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<SEC-DOCUMENT>0000950134-06-019352.txt : 20061020
<SEC-HEADER>0000950134-06-019352.hdr.sgml : 20061020
<ACCEPTANCE-DATETIME>20061020112143
ACCESSION NUMBER:		0000950134-06-019352
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20061117
FILED AS OF DATE:		20061020
DATE AS OF CHANGE:		20061020
EFFECTIVENESS DATE:		20061020

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NATURAL HEALTH TRENDS CORP
		CENTRAL INDEX KEY:			0000912061
		STANDARD INDUSTRIAL CLASSIFICATION:	WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190]
		IRS NUMBER:				592705336
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-26272
		FILM NUMBER:		061154667

	BUSINESS ADDRESS:	
		STREET 1:		12901 HUTTON DRIVE
		STREET 2:		--
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		972-241-4080

	MAIL ADDRESS:	
		STREET 1:		12901 HUTTON DRIVE
		STREET 2:		--
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>d39989ddef14a.htm
<DESCRIPTION>DEFINITIVE PROXY STATEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>def14a</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 18pt; margin-top: 18pt"><B>SCHEDULE 14A</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
<br>(Amendment No. &#95;&#95;&#95;)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Filed by Registrant</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Filed by a Party other than the Registrant</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">Check the appropriate box:</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Preliminary Proxy Statement</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Definitive Proxy Statement</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Definitive Additional Materials</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Soliciting Material Pursuant to &#167;240.14a-11(c) or &#167;240.14a-12</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD colspan="9" valign="top" align="center"><FONT style="font-size:14pt"><B>NATURAL HEALTH TRENDS CORP.</B></FONT><br><I>(Name of Registrant As Specified in its Charter)</I><BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">Payment of Filing Fee (Check the appropriate box):</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">No fee required.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(4) and 0-11.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">1)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Title of each class of securities to which transaction applies:</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N/A</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">2)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Aggregate number of securities to which transaction applies:</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N/A</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">3)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule&nbsp;0-11:<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N/A</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">4)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Proposed maximum aggregate value of transaction:</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N/A</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">5)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left">Total fee paid</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N/A</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP> Set forth the amount on which the filing fee is calculated and state how it was
determined.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left"><DIV style="margin-left:0px; text-indent:30px"><FONT face="Wingdings">&#111;</FONT> Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and date of its filing.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1)&nbsp;Amount Previously Paid:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;N/A
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2)&nbsp;Form, Schedule or Registration Statement No.:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;N/A
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3)&nbsp;Filing Party:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;N/A
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4)&nbsp;Date Filed:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;N/A
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NATURAL HEALTH TRENDS CORP.<BR>
2050 DIPLOMAT DRIVE<BR>
DALLAS, TEXAS 75234</B>
</DIV>

<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 0pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 0pt"><B>NOTICE OF ANNUAL MEETING OF STOCKHOLDERS<BR>
TO BE HELD ON NOVEMBER 17, 2006</B>
</DIV>
<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 0pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>To the Stockholders of Natural Health Trends Corp.:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2006 annual meeting of stockholders of Natural Health Trends Corp. (the &#147;Company&#148;) will be
held on November&nbsp;17, 2006 at 2050 Diplomat Drive, Dallas, Texas 75234 at 9:00 a.m. local time
(Central Daylight Time). At the meeting, the holders of the Company&#146;s outstanding common stock
will act on the following matters:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Election of six (6)&nbsp;directors to the Board of Directors of the Company to serve
until the next annual meeting of the Company&#146;s stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Ratification of the appointment of Lane Gorman Trubitt, L.L.P. as the Company&#146;s
independent auditors for the fiscal year ending December&nbsp;31, 2006;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the Company&#146;s 2007 Annual Incentive Plan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the Company&#146;s 2007 Equity Incentive Plan; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any other matters that properly come before the meeting.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All holders of record of shares of the Company&#146;s common stock at the close of business on
October&nbsp;6, 2006 are entitled to vote at the meeting and any postponements or adjournments of the
meeting.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="4" align="left">BY ORDER OF THE BOARD OF DIRECTORS</TD>
</TR>
<TR>
    <TD  colspan="5" valign="top" align="left">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">October&nbsp;20, 2006</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">
 /s/ Gary C. Wallace<BR>Gary C. Wallace<BR>
Secretary<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED FORM OF
PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO OUR TRANSFER AGENT. THIS PROXY STATEMENT
AND PROXY CARD ARE BEING MAILED TO THE COMPANY&#146;S STOCKHOLDERS ON
OR ABOUT OCTOBER 20, 2006.</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">ABOUT THE MEETING</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">1</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#102">What is the purpose of the meeting?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#103">Who is entitled to vote at the meeting?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#104">What are the voting rights of the holders of the
Company&#146;s common stock?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#105">Who can attend the meeting?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">What constitutes a quorum?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#107">How do I vote?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">2</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#108">Can I revoke my proxy after I return it?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">2</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#109">What are the Board of Directors&#146; recommendations?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">2</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#110">What vote is required to approve each item?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">2</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#111">What types of expenses will the Company incur?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">3</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">STOCK OWNERSHIP</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">4</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#113">Who are the owners of the Company&#146;s stock?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#114">What is the status of Section&nbsp;16(a) beneficial ownership reporting compliance?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">6</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">GOVERNANCE OF THE COMPANY</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">7</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#116">Who are the current members of the Board of Directors?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">7</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#117">Who is the Chairman of the Board?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">7</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#118">Which directors are considered independent?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">8</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#119">How often did the Board of Directors meet during fiscal 2005?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">8</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#120">What is the role of the Board of Directors&#146; committees?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">8</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#121">What is the Executive Management Committee?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">10</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#122">How are directors compensated?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">10</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#123">How do stockholders communicate with the Board of Directors?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">11</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#124">Does the Company have a Code of Ethics?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">11</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#125">Certain Relationships and Related Transactions&#151;What
related party transactions involved directors, executive officers
or significant stockholders?</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">11</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#126">REPORT OF THE AUDIT COMMITTEE</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">15</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#127">EXECUTIVE COMPENSATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">16</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#128">Report of the Compensation Committee on Executive Compensation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">16</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#129">Compensation Committee Interlocks and Insider Participation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">17</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#130">Executive Officers of the Company</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">17</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#131">Summary Compensation Table</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">19</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#132">Option Grants in Last Fiscal Year</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">20</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#133">Aggregate Option Exercises in Last Fiscal Year and</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">21</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fiscal Year-End Option Values</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">21</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#134">Equity Compensation Plan Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">21</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#135">Employment Agreements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">22</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#136">COMPARISON OF CUMULATIVE TOTAL RETURN</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">24</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#137">ITEM ONE: ELECTION OF DIRECTORS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">26</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->i<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#138">Biographical Summaries of Nominees for the Board of Directors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">26</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#139">ITEM
TWO: APPOINTMENT OF LANE GORMAN TRUBITT, L.L.P. AS INDEPENDENT
AUDITORS FOR THE COMPANY FOR FISCAL YEAR ENDING DECEMBER 31, 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">28</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#140">Audit and Other Professional Fees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">30</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#141">Pre-approval Policies for Audit and Non-audit Services</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">31</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#142">ITEM THREE: Approval of the Company&#146;s 2007 Annual Incentive Plan</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">31</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#143">ITEM FOUR: Approval of the Company&#146;s 2007 Equity Incentive Plan</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">35</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#144">OTHER MATTERS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">43</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#145">ADDITIONAL INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">43</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#146">Stockholder Proposals for the 2007 Annual Meeting and Other
Stockholder Communications</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">43</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#147">Annual Report</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">44</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#148">HOUSEHOLDING INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">44</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Appendix&nbsp;A:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natural Health Trends Corp. 2007 Annual Incentive Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Appendix&nbsp;B:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natural Health Trends Corp. 2007 Equity Incentive Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->ii<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NATURAL HEALTH TRENDS CORP.<BR>
2050 Diplomat Drive, Dallas, Texas 75234</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>PROXY STATEMENT</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This proxy statement contains information related to the annual meeting of stockholders
of Natural Health Trends Corp. (&#147;the Company&#148;) to be held on November&nbsp;17, 2006, beginning at 9:00
a.m., at the Company&#146;s executive offices, 2050 Diplomat Drive, Dallas, Texas 75234, and at any
postponements or adjournments thereof. This proxy statement is being mailed to stockholders on or
about October&nbsp;20, 2006.
</DIV>

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ABOUT THE MEETING</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>What is the purpose of the meeting?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the annual meeting, stockholders will act upon the matters outlined in the Notice of Annual
Meeting of Stockholders included with this proxy statement, including the election of Directors,
and ratification of the appointment of the Company&#146;s independent public accountants.
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Who is entitled to vote at the meeting?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only stockholders of record at the close of business on October&nbsp;6, 2006, the record date for
the meeting (the &#147;Record Date&#148;), are entitled to receive notice of and to participate in the annual
meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the
shares that you held on that date at the meeting, or any postponements or adjournments of the
meeting.
</DIV>

<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>What are the voting rights of the holders of the Company&#146;s common stock?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each outstanding share of the Company&#146;s common stock will be entitled to one vote on each
matter considered at the meeting. Cumulative voting in the election of directors is prohibited by
the Company&#146;s certificate of incorporation.
</DIV>

<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Who can attend the meeting?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All stockholders as of the record date, or their duly appointed proxies, may attend the
meeting.
</DIV>

<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>What constitutes a quorum?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The presence at the meeting, in person or by proxy, of the holders of a majority of the
aggregate voting power of the stock outstanding on the record date will constitute a quorum,
permitting the stockholders to act upon the matters outlined in the Notice of Annual Meeting of
Stockholders. As of the record date, 8,199,933 shares of common stock, representing the same
number of votes, were outstanding. Thus, the presence of the holders of common stock representing
at least 4,181,966 shares of common stock will be required to establish a quorum.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proxies received but marked as abstentions and broker non-votes will be included in the
calculation of the number of votes considered to be present at the meeting.
</DIV>

<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>How do I vote?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you complete and properly sign the accompanying form of proxy and return it to the Company,
it will be voted as you direct. If you are a registered stockholder and attend the meeting, you
may deliver your completed proxy in person.
</DIV>

<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Can I revoke my proxy after I return it?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proxies given by stockholders of record for use at the annual meeting may be revoked at any
time prior to the exercise of the powers conferred. In addition to revocation in any other manner
permitted by law, stockholders of record giving a proxy may revoke the proxy by an instrument in
writing, executed by the stockholder or his attorney authorized in writing or, if the stockholder
is a corporation, under its corporate seal, by an officer or attorney thereof duly authorized, and
deposited either at the corporate headquarters of the Company at any time up to and including the
last business day preceding the day of the annual meeting, or any adjournment thereof, at which the
proxy is to be used, or with the chairman of the annual meeting on the day of the annual meeting or
adjournment thereof, and upon either of such deposits the proxy is revoked.
</DIV>

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>What are the Board of Directors&#146; recommendations?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless you give other instructions on your returned proxy, the persons named as proxy holders
on the proxy will vote in accordance with the recommendations of the Board of Directors. The Board
of Directors&#146; recommendations are set forth together with the description of each item in this
proxy statement. In summary, the Board of Directors recommends a vote:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>for </I>election of the nominated slate of Directors (see Item&nbsp;One),</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>for </I>ratification of the appointment of Lane Gorman Trubitt, L.L.P. as the Company&#146;s
independent auditors for the fiscal year ending December&nbsp;31, 2006 (see Item&nbsp;Two),</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>for </I>the approval of the Company&#146;s 2007 Annual Incentive Plan (see Item&nbsp;Three), and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>for </I>the approval of the Company&#146;s 2007 Equity Incentive Plan (see Item&nbsp;Four).</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to any other matter that properly comes before the meeting, the proxy holders
will vote as recommended by the Board of Directors or, if no recommendation is given, in their own
discretion.
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>What vote is required to approve each item?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Election of Directors. </B>The affirmative vote of a plurality of the votes cast at the meeting
is required for the election of Directors. A properly executed proxy marked &#147;Withhold
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Authority&#148; with respect to the election of all Directors will not be voted with respect to the
Directors, although it will be counted for purposes of determining whether there is a quorum.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ratification of Independent Auditors. </B>For the ratification of the appointment of Lane Gorman
Trubitt, L.L.P. as the Company&#146;s independent auditors for the fiscal year ending December&nbsp;31, 2006
(Item&nbsp;Two), the affirmative vote of the holders of a majority of the shares represented in person
or by proxy and entitled to vote on the item at the annual meeting will be required for approval.
A properly executed proxy marked &#147;Abstain&#148; with respect to Item&nbsp;Two will not be voted, although it
will be counted for purposes of determining whether there is a quorum. Accordingly, an abstention
will have the effect of a negative vote for such Item.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approval of the Annual Incentive Plan and the Equity Incentive Plan. </B>For the approval of each
of the Company&#146;s 2007 Annual Incentive Plan (Item&nbsp;Three) and the Company&#146;s 2007 Equity Incentive
Plan (Item&nbsp;Four), the affirmative vote of the holders of a majority of the shares represented in
person or by proxy and entitled to vote on each of the items at the annual meeting will be required
for approval. A properly executed proxy marked &#147;Abstain&#148; with respect to Items Three and/or Four
will not be voted for that Item, although it will be counted for purposes of determining whether
there is a quorum. Accordingly, an abstention will have the effect of a negative vote for such
Item.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker non-votes will count in determining if a quorum is present at the annual meeting. A
broker non-vote occurs if a broker or other nominee attending the annual meeting in person or
submitting a proxy does not have discretionary authority to vote on a particular item and has not
received voting instructions with respect to that item.
</DIV>

<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>What types of expenses will the Company incur?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The expense of preparing, printing and mailing this proxy statement and notice, exhibits and
the proxies solicited hereby will be borne by the Company. In addition to the use of the mails,
proxies may be solicited by officers and directors and regular employees of the Company, without
additional remuneration, by personal interviews, telephone, telegraph or facsimile transmission.
The Company may elect to engage a proxy solicitation firm to solicit stockholders to vote or grant
a proxy with respect to the proposals contained in this proxy statement. The Company will request
brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial
owners of shares of common stock held of record and will provide reimbursements for the cost of
forwarding the material in accordance with customary charges.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STOCK OWNERSHIP</B>
</DIV>

<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Who are the owners of the Company&#146;s stock?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the amount of the Company&#146;s common stock beneficially owned (unless
otherwise indicated) as of the Record Date by (i)&nbsp;each stockholder we know is the beneficial owner
of more than 5% of the Company&#146;s common stock, (ii)&nbsp;each director or director nominee, (iii)&nbsp;each
of the executive officers named in the Summary Compensation Table set forth under &#147;Executive
Compensation&#148; and (iv)&nbsp;all executive officers and directors as a group. Beneficial ownership is
determined in accordance with the rules and regulations of the Securities and Exchange Commission
and generally includes those persons who have voting or investment power with respect to the
securities. Except as otherwise indicated, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power with respect to all shares of the
Company&#146;s common stock beneficially owned by them.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount and</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Nature of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percent</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Beneficial</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">of</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name and Address of Beneficial Owner<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Ownership<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Class<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Stephanie S. Hayano</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Robert H. Hesse</B><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP><br>
<B>360 Thornton Road<br>
Englewood, NJ 07631</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6,984</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Anthony B. Martino</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Randall A. Mason</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">126,262</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Terrence M. Morris</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Colin J. O&#146;Brien</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">17,500</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Sir Brian Wolfson</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">86,627</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(9)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>John Cavanaugh</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">453,968</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(10)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Chris Sharng</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">27,932</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(11)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Richard S. Johnson</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">23,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Keith C. Zagar<br>
704 Chaucer Court<br>
Southlake, TX 76092</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top"> </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Per Ahlund</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount and</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Nature of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percent</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Beneficial</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">of</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name and Address of Beneficial Owner<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Ownership<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Class<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Mark D. Woodburn</B><SUP style="font-size: 85%; vertical-align: text-top">(13)</SUP><br>
<B>809 Dominion Drive<br>
Southlake, TX 76092</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">16,921</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(14)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Terry A. LaCore</B><SUP style="font-size: 85%; vertical-align: text-top">(15)</SUP><br>
<B>3105 Brookhollow Lane<br>
Flower Mound, TX 75028</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">244,998</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(16)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Krage &#038; Janvey, L.L.P.<br>
2100 Ross Avenue<br>
Suite&nbsp;2600<br>
Dallas, Texas 75201</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,081,066</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top"> (17)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">13.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Directors and Executive Officers As a<br>
Group (10 persons)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,831,355</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top"> (18)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">21.1</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Indicates beneficial ownership of less than 1%</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Unless otherwise indicated, the address of each beneficial owner is c/o Natural Health
Trends Corp., 2050 Diplomat Drive, Dallas, Texas 75234</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Any securities not outstanding that are subject to options or conversion privileges
exercisable within 60&nbsp;days of April&nbsp;28, 2006 are deemed outstanding for the purpose of
computing the percentage of outstanding securities of the class owned by any person holding
such securities but are not deemed outstanding for the purpose of computing the percentage of
the class owned by any other person in accordance with Item&nbsp;403 of Regulation&nbsp;S-K of the
Securities Act 1933 and Rule&nbsp;13(d)-3 of the Securities Exchange Act, and based upon 8,199,933
shares of common stock outstanding (excluding treasury shares) as of the Record Date.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Hesse is a former director of the Company and the former Interim Chief Executive
Office of the Company, and therefore the shares beneficially owned by him are not included in
&#147;Directors and Executive Officers as a Group.&#148;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 1,984 shares of common stock issuable upon the exercise of warrants held by
Mr.&nbsp;Hesse.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 7,500 shares of common stock issuable upon the exercise of options held by
Mr.&nbsp;Martino.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;67,500 shares of common stock issuable upon the exercise of options held
by Mr.&nbsp;Mason, (ii)&nbsp;27,399 shares owned by Marden Rehabilitation Associates, Inc., an entity
controlled by Mr.&nbsp;Mason, and (iii)&nbsp;31,363 shares of common stock owned by Magco, Inc, an
entity controlled by Mr.&nbsp;Mason.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 7,500 shares of common stock issuable upon the exercise of options held by
Mr.&nbsp;Morris.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 7,500 shares of common stock issuable upon the exercise of options held by
Mr.&nbsp;O&#146;Brien.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;60,000 shares issuable upon the exercise of options held by Capital
Development S.A, an entity controlled by Sir Brian Wolfson (&#147;Capital Development&#148;), (ii)&nbsp;1,984
shares of common stock issuable upon the exercise of warrants held by Capital Development,
(iii)&nbsp;4,190 shares of common stock owned by Capital Development, (iv)&nbsp;12,953 shares of common
stock owned by Schweco Nominee Limited, an entity controlled by Sir Brian Wolfson and (v)
7,500 shares of common stock issuable upon the exercise of options held by Sir Brian Wolfson.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;253,580 shares of common stock issuable upon the exercise of options
held by Mr.&nbsp;Cavanaugh, and (ii)&nbsp;1,984 shares of common stock issuable upon the exercise of
warrants held by Mr.&nbsp;Cavanaugh.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;1,984 shares of common stock issuable upon the exercise of warrants held
by Mr.&nbsp;Sharng, and (ii)&nbsp;22,464 shares of common stock issuable upon the exercise of options
held by Mr.&nbsp;Sharng.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(12)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 23,000 shares of common stock issuable upon the exercise of options held by
Mr.&nbsp;Johnson. Mr.&nbsp;Johnson is a former executive officer of the Company, and therefore the
shares beneficially owned by him are not included in &#147;Directors and Executive Officers as a
Group.&#148;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(13)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Woodburn is a former director and the former President and Secretary of the
Company, and therefore the shares beneficially owned by him are not included in &#147;Directors and
Executive Officers as a Group.&#148;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(14)</TD>
    <TD>&nbsp;</TD>
    <TD>Some elements of Mr.&nbsp;Woodburn&#146;s beneficial ownership are based on the Company&#146;s good
faith estimates, but no assurance can be given that these estimates are correct. Includes (i)
14,937 shares of common stock held by the LaCore and Woodburn Partnership, a general
partnership with respect to which Mr.&nbsp;Woodburn is a general partner, and (ii)&nbsp;1,984 shares of
common stock issuable upon the exercise of warrants held by the LaCore and Woodburn
Partnership. Excludes 540,533 shares of common stock that are held in escrow by a third party
for the benefit of the LaCore and Woodburn Partnership. See &#147;Governance of the Company -
Certain Relationships and Related Transactions.&#148;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(15)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;LaCore is a former director of the Company and the former Chief Executive Office
of Lexxus International, Inc., and therefore the shares beneficially owned by him are not
included in &#147;Directors and Executive Officers as a Group.&#148;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(16)</TD>
    <TD>&nbsp;</TD>
    <TD>Some elements of Mr.&nbsp;LaCore&#146;s beneficial ownership are based on the Company&#146;s good
faith estimates, but no assurance can be given that these estimates are correct. Includes (i)
14,937 shares of common stock held by the LaCore and Woodburn Partnership, a general
partnership with respect to which Mr.&nbsp;LaCore is a general partner, (ii)&nbsp;1,984 shares of common
stock issuable upon the exercise of warrants held by the LaCore and Woodburn Partnership, and
(iii)&nbsp;1,984 shares of common stock issuable upon the exercise of warrants held by Mr.&nbsp;LaCore.
Excludes 540,533 shares of common stock that are held in escrow by a third party for the
benefit of Mr.&nbsp;LaCore and 540,533 additional shares of common stock that are held in escrow by
a third party for the benefit of the LaCore and Woodburn Partnership. See &#147;Governance of the
Company &#151; Certain Relationships and Related Transactions.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(17)</TD>
    <TD>&nbsp;</TD>
    <TD>On February&nbsp;10, 2006, the Company entered into an Escrow Agreement with Mark Woodburn
and Terry LaCore (each of whom are former officers and directors of the Company), the LaCore
and Woodburn Partnership, and Krage and Janvey LLP, as escrow agent. Pursuant to the Escrow
Agreement, (i)&nbsp;the Company issued and deposited with the escrow agent stock certificates in
the name of the escrow agent representing an aggregate of 1,081,066 shares of the Company&#146;s
common stock, and (ii)&nbsp;the escrow agent granted an irrevocable proxy to the Company to vote
the escrowed shares on all matters presented at meetings of stockholders or any written
consent executed in lieu thereof. The parties have agreed that the escrow agent will hold the
escrowed shares (as well as other escrowed assets) until it receives (i)&nbsp;joint written
instructions from the Company, Woodburn and LaCore, or (ii)&nbsp;a final non-appealable order from
a court of competent jurisdiction.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(18)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;462,496 shares that may be acquired upon the exercise of outstanding
options or warrants that currently are exercisable or will become exercisable within the next
60&nbsp;days by the Company&#146;s directors and executive officers and (ii)&nbsp;1,081,066 shares of common
stock issued to an escrow agent with respect to which the Company&#146;s board of directors has a
right to vote such shares at meetings of stockholders or a written consent executed by
stockholders in lieu of a meeting. See &#147;Governance of the Company &#150; Certain Relationships and
Related Transactions.&#148;</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>What is the status of Section&nbsp;16(a) beneficial ownership reporting compliance?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16(a) of the Securities Exchange Act of 1934 requires the Company&#146;s directors and
executive officers, and persons who own more than ten percent (10%) of a registered class of
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Company&#146;s equity securities, to file with the Securities and Exchange Commission (&#147;SEC&#148;)
initial reports of ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
To the Company&#146;s knowledge, based solely on its review of the copies of such reports furnished to
the Company during the fiscal year ended December&nbsp;31, 2005, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten percent beneficial owners were
satisfied, except the following: Mssrs. Martino, Morris and Ahlund did not file a Form&nbsp;3 or a Form
4 for one transaction each; Mssrs. Sharng and Davidson and Sir Brian Wolfson filed a Form&nbsp;4 late
for one transaction each; Mr.&nbsp;Hesse filed a Form&nbsp;4 late for each of two transactions; and Mssrs.
Sharng and Mason failed to file a Form&nbsp;4 for one transaction each.
</DIV>

<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOVERNANCE OF THE COMPANY</B>
</DIV>

<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Who are the current members of the Board of Directors?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The members of the Board of Directors on the date of this proxy statement and the committees
of the Board of Directors on which they currently serve are identified below.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="67%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Audit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Nominating</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Director</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Committee</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size:10pt"><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stephanie S. Hayano</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Anthony B. Martino</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">C</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Randall A. Mason</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Terrence M. Morris</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">M</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">M</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">M</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Colin J. O&#146;Brien</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">M</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">C</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sir Brian Wolfson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">C</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD colspan="3">M = Member</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD colspan="3">C = Chair</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Who is the Chairman of the Board?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sir Brian Wolfson served as the Company&#146;s Chairman of the Board throughout 2005. On March&nbsp;28,
2006, Sir Brian Wolfson resigned as Chairman for personal reasons, became Vice Chairman of the
Board, and Mr.&nbsp;Mason was elected Chairman of the Board. The Chairman of the Board organizes the
work of the Board of Directors and ensures that the Board of Directors has access to sufficient
information to enable the Board of Directors to carry out its functions, including monitoring the
Company&#146;s performance and the performance of management. In carrying out this role, the Chairman,
among other things, presides over all meetings of the Board of Directors and stockholders,
including executive sessions of the Board of Directors in which
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">management directors and other members of management do not participate, establishes the annual
agenda of the Board of Directors and agendas of each meeting in consultation with the President and
oversees the distribution of information to directors.
</DIV>

<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Which directors are considered independent?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has determined that Messrs.&nbsp;Martino, Morris and O&#146;Brien and Sir Brian
Wolfson are independent directors (as independence is defined in the rules of The Nasdaq Stock
Market). In assessing the independence of the directors, the Board of Directors determines whether
or not any director has a material relationship with us (either directly or indirectly as a
partner, stockholder or officer of an organization that has a relationship with us) that would
interfere with the exercise of independent judgment in carrying out the responsibilities of a
director. The Board of Directors considers all relevant facts and circumstances in making
independence determinations, including the existence and scope of any commercial, industrial,
banking, consulting, legal, accounting, charitable and familial relationships.
</DIV>

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>How often did the Board of Directors meet during fiscal 2005?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors met seven times during the fiscal year ended December&nbsp;31, 2005, and
each director attended at least seventy-five percent (75%) of these meetings and the meetings of
the committees of the Board of Directors on which such director served.
</DIV>

<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>What is the role of the Board of Directors&#146; committees?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has standing Audit, Compensation and Nominating Committees, and during
the first quarter of 2006 formed a Search Committee to search for a chief executive officer for the
Company. In August&nbsp;2006, following the appointment of Stephanie S. Hayano as the Company&#146;s
President and Chief Executive Officer, the Search Committee disbanded.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Audit Committee. </B>Randall A. Mason (Chairman), Sir Brian Wolfson and Robert H. Hesse served on
the Audit Committee of the Board of Directors during 2005. Messrs.&nbsp;Mason and Hesse resigned as
members of the Audit Committee in the course of 2005 because they could no longer be considered
&#147;independent&#148; in accordance with applicable rules.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;7, 2005, Anthony B. Martino (Chairman), Terrence M. Morris, and Colin J. O&#146;Brien
were elected to the Board of Directors and appointed to the Audit Committee. At such time, Sir
Brian Wolfson resigned from the Audit Committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has determined that the current members of the Audit Committee are
independent and satisfy the other criteria set forth in the NASDAQ National Market listing
standards and meet the independence requirements contained in Exchange Act Rule&nbsp;10A-3(b)(1). The
Board of Directors has determined that Mr.&nbsp;Martino meets the SEC criteria of an &#147;audit committee
financial expert&#148; and at least one additional member meets the requirements of NASD Marketplace
Rule&nbsp;4350, financial oversight responsibilities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The function of the Audit Committee is set forth in the Audit Committee Charter as approved by
the Board. In general these responsibilities include meeting with the internal
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">financial staff of the Company and the independent public accountants engaged by the Company to
review (i)&nbsp;the scope and findings of the annual audit, (ii)&nbsp;quarterly financial statements, (iii)
accounting policies and procedures and the Company financial reporting and (iv)&nbsp;the internal
controls employed by the Company..
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee is also directly and solely responsible for the appointment, retention,
compensation, oversight and termination of the Company&#146;s independent accountants. In addition, the
Audit Committee will also function as the Company&#146;s Qualified Legal Compliance Committee (the
&#147;QLCC&#148;). The purpose of a QLCC is to receive, retain and investigate reports made directly, or
otherwise made known, of evidence of material violations of any United States federal or state law,
including any breach of fiduciary duty by the Company, its officers, directors, employees or
agents, and if the QLCC believes appropriate, to recommend courses of action to the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee&#146;s findings and recommendations are reported to management and the Board of
Directors for appropriate action
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Compensation Committee. </B>The functions of the Compensation Committee are described below under
the heading &#147;Executive Compensation&#151;Report of the Compensation Committee.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Nominating Committee. </B>The Nominating Committee operates pursuant to a charter approved by our
Board of Directors, a copy of which is posted on our website at www.naturalhealthtrendscorp.com.
The Nominating Committee is comprised of directors who are independent for purposes of the NASDAQ
National Market listing standards. The Nominating Committee considers and makes recommendations to
the Board of Directors with respect to the size and composition of the Board of Directors and
identifies potential candidates to serve as directors. The Nominating Committee identifies
candidates to the Board of Directors by introduction from management, members of the Board of
Directors, employees or other sources and stockholders that satisfy the Company&#146;s policy regarding
stockholder recommended candidates. The Nominating Committee does not evaluate director candidates
recommended by stockholders differently than director candidates recommended by other sources. The
Nominating Committee met once during 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders wishing to submit recommendations for the 2006 annual meeting should write to the
General Counsel c/o Natural Health Trends Corp., 2050 Diplomat Drive, Dallas, Texas 75234. Any
such stockholder must meet and evidence the minimum eligibility requirements specified in Exchange
Act Rule&nbsp;14a-8 and submit, within the same timeframe for submitting a stockholder proposal required
by Rule&nbsp;14a-8: (i)&nbsp;evidence in accordance with Rule&nbsp;14a-8 of compliance with the stockholder
eligibility requirements, (ii)&nbsp;the written consent of the candidate(s) for nomination as a
director, (iii)&nbsp;a resume or other written statement of the qualifications of the candidate(s) for
nomination as a director, and (iv)&nbsp;all information regarding the candidate(s) and the submitting
stockholder that would be required to be disclosed in a proxy statement filed with the SEC if the
candidate(s) were nominated for election to the Board of Directors.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In considering Board of Directors candidates, the Nominating Committee takes into
consideration the Company&#146;s Board Candidate Guidelines (as set forth in the charter of the
Nominating Committee), the Company&#146;s policy regarding stockholder recommended director candidates,
as set forth above, and all other factors that they deem appropriate, including, but not limited
to, the individual&#146;s character, education, experience, knowledge and skills.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, the Nominating Committee has not received a candidate recommendation from any
stockholder (or group of stockholders) that beneficially owns more than five percent of the
Company&#146;s common stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Search Committee. </B>Following the termination of Mark D. Woodburn as the Company&#146;s President,
the Board of Directors formed the Search Committee to identify and consider appropriate candidates
to serve as the Company&#146;s next chief executive officer. Mr.&nbsp;O&#146;Brien served as Chairman and Messrs.
Martino and Mason also served on the Search Committee. The Search Committee did not formally meet
during 2005. In August&nbsp;2006, following the appointment of Stephanie S. Hayano as the Company&#146;s
President and Chief Executive Officer, the Search Committee disbanded.
</DIV>

<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>What is the Executive Management Committee?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;28, 2006, the Board of Directors authorized the formation of the Executive Management
Committee to replace the prior &#147;Office of the Chief Executive.&#148; The Executive Management Committee
was not a Committee of the Board of Directors, but rather was charged with managing the Company&#146;s
day-to-day operations while the Search Committee conducted its search for a chief executive officer
for the Company. The Executive Management Committee, consisted of Curtis Broome, the Company&#146;s
President of NHT Global, Chris Sharng, the Company&#146;s Executive Vice President and Chief Financial
Officer, and John Cavanaugh, the President of the Company&#146;s MarketVision subsidiary, and reported
directly to the Board of Directors. Terrence M. Morris, a member of the Board of Directors
attended Executive Management Committee meetings and acted as a liaison with the Board of Directors
regarding matters addressed by the Executive Management Committee. In August&nbsp;2006, following the
appointment of Ms.&nbsp;Hayano as the Company&#146;s President and Chief Executive Officer, the Executive
Management Committee disbanded.
</DIV>

<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>How are directors compensated?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee directors do not receive compensation for their services as directors. Each
non-employee member of our Board of Directors receives a cash retainer, plus the reimbursement of
their respective out-of-pocket expenses incurred in connection with the performance of their duties
as directors. The cash retainer is payable to each director monthly, with each of Messrs.&nbsp;Martino,
Morris and O&#146;Brien receiving a monthly retainer of $3,333, Sir Brian Wolfson receiving a monthly
retainer of $4,167 and Mr.&nbsp;Mason receiving a monthly retainer of $5,333. Mr.&nbsp;Martino receives an
additional payment of $2,000 per month for services rendered as Chairman of the Audit Committee.
Mr.&nbsp;Morris received an additional payment of $4,000 per month as compensation for his director
duties associated with acting as a liaison between the Executive Management Committee and the Board
of Directors from March&nbsp;28, 2006
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to July&nbsp;28, 2006. Mr.&nbsp;Morris also received $4,000 for assisting the Company&#146;s new Chief Executive
Officer during August&nbsp;2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, the Company issued options to purchase 7,500 shares of common stock to each of Sir
Brian Wolfson and Messrs.&nbsp;Hesse, Mason, Martino, Morris and O&#146;Brien as compensation for serving as
directors of the Company. It is anticipated that following the Company&#146;s stockholders meeting in
November&nbsp;2006, the Company will issue to each of the Company&#146;s non-employee directors options
exercisable for 15,000 shares of common stock at a price per share equal to the fair market value
of the Company&#146;s common stock on the date of grant (as reported by The Nasdaq Stock Market) as
compensation for services rendered as members of the Board.
</DIV>

<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>How do stockholders communicate with the Board of Directors?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders or other interested parties wishing to communicate with the Board of Directors,
the independent directors as a group, or any individual director may do so in writing by sending an
e-mail to the attention of Randall A. Mason, Chairman of the Board, at chairman@nhtglobal.com
Accounting controls and other financial matters will be referred to our Audit Committee
chairperson. Other matters will be referred to the Board of Directors, the independent directors,
or individual directors as appropriate. Stockholders may also have an opportunity to communicate
with board members at the annual meeting, as the Company has a policy encouraging board member
attendance at such meetings. One of the five then serving members of the Board of Directors
attended the Company&#146;s 2005 annual meeting of stockholders.
</DIV>

<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Does the Company have a Code of Ethics?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a Code of Business Conduct and a Code of Ethics for Senior Financial Officers
(collectively, the &#147;Codes&#148;) that apply to our employees, officers (including our principal
executive officer and principal financial officer) and directors. The Codes are intended to
establish standards necessary to deter wrongdoing and to promote compliance with applicable
governmental laws, rules and regulations and honest and ethical conduct. The Codes cover all areas
of professional conduct, including conflicts of interest, fair dealing, financial reporting and
disclosure, protection of Company assets and confidentiality. Employees have an obligation to
promptly report any known or suspected violation of the Codes without fear of retaliation. Waiver
of any provision of the Codes for executive officers and directors may only be granted by the Board
of Directors or one of its committees and any such waiver or modification of the Codes relating to
such individuals will be disclosed by the Company.
</DIV>

<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Certain Relationships and Related Transactions&#151;What related party transactions involved directors,
executive officers or significant stockholders?</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>S&#038;B Business Services</B>. In August&nbsp;2001, the Company entered into a written lease agreement and
an oral management agreement with S&#038;B Business Services, an affiliate of Brad LaCore, the brother
of Terry LaCore, former Chief Executive Officer of Lexxus International, Inc. (&#147;Lexxus U.S.&#148;) and
former director of the Company, and Sherry LaCore, Brad LaCore&#146;s spouse. Under the terms of the two
agreements, S&#038;B Business Services provided warehouse facilities and certain equipment, managed and
shipped inventory, provided independent
</DIV>



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</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">distributor support services and disbursed payments to independent distributors. In
exchange for these services, the Company paid $18,000 annually for leasing the warehouse, $3,600
annually for the lease of warehouse equipment and $120,000 annually for the management services
provided, plus an annual average of approximately $12,000 for business related services. The
Company paid S&#038;B Business Services approximately $150,000, $160,000 and $158,000 during 2003, 2004
and 2005, respectively, and approximately $18,000 during the six month period ended June&nbsp;30, 2006.
The payment disbursement function was transferred to the Company&#146;s Dallas head office during the
third quarter of 2005. In January&nbsp;2006, the Company hired Sherry LaCore as an employee and
simultaneously terminated the oral management agreement with S&#038;B Business Services. Additionally,
the Company to closed the warehouse facility by the end of March&nbsp;2006 and terminated the related
lease agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>William Woodburn</B>. In September&nbsp;2001, the Company entered into an oral consulting agreement
with William Woodburn, the father of Mark Woodburn, former President and director of the Company,
pursuant to which William Woodburn provided the Company with management advice and other advisory
assistance. In exchange for such services, the Company starting June&nbsp;8, 2001 paid to Ohio Valley
Welding, Inc., an affiliate of William Woodburn, $6,250 on a bi-weekly basis. The Company paid
$168,750 and $118,750 during 2003 and 2004, respectively, to Ohio Valley Welding, Inc. The
consulting agreement between the Company and William Woodburn was terminated as of September&nbsp;30,
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Former Controller Payments</B>. The Company&#146;s former controller is married to Mark Woodburn,
former President and director of the Company. Her employment with the Company ended in August&nbsp;2004.
The Company paid her approximately $100,000 in each of the years 2003 and 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>MarketVision</B>. On March&nbsp;31, 2004, the Company entered into a merger agreement with
MarketVision Communications Corporation (&#147;MarketVision&#148;), pursuant to which the Company acquired
all of the outstanding capital stock of MarketVision. As a founding stockholder of MarketVision,
Terry LaCore, former Chief Executive Officer of Lexxus U.S. and former director of the Company,
received 450,000 shares of the Company&#146;s common stock and was entitled to receive approximately
$840,000 plus interest from promissory notes issued by the Company. As a stockholder of
MarketVision, John Cavanaugh received 196,420 shares of the Company&#146;s common stock, cash in the
amount of $1,094,000 and was entitled to receive approximately $1,934,000 plus interest from
promissory notes issued by the Company. In 2005, each of Messrs.&nbsp;LaCore and Cavanaugh received
principal and interest payments under the notes totaling $314,297, and as December&nbsp;31, 2005 no
amounts remained outstanding under the notes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company also entered into a software license agreement (the &#147;Software License Agreement&#148;)
with MarketVision Consulting Group, LLC, an entity owned by the former stockholders of MarketVision
(other than Mr.&nbsp;LaCore) (the &#147;Licensee&#148;). Upon an Event of Default (as defined), the Software
License Agreement grants, among other things, the Licensee with an irrevocable, exclusive,
perpetual, royalty free, fully-paid, worldwide, transferable, sublicensable right and license to
use, copy, modify, distribute, rent, lease, enhance, transfer, market, and create derivative works
to the MarketVision software. An &#147;Event of Default&#148; under the Software License Agreement includes a
&#147;Share Default,&#148; which is defined as the market value per share of the Company failing to equal or
exceed $10.00 per share for any one rolling
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">period of six months for a certain period following the
acquisition of MarketVision. The last time that the Company&#146;s stock closed at or above $10.00 per
share was February&nbsp;16, 2006, and a
Share Default would otherwise have occurred on August&nbsp;17, 2006. In August and September&nbsp;2006,
the parties to the Software License Agreement amended that agreement to provide that no Share
Default will occur prior to October&nbsp;30, 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite the granting of such a license to the Licensee if an Event of Default should occur,
under the Software License Agreement, the Company and MarketVision retain the right to continue to
use the MarketVision software for its internal use only and not as an application service provider
or service bureau, but may not rent, lease, license, transfer or distribute the software without
the Licensee&#146;s prior written consent. Moreover, the Company would have the right to receive certain
application service provider services from Licensee. Although the Company does not believe that an
Event of Default would, by itself, have a material adverse effect on the Company, it is possible
that it could trigger other events that could have such an effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2004 Private Placement</B>. On October&nbsp;6, 2004, certain members of the Company&#146;s board of
directors and certain of the Company&#146;s officers invested approximately $25,000 and purchased 1,984
units upon the same terms and conditions as the other buyers in the private placement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Import Services</B>. A director of the Company&#146;s China subsidiary is the sole director of Access
Int&#146;l (Zhuhai Ftz) Warehousing &#038; Trading Co. Ltd. and its group (collectively, &#147;Access&#148;), a
transportation and logistics company, and the owner of Info Development Ltd. (&#147;Info&#148;), an import
services company, both of which provided services to the Company&#146;s Hong Kong subsidiary. Payments
totaling approximately $5.2&nbsp;million and $0.2&nbsp;million were paid to Access and Info during 2005,
respectively and approximately $382,000 were paid to Acess and Info during the six month period
ended June&nbsp;30, 2006. At June&nbsp;30, 2006, approximately $18,000 was due to Info.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Matters Relating to Messrs.&nbsp;Woodburn and LaCore</B>. On November&nbsp;10, 2005, an independent
investigator retained by the Company&#146;s Audit Committee learned that an entity controlled by Messrs.
Woodburn and LaCore received payments from an independent distributor of the Company&#146;s products
during 2001 through August&nbsp;2005. The Company believes that Messrs.&nbsp;Woodburn and LaCore received
from such independent distributor a total of approximately $1.4&nbsp;million and $1.1&nbsp;million,
respectively. The Company believes that the fees paid by the Company to such independent
distributor were not in excess of the amounts due under the Company&#146;s regular distributor
compensation plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately $2.4&nbsp;million of the funds paid by the independent distributor to Messrs.
Woodburn and LaCore were paid at the direction of Messrs.&nbsp;Woodburn and LaCore to an entity that is
partially owned by Mr.&nbsp;Woodburn&#146;s father and Randall A. Mason, the Company&#146;s current Chairman of
the Board and former Chairman of the Audit Committee. The funds were subsequently paid to an entity
controlled by Messrs.&nbsp;Woodburn and LaCore at their direction. After investigation by the Audit
Committee, the Board of Directors of the Company concluded that Mr.&nbsp;Mason was unaware that these
payments were directed by Messrs.&nbsp;Woodburn and LaCore to an entity partially owned by him until
uncovered by the Audit&#146;s Committee&#146;s
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">independent investigator on November&nbsp;10, 2005, and that Mr.
Mason was not involved in any misconduct and received no pecuniary benefit from the payments made
by the independent
distributor. However, since payments were directed into an entity that is partially owned by
Mr.&nbsp;Mason, he could no longer be considered &#147;independent&#148; in accordance with the rules of The
NASDAQ Stock Market and under the federal securities laws. Therefore, effective November&nbsp;11, 2005,
Mr.&nbsp;Mason resigned as Chairman and a member of the Company&#146;s Audit Committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;14, 2005, in light of the information learned by the Company&#146;s Audit Committee on
November&nbsp;10, 2005, the Company terminated the employment of each of Messrs.&nbsp;Woodburn and LaCore. No
severance has been paid by the Company to Messrs.&nbsp;Woodburn and LaCore.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, a loan made by the Company under the direction of Mr.&nbsp;Woodburn in the aggregate
principal amount of $256,000 in February&nbsp;2004 was previously recorded as a loan to a third party.
On November&nbsp;10, 2005, the Audit Committee investigator learned that the Company actually loaned the
funds to an entity owned and controlled by the parents of Mr.&nbsp;Woodburn. The loan was repaid in
full, partially by an entity controlled by a third party and partially by an entity controlled by
Mr.&nbsp;Woodburn in December&nbsp;2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;10, 2006, the Company entered into an Escrow Agreement (the &#147;Agreement&#148;) with
Messrs.&nbsp;Woodburn and LaCore, the LaCore and Woodburn Partnership, an affiliate of Woodburn and
LaCore, and Krage and Janvey LLP, as escrow agent (the &#147;Agent&#148;). Pursuant to the Agreement, (i)
the Company agreed to issue and deposit with the Agent stock certificates in the name of the Agent
representing an aggregate of 1,081,066 shares of the Company&#146;s common stock (the &#147;Escrowed Shares&#148;)
and (ii)&nbsp;Woodburn and LaCore deposited with the Agent $1,206,000 in immediately available funds
(the &#147;Cash Deposit&#148;). The Escrowed Shares are the shares of common stock issuable upon the
cashless exercise of options issued in 2001 and 2002 to LaCore and the LaCore and Woodburn
Partnership for 1,200,000 shares of common stock exercisable at $1.00 and $1.10 per share. The
number of Escrow Shares is based upon the closing price of the Company&#146;s common stock on February
9, 2006 of $10.14 and the surrender of 118,934 option shares as payment of the aggregate exercise
price of $1,206,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Escrowed Shares were issued pursuant to Section&nbsp;4(2) of the Securities Act of 1933, as
amended, to the Agent upon receipt from the Agent of an irrevocable proxy (the &#147;Proxy&#148;) to the
Company to vote the Escrowed Shares on all matters presented at meetings of stockholders or any
written consent executed in lieu thereof. The parties have agreed that the Agent will hold the
Escrowed Shares and the Cash Deposit until it receives (i)&nbsp;joint written instructions from the
Company, Woodburn and LaCore, or (ii)&nbsp;a final non-appealable order from a court of competent
jurisdiction. Each of the Company and Woodburn and LaCore has further agreed that all current and
future rights, claims, defenses and causes of actions they have or may have against each other are
preserved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;23, 2006, an independent investigator retained by the Audit Committee of the Board of
Directors confirmed that affiliates of immediate family members of Mr.&nbsp;Woodburn have owned since
1998, and continue to own, equity interests in Aloe Commodities (&#147;Aloe&#148;), the largest manufacturer
of the Company and the supplier of the <I>Skindulgence</I>&#174; Line and <I>LaVie</I>&#153; products, representing
approximately 5% of the outstanding shares of Aloe. The Company paid
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Aloe and certain of its
affiliates approximately $2,348,000 and $4,135,000 during the three and six month periods ended
June&nbsp;30, 2005, respectively. The Company paid Aloe and certain of its
affiliates approximately $1,557,000 during the three and six month periods ended June&nbsp;30,
2006. At June&nbsp;30, 2006, approximately $816,000 was due to Aloe and certain of its affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August&nbsp;2006, the Company was advised by the Staff of the Securities and Exchange Commission
that it is conducting an informal inquiry into matters that are the subject of previously disclosed
investigations by the Company&#146;s Audit Committee, including the payments received by two former
officers and directors of the Company from an independent distributor. In connection with the
inquiry, the SEC staff has requested that the Company voluntarily provide it with certain
information and documents, including information gathered by the independent investigator engaged
by the Company&#146;s Audit Committee. The Company intends to cooperate with the SEC inquiry.
</DIV>
<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>REPORT OF THE AUDIT COMMITTEE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The following Report of the Audit Committee does not constitute soliciting material and shall not
be deemed filed or incorporated by reference into any other Company filing under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the
Company specifically incorporates this Report of the Audit Committee by reference therein.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee operates pursuant to a written charter approved by the Board. In 2005,
the Audit Committee met four times. During 2006 the Audit Committee will have met no less than
quarterly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management is responsible for the Company&#146;s internal controls and the financial reporting
process. The Company&#146;s independent public accounting firm, selected each year by the Audit
Committee, with the approval of the Board of Directors, is responsible for performing an
independent audit of the Company&#146;s financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States) and for issuing a report thereon. As
described in the Audit Committee Charter, generally the Audit Committee&#146;s responsibility is to
monitor and oversee these processes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to its other responsibilities under the Audit Committee Charter, the Audit
Committee has reviewed and discussed with management of the Company the Company&#146;s audited financial
statements for the year ended December&nbsp;31, 2005. The Audit Committee has discussed with BDO Seidman
LLP (&#147;BDO&#148;), the Company&#146;s independent public accounting firm for 2005, the matters required to be
discussed by Statement No.&nbsp;61 (Communication with Audit Committees). In addition, the Audit
Committee has received from BDO written affirmation of their independence required by Independence
Standards Board Standard No.&nbsp;1 (Independence Discussions with Audit Committees), and discussed with
the BDO representatives their independence from the Company and its management.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon the review and discussions referred to above, the Audit Committee recommended to
the Board of Directors for the Company that the Company&#146;s audited financial statements be included
in the Company&#146;s Annual Report on Form 10-K for the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Members of the Audit Committee
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Anthony B. Martino (Chairman)<BR>
Terrence M. Morris<BR>
Colin J. O&#146;Brien</I>

</DIV>
<DIV align="left">
<A name="127"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXECUTIVE COMPENSATION</B>
</DIV>

<DIV align="left">
<A name="128"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Report of the Compensation Committee on Executive Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following Report of the Compensation Committee does not constitute soliciting material and
shall not be deemed filed or incorporated by reference into any other Company filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent the Company specifically incorporates this Report of the Compensation Committee by
reference therein.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sir Brian Wolfson (Chairman), Randall A. Mason and Robert H. Hesse served on the Compensation
Committee of the Board of Directors during 2005, although Messrs.&nbsp;Mason and Hesse resigned as
members of the Compensation Committee in the course of 2005 because they could no longer be
considered &#147;independent&#148; in accordance with applicable rules. On December&nbsp;7, 2005, Colin J.
O&#146;Brien (Chairman) and Terrence M. Morris were elected to the Board of Directors and appointed to
the Compensation Committee, and at such time Sir Brian Wolfson resigned from the Compensation
Committee. The Compensation Committee is comprised of directors who are independent for purposes
of the Nasdaq National Market listing standards. The Compensation Committee is primarily
responsible for approving salaries, bonuses and other compensation for the Company&#146;s President and
executive officers, reviewing management recommendations relating to new incentive compensation
plans and changes to existing incentive compensation plans, and administering the Company&#146;s stock
plans, including granting options and setting the terms thereof pursuant to such plans (all subject
to approval by the Board of Directors). During 2005, the Compensation Committee met seven (7)
times.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The Compensation Committee&#146;s Executive Compensation Philosophy</B>. The Compensation Committee&#146;s
goal is to develop executive compensation policies and practices that are consistent with and
linked to the Company&#146;s long term goal of maximizing stockholder value. The program is designed to
facilitate the long-term success and growth of the Company through the attraction, motivation, and
retention of outstanding executives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The objectives of the Company&#146;s executive compensation programs are to: (i)&nbsp;attract and retain
the highest quality executives, (ii)&nbsp;inspire and motivate executive officers to increase Company
performance, (iii)&nbsp;align executive officers&#146; financial interest with those of the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Company&#146;s
long-term investors, and (iv)&nbsp;reward executive officers for exceptional individual contributions to
the achievement of the Company&#146;s objectives.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive compensation consists of three components: base salary, annual incentive bonuses and
long-term incentive awards (stock options). Each compensation component is
offered to executives in varying combinations, structured in each case, to meet varying
business objectives and to provide a level of total compensation comparable to similarly situated
public companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Compensation of the Chief Executive Officer. </B>Mr.&nbsp;Woodburn received salary compensation of
$127,923 in 2005. Effective October&nbsp;3, 2005, Mr.&nbsp;Woodburn was terminated as the Company&#146;s chief
executive officer and Mr.&nbsp;Hesse, a member of the Company&#146;s Board of Directors since July&nbsp;2004, was
appointed the Company&#146;s Interim Chief Executive Officer. On the basis of negotiations between the
Compensation Committee and Mr.&nbsp;Hesse, Mr.&nbsp;Hesse was paid compensation of $2,000 per day during the
remainder of 2005, plus the reimbursement of his out-of-pocket expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Members of the Compensation Committee
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Colin J. O&#146;Brien (Chairman)<BR>
Terrence M. Morris</I>

</DIV>
<DIV align="left">
<A name="129"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Committee Interlocks and Insider Participation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, the following directors served on the Compensation Committee: Sir Brian Wolfson
and Messrs.&nbsp;Mason, Hesse, O&#146;Brien and Morris. No member of our compensation committee is a
current or former officer or employee of the Company or its subsidiaries (except Mr.&nbsp;Hesse, who
served as the Company&#146;s Interim Chief Executive Officer from October&nbsp;3, 2005 to March&nbsp;28, 2006) or
has had a relationship requiring disclosure by the Company under applicable federal securities
regulations. No executive officer of the Company served as a director or member of the
compensation committee of any entity that has one or more executive officers serving as a member of
the Company&#146;s board of directors or compensation committee.
</DIV>
<DIV align="left">
<A name="130"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Executive Officers of the Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain information concerning executive officers of the Company is set forth below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Position(s) with the Company</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stephanie S. Hayano
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Executive Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chris Sharng
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief Financial Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">John Cavanaugh
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President of MarketVision</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Per Ahlund
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">57</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President of Worldwide Supply Chain Management</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Timothy S. Davidson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">36</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Accounting Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Stephanie S. Hayano. </B>Ms.&nbsp;Hayano has been the President and Chief Executive Officer of
the Company since July&nbsp;31, 2006. Previously, she was the president of her own consulting company
since September&nbsp;2004. From January&nbsp;2002 to September&nbsp;2004, Ms.&nbsp;Hayano was
General Manager and Chief Operating Officer of the Personal Care Division of Cosmopolitan
Cosmetics, a $150&nbsp;million division of Proctor &#038; Gamble&#146;s Wella unit. From May&nbsp;1999 to December
2001, Ms.&nbsp;Hayano was Executive Vice President of AM Products, a $120&nbsp;million manufacturer of
value-driven cosmetics products. From 1993 until 1999, Ms.&nbsp;Hayano served as Vice President of
Marketing for Del Laboratories&#146; &#147;Sally Hansen&#148; and &#147;Naturistics&#148; brands.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Chris Sharng. </B>Mr.&nbsp;Sharng has been the Executive Vice President and Chief Financial Officer of
the Company since August&nbsp;2004. Mr.&nbsp;Sharng performed the functions of the principal executive
officer of the Company from April to August&nbsp;2006. From March&nbsp;2004 through July&nbsp;2004, Mr.&nbsp;Sharng
was the Chief Financial Officer of NorthPole Limited, a privately held Hong Kong-based manufacturer
and distributor of outdoor recreational equipment. From October&nbsp;2000 through February&nbsp;2004, Mr.
Sharng was the Senior Vice President and Chief Financial Officer of Ultrak Inc., which changed its
name to American Building Control Inc. in 2002, a Texas-based, publicly traded company listed on
NASDAQ that designed and manufactured security systems and products. From March&nbsp;1989 through July
2000, Mr.&nbsp;Sharng worked at Mattel, Inc., most recently as the Vice President of International
Finance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>John Cavanaugh</B>. Mr.&nbsp;Cavanaugh has been the Chief Executive Officer of MarketVision since its
founding in 2000 and its President after its acquisition by the Company in March&nbsp;2004. From 1997
until 2000, Mr.&nbsp;Cavanaugh was the founder and CEO of WebWizard LLC, an internet application design
company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Per Ahlund</B>. Mr.&nbsp;Ahlund has been Vice-President of Worldwide Supply Chain since November&nbsp;2005.
From April&nbsp;2000 to October&nbsp;2001, Mr.&nbsp;Ahlund was President of Nolato Texas Inc., part of the Nolato
Group, a supplier to the global mobile phone industry. From April&nbsp;2003 to January&nbsp;2004, Mr.&nbsp;Ahlund
was General Manager of Eimo Americas Telecom Business Unit, also a supplier to the global mobile
phone industry. From February&nbsp;2004 to November&nbsp;2005, Mr.&nbsp;Ahlund worked as an independent management
consultant advising multinational companies on operational integration issues. From July&nbsp;1999 to
April&nbsp;2000, Mr.&nbsp;Ahlund was Vice President of InnoVisions Group, a management consulting firm
advising on business development and supply chain management. From October&nbsp;1980 to July&nbsp;1999, Mr.
Ahlund held various senior international supply chain positions with AB SKF, the global bearing
leader with sales of approximately $6&nbsp;billion and with 80 plants in 23 countries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Timothy S. Davidson</B>. Mr.&nbsp;Davidson has been the Company&#146;s Chief Accounting Officer since
September&nbsp;2004. From February&nbsp;2000 to February&nbsp;2001, Mr.&nbsp;Davidson was Manager of Financial
Reporting for a Dallas-based telecommunications company, IP Communications, Inc. From March&nbsp;2001 to
September&nbsp;2004, Mr.&nbsp;Davidson was Corporate Controller for another telecommunications company,
Celion Networks, Inc., located in Richardson, Texas. From December&nbsp;1994 through January&nbsp;2000, Mr.
Davidson was employed by Arthur Andersen, LLP, most recently as an Audit Manager.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="131"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Summary Compensation Table</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the compensation awarded, earned by, or paid to each of the
Company&#146;s Chief Executive Officers serving during 2005, the Company&#146;s four other most highly
compensated executive officers who were serving in such capacity at the end of 2005 and one other
executive officer who served during 2005 (the &#147;Named Executive Officers&#148;):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>LONG-TERM</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>ANNUAL COMPENSATION</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>COMPENSATION AWARDS</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Name and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other Annual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities Underlying</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Salary($)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Bonus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Options(#)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert H. Hesse</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">146,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interim Chief Executive</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Officer (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John Cavanaugh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">193,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">11,662 </TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">President of</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">147,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">253,580</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MarketVision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chris Sharng</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">238,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Vice President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">92,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,124</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">and Chief Financial Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Richard S. Johnson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">480,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">President of NHT Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">73,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">294,494</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Keith C. Zagar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">180,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Former General Counsel and</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ethics and
Compliance Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark D. Woodburn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">127,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Former President (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4,000 </TD>
    <TD nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Terry A. LaCore</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">138,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">16,823</TD>
    <TD nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Former Chief Executive</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">150,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">24,000</TD>
    <TD nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Officer of Lexxus U.S. (6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">144,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">24,000</TD>
    <TD nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Excludes all compensation awarded to Mr.&nbsp;Hesse in his capacity as a director of the
Company, for which he received cash retainer payments of $36,667 in 2005, the reimbursement of
$20,000 in expenses and options to purchase 7,500 shares of the Company&#146;s common stock. The
&#147;Other Annual Compensation&#148; amount pertains to apartment and other expenses paid by the
Company. Mr.&nbsp;Hesse ceased to serve as the Interim Chief Executive Officer of the Company
effective March&nbsp;28, 2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Bonus earned by Mr.&nbsp;Cavanaugh, but may be used by Mr.&nbsp;Cavanaugh as an incentive fund for some
MarketVision employees.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Amount pertaining to a Japanese housing allowance ($101,598), automobile use ($14,900),
driver ($39,533), club dues and fees ($13,363) and Japanese / U.S. tax equalization
($125,100).</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Woodburn was President of the Company from January&nbsp;1, 2005, to October&nbsp;3, 2005, and
Global Managing Director &#150; Operations from October&nbsp;3, 2005 to November&nbsp;10, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Approximate amount pertaining to personal travel expenses paid by the Company.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;LaCore was Chief Executive Officer of Lexxus U.S. from January&nbsp;1, 2005, to October&nbsp;3,
2005, and Global Managing Director &#150; Business Development from October&nbsp;3, 2005 to November&nbsp;10,
2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Pertains to a housing allowance for a house maintained for Mr.&nbsp;LaCore&#146;s use in Dallas, Texas.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Approximate amount pertaining to a housing allowance for a house maintained for Mr.&nbsp;LaCore&#146;s
use in Dallas, Texas ($14,000) and personal travel expenses paid by the Company ($10,000).</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="132"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Option Grants in Last Fiscal Year</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding options granted to each Named Executive
Officer during 2005 and the values of such options held by such individuals at fiscal year end:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>% of Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Potential Realizable Value</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>At Assumed Annual Rates</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Granted to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Of Stock Appreciation for</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Date of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Employees in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Option Term (1)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Grant</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Granted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>$/Share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>5%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>10%</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert H. Hesse</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/31/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">12.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/31/10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">82,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">183,336</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/31/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/31/10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,834</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John Cavanaugh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/25/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/25/10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,078</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chris Sharng</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/31/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/31/10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,668</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/25/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/25/10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,129</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Richard S. Johnson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/31/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/31/10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,668</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Keith C. Zagar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark D. Woodburn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Terry A. LaCore</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The amounts under these columns reflect calculations at assumed 5% and 10% appreciation rates
and, therefore, are not intended to forecast future appreciation, if any, of the respective
underlying common stock. The potential realizable value to the optionees was computed as the
difference between the appreciated value, at the expiration dates of the stock options, of the
applicable underlying common stock obtainable upon exercise of such stock options over the
aggregate exercise price of such stock options.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Stock options vest annually over a three year period.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Stock options vest in full on date of grant.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left">
<A name="133"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No options to purchase shares of the Company&#146;s common stock were exercised by the named
executive officers in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information concerning the exercise of stock options during the
year ended December&nbsp;31, 2005 by the Named Executive Officers and the number and aggregate value of
unexercised in-the-money options for stock options at December&nbsp;31, 2005. The actual amount, if any,
realized on exercise of stock options will depend on the amount by which the market price of the
Company&#146;s common stock on the date of exercise exceeds the exercise price. The actual value
realized on the exercise of unexercised in-the-money stock options (whether exercisable or
unexercisable) may be higher or lower than the values reflected in this table.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Number of Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Value of Unexercised in the</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Underlying Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Money Options at</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Options at FY-End (#)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>FY-End ($) (1)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Acquired on</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Value</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercise(#)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Realized ($)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Unexercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Unexercisable</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert H. Hesse</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size:10pt"><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John Cavanaugh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">253,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size:10pt"><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chris Sharng</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size:10pt"><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Richard S. Johnson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size:10pt"><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Keith C. Zagar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size:10pt"><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark D. Woodburn(2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">600,000 </TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,187,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size:10pt"><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Terry A. LaCore(2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="white-space: nowrap">1,200,000</FONT></TD>
    <TD nowrap>(2) (3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,374,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Based upon a closing price on December&nbsp;30, 2005 of $9.65 per share as reported on the Nasdaq
National Market.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 600,000 options held by the LaCore and Woodburn Partnership, a general partnership
owned by Messrs.&nbsp;Woodburn and LaCore. These options were exercised in February&nbsp;2006 and
placed in escrow with a third party. See &#147;Governance of the Company &#150; Certain Relationships
and Related Transactions....&#148;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 600,000 options held by Mr.&nbsp;LaCore that were exercised in February&nbsp;2006 and placed
in escrow with a third party. See &#147;Governance of the Company &#150; Certain Relationships and
Related Transactions....&#148;</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="134"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Equity Compensation Plan Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information as of December&nbsp;31, 2005 with respect to the Company&#146;s
common stock that may be issued under its existing equity compensation plans. The table shows the
number of securities to be issued under compensation plans that have been approved by stockholders
and those that have not been so approved. The footnotes and other
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt;margin-left:4%">information following the table are intended to provide additional detail on the compensation
plans.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(a)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(b)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(c)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of securities to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of securities remaining</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>be issued upon exercise of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise price of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>available for future issuance under</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>outstanding options,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>outstanding options,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>equity compensation plans (excluding</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Plan category</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>warrants and rights</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>warrants and rights</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>securities reflected in column (a))</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans or
arrangements
approved by
security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">592,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">957,876</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans or
arrangements not
approved by
security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,330,000</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,922,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">957,876</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>On June&nbsp;1, 2005, an amendment was approved by the Company&#146;s stockholders which increased
the number of shares of common stock reserved under the 2002 Stock Option Plan to 1,550,000
shares.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;options exercisable for 570,000 shares of common stock issued to the LaCore and
Woodburn Partnership, (ii)&nbsp;options exercisable for 570,000 shares of common stock issued to
Mr.&nbsp;LaCore, (iii)&nbsp;options exercisable for 30,000 shares of common stock issued to Benchmark
Consulting Group (which was subsequently assigned to the LaCore and Woodburn Partnership),
(iv)&nbsp;options exercisable for 30,000 shares of common stock issued to Mr.&nbsp;LaCore, (v)&nbsp;options
exercisable for 125,000 shares of common stock issued to certain employees and members of the
Company&#146;s board of directors, and (vi)&nbsp;options exercisable for 5,000 shares of common stock
issued to an unrelated party. See &#147;Governance &#150; Certain Relationships and Related
Transactions...&#148; regarding the exercise in February&nbsp;2006 of stock options issued to the LaCore
and Woodburn Partnership and to Mr.&nbsp;LaCore.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="135"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left:4%"><B>Employment Agreements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left:4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Stephanie S. Hayano. </B>On July&nbsp;31, 2006, the Company entered into a letter agreement (the
&#147;Hayano Agreement&#148;) with Stephanie Hayano pursuant to which Ms.&nbsp;Hayano agreed to serve as the
President and Chief Executive Officer of the Company and to serve on the Company&#146;s Board of
Directors. Under the Agreement, the Company agreed to pay Ms.&nbsp;Hayano an annual base salary of
$300,000 plus an annual bonus equal to 50% of her base salary if certain annual performance goals
for the Company are achieved. However, for fiscal 2006, the Company has agreed to pay Ms.&nbsp;Hayano
an annual bonus equal to $62,500. In addition, the Company has agreed to pay a temporary living
allowance equal to $5,000 per month through January&nbsp;31, 2007, or until she relocates to the Dallas
metropolitan area, whichever is sooner. Ms.&nbsp;Hayano has also been granted options to purchase
150,000 shares of the Company&#146;s common stock at an exercise price of $2.79 per share (the closing
price on The Nasdaq Stock Market on July&nbsp;31, 2006, the date of grant). The options vest in equal
annual installments over a 3&nbsp;year period commencing on July&nbsp;31, 2007 and expire on July&nbsp;31, 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left:4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following Ms.&nbsp;Hayano&#146;s relocation to the Dallas metropolitan area, she will be entitled to
severance in the event that her employment is terminated by the Company without Cause (as defined
in the Agreement) or in connection with a Change of Control (as defined in the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Agreement). She is also entitled to severance in the event that she terminates her employment
for Good Reason (as defined in the agreement). Ms.&nbsp;Hayano shall receive as severance the
continuation of her base salary for up to two (2)&nbsp;years for a termination without Cause or for Good
Reason, and up to three (3)&nbsp;years for a termination in connection with a Change of Control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Company and Ms.&nbsp;Hayano entered into a Non-Competition and Proprietary Rights
Assignment Agreement dated July&nbsp;31, 2006 pursuant to which Ms.&nbsp;Hayano has agreed (i)&nbsp;to keep
certain Company information confidential, (ii)&nbsp;to assign the rights to certain work product to the
Company, (iii)&nbsp;not to compete with the Company during the term of her employment and for six (6)
months thereafter, and (iv)&nbsp;not to solicit Company customers or distributors during the term of her
employment and for twelve (12)&nbsp;months thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Robert H. Hesse. </B>Immediately following the termination of Mark Woodburn as the Company&#146;s
President on October&nbsp;3, 2005, and pursuant to negotiations with the Compensation Committee, Robert
H. Hesse commenced serving as the Company&#146;s Interim Chief Executive Officer and received $2,000 per
day compensation, plus the reimbursement of all out-of-pocket expenses. On March&nbsp;10, 2006, the
Company entered into a letter agreement dated March&nbsp;1, 2006 with Mr.&nbsp;Hesse pursuant to which Mr.
Hesse agreed to continue acting as the Interim Chief Executive Officer of the Company. In addition
to continuing his base pay of $2,000 per day, the Company agreed to pay Mr.&nbsp;Hesse a retention bonus
equal to $300,000, of which $150,000 was due and payable upon executing the letter agreement and
$150,000 was due within 5&nbsp;days after satisfactory completion of Mr.&nbsp;Hesse&#146;s term as Interim Chief
Executive Officer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;28, 2006, the Board of Directors and Mr.&nbsp;Hesse mutually agreed that Mr.&nbsp;Hesse had
completed his assignment as the Interim Chief Executive Officer of the Company, effective
immediately. On May&nbsp;5, 2006, the Company paid $150,000 to Mr.&nbsp;Hesse as provided in the
above-referenced letter agreement. Mr.&nbsp;Hesse has released the Company from all other obligations
under that letter agreement and, effective May&nbsp;5, 2006, resigned from the Company&#146;s Board of
Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Chris Sharng. </B>In June&nbsp;2004, the Company entered into an employment agreement with Chris
Sharng pursuant to which Mr.&nbsp;Sharng agreed to serve as the Company&#146;s Executive Vice President and
Chief Financial Officer. The term of Mr.&nbsp;Sharng&#146;s employment commenced on August&nbsp;1, 2004 and ends
on December&nbsp;31, 2007. The Company agreed to pay Mr.&nbsp;Sharng an annual base salary of $230,000, for
the first year of the term and a base salary of $250,000 thereafter. Pursuant to the agreement,
Mr.&nbsp;Sharng received options under the Company&#146;s 2002 Stock Plan to purchase 34,124 shares of Common
Stock at an exercise price equal to $11.40 per share, the closing market price on the date of
grant. These options vest beginning with 4,992 options vesting on January&nbsp;31, 2005, and 832
options vesting monthly thereafter. In addition, Mr.&nbsp;Sharng is entitled to receive a performance
bonus based upon the performance of his duties and the Company&#146;s financial performance as
determined by the Company&#146;s Compensation Committee or Board of Directors. However, for the years
ending December&nbsp;31, 2004 and 2005, Mr.&nbsp;Sharng was entitled to receive a bonus of not less than
$50,000. A bonus amount of $50,000 for the year ending December&nbsp;31, 2005 was paid in April&nbsp;2006. .
The employment agreement provides that in the event of the termination of Mr.&nbsp;Sharng&#146;s employment
under certain circumstances, he is entitled to severance equal to his base salary for a 12-month
period; provided, that in the event of the termination of Mr.&nbsp;Sharng&#146;s employment following a
change in
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">control of the Company, he is entitled to a payment equal to the greater of his base salary
through the end of the term of his employment agreement or his base salary covering a period of 24
months. The employment agreement contains other customary terms and conditions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>John Cavanaugh. </B>In connection with the Company&#146;s acquisition of MarketVision in March&nbsp;2004,
an employment agreement was executed with John Cavanaugh for a term of three years. The employment
agreement provides that Mr.&nbsp;Cavanaugh will serve as President of MarketVision and provided Mr.
Cavanaugh with an annual salary of $193,000, as well as options to purchase 253,580 shares of the
Company&#146;s common stock at an exercise price of $18.11 per share, which represented market value at
the time of the closing of the acquisition of MarketVision. The employment agreement provides that
in the event of the termination of Mr.&nbsp;Cavanaugh&#146;s employment under certain circumstances, he is
entitled to severance equal to the lesser of his base salary through the end of the term of the
employment agreement or his base salary for a 12-month period. The employment agreement contains
customary terms including confidentiality and non-competition provisions. In October&nbsp;2006, the
Company agreed to amend Mr.&nbsp;Cavanaugh&#146;s employment agreement to provide for the following: (i)&nbsp;an
additional term of three (3)&nbsp;years; (ii)&nbsp;terms and conditions regarding the payment of severance
similar to those provided to Ms.&nbsp;Hayano (including the payment of severance upon a Change of
Control (to be defined); (iii)&nbsp;a 3% annual increase in base salary assuming satisfactory
performance by Mr.&nbsp;Cavanaugh; (iv)&nbsp;annual participation in the Company&#146;s bonus plan commencing in
fiscal 2006; (v)&nbsp;new non-competition and non-solicitation provisions similar to those executed by
Ms.&nbsp;Hayano; and (vi)&nbsp;the payment to Mr.&nbsp;Cavanaugh of a retention bonus equal to $88,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Richard Johnson. </B>As of November&nbsp;1, 2004, the Company and NHT Japan entered into an employment
agreement with Richard Johnson pursuant to which Mr.&nbsp;Johnson agreed to serve as the Company&#146;s
President &#151; Japan and as the Representative Director of NHT Japan. Under the terms of this
employment agreement, the Company had agreed to pay Mr.&nbsp;Johnson an annual base salary of $480,000,
a performance bonus in accordance with the Company&#146;s bonus program and certain other of Mr.
Johnson&#146;s expenses. On March&nbsp;16, 2006, Mr.&nbsp;Johnson, the Company and NHT Japan amended Mr.
Johnson&#146;s employment agreement effective as of February&nbsp;1, 2006. As amended, the employment
agreement is extended through January&nbsp;31, 2009. Under the amended employment agreement, Mr.&nbsp;Johnson
will continue to serve as President of NHT Japan and will provide advice and services to the
Company, as requested. For health reasons, Mr.&nbsp;Johnson will reside in the U.S. and is expected to
work a reduced number of hours. He will be compensated by the Company under the amended employment
agreement at the rate of $2,000 per day with a minimum of $16,000 per quarter (or $64,000 per
year). Under the amended employment agreement, the Company will issue to Mr.&nbsp;Johnson options
exercisable for 8,000 shares of the Company&#146;s common stock during each year of the term of the
consulting agreement. The options shall be exercisable at a price equal to the fair market value of
the shares of common stock on the date of grant and will be issued pursuant to the Company&#146;s 2002
Stock Plan. The Company has also agreed to reimburse Mr.&nbsp;Johnson for business related expenses.
</DIV>
<DIV align="left">
<A name="136"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COMPARISON OF CUMULATIVE TOTAL RETURN</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following graph compares the performance of the Company&#146;s common stock with the
performance of the Nasdaq Stock Market (U.S. and Foreign)(&#147;the Nasdaq Index&#148;) and a peer group
index over the five-year period extending through the fiscal year ending December&nbsp;31,
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2005. The graph assumes that $100 was invested on December&nbsp;31, 2000 in the Company&#146;s common stock,
the Nasdaq Index and the peer group index and that all dividends, as applicable, were reinvested.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The peer group index is a self-determined group of companies and consists of companies engaged
in the direct selling business that were selected by the Company. These peer group companies are:
AMS Health Sciences Inc., Mannatech Inc., Herbalife Ltd., Nu Skin Enterprises Inc., Reliv
International Inc., and USANA Health Sciences Inc.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Comparison of Five &#151; Year Cumulative Total Returns<BR>
Performance Graph for<BR>
Natural Health Trends Corp.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Produced on 04/17/2006 including data to 12/30/2005
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="d39989dd3998901.gif" alt="(PERFORMANCE GRAPH)">
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="137"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ITEM ONE</B>
</DIV>

<DIV align="left">
<A name="137"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ELECTION OF DIRECTORS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Company&#146;s bylaws, the number of directors shall not be less than 3 nor more than 11,
with the exact number fixed from time to time by action of the stockholders or of the directors.
The Company&#146;s board presently consists of six (6)&nbsp;directors whose term expires at the annual
meeting. Officers are elected annually by and serve at the discretion of the Board of Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Nominating Committee of the Board of Directors has recommended, and the Board of Directors
has nominated, each of the six (6)&nbsp;nominees set forth below to serve as a director until the next
annual meeting of the Company&#146;s stockholders or until his successor is duly elected and qualified.
It should be noted that Stephanie Hayano, the Company&#146;s President and Chief Executive Officer, has
agreed to resign as a member of the Company&#146;s Board of Directors if she is no longer employed by
the Company as its President and Chief Executive Officer. Biographical summaries of the six (6)
persons who have been nominated to stand for election at the annual meeting are provided below for
your information. The Board of Directors recommends that these persons be elected at the annual
meeting to serve until the next annual meeting of stockholders. Proxies will be voted for the
election of the six (6)&nbsp;nominees listed below as directors of the Company unless otherwise
specified on the proxy. A plurality of the votes cast by holders of Common Stock present in person
or represented by proxy at the annual meeting will be necessary to elect the directors listed
below. If, for any reason, any of the nominees shall be unable or unwilling to serve, the proxies
will be voted for a substitute nominee who will be designated by the Board of Directors at the
annual meeting. Stockholders may withhold authority from voting for one or more nominees by
marking the appropriate boxes on the enclosed proxy card. Withheld votes shall be counted
separately and shall be used for purposes of calculating whether a quorum is present at the
meeting.
</DIV>
<DIV align="left">
<A name="138"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Biographical Summaries of Nominees for the Board of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Stephanie S. Hayano. </B>Ms.&nbsp;Hayano has been the President and Chief Executive Officer of the
Company since July&nbsp;31, 2006. Previously, she was the president of her own consulting company since
September&nbsp;2004. From January&nbsp;2002 to September&nbsp;2004, Ms.&nbsp;Hayano was general manager and Chief
Operating Officer of the Personal Care Division of Cosmopolitan Cosmetics, a $150&nbsp;million division
of Proctor &#038; Gamble&#146;s Wella unit. From May&nbsp;1999 to December&nbsp;2001, Ms.&nbsp;Hayano was Executive Vice
President of AM Products, a $120&nbsp;million manufacturer of value-driven cosmetics products. From 1993
until 1999, Ms.&nbsp;Hayano served as Vice President of Marketing for Del Laboratories&#146; &#147;Sally Hansen&#148;
and &#147;Naturistics&#148; brands. Ms.&nbsp;Hayano graduated from Cornell University with Bachelor of Arts degree
in Physics.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Randall A. Mason. </B>Mr.&nbsp;Mason has been a director of the Company since May&nbsp;2003 and has served
as Chairman of the Board of Directors since March&nbsp;2006. Mr.&nbsp;Mason has served as Chief Executive
Officer of Marden Rehabilitation Associates, Inc. since 1989.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Marden Rehabilitation Associates, Inc. is a private, closely held regional ancillary healthcare services provider in the states of
Ohio, W. Virginia, and Pennsylvania.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Anthony B. Martino. </B>Mr.&nbsp;Martino has served as a director of the Company since December&nbsp;2005.
Mr.&nbsp;Martino is currently Chairman of the Audit Committee of the Dormitory Authority of the State of
New York, a position appointed by the Governor of the State of New York. From 1965 to 1976, Mr.
Martino was a certified public accountant with Price Waterhouse. From 1976 to 2000, Mr.&nbsp;Martino was
a partner with Lumsden &#038; McCormick, LLP, a certified public accounting firm. From 2000 to 2002, Mr.
Martino was an Investment Advisor with Barlar Management Company, an investment firm specializing
in oil and gas investments. Mr.&nbsp;Martino is member of several boards of directors, including the
regional board of Key Bank, the Buffalo Niagara Medical Campus, the Mount Calvary Cemetery, Cradle
Beach Camp, and the Kelly for Kids Foundation. Mr.&nbsp;Martino is a member of the American Institute of
Certified Public Accountants and the New York State Society of Certified Public Accountants. He
earned a bachelors of science degree in accounting from the University of Buffalo.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Terrence M. Morris. </B>Mr.&nbsp;Morris has served as a director of the Company since December&nbsp;2005.
Mr.&nbsp;Morris was a founder and Managing Director of Morningside Ventures, a $200 plus million venture
capital fund, from 1987 to 2002. From 1984 to 1987, Mr.&nbsp;Morris worked at Bay Partners, a venture
capital firm. From 1980 to 1984, Mr.&nbsp;Morris was a consultant with Boston Consulting Group, Inc., a
large, full-service international consulting firm. From 1977 to 1980, Mr.&nbsp;Morris held a variety of
positions with Baxter International, Inc. a global healthcare company. Mr.&nbsp;Morris is on the Board
of Trustees of Marietta College and previously served as a member of the boards of directors of
Family Education Network, Cell Therapeutics, and Dendreon Corporation. Mr.&nbsp;Morris earned a bachelor
of science in physics from Marietta College, a PhD in electrical engineering from the California
Institute of Technology, and a MBA in finance from the Harvard Business School.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Colin J. O&#146;Brien. </B>Mr.&nbsp;O&#146;Brien has served as a director of the Company since December&nbsp;2005.
Mr.&nbsp;O&#146;Brien has been retired since 2001. Mr.&nbsp;O&#146;Brien was employed in various positions with Xerox
Corporation from February&nbsp;1992 to January&nbsp;2001, including Vice President of Business Development
and Systems Strategy, and Chief Executive Officer of Xerox&#146;s New Enterprise Board and Executive
Chairman of XESystems, Inc., a subsidiary of Xerox. In 1986, Mr.&nbsp;O&#146;Brien formed an investment
company with E.M. Warburg Pincus &#038; Co. Inc., making a number of acquisitions in defense
electronics. Prior to that time, Mr.&nbsp;O&#146;Brien served as Chairman and Chief Executive of Times Fiber
Communications, Inc., a publicly traded telecommunications equipment company, and as President of
General Instrument&#146;s cable television operations. He has held management positions with Union
Carbide in both Canada and Europe. From September&nbsp;2000 until September&nbsp;2005, Mr.&nbsp;O&#146;Brien was a
director of Scientific Games Corporation, a Nasdaq listed company that provides services, systems,
and products to the lottery industry, and since February&nbsp;2003 served as Chairman of its Audit
Committee. Mr.&nbsp;O&#146;Brien is currently a director of Kepner-Tregoe Inc., a global consulting and
training services firm, and Document Sciences Corporation, a Nasdaq listed software developer. Mr.
O&#146;Brien received a Bachelor of Sciences degree in Chemical Engineering from the University of New
South Wales, Australia.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Sir Brian Wolfson. </B>Sir Brian Wolfson has served as Vice Chairman of the Board since March
2006, and served as Chairman of the Board from May&nbsp;2003 to March&nbsp;2006 and from 1998 to 2000. Sir
Brian Wolfson served as Chairman of the Board of Wembley PLC from 1986 to 1995. He was a director
of Fruit of the Loom, Inc. from 1992 until 2002, while serving as the Chairman of the Board from
2000 until 2002. Currently, Sir Brian Wolfson is a
director of Kepner-Tregoe, Inc., a global consulting and training services firm, and
Scientific Games Corporation, a Nasdaq listed company that provides services, systems, and products
to the lottery industry.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The Board of Directors recommends that stockholders vote &#147;FOR&#148; each of the persons nominated by the
Board of Directors. Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the above listed nominees and AGAINST any other
nominees.</B>
</DIV>

<DIV align="left">
<A name="139"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ITEM TWO</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>APPOINTMENT OF LANE GORMAN TRUBITT, L.L.P. AS INDEPENDENT</B><br> <U><B>AUDITORS FOR THE COMPANY FOR FISCAL
YEAR ENDING DECEMBER 31, 2006</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company changed its independent registered public accounting firm as of September&nbsp;7, 2006
from BDO Seidman, LLP(&#147;BDO&#148;) to Lane Gorman Trubitt, L.L.P. (&#147;Lane Gorman&#148;). In July&nbsp;2006, the
Audit Committee of the Company&#146;s Board of Directors issued a request for proposals to four (4)
independent registered public accounting firms, including BDO. On September&nbsp;7, 2006, the Audit
Committee with the approval of the Company&#146;s Board of Directors selected Lane Gorman as its
independent registered public accounting firm.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The reports of BDO on the combined consolidated financial statements of the Company for the
Company&#146;s fiscal years ended December&nbsp;31, 2005 and 2004 contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting
principle. However, the opinion did contain an emphasis of a matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the Company&#146;s fiscal years ended December&nbsp;31, 2005 and 2004, and through September&nbsp;7,
2006, there were no disagreements with BDO on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of BDO, would have caused BDO to make reference thereto in its reports
on the Company&#146;s financial statements for such years
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no &#147;reportable events&#148; described in Item&nbsp;304(a)(1)(v) of Regulation&nbsp;S-K
(&#147;Regulation&nbsp;S-K&#148;) during the Company&#146;s fiscal years ended December&nbsp;31, 2005 and 2004, and through
September&nbsp;7, 2006, except for the existence of certain previously reported material weaknesses in
the Company&#146;s internal control over financial reporting which are described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A material weakness is a control deficiency or a combination of control deficiencies that
results in more than a remote likelihood that a material misstatement of the annual or interim
consolidated financial statements will not be prevented or detected. As previously reported and
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">discussed in Item&nbsp;4, &#147;Controls and Procedures,&#148; in the Company&#146;s Quarterly Report on Form 10-Q for
the quarter ended June&nbsp;30, 2006, in connection with BDO&#146;s audits of the Company&#146;s consolidated
financial statements for the fiscal year ended December&nbsp;31, 2005, the following material weaknesses
in our internal control over financial reporting were reported in our 2005 Annual Report on Form
10-K filed with the United States Securities and Exchange Commission on May&nbsp;8, 2006:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> We did not maintain an effective control environment because (1)&nbsp;we lack an effective
anti-fraud program to detect and prevent fraud, for example, relating to the previous top two
executive officers of the Company, Mark Woodburn and Terry LaCore, in terms of (i)&nbsp;conflicts of
interests related to executive officers, especially their financial dealings with independent
distributors and other vendors, and (ii)&nbsp;proper supervision of the executives conduct separating
their executive duties from personal financial interests outside the Company, (2)&nbsp;we failed to
perform background checks consistently on personnel being placed into positions of responsibility,
(3)&nbsp;an adequate tone was not set from the top as control measures in place were ignored by the
previous top two executives and the importance of controls was not properly emphasized and
communicated throughout the Company and (4)&nbsp;we did not effectively address the control
deficiencies noted in the fiscal year 2004 external audit;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> We did not maintain effective monitoring controls over financial reporting because (1)
our policies regarding review, supervision and monitoring of our accounting operations throughout
the Company were not fully designed, in place, or operating effectively and (2)&nbsp;we do not have an
internal audit function;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> We did not maintain effective control over period-end financial close and reporting
because (1)&nbsp;we lacked sufficient complement of personnel with an appropriate level of accounting
knowledge, experience and training in the application of GAAP commensurate with our financial
reporting requirements to prepare, review and approve account reconciliations and supporting
schedules, and (2)&nbsp;our legacy accounting systems do not facilitate the appropriate review and
approval over the recording of journal entries to ensure the accuracy and completeness of the
journal entries recorded;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> We did not maintain effective controls over the disbursement function since we (1)
lacked adequate segregation of duties and (2)&nbsp;lacked appropriate review, approval, and supporting
documentation;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> We did not maintain effective controls over the payroll function since we (1)&nbsp;lacked
adequate segregation of duties and (2)&nbsp;lacked appropriate review, approval, and supporting
documentation;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> We did not maintain effective controls over the inventory function since we (1)&nbsp;did
not maintain restricted access to the inventory detail schedule used to support the general ledger
balances and (2)&nbsp;used the periodic inventory system and performed monthly inventory counts using
physical inventory count sheets lacking reviewer documentation;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> We lacked documentation with respect to certain related party transactions,
subsidiary operations and expense reimbursement procedures. In addition, sufficient
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">policies regarding loans to employees and third parties had not been adopted or implemented, and policies
related to independent distributor relationships were inadequate;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> We lacked timely resolution of identified accounting and legal issues, and as a
result, did not timely complete period-end financial statements and reporting; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> We do not have all material contracts in writing and approved by all parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee of the Company&#146;s Board of Directors discussed the material weaknesses
described above with BDO, and the Company has authorized BDO to respond fully
to the inquiries of its successor independent registered public accounting firm, Lane Gorman,
concerning the subject matter of the material weaknesses described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BDO has furnished a letter addressed o the Securities and Exchange Commission (the &#147;SEC&#148;)
stating that BDO agrees with the statements made by the Company set forth above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;7, 2006, the Audit Committee of the Company&#146;s Board of Directors engaged Lane
Gorman as the Company&#146;s new independent registered public accounting firm. The Company has not
consulted with Lane Gorman on any matter described in Item&nbsp;304(a)(2) of Regulation&nbsp;S-K during the
Company&#146;s fiscal years ended December&nbsp;31, 2005 and 2006, and through September&nbsp;7, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has appointed Lane Gorman as the Company&#146;s independent auditors for the
fiscal year ending December&nbsp;31, 2006. Representatives of Lane Gorman are expected to be present at
the annual meeting to respond to questions and to make a statement should they so desire.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The affirmative vote of a majority of the shares of Common Stock represented at the meeting
and entitled to vote is required for the ratification of the appointment of Lane Gorman as the
Company&#146;s independent auditors. The Audit Committee is directly responsible for the appointment
and retention of the Company&#146;s independent auditors. Although ratification by stockholders is not
required by the Company&#146;s organizational documents or applicable law, the Audit Committee has
determined that requesting ratification by stockholders of its appointment of Lane Gorman as the
Company&#146;s independent auditors is a matter of good corporate practice. If the Company&#146;s
stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to
retain Lane Gorman, but may still determine to retain them. Even if the selection is ratified, the
Audit Committee, in its discretion, may change the appointment at any time during the year if it
determines that such a change would be in the best interest of the Company and its stockholders.
</DIV>
<DIV align="left">
<A name="140"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit and Other Professional Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the fiscal years ended December&nbsp;31, 2004 and 2005, approximate fees billed to the
Company for services provided by BDO Seidman LLP were as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Audit Fees. </B>Fees billed to the Company by BDO Seidman, LLP for the audit of our
annual financial statements and the review of our quarterly financial statements for the years
ended December&nbsp;31, 2004 and 2005 totaled approximately $330,000 and $709,000, respectively.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Audit-Related Fees</B>. Fees billed to the Company by BDO Seidman, LLP for audit-related services
include services relating to assurance and associated services that traditionally are performed by
the principal accountant, including attest services that are not required by statute or regulation,
accounting consultation and audits in connection with mergers, acquisitions and divestitures,
employee benefit plan audits, and consultation regarding financial accounting and reporting
standards. Aggregate audit-related fees billed to the Company by BDO Seidman during the years ended
December&nbsp;31, 2004 and 2005 totaled approximately $98,000 and $38,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Tax Fees</B>. The aggregate fees billed to the Company by BDO Seidman, LLP for services
rendered in connection with tax compliance, planning and advice during the years ended December&nbsp;31,
2004 and 2005 totaled approximately $158,000 and $330,000, respectively .
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>All Other Fees. </B>There were no fees billed by BDO Seidman, LLP for services other
than audit fees, audit-related fees or tax fees during the years ended December&nbsp;31, 2004, but for
the year ended December&nbsp;31, 2005 fees totaling $64,000 were billed relating to a registration
statement.
</DIV>
<DIV align="left">
<A name="141"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-approval Policies and Procedures for Audit and Non-audit Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consistent with the Audit Committee&#146;s responsibility for engaging our independent auditors,
all audit and permitted non-audit services require pre-approval by the Audit Committee. All audit
and permitted non-audit services performed by BDO Seidman, LLP during 2004 and 2005 were
pre-approved.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The Board of Directors recommends that stockholders vote &#147;FOR&#148; the ratification of the appointment
of Lane Gorman Trubitt, L.L.P. as independent public auditors for the Company for the
fiscal year ended December&nbsp;31, 2006. Unless marked to the contrary, proxies received from
stockholders will be voted in favor of the ratification of the appointment of Lane Gorman Trubitt,
L.L.P. as independent public auditors for the Company for the fiscal year ended December&nbsp;31, 2006.</B>
</DIV>

<DIV align="left">
<A name="142"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ITEM THREE</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>APPROVAL OF 2007 ANNUAL INCENTIVE PLAN</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;4, 2006, the Compensation Committee of the Company&#146;s Board of Directors
approved, subject to stockholder approval, the Natural Health Trends Corp. 2007 Annual Incentive
Plan (the &#147;Annual Incentive Plan&#148;). The Plan is designed to allow the Company to grant annual cash
bonuses based upon performance or other criteria to eligible employees of the Company or any Parent
of Subsidiary, each as defined in the Annual Incentive Plan, thereof. The design of the Annual
Incentive Plan is part of an overarching Compensation Committee initiative to provide incentive
compensation to eligible employees through shareholder-approved plans.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Description of the Annual Incentive Plan.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Purpose.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Annual Incentive Plan was approved by the Compensation Committee of the Company&#146;s Board of
Directors on October&nbsp;4, 2006. The purposes of the Annual Incentive Plan are to retain and motivate
the eligible employees of the Company or any Parent or Subsidiary thereof who have been designated
by the Compensation Committee to participate in the Annual Incentive Plan for a specified
12-consecutive month fiscal or calendar year period (&#147;Performance Period&#148;) by providing them with
the opportunity to earn incentive payments based upon the extent to which specified performance
goals have been achieved or exceeded for the applicable
Performance Period. In addition, bonus awards based upon factors other than performance may be
considered. The text of the Annual Incentive Plan is attached to this proxy statement as <U>Annex
A</U>. The following is a summary of the Annual Incentive Plan and should be read together with the
full Annual Incentive Plan text. In the event of a conflict between the terms of this summary and
the terms of the Annual Incentive Plan text, the terms of the Annual Incentive Plan text shall
prevail.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Awards Under the Plan.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Awards to Covered Employees
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Annual Incentive Plan, the Company will be permitted to grant annual
performance-based awards based upon performance criteria that satisfy the requirements for
&#147;performance-based compensation&#148; under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the &#147;Code&#148;). Such awards are not subject to a $1&nbsp;million annual deduction limit for the
Company that otherwise would apply to awards by the Company to its Chief Executive Officer or one
of its four next highest paid officers (&#147;Covered Employees&#148;). The Committee may grant awards to
Covered Employee only based upon performance criteria that satisfy the requirements for
&#147;performance-based compensation&#148; under Section 162(m) of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly, performance-based awards for Covered Employees will be based exclusively on one
or more of the following objective Company (including any division or operating unit thereof) or
individual measures, stated in either absolute or relative terms, such as rates of growth or
improvement, the attainment by a share of common stock of the Company of a specified fair market
value for a specified period of time, earnings per share, earnings per share excluding
non-recurring, special or extraordinary items, return to stockholders (including dividends), return
on capital, return on total capital deployed, return on assets, return on equity, earnings of the
Company before or after taxes and/or interest, revenues, revenue increase, distributor count, new
distributor count, growth in distributor count, distributor retention rate, distributor attrition
rate, repeat purchase rate, recurring revenue, recurring revenue increase, market share, cash flow
or cost reduction goals, cash flow provided by operations, net cash flow, short-term or long-term
cash flow return on investment, interest expense after taxes, return on investment, return on
investment capital, economic value created, operating margin, gross profit margin, net profit
margin, pre-tax income margin, net income margin, net income before or after taxes, pretax earnings
before interest, depreciation and amortization, pre-tax operating earnings after interest expense
and before incentives, and/or extraordinary or special items, operating
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">earnings, net cash provided
by operations, and strategic business criteria, consisting of one or more objectives based on
meeting specified market penetration, geographic business expansion goals, cost targets, customer
satisfaction, reductions in errors and omissions, reductions in lost business, management of
employment practices and employee benefits, supervision of litigation and information technology,
quality and quality audit scores, productivity, efficiency, and goals relating to acquisitions or
divestitures, or any combination of the foregoing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Awards to Other Participants
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Awards to participants who are not Covered Employees may be based upon performance criteria
that satisfy the requirements for &#147;performance-based compensation&#148; under Section 162(m) of the
Code, other performance criteria or criteria other than performance criteria (e.g., a time vested
annual bonus).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Eligible Participants.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All employees of the Company or any Parent or Subsidiary thereof are eligible to participate
in the Annual Incentive Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Administration.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Annual Incentive Plan will be administered by the Compensation Committee of the Company&#146;s
Board of Directors. The Compensation Committee of the Board of Directors of the Company will have
the authority to adopt, alter and repeal administrative rules, guidelines and practices governing
the operation of the Annual Incentive Plan and to interpret the provisions of the Annual Incentive
Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General Provisions.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments of bonuses under the Annual Incentive Plan will be made in cash, in a single lump
sum, generally no later than March&nbsp;15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> following the annual Performance Period. In the
event of the participant&#146;s death, the payment will be made to the participant&#146;s beneficiary based
upon the number of months in the Performance Period during which the participant worked, divided by
12. For this purpose, the Committee will assume that the applicable performance or other criteria
for the Performance Period have been satisfied. In the event of the participant&#146;s disability, the
same rule will apply, except that the payment will be made to the participant. Additionally, the
Committee will have the discretion to accelerate the payment of the award in extreme cases of
disability. In the event of the participant&#146;s termination for &#147;Good Reason&#148; (e.g., on account of
the material diminution of the participant&#146;s job duties) or retirement on or after attaining age
65, the payment will be made to the participant based upon the number of months in the Performance
Period during which the participant worked, divided by 12, and only to the extent that the
applicable performance or other criteria for the Performance Period are satisfied. In the event of
the participant&#146;s termination other than for &#147;Good Reason&#148; or for cause, the bonus will be
forfeited in its entirety. Special rules regarding payments apply in the case of a change in
control of the Company.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee may amend, suspend or terminate the Annual Incentive Plan or any
portion thereof at any time after its adoption; provided that no amendment shall be made without
stockholder approval if such approval is necessary to comply with any applicable law, rules or
regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>United States Federal Income Tax Consequences</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following general discussion of the Federal income tax consequences of the issuance and
payment of cash bonus awards granted under the Annual Incentive Plan is based upon the provisions
of the Code as in effect on the date hereof, current regulations thereunder and existing
administrative rulings of the Internal Revenue Service. This discussion is not intended to be a
complete discussion of all of the Federal income tax consequences of the Annual Incentive Plan or
of all of the requirements that must be met in order to qualify for the tax treatment described
herein. Changes in the law and regulations may modify the discussion, and in some cases the
changes may be retroactive. No information is provided as to state tax laws. In addition, because
tax consequences may vary, and certain exceptions to the general rules discussed herein
may be applicable, depending upon the personal circumstances of individual award recipients,
each award recipient should consider his personal situation and consult with his tax advisor with
respect to the specific tax consequences applicable to him. The Annual Incentive Plan is not
qualified under Section&nbsp;401 of the Code, nor is it subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended. Further, the Annual Incentive Plan is not a
deferred compensation plan within the meaning of Section&nbsp;409A of the Code. The tax treatment of
the each kind of award under the Annual Incentive Plan is as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Consequences to the Participant</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any award granted under the Plan is taxable to the participant not at the time of grant, but
rather, for the year in which it is paid. Federal income tax applies at the ordinary income tax
rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Consequences to the Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;162(m) of the Code places a $1&nbsp;million annual limit on the compensation deductible by
the Company paid to any of its Covered Employees. The limit, however, does not apply to
performance-based compensation within the meaning of Section&nbsp;162(m). Under the Annual Incentive
Plan, Covered Employees may not receive performance-based awards that do not qualify under Section
162(m) of the Code. Accordingly, the $1&nbsp;million deduction limit should not apply to them.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The Board of Directors unanimously recommends that the stockholders vote &#147;for&#148; the approval of
Natural Health Trends Corp. 2007 Annual Incentive Plan.</B>
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="143"></A>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ITEM FOUR</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>APPROVAL OF 2007 EQUITY INCENTIVE PLAN</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;18, 2006, the Compensation Committee of Company&#146;s Board of Directors approved,
subject to stockholder approval, the Natural Health Trends Corp. 2007 Equity Incentive Plan (the
&#147;2007 Plan&#148;), to provide that the Company may grant (i)&nbsp;incentive stock options intended to qualify
under Section&nbsp;422 of the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;), (ii)&nbsp;options that
are not qualified as incentive stock options (&#147;nonqualified stock options&#148;), (iii)&nbsp;restricted
shares of common stock (&#147;restricted stock&#148;), (iv)&nbsp;restricted stock units, (v)&nbsp;stock appreciation
rights either in tandem with an option or alone and unrelated to an option (&#147;SARs&#148;), (vi)&nbsp;shares of
common stock awarded based on achieving certain performance goals (&#147;performance shares&#148;), (vii)
awards of common stock, including shares of common stock awarded without payment therefor (&#147;award
shares&#148;), and (viii)&nbsp;common stock and other rights granted as units that are valued whole or in
part by reference to the value of the common stock (&#147;stock awards&#148;). The 2007 Plan replaces in its
entirety the Natural Health Trend Corp. 2002 Stock Option Plan (the &#147;2002 Plan&#148;), which shall be
deemed terminated as of the date the Company&#146;s stockholders approve the 2007 Plan. Awards made
under the 2002 Plan, however, shall continue to be subject to the terms of such Plan, except to the
extent that either there is no conflict between the terms of the 2002 Plan and the terms of the
2007 Plan with respect to such awards or the recipient consents to the applicability of the terms
of the 2007 Plan to such awards. The design of the 2007 Plan is part of an overarching
Compensation Committee initiative to provide incentive compensation to eligible employees and
others through shareholder-approved plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Description of the 2007 Plan.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Purpose.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2007 Plan was approved by the Compensation Committee of the Company&#146;s Board of Directors
on August&nbsp;18, 2006. The purposes of the 2007 Plan are to enable the Company to attract and retain
employees, officers, directors, consultants and advisors of the Company or any Parent or
Subsidiary, each as defined in the Plan, thereof to provide an incentive for them to assist the
Company or any Parent or Subsidiary thereof in achieving long-range performance goals, and to
enable them to participate in the long-term growth of the Company. The text of the 2007 Plan is
attached to this proxy statement as <U>Annex B</U>. The following is a summary of the 2007 Plan
and should be read together with the full 2007 Plan text. In the event of a conflict between the
terms of this summary and the terms of the 2007 Plan text, the terms of the 2007 Plan text shall
prevail.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Awards Under the Plan.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the 2007 Plan, the Company will be permitted to grant (i)&nbsp;incentive stock options
intended to qualify under Section&nbsp;422 of the Code, (ii)&nbsp;nonqualified stock options, (iii)
restricted stock, (iv)&nbsp;restricted stock units, (v)&nbsp;stock appreciation rights either in tandem with
an option or alone and unrelated to an option, or SARs, (vi)&nbsp;performance shares, (vii)&nbsp;award
shares, or (viii)&nbsp;stock awards.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Eligible Participants.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All employees, and in the case of awards other than incentive stock options, directors,
consultants and advisors of the Company or any Parent or Subsidiary thereof capable of contributing
significantly to the successful performance of the Company or any Parent or Subsidiary thereof are
eligible to participate in the 2007 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Administration.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2007 Plan will be administered by the Compensation Committee of the Company&#146;s Board of
Directors. The Compensation Committee of the Board of Directors of the Company will have the
authority to adopt, alter and repeal administrative rules, guidelines and practices governing the
operation of the 2007 Plan and to interpret provisions of the 2007 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Securities to be Offered.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The maximum aggregate number of shares of common stock available for issuance under the 2007
Plan is 1,550,000 shares. The shares of common stock available for issuance under the 2007 Plan
are subject to adjustment for any stock dividend, recapitalization, stock split, stock combination
or certain other corporate reorganizations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares issued may consist in whole or in part of authorized but unissued shares or treasury
shares. Shares subject to an award that expires or is terminated unexercised or is forfeited for
any reason or settled in a manner that results in fewer shares outstanding than were initially
awarded will again be available for award under the 2007 Plan. The maximum number of shares which
may be granted to an individual in a fiscal year is limited to 150,000 shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Nonqualified and Incentive Stock Options.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of the 2007 Plan, the Compensation Committee may award incentive
stock options and nonqualified stock options and determine the number of shares to be covered by
each option, the option price therefor and the conditions and limitations applicable to the
exercise of the option. Each option shall be exercisable at such times and subject to such terms
and conditions as the Compensation Committee may specify in the applicable award or thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms and conditions of incentive stock options shall be subject to and comply with
Section&nbsp;422 of the Code and any regulations thereunder. No incentive stock option granted under the
2007 Plan may be granted more than ten years after August&nbsp;18, 2006 and no such grant (or grant of a
nonqualified stock option) may be exercisable more than ten years from the date of grant (five
years after the date of grant for incentive stock options granted to holders of more than ten
percent of the common stock). Incentive stock options shall be granted only to employees of the
Company or any Parent or Subsidiary thereof and shall be transferable by the optionee only by the
laws of descent and distribution, and shall be exercisable only by the employee during his or her
lifetime.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The exercise price of options granted under the 2007 Plan may not be less than the fair market
value of the common stock on the date of grant. Incentive stock options may be granted
to holders of more than 10% of the Company&#146;s outstanding voting capital stock only at an
exercise price of at least 110% of the fair market value of such stock on the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restricted Stock.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to provisions of the 2007 Plan, the Compensation Committee may grant shares of
restricted stock to participants, with such restricted periods and other conditions as the
Compensation Committee may determine and for no cash consideration or such minimum consideration as
may be required by applicable law. During the restricted period, unless otherwise determined by
the Compensation Committee, stock certificates evidencing the restricted shares will be held by the
Company and may not be sold, assigned, transferred, pledged or otherwise encumbered, except as
permitted by the Compensation Committee. At the expiration of the restricted period, the Company
will deliver such certificates to the participant or, if the participant has died, to the
beneficiary designed by the participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restricted Stock Units.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of the 2007 Plan, the Compensation Committee may grant restricted
stock unit awards. A restricted stock unit is a contractual promise to issue shares at a specified
future date, subject to fulfillment of vesting conditions specified by the Compensation Committee.
A restricted stock unit award carries no voting or dividend rights or other rights associated with
stock ownership. A restricted stock unit award may be settled in common stock, cash, or in any
combination of common stock and/or cash; provided, however, that a determination to settle a
restricted stock unit award in whole or in part in cash shall be made by the Compensation Committee
in its sole discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock Appreciation Rights.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of the 2007 Plan, the Compensation Committee may award SARs in
tandem with an option (at or after the award of the option) or alone and unrelated to an option. A
SAR entitles the holder to receive from the Company an amount equal to the excess, if any, of the
fair market value of the common stock over the reference price. SARs granted in tandem with an
option will terminate to the extent that the related option is exercised, and the related option
will terminate to the extent that the tandem SARs are exercised.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Performance Shares.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of the 2007 Plan, the Compensation Committee may grant performance
shares to participants in the form of grants of shares of common stock. Performance shares are
earned over a period of time (a performance cycle) selected by the Compensation Committee from time
to time. There may be more than one performance cycle in existence at any one time and the
duration of the performance cycles may differ from each other. Unless otherwise determined by the
Compensation Committee, the payment value of the performance shares will be equal to the fair
market value of the common stock on the date the performance shares are earned or on the date the
Compensation Committee determines that the
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">performance shares have been earned. The Compensation
Committee shall establish performance goals for each cycle for the purpose of determining the
extent to which performance shares awarded for such cycle are earned. As soon as practicable after
the end of a performance cycle, the Compensation Committee shall determine the number of
performance shares which have
been earned on the basis of performance in relation to the established performance goals.
Payment values (stock certificates) of earned performance shares are distributed to the participant
or, if the participant has died, to the beneficiary designated by the participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock Awards.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of the 2007 Plan, the Compensation Committee may award stock awards,
which may be designated as award shares by the Compensation Committee, subject to such terms,
restrictions, conditions, performance criteria, vesting requirements and payment needs, if any, as
the Compensation Committee shall determine. Shares of common stock or other rights awarded in
connection with a stock award shall be issued for no cash consideration or such minimum
consideration as may be required by law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General Provisions.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each award shall be evidenced by a written document delivered to the participant specifying
the terms and conditions thereof and containing such other terms and conditions not inconsistent
with the provisions of the 2007 Plan as the Compensation Committee considers necessary or
advisable. Each type of award may be made alone, in addition to, or in relation to any other type
of award. The terms of each type of award need not be identical and the Compensation Committee need
not treat participants uniformly. The Compensation Committee may amend, modify or terminate any
outstanding award, including substituting therefor another award, changing the date of exercise or
realization and converting an incentive stock option to a nonqualified stock option, provided that
the participant&#146;s consent to such action shall be required unless the Compensation Committee
determines that the action would not materially and adversely affect the participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee will determine whether awards granted pursuant to the 2007 Plan are
settled in whole or in part in cash, common stock, other securities of the Company, other property
or such other methods as the Compensation Committee may deem appropriate. In the Compensation
Committee&#146;s discretion, tax obligations required to be withheld in respect of an award may be paid
in whole or in part in shares of common stock, including shares retained from such award. The
Compensation Committee will determine the effect on an award of the death, disability, retirement
or other termination of employment of a participant and the extent to which and period during which
the participant&#146;s legal representative, guardian or designated beneficiary may receive payment of
an award or exercise rights thereunder. Except as otherwise provided by the Compensation Committee,
awards under the 2007 Plan will not be transferable other than as designated by the participant by
will or by the laws of descent and distribution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee in its discretion may take certain actions in order to preserve a
participant&#146;s rights under an award in the event of a change in control of the Company, including
(i)&nbsp;providing for the acceleration of any time period relating to the exercise or realization of
the award, (ii)&nbsp;providing for the repurchase of the award for an amount of
cash
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or other property
that could have been received upon the exercise or realization of the award had the award been
currently exercisable or payable, (iii)&nbsp;adjusting the terms of the award in order to reflect the
change in control, (iv)&nbsp;causing the award to be assumed, or new rights substituted therefor, by
another entity, or (v)&nbsp;making such other provision as the Compensation Committee may consider
equitable and in the best interest of the Company, provided that, in the case of an action taken
with respect to an outstanding award, the participant&#146;s consent to such action shall
be required unless the Compensation Committee determines that the action, taking into account
any related action, would not materially and adversely affect the participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee may amend, suspend or terminate the 2007 Plan or any portion
thereof at any time after its adoption; provided that no amendment shall be made without
stockholder approval if such approval is necessary to comply with any applicable law, rules or
regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>United States Federal Income Tax Consequences</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following general discussion of the Federal income tax consequences of the issuance and
exercise of options granted under the 2007 Plan is based upon the provisions of the Code as in
effect on the date hereof, current regulations thereunder and existing administrative rulings of
the Internal Revenue Service. This discussion is not intended to be a complete discussion of all of
the Federal income tax consequences of the 2007 Plan or of all of the requirements that must be met
in order to qualify for the tax treatment described herein. Changes in the law and regulations may
modify the discussion, and in some cases the changes may be retroactive. No information is provided
as to state tax laws. In addition, because tax consequences may vary, and certain exceptions to the
general rules discussed herein may be applicable, depending upon the personal circumstances of
individual holders of securities, each holder of an award should consider his personal situation
and consult with his tax advisor with respect to the specific tax consequences applicable to him.
The 2007 Plan is not qualified under Section&nbsp;401 of the Code, nor is it subject to the provisions
of the Employee Retirement Income Security Act of 1974, as amended. The tax treatment of each kind
of award under the 2007 Plan is as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Incentive Stock Options</I>. Incentive stock options to be granted under the 2007 Plan are
intended to qualify as incentive stock options under Section&nbsp;422 of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A participant generally will not recognize taxable income upon the grant or exercise of an
incentive stock option. Under certain circumstances, however, there may be alternative minimum tax
or other tax consequences, as described below. If an option holder does not make a &#147;disqualifying
disposition&#148; (as defined below), then the option holder will not recognize any taxable income until
shares are sold or exchanged, and any gain recognized upon disposition of shares will be taxable as
long-term capital gain. A &#147;disqualifying disposition&#148; means any disposition of shares acquired on
the exercise of an incentive stock option where such disposition occurs within two years of the
date the option was granted or within one year of the date the shares were transferred to the
option holder. The use of the shares acquired pursuant to the exercise of an incentive stock option
to pay the option exercise price under another stock option is treated as a disposition for this
purpose.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, if the option holder makes a disqualifying disposition, then the excess of (a)&nbsp;the
lesser of (i)&nbsp;the fair market value of the shares on the date of exercise or (ii)&nbsp;the amount
realized upon disposition of the shares over (b)&nbsp;the option exercise price will be taxable to the
option holder as ordinary income. In the case of a gift or certain other transfers, the amount of
taxable ordinary income is not limited to the gain that would have resulted from a sale. Instead,
it is equal to the excess of the fair market value of the shares on the date of exercise over the
option exercise price. In the case of a disqualifying disposition, if the amount realized on
disposition of the shares exceeds the fair market value of the shares on the date of exercise, the
excess will be taxed as either long-term or short-term capital gain depending on the option
holder&#146;s holding
period for the shares. The holding period for the shares generally would begin on the date the
shares were acquired and would not include the period of time during which the option was held.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain option holders will be subject to Section 16(b) of the Securities Exchange Act of 1934
upon their sale of shares of common stock. If an option holder is subject to Section&nbsp;16(b), the
date on which the fair market value of the shares is determined may similarly be postponed. The
Treasury regulations have not yet been amended to conform with the most recent revision to Section
16(b). However, it is generally anticipated that the date on which the fair market value of the
shares is determined will be the earlier of (i)&nbsp;the date six months after the date the stock option
was granted, or, (ii)&nbsp;the first day on which the sale of the shares would not subject the
individual to liability under Section&nbsp;16(b). It is possible that the six-month period will instead
run from the option holder&#146;s most recent grant or purchase of common stock prior to his or her
exercise of the stock option. On the determination date, the option holder will generally recognize
ordinary taxable income in an amount equal to the excess of the fair market value of the shares of
common stock at that time over the option exercise price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite the general rule, in the case of a substantial risk of forfeiture, or in the case of
recipients subject to Section 16(b) (if the determination date is after the date of exercise), the
option holder may make an election pursuant to Section 83(b) of the Code, in which case the option
holder will recognize ordinary taxable income at the time the stock option is exercised and not on
the later date. In order to be effective, the Section 83(b) election must be made and filed with
the IRS within 30&nbsp;days after exercise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, the fair market value of the shares on the date of exercise, less the exercise
price, will be included in the option holder&#146;s alternative minimum taxable income in the year the
option is exercised. However, if in the same year, the shares are disposed of at a lower price,
then alternative minimum taxable income is calculated using this lower price instead of the shares&#146;
fair market value on the date of exercise. The application of the alternative minimum tax rules for
option holders subject to Section 16(b) or who receive shares that are not &#147;substantially vested&#148;
is more complex and may depend upon whether such holders are entitled to and make a Section 83(b)
election. Because of the many adjustments that apply to the computation of the alternative minimum
tax, it is not possible to predict the application of such tax to any particular option holder. An
option holder may owe alternative minimum tax even though he has not disposed of the shares or
otherwise received any cash with which to pay the tax. The alternative minimum tax rate is higher
than the rate applicable to long-term capital gains.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company will not be entitled to any deduction with respect to the grant or exercise of
incentive stock options. In addition, no deduction will be allowed to the Company upon the
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">disposition of stock acquired upon the exercise of an incentive stock option, unless the
disposition is a disqualifying disposition. In the case of a disqualifying disposition, the Company
generally will be entitled to a deduction equal to the amount of compensation income that is
recognized by the employee as a result of the disqualifying disposition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Nonqualified Stock Options</I>. A recipient of a nonqualified stock option generally will not
recognize any income for federal tax purposes with respect to the option until the option is
exercised. At that time, subject to certain limited exceptions, the recipient will recognize
ordinary income in an amount equal to the excess of the fair market value of the shares on the date
acquired over the option exercise price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The application of the tax rules to an option holder who receives shares that are subject to a
substantial risk of forfeiture (for example, if the shares must be returned to the Company if the
recipient does not work for the Company for a period of time, if any, specified in the award) are
more complex. In that case, the recipient generally will not recognize income until the date the
shares are no longer subject to the substantial risk of forfeiture, unless a Section 83(b) election
(described below) is made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain option holders will be subject to Section 16(b) of the Securities Exchange Act of 1934
upon their sale of shares of common stock. If an option holder is subject to Section&nbsp;16(b), the
date on which the fair market value of the shares is determined may similarly be postponed. The
Treasury regulations have not yet been amended to conform with the most recent revision to Section
16(b). However, it is generally anticipated that the date on which the fair market value of the
shares is determined will be the earlier of (i)&nbsp;the date six months after the date the stock option
was granted, or (ii)&nbsp;the first day on which the sale of the shares would not subject the individual
to liability under Section&nbsp;16(b). It is possible that the six month period will instead run from
the option holder&#146;s most recent grant or purchase of common stock prior to his or her exercise of
the stock option. On the determination date, the option holder will generally recognize ordinary
taxable income in an amount equal to the excess of the fair market value of the shares of common
stock at that time over the option exercise price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite the general rule, in the case of a substantial risk of forfeiture, or in the case of
recipients subject to Section 16(b) (if the determination date is after the date of exercise), the
option holder may make an election pursuant to Section 83(b) of the Code, in which case the option
holder will recognize ordinary taxable income at the time the stock option is exercised and not on
the later date. In order to be effective, the Section 83(b) election must be made and filed with
the IRS within 30&nbsp;days after exercise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When an option recipient recognizes income, the Company will generally be entitled to a
compensation deduction for federal income tax purposes in an amount equal to the taxable income
recognized by the recipient, provided that the Company reports the income on a timely provided and
filed Form W-2 or 1099, whichever is applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon a subsequent sale of shares acquired by the exercise of a nonqualified stock option, a
recipient generally will recognize capital gain (or loss) equal to the amount by which the selling
price of the shares exceeds (or is exceeded by) their fair market value on the date of exercise.
The capital gain or loss will be short-term or long-term depending upon how long the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shares were
held. Any capital gain or loss would be long-term if the holding period for the shares was more
than twelve months. The holding period for the shares generally would begin on the date the shares
were acquired, and would not include the period of time during which the option was held.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock Appreciation Rights</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A recipient of a SAR will not be considered to receive any income at the time a SAR is
granted, nor will the Company be entitled to a deduction at that time. Upon the exercise of a SAR,
the holder will have ordinary income equal to the cash received upon the exercise. At that time,
the Company will be entitled to a tax deduction equal to the amount of ordinary income realized by
the holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restricted Stock and Performance Shares</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The recipient of restricted stock or performance shares will be treated in the same manner as
a person who has exercised a nonqualified stock option, as described above, for which the Company
has imposed restrictions on the shares received, and for which the exercise price is either zero or
a nominal amount. In general, this means that the holder may either wait until the restrictions
have elapsed (or the performance goals have been met), and then pay tax at ordinary income tax
rates, based upon the fair market value of the shares at that time, or he or she can file a Section
83(b) election, and pay tax based on the fair market value of the shares at the time they are
received. Again, the Company will get a deduction that corresponds to the income recognized by the
recipient.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restricted Stock Unit Awards</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The grant of a restricted stock unit award will not result in income for the grantee or in a
deduction for the Company. Upon the lapse of the restrictions of a restricted stock unit, the
grantee will recognize ordinary income and the Company will be entitled to a deduction measured by
the fair market value of the shares plus any cash received.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock Awards</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A person who receives a stock award that includes common stock will be treated, with regard to
such common stock, in the same manner as a person who has exercised a nonqualified stock option, as
described above. In general, this means that the holder will have taxable income at the time the
shares are received if they are not subject to restrictions, or as described in the preceding
paragraph for restricted stock, if they are subject to restrictions. The tax treatment of a stock
award that consists of other rights will depend on the provisions of the award. It may be
immediately taxable if there are no restrictions on the receipt of the cash or other property that
the stock award represents, or the tax consequences may be deferred if the receipt of cash or other
property for the stock award is restricted, or subject to vesting or performance goals. In those
situations in which a participant receives property subject to restrictions, the participant may
wish to make a Section 83(b) election, as described above. At the time that the holder of the
stock award has ordinary income, the Company will be entitled to a tax deduction equal to the
amount of ordinary income realized by the holder.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->42<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Deductibility of Awards</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;162(m) of the Code places a $1&nbsp;million annual limit on the compensation deductible by
the Company paid to certain of its executives. The limit, however, does not apply to
performance-based compensation. The Company believes that awards under the 2007 Plan will qualify
for the performance-based compensation exception to the deductibility limit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The Board of Directors unanimously recommends that the stockholders vote &#147;for&#148; the approval of
Natural Health Trends Corp. 2007 Equity Incentive Plan.</B>
</DIV>
<DIV align="left">
<A name="144"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OTHER MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the date of this proxy statement, the Company has no knowledge of any business other than
that described above that will be presented at the annual meeting. If any other matter is properly
brought before the meeting for action by stockholders, proxies in the enclosed form returned to the
Company will be voted in accordance with the recommendation of the Board of Directors or, in the
absence of such a recommendation, in accordance with the judgment of the proxy holder.
</DIV>
<DIV align="left">
<A name="145"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADDITIONAL INFORMATION</B>
</DIV>

<DIV align="left">
<A name="146"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stockholder Proposals for the 2007 Annual Meeting and Other Stockholder Communications</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any stockholder wishes to present a proposal for inclusion in the 2007 proxy materials to
be solicited by the Company&#146;s Board of Directors with respect to the 2007 annual meeting of
stockholders, that proposal must be presented to the Company&#146;s General Counsel prior to December
31, 2006. Stockholder communications to the Board of Directors, including any such communications
relating to director nominees, may also be addressed to the Company&#146;s General Counsel at the
Company&#146;s address. The Board of Directors believes that no more detailed process for these
communications is appropriate, due to the variety in form, content and timing of these
communications. The Company&#146;s General Counsel will forward the substance of meaningful stockholder
communications, including those relating to director candidates, to the Board of Directors or the
appropriate committee upon receipt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a stockholder is permitted to present a proposal at the 2007 annual meeting of stockholders
but the proposal was not included in the 2007 proxy materials, the Company believes that its proxy
holders would have the discretionary authority granted by the proxy card (as permitted under SEC
rules) to vote on the proposal if the proposal was received after the date that is 45 calendar days
prior to the anniversary of the mailing of this proxy statement.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->43<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="147"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Annual Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Annual Report to Stockholders, which includes our consolidated financial statements as of
and for the year ended December&nbsp;31, 2005, is being mailed to you along with this proxy
statement. Upon the written or oral request by any stockholder, the Company undertakes to
deliver, without charge to the requesting stockholder, a copy of our Annual Report on Form 10-K and
Form 10-K/A. Requests should be directed to the Company&#146;s General Counsel at 2050 Diplomat Drive,
Dallas, Texas 75234.
</DIV>
<DIV align="left">
<A name="148"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>HOUSEHOLDING INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the Company has received contrary instructions, the Company may send a single copy of
this proxy statement and notice of annual meeting to any household at which two or more
stockholders reside if the Company believes the stockholders are members of the same family. Each
stockholder in the household will continue to receive a separate proxy card. This process, known as
&#147;householding,&#148; reduces the volume of duplicate information received at any one household and helps
to reduce the Company&#146;s expenses. However, if stockholders prefer to receive multiple sets of the
Company&#146;s disclosure documents at the same address this year or in future years, the stockholders
should follow the instructions described below. Similarly, if an address is shared with another
stockholder and together both of the stockholders would like to receive only a single set of the
Company&#146;s disclosure documents, the stockholders should follow these instructions:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the shares are registered in the name of the stockholder, the stockholder should contact
the Company at its offices at 2050 Diplomat Drive, Dallas, Texas 75234, Attention: General Counsel,
or by telephone at 972-241-4080, to inform the Company of their request. If a bank, broker or other
nominee holds the shares, the stockholder should contact the bank, broker or other nominee
directly.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By Order of the Board of Directors,
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" NOWRAP>/s/ Gary C. Wallace</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">October&nbsp;20, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gary C. Wallace</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->44<!-- /Folio -->
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Appendix&nbsp;A</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NATURAL HEALTH TRENDS CORP.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>2007 ANNUAL INCENTIVE PLAN</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>I. Purposes</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <B><I>General. </I></B>The purposes of the Natural Health Trends Corp. 2007 Annual Incentive Plan (the
<I>&#147;Plan&#148;</I>) are to retain and motivate the Eligible Employees of Natural Health Trends Corp. (the
<I>&#147;Company&#148;</I>) or any Parent or Subsidiary thereof who have been designated by the Committee to
participate in the Plan for a specified Performance Period by providing them with the opportunity
to earn incentive payments based upon the extent to which specified performance or other goals have
been achieved or exceeded for an applicable Performance Period. Additional definitions are
contained in Article&nbsp;II and certain other Sections of the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <B><I>Status of Compensation for &#147;Covered Employees&#148; as Qualified Performance-Based
Compensation. </I></B>It is intended that all amounts payable to Participants who are &#147;covered employees&#148;
within the meaning of Section 162(m) of the Code will constitute &#147;qualified performance-based
compensation&#148; within the meaning of U.S. Treasury regulations promulgated thereunder, and the Plan
and the terms of any awards hereunder to such Participants shall be so interpreted and construed to
the maximum extent possible.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>II. Certain Definitions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <B><I>&#147;Base Salary&#148; </I></B>shall mean a Participant&#146;s rate of annual compensation for services
performed for the Company, Parent or Subsidiary, as applicable, in effect on the first day of an
applicable Performance Period. In computing Base Salary, only such compensation as would be
includable in the Participant&#146;s gross income for United States federal income tax purposes shall be
included (including amounts excludable under Section&nbsp;911 of the Code) or which would have been so
includable if the Participant had been a United States citizen or resident; provided, however, that
a Participant&#146;s pre-tax elective or salary reduction contributions to a cafeteria plan, cash or
deferred arrangement, qualified transportation fringe benefit plan, tax-sheltered annuity, and the
amounts credited to a Participant under a non-qualified deferred compensation plan, each within the
meaning of Treasury Regulation&nbsp;Section&nbsp;1.280G-1, Q&#038;A 21(a) shall be taken into account. For
purposes of this definition, Parent and Subsidiary shall be defined by applying the applicable
statutory references in Section&nbsp;2.16 and 2.21, respectively, by replacing &#147;more than 50%&#148; with &#147;at
least 80%&#148; where the former term appears.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <B><I>&#147;Beneficiary&#148; </I></B>shall mean the person designated by the Participant pursuant to the terms of
Section&nbsp;6.6 hereof to receive his or her benefits under the Plan in the event of the Participant&#146;s
death.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <B><I>&#147;Board&#148; </I></B>shall mean the Board of Directors of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <B><I>&#147;Cause&#148; </I></B>shall mean
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 0pt; margin-left: 3%">
<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;cause&#148; or words of similar import in the Participant&#146;s written
employment agreement with the Company, if any, and, in addition, shall include
conduct, as determined by the Committee, involving one or more of the
following:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>gross misconduct or inadequate performance by
the Participant which is injurious to the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the commission of an act of embezzlement, fraud
or theft, which results in economic loss, damage or injury to the
Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the unauthorized disclosure of any trade
secret or confidential information of the Company (or any client,
customer, supplier or other third party who has a business relationship
with the Company) or the violation of any non-competition or
non-solicitation covenant or assignment of inventions obligation with
the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the commission of an act which constitutes
unfair competition with the Company or which induces any customer or
prospective customer of the Company to breach a contract with the
Company or to decline to do business with the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(v)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the indictment of the Participant for a felony
or serious misdemeanor offense, either in connection with the
performance of his or her obligations to the Company or which shall
adversely affect the Participant&#146;s ability to perform such obligations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(vi)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the commission of an act of fraud or breach of
fiduciary duty which results in loss, damage or injury to the Company;
or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(vii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the failure of the Participant to perform in a
material respect his or her employment, consulting or advisory
obligations without proper cause.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For purposes of this definition, &#147;Company&#148; shall be deemed to include any Parent
or Subsidiary.</TD>
</TR>

</TABLE>
</DIV>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <B><I>&#147;Change in Control&#148; </I></B>shall mean the occurrence of any of the following:
</DIV>

<DIV style="margin-top: 0pt; margin-left: 3%">
<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The acquisition by any individual, entity or group (within the
meaning of Section&nbsp;13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the <B><I>&#147;Exchange Act&#148;</I></B>)) of beneficial ownership (within the meaning of
Rule&nbsp;13d-3 promulgated under the Exchange Act) of 50% or more of the then
outstanding shares of voting stock of the Company (the <B><I>&#147;Voting Stock&#148;</I></B>);
provided, however, that any acquisition by the Company or its subsidiaries, or
any employee benefit plan (or related trust) of the Company or its subsidiaries
of 50% or more of Voting Stock shall not constitute a Change in Control; and
provided, further, that any acquisition by a corporation with respect to which,
following such acquisition, more than 50% of the then outstanding shares of
common stock of such corporation, is then beneficially owned, directly or
</TD>
</TR>
</TABLE>
</DIV>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->A-2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV style="margin-top: 0pt; margin-left: 3%">
<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners of the Voting Stock immediately prior to such acquisition
in substantially the same proportion as their ownership, immediately prior to
such acquisition, of the Voting Stock, shall not constitute a Change in Control;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Individuals who, as of the Effective Date, constitute the Board
(the &#147;<B>Incumbent Directors&#148;</B>) cease for any reason (other than malfeasance) to
constitute a majority of the members of the Board; provided that any individual
who becomes a director after the Effective Date whose election or nomination
for election by the Company&#146;s shareholders was approved by a majority of the
members of the Incumbent Directors (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual
or threatened &#147;election contest&#148; relating to the election of the Directors of
the Company (as such terms are used in Rule&nbsp;14a-11 under the Exchange Act),
&#147;<B>tender offer</B>&#148; (as such term is used in Section 14(d) of the Exchange Act) or a
proposed Merger (as defined below) shall be deemed to be members of the
Incumbent Directors; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The consummation of (i)&nbsp;a reorganization, merger or
consolidation (any of the foregoing, a <I>&#147;</I><B><I>Merger</I></B><I>&#148;</I>), in each case, with respect to
which all or substantially all of the individuals and entities who were the
beneficial owners of the Voting Stock immediately prior to such Merger do not,
following such Merger, beneficially own, directly or indirectly, more than 50%
of the then outstanding shares of common stock of the corporation resulting
from Merger, (ii)&nbsp;a complete liquidation or dissolution of the Company or (iii)
the sale or other disposition of all or substantially all of the assets of the
Company, excluding a sale or other disposition of assets to a subsidiary of the
Company.</TD>
</TR>

</TABLE>
</DIV>
 </DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 <B><I>&#147;Code&#148; </I></B>shall mean the Internal Revenue Code of 1986, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7 <B><I>&#147;Committee&#148; </I></B>shall mean the Compensation Committee of the Board or such other committee
designated by the Board that satisfies any then applicable requirements of the New York Stock
Exchange, Nasdaq, or such other principal national stock exchange on which the Common Stock is then
traded, to constitute a compensation committee, and which consists of two or more members of the
Board, each of whom may be an &#147;outside director&#148; within the meaning of Section 162(m) of the Code.
Notwithstanding the foregoing, in the case of any Individual Award Opportunity granted to any
Participant who is a &#147;covered employee&#148; within the meaning of Section 162(m) of the Code, the
Committee shall consist solely of two or more members of the Board who are &#147;outside directors&#148;
within the meaning of such Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8 <B><I>&#147;Company&#148; </I></B>shall mean Natural Health Trends, Corp., and any successor thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9 <B><I>&#147;Common Stock&#148; </I></B>shall mean common stock of the Company, par value of $.01 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.10 <B><I>&#147;Determination Period&#148; </I></B>shall mean, with respect to any Performance Period, a period
commencing on or before the first day of the Performance Period and ending not later than the
earlier of (i)&nbsp;90&nbsp;days after the commencement of the Performance Period and (ii)&nbsp;the date on which
twenty-five percent (25%) of the Performance Period has been completed. Any
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">action required to be taken within a Determination Period may be taken at a later date if
permissible under Section 162(m) of the Code or regulations promulgated thereunder, as they may be
amended from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.11 <B><I>&#147;Disability&#148; </I></B>shall mean the inability of the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.12 <B><I>&#147;Effective Date&#148; </I></B><B>shall </B>mean January&nbsp;1, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.13 <B><I>&#147;Eligible Employee&#148; </I></B>shall mean an employee of the Company or any Parent or Subsidiary
thereof, but only if the employee is reported as such in the payroll records of such entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.14 <B><I>&#147;ERISA&#148; </I></B>shall mean the Employee Retirement Income Security Act of 1974 as currently in
effect, and as it may be amended from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.15 <B><I>&#147;Good Reason&#148; </I></B>shall mean the occurrence of any one or more of the following events:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a material breach by the Company of its obligations under this
Plan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a material diminution in the Participant&#146;s position or job
duties, as set forth in the Participant&#146;s written employment agreement with the
Company, Parent or Subsidiary, as applicable, or other written documentation;
or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any reduction in the Participant&#146;s Base Salary, unless, with
the agreement of the Company&#146;s executive management, such reduction is part of
a general, pro rata reduction in the incentive compensation plans for all
employees and officers of the Company, Parent or Subsidiary, as applicable,
implemented as a result of financial problems experienced by the Company,
Parent or Subsidiary, as applicable;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provided, however, that a Good Reason shall not exist involving any of the above
until the Company, in the case of (a)&nbsp;above, or the Company, Parent or Subsidiary,
as applicable, in the case of (b)&nbsp;or (c)&nbsp;above, has first failed to cure such
breach, diminution of position or job duties or reduction in Base Salary, as
applicable, within thirty (30)&nbsp;days of having been given written notice of the same
by the Participant.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.16 <B><I>&#147;Individual Award Opportunity&#148; </I></B>shall mean the potential of a Participant to receive an
incentive payment based on the extent to which the applicable performance or other goals for a
Performance Period shall have been satisfied. An Individual Award Opportunity may be expressed in
U.S. dollars or pursuant to a formula that is consistent with the provisions of the Plan.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-4<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.17 <B><I>&#147;Parent&#148; </I></B>shall mean a &#147;parent corporation,&#148; within the meaning of Section 424(e) of the
Code, with respect to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.18 <B><I>&#147;Participant&#148; </I></B>shall mean an Eligible Employee who is designated by the Company to
participate in the Plan for a Performance Period, in accordance with Article&nbsp;III.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.19 <B><I>&#147;Performance Period&#148; </I></B>shall mean a 12-consecutive-month fiscal or calendar year period for
which performance or other goals are established pursuant to Article&nbsp;IV.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.20 <B><I>&#147;Plan&#148; </I></B>shall mean the Natural Health Trends Corp. 2007 Annual Incentive Plan, as set
forth herein, as it may be amended from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.21 <B><I>&#147;Retirement&#148; </I></B>shall mean the voluntary termination of the Participant at any time on or
after attaining age 65.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.22 <B><I>&#147;Subsidiary&#148; </I></B>shall mean a &#147;subsidiary corporation,&#148; within the meaning of Section 424(f)
of the Code, with respect to the Company.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>III. Administration</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <B><I>General. </I></B>The Plan shall be administered by the Committee, which shall have the full power
and authority to interpret, construe and administer the Plan and any Individual Award Opportunity
granted hereunder (including reconciling any inconsistencies, correcting any defects and addressing
any omissions). The Committee&#146;s interpretation, construction and administration of the Plan and
all its determinations hereunder shall be final, conclusive and binding on all persons for all
purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <B><I>Powers and Responsibilities. </I></B>The Committee shall have the following discretionary powers,
rights and responsibilities in addition to those described in Section&nbsp;3.1.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to designate within the Determination Period the Participants
for a Performance Period;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to establish within the Determination Period the performance
goals and other terms and conditions that are to apply to each Participant&#146;s
Individual Award Opportunity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to determine in writing prior to the payment under any
Individual Award Opportunity that the performance goals for a Performance
Period and other material terms applicable to the Individual Award Opportunity
have been satisfied;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to reduce or eliminate, as of the end of the applicable
Performance Period, based upon objective or subjective measures, the minimum or
maximum amount to be paid to a Participant under any Individual Award
Opportunity who has qualified for such minimum or maximum amount, provided,
that such reduction does not result in an increase in the amount</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-5<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>payable to another Participant under another Individual Award Opportunity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to grant Individual Award Opportunities for Participants who
are not &#147;covered employees&#148; within the meaning of Section 162(m) of the Code
based upon the attainment of performance goals that do not constitute
&#147;objective performance goals&#148; within the meaning of Section 162(m) of the Code;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to adopt, revise, suspend, waive or repeal, when and as
appropriate, in its sole and absolute discretion, such administrative rules,
guidelines and procedures for the Plan as it deems necessary or advisable to
implement the terms and conditions of the Plan.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <B><I>Delegation of Power. </I></B>The Committee may delegate some or all of its power and authority
hereunder to the President and Chief Executive Officer of the Company or other executive officer of
the Company as the Committee deems appropriate. Notwithstanding the foregoing, with respect to any
person who is a &#147;covered employee&#148; within the meaning of Section 162(m) of the Code or who, in the
Committee&#146;s judgment, is likely to be a covered employee at any time during the applicable
Performance Period, only the Committee shall be permitted to (i)&nbsp;designate such person to
participate in the Plan for such Performance Period, (ii)&nbsp;establish performance goals and
Individual Award Opportunities for such person, and (iii)&nbsp;certify the achievement of such
performance goals. For purposes of the immediately preceding sentence, &#147;Committee&#148; shall mean two
or more members of the Board who are &#147;outside directors&#148; within the meaning of Section 162(m) of
the Code.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>IV. Performance Goals and Other Criteria</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <B>Establishing Performance Goals and Other Criteria</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Role of Committee</U>. The Committee shall establish
within the Determination Period of each Performance Period (i)&nbsp;one or more
objective performance goals for each Participant or for any group of
Participants (or both), provided that the outcome of each goal is substantially
uncertain at the time the Committee establishes such goal and/or (ii)&nbsp;other
criteria, including, but not limited to, performance criteria that do not
satisfy the requirements of Treasury Regulation&nbsp;Section&nbsp;1.162-27(e)(2) or time
vesting criteria, the satisfaction of which is required for the payment of an
Incentive Award Opportunity.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Performance Factors</U>. Performance goals shall be based
exclusively on one or more of the following objective Company (including any
division or operating unit thereof) or individual measures, stated in either
absolute terms or relative terms, such as rates of growth or improvement, the
attainment by a share of Common Stock of a specified fair market value for a
specified period of time, earnings per share, earnings per share excluding
non-recurring, special or extraordinary items, return to stockholders
(including dividends), return on capital, return on total</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>capital deployed, return on assets, return on equity, earnings of the
Company before or after taxes and/or interest, revenues, revenue increase,
distributor count, new distributor count, growth in distributor count,
distributor retention rate, distributor attrition rate, repeat purchase
rate, recurring revenue, recurring revenue increase, market share, cash flow
or cost reduction goals, cash flow provided by operations, net cash flow,
short-term or long-term cash flow return on investment, interest expense
after taxes, return on investment, return on investment capital, economic
value created, operating margin, gross profit margin, net profit margin,
pre-tax income margin, net income margin, net income before or after taxes,
pretax earnings before interest, depreciation and amortization, pre-tax
operating earnings after interest expense and before incentives, and/or
extraordinary or special items, operating earnings, net cash provided by
operations, and strategic business criteria, consisting of one or more
objectives based on meeting specified market penetration, geographic
business expansion goals, cost targets, customer satisfaction, reductions in
errors and omissions, reductions in lost business, management of employment
practices and employee benefits, supervision of litigation and information
technology, quality and quality audit scores, productivity, efficiency, and
goals relating to acquisitions or divestitures, or any combination of the
foregoing.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Participants Who Are Covered Employees</U>. With respect
to Participants who are &#147;covered employees&#148; within the meaning of Section
162(m) of the Code or who, in the Committee&#146;s judgment, are likely to be
covered employees at any time during the applicable Performance Period, an
Individual Award Opportunity may be based only on performance factors that are
compliant with the requirements of Treasury Regulation&nbsp;Section&nbsp;1.162-27(e)(2).
For this purpose, the factors listed in Section&nbsp;4.1(b) shall be deemed to be
compliant with the requirements of such Treasury Regulation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Participants Who Are Not Covered Employees</U>. With
respect to Participants who are not &#147;covered employees&#148; within the meaning of
Section 162(m) of the Code and who, in the Committee&#146;s judgment, are not likely
to be covered employees at any time during the applicable Performance Period,
the performance or other goals established for the Performance Period may
consist of any objective Company (including any division or operating unit
thereof) or individual measures, whether or not listed in (b)&nbsp;above or whether
or not compliant with the requirements of Treasury Regulation&nbsp;Section
1.162-27(e)(2). Without in any way limiting the generality of the foregoing,
such performance goals may include subjective goals, the satisfaction of which
shall be determined by the Committee, in its sole and absolute discretion.
Performance or other goals with respect to an Individual Award Opportunity
shall be subject to such other special rules and conditions as the Committee
may establish at any time within the Determination Period.</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Minimum and Maximum Award Amounts</U>. Each Individual
Award Opportunity that is based upon performance shall include minimum and
maximum award amounts and set forth specific levels of performance required
during the applicable Performance Period in order for the Participant to be
eligible for payment of such amounts.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <B><I>Impact of Extraordinary Items or Changes in Accounting. </I></B>The measures utilized in
establishing performance goals under the Plan for any given Performance Period shall be determined
in accordance with generally accepted accounting principles ( <I>&#147;GAAP&#148;</I>) and in a manner consistent
with the methods used in the Company&#146;s audited financial statements, without regard to (i)
extraordinary or other nonrecurring or unusual items, or restructuring or impairment charges, as
determined by the Company&#146;s independent public accountants in accordance with GAAP or (ii)&nbsp;changes
in accounting, unless, in each case, the Committee decides otherwise within the Determination
Period or as otherwise required under Section 162(m) of the Code.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>V. Individual Award Opportunities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <B><I>Terms. </I></B>At the time performance goals are established for a Performance Period, the
Committee also shall establish an Individual Award Opportunity for each Participant or group of
Participants, which shall be based on the achievement of one or more specified targets of
performance goals. The targets shall be expressed in terms of an objective formula or standard
which may, at the discretion of the Committee, be based upon the Participant&#146;s Base Salary or a
multiple thereof. In all cases the Committee shall have the sole and absolute discretion to reduce
the amount of any payment under any Incentive Award Opportunity that would otherwise be made to any
Participant or to decide that no payment shall be made; provided, however, that no reduction or
elimination of any such payment with respect to one Participant shall result in an increase in the
amount payable under an Incentive Award Opportunity granted to another Participant. Subject to
Section&nbsp;5.4 hereof, no Participant who is a &#147;disqualified individual&#148; within the meaning of Section
280G of the Code shall receive a payment under the Plan with respect to any taxable year of the
Company in excess of three (3)&nbsp;times his or her &#147;base amount&#148; within the meaning of Section&nbsp;280G.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <B><I>Incentive Payments. </I></B>Payments under Individual Award Opportunities shall be in cash, and
except as provided in Section&nbsp;5.3, shall be made at the time determined by the Committee after the
end of the Performance Period for which the Individual Award Opportunities are payable, except that
no such payment shall be made unless and until the Committee, based to the extent applicable on the
Company&#146;s audited financial statements for the Company&#146;s taxable year in which such Performance
Period ends (as prepared and reviewed by the Company&#146;s independent public accountants), has
certified in writing the extent to which the applicable performance goals for such Performance
Period have been satisfied. Notwithstanding the foregoing or any provision of this Plan to the
contrary, however, all payments to a Participant under an Individual Award Opportunity for a given
Performance Period must be made to the Participant no later than (i)&nbsp;the 15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day of the
third month following the Participant&#146;s first taxable year in which the Individual Award
Opportunity is no longer subject to a &#147;substantial risk for forfeiture &#147; (within the meaning of
Section&nbsp;409A of the Code) or (ii)&nbsp;the 15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day of the third month following the end of
the Company&#146;s fiscal year in which the Incentive Award
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Opportunity is no longer subject to a &#147;substantial risk of forfeiture&#148; (within the meaning of
Section&nbsp;409A of the Code).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <B>Payments in the Event of Death, Disability, Termination for Cause, Termination for Good
Reason, Termination Other Than for Good Reason, a Change in Control or Retirement. </B>Notwithstanding
any provision of this Plan to the contrary, payments in the event of the occurrence of any of the
following events during an applicable Performance Period shall be made as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Death</U>. In the event of a Participant&#146;s death during an
applicable Performance Period, the Incentive Award Opportunity payable to the
Participant&#146;s Beneficiary or Beneficiaries with respect to such Performance
Period shall be the full amount payable under the Incentive Award Opportunity,
assuming, as of the date that the Committee receives notice and proof of the
Participant&#146;s death, that the applicable performance objectives(s) or other
criteria with respect to such Individual Award Opportunity will be satisfied at
the targeted level(s), multiplied by a fraction, the numerator of which is the
number of full consecutive months of the Participant&#146;s employment during the
Performance Period prior to his or her death, and the denominator of which is
12. Such Individual Award Opportunity shall be paid to the Beneficiary(ies) in
a single lump sum, net applicable withholding and other taxes as soon as
administratively practicable after the Committee receives notice and proof of
the Participant&#146;s death.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Disability</U>. In the event of a Participant&#146;s Disability
during an applicable Performance Period, the Incentive Award Opportunity
payable to the Participant with respect to such Performance Period shall be the
full amount payable under Incentive Award Opportunity, as determined by the
Committee as of the end of the Performance Period, multiplied by a fraction,
the numerator of which is the number of full consecutive months of the
Participant&#146;s employment during the Performance Period prior to his or her
Disability, and the denominator of which is 12. Whether the Participant has
sustained a Disability shall be determined by the Committee in its sole
discretion, but in good faith. For this purpose, the Committee may require the
Participant to submit medical evidence of Disability; provided, however, that
any such requirement shall comply with the applicable requirements of the
Health Insurance Portability and Accountability Act of 1996, as amended. Any
Individual Award Opportunity that becomes payable on account of the
Participant&#146;s Disability shall be payable only after the Committee certifies
that the applicable performance objective(s) or other criteria with respect to
the Individual Award Opportunity have been satisfied; provided, however, that
the Committee, in its sole discretion, may accelerate the payment of any such
Individual Award Opportunity in the case of extreme or extraordinary
Disability, as determined by the Committee in its sole discretion. Any payment
that is accelerated on account of extreme or</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>extraordinary Disability shall be based upon the assumption, made at the
time of the determination of Disability, that the applicable performance
objective(s) or other criteria with respect to the Individual Award
Opportunity will be satisfied at the targeted level(s). Payment of any
Individual Award Opportunity on account of the Participant&#146;s Disability
shall be made in a single lump sum.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Termination for Cause</U>. In the event of the
Participant&#146;s termination of employment for Cause during an applicable
Performance Period, the Incentive Award Opportunity granted to the Participant
with respect to such Performance Period shall be immediately forfeited in full.
Whether a Participant has committed an act or omitted an action that
constitutes grounds for a termination for Cause shall be determined by the
Committee in its sole discretion, but in good faith.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Termination by Participant for Good Reason</U>. In the
event of the Participant&#146;s termination of employment for Good Reason during an
applicable Performance Period, the Incentive Award Opportunity payable to the
Participant with respect to such Performance Period shall be the full amount
payable under Incentive Award Opportunity, as determined by the Committee as of
the end of the Performance Period, multiplied by a fraction, the numerator of
which is the number of full consecutive months of the Participant&#146;s employment
during the Performance Period prior to his or her termination for Good Reason,
and the denominator of which is 12. Whether the Participant has sustained a
Good Reason event shall be determined by the Committee in its sole discretion,
but in good faith. Any Individual Award Opportunity that becomes payable on
account of a termination of employment for Good Reason shall be payable only
after the Committee certifies that the applicable performance objective(s) or
other criteria with respect to the Individual Award Opportunity have been
satisfied. Payment of any Individual Award Opportunity on account of the
Participant&#146;s termination of employment for Good Reason shall be made a single
lump sum.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Termination by Participant Other Than for Good Reason</U>.
In the event of the Participant&#146;s voluntary termination of employment other
than for Good Reason during an applicable Performance Period, the Incentive
Award Opportunity granted to the Participant with respect to such Performance
Period shall be immediately forfeited in full.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Termination in Connection with a Change in Control</U>. In
the event of the Participant&#146;s termination of employment in connection with a
Change in Control, where both the Change in Control and the termination of
employment occur within the same Performance Period, the Incentive Award
Opportunity payable to the Participant with respect to such Performance Period
shall be the full amount otherwise payable under Incentive Award Opportunity
multiplied by a fraction, the numerator of</TD>
</TR>

</TABLE>
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>which is the number of full consecutive months of the Participant&#146;s
employment during the Performance Period prior to his or her termination of
employment, and the denominator of which is 12. Whether the Participant has
sustained a termination of employment in connection with a Change in Control
shall be determined by the Committee in its sole discretion, but in good
faith. If the reason for the Change in Control is an event described in
Section&nbsp;2.5(a) or (c), the Individual Award Opportunity shall be paid in a
single lump sum as soon as administratively practicable following the
termination of employment, the payment to be based upon the assumption that,
as of the date of the Change in Control, the applicable performance
objective(s) or other criteria will be satisfied at the targeted level(s).
If the reason for the Change in Control is an event described in Section
2.5(b), the Individual Award Opportunity shall be payable, in a single lump
sum, only after the Committee certifies that the applicable performance
objective(s) or other criteria with respect to the Individual Award
Opportunity have been satisfied, as determined by the Committee as of the
end of the Performance Period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Retirement</U>. In the event of a Participant&#146;s Retirement
during an applicable Performance Period, the Incentive Award Opportunity
payable to the Participant with respect to such Performance Period shall be the
full amount payable under Incentive Award Opportunity, assuming for this
purpose that, as of the date of Retirement, the applicable performance
objective(s) or other criteria will be satisfied at the targeted level(s),
multiplied by a fraction, the numerator of which is the number of full
consecutive months of the Participant&#146;s employment during the Performance
Period prior to his or her Retirement, and the denominator of which is 12. Any
Individual Award Opportunity that becomes payable on account of the
Participant&#146;s Retirement shall be payable only after the Committee certifies
that the applicable performance objective(s) or other criteria with respect to
the Individual Award Opportunity have been satisfied. Payment of any
Individual Award Opportunity on account of the Participant&#146;s Retirement shall
be made in a single lump sum.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 <B><I>Parachute Payments and Parachute Awards</I></B><B>. </B>Notwithstanding any provision of this Plan to
the contrary, but subject to any conflicting provisions in any Participant&#146;s employment agreement
with the Company or any Parent or Subsidiary thereof, if, in connection with a Change in Control, a
tax under Section&nbsp;4999 of the Code would be imposed on the Participant (after taking into account
the exceptions set forth in Sections&nbsp;280G(b)(4) and 280G(b)(5) of the Code), then the number of
Incentive Award Opportunities that become vested or distributable shall be reduced (or delayed), to
the minimum extent necessary, so that no such tax would be imposed on the Participant (the
Incentive Award Opportunities not becoming so vested or distributable, the <I>&#147;Parachute Awards&#148;</I>);
provided, however, that if the &#147;aggregate present value&#148; of the Parachute Awards would exceed the
tax that, but for this sentence, would be imposed on the Participant under Section&nbsp;4999 of the Code
in connection with the Change in Control, then the Incentive Award Opportunities shall become
immediately vested and distributable without regard to the provisions of this sentence. For
purposes of the preceding
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-11<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">sentence, the &#147;aggregate present value&#148; of an Award shall be calculated on an after-tax basis
(other than taxes imposed by Section&nbsp;4999 of the Code) and shall be based on economic principles
rather than the principles set forth under Section&nbsp;280G of the Code and the regulations promulgated
thereunder. All determinations required to be made under this Section&nbsp;5.4 shall be made by the
Company.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>VI. General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <B>Effective Date and Term of Plan. </B>The Plan shall be submitted to the stockholders of the
Company for approval at the 2006 annual meeting of stockholders and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or represented by proxy at such
meeting, shall become effective for Performance Periods beginning on or after January&nbsp;1, 2007.
This Plan shall terminate as of January&nbsp;1, 2012, unless terminated earlier by the Committee. In
the event that this Plan is not approved by the stockholders of the Company, this Plan shall be
null and void.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <B>Amendment or Termination of Plan. </B>The Committee may amend or terminate this Plan as it
shall deem advisable, subject to any requirement of stockholder approval required by applicable
law, rule or regulation, including Section 162(m) of the Code. Notwithstanding any provision of
this Plan to the contrary, if the Company has executed a definitive acquisition or similar
agreement pursuant to which a Change in Control will occur upon the closing of the transaction(s)
contemplated thereby, the Committee, in its sole discretion, may treat the execution of such
agreement itself as triggering a Change in Control within the meaning of Section&nbsp;2.5(a) (b)&nbsp;or (c),
as applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <B>Non-Transferability of Awards. </B>No award under the Plan shall be transferable other than
by will, the laws of descent and distribution or pursuant to beneficiary designation procedures
approved by the Company. Except to the extent permitted by the foregoing sentence, no award may be
sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any
attempt to sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any such
award, such award and all rights thereunder shall immediately become null and void.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <B>Tax Withholding and Deductions. </B>The Company shall have the right to require, prior to the
payment of any amount pursuant to an award made hereunder, payment by the Participant of any
Federal, state, local, foreign or other taxes which may be required to be withheld or paid in
connection with such award. It is intended that the Company&#146;s contributions under the Plan will be
deductible to the Company when benefits are received by the Participant under Section&nbsp;404(a)(5) of
the Code, and the Participant shall be taxed on the benefits upon actual receipt of payments under
Section&nbsp;61 of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <B>No Right of Participation or Employment. </B>No person shall have any right to participate in
this Plan. Neither this Plan nor any award made hereunder shall confer upon any person any right
to continued employment by the Company or any Parent or Subsidiary thereof Company, or affect in
any manner the right of the Company, or any Parent or Subsidiary thereof to terminate the
employment of any person at any time without liability hereunder.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-12<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <B>Designation of Beneficiary. </B>A Participant may file with the Committee a written
designation of one or more persons as such Participant&#146;s beneficiary or beneficiaries (both primary
and contingent) in the event of the Participant&#146;s death. Each beneficiary designation shall become
effective only when filed in writing with the Committee during the Participant&#146;s lifetime on a form
prescribed by the Committee. The spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of a beneficiary other than such spouse. The filing
with the Committee of a new beneficiary designation shall cancel all previously filed beneficiary
designations. If a Participant fails to designate a beneficiary, or if all designated
beneficiaries of a Participant predecease the Participant, then each outstanding award shall be
payable to the Participant&#146;s executor, administrator, legal representative or similar person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7 <B>Governing Law. </B>This Plan and each award hereunder, and all determinations made and
actions taken pursuant thereto, to the extent not otherwise governed by the laws of the United
States, shall be governed by the laws of the State of Delaware and construed in accordance
therewith without giving effect to principles of conflicts of laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8 <B>Other Plans. </B>Neither the adoption of the Plan nor the submission of the Plan to the
Company&#146;s stockholders for their approval shall be construed as limiting the power of the Board or
the Committee to adopt such other incentive arrangements as it may otherwise deem appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9 <B>Binding Effect. </B>The Plan shall be binding upon the Company and its successors and assigns
and the Participants and their Beneficiaries, personal representatives and heirs. If the Company
becomes a party to any merger, consolidation or reorganization, then the Plan shall remain in full
force and effect as an obligation of the Company or its successors in interest, unless the Plan is
amended or terminated pursuant to Section&nbsp;6.2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Approvals</B><BR>
<B><I>2007 Annual Incentive Plan:</I></B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Adopted by the Compensation Committee of the
Board of Directors on:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Approved by the Stockholders on:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-13<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Appendix&nbsp;B</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NATURAL HEALTH TRENDS CORP.<BR>
2007 EQUITY INCENTIVE PLAN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. <U>Purpose and Eligibility</U>. The purpose of this 2007 Equity Incentive Plan (the &#147;Plan&#148;) of
Natural Health Trends Corp., a Delaware corporation (the &#147;Company&#148;) is to provide stock options,
stock issuances and other equity interests in the Company (each, an &#147;Award&#148;) to (a)&nbsp;Employees,
officers, directors, consultants and advisors of the Company and any Parent or Subsidiary thereof,
and (b)&nbsp;any other Person who is determined by the Committee of the Board of Directors of the
Company (the &#147;Board&#148;) to have made (or is expected to make) contributions to the Company or any
Parent or Subsidiary thereof. Any person to whom an Award has been granted under the Plan is
called a &#147;Participant.&#148; Additional definitions are contained in Section&nbsp;3 and certain other
Sections of the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. <U>Restatement and Effective Date</U>. This Plan replaces in its entirety the Natural Health
Trends Corp. 2002 Stock Option Plan (the &#147;2002 Plan&#148;). As of the date this Plan is approved by the
Company&#146;s shareholders, the 2002 Plan shall be deemed terminated; provided, however, that, after
such date of termination, and for the period of time thereafter during which this Plan or any
successor thereto remains in existence, all &#147;Stock Options,&#148; as defined in the 2002 Plan, and
vested stock issuances with respect thereto, shall be subject to the terms of the 2002 Plan and the
applicable grant agreement executed thereunder, and not to the terms of this Plan, except to the
extent that (a)&nbsp;there is no conflict between the terms of the 2002 Plan and the terms of this Plan
with respect to such Stock Options and vested stock issuances or (b)&nbsp;the recipient of such Stock
Options and vested stock issuances consents to the applicability of this Plan. In the event of the
applicability of (a)&nbsp;or (b)&nbsp;of the immediately preceding sentence, the Committee shall take such
actions as are consistent with Section&nbsp;14j of this Plan and applicable law to apply the provisions
of this Plan to Stock Options and vested stock issuances with respect thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. <U>Certain Definitions</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<B>&#147;Base Salary&#148; </B>shall mean a Participant&#146;s rate of annual compensation for services performed
for the Company, Parent or Subsidiary, as applicable, in effect on the first day of an applicable
Performance Period. In computing Base Salary, only such compensation as would be includable in the
Participant&#146;s gross income for United States federal income tax purposes shall be included
(including amounts excludable under Section&nbsp;911 of the Code) or which would have been so includable
if the Participant had been a United States citizen or resident; provided, however, that a
Participant&#146;s pre-tax elective or salary reduction contributions to a cafeteria plan, cash or
deferred arrangement, qualified transportation fringe benefit plan, tax-sheltered annuity, and the
amounts credited to a Participant under a non-qualified deferred compensation plan, each within the
meaning of Treasury Regulation&nbsp;Section&nbsp;1.280G-1, Q&#038;A 21(a) shall be taken into account. For
purposes of this definition, Parent and Subsidiary shall be defined by applying the applicable
statutory references in Section&nbsp;3n and 3s, respectively, by replacing &#147;more than 50%&#148; with &#147;at
least 80%&#148; where the former term appears.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<B>&#147;Cause&#148; </B>shall mean
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;cause&#148; or words of similar import contained in the
Participant&#146;s written employment agreement, if any, with the Company; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>conduct, as determined by the Committee, involving one or more
of the following:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(A)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>gross misconduct or inadequate performance by
the Participant which is injurious to the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(B)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the commission of an act of embezzlement, fraud
or theft, which results in economic loss, damage or injury to the
Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(C)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the unauthorized disclosure of any trade secret
or confidential information of the Company (or any client, customer,
supplier or other third party who has a business relationship with the
Company) or the violation of any non-competition or non-solicitation
covenant or assignment of inventions obligation with the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(D)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the commission of an act which constitutes
unfair competition with the Company or which induces any customer or
prospective customer of the Company to breach a contract with the
Company or to decline to do business with the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(E)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the indictment of the Participant for a felony
or serious misdemeanor offense, either in connection with the
performance of his or her obligations to the Company or which shall
adversely affect the Participant&#146;s ability to perform such obligations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(F)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the commission of an act of fraud or breach of
fiduciary duty which results in loss, damage or injury to the Company;
or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(G)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the failure of the Participant to perform in a
material respect his or her employment, consulting or advisory
obligations without proper cause.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For purposes of this definition, &#147;Company&#148; shall be deemed to include any Parent or
Subsidiary.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;<B>&#147;Change in Control&#148; </B>shall mean
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The acquisition by any individual, entity or group (within the
meaning of Section&nbsp;13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the <B>&#147;Exchange Act&#148;</B>)) of beneficial ownership (within the meaning of
Rule&nbsp;13d-3 promulgated under the Exchange Act) of 50% or more of the then
outstanding shares of voting stock of the Company (the <B>&#147;Voting Stock&#148;</B>);
provided, however, that any acquisition by the Company or its subsidiaries, or
any employee benefit plan (or related trust) of the Company or its subsidiaries
of 50% or more of Voting Stock shall not constitute a Change in Control; and
provided, further, that any acquisition by a corporation with respect to which,
following such acquisition, more than 50% of the then outstanding shares of
common
</TD>
</TR>
</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>stock of such corporation, is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners of the Voting Stock immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Voting Stock, shall not
constitute a Change in Control;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Individuals who, as of the Effective Date, constitute the Board
(the <B>&#147;Incumbent Directors&#148;</B>) cease for any reason (other than malfeasance) to
constitute a majority of the members of the Board; provided that any individual
who becomes a director after the Effective Date whose election or nomination
for election by the Company&#146;s shareholders was approved by a majority of the
members of the Incumbent Directors (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual
or threatened &#147;election contest&#148; relating to the election of the Directors of
the Company (as such terms are used in Rule&nbsp;14a-11 under the Exchange Act),
<B>&#147;tender offer&#148; </B>(as such term is used in Section 14(d) of the Exchange Act) or a
proposed Merger (as defined below) shall be deemed to be members of the
Incumbent Directors; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The consummation of (A)&nbsp;a reorganization, merger or
consolidation (any of the foregoing, a <B>&#147;Merger&#148;</B>), in each case, with respect to
which all or substantially all of the individuals and entities who were the
beneficial owners of the Voting Stock immediately prior to such Merger do not,
following such Merger, beneficially own, directly or indirectly, more than 50%
of the then outstanding shares of common stock of the corporation resulting
from Merger, (B)&nbsp;a complete liquidation or dissolution of the Company or (C)
the sale or other disposition of all or substantially all of the assets of the
Company, excluding a sale or other disposition of assets to a Subsidiary of the
Company.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;<B>&#147;Code&#148; </B>means the Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;<B>&#147;Committee&#148; </B>shall mean the Compensation Committee of the Board or such other committee
designated by the Board that satisfies any then applicable requirements of the New York Stock
Exchange, Nasdaq, or such other principal national stock exchange on which the Common Stock is then
traded, and which consists of two or more members of the Board, each of whom may be an outside
director within the meaning of Section 162(m) of the Code. Notwithstanding the foregoing, in the
case of any Award granted to any Participant who is a &#147;covered employee&#148; within the meaning of
Section&nbsp;162(m), the Committee shall consist of two or more members of the Board who are &#147;outside
directors&#148; within the meaning of such Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;<B>&#147;Common Stock&#148; </B>shall mean the common stock of the Company, par value of $.01 per share.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->B-3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.&nbsp;<B>&#147;Company,&#148; </B>for purposes of Awards other than Incentive Stock Options, shall include any
other business venture in which the Company has a direct or indirect significant interest, as
determined by the Committee in its sole discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h.&nbsp;<B>&#147;Designated Beneficiary&#148; </B>shall mean the beneficiary designated by a Participant, in
accordance with Section&nbsp;16g hereof, to receive amounts due or exercise rights of the Participant in
the event of the Participant&#146;s death. In the absence of an effective designation by a Participant,
Designated Beneficiary shall mean the Participant&#146;s estate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;<B>&#147;Determination Period&#148; </B>shall mean, with respect to any Performance Period, a period
commencing on or before the first day of the Performance Period and ending not later than the
earlier of (i)&nbsp;90&nbsp;days after the commencement of the Performance Period and (ii)&nbsp;the date on which
twenty-five percent (25%) of the Performance Period has been completed. Any action required to be
taken within a Determination Period may be taken at a later date if permissible under Section
162(m) of the Code or regulations promulgated thereunder, as they may be amended from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j.&nbsp;<B>&#147;Disability&#148; </B>shall mean the inability of the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k.&nbsp;<B>&#147;Effective Date&#148; </B>shall mean January&nbsp;1, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l.&nbsp;<B>&#147;Employee&#148; </B>shall mean an employee of the Company or any Parent or Subsidiary thereof, but
only if the employee is reported as such on the payroll records of such entity. For purposes of
eligibility under the Plan, an &#147;Employee&#148; shall include any person to whom an offer of employment
has been extended by the Company or any Parent or Subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m.&nbsp;<B>&#147;ERISA&#148; </B>shall mean the Employee Retirement Income Security Act of 1974, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n.&nbsp;<B>&#147;Good Reason&#148; </B>shall mean the occurrence of any one or more of the following events:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a material breach by the Company of its obligation under this
Agreement;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a material diminution in the Participant&#146;s position or job
duties, as set forth in the Participant&#146;s written employment agreement with the
Company, Parent or Subsidiary, as applicable, or other written documentation;
or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any reduction in the Participant&#146;s Base Salary by more than 80
percent (80%), either in one step or a series of steps, within a Performance
Period;</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">provided, however, that a Good Reason shall not exist involving any of the above
until the Company, in the case of (i)&nbsp;above, or the Company, Parent or Subsidiary,
as applicable, in the case of (ii)&nbsp;or (iii)&nbsp;above, has first failed to cure such
breach, diminution of position or job duties or reduction in Base Salary, as
applicable, within thirty (30)&nbsp;days of having been given written notice of the same
by the Participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o.&nbsp;<B>&#147;Parent&#148; </B>shall mean a &#147;parent corporation,&#148; within the meaning of Section 424(e) of the
Code, with respect to the Company.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;p.&nbsp;<B>&#147;Performance Period&#148; </B>shall mean a two or more-consecutive fiscal or calendar year period
for which performance or other goals are established herein with respect to an Award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;q.&nbsp;<B>&#147;Person&#148; </B>shall mean a person within Section&nbsp;3(a)(9) of the Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;r.&nbsp;<B>&#147;Plan&#148; </B>shall mean the Natural Health Trends Corp. 2007 Equity Incentive Plan, as set forth
herein, as it may be amended from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;s.&nbsp;<B>&#147;Retirement&#148; </B>shall mean the voluntary termination of the Participant at any time on or
after attaining age 65.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;t.&nbsp;<B>&#147;Subsidiary&#148; </B>shall mean a &#147;subsidiary corporation,&#148; within the meaning of Section 424(f) of
the Code, with respect to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">4. <U>Administration.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>General</U>. The Plan shall be administered by the Committee. The Committee, in its
sole discretion, shall have the authority to grant and amend Awards, to adopt, amend and repeal
rules relating to the Plan and to interpret and correct the provisions of the Plan and any Award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Powers and Responsibilities</U>. Subject to the express limitation of the Plan, the
Committee shall have the following discretionary powers, rights and responsibilities, in addition
to those described in Section&nbsp;4a.:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to construe and determine the respective Stock Option
Agreements, other Agreements, Awards and the Plan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to prescribe, amend and rescind rules and regulations relating
to the Plan and any Awards;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to determine the extent to which Award vesting schedules shall
be accelerated or Award payments made to, or forfeited by, a Participant in the
event of (A)&nbsp;the Participant&#146;s termination of employment with the Company or
any Parent or Subsidiary thereof due to Disability, Retirement, death, Good
Reason, Cause or other reason, or (B)&nbsp;a Change in Control of the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">iv.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to determine the terms and provisions of the respective Stock
Option Agreements, other Agreements and Awards, which need not be identical;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">v.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to reduce or eliminate, as of the end of any applicable
Performance Period, based upon objective or subjective measures, the minimum or
maximum amount to be paid to a Participant under any Award who has qualified
for such minimum or maximum amount, provided, that such reduction does not
result in an increase in the amount payable to another Participant under
another Award;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">vi.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to grant Awards to Participants who are not &#147;covered employees&#148;
within the meaning of Section 162(m) based upon the attainment of performance</TD>
</TR>

</TABLE>
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>goals that </U>do not constitute &#147;objective performance goals&#148; within
the meaning of Section&nbsp;162(m); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">vii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to make all other determinations in the judgment of the
Committee necessary or desirable for the administration and interpretation of
the Plan.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Stock Option Agreement, other Agreement or Award
in the manner and to the extent it shall deem expedient to carry the Plan, any Stock
Option Agreement, other Agreement or Award into effect and it shall be the sole and
final judge of such expediency. All decisions by the Committee shall be final and
binding on all interested persons. Neither the Company nor any member of the
Committee shall be liable for any action or determination relating to the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;<U>Delegation of Power</U>. The Committee may delegate some or all of its power and
authority hereunder to the President and Chief Executive Officer of the Company or other executive
officer of the Company as the Committee deems appropriate. Notwithstanding the foregoing, with
respect to any person who is a &#147;covered employee&#148; within the meaning of Section 162(m) of the Code
or who, in the Committee&#146;s judgment, is likely to be a covered employee at any time during the
applicable Performance Period, only the Committee shall be permitted to (i)&nbsp;designate such person
to participate in the Plan for such Performance Period, (ii)&nbsp;establish performance goals and
Individual Award Opportunities for such person, and (iii)&nbsp;certify the achievement of such
performance goals. For purposes of the immediately preceding sentence, &#147;Committee&#148; shall mean two
or more members of the Board who are &#147;outside directors&#148; within the meaning of Section 162(m) of
the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">5. <U>Performance Goals and Other Criteria</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>Role of Committee</U>. The Committee shall establish within the Determination Period
of each Performance Period (i)&nbsp;one or more objective performance goals for each Participant or for
any group of Participants (or both), provided that the outcome of each goal is substantially
uncertain at the time the Committee establishes such goal and/or (ii)&nbsp;other criteria, including,
but not limited to, performance criteria that do not satisfy the requirements of Treasury
Regulation&nbsp;Section&nbsp;1.162-27(e)(2) or time vesting criteria, the satisfaction of which is required
for the payment of an Incentive Award Opportunity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Performance Factors</U>. Performance goals shall be based exclusively on one or more
of the following objective Company (including any division or operating unit thereof) or individual
measures, stated in either absolute terms or relative terms, such as rates of growth or
improvement, the attainment by a share of Common Stock of a specified fair market value for a
specified period of time, earnings per share, earnings per share excluding non-recurring, special
or extraordinary items, return to stockholders (including dividends), return on capital, return on
total capital deployed, return on assets, return on equity, earnings of the Company before or after
taxes and/or interest, revenues, revenue increase, distributor count, new distributor count, growth
in distributor count, distributor retention rate, distributor attrition rate, repeat purchase rate,
recurring revenue, recurring revenue increase, market share, cash flow or cost reduction goals,
cash flow provided by
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">operations, net cash flow, short-term or long-term cash flow return on investment, interest
expense after taxes, return on investment, return on investment capital, economic value created,
operating margin, gross profit margin, net profit margin, pre-tax income margin, net income margin,
net income before or after taxes, pretax earnings before interest, depreciation and amortization,
pre-tax operating earnings after interest expense and before incentives, and/or extraordinary or
special items, operating earnings, net cash provided by operations, and strategic business
criteria, consisting of one or more objectives based on meeting specified market penetration,
geographic business expansion goals, cost targets, customer satisfaction, reductions in errors and
omissions, reductions in lost business, management of employment practices and employee benefits,
supervision of litigation and information technology, quality and quality audit scores,
productivity, efficiency, and goals relating to acquisitions or divestitures, or any combination of
the foregoing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;<U>Participants Who Are Covered Employees</U>. With respect to Participants who are
&#147;covered employees&#148; within the meaning of Section 162(m) of the Code or who, in the Committee&#146;s
judgment, are likely to be covered employees at any time during the applicable Performance Period,
an Individual Award Opportunity may be based only on performance factors that are compliant with
the requirements of Treasury Regulation&nbsp;Section&nbsp;1.162-27(e)(2). For this purpose, the factors
listed in Section&nbsp;4.1(b) shall be deemed to be compliant with the requirements of such Treasury
Regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;<U>Participants Who Are Not Covered Employees</U>. Notwithstanding any provision of this
Plan to the contrary, with respect to Participants who are not &#147;covered employees&#148; within the
meaning of Section 162(m) of the Code and who, in the Committee&#146;s judgment, are not likely to be
covered employees at any time during the applicable Performance Period, the performance or other
goals established for the Performance Period may consist of any objective Company (including any
division or operating unit thereof) or individual measures, whether or not listed in (b)&nbsp;above or
whether or not compliant with the requirements of Treasury Regulation&nbsp;Section&nbsp;1.162-27(e)(2), and
the Committee may grant Awards without regard to the need for satisfaction of any performance goals
whatsoever and/or without reference to any particular Performance Period. Without in any way
limiting the generality of the foregoing, such performance goals may include subjective goals, the
satisfaction of which shall be determined by the Committee, in its sole and absolute discretion,
and the Committee may grant Awards subject only to the requirement of time vesting. Performance or
other goals with respect to an Award shall be subject to such other special rules and conditions as
the Committee may establish at any time within the Determination Period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;<U>Applicability of Section&nbsp;Rule&nbsp;16b-3</U>. Notwithstanding anything to the contrary in
the foregoing if, or at such time as, the Common Stock is or becomes registered under <U>Section
12</U> of the Securities and Exchange Act of 1934, as amended (the <B>&#147;Exchange Act&#148;</B>), or any
successor statute, the Plan shall be administered in a manner consistent with Rule&nbsp;16b-3
promulgated thereunder, as it may be amended from time to time, or any successor rules <B>(&#147;Rule
16b-3&#148;</B>), such that all subsequent grants of Awards hereunder to Reporting Persons, as hereinafter
defined, shall be exempt under such rule. Those provisions of the Plan which make express
reference to Rule&nbsp;16b-3 or which are required in order for certain option transactions to qualify
for exemption under Rule&nbsp;16b-3 shall apply only to such persons as are required to file reports
under Section&nbsp;16 (a)&nbsp;of the Exchange Act (a <B>&#147;Reporting Person&#148;</B>).
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;<U>Applicability of Section&nbsp;162(m)</U>. Notwithstanding any provisions in this Plan to
the contrary, whenever the Committee is authorized to exercise its discretion in the administration
or amendment of this Plan or any Award hereunder or otherwise, the Committee may not exercise such
discretion in a manner that would cause any outstanding Award that would otherwise qualify as
performance-based compensation under Section&nbsp;162 (m)&nbsp;Code and the regulations thereunder (&#147;Section
162 (m)&#148;) to fail to so qualify under Section&nbsp;162 (m). To the extent necessary for an Award
granted hereunder to qualify as performance-based compensation under Section&nbsp;162(m), such Award
shall be made pursuant to preestablished objective performance criteria. In furtherance thereof,
performance goals shall be based exclusively on one or more of the objective Company (including any
division or operating unit thereof) or individual measures set forth in Section&nbsp;5b. hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">6. <U>Stock Available for Awards</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>Number of Shares</U>. Subject to adjustment under <U>Section&nbsp;6c</U>, the aggregate
number of shares of Common Stock of the Company that may be issued pursuant to the Plan is the
Available Shares (as defined on the last page). If any Award expires, or is terminated,
surrendered or forfeited, in whole or in part, the unissued Common Stock covered by such Award
shall again be available for the grant of Awards under the Plan. If an Award granted under the Plan
shall expire or terminate for any reason without having been exercised in full, the unpurchased
shares subject to such Award shall again be available for subsequent Awards under the Plan. Shares
issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury
shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Per-Participant Limit</U>. Subject to adjustment under <U>Section&nbsp;6c</U>, no
Participant may be granted Awards during any one fiscal year to purchase more than 150,000 shares
of Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;<U>Adjustment to Common Stock</U>. Subject to <U>Section&nbsp;14</U>, in the event of any
stock split, reverse stock split, stock dividend, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off,
split-up, or other similar change in capitalization or similar event, (i)&nbsp;the number and class of
securities available for Awards under the Plan and the per-Participant share limit and (ii)&nbsp;the
number and class of securities, vesting schedule and exercise price per share subject to each
outstanding Option and Stock Appreciation Right shall be adjusted by the Company (or substituted
Awards may be made if applicable) to the extent the Committee shall determine, in good faith, that
such an adjustment (or substitution) is appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">7. <U>Stock Option Awards.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>General</U>. The Committee may grant options to purchase Common Stock (each, an
<B>&#147;Option&#148;</B>) and determine the number of shares of Common Stock to be covered by each Option, the
exercise price of each Option and the conditions and limitations applicable to the exercise of each
Option and the shares of Common Stock issued upon the exercise of each Option, including, but not
limited to, vesting provisions and restrictions relating to applicable federal or state securities
laws. Each Option will be evidenced by a Stock Option Agreement, consisting of
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">a Notice of Stock Option Award and a Stock Option Award Agreement (collectively, a <B>&#147;Stock
Option Agreement&#148;</B>).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Incentive Stock Options</U>. An Option that the Committee intends to be an incentive
stock option (an <B>&#147;Incentive Stock Option&#148;</B>) as defined in Section&nbsp;422 of the Code, as amended, or
any successor statute <B>(&#147;Section&nbsp;422&#148;</B>), shall be granted only to an Employee and shall be subject to
and shall be construed consistently with the requirements of Section&nbsp;422 and regulations
thereunder. The Committee, the Board and the Company shall have no liability if an Option or any
part thereof that is intended to be an Incentive Stock Option does not qualify as such. An Option
or any part thereof that does not qualify as an Incentive Stock Option is referred to herein as a
<B>&#147;Nonstatutory Stock Option&#148; </B>or <B>&#147;Nonqualified Stock Option.&#148;</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;<U>Dollar Limitation</U>. For so long as the Code shall so provide, Options granted to any
Employee under the Plan (and any other incentive stock option plans of the Company) which are
intended to qualify as Incentive Stock Options shall not qualify as Incentive Stock Options to the
extent that such Options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate Fair Market Value (as defined below and
determined as of the respective date or dates of grant) of more than $100,000. The amount of
Incentive Stock Options which exceed such $100,000 limitation shall be deemed to be Nonqualified
Stock Options. For the purpose of this limitation, unless otherwise required by the Code or
regulations of the Internal Revenue Service or determined by the Committee, Options shall be taken
into account in the order granted, and the Committee may designate that portion of any Incentive
Stock Option that shall be treated as Nonqualified Option in the event that the provisions of this
paragraph apply to a portion of any Option. The designation described in the preceding sentence
may be made at such time as the Committee considers appropriate, including after the issuance of
the Option or at the time of its exercise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;<U>Exercise Price</U>. The Committee shall establish the exercise price (or determine the
method by which the exercise price shall be determined) at the time each Option is granted and
specify the exercise price in the applicable Stock Option Agreement; provided, however, in no event
may the per share exercise price be less than the Fair Market Value (as defined below) of the
Common Stock on the date of grant; and provided, further, however, that, except as may be required
under <U>Section&nbsp;6c</U>, the Committee may not reduce, directly or indirectly, at any time
following the grant of the Option, the exercise price per share of Common Stock underlying the
Option to a level below the Fair Market Value per share of Common Stock on the date of grant. In
the case of an Incentive Stock Option granted to a Participant who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, then the exercise price shall be no less than
110% of the Fair Market Value of the Common Stock on the date of grant. In the case of a grant of
an Incentive Stock Option to any other Participant, the exercise price shall be no less than 100%
of the Fair Market Value of the Common Stock on the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;<U>Term of Options</U>. Each Option shall be exercisable at such times and subject to
such terms and conditions as the Committee may specify in the applicable Stock Option Agreement;
provided, that the term of any Incentive Stock Option may not be more than ten (10)&nbsp;years from the
date of grant. In the case of an Incentive Stock Option granted to a Participant
</DIV>


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</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">who, at the time of grant of such Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option shall be no longer than five (5)&nbsp;years from the date of grant. The term of any
Nonqualified Stock Option may not be more than ten (10)&nbsp;years from the date of grant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;<U>Exercise of Option</U>. Options may be exercised only by delivery to the Company of a
written notice of exercise signed by the proper person together with payment in full as specified
in <U>Section&nbsp;7g</U> and the Stock Option Agreement for the number of shares for which the Option
is exercised.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.&nbsp;<U>Payment Upon Exercise</U>. Common Stock purchased upon the exercise of an Option shall
be paid for by one or any combination of the following forms of payment as permitted by the
Committee in its sole and absolute discretion:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>by check payable to the order of the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>only if the Common Stock is then publicly traded, by delivery
of an irrevocable and unconditional undertaking by a creditworthy broker
(selected by the Participant and otherwise without the financial involvement of
the Company) to deliver promptly to the Company sufficient funds to pay the
exercise price, or delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to deliver
promptly to the Company cash or a check sufficient to pay the exercise price
(each, a <B>&#147;Cashless Exercise&#148;</B>);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to the extent explicitly provided in the applicable Stock
Option Agreement, by delivery of shares of Common Stock owned by the
Participant valued at Fair Market Value (as determined by the Committee or as
determined pursuant to the applicable Stock Option Agreement);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">iv.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>payment of such other lawful consideration as the Committee may
determine.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Except as otherwise expressly set forth in a Stock Option Agreement, the Committee shall have no
obligation to accept consideration other than cash and in particular, unless the Committee so
expressly provides, in no event will the Company accept the delivery of shares of Common Stock that
have not been owned by the Participant at least six months prior to the exercise or permit a
Cashless Exercise if such Cashless Exercise would contravene any provision of applicable law. The
Fair Market Value of any shares of the Company&#146;s Common Stock or other non-cash consideration which
may be delivered upon exercise of an Option shall be determined in such manner as may be prescribed
by the Committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h.&nbsp;<U>Acceleration, Extension, Etc</U>. The Committee may, in its sole discretion, and in all
instances subject to any relevant tax and accounting considerations which may adversely impact or
impair the Company, (i)&nbsp;accelerate the date or dates on which all or any particular Options or
Awards granted under the Plan may be exercised, or (ii)&nbsp;extend the dates during which all or any
particular Options or Awards granted under the Plan may be exercised or vest.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;<U>Determination of Fair Market Value</U>. If, at the time an Option is granted under the
Plan, the Company&#146;s Common Stock is publicly traded under the Exchange Act, &#147;Fair Market Value&#148;
shall mean (i)&nbsp;if the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market or The Nasdaq Small Cap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the last reported sales price for such
stock (on that date) or the closing bid, if no sales were reported as quoted on such exchange or
system as reported in <I>The Wall Street Journal </I>or such other source as the Committee deems reliable;
or (ii)&nbsp;the average of the closing bid and asked prices last quoted (on that date) by an
established quotation service for over-the-counter securities, if the Common Stock is not reported
on a national market system. In the absence of an established market for the Common Stock, the Fair
Market Value thereof shall be determined in good faith by the Committee after taking into
consideration all factors which it deems appropriate.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">8. <U>Restricted Stock Awards.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>Grants</U>. The Committee may grant Awards entitling recipients to acquire shares of
Common Stock, subject to (i)&nbsp;restrictions on transfer as set forth in the applicable Award
instrument and (ii)&nbsp;forfeiture unless and until all specified employment, vesting and/or
performance conditions, as set forth in the applicable Award instrument, are met (such shares of
Common Stock, <B>&#147;Restricted Stock,&#148; </B>and each such Award, a <B>&#147;Restricted Stock Award&#148;</B>).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Terms and Conditions</U>. The Committee shall determine the terms and conditions of
any such Restricted Stock Award. Any stock certificates issued in respect of a Restricted Stock
Award shall be registered in the name of the Participant and, unless otherwise determined by the
Committee, deposited by the Participant, together with a stock power endorsed in blank, with the
Company (or its designee). Restricted Stock Awards shall be issued for no cash consideration or
such minimum consideration as may be required by law. After the expiration of the applicable
restriction periods, the Company (or such designee) shall deliver the certificates no longer
subject to such restrictions to the Participant or, if the Participant has died, to the Designated
Beneficiary.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">9. <U>Restricted Stock Unit Awards.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>Grant</U>. The Committee may grant Awards entitling recipients to the right to
acquire, at some time in the future, shares of Restricted Stock, subject to such other conditions
as the Committee may prescribe in the applicable Award Agreement (each such Award, a <B>&#147;Restricted
Stock Unit Award&#148;</B>). Restricted Stock Unit Awards are subject to forfeiture unless and until all
specified Award conditions are met, as determined by the Committee and set forth in the particular
Agreements applicable to such Awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Terms and Conditions</U>. The Committee shall determine the terms and conditions of
any such Restricted Stock Unit Award. No stock certificates shall be issued in respect of a
Restricted Stock Unit Award at the time of grant. However, upon the lapse of all applicable
restrictions, the Company (or the Company&#146;s counsel as its designee) shall deliver stock
certificates to the Participant or, if the Participant has died, to the Designated Beneficiary.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">10. <U>Stock Appreciation Right Awards.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>Grant</U>. The Committee may grant Awards entitling recipients to the right to
acquire, at some time in the future, upon exercise, one or more shares of Common Stock, in an
amount equal to the product of (i)&nbsp;the excess of (A)&nbsp;the Fair Market Value of a share of Common
Stock on the date of exercise over (B)&nbsp;the exercise price per share set forth in the applicable
Award Agreement and (ii)&nbsp;the number of shares of Common Stock with respect to which the right is
exercised, subject to such other conditions as the Committee may prescribe in the applicable Award
Agreement (each, a <B>&#147;Stock Appreciation Right Award&#148;</B>). Stock Appreciation Right Awards are subject
to forfeiture unless and until all specified Award conditions are met, as determined by the
Committee and set forth in the particular Agreements applicable to such Awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Terms</U>. The Committee shall determine the terms and conditions of any such Stock
Appreciation Right Award. A Stock Appreciation Right Award may be issued either in tandem with, or
by reference to, an Option (each such Award, a <B>&#147;Tandem SAR&#148;</B>) or not so issued (each such Award, a
<B>&#147;Free-Standing SAR&#148;</B>). It is the intention of the Committee that the exercise of Tandem SARs assist
the recipient of an Option with the ability to pay the exercise price of the Option. The exercise
price of a Tandem SAR shall be the exercise price per share of the related Option. The exercise
price of a Free-Standing SAR shall be determined by the Committee in its sole discretion; provided,
however, that exercise price shall not be less than 100% of the Fair Market Value of a share of
Common Stock on the date of grant; and provided, further, however, that, except as may be required
under <U>Section&nbsp;6c</U>, the Committee may not reduce, at any time following the grant of the
Free-Standing SAR, the exercise price per share of Common Stock underlying such Free-Standing SAR
to a level below the Fair Market Value per share of Common Stock on the date of grant. No stock
certificates shall be issued in respect of a Stock Appreciation Right Award, and such Award shall
be reflected merely in book entry form on the Company&#146;s books and records. However, upon exercise,
the Company (or the Company&#146;s counsel as its designee) shall deliver stock certificates to the
Participant or, if the Participant has died, to the Designated Beneficiary.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">11. <U>Performance Share Awards</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>Grants</U>. The Committee may grant Awards entitling recipients to acquire shares of
Common Stock upon the attainment of specified performance goals within a specified Performance
Period, which shares may or may not be shares of Restricted Stock, subject to such other conditions
as the Committee may prescribe in the applicable Award (each such share of Common Stock, a
<B>&#147;Performance Share,&#148; </B>and each such Award, a <B>&#147;Performance Share Award&#148;</B>). Performance Share Awards
are subject to forfeiture unless and until all specified Award conditions are met, as determined by
the Committee and set forth in the particular Agreements applicable to such Awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Terms and Conditions</U>. The Committee shall determine the terms and conditions of
any such Performance Share Award. Unless otherwise determined by the Committee, the payment value
of the Performance Share Awards shall be based upon the Fair Market Value of the Common Stock
underlying such Award on the date the Performance Shares are earned or on the date the Committee
determines that the Performance Shares have been earned. The
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Committee shall establish performance goals for each Performance Period for the purpose of
determining the extent to which Performance Shares awarded for such cycle are earned. As soon as
administratively practicable after the end of a performance cycle, the Committee shall determine
the number of Performance Shares which have been earned in relation to the established performance
goals. No stock certificates shall be issued in respect of a Performance Share Award at the time
of grant unless the Performance Shares are shares of Restricted Stock, in which case the rules of
Section&nbsp;10b with respect to the issuance of certificates shall apply. However, upon the lapse of
all applicable restrictions, the Company (or the Company&#146;s counsel as its designee) shall deliver
stock certificates to the Participant or, if the Participant has died, to the Designated
Beneficiary.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">12. <U>Award Shares</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>Grants</U>. The Committee may grant Awards entitling recipients to acquire shares of
Common Stock, subject to such terms, restrictions, conditions, performance criteria, vesting
requirements and payment needs, if any, as the Committee shall determine in the applicable Award
Agreement (each such Award, an <B>&#147;Award Share.&#148;</B>) Award Shares are subject to forfeiture unless and
until all specified Award conditions are met, as determined by the Committee and set forth in the
particular Agreements applicable to such Awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Terms and Conditions</U>. The Committee shall determine the terms and conditions of
any such Award Share. Award Shares shall be issued for no cash consideration or such minimum
consideration as may be required by law. When paid, the Company (or the Company&#146;s counsel as its
designee) shall deliver stock certificates for the Award Shares to the Participant or, if the
Participant has died, to the Designated Beneficiary.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">13. <U>Other Stock-Based Awards</U>. The Committee shall have the right to grant other Awards
based upon the Common Stock having such terms and conditions as the Committee may determine,
including, without limitation, the grant of securities convertible into Common Stock and the grant
of phantom stock awards or stock units.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">14. <U>General Provisions Applicable to Awards.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>Transferability of Awards</U>. Except as the Committee may otherwise determine or
provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise
encumbered by the person to whom they are granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution, and, during the life of the Participant,
shall be exercisable only by the Participant; provided, however, except as the Committee may
otherwise determine or provide in an Award, that Nonstatutory Options and Restricted Stock Awards
may be transferred pursuant to a qualified domestic relations order (as defined in ERISA) or to a
grantor-retained annuity trust or a similar estate-planning vehicle in which the trust is bound by
all provisions of the Stock Option Agreement and Restricted Stock Award, which are applicable to
the Participant. References to a Participant, to the extent relevant in the context, shall include
references to authorized transferees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Documentation</U>. Each Award under the Plan shall be evidenced by a written
instrument (each, an <B>&#147;Agreement&#148;</B>) in such form as the Committee shall determine or as
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->B-13<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">executed by an officer of the Company pursuant to authority delegated by the Committee or
Board. Each Award Agreement may contain terms and conditions in addition to those set forth in the
Plan, provided that such terms and conditions do not contravene the provisions of the Plan or
applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;<U>Committee Discretion</U>. The terms of each type of Award need not be identical, and
the Committee need not treat Participants uniformly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;<U>Additional Award Provisions</U>. The Committee may, in its sole discretion, include
additional provisions in any Stock Option Agreement, Restricted Stock Award or other Award granted
under the Plan, including without limitation restrictions on transfer, commitments to pay cash
bonuses, to make, arrange for or guaranty loans (subject to compliance with <U>Section&nbsp;14m</U>) or
to transfer other property to Participants upon exercise of Awards, or transfer other property to
Participants upon exercise of Awards, or such other provisions as shall be determined by the
Committee; provided that such additional provisions shall not be inconsistent with any other term
or condition of the Plan or applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;<U>Termination of Status</U>. The Committee shall determine the effect on an Award of the
Disability, death, Retirement, authorized leave of absence or other change in the employment or
other status of a Participant and the extent to which, and the period during which, the
Participant, or the Participant&#146;s legal representative, conservator, guardian or Designated
Beneficiary, may exercise rights under the Award, subject to applicable law and the provisions of
the Code related to Incentive Stock Options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;<U>Change in Control of the Company</U>.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Unless otherwise expressly provided in the applicable
Agreement, in connection with the occurrence of a Change in Control, the
Committee shall, in its sole discretion as to any outstanding Award (including
any portion thereof; on the same basis or on different bases, as the Committee
shall specify), take one or any combination of the following actions:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="7%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>make appropriate provision for the
continuation of such Award by the Company or the assumption of such
Award by the surviving or acquiring entity and by substituting on an
equitable basis for the shares then subject to such Award either (x)
the consideration payable with respect to the outstanding shares of
Common Stock in connection with the Change in Control, (y)&nbsp;shares of
stock of the surviving or acquiring corporation or (z)&nbsp;such other
securities as the Committee deems appropriate, the fair market value of
which (as determined by the Committee in its sole discretion) shall not
materially differ from the fair market value of the shares of Common
Stock subject to such Award immediately preceding the Change in
Control;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="7%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accelerate the date of exercise or vesting of
such Award;</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="7%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">C.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>permit the exchange of such Award for the
right to participate in any stock option or other employee benefit plan
of any successor corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="7%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">D.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provide for the repurchase of the Award for an
amount equal to the difference of (x)&nbsp;the consideration received per
share for the securities underlying the Award in the Change in Control
minus (y)&nbsp;the per share exercise price of such securities. Such amount
shall be payable in cash or the property payable in respect of such
securities in connection with the Change in Control. The value of any
such property shall be determined by the Committee in its discretion;
or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="7%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">E.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provide for the termination of such Award
immediately prior to the consummation of the Change in Control;
provided that no such termination will be effective if the Change in
Control is not consummated.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.&nbsp;<U>Dissolution or Liquidation</U>. In the event of the proposed dissolution or
liquidation of the Company, the Committee shall notify each Participant as soon as practicable
prior to the effective date of such proposed transaction. The Committee in its sole discretion may
provide for a Participant to have the right to exercise his or her Award until fifteen (15)&nbsp;days
prior to such transaction as to all of the shares of Common Stock covered by the Option or Award,
including shares as to which the Option or Award would not otherwise be exercisable, which exercise
may in the sole discretion of the Committee, be made subject to and conditioned upon the
consummation of such proposed transaction. To the extent it has not been previously exercised, an
Award will terminate upon the consummation of such proposed action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h.&nbsp;<U>Assumption of Awards Upon Certain Events</U>. In connection with a merger or
consolidation of an entity with the Company or the acquisition by the Company of property or stock
of an entity, the Committee may grant Awards under the Plan in substitution for stock and
stock-based awards issued by such entity or an affiliate thereof. The substitute Awards shall be
granted on such terms and conditions as the Committee considers appropriate in the circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;<U>Parachute Payments and Parachute Awards</U>. Notwithstanding the provisions of
<U>Section&nbsp;14f</U>, but subject to any contrary provisions in a Participant&#146;s employment agreement
with the Company or any Parent or Subsidiary, if, in connection with a Change in Control, a tax
under Section&nbsp;4999 of the Code would be imposed on the Participant (after taking into account the
exceptions set forth in Sections&nbsp;280G(b)(4) and 280G(b)(5) of the Code), then the number of Awards
which shall become exercisable, realizable or vested as provided in such Section shall be reduced
(or delayed), to the minimum extent necessary, so that no such tax would be imposed on the
Participant (the Awards not becoming so accelerated, realizable or vested, the <B>&#147;Parachute Awards&#148;</B>);
provided, however, that if the &#147;aggregate present value&#148; of the Parachute Awards would exceed the
tax that, but for this sentence, would be imposed on the Participant under Section&nbsp;4999 of the Code
in connection with the Change in Control, then the Awards shall become immediately exercisable,
realizable and vested without regard to the provisions of this sentence. For purposes of the
preceding sentence, the &#147;aggregate present value&#148; of an Award
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shall be calculated on an after-tax basis (other than taxes imposed by Section&nbsp;4999 of the
Code) and shall be based on economic principles rather than the principles set forth under Section
280G of the Code and the regulations promulgated thereunder. All determinations required to be made
under this <U>Section&nbsp;14i</U> shall be made by the Company or such advisors as the Company shall
retain for such purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j.&nbsp;<U>Amendment of Awards</U>. The Committee may amend, modify or terminate any outstanding
Award including, but not limited to, substituting therefor another Award of the same or a different
type, changing the date of exercise or realization, and converting an Incentive Stock Option to a
Nonstatutory Stock Option, provided that the Participant&#146;s consent to such action shall be required
unless the Committee determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k.&nbsp;<U>Conditions on Delivery of Stock</U>. The Company will not be obligated to deliver any
shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously
delivered under the Plan until (i)&nbsp;all conditions of the Award have been met or removed to the
satisfaction of the Company, (ii)&nbsp;in the opinion of the Company&#146;s counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market rules and regulations,
and (iii)&nbsp;the Participant has executed and delivered to the Company such representations or
agreements as the Company may consider appropriate to satisfy the requirements of any applicable
laws, rules or regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l.&nbsp;<U>Acceleration</U>. The Committee may at any time provide that any Options shall become
immediately exercisable in full or in part, that any Restricted Stock Awards shall be free of some
or all restrictions, or that any other stock-based Awards may become exercisable in full or in part
or free of some or all restrictions or conditions, or otherwise realizable in full or in part, as
the case may be, despite the fact that the foregoing actions may (i)&nbsp;cause the application of
Sections&nbsp;280G and 4999 of the Code if a change in control of the Company occurs, or (ii)&nbsp;disqualify
all or part of the Option as an Incentive Stock Option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m.&nbsp;<U>Sarbanes-Oxley Act Compliance</U>. Notwithstanding any provision of the Plan to the
contrary, the Committee, in accordance with any applicable rules or regulations promulgated by the
Securities and Exchange Commission (the &#147;SEC&#148;) and/or the United States Department of Labor, shall
(i)&nbsp;notify in a timely manner each Participant who is a Reporting Person of any transaction
occurring under the Plan that requires reporting by the Reporting Person on SEC Form&nbsp;4 or 5 as
applicable, each as revised pursuant to changes to Exchange Act Rule&nbsp;16a-3, 16a-6 or 16a-8, as
applicable, made by Sarbanes-Oxley Act of 2002, P.L. No.&nbsp;107-204 (the <B>&#147;Act&#148;</B>); (ii)&nbsp;otherwise comply
with all notice, disclosure and reporting requirements applicable to the Program pursuant to such
Act; and (iii)&nbsp;prohibit the making or guaranteeing of loans under Section&nbsp;8c of this Program to the
extent necessary to comply with Section&nbsp;402 of the Act.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">15. <U>Taxes/Code 409A</U>. The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee or recipient of an Award any federal, state or local taxes of any
kind required by law to be withheld with respect to any shares issued upon exercise of Options or
other Awards under the Plan, the purchase of shares subject to the Award or the grant of Common
Stock free and clear of any restrictions thereon. Subject to the prior approval of the
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-16<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Company, which may be withheld by the Company in its sole discretion, the optionee or recipient of
an Award may elect to satisfy such obligation, in whole or in part, (a)&nbsp;by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of an Option or other
Award, the purchase of shares subject to an Award, or the grant of Common Stock free and clear of
any restrictions thereon or (b)&nbsp;by delivering to the Company shares of Common Stock already owned
by the optionee or Award recipient of an Award. The shares so delivered or withheld shall have a
Fair Market Value of the shares used to satisfy such withholding obligation as shall be determined
by the Company as of the date that the amount of tax to be withheld is to be determined. An
optionee or recipient of an Award who has made an election pursuant to this Section may only
satisfy his or her withholding obligation with shares of Common Stock which are not subject to any
repurchase, forfeiture, unfulfilled vesting or other similar requirements. Notwithstanding
anything herein to the contrary, to the extent a delay in payment or other modification to this
Plan or an Agreement is required as determined in the opinion of Company&#146;s tax advisors to prevent
the imposition of an additional tax to the recipient under Section&nbsp;409A of the Code, then such
payment shall not be made until the first date on which such payment is permitted or other
modifications shall be made to comply with Section&nbsp;409A and interpretive guidance issued
thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">16. <U>Miscellaneous.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>No Right To Employment or Other Status</U>. No person shall have any claim or right to
be granted an Award, and the grant of an Award shall not be construed as giving a Participant the
right to continued employment or any other relationship with the Company. The Company expressly
reserves the right at any time to dismiss or otherwise terminate its relationship with a
Participant free from any liability or claim under the Plan.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->B-17<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>No Rights As Stockholder</U>. Subject to the provisions of the applicable Award, no
Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any
shares of Common Stock to be distributed with respect to an Award until becoming the record holder
thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;<U>Effective Date and Term of Plan</U>. The Plan shall be submitted to the stockholders of
the Company for approval at the 2006 annual meeting of stockholders and, if approved by the
affirmative vote of a majority of the shares of Common Stock present in person or represented by
proxy at such meeting, shall become effective for Performance Periods beginning on or after January
1, 2007. No Awards shall be granted under the Plan after the completion of ten years from the date
on which the Plan was adopted by the Committee, but Awards previously granted may extend beyond
that date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;<U>Amendment of Plan</U>. The Committee may amend, suspend or terminate the Plan or any
portion thereof at any time; provided, however, that no amendment shall be made without stockholder
approval if such approval is necessary to comply with any applicable law, rules or regulations.
Notwithstanding any provision of this Plan to the contrary, if the Company has executed a
definitive acquisition or similar agreement pursuant to which a Change in Control will occur upon
the closing of the transaction(s) contemplated thereby, the Committee, in its sole discretion, may
treat the execution of such agreement itself as triggering a Change in Control within the meaning
of Section&nbsp;3ci, ii or iii, as applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;<U>No Trust Fund or ERISA Plan Created</U>. Neither the Plan nor any Award granted
thereunder shall create or be construed as creating a trust or separate fund of any kind or a
fiduciary relationship between the Company and a Participant, Designated Beneficiary or any other
person. To the extent that any Participant, Designated Beneficiary or any other person acquires
any Award under the Plan, his or her rights with respect thereto shall be not greater than the
rights of any unsecured general creditor of the Company. The Plan is not intended to constitute
any type of plan, fund or program providing retirement income or resulting in the deferral of
income for periods extending to the termination of employment of beyond, and ERISA shall not apply
to the Plan. No provision of this Plan shall be construed as subjecting any portion of the Plan to
any requirements of ERISA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;<U>Governing Law</U>. The provisions of the Plan and all Awards made hereunder shall be
governed by and interpreted in accordance with the laws of the state of Delaware, without regard to
any applicable conflicts of law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.&nbsp;<U>Designation of Beneficiary</U>. A Participant may file with the Committee a written
designation of one or more persons as such Participant&#146;s Designated Beneficiary or Designated
Beneficiaries. Each beneficiary designation shall become effective only when filed in writing with
the Committee during the Participant&#146;s lifetime on a form prescribed by the Committee. The spouse
of a married Participant domiciled in a community property jurisdiction shall join in any
designation of a beneficiary other than such spouse. The filing with the Committee of a new
beneficiary designation shall cancel all previously filed beneficiary designations. If a
Participant fails to designate a beneficiary, or if all designated beneficiaries of a Participant
predecease the Participant, then each outstanding award shall be payable to the Participant&#146;s
estate.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->B-18<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Approvals</B><BR>
<B><I>2007 Equity Incentive Plan:</I></B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available Shares:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(1)&nbsp;Incentive Stock Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">155,000</TD>
    <TD nowrap>*</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(2)&nbsp;Other Awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,395,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,550,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>10% of total Available Shares on date of Adoption by Committee</TD>
</TR>

</TABLE>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Adopted by the Compensation Committee
of the Board of Directors on:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u>August&nbsp;18, 2006</u>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Approved by the Stockholders on:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->B-19<!-- /Folio -->
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<DIV style="width: 100%; border: 1px solid black; padding: 4px;">


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>NATURAL HEALTH TRENDS CORP.</B>
</DIV>


<DIV align="Center" style="font-size: 12pt; margin-top: 12pt"><B>PROXY</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 12pt"><B>PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR<BR>
THE ANNUAL MEETING TO BE HELD ON NOVEMBER 17, 2006</B>

</DIV>
<DIV align="left" style="font-size: 11pt; margin-top: 12pt">The undersigned hereby appoints Stephanie S. Hayano or Gary C. Wallace, and
each of them, jointly and severally, as the undersigned&#146;s proxy or proxies,
with full power of substitution, to vote all shares of common stock of Natural
Health Trends Corp. (the &#147;Company&#148;) which the undersigned is entitled to vote
at the annual meeting of the common stockholders to be held at 2050 Diplomat
Drive, Dallas, Texas 75234 on Friday, November&nbsp;17, 2006 at 9:00 a.m., Dallas,
Texas time, and any postponements or adjournments thereof, as fully as the
undersigned could if personally present, upon the Items set forth below,
revoking any proxy or proxies heretofore given.
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 6pt"><B>THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE BELOW, BUT
IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR ALL THE NOMINEES IN
ITEM 1 AND FOR ITEM 2 AND IN THE DISCRETION OF THE PROXY HOLDER WITH RESPECT TO
ANY OTHER MATTER AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENTS
OR ADJOURNMENTS THEREOF.</B>
</DIV>


<DIV align="Center" style="font-size: 11pt; margin-top: 6pt">(Continued, and to be marked, dated and signed, on the other side.)

</DIV>

<DIV align="Center" style="font-size: 12pt; margin-top: 6pt"><FONT FACE="WEBDINGS" SIZE="3">&#53;</FONT><B> FOLD AND DETACH HERE </B><FONT FACE="WEBDINGS" SIZE="3">&#53;</FONT>

</DIV>
</DIV>
</div>
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">

<P align="center" style="font-size: 10pt"><!-- Folio --> <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 4px;">
<DIV align="center">
<TABLE style="font-size: 9pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="84%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD><!-- VRule -->
    <TD width="0%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD><!-- VRule -->
    <TD width="0%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="left" valign="bottom" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 2px solid #000000;border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The board of directors recommend a vote FOR Items 1, 2, 3 and 4
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Please mark your<BR>

votes as indicated <BR>

in this example.
</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">X</TD>
    <TD width="1%" style="border-right: 2px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD STYLE="border-right: 2px solid #000000" >&nbsp;</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD align="left" valign="bottom" style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 2px solid #000000;border-right: 2px solid #000000" width="1%">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center" style="magin-top: 0pt">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The election of the following six directors to hold office until the next annual meeting of the
Company&#146;s stockholders and until their respective successors shall have been duly elected and
qualified.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" >
<TABLE style="font-size: 9pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" >
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="Wingdings">&#111;</FONT> FOR ALL NOMINEES (except for the names struck out below)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="Wingdings">&#111;</FONT> WITHHOLD AUTHORITY FOR ALL NOMINEES</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 9pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR  style="font-size: 1pt" valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 8pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Randall A. Mason,
Stephanie S. Hayano,
Anthony B. Martino,</TD>
</TR>
<TR style="font-size: 8pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terrence M. Morris,
Colin J. O&#146;Brien and
Sir Brian Wolfson)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike a line through
that nominee&#146;s name above.</B></TD>
</TR>
<TR style="font-size: 8pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The ratification of Lane Gorman Trubitt, L.L.P. as the Company&#146;s independent auditors for the
fiscal year ending December&nbsp;31, 2006.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FOR <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AGAINST <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ABSTAIN <FONT face="Wingdings">&#111;</FONT></DIV>


<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The approval of the Company&#146;s 2007 Annual Incentive Plan.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The approval of the Company&#146;s 2007 Equity Incentive Plan.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE ANNUAL MEETING OR ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="RIGHT">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="35%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Date&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Signature</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Signature, If Jointly Held</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="right" style="font-size: 8pt; margin-top: 12pt">If acting as Attorney, Executor, Trustee or in other<BR>
representative capacity, please sign name and title.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FOLD AND DETACH HERE AND READ THE REVERSE SIDE</B>
</DIV>

</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
