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<SEC-DOCUMENT>0000950134-07-021658.txt : 20071022
<SEC-HEADER>0000950134-07-021658.hdr.sgml : 20071022
<ACCEPTANCE-DATETIME>20071022080030
ACCESSION NUMBER:		0000950134-07-021658
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20071019
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Unregistered Sales of Equity Securities
ITEM INFORMATION:		Other Events
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20071022
DATE AS OF CHANGE:		20071022

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:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-26272
		FILM NUMBER:		071182214

	BUSINESS ADDRESS:	
		STREET 1:		2050 DIPLOMAT DRIVE
		STREET 2:		--
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		972-241-4080

	MAIL ADDRESS:	
		STREET 1:		2050 DIPLOMAT DRIVE
		STREET 2:		--
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>d50652e8vk.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML>
<HEAD>
<TITLE>e8vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, DC 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 8-K</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>CURRENT REPORT PURSUANT<BR>
TO SECTION 13 OR 15(D) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Date of report (Date of earliest event reported): </B><U><B>October&nbsp;19, 2007</B></U>

</DIV>
<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>Natural Health Trends Corp.</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>


<DIV align="center" style="font-size: 10pt">(Exact Name of Registrant as Specified in Its Charter)</DIV>



<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Delaware</div>
<DIV align="center" style="font-size: 10pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 0pt">
(State or Other Jurisdiction of Incorporation)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD align="center" valign="top">0-26272
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">59-2705336</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 align="center" valign="top">(Commission File Number)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(IRS Employer Identification No.)</TD>
</TR>
<!-- End Table Body -->
</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="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">2050 Diplomat Drive, Dallas, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">75234</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 align="center" valign="top">(Address of Principal Executive Offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(972)&nbsp;241-4080

</DIV>
<DIV align="center" style="font-size: 10pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>


<DIV align="center" style="font-size: 10pt">(Registrant&#146;s Telephone Number, Including Area Code)</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (<I>see </I>General
Instruction A.2. below):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT> Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT> Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT> Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT> Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</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>Item&nbsp;1.01 Entry into a Material Definitive Agreement.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;19, 2007, Natural Health Trends Corp. (the &#147;Company&#148;) entered into a Securities Purchase
Agreement (&#147;Securities Purchase Agreement&#148;) with the institutional investors named therein (the
&#147;Purchasers&#148;) pursuant to which the Purchasers agreed to provide an aggregate of $3,740,000&nbsp;million
in financing to the Company in a private placement (the &#147;Private Placement&#148;) of variable rate
convertible debentures having an aggregate face amount of $4,250,000 (the &#147;Debentures&#148;), seven-year
warrants to purchase 1,496,000 shares of the Company&#146;s common stock (the &#147;Seven Year Warrants&#148;),
and one-year warrants to purchase 1,496,000 shares of the Company&#146;s common stock (the &#147;One Year
Warrants&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Securities Purchase Agreement</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As noted above, the Securities Purchase Agreement provides for the issuance and sale to the
Purchasers of the Debentures, the Seven Year Warrants and the One Year Warrants (collectively, the
&#147;Securities&#148;) for an aggregate purchase price of $3,740,000. Other significant provisions of the
Securities Purchase Agreement include, among others:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">* until the one year anniversary of the closing of the sale of the Securities (the &#147;Closing Date&#148;)
the Company shall offer to the Purchasers the opportunity to participate in subsequent securities
offerings by the Company (up to 100% of such offerings), subject to certain exceptions for, among
other things, strategic investments;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">* for 60&nbsp;days after the effective date of the initial registration statement (the &#147;Registration
Statement&#148;) covering the shares of common stock underlying the Securities (the &#147;Effective Date&#148;),
the Company will not issue Common Stock or equivalent securities, subject to certain exceptions
for, among other things, strategic investments;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">* until such time as no Purchaser holds any of the Securities, the Company is prohibited from
effecting or entering into an agreement to effect any financing involving (a)&nbsp;the issuance or sale
of common stock or equivalent securities with an effective price or number of underlying shares
that floats or resets or otherwise varies or is subject to adjustment based upon trading prices of
or quotations for shares of common stock, the market for the common stock, or the business of the
Company or (b)&nbsp;any agreement to sell securities at a future determined price;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">* until the earlier of the date that shareholder approval is obtained or the Securities are no
longer outstanding, neither the Company nor any of its subsidiaries may issue common stock or
equivalent securities at an effective price that is less than $3.52;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">* until the one year anniversary of the Effective Date, the Company shall not undertake a reverse
or forward stock split or reclassification of the common stock without the prior written consent of
the Purchasers holding a majority in principal amount outstanding of the Debentures; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">* the Company&#146;s agreement to seek shareholder approval of the issuance of all of the shares of
common stock underlying the Securities no later than the date of the Company&#146;s 2008 annual
shareholder meeting.
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Debentures have an aggregate principal amount of $4,250,000, and the purchase price paid for
them is convertible by their holders into the Company&#146;s common stock at a conversion price of
$2.50 (the &#147;Conversion Price&#148;). The Conversion Price is subject to adjustment for stock splits,
stock dividends, distributions, combinations, rights offerings, mergers, consolidations, sales of
all or substantially all assets, tender offers, exchange offers, reclassifications or compulsory
share exchanges. In addition, subject to certain exceptions, (a)&nbsp;the Conversion Price for the
Debentures is subject to anti-dilution
</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">adjustments from time to time if the Company issues its common stock or convertible securities at a
purchase price below Conversion Price (a &#147;Dilutive Issuance&#148;) and (b)&nbsp;the Company has agreed not to
make a Dilutive Issuance without shareholder approval.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">After one year, the Company can force conversion of the Debentures at the Conversion Price if the
daily volume weighted average price (&#147;VWAP&#148;) of the common stock for each of the 20 Trading Days
prior to the forced conversion date exceeds $7.50 per share, subject to adjustment, provided that a
registration statement covering the stock is then effective and certain trading volume requirements
and other conditions are met.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Debentures bear interest at the greater of (i)&nbsp;LIBOR plus 4% and (ii)&nbsp;10% per annum. Interest
is payable quarterly beginning on January&nbsp;1, 2008. 50% of the original principal amount of the
Debentures is payable in 12 equal monthly installments beginning on November&nbsp;1, 2008, and the
balance is payable on October&nbsp;19, 2009, unless extended by the holders to October&nbsp;19, 2012 (the
extended maturity date). Payments of principal and interest may be made in cash or, at the option
of the Company if certain conditions are met, in shares of registered common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If interest is paid in shares of common stock, the conversion price per share will be set at 90% of
the VWAP for the 20 consecutive trading days immediately prior to the applicable payment date or,
if less, the average of the VWAPs for the 20 consecutive trading days immediately prior to the date
the applicable shares are issued and delivered if such delivery is after the payment date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If principal is paid in shares of common stock during a specified period immediately prior to the
extended maturity date, the conversion price shall be equal to 90% of the average of the VWAPs for the 20 consecutive trading days
ending on the trading day that is immediately prior to the applicable payment date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Debentures contain certain limitations on optional and mandatory conversion and payment in
shares of common stock, including that, absent shareholder approval, (a)&nbsp;the Company may not issue
shares of common stock in payment of principal or interest on the Debentures that, when aggregated
with prior such payments (excluding payments of principal with shares not in excess of the number
issuable at the Conversion Price) exceed 5% of the Company&#146;s outstanding shares on the trading day
immediately preceding the date of Securities Purchase Agreement and (b)&nbsp;the Company may not issue
shares of common stock upon conversion of or payment of interest or liquidated damages on the
Debentures that, in the aggregate, exceed 19.99% of the Company&#146;s outstanding shares on the trading
day immediately preceding the date of Securities Purchase Agreement. Moreover, neither the Company
nor the holders may effect any conversion of a Debenture to the extent that it would result in the
holder and its affiliates owning more than 4.99% of the Company&#146;s outstanding common stock, unless
this limitation is increased or decreased by the holder (increased up to a maximum of 9.99%) of the
Company&#146;s outstanding common stock upon not less than 61&nbsp;days prior notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company may, under certain circumstances, redeem the Debentures for cash equal to 115% of the
aggregate outstanding principal amount plus any accrued and unpaid interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Debentures contain certain negative covenants that, among other things, for so long as any
Debentures remain outstanding, prohibit the Company and its subsidiaries from incurring
indebtedness for borrowed money, creating or suffering liens other than certain permitted liens,
amending charter documents to materially adversely harm the Debenture holders, repurchasing shares
of its common stock (with certain exceptions), repaying certain indebtedness before its due date,
paying cash dividends on stock other than the Company&#146;s Series&nbsp;A Convertible Preferred Stock, and
entering into certain transactions with affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Events of default under the Debentures include, among others, payment defaults not timely cured,
failure to perform other covenants not timely cured, cross-defaults not timely cured having a
material adverse
</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">effect on the Company, representations or warranties are untrue when made, certain bankruptcy-type
events involving the Company or any significant subsidiary, acceleration of more than $150,000 in
indebtedness for borrowed money or under a long-term leasing or factoring agreement, the Company&#146;s
common stock is no longer listed on an eligible market, the Company is subject to certain changes
in control or sells or disposes of more than 40% of its assets a single or series of related
transactions, the Registration Statement is not declared effective for more than 270&nbsp;days after the
Closing Date, the effectiveness of the Registration Statement lapses beyond a specified period,
failure to timely deliver certificates for converted shares, and a judgment in excess of $250,000
against the Company, any subsidiary or their respective assets that is not timely vacated, bonded
or stayed. Upon an event of default, the holders may elect to require the Company to repurchase all
or any portion of the outstanding principal amount of the Debentures for a purchase price equal to
115% of such outstanding principal amount, plus all accrued but unpaid interest.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Seven Year Warrants have a seven-year term and the One Year Warrants have a one-year term, each
beginning six months and one day after their respective issuance. Both the Seven Year Warrants and
the One Year Warrants (collectively, the &#147;Warrants&#148;) have an exercise price of $3.52 per share and
otherwise have identical terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The exercise price and the number of shares underlying the Warrants are subject to adjustment for
stock dividends and splits, combinations, and reclassifications, certain rights offerings and
distributions to common stockholders, and mergers, consolidations, sales of all or substantially
all assets, tender offers, exchange offers, reclassifications or compulsory share exchanges. In
addition, subject to certain exceptions, the exercise price and number of shares underlying both
types of warrants are subject to anti-dilution adjustments from time to time if the Company issues
its common stock or equivalent securities at below the exercise price for the warrants; provided
that the exercise price cannot be adjusted lower than $3.52 prior to shareholder approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If, at any time after the earlier of October&nbsp;19, 2008 and the completion of the then applicable
holding period under Rule&nbsp;144, there is no effective registration statement for the underlying
shares of common stock, the Warrants may be exercised by means of a cashless exercise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Registration Rights Agreement</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company and the Purchasers also entered into a Registration Rights Agreement pursuant to which
the Company agreed to file an initial Registration Statement with the U.S. Securities and Exchange
Commission within 30 calendar days from the Closing Date and use its best efforts to have such
Registration Statement declared effective with the Securities and
Exchange Commission within 120 calendar days (or 150 day in the event
of a full review). If all of
the shares underlying the Securities cannot be included in the Initial Registration Statement, the
Company must also timely file subsequent Registration Statements or otherwise include such shares
in other Registration Statements on a piggy-back basis. If the Registration Statements are not
timely filed or declared effective, the Company is required to pay the Purchasers a cash fee of 2%
per month of the purchase price for the unregistered securities until the first anniversary of the
Closing Date and 1% per month thereafter until the second anniversary of the Closing Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The disclosure about the foregoing agreements and instruments, and the related Private Placement,
contained in this report does not constitute an offer to sell or a solicitation of an offer to buy
any securities of the Company, and is made only as required under applicable rules for filing
current reports with the United States Securities and Exchange Commission, and as permitted under
Rule&nbsp;135c under the Securities Act.
</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>Item&nbsp;3.02 Unregistered Sales of Equity Securities.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The disclosure set forth under Item&nbsp;1.01 above is incorporated herein by this reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, Dawson James Securities, Inc. (&#147;Dawson James&#148;) acted as placement agent in connection
with the Private Placement. In addition to a cash transaction fee of approximately $280,500,
Dawson James and its assigns will receive five-year warrants to purchase 149,600 shares of the
Common Stock at an exercise price of $3.52 per share. Other than its five-year term, the terms of
the warrants issued to Dawson James shall be identical to the terms in the Warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The securities issued in connection with the Private Placement, including the warrants issued to
Dawson James, were issued in a transaction exempt from registration under the Securities Act of
1933, as amended (the &#147;Securities Act&#148;), pursuant to Section&nbsp;4(2) thereof and Regulation&nbsp;D
promulgated hereunder, and therefore may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements. The disclosure about the
Private Placement and related agreements contained in this report does not constitute an offer to
sell or a solicitation of an offer to buy any securities of the Company, and is made only as
required under applicable rules for filing current reports with the United States Securities and
Exchange Commission, and as permitted under Rule&nbsp;135c under the Securities Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8.01 Other Events.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;22, 2007, the Company issued a press release announcing the completion of the offering
described in Item&nbsp;1.01 above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9.01 Financial Statements and Exhibits.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(d)&nbsp;Exhibits

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="5%">&nbsp;</TD>
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    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement dated October&nbsp;19, 2007 between the Company and certain
Purchasers.</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 valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registration Rights Agreement to be signed by the Company and the Purchasers named in
the Securities Purchase Agreement dated October&nbsp;19, 2007, between the Company and the
Purchasers named therein.</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 valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Variable Rate Convertible Debenture to be issued by the Company to the Purchasers
named in the Securities Purchase Agreement dated October&nbsp;19, 2007, between the Company and the
Purchasers named therein.</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 valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Seven Year and One Year Warrants to Purchase Shares of Common Stock of the Company to
be issued by the Company to the Purchasers named in the Securities Purchase Agreement dated
October&nbsp;19, 2007, between the Company and the Purchasers named therein</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 valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Press Release of the Company dated October&nbsp;22, 2007.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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



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



</TABLE>
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date: October&nbsp;22, 2007
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">NATURAL HEALTH TRENDS CORP.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Chris Sharng
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chris Sharng&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

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


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">EXHIBIT INDEX
</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="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement dated October&nbsp;19, 2007 between the Company and certain
Purchasers.</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 valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registration Rights Agreement to be signed by the Company and the Purchasers named in
the Securities Purchase Agreement dated October&nbsp;19, 2007, between the Company and the
Purchasers named therein.</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 valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Variable Rate Convertible Debenture to be issued by the Company to the Purchasers
named in the Securities Purchase Agreement dated October&nbsp;19, 2007, between the Company and the
Purchasers named therein.</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 valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Seven Year and One Year Warrants to Purchase Shares of Common Stock of the Company to
be issued by the Company to the Purchasers named in the Securities Purchase Agreement dated
October&nbsp;19, 2007, between the Company and the Purchasers named therein</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 valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Press Release of the Company dated October&nbsp;22, 2007.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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




</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>d50652exv10w1.htm
<DESCRIPTION>SECURITIES PURCHASE AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 18pt">Exhibit 10.1</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Securities Purchase Agreement (this &#147;<U>Agreement</U>&#148;) is dated as of October&nbsp;19, 2007
between Natural Heath Trends Corp., a Delaware corporation (the &#147;<U>Company</U>&#148;), and each
purchaser identified on the signature pages hereto (each, including its successors and assigns, a
&#147;<U>Purchaser</U>&#148; and collectively the &#147;<U>Purchasers</U>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section&nbsp;4(2) of the Securities Act of 1933, as amended (the &#147;<U>Securities Act</U>&#148;), and Rule&nbsp;506
promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
the Company and each Purchaser agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE I.<BR>
DEFINITIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Definitions</U>. In addition to the terms defined elsewhere in this Agreement: (a)
capitalized terms that are not otherwise defined herein have the meanings given to such terms in
the Debentures (as defined herein), and (b)&nbsp;the following terms have the meanings set forth in this
Section&nbsp;1.1:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Action</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;3.1(j).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affiliate</U>&#148; means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person, as
such terms are used in and construed under Rule&nbsp;405 under the Securities Act. With respect
to a Purchaser, any investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of
such Purchaser.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Board of Directors</U>&#148; means the board of directors of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Business Day</U>&#148; means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action to close.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Closing</U>&#148; means the closing of the purchase and sale of the Securities pursuant
to Section&nbsp;2.1.
</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;&#147;<U>Closing Date</U>&#148; means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all conditions precedent
to (i)&nbsp;the Purchasers&#146; obligations to pay the Subscription Amount and (ii)&nbsp;the Company&#146;s
obligations to deliver the Securities have been satisfied or waived.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commission</U>&#148; means the Securities and Exchange Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Common Stock</U>&#148; means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may hereafter be
reclassified or changed into.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Common Stock Equivalents</U>&#148; means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Company Counsel</U>&#148; means Gary C. Wallace, with offices located at 2050 Diplomat
Drive, Dallas, Texas 75234.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Conversion Price</U>&#148; shall have the meaning ascribed to such term in the
Debentures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Debentures</U>&#148; means the Variable Rate Convertible Debentures due, subject to the
terms therein, 2&nbsp;years from their date of issuance, issued by the Company to the Purchasers
hereunder, in the form of <U>Exhibit&nbsp;A</U> attached hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Disclosure Schedules</U>&#148; shall have the meaning ascribed to such term in Section
3.1.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Effective Date</U>&#148; means the date that the initial Registration Statement filed
by the Company pursuant to the Registration Rights Agreement is first declared effective by
the Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Evaluation Date</U>&#148; shall have the meaning ascribed to such term in Section
3.1(r).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Exchange Act</U>&#148; means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Exempt Issuance</U>&#148; means the issuance of (a)&nbsp;shares of Common Stock or options
issued under either the Company&#146;s 2002 Stock Option Plan (up to 151,000 shares of Common
Stock or Common Stock Equivalents, in the aggregate, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Agreement) or the Company&#146;s 2007 Equity
Incentive Plan or to employees, officers or directors of the Company pursuant to any other
stock or option plan duly adopted for such purpose by a majority of the non-employee members
of the Board of Directors or a majority of the
</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">members of a committee of non-employee directors established for such purpose, (b)
securities upon the exercise or exchange of or conversion of any Securities issued hereunder
and/or other securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the number of such
securities or to decrease the exercise, exchange or conversion price of such securities, (c)
securities issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company, provided that any such issuance shall only be
to a Person which is, itself or through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company receives benefits in
addition to the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities, (d)&nbsp;up to 175,000 shares of Common Stock
or Common Stock Equivalents, in the aggregate, subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions of the
Common Stock that occur after the date of this Agreement, in connection with the final
settlement of the Loghry litigation, and (e)&nbsp;up to an aggregate of 100,000 shares of Common
Stock in any 12&nbsp;month period to consultants of the Company, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>FWS</U>&#148; means Feldman Weinstein &#038; Smith LLP with offices located at 420 Lexington
Avenue, Suite&nbsp;2620, New York, New York 10170-0002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>GAAP</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;3.1(h).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indebtedness</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;3.1(aa).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Intellectual Property Rights</U>&#148; shall have the meaning ascribed to such term in
Section&nbsp;3.1(o).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Legend Removal Date</U>&#148; shall have the meaning ascribed to such term in Section
4.1(c).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Liens</U>&#148; means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Material Adverse Effect</U>&#148; shall have the meaning assigned to such term in
Section&nbsp;3.1(b).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Material Permits</U>&#148; shall have the meaning ascribed to such term in Section
3.1(m).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Maximum Rate</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;5.17.
</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" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Participation Maximum</U>&#148; shall have the meaning ascribed to such term in Section
4.12.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Person</U>&#148; means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any kind.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Pre-Notice</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;4.12.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Principal Amount</U>&#148; shall mean, as to each Purchaser, the amounts set forth
below such Purchaser&#146;s signature block on the signature pages hereto and next to the heading
&#147;Principal Amount,&#148; in United States Dollars, which shall equal such Purchaser&#146;s
Subscription Amount multiplied by 1.1364.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Proceeding</U>&#148; means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Purchaser Party</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;4.10.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Registration Rights Agreement</U>&#148; means the Registration Rights Agreement, dated
the date hereof, among the Company and the Purchasers, in the form of <U>Exhibit&nbsp;B</U>
attached hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Registration Statement</U>&#148; means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Required Approvals</U>&#148; shall have the meaning ascribed to such term in Section
3.1(e).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Required Minimum</U>&#148; means, as of any date, the maximum aggregate number of
shares of Common Stock then issued or potentially issuable in the future pursuant to the
Transaction Documents, including any Underlying Shares issuable upon exercise or conversion
in full of all Warrants and Debentures (including Underlying Shares issuable as payment of
interest), ignoring any conversion or exercise limits set forth therein, and assuming that
the Conversion Price is at all times on and after the date of determination 75% of the then
Conversion Price on the Trading Day immediately prior to the date of determination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Rule&nbsp;144</U>&#148; means Rule&nbsp;144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect as such
Rule.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>SEC Reports</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;3.1(h).
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->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;&#147;<U>Securities</U>&#148; means the Debentures, the Warrants, the Warrant Shares and the
Underlying Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Securities Act</U>&#148; means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Shareholder Approval</U>&#148; means such approval as may be required by the applicable
rules and regulations of the Nasdaq Stock Market (or any successor entity) from the
shareholders of the Company with respect to the transactions contemplated by the Transaction
Documents, including the issuance of all of the Underlying Shares in excess of 19.99% of the
issued and outstanding Common Stock on the Closing Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Short Sales</U>&#148; means all &#147;short sales&#148; as defined in Rule&nbsp;200 of Regulation&nbsp;SHO
under the Exchange Act (but shall not be deemed to include the location and/or reservation
of borrowable shares of Common Stock).&nbsp;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subscription Amount</U>&#148; means, as to each Purchaser, the aggregate amount to be
paid for Debentures and Warrants purchased hereunder as specified below such Purchaser&#146;s
name on the signature page of this Agreement and next to the heading &#147;Subscription Amount,&#148;
in United States dollars and in immediately available funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsequent Financing</U>&#148; shall have the meaning ascribed to such term in Section
4.12.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsequent Financing Notice</U>&#148; shall have the meaning ascribed to such term in
Section&nbsp;4.12.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsidiary</U>&#148; means any subsidiary of the Company as set forth on <U>Schedule
3.1(a)</U> and shall, where applicable, include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Trading Day</U>&#148; means a day on which the NASDAQ Global Market is open for
trading.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Trading Market</U>&#148; means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American Stock Exchange,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the
New York Stock Exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Transaction Documents</U>&#148; means this Agreement, the Debentures, the Warrants, the
Registration Rights Agreement, all exhibits and schedules thereto and hereto and any other
documents or agreements executed in connection with the transactions contemplated hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Transfer Agent</U>&#148; means American Stock Transfer and Trust Company, the current
transfer agent of the Company with a mailing address of 6201 15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Ave.,
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Brooklyn, NY 11219 and a facsimile number of (718)&nbsp;921-8334, and any successor transfer
agent of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Underlying Shares</U>&#148; means the shares of Common Stock issued and issuable upon
conversion or redemption of the Debentures and upon exercise of the Warrants and issued and
issuable in lieu of the cash payment of interest on the Debentures in accordance with the
terms of the Debentures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Variable Rate Transaction</U>&#148; shall have the meaning ascribed to such term in
Section&nbsp;4.13(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>VWAP</U>&#148; means, for any date, the price determined by the first of the following
clauses that applies: (a)&nbsp;if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. New York City time to 4:02
p.m. New York City time); (b)&nbsp; if the OTC Bulletin Board is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the nearest preceding date) on
the OTC Bulletin Board; (c)&nbsp;if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the &#147;Pink Sheets&#148;
published by Pink Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the Common Stock so
reported; or (d)&nbsp;in all other cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Warrants</U>&#148; means the Common Stock purchase warrants delivered to the Purchasers
at the Closing in accordance with Section&nbsp;2.2(a) hereof in the form of <U>Exhibit&nbsp;C</U>
attached hereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Warrant Shares</U>&#148; means the shares of Common Stock issuable upon exercise of the
Warrants.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II.<BR>
PURCHASE AND SALE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Closing</U>. On the Closing Date, upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to
purchase, not less than, in the aggregate, $3,739,880 and up to, in the aggregate, $4,250,000 in
principal amount of the Debentures. Each Purchaser shall deliver to the Company, via wire
transfer, immediately available funds equal to its Subscription Amount and the Company shall
deliver to each Purchaser its respective Debenture and a Warrant, as determined pursuant to Section
2.2(a), and the Company and each Purchaser shall deliver the other items set forth in
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Section&nbsp;2.2 deliverable at the Closing. Upon satisfaction of the conditions set forth in
Sections&nbsp;2.2 and 2.3, the Closing shall occur at the offices of FWS or such other location as the
parties shall mutually agree.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Deliveries</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) On the Closing Date, the Company shall deliver or cause to be delivered to each
Purchaser the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) this Agreement duly executed by the Company;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a legal opinion of Company Counsel, in substantially the form of
<U>Exhibit&nbsp;D</U> attached hereto;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a Debenture with a principal amount equal to such Purchaser&#146;s Principal
Amount, registered in the name of such Purchaser;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) a Warrant, registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 100% of such Purchaser&#146;s Subscription
Amount divided by the initial Conversion Price of the Debentures, with an exercise
price equal to $3.52, subject to adjustment therein, exercisable commencing 6&nbsp;months
and 1&nbsp;day from the date hereof for a term of seven years;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) a Warrant, registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 100% of such Purchaser&#146;s Subscription
Amount divided by the initial Conversion Price of the Debentures, with an exercise
price equal to $3.52, subject to adjustment therein, exercisable commencing 6&nbsp;months
and 1&nbsp;day from the date hereof for a term of one year; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the Registration Rights Agreement duly executed by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) On the Closing Date, each Purchaser shall deliver or cause to be delivered to the
Company the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) this Agreement duly executed by such Purchaser;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) such Purchaser&#146;s Subscription Amount by wire transfer to the account as
specified in writing by the Company; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Registration Rights Agreement duly executed by such Purchaser.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Closing Conditions</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:
</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; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all obligations, covenants and agreements of each Purchaser required to be
performed at or prior to the Closing Date shall have been performed; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the delivery by each Purchaser of the items set forth in Section&nbsp;2.2(b)
of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Company contained herein;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the delivery by the Company of the items set forth in Section&nbsp;2.2(a) of
this Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) from the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission or the Company&#146;s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any time prior
to the Closing Date, trading in securities generally as reported by Bloomberg L.P.
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of each Purchaser,
makes it impracticable or inadvisable to purchase the Securities at the Closing.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE III.<BR>
REPRESENTATIONS AND WARRANTIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Representations and Warranties of the Company</U>.
Except as set forth in the Disclosure Schedules, which Disclosure
Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made
herein to the extent of the disclosure contained in
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the corresponding section of the Disclosure
Schedules, the Company hereby makes the following representations and warranties to each Purchaser:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Subsidiaries</U>. All of the direct and indirect subsidiaries of the Company
are set forth on <U>Schedule&nbsp;3.1(a)</U>. Except as noted in Schedule&nbsp;3.1(a), the Company
owns, directly or indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of
capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights to subscribe for or purchase securities. If the
Company has no subsidiaries, all other references to the Subsidiaries or any of them in the
Transaction Documents shall be disregarded.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Organization and Qualification</U>. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as applicable),
with the requisite power and authority to own and use its properties and assets and to carry
on its business as currently conducted, except where the failure to be in good standing
would not have a Material Adverse Effect. Neither the Company nor any Subsidiary is in
violation or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the Company and
the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not reasonably be
expected to result in (i)&nbsp;a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii)&nbsp;a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of the Company
and the Subsidiaries, taken as a whole, or (iii)&nbsp;a material adverse effect on the Company&#146;s
ability to perform in any material respect on a timely basis its obligations under any
Transaction Document (any of (i), (ii)&nbsp;or (iii), a &#147;<U>Material Adverse Effect</U>&#148;) and no
Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or qualification.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Authorization; Enforcement</U>. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by each of the
Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company
and no further action is required by the Company, the Board of Directors or the
Company&#146;s stockholders in connection therewith other than in connection with the Required
Approvals. Each Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except (i)&nbsp;as limited by
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors&#146; rights generally, (ii)&nbsp;as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii)&nbsp;insofar as indemnification and contribution provisions may be limited by
applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U>No Conflicts</U>. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the other transactions
contemplated hereby and thereby do not and will not: (i)&nbsp;conflict with or violate any
provision of the Company&#146;s or any Subsidiary&#146;s certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (ii)&nbsp;conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is bound or affected, or
(iii)&nbsp;subject to the Required Approvals, conflict with or result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject (including federal
and state securities laws and regulations), or by which any property or asset of the Company
or a Subsidiary is bound or affected; except in the case of each of clauses (ii)&nbsp;and (iii),
such as could not reasonably be expected to result in a Material Adverse Effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <U>Filings, Consents and Approvals</U>. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the Company of
the Transaction Documents, other than (i)&nbsp;filings required pursuant to Section&nbsp;4.6, (ii)&nbsp;the
filing with the Commission of the Registration Statement and any related Prospectus or
Prospectus Supplement, (iii)&nbsp;the notice and/or application(s) to each applicable Trading
Market for the issuance and sale of the Securities and the listing of the Underlying Shares
for trading thereon in the time and manner required thereby, (iv)&nbsp;the filing of Form&nbsp;D with
the Commission and such filings as are required to be made under applicable state securities
laws and (vi)&nbsp;Shareholder Approval (collectively, the &#147;<U>Required Approvals</U>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <U>Issuance of the Securities</U>. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction Documents. The
Underlying Shares, when issued in accordance with the terms of the Transaction Documents,
will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by
the Company other than restrictions on transfer provided for
</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; margin-left: 2%">in the Transaction Documents.
The Company has reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the
date hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <U>Capitalization</U>. The capitalization of the Company is as set forth on
<U>Schedule&nbsp;3.1(g)</U>, which <U>Schedule&nbsp;3.1(g)</U> shall also include the number of
shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of
the date hereof. The Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the exercise of employee
stock options under the Company&#146;s stock option plans, the issuance of shares of Common Stock
under the Company&#146;s 2007 Equity Incentive Plan and pursuant to the conversion or exercise of
Common Stock Equivalents outstanding as of the date of the most recently filed periodic
report under the Exchange Act. No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions contemplated
by the Transaction Documents. Except as a result of the purchase and sale of the Securities
and as listed in <U>Schedule&nbsp;3.1(g)</U>, there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock
Equivalents. The issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the Purchasers) and
will not result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. Except for the Required Approvals, no further
approval or authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale of the Securities. There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company&#146;s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any of the
Company&#146;s stockholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <U>SEC Reports; Financial Statements</U>. Except as disclosed in Schedule&nbsp;3.1(h),
the Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve
months preceding the date hereof (or such shorter period as the Company was required by law
or regulation to file such material) (the foregoing materials, including the exhibits
thereto and documents incorporated by reference therein, being collectively referred to
herein as the &#147;<U>SEC Reports</U>&#148;) on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all material respects
</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; margin-left: 2%">with the requirements of the Securities Act and the Exchange Act, as applicable, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports comply in
all material respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (&#147;<U>GAAP</U>&#148;),
except as may be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes required by GAAP,
and fairly present in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited statements, to
normal, immaterial, year-end audit adjustments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <U>Material Changes</U>. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in a subsequent
SEC Report filed prior to the date hereof and except as set forth on <U>Schedule&nbsp;3.1(i)</U>
attached hereto, (i)&nbsp;there has been no event, occurrence or development that has had or that
could reasonably be expected to result in a Material Adverse Effect, (ii)&nbsp;the Company has
not incurred any liabilities (contingent or otherwise) other than (A)&nbsp;trade payables and
accrued expenses incurred in the ordinary course of business consistent with past practice
and (B)&nbsp;liabilities not required to be reflected in the Company&#146;s financial statements
pursuant to GAAP or disclosed in filings made with the Commission, (iii)&nbsp;the Company has not
altered its method of accounting, (iv)&nbsp;the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased, redeemed or made
any agreements to purchase or redeem any shares of its capital stock and (v)&nbsp;the Company has
not issued any equity securities to any officer, director or Affiliate, except pursuant to
existing Company equity incentive plans and Common Stock Equivalents outstanding as of the
date of the most recently filed periodic report under the Exchange Act. The Company does not
have pending before the Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this Agreement, the execution of
this Agreement and the other Transaction Documents, the closing of the Company&#146;s third
quarter on September&nbsp;30, 2007, or as set forth on <U>Schedule&nbsp;3.1(i)</U>, no event,
liability or development has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial condition,
that would be required to be disclosed by the Company under applicable securities laws at
the time this representation is made or
deemed made that has not been publicly disclosed at least one Trading Day prior to the
date that this representation is made.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <U>Litigation</U>. Except as disclosed in the SEC Reports, there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge
of the Company, threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">administrative
agency or regulatory authority (federal, state, county, local or foreign) (collectively, an
&#147;<U>Action</U>&#148;) which (i)&nbsp;adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)&nbsp;could, if there
were an unfavorable decision, reasonably be expected to result in a Material Adverse Effect.
Except as disclosed in the SEC Reports, neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of breach of
fiduciary duty. Except as disclosed in the SEC Reports, there has not been, and to the
knowledge of the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) <U>Labor Relations</U>. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company which could
reasonably be expected to result in a Material Adverse Effect. None of the Company&#146;s or its
Subsidiaries&#146; employees is a member of a union that relates to such employee&#146;s relationship
with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No executive officer, to the
knowledge of the Company, is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive covenant in
favor of any third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect to any of
the foregoing matters. To its knowledge, the Company and its Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and regulations relating to employment
and employment practices, terms and conditions of employment and wages and hours, except
where the failure to be in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) <U>Compliance</U>. Neither the Company nor any Subsidiary (i)&nbsp;is in default under
or in violation of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived), (ii)&nbsp;is
in violation of any order of any court, arbitrator or governmental body, or (iii)&nbsp;is or has
been in violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws applicable to its
business and all such laws that affect the environment, except in each case as could not
reasonably be expected to result in a Material Adverse Effect.
</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;(m)&nbsp;<U>Regulatory Permits</U>. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses as described
in the SEC Reports, except where the failure to possess such permits could not reasonably be
expected to result in a Material Adverse Effect (&#147;<U>Material Permits</U>&#148;), and neither
the Company nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;<U>Title to Assets</U>. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable title in all
personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do not have a
Material Adverse Effect on the financial condition of the Company and Liens for the payment
of federal, state or other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;<U>Patents and Trademarks</U>. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual
property rights and similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to so have a
Material Adverse Effect (collectively, the &#147;<U>Intellectual Property Rights</U>&#148;). Neither
the Company nor any Subsidiary has received a notice (written or otherwise) that any of the
Intellectual Property Rights used by the Company or any Subsidiary violates or infringes
upon the rights of any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another Person of
any of the Intellectual Property Rights. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties, except where failure to do so could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;<U>Insurance</U>. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance coverage at least
equal to the aggregate Subscription Amount. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a significant increase in
cost.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;<U>Transactions with Affiliates and Employees</U>. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">transaction with
the Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any entity in which any officer, director, or any such
employee has a material interest or is an officer, director, trustee or partner, in each
case in excess of $100,000 other than for (i)&nbsp;payment of salary or consulting fees for
services rendered, (ii)&nbsp;reimbursement for expenses incurred on behalf of the Company and
(iii)&nbsp;other employee benefits, including stock option agreements under any stock option plan
of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;<U>Sarbanes-Oxley; Internal Accounting Controls</U>. The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date. Except as set forth on <U>Schedule&nbsp;3.1(r)</U> attached hereto, the
Company and the Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i)&nbsp;transactions are executed in accordance with
management&#146;s general or specific authorizations, (ii)&nbsp;transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to maintain asset
accountability, (iii)&nbsp;access to assets is permitted only in accordance with management&#146;s
general or specific authorization, and (iv)&nbsp;the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the
Commission&#146;s rules and forms. The Company&#146;s certifying officers have evaluated the
effectiveness of the Company&#146;s disclosure controls and procedures as of the end of the
period covered by the Company&#146;s most recently filed periodic report under the Exchange Act
(such date, the &#147;<U>Evaluation Date</U>&#148;). The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their evaluations
as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the
Company&#146;s internal control over financial reporting (as such term is defined in the Exchange
Act) that has materially affected, or is reasonably likely to materially affect, the
Company&#146;s internal control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) <U>Certain Fees</U>. Except for fees set forth on <U>Schedule&nbsp;3.1(s)</U>
attached hereto, no brokerage or finder&#146;s fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
</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;(t)&nbsp;<U>Private Placement</U>. Assuming the accuracy of the Purchasers&#146;
representations and warranties set forth in Section&nbsp;3.2, no registration under the
Securities Act is required for the offer and sale of the Securities by the Company to the
Purchasers as contemplated hereby. Subject to obtaining the Required Approvals, the issuance
and sale of the Securities hereunder does not contravene the rules and regulations of the
Trading Market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)&nbsp;<U>Investment Company</U>. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an Affiliate of,
an &#147;investment company&#148; within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act of 1940, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;<U>Registration Rights</U>. Other than each of the Purchasers and as set forth on
<U>Schedule&nbsp;3.1(v)</U> attached hereto, no Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)&nbsp;<U>Listing and Maintenance Requirements</U>. The Common Stock is registered
pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed
to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification
that the Commission is contemplating terminating such registration. Except as set forth on
<U>Schedule&nbsp;3.1(w)</U> attached hereto, the Company has not, in the 12&nbsp;months preceding the
date hereof, received notice from any Trading Market on which the Common Stock is or has
been listed or quoted to the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance with all
such listing and maintenance requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;<U>Application of Takeover Protections</U>. The Company and the Board of
Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company&#146;s
certificate of incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result of the
Purchasers and the Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including without limitation as a result of the Company&#146;s
issuance of the Securities and the Purchasers&#146; ownership of the Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)&nbsp;<U>Disclosure</U>. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or might
constitute material, nonpublic information. The Company understands and confirms that the
Purchasers will rely on the foregoing representation in effecting transactions in securities
of the Company. All disclosure furnished by or on behalf of the Company to
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Purchasers
regarding the Company, its business and the transactions contemplated hereby, including the
Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during the twelve months
preceding the date of this Agreement taken as a whole do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they were
made and when made, not misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section&nbsp;3.2 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)&nbsp;<U>No Integrated Offering</U>. Assuming the accuracy of the Purchasers&#146;
representations and warranties set forth in Section&nbsp;3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of (i)&nbsp;the Securities Act which would require the
registration of any such securities under the Securities Act, or (ii)&nbsp;any applicable
shareholder approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated.<U> </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa)&nbsp;<U>Solvency</U>. Based on the consolidated financial condition of the Company as
of the Closing Date after giving effect to the receipt by the Company of the proceeds from
the sale of the Securities hereunder, (i)&nbsp;the fair saleable value of the Company&#146;s assets
exceeds the amount that will be required to be paid on or in respect of the Company&#146;s
existing debts and other liabilities (including known contingent liabilities) as they
mature, (ii)&nbsp;the Company&#146;s assets do not constitute unreasonably small capital to carry on
its business as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business conducted by the
Company, and projected capital requirements and capital availability thereof, and (iii)&nbsp;the
current cash flow of the Company, together with the proceeds the Company would receive, were
it to liquidate all of its assets, after taking into account all anticipated uses of the
cash, would be sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid. The Company does not intend to
incur debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt). The Company has
no knowledge of any facts or circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or reorganization laws of any
jurisdiction within one year from the Closing Date. <U>Schedule&nbsp;3.1(aa)</U> sets forth as
of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of
this Agreement, &#147;<U>Indebtedness</U>&#148; means (a)&nbsp;any liabilities for borrowed money or
amounts owed in excess of $50,000 (other than trade accounts payable and accrued expenses
incurred in the ordinary course of business), (b)&nbsp;all guaranties, endorsements
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and other
contingent obligations in respect of indebtedness of others, whether or not the same are or
should be reflected in the Company&#146;s balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection or similar transactions
in the ordinary course of business; and (c)&nbsp;the present value of any lease payments in
excess of $50,000 due under leases required to be capitalized in accordance with GAAP.
Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb)&nbsp;<U>Tax Status</U>. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect, the
Company and each Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been asserted or threatened against
the Company or any Subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc)&nbsp;<U>No General Solicitation</U>. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other &#147;accredited investors&#148; within the meaning of Rule&nbsp;501
under the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd)&nbsp;<U>Foreign Corrupt Practices.</U> Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i)&nbsp;directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii)&nbsp;made any unlawful
payment to foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii)&nbsp;failed to disclose fully
any contribution made by the Company (or made by any person acting on its behalf of which
the Company is aware) which is in violation of law, or (iv)&nbsp;violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee)&nbsp;<U>Accountants</U>. The Company&#146;s accounting firm is Lane Gorman Trubitt LLP.
To the knowledge and belief of the Company, such accounting firm (i)&nbsp;is a registered public
accounting firm as required by the Exchange Act and (ii)&nbsp;shall express its opinion with
respect to the financial statements to be included in the Company&#146;s Annual Report for the
year ending December&nbsp;31, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff)&nbsp;<U>Seniority</U>. As of the Closing Date, no Indebtedness or other claim against
the Company is senior to the Debentures in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured
by purchase money security interests (which is senior only as to underlying assets covered
thereby) and capital lease obligations (which is senior only as to the property covered
thereby).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg)&nbsp;<U>No Disagreements with Accountants and Lawyers.</U> There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company
</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 arise, between
the Company and the accountants and lawyers formerly or presently employed by the Company
and the Company is current with respect to any fees owed to its accountants and lawyers
which could affect the Company&#146;s ability to perform any of its obligations under any of the
Transaction Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh)&nbsp;<U>Acknowledgment Regarding Purchasers&#146; Purchase of Securities</U>. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an
arm&#146;s length purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated thereby and any advice given by
any Purchaser or any of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely incidental to the
Purchasers&#146; purchase of the Securities. The Company further represents to each Purchaser
that the Company&#146;s decision to enter into this Agreement and the other Transaction Documents
has been based solely on the independent evaluation of the transactions contemplated hereby
by the Company and its representatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;<U>Acknowledgment Regarding Purchasers&#146; Trading Activity</U>. Notwithstanding
anything in this Agreement or elsewhere herein to the contrary (except for Sections&nbsp;3.2(f)
and 4.15 hereof), it is understood and acknowledged by the Company that (i)&nbsp;none of the
Purchasers has been asked to agree by the Company, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or &#147;derivative&#148;
securities based on securities issued by the Company or to hold the Securities for any
specified term, (ii)&nbsp;past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or &#147;derivative&#148; transactions, before
or after the closing of this or future private placement transactions, may negatively impact
the market price of the Company&#146;s publicly-traded securities, (iii)&nbsp;any Purchaser, and
counter-parties in &#147;derivative&#148; transactions to which any such Purchaser is a party,
directly or indirectly, may presently have a &#147;short&#148; position in the Common Stock, and (iv)
each Purchaser shall not be deemed to have any affiliation with or control over any arm&#146;s
length counter-party in any &#147;derivative&#148; transaction. The Company further understands and
acknowledges that (a)&nbsp;one or more Purchasers may engage in hedging activities at various
times during the period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Underlying Shares deliverable with respect to
Securities are being determined and (b)
such hedging activities (if any) could reduce the value of the existing stockholders&#146;
equity interests in the Company at and after the time that the hedging activities are being
conducted.&nbsp; The Company acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj)&nbsp;<U>Regulation&nbsp;M Compliance</U>.&nbsp; The Company has not, and to its knowledge no one
acting on its behalf has, (i)&nbsp;taken, directly or indirectly, any action designed to cause or
to result in the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of any of the Securities, (ii)&nbsp;sold, bid for,
</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">purchased, or
paid any compensation for soliciting purchases of, any of the securities of the Company or
(iii)&nbsp;paid or agreed to pay to any Person any compensation for soliciting another to
purchase any other securities of the Company, other than, in the case of clauses (ii)&nbsp;and
(iii), compensation paid to the Company&#146;s placement agent in connection with the placement
of the Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk)&nbsp;<U>FDA</U>. As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (&#147;<U>FDA</U>&#148;) under the Federal Food, Drug and Cosmetic Act, as
amended, and the regulations thereunder (&#147;<U>FDCA</U>&#148;) that is manufactured, packaged,
labeled, tested, distributed, sold, and/or marketed by the Company or any of its
Subsidiaries (each such product, a &#147;<U>Pharmaceutical Product</U>&#148;), such Pharmaceutical
Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed
by the Company in compliance with all applicable requirements under FDCA and similar laws,
rules and regulations relating to registration, investigational use, premarket clearance,
licensure, or application approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling, advertising, record keeping and
filing of reports, except where the failure to be in compliance would not have a Material
Adverse Effect. There is no pending, completed or, to the Company&#146;s knowledge, threatened,
action (including any lawsuit, arbitration, or legal or administrative or regulatory
proceeding, charge, complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries has received any notice,
warning letter or other communication from the FDA or any other governmental entity, which
(i)&nbsp;contests the premarket clearance, licensure, registration, or approval of, the uses of,
the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the
labeling and promotion of any Pharmaceutical Product, (ii)&nbsp;withdraws its approval of,
requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of
advertising or sales promotional materials relating to, any Pharmaceutical Product, (iii)
imposes a clinical hold on any clinical investigation by the Company or any of its
Subsidiaries, (iv)&nbsp;enjoins production at any facility of the Company or any of its
Subsidiaries, (v)&nbsp;enters or proposes to enter into a consent decree of permanent injunction
with the Company or any of its Subsidiaries, or (vi)&nbsp;otherwise alleges any violation of any
laws, rules or regulations by the Company or any of its Subsidiaries, and which, either
individually or in the aggregate, would have a Material Adverse Effect. The properties,
business and operations of the Company have been and are being conducted in all material
respects in accordance with all applicable laws, rules and regulations of the FDA.&nbsp; The
Company has not been informed by the FDA that the FDA will prohibit the marketing, sale,
license or use in the
United States of any product proposed to be developed, produced or marketed by the
Company nor has the FDA expressed any concern as to approving or clearing for marketing any
product being developed or proposed to be developed by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll) <U>Form&nbsp;S-3 Eligibility</U>. The Company meets the eligibility requirements set
forth in General Instruction I.A to Form S-3 promulgated under the Securities Act.
</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;3.2 <U>Representations and Warranties of the Purchasers</U>. Each Purchaser, for itself
and for no other Purchaser hereby, represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Organization; Authority</U>. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization
with full right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of the Transaction
Documents and performance by such Purchaser of the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary corporate or similar action
on the part of such Purchaser. Each Transaction Document to which it is a party has been
duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the
terms hereof, will constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i)&nbsp;as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors&#146; rights generally, (ii)
as limited by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies and (iii)&nbsp;insofar as indemnification and contribution provisions
may be limited by applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Own Account</U>. Such Purchaser understands that the Securities are
&#147;restricted securities&#148; and have not been registered under the Securities Act or any
applicable state securities law and such Purchaser is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any applicable state securities
law, has no present intention of distributing any of such Securities in violation of the
Securities Act or any applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding the
distribution of such Securities (this representation and warranty not limiting such
Purchaser&#146;s right to sell the Securities pursuant to the Registration Statement or otherwise
in compliance with applicable federal and state securities laws) in violation of the
Securities Act or any applicable state securities law. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Purchaser Status</U>. At the time such Purchaser was offered the Securities,
it was, and at the date hereof it is, and on each date on which it exercises any Warrants or
converts any Debentures it will be either: (i)&nbsp;an &#147;accredited investor&#148; as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii)&nbsp;a
&#147;qualified institutional buyer&#148; as defined in Rule&nbsp;144A(a) under the Securities Act. Such
Purchaser is not required to be registered as a broker-dealer under Section&nbsp;15 of the
Exchange Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U>Experience of Such Purchaser</U>. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks of such
</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; margin-left: 2%">investment.
Such Purchaser is able to bear the economic risk of an investment in the Securities and, at
the present time, is able to afford a complete loss of such investment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <U>General Solicitation</U>. Such Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general advertisement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <U>Short Sales and Confidentiality Prior To The Date Hereof</U>. Other than
consummating the transactions contemplated hereunder, such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any understanding with
such Purchaser, executed any purchases or sales, including Short Sales,&nbsp;of the securities of
the Company during the period commencing from the time that such Purchaser first received a
term sheet (written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder until the date
hereof (&#147;<U>Discussion Time</U>&#148;). Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Purchaser&#146;s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers managing other
portions of such Purchaser&#146;s assets, the representation set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement. Other than to
other Persons party to this Agreement, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including the existence and
terms of this transaction).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IV.<BR>
OTHER AGREEMENTS OF THE PARTIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Transfer Restrictions</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Securities may only be disposed of or resold in compliance with state and
federal securities laws and cannot be disposed of or resold unless pursuant to an effective
Registration Statement under the Securities Act or an exemption from registration is
available. In connection with any transfer of Securities other than pursuant to an
effective registration statement or Rule&nbsp;144, to the Company or in connection with a pledge
as contemplated in Section&nbsp;4.1(b), the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the Registration
Rights Agreement.
</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;The Purchasers agree to the imprinting, so long as is required by this Section&nbsp;4.1,
of a legend on any of the Securities in the following form:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&#091;NEITHER&#093; THIS SECURITY &#091;NOR THE SECURITIES INTO WHICH THIS SECURITY IS &#091;EXERCISABLE&#093;
&#091;CONVERTIBLE&#093;&#093; HAS &#091;NOT&#093; BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE &#147;SECURITIES ACT&#148;), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY &#091;AND
THE SECURITIES ISSUABLE UPON &#091;EXERCISE&#093; &#091;CONVERSION&#093; OF THIS SECURITY&#093; MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security
interest in some or all of the Securities to a financial institution that is an &#147;accredited
investor&#148; as defined in Rule 501(a) under the Securities Act and who agrees to be bound by
the provisions of this Agreement and the Registration Rights Agreement and, if required
under the terms of such arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no notice
shall be required of such pledge. At the appropriate Purchaser&#146;s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to the Registration Rights
Agreement, the preparation and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section&nbsp;4.1(b) hereof): (i)&nbsp;while a registration
statement (including the Registration Statement) covering the resale of such security is
effective under the Securities Act, or (ii)&nbsp;following any sale of such Underlying Shares
pursuant to Rule&nbsp;144, or (iii)&nbsp;if such Underlying Shares are eligible for sale under Rule
144(k), or (iv)&nbsp;if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by the staff of
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">Commission). The Company shall cause its counsel to issue a legal opinion to the
Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect
the removal of the legend hereunder. If all or any portion of a Debenture or Warrant is
converted or exercised (as applicable) at a time when there is an effective registration
statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be
sold under Rule 144(k) or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission) then such Underlying Shares shall be issued free of
all legends. The Company agrees that following the Effective Date or at such time as such
legend is no longer required under this Section&nbsp;4.1(c), it will, no later than three Trading
Days following the delivery by a Purchaser to the Company or the Transfer Agent of a
certificate representing Underlying Shares, as applicable, issued with a restrictive legend
(such third Trading Day, the &#147;<U>Legend Removal Date</U>&#148;), deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in
this Section. Certificates for Underlying Shares subject to legend removal hereunder shall
be transmitted by the Transfer Agent to the Purchaser by crediting the account of the
Purchaser&#146;s prime broker with the Depository Trust Company System as directed by such
Purchaser.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) In addition to such Purchaser&#146;s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of
Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are
submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject
to Section&nbsp;4.1(c), $10 per Trading Day (increasing to $20 per Trading Day 5 Trading Days
after such damages have begun to accrue) for each Trading Day after the second Trading Day
after the Legend Removal Date until such certificate is delivered without a legend. Nothing
herein shall limit such Purchaser&#146;s right to pursue actual damages for the Company&#146;s failure
to deliver certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all remedies available to it at
law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Each Purchaser, severally and not jointly with the other Purchasers, agrees that
such Purchaser will sell any Securities pursuant to either the registration requirements of
the Securities Act, including any applicable prospectus delivery requirements, or an
exemption therefrom, and that if Securities are sold pursuant to a Registration Statement,
they will be sold in compliance with the plan of distribution set
forth therein, and acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section&nbsp;4.1 is predicated upon the
Company&#146;s reliance upon this understanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Acknowledgment of Dilution</U>. The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges that its
</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">obligations
under the Transaction Documents, including without limitation its obligation to issue the
Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any
such dilution or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other stockholders of the
Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Furnishing of Information</U>. Until the earliest of the time that (i)&nbsp;the
requirements of Rule 144(k) have been met with respect to the Securities or (ii)&nbsp;the Warrants have
expired, the Company covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act. Until the Requirements of Rule 144(k) have been met with
respect to the Securities, if the Company is not required to file reports pursuant to the Exchange
Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with
Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule
144. The Company further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time to enable such Person
to sell such Securities without registration under the Securities Act within the requirements of
the exemption provided by Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Integration</U>. The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section&nbsp;2 of the Securities Act)
that would be integrated with the offer or sale of the Securities to the Purchasers in a manner
that would require the registration under the Securities Act of the sale of the Securities to the
Purchasers or that would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <U>Conversion and Exercise Procedures</U>. The form of Notice of Exercise included in
the Warrants and the form of Notice of Conversion included in the Debentures set forth the totality
of the procedures required of the Purchasers in order to exercise the Warrants or convert the
Debentures. No additional legal opinion or other information or instructions shall be required of
the Purchasers to exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in the Transaction Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <U>Securities Laws Disclosure; Publicity</U>. The Company shall, by 8:30 a.m. (New York
City time) on the Trading Day following the date hereof, issue a Current Report on Form&nbsp;8-
K disclosing the material terms of the transactions contemplated hereby and attaching the
Transaction Documents as exhibits thereto. The Company and each Purchaser shall consult with each
other in issuing any other press releases with respect to the transactions contemplated hereby, and
neither the Company nor any Purchaser shall issue any such press release or otherwise make any such
public statement without the prior consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the other party with
prior notice of such public statement or communication. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except (i)&nbsp;as required by federal securities law in connection with (A)
any registration statement contemplated by the Registration Rights Agreement and (B)&nbsp;the filing of
final Transaction Documents (including signature pages thereto) with the Commission and (ii)&nbsp;to the
extent such disclosure is required by law or Trading Market regulations, in which case the Company
shall provide the Purchasers with prior notice of such disclosure permitted under this clause (ii).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 <U>Shareholder Rights Plan</U>. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an &#147;Acquiring Person&#148;
under any control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers entered into prior to the date of this
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8 <U>Non-Public Information</U>. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, the Company covenants and agrees
that neither it nor any other Person acting on its behalf will provide any Purchaser or its agents
or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the
Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9 <U>Use of Proceeds</U>. Except as set forth on <U>Schedule&nbsp;4.9</U> attached hereto, the
Company shall use the net proceeds from the sale of the Securities hereunder for working capital
purposes and shall not use such proceeds for (a)&nbsp;the satisfaction of any portion of the Company&#146;s
debt (other than payment of trade payables in the ordinary course of the Company&#146;s business and
prior practices), (b)&nbsp;the redemption of any Common Stock or Common Stock Equivalents or (c)&nbsp;the
settlement of any outstanding litigation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10 <U>Indemnification of Purchasers</U>. Subject to the provisions of this Section&nbsp;4.10,
the Company will indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a functionally equivalent
role of a Person holding such titles notwithstanding a lack of such title or any other title),
each Person who controls such Purchaser (within the meaning of Section&nbsp;15 of the Securities Act and
Section&nbsp;20 of the Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of such controlling
person (each, a &#147;<U>Purchaser Party</U>&#148;) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts
paid in
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">settlements, court costs and reasonable attorneys&#146; fees and costs of investigation that any
such Purchaser Party may suffer or incur as a result of or relating to (a)&nbsp;any breach of any of the
representations, warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b)&nbsp;any action instituted against a Purchaser in any capacity,
or any of them or their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such Purchaser&#146;s
representations, warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any violations by the Purchaser
of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Purchaser Party except to the extent that (i)&nbsp;the employment thereof has
been specifically authorized by the Company in writing, (ii)&nbsp;the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)&nbsp;in such action
there is, in the reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more than one such
separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (i)
for any settlement by a Purchaser Party effected without the Company&#146;s prior written consent, which
shall not be unreasonably withheld or delayed; or (ii)&nbsp;to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser Party&#146;s breach of any of the
representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement
or in the other Transaction Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11 <U>Reservation and Listing of Securities</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Company shall maintain a reserve from its duly authorized shares of Common
Stock for issuance pursuant to the Transaction Documents in such amount as may be required
to fulfill its obligations in full under the Transaction Documents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If, on any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such date, then the Board of
Directors shall use commercially reasonable efforts to amend the
Company&#146;s certificate or articles of incorporation to increase the number of authorized
but unissued shares of Common Stock to at least the Required Minimum at such time, as soon
as possible and in any event not later than the 75th day after such date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Company shall, if applicable: (i)&nbsp;in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an additional shares
listing application covering a number of shares of Common Stock at least equal to
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">the
Required Minimum on the date of such application, (ii)&nbsp;take all steps necessary to cause
such shares of Common Stock to be approved for listing on such Trading Market as soon as
possible thereafter, (iii)&nbsp;provide to the Purchasers evidence of such listing, and (iv)
maintain the listing of such Common Stock on any date at least equal to the Required Minimum
on such date on such Trading Market or another Trading Market. In addition, the Company
shall hold a special meeting of shareholders (which may also be at the annual meeting of
shareholders) no later than the date of the Company&#146;s 2008 annual shareholder meeting for
the purpose of obtaining Shareholder Approval, with the recommendation of the Company&#146;s
Board of Directors that such proposal be approved, and the Company shall solicit proxies
from its shareholders in connection therewith in the same manner as all other management
proposals in such proxy statement and all management-appointed proxyholders shall vote their
proxies in favor of such proposal. If the Company does not obtain Shareholder Approval at
the first meeting, the Company shall seek to obtain Shareholder Approval at each subsequent
shareholder meeting thereafter until the earlier of the date Shareholder Approval is
obtained or the Debentures are no longer outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12 <U>Participation in Future Financing</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) From the date hereof until the date that is the 12&nbsp;month anniversary of the Closing
Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents (a &#147;<U>Subsequent Financing</U>&#148;), each Purchaser shall have the right to
participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent
Financing (the &#147;<U>Participation Maximum</U>&#148;) on the same terms, conditions and price
provided for in the Subsequent Financing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) At least 5 Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Purchaser a written notice of its intention to effect a
Subsequent Financing (&#147;<U>Pre-Notice</U>&#148;), which Pre-Notice shall ask such Purchaser if it
wants to review the details of such financing (such additional notice, a &#147;<U>Subsequent
Financing Notice</U>&#148;). Upon the request of a Purchaser, and only upon a request by such
Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than
1 Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser.
The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of
such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the
Person or Persons through or with whom such Subsequent Financing is proposed to be effected
and shall include a term sheet or similar document relating thereto as an attachment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Any Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time) on the
5<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Trading Day after all of the Purchasers have received the Pre-Notice that the
Purchaser is willing to participate in the Subsequent Financing, the amount of the
Purchaser&#146;s participation, and that the Purchaser has such funds ready, willing, and
available for investment on the terms set forth in the Subsequent Financing Notice. If 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; margin-left: 2%">Company receives no notice from a Purchaser as of such 5<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) If by 5:30 p.m. (New York City time) on the 5<SUP style="font-size: 85%; vertical-align: text-top">th </SUP>Trading Day after all of
the Purchasers have received the Pre-Notice, notifications by the Purchasers of their
willingness to participate in the Subsequent Financing (or to cause their designees to
participate) is, in the aggregate, less than the total amount of the Subsequent Financing,
then the Company may effect the remaining portion of such Subsequent Financing on the terms
and with the Persons set forth in the Subsequent Financing Notice.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) If by 5:30 p.m. (New York City time) on the 5<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Trading Day after all of
the Purchasers have received the Pre-Notice, the Company receives responses to a Subsequent
Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the
Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata
Portion (as defined below) of the Participation Maximum.&nbsp; &#147;<U>Pro Rata Portion</U>&#148; means
the ratio of (x)&nbsp;the Subscription Amount of Securities purchased on the Closing Date by a
Purchaser participating under this Section&nbsp;4.12 and (y)&nbsp;the sum of the aggregate
Subscription Amounts of Securities purchased on the Closing Date by all Purchasers
participating under this Section&nbsp;4.12.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above in this
Section&nbsp;4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent Financing Notice
within 60 Trading Days after the date of the initial Subsequent Financing Notice.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Notwithstanding the foregoing, this Section&nbsp;4.12 shall not apply in respect of (i)
an Exempt Issuance, (ii)&nbsp;an underwritten public offering of Common Stock, or (iii)&nbsp;as to any
particular Purchaser, to the extent that such Purchaser, following its participation in such
Subsequent Financing, would beneficially own in excess of 19.99% of the Company&#146;s Common
Stock outstanding immediately prior to the closing of such Subsequent Financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.13 <U>Subsequent Equity Sales</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) From the date hereof until 60&nbsp;days after the Effective Date, neither the Company
nor any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
<U>provided</U>, <U>however</U>, the 60&nbsp;day period set forth in this Section&nbsp;4.13 shall be
extended for the number of Trading Days during such period in which (i)&nbsp;trading in the
Common Stock is suspended by any Trading Market, or (ii)&nbsp;following the Effective Date,
the Registration Statement is not effective or the prospectus included in the Registration
Statement may not be used by the Purchasers for the resale of the Underlying Shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) From the date hereof until such time as no Purchaser holds any of the Securities,
the Company shall be prohibited from effecting or entering into an agreement
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">to effect any
Subsequent Financing involving a Variable Rate Transaction. &#147;<U>Variable Rate
Transaction</U>&#148; means a transaction in which the Company issues or sells (i)&nbsp;any debt or
equity securities that are convertible into, exchangeable or exercisable for, or include the
right to receive additional shares of Common Stock either (A)&nbsp;at a conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance of such
debt or equity securities, or (B)&nbsp;with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such debt or equity
security or upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock or (ii)&nbsp;enters
into any agreement, including, but not limited to, an equity line of credit, whereby the
Company may sell securities at a future determined price.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) From the date hereof until the earlier of (i)&nbsp;the date that Shareholder Approval is
obtained and deemed effective and (ii)&nbsp;the date that the Debentures and Warrants are no
longer outstanding, neither the Company nor any Subsidiary, as applicable, shall sell or
grant any option to purchase or sell or grant any right to reprice, or otherwise dispose of
or issue (or announces any sale, grant or any option to purchase or other disposition) any
Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common
Stock at an effective price per share that is lower than $3.52, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement (if the holder
of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights per share which are
issued in connection with such issuance, be entitled to receive shares of Common Stock at an
effective price per share that is lower than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of such issuance).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Notwithstanding the foregoing, this Section&nbsp;4.13 shall not apply in respect of an
Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.14 <U>Equal Treatment of Purchasers</U>. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to the Transaction
Documents. Further, the Company shall not make any payment of principal or interest on the
Debentures in amounts which are disproportionate to the respective principal amounts outstanding on
the Debentures at any applicable time. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class
and shall not in any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
</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;4.15 <U>Short Sales and Confidentiality After The Date Hereof</U>. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on
its behalf or pursuant to any understanding with it will execute any Short Sales during the period
commencing at the Discussion Time and ending at the time that the transactions contemplated by this
Agreement are first publicly announced as described in Section&nbsp;4.6.&nbsp; Each Purchaser, severally and
not jointly with the other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as described in Section&nbsp;4.6,
such Purchaser will maintain the confidentiality of the existence and terms of this transaction and
the information included in the Disclosure Schedules.&nbsp; Each Purchaser severally and not jointly
with any other Purchaser understands and acknowledges, and agrees, to act in a manner that will not
violate the positions of the Commission as set forth in Item&nbsp;65, Section&nbsp;A, of the Manual of
Publicly Available Telephone Interpretations, dated July&nbsp;1997, compiled by the Office of Chief
Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in Short Sales in the
securities of the Company after the time that the transactions contemplated by this Agreement are
first publicly announced as described in Section&nbsp;4.6.&nbsp; Subject to the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser&#146;s assets and the portfolio managers have no direct knowledge of
the investment decisions made by the portfolio managers managing other portions of such Purchaser&#146;s
assets, the covenant set forth above shall only apply with respect to the portion of assets managed
by the portfolio manager that made the investment decision to purchase the Securities covered by
this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.16 <U>Form&nbsp;D; Blue Sky Filings</U>. The Company agrees to timely file a Form&nbsp;D with
respect to the Securities as required under Regulation&nbsp;D and to provide a copy thereof, promptly
upon request of any Purchaser. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale
to the Purchasers at the Closing under applicable securities or &#147;Blue Sky&#148; laws of the states of
the United States, and shall provide evidence of such actions promptly upon request of any
Purchaser.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.17 <U>Capital Changes</U>. Until the one year anniversary of the Effective Date, the
Company shall not undertake a reverse or forward stock split or reclassification of the Common
Stock without the prior written consent of the Purchasers holding a majority in principal amount
outstanding of the Debentures.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE V.<BR>
MISCELLANEOUS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Termination</U>.&nbsp; This Agreement may be terminated by any Purchaser, as to such
Purchaser&#146;s obligations hereunder only and without any effect whatsoever on the obligations between
the Company and the other Purchasers, by written notice to the other parties, if the Closing has
not been consummated on or before October&nbsp;31, 2007; <U>provided</U>, <U>however</U>, that such
termination will not affect the right of any party to sue for any breach by the other party (or
parties).
</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;5.2 <U>Fees and Expenses</U>. At the Closing, the Company has agreed to reimburse Rockmore
Investment Master Fund Ltd. (&#147;<U>Rockmore</U>&#148;) the non-accountable sum of $50,000 for its legal
fees and expenses, $20,000 of which has been paid prior to the Closing. Accordingly, in lieu of
the foregoing payments, the aggregate amount that Rockmore is to pay for the Securities at the
Closing shall be reduced by $30,000 in lieu thereof.. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in
connection with the delivery of any Securities to the Purchasers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <U>Entire Agreement</U>. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 <U>Notices</U>. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a)&nbsp;the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b)&nbsp;the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c)&nbsp;the second Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)&nbsp;upon actual
receipt by the party to whom such notice is required to be given. The address for such notices and
communications shall be as set forth on the signature pages attached hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5 <U>Amendments; Waivers</U>. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers of at least 67% in interest of the Securities still held by Purchasers
or, in the case of a waiver, by the party against whom enforcement of any such waived provision is
sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the exercise of any such
right.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 <U>Headings</U>. The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7 <U>Successors and Assigns</U>. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of each
Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this
</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 to any Person to whom such Purchaser assigns or transfers any Securities, provided that
such transferee agrees in writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the &#147;Purchasers.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8 <U>No Third-Party Beneficiaries</U>. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in
Section&nbsp;4.10.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9 <U>Governing Law</U>. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of
Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement of
any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law. If either party shall commence an action or proceeding to
enforce any provisions of the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys&#146; fees and other
costs and expenses incurred with the investigation, preparation and prosecution of such action or
proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10 <U>Survival</U>. The representations and warranties shall survive the Closing and the
delivery of the Securities for the applicable statue of limitations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11 <U>Execution</U>. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party,
it being understood that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail delivery of a &#147;.pdf&#148; format data
file, such signature shall create a valid and binding obligation of the party executing (or on
whose behalf such signature is executed) with the same force and effect as if such facsimile or
&#147;.pdf&#148; signature page were an original thereof.
</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;5.12 <U>Severability</U>. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13 <U>Rescission and Withdrawal Right</U>. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights; <U>provided</U>, <U>however</U>, in the case
of a rescission of a conversion of a Debenture or exercise of a Warrant, the Purchaser shall be
required to return any shares of Common Stock delivered in connection with any such rescinded
conversion or exercise notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.14 <U>Replacement of Securities</U>. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any reasonable
third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.15 <U>Remedies</U>. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in
any action for specific performance of any such obligation the defense that a remedy at law would
be adequate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.16 <U>Payment Set Aside</U>. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.17 <U>Usury</U>. To the extent it may lawfully do so, the Company hereby agrees not to
insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be
compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any claim, action or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding
any provision to the contrary contained in any Transaction Document, it is expressly agreed and
provided that the total liability of the Company under the Transaction Documents for payments in
the nature of interest shall not exceed the maximum lawful rate authorized under applicable law
(the &#147;<U>Maximum Rate</U>&#148;), and, without limiting the foregoing, in no event shall any rate of
interest or default interest, or both of them, when aggregated with any other sums in the nature of
interest that the Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective
date forward, unless such application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by
such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the
Company, the manner of handling such excess to be at such Purchaser&#146;s election.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.18 <U>Independent Nature of Purchasers&#146; Obligations and Rights</U>. The obligations of
each Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance or
non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in their review and negotiation
of the Transaction Documents. For reasons of administrative convenience only, Purchasers and
their respective counsel have chosen to communicate with the Company through FWS. FWS does not
represent all of the Purchasers but only Rockmore. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.19 <U>Liquidated Damages</U>. The Company&#146;s obligations to pay any partial liquidated
damages or other amounts owing under the Transaction Documents is a continuing obligation of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->35<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the
Company and shall not terminate until all unpaid partial liquidated damages and other amounts have
been paid notwithstanding the fact that the instrument or security pursuant to which such partial
liquidated damages or other amounts are due and payable shall have been canceled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.20 <U>Saturdays, Sundays, Holidays, etc.</U> If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a Business Day,
then such action may be taken or such right may be exercised on the next succeeding Business Day.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.21 <U>Construction</U>. The parties agree that each of them and/or their respective counsel
has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal
rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments
hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.22 <U><B>Waiver of Jury Trial</B></U><B>. In any action, suit or proceeding in any jurisdiction
brought by any party against any other party, the parties each knowingly and intentionally, to the
greatest extent permitted by applicable law, hereby absolutely, unconditionally, irrevocably and
expressly waives forever trial by jury.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>(Signature Pages Follow)</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->36<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</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;IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.
</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="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>NATURAL HEALTH TRENDS CORP.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>Address for Notice</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
2050 Diplomat Drive
</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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dallas, TX 75234</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">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Chris Sharng
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fax: 972-243-5428</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>
    <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">Name: Chris Sharng</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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 align="left" valign="top">Title: President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">With a copy to (which shall not constitute notice):
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;REMAINDER OF PAGE INTENTIONALLY LEFT BLANK<BR>
SIGNATURE PAGE FOR PURCHASER FOLLOWS&#093;
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->37<!-- /Folio -->
</DIV>



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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Purchaser: Rockmore Investment Master Fund Ltd.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Signature of Authorized Signatory of Purchaser</I>: /s/ Bruce Bernstein

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Authorized Signatory: Bruce Bernstein<BR>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Title of Authorized Signatory: President

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Email Address of Purchaser:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Facsimile Number of Purchaser:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Address for Notice of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Delivery of Securities for Purchaser (if not same as address for notice):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Subscription Amount: $879,971.84
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Principal Amount <I>(Subscription Amount multiplied by 1.1364)</I>: $1,000,000
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Warrant Shares:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EIN Number:
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Purchaser: Iroquois Master Fund, Ltd.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Signature of Authorized Signatory of Purchaser</I>: /s/ Joshua Silverman

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Authorized Signatory: Joshua Silverman

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Title of Authorized Signatory: Authorized Signatory

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Email Address of Purchaser:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Facsimile Number of Purchaser:

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Notice of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Delivery of Securities for Purchaser (if not same as address for notice):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Subscription Amount: $879,971.84
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Principal Amount <I>(Subscription Amount multiplied by 1.1364)</I>: $1,000,000
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Warrant Shares:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EIN Number:
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Purchaser: Hudson Bay Fund LP

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Signature of Authorized Signatory of Purchaser</I>: /s/ Yoav Roth

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Authorized Signatory: Yoav Roth

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Title of Authorized Signatory: Principal and Portfolio Manager

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Email Address of Purchaser:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Facsimile Number of Purchaser:

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Notice of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Delivery of Securities for Purchaser (if not same as address for notice):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Subscription Amount: $378,387.89
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Principal Amount <I>(Subscription Amount multiplied by 1.1364)</I>: $430,000
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Warrant Shares:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EIN Number:
</DIV>



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



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Purchaser: Hudson Bay Overseas Fund LTD
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Signature of Authorized Signatory of Purchaser</I>: /s/ Yoav Roth
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Authorized Signatory: Yoav Roth
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Title of Authorized Signatory: Principal and Portfolio Manager
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Email Address of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Facsimile Number of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Notice of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Delivery of Securities for Purchaser (if not same as address for notice):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Subscription Amount: $501,583.95
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Principal Amount <I>(Subscription Amount multiplied by 1.1364)</I>: $570,000
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Warrant Shares:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EIN Number:
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Purchaser: Portside Growth and Opportunity Fund
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Signature of Authorized Signatