	 	 
	
              LENDER:

            	 
	 	 
	 	 	 
	
              VINEYARD
                BANK, N.A.

            	 
	 	 	 
	
              By:

            	
              /s/
                Laura Green

            	 
	
              Authorized
                SignerExhibit
      4.1

     

    UKARMA
      CORPORATION

    2006
      STOCK OPTION, DEFERRED STOCK

    AND

    RESTRICTED
      STOCK PLAN

    

    Section
      1. General
      Purpose of Plan; Definitions.

    

    (a) This
      plan
      is intended to implement and govern the 2006 Stock Option, Deferred Stock and
      Restricted Stock Plan (the “Plan”) of UKARMA
      CORPORATION,
      (the
“Company”).  The Plan was adopted January
      1, 2006
      by the
      Board of Directors.  The purpose of the Plan is to enable the Company to
      obtain and retain competent, employees, personnel, consultants and service
      providers who will contribute to the Company’s success by their ability,
      ingenuity, industry and services, and to provide incentives to such personnel,
      employees, consultants and service providers and will therefore, inure to the
      benefit of all shareholders of the Company.

    

    (b) For
      purposes of the Plan, the following terms shall be defined as set forth
      below:

    

    (1) “Administrator”
means
      the Board, or if the Board does not administer the Plan, the Committee, in
      accordance with Section 2.

    

    (2) “Award”
means
      any award of Deferred Stock, Restricted Stock or Stock Options.

    

    (3) “Board”
means
      the Board of Directors of the Company.

    

    (4) “Code”
means
      the Internal Revenue Code of 1986, as amended from time to time, or any
      successor thereto.

     

    (5) “Commission”
means
      the Securities and Exchange Commission.

    

    (6) “Committee”
means
      the Compensation Commit-tee of the Board, or any other Committee the Board
      may
      subsequently appoint to administer the Plan.  If at any time the Board
      shall administer the Plan, then the functions of the Committee specified in
      the
      Plan shall be exercised by the Board.

    

    (7) “Company”
means
      UKARMA
      CORPORATION,
      a
      corporation organized under the laws of Nevada and its Subsidiaries (or any
      successor corporation).

    

    (8) “Deferred
      Stock”
means
      an award made granted pursuant to Section 6 below of the right to receive Stock
      at the end of a specified deferral period.

    

    (9) “Disability”
means
      permanent and total disability as determined under the Company’s disability
      program or policy, or if such disability program or policy does not exist,
      then
      any disability that renders an Eligible Participant unable to serve the Company
      in the capacity for which such Eligible Participant served immediately prior
      to
      such disability.

    

    (10) “Effective
      Date”
shall
      mean the date provided pursuant to Section 15.

    

    (11) “Eligible
      Participant”
means
      an employee, consultant, advisor, service provider, director (including
      non-employee director), or Officer of the Company, eligible to participate
      in
      the Plan pursuant to Section 4, provided however in the case of a consultant
      or
      service provider, such person is (i) a natural person (ii) provides bona fide
      services to the Company, and (iii) the services are not in connection with
      the
      offer or sale of securities in a capital -raising transaction and do not
      directly or indirectly promote or maintain a market in the Company’s
      securities.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (12) “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

    

    (13) “Fair
      Market Value”
means,
      as of any given date, with respect to any Awards granted hereunder, at the
      discretion of the Administrator and subject to such limitations as the
      Administrator may impose, (A) the closing sales price of the Stock on such
      date,
      or (B) the average of the closing sales price of the Stock on each day on which
      the Stock was traded over a period of up to twenty trading days immediately
      prior to such date, or (C) if the Stock is not publicly traded, the fair market
      value of the Stock as otherwise determined by the Administrator in the good
      faith exercise of its discretion.  

    

    (14) “Incentive
      Stock Option”
means
      any Stock option intended to be designated as an “incentive stock option” within
      the meaning of Section 422 of the Code.

    

    (15)
       “Non-Qualified
      Stock Option”
means
      any Stock Option that is not an Incentive Stock Option, including any Stock
      Option that provides (as of the time such option is granted) that it will not
      be
      treated as an Incentive Stock Option.

    

    (16) “Officer”
means
      the Chief Executive Officer, Chairman of the Board, President, Chief Financial
      Officer, Chief Accounting Officer, Chief Operating Officer, any vice president
      in charge of a principal business function (such as sales, administration or
      finance) and any other person who performs similar policy-making functions
      for
      the Company.

    

    (17) “Parent
      Corporation”
means
      any corporation (other than the Company) in an unbroken chain of corporations
      ending with the Company, if each of the corporations other than the Company
      owns
      stock possessing 50% or more of the total combined voting power of all classes
      of stock in one of the other corporations in the chain.

    

    (18) “Participant”
means
      any Eligible Participant selected by the Administrator pursuant to the
      Administrator’s authority in Section 2 below to receive grants of Stock Options
      or Awards or any combination of the foregoing.  

    

    (19) “Restricted
      Period”
means
      the period set by the Administrator as it pertains to Deferred Stock or
      Restricted Stock awards pursuant to Section 6.

    

    (20) “Restricted
      Stock”
means
      an award of shares of Stock granted pursuant to Section 6 subject to
      restrictions that will lapse with the passage of time or upon the attainment
      of
      performance objectives, or in consideration of services, in which case if the
      shares are registered under Form S-8 and are fully vested as determined by
      the
      Administrator, no restrictions shall be applicable with respect to such
      shares.

    

    (21) “Securities
      Act”
means
      the Securities Act of 1933, as amended.

    

    (22) “Stock”
means
      the Common Stock, $0.001 par value, of the Company.

    

    (23) “Stock
      Option”
means
      an option to pur-chase shares of Stock granted pursuant to Section
      5.

    

    (24) “Subsidiary”
means
      any corporation (other than the Company) in an unbroken chain of corporations
      beginning with the Company, if each of the corporations (other than the last
      corporation) in the unbroken chain owns stock possessing 50% or more of the
      total combined voting power of all classes of stock in one of the other
      corporations in the chain.

    

    Section
      2. Administration.

    

    (a) The
      Plan
      shall be administered by the Board or by a Committee appointed by the Board,
      which shall serve at the pleasure of the Board; provided,
      however,
      that if
      the Stock is registered under Section 12 of the Securities Act and if the
      Committee does not consist solely of “Non-Employee Directors,” as defined in
      Rule 16b-3 as promulgated by the Commission under the Exchange Act, and as
      such
      Rule may be amended from time to time, or any successor definition adopted
      by
      the Commission, then the Plan shall be administered, and each grant shall be
      approved, by the Board.

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (b) The
      Administrator shall have the power and authori-ty to grant to Eligible
      Participants, pursuant to the terms of the Plan: (i) Stock Options, (ii)
      Deferred Stock, (iii) Restricted Stock, or (iv) any combination of the
      foregoing.

    In
      particular, the Administrator shall have the authority:

    

    (1) to
      select
      those employees of the Company and others who are Eligible
      Participants;

    

    (2) to
      determine whether and to what extent Stock Options, Deferred Stock, Restricted
      Stock or a combination of the foregoing, are to be granted to Eligible
      Participants;

    

    (3) to
      determine the number of shares of Stock to be covered by each such
      Award;

    

    (4) to
      determine the terms and conditions, not inconsistent with the terms of the
      Plan,
      of any such Award including, but not limited to, (i) the restricted period
      applicable to Deferred Stock or Restricted Stock awards, (ii) the date or dates
      on which restrictions applicable to such Deferred Stock or Restricted Stock
      shall lapse during such period, and (iii) when and in what increments shares
      covered by Stock Options may be purchased; and

    

    (5) to
      determine the terms and conditions, not inconsistent with the terms of the
      Plan,
      which shall govern all written instruments evidencing the Stock Options,
      Deferred Stock, Restricted Stock or any combination of the
      foregoing.

    

    (c) The
      Administrator shall have the authority, in its discretion, to adopt, alter
      and
      repeal such administrative rules, guidelines and practices governing the Plan
      as
      it shall from time to time deem advisable; to interpret the terms and provisions
      of the Plan and any Award issued under the Plan (and any agreements relating
      thereto); and to otherwise supervise the administration of the
      Plan.

    

    (d) All
      decisions made by the Administrator pursuant to the provisions of the Plan
      shall
      be final and binding on all persons, including the Company, any future
      Subsidiaries or Parent Corporation and the Participants.

    

    Section
      3. Stock
      Subject to Plan.

    

    (a) The
      total
      number of shares of Stock reserved and available for issuance under the Plan
      shall be 7,500,000 shares subject to annual increase in the sole discretion
      of
      the Board up to an amount equal to 100% of the then outstanding fully diluted
      shares of Common Stock of the Company.  Such shares shall consist of
      autho-rized but unissued shares of Common Stock.

    

    (b) To
      the
      extent that (i) a Stock Option expires or is otherwise terminated without being
      exercised or (ii) any shares of Stock subject to any Deferred Stock or
      Restricted Stock award granted hereunder are forfeited, such shares shall again
      be available for issuance in connection with future Awards under the Plan.
       If any shares of Stock have been pledged as collateral for indebtedness
      incurred by a Participant in connection with the exercise of a Stock Option
      and
      such shares are returned to the Company in satisfaction of such indebted-ness,
      such shares shall again be available for issuance in connection with future
      Awards under the Plan.

    

    (c) In
      the
      event of any merger, reorganization, consolidation, recapitalization, stock
      dividend, or other change in corporate structure affecting the Stock, an
      appropriate substitution or adjustment shall be made in (i) the aggregate number
      of shares reserved for issuance under the Plan, and (ii) the kind, number and
      option price of shares subject to outstanding Stock Options or Awards granted
      under the Plan as may be determined by the Administrator, in its sole
      discretion, provided that the number of shares subject to any Award shall always
      be a whole number.  Such other substitutions or adjustments shall be made
      as may be determined by the Administrator, in its sole discre-tion; provided,
      however,
      that
      with respect to Incentive Stock Options, such adjustment shall be made in
      accordance with Section 424 of the Code.  

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Section
      4. Eligibility.

    

    Officers
      and other employees, directors and consultants and advisors of the Company,
      who
      are responsible for or contribute to the management, growth and/or profitability
      of the business of the Company and service providers shall be eligible to be
      granted Non-Qualified Stock Options, Deferred Stock or Restricted Stock awards
      hereunder.  Officers and other employees of the Company shall also be
      eligible to be granted Incentive Stock Options hereunder.  The Participants
      under the Plan shall be selected from time to time by the Administrator, in
      its
      sole discretion, from among the persons recommended by the senior management
      of
      the Company, and the Administrator shall determine, in its sole discretion,
      the
      number of shares covered by each Award.

    

    Section
      5. Stock
      Options for Eligible Employees.

    

    (a) Stock
      Options may be granted alone or in addition to other Awards granted under the
      Plan.  Any Stock Option granted under the Plan shall be in such form as the
      Administrator may from time to time approve, and the provisions of Stock Option
      awards need not be the same with respect to each Optionee. Recipients of Stock
      Options shall enter into a stock option agreement with the Company, in such
      form
      as the Administrator shall determine, which agreement shall set forth, among
      other things, the exercise price of the option, the term of the option and
      provisions regarding exercisability of the option granted
      thereunder.

    

    (b) The
      Stock
      Options granted under the Plan may be of two types: (x) Incentive Stock Options
      and (y) Non-Qualified Stock Options.  

    

    The
      Administrator shall have the authority under this Section 5 to grant any
      Optionee In-centive Stock Options, Non--Qualified Stock Options, or both types
      of Stock Options; provided,
      however,
      that
      Incentive Stock Options may not be granted to any individual who is not an
      employee of the Company.  To the extent that any Stock Option does not
      qualify as an Incentive Stock Option, it shall constitute a separate
      Non-Qualified Stock Option.  More than one option may be granted to the
      same Optionee and be outstanding concurrently hereunder.

    

    (c) Stock
      Options granted under the Plan shall be subject to the following terms and
      conditions and shall contain such additional terms and conditions, not
      inconsistent with the terms of the Plan, as the Administrator shall, in its
      sole
      discretion, deem desirable:

    

    (i) Option
      Price.
      The
      option price per share of Stock purchasable under an Incentive Stock Option
      shall be determined by the -Administrator, in its sole discretion, at the time
      of grant but shall be not less than 100% of the Fair Market Value of the Stock
      on such date.  The option price per share of Stock purchasable under a
      Non-Qualified Stock Option may be less than 100% of such Fair Market Value
      as
      determined by the Administrator.  If an employee owns or is deemed to own
      (by reason of the attribution rules applicable under Section 424(d) of the
      Code)
      more than 10% of the combined voting power of all classes of stock of the
      Company and an Incentive Stock Option is granted to such employee, the option
      price of such Incentive Stock Option (to the extent required by the Code at
      the
      time of grant) shall be no less than 110% of the Fair Market Value of the Stock
      on the date such Incentive Stock Option is granted.  

    

    (ii) Option
      Term.
       The term of each Stock Option shall be fixed by the Administrator, but no
      Stock Option shall be exercisable more than ten years after the date such Stock
      Option is granted; provided,
      however,
      that if
      an employee owns or is deemed to own (by reason of the attribution rules of
      Section 424(d) of the Code) more than 10% of the combined voting power of all
      classes of stock of the Company or any future Parent Corporation or any future
      Subsidiary and an Incentive Stock Option is granted to such employee, the term
      of such Incentive Stock Option (to the extent required by the Code at the time
      of grant) shall be no more than five years from the date of grant.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (iii) Exercisability.
       Stock Options shall be exercisable as determined by the Administrator or
      immediately for shares of Restricted Stock, if the Administrator so determines,
      which shall be subject to the provisions of Section 6 below, and subject to
      such
      terms and conditions as shall be determined by the Administrator -at or after
      grant; provided,
      however,
      that
      such Stock Options shall in any case vest at least 20% per year over the
      five-year period commencing from the date of grant.  To the extent not
      exercised, installments shall accumulate and be exercisable in whole or in
      part
      at any time after becoming exercisable but not later than the date the Stock
      Option expires.  The Administrator may provide, in its discretion, that any
      Stock Option shall be exercisable only in install-ments, and the Administrator
      may waive such installment exercise provisions at any time in whole or in part
      based on such factors as the Administrator may determine in its sole
      dis-cretion.

    

    (iv) Method
      of Exercise.
       Subject to Subsection 5(c)(iii), Stock Options may be exercised in whole
      or in part at any time during the option period by giving written notice of
      exercise to the Company specifying the number of shares to be purchased,
      accompanied by payment in full of the purchase price in cash or its cash
      equivalent, as determined by the Administrator.  The Administrator may, in
      its sole discretion, accept payment in whole or in part on behalf of the Company
      (i) in the form of unrestricted Stock already owned by the optionee, or, in
      the
      case of the exercise of a Non-Qualified Stock Option, Restricted Stock subject
      to an Award hereunder (based, in each case, on the Fair Market Value of the
      Stock on the date the option is exercised), (ii) by cancellation of any
      indebt-edness owed by the Company to the optionee, (iii) by a full recourse
      promissory note executed by the optionee, (iv) by requesting that the Company
      withhold whole shares of Common Stock then issuable upon exercise of the Stock
      Option (based on the Fair Market Value of the Stock on the date the option
      is
      exercised), (v) by arrangement with a broker which is acceptable to the
      Administrator where payment of the option price is made pursuant to an
      irrevocable direction to the broker to deliver all or part of the proceeds
      from
      the sale of the shares underlying the option to the Company, or (vi) by any
      combination of the foregoing; provided,
      however,
      that in
      the case of an Incentive Stock Option, the right to make payment in the form
      of
      already owned shares may be authorized only at the time of grant.  Any
      payment in the form of stock already owned by the optionee may be effected
      by
      use of an attestation form approved by the Administrator.  If payment of
      the option exercise price of a Non-Qualified Stock Option is made in whole
      or in
      part in the form of Restricted Stock, the shares received upon the exercise
      of
      such Stock Option (to the extent of the number of shares of Restricted Stock
      surrendered upon exercise of such Stock Option) shall be restricted in
      accordance with the original terms of the Restricted Stock award in question,
      except that the Administrator may direct that such restrictions shall apply
      only
      to that number of shares equal to the number of shares surrendered upon the
      exercise of such option.  An optionee shall generally have the rights to
      dividends and other rights of a shareholder with respect to shares subject
      to
      the option only after the optionee has given written notice of exercise, has
      paid in full for such shares, and, if requested, has given the representation
      described in paragraph (a) of Section 10.

    

    (d) The
      Administrator may require the voluntary surrender of all or a portion of any
      Stock Option granted under the Plan as a condition precedent to a grant of
      a new
      Stock Option.  Subject to the provisions of the Plan, such new Stock Option
      shall be exercisable at the price, during such period and on such other terms
      and conditions as are specified by the Administrator at the time the new Stock
      Option is granted; provided,
      however,
      that
      should the Administrator so require, the number of shares subject to such new
      Stock Option shall not be greater than the number of shares subject to the
      surrendered Stock Option.  Upon their surrender, the Stock Options shall be
      canceled and the shares previously subject to such canceled Stock Options shall
      again be available for grants of Stock Options and other Awards
      hereunder.

    

    (e) Subject
      to the restrictions, if any are applicable of Section 402 of the SARBANES-OXLEY
      Act of 2002, the Company may make loans available to Stock Option holders in
      connection with the exercise of outstanding options granted under the Plan,
      as
      the Administrator, in its discretion, may determine.  Such loans shall (i)
      be evidenced by promissory notes entered into by the Stock Option holders in
      favor of the Company, (ii) be subject to the terms and conditions set forth
      in
      this paragraph and such other terms and conditions, not inconsistent with the
      Plan, as the Administrator shall deter-mine, (iii) bear interest, if any, at
      such rate as the Administrator shall determine and (iv) be subject to Board
      approval.  In no event may the principal amount of any such loan exceed the
      sum of (x) the exercise price less the par value of the shares of Stock covered
      by the option, or portion thereof, exercised by the holder and (y) any Federal,
      state, and local income tax attributable to such exercise.  The initial
      term of the loan, the schedule of payments of principal and interest under
      the
      loan, the extent to which the loan is to be with or without recourse against
      the
      holder with respect to principal or interest and the conditions upon which
      the
      loan will become payable in the event of the holder’s termination of employment
      shall be determined by the Administrator; provided,
      however,
      that
      the term of the loan, including extensions, shall not exceed seven (7) years.
       Unless the Administrator determines otherwise, when a loan is made, shares
      of Common Stock having a Fair Market Value at least equal to the principal
      amount of the loan shall be pledged by the holder to the Company as security
      for
      payment of the unpaid balance of the loan, and such pledge shall be evidenced
      by
      a pledge agreement, the terms of which shall be determined by the Administrator,
      in its discretion; provided,
      however,
      that
      each loan shall comply with all applicable laws, regulations and rules of the
      Board of Governors of the Federal Reserve System and any other governmental
      agency having jurisdiction.

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (f) No
      Stock
      Option shall be transferable by the optionee otherwise than by will or by the
      laws of descent and distribution or as permitted in Form S-8 under the
      Securities Act of 1933.  Incentive Stock Options shall be exercisable,
      during the optionee’s lifetime, only by the optionee.

    

    (g) If
      an
      optionee’s employment with the Company, terminates by reason of death or
      Disability, the Stock Option may thereafter be immediately exercised, to the
      extent then exercisable (or on such accelerated basis as the Administrator
      shall
      deter-mine at or after grant), by the legal representative of the optionee,
      by
      the legal representative of the estate of the optionee, or by the legatee of
      the
      optionee under the will of the optionee, for a period of at least six (6) months
      from the date of such death or disability. In the event of a termina-tion of
      employment by reason of Disability, if an Incen-tive Stock Option is exercised
      after the expiration of the exercise periods that apply for purposes of Section
      422 of the Code, such Stock Option shall thereafter be treated as a
      Non-Qualified Stock Option.

    

    (h) Except
      as
      otherwise provided in this paragraph or otherwise determined by the
      Administrator, if an optionee’s employment with the Company, terminates for any
      reason other than death or Disability, the optionee must exercise his or her
      Stock Options within ninety (90) days from the date of such termination.
 If the optionee does not exercise his or her Stock Options within this
      ninety (90) day period, the Stock Options automatically terminate, and such
      Stock Options become null and void.   

    

    (i) To
      the
      extent that the aggregate Fair Market Value (de-termined as of the date the
      Incentive Stock Option is granted) of the shares of Stock with respect to which
      Incentive Stock Options granted to an optionee under this Plan and all other
      option plans of the Company, any future Parent Corporation and any future
      Subsidiary become exercisable for the first time by the optionee during any
      calendar year exceeds $100,000, such Stock Options shall be treated as
      Non-Qualified Stock Options.

    

    Section
      6. Deferred
      Stock and Restricted Stock.

    

    (a) Deferred
      Stock and Restricted Stock awards may be issued to Eligible Participants either
      alone or in addition to other Awards granted under the Plan.  The
      Administrator shall determine the Eligible Participants, and the time or times
      at which grants of Deferred Stock or Restricted Stock awards shall be made;
      the
      number of shares to be awarded; the price, if any, to be paid by the recipient
      or the consideration in the form of services to be received by the Company,
      in
      return for  Deferred Stock or Restricted Stock awards; the Restricted
      Period (as defined in paragraph 6(c) hereof) applicable to Deferred Stock or
      Restricted Stock awards; the performance objectives applicable to Deferred
      Stock
      or Restricted Stock awards if any; the date or dates on which restrictions
      applicable to such Deferred Stock or Restricted Stock awards shall lapse during
      such Restricted Period; and all other conditions of the De-ferred Stock or
      Restricted Stock awards.  The Administrator may also condition the grant of
      Deferred Stock or Re-stricted Stock awards upon the exercise of Stock Options,
      or upon such other criteria as the Administrator may deter-mine, in its sole
      discretion.  The provisions of Deferred Stock or Restricted Stock awards
      need not be the same with respect to each recipient.

    

    (b) The
      prospective recipient of a Deferred Stock or Restricted Stock award shall not
      have any rights with respect to such Award, unless and until such recipient
      has
      executed an agreement evidencing the Award (a “Deferred Stock Award Agreement”
or “Restricted Stock Award Agreement” as appropriate) and has deliv-ered a fully
      executed copy thereof to the Company, within a period of ten days (or such
      other
      period as the Administrator may specify) after the Award date.

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    Except
      as
      provided below in this paragraph (b) of Section 6, each Participant who is
      awarded Restricted Stock shall be issued a stock certificate in respect of
      such
      shares of Restricted Stock; and (ii) such certificate shall be registered in
      the
      name of the Participant, and shall bear an appropriate legend referring to
      the
      terms, conditions, and restrictions applicable to such Award, substantially
      in
      the following form to the extent applicable:

    

    “The
      transferability of this certificate and the shares of stock represented hereby
      are subject to the terms and conditions (including forfeiture) of UKARMA
      CORPORATION Corporation
      2006 Stock Option, Deferred Stock and Restricted Stock Plan and a Restricted
      Stock Award Agreement entered into between the registered owner and UKARMA
      CORPORATION.  Copies
      of
      such Plan and Agreement are on file in the offices of UKARMA
      CORPORATION”

    

    The
      Company shall require that the stock cer-tificates evidencing such shares be
      held in the custody of the Company until the restrictions thereon shall have
      lapsed, and, as a condition of any Restricted Stock award, the Participant
      shall
      have delivered a stock power, endorsed in blank, relating to the Stock covered
      by such Award, provided however if the shares of registered under Form S-8
      and
      are fully vested, as determined by the Administrator, no legend need appear
      on
      the certificates.

    

    With
      respect to Deferred Stock awards, at the expiration of the Restricted Period,
      or
      where no registration is applicable as determined by the Administrator, stock
      certificates in respect of such shares of Deferred Stock shall be delivered
      to
      the Participant, or his legal representative, in a number equal to the shares
      of
      Stock covered by the Deferred Stock award.

    

    (c) The
      Deferred Stock or Restricted Stock awards granted pursuant to this Section
      6
      shall be subject to the following restrictions and conditions if the
      Administrator elects to impose such restrictions:

    

    (i) Subject
      to the provisions of the Plan and the Deferred Stock or Restricted Stock Award
      Agreements, during such period as may be set by the Administrator com-mencing
      on
      the grant date (the “Restricted Period”), the Participant shall not be permitted
      to sell, transfer, pledge or assign shares of Deferred Stock or Restricted
      Stock
      awarded under the Plan, except by gift for estate and tax planning purposes
      to
      family members and in conformity with the restrictions applicable to such shares
      under this Plan.  The Administrator may, in its sole discretion, provide
      for the lapse of such restrictions in installments or may waive any such
      restrictions altogether and may accelerate or waive such restrictions in whole
      or in part based on such factors and such circumstances as the Administrator
      may
      determine, in its sole discretion, including, but not limited to, the attainment
      of certain performance related goals, the commitment by a service provider
      to
      provide services, the Participant’s termination, death or
      Disability.

    

    (ii) Except
      as
      provided in paragraph (c)(i) of this Section 6, the Participant shall have,
      with
      respect to the shares of Restricted Stock, all of the rights of a shareholder
      of
      the Company, including the right to vote the shares, and the right to receive
      any dividends thereon during the Restricted Period. With respect to Deferred
      Stock awards, the Participant shall generally not have the rights of a
      shareholder of the Company, including the right to vote the shares during the
      Restricted Period; provided,
      however,
      that
      dividends declared during the Restricted Period with respect to the number
      of
      shares covered by a De-ferred Stock award shall be paid to the Participant.
       Certificates for shares of unrestricted Stock shall be delivered to the
      Participant promptly after, and only after, the Restricted Period shall expire
      without forfei-ture in respect of such shares of Deferred Stock or Restricted
      Stock, except as the Administrator, in its sole discretion, shall otherwise
      determine. 

    

    (iii) Subject
      to the provisions of the Deferred Stock or Restricted Stock Award Agreement
      and
      this Section 6, upon termination of employment for any reason during the
      Restricted Period, all shares subject to any restriction as of the date of
      such
      termination shall be forfeited by the Participant, and the Participant shall
      only receive the amount, if any, paid by the Participant for such Deferred
      Stock
      or Restricted Stock, plus simple interest on such amount at the rate of 8%
      per
      year provided however that unless otherwise provided by the Administrator,
      either at the time of grant or thereafter, (or unless provided otherwise in
      the
      employment or other agreement, if any) Restricted Stock shall be free of the
      forfeiture provision as determined by the Administrator, provided further that
      in the event of a Change of Control, the provisions of Section 9 shall
      apply.

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    Section
      7. Amendment
      and Termination.

    

    (a) The
      Board
      may amend, alter or discontinue the Plan and it is contemplated that when the
      Company registers under Section 12(g) of the Securities and Exchange Act of
      1934, that the Board may adopt amendments to the Plan to enable compliance
      with
      Section 16(b) of said Act, but no amendment, alteration, or discontinuation
      shall be made that would impair the rights of the Participant under any Award
      theretofore granted without such Participant’s consent, or that without the
      approval of the shareholders (as described below) would:

    

    (i) except
      as
      provided in Section 3, increase the total number of shares of Stock reserved
      for
      the purpose of the Plan;

    

    (ii) change
      the employees or class of employees eligible to participate in the
      Plan;

    

    (iii) extend
      the maximum option period under Section 5 of the Plan.

    

    (b) Notwithstanding
      the foregoing, shareholder approval under this Section 7 shall only be required
      at such time and under such circumstances as shareholder approval would be
      required under applicable federal and state laws, regulations and exchange
      requirements.

    

    (c) The
      Administrator may amend the terms of any Award theretofore granted,
      prospectively or retroactively, but, subject to Section 3, no such amendment
      shall impair the rights of any holder without his or her consent.

    

    Section
      8. Unfunded
      Status of Plan.

    

    The
      Plan
      is intended to constitute an “unfunded” plan for incentive compensation.
 With respect to any payments not yet made to a Participant or optionee by
      the Company, nothing contained herein shall give any such Participant or
      optionee any rights that are greater than those of a general creditor of the
      Company.

    

    Section
      9. Change
      of Control.

    

    The
      following acceleration and valuation provi-sions shall apply in the event of
      a
“Change of Control”, as defined in paragraph (b) of this Section
      9:

    

    (a) In
      the
      event of a “Change of Control,” unless otherwise determined by the Administrator
      or the Board in writing at or after grant (including under any individual
      agreement), but prior to the occurrence of such Change of Control;

    

    (i) the
      restrictions applicable to any Re-stricted Stock or Deferred Stock awards under
      the Plan shall lapse, and such shares and all outstanding Awards, including
      but
      not limited to all outstanding Stock Options, shall be deemed fully
      vested;

    

    (ii) any
      indebtedness incurred pursuant to paragraph (e) of Section 5 above shall be
      forgiven and the collateral pledged in connection with any such loan shall
      be
      released; and

    

    (iii) the
      value
      of all outstanding Stock Op-tions, Restricted Stock and Deferred Stock awards
      shall, to the extent determined by the Administrator at or after grant, be
      cashed out by a payment of cash or other property, as the Administrator may
      determine, on the basis of the “Change of Control Price” (as defined in
      paragraph (c) of this Section 9) as of the date the Change of Control occurs
      or
      such other date as the Administrator may determine prior to the Change of
      Control.

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (b) For
      purposes of paragraph (a) of this Section 9, a “Change of Control” shall be
      deemed to have occurred if:

     

    (i) any
      “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act
      (other than the Company; any trustee or other fiduciary holding securities
      under
      an employee benefit plan of the Company; or any company owned, directly or
      indirectly, by the shareholders of the Company in substantially the same
      proportions as their ownership of the Stock of the Company) is or becomes after
      the Effective Date the “beneficial owner” (as defined in Rule 13d-3 under the
      Exchange Act), directly or indirectly, of securities of the Company (not
      including in the securities beneficially owned by such person or any securities
      acquired directly from the Company or its affiliates) representing 50% or more
      of the combined voting power of the Company’s then outstanding securities;
      or

    

    (ii) during
      any period of two consecutive years (not including any period prior to the
      Effective Date or prior to the time of registration of the Company’s Stock under
      Section 12 of the Securities Act), individuals who at the beginning of such
      period constitute the Board, and any new director (other than a director
      designated by a person who has entered into an agreement with the Company to
      effect a transaction described in clause (i), (iii) or (iv) of this paragraph
      (b) of Section 9) whose election by the Board or nomination for election by
      the
      Company’s shareholders was approved by a vote of at least two-thirds (2/3) of
      the directors then still in office who either were directors at the begin-ning
      of the period or whose election or nomination for election was previously so
      approved, cease for any reason to constitute at least a majority thereof;
      or

    

    (iii) the
      shareholders of the Company approve a merger or consolidation of the Company
      with any other corporation, other than (A) a merger or consolidation which
      would
      result in the voting securities of the Compa-ny outstanding immediately prior
      thereto continuing to represent (either by remaining outstanding or by being
      converted into voting securities of the surviving enti-ty), in combination
      with
      the ownership of any trustee or other fiduciary holding securities under an
      employee benefit plan of the Company, at least 75% of the combined voting power
      of the voting securities of the Company or such surviving entity outstanding
      immediately after such merger or consolidation or (B) a merger or consolidation
      effected to implement a recapitalization of the Company (or similar transaction)
      in which no person acquires more than 50% of the combined voting power of the
      Company’s then outstanding securities (C) a merger to effect a change of
      domicile; or

    

    (iv) the
      shareholders of the Company approve a plan of complete liquidation of the
      Company or an agreement for the sale or disposition by the Company of all or
      substantially all of the Company’s assets.

    

    (c) For
      purposes of this Section 9, “Change of Control Price” means the higher of (i)
      the highest price per share paid or offered in any transaction related to a
      Change of Control of the Company or (ii) the highest price per share paid in
      any
      transaction reported on the exchange or national market system on which the
      Stock is listed, at any time during the preceding sixty day period as determined
      by the Administrator, except that, in the case of Incentive Stock Options such
      price shall be based only on transactions reported for the date on which the
      Administrator decides to cash out such options.

    

    Section
      10. General
      Provisions.

    

    (a) Each
      person purchasing shares pursuant to a Stock Option represents and agrees with
      the Company that such person is acquiring the shares for his own account without
      a view to distribution thereof.  The certificates for such shares may
      include any legend that the Administrator deems appropriate to reflect any
      restrictions on transfer.

    

    All
      certificates for shares of Stock delivered under the Plan shall be subject
      to
      such stock-transfer orders and other restrictions as the Administrator may
      deem
      advisable under the rules, regulations, and other requirements of the
      Commission, any stock exchange upon which the Stock is then listed, and any
      applicable Federal or state securities law, and the Administrator may cause
      a
      legend or legends to be placed on any such certificates to make appropriate
      reference to such restrictions.

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (b) Nothing
      contained in the Plan shall pre-vent the Board from adopting other or additional
      compen-sation arrangements, subject to shareholder approval if such approval
      is
      required; and such arrangements may be either generally applicable or applicable
      only in specif-ic cases. 

    

    (c) Each
      Participant shall, no later than the date as of which the value of an Award
      first becomes includable in the gross income of the Participant for Federal
      income tax purposes, pay to the Company, or make arrangements satisfactory
      to
      the Administrator regarding payment of, any Federal, state, or local taxes
      of
      any kind required by law to be withheld with respect to the Award.  The
      obligations of the Company under the Plan shall be conditional on the making
      of
      such payments or arrangements, and the Company (and, where applicable, its
      Subsidiaries) shall, to the extent permitted by law, have the right to deduct
      any such taxes from any payment of any kind otherwise due to the
      Participant.

    

    (d) No
      member
      of the Board or the Administrator, nor any officer or employee of the Company
      acting on behalf of the Board or the Administrator, shall be personally liable
      for any action, determination, or interpretation taken or made in good faith
      with respect to the Plan, and all members of the Board or the Administrator
      and
      each and any officer or employee of the Company acting on their behalf shall,
      to
      the extent permitted by law, be fully indemnified and protected by the Company
      in respect of any such action, determination or interpretation. 

    

    (e) This
      Plan
      is purely voluntary on the part of the Company, and while the Company hopes
      to
      continue it indefinitely, the continuance of the Plan shall not be deemed to
      constitute a contract between the Company and any employee, or to be
      consideration for or a condition of the employment of any employee.
 Nothing contained in the Plan shall be deemed to give any employee the
      right to be retained in the employ of the Company, any future Subsidiaries,
      or
      any future Parent Corporation to interfere with the right of the Company to
      discharge or retire any employee thereof at any time. No employee shall have
      any
      right to or interest in Stock Options, Restricted Stock, or Deferred Stock,
      authorized hereunder prior to the grant of such a Stock Option or other award
      described herein to such employee, and upon such grant he or she shall have
      only
      such rights and interests as are expressly provided herein, subject, however,
      to
      all applicable provisions of the Company’s Articles of Incorporation, as the
      same may be amended from time to time.

    

    (f) In
      the
      event of a stock split, the per share exercise price of Options granted
      hereunder and number of shares covered by the Option grant shall be adjusted
      proportionately as follows:  in the event of a split, the price shall be
      reduced proportionately and the number of shares increased proportionately;
      in
      the event of a reverse split, the price shall be increased proportionately
      and
      the number of shares covered by the Option reduced proportionately.

    

    Section
      11. Specific
      Performance.

    

    The
      Stock
      Options granted under this Plan and the Shares issued pursuant to the exercise
      of such Stock Options cannot be readily purchased or sold in the open market,
      and, for that reason among others, the Company and its shareholders will be
      irreparably damaged in the event that this Plan is not specifically enforced.
       In the event of any controversy concerning the right or obligation to
      purchase or sell any such Option or Optioned Stock, such right or obligation
      shall be enforceable in a court of equity by a decree of a specific performance.
       Such remedy shall, however, be cumulative and not exclusive, and shall be
      in addition to any other remedy which the parties may have.

    

    Section
      12. Invalid
      Provision.

    

    In
      the
      event that any provision of this Plan is found to be invalid or otherwise
      unenforceable under any applicable law, such invalidity or unenforceability
      shall not be construed as rendering any other provisions contained herein
      invalid or unenforceable, and all such other provisions shall be given full
      force and effect to the same extent as though the invalid unenforceable
      provision was not contained herein.

    

    Section
      13. Applicable
      Law.

    

    This
      Plan
      shall be governed by and construed in accordance with the laws of the State
      of
      Colorado, or the laws of the state of any successor corporation.

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    Section
      14. Successors
      and Assigns.

    

    This
      Plan
      shall be binding on and inure to the benefit of the Company and the employees
      to
      whom an Option is granted hereunder, and such employees’ heirs, executors,
      administrators, legatees, personal representatives, assignees and transferees
      and any successor corporation who assumes this Plan.

    

    Section
      15. Effective
      Date of Plan.

    

    The
      Plan
      became effective (the “Effective Date”) on January 1, 2006.  Shareholder
      approval of the plan shall be obtained within 12 months from the Effective
      Date.

    

    Section
      16. Term
      of Plan.

    

    No
      Stock
      Option, De-ferred Stock or Restricted Stock award shall be granted pursuant
      to
      the Plan on or after the tenth anniversary of the Effective Date, but Awards
      theretofore granted may extend beyond that date.

    

    Section
      17. Annual
      Financial Statements.

    

    If
      required by federal or state law, the Company shall deliver annual financial
      statements to each employee granted a Stock Option, Deferred Stock or Restricted
      Stock hereunder until such Award expires or is otherwise canceled.

    

    Section
      18. Disclosure
      Requirements

    

    In
      the
      event the aggregate offering price of securities subject to outstanding options
      plus the offering price of securities sold in the preceding twelve (12) months,
      as a result of Awards issued under this Plan, exceeds $5,000,000, the Company
      shall deliver the following disclosure documents to the Participant or optionee
      within a reasonable period of time before the applicable date of exercise,
      conversion or sale:

    

    (a) A
      summary
      of the material terms of this Plan;

     

    (b) Information
      about the risks associated with purchasing the shares of stock in the Company;
      and

    

    (c) Financial
      statements as of a date no more than 180 days before the sale of securities
      pursuant to this Section 19.

    

    Section
      19. Additional
      Information

    

    Additional
      information regarding the Plan and its administrators may be obtained from
      the
      Company at 770 Broadway, 2nd Floor, New York, NY 10003, (212) 653-8738,
      Attention:  Bill Glaser.  Participants under this Plan shall have
      available without charge, upon written or oral request, the documents
      incorporated by reference in Item 3 of Part II of the registration statement
      on
      Form S-8 as filed with the Securities and Exchange Commission and such documents
      are incorporated in the Section 10(a) prospectus.  Participants under this
      Plan shall also have available under this Plan, without charge, upon written
      or
      oral request, of other documents required to be delivered to employees pursuant
      to Rule 428(b) of the Rules of the Securities and Exchange Commission under
      the
      Securities Act of 1933.  All such requests shall be made at the address set
      forth in this paragraph, or at the phone number set forth in this paragraph,
      attention: Bill Glaser.

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    
 

    IN
      WITNESS WHEREOF, pursuant to the due authorization and adoption of this Plan
      by
      the Board on the day and year first above written, the Company has caused this
      Plan to be duly executed by its duly authorized officers.

    

    

    DATED:
      January 1, 2006

    

    
      	 	 	 
	 	UKARMA
              CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/ Bill
              Glaser
	 	
              
Bill
              Glaser, Chief Executive
              Officer

     

    
      
         

      

      
        12

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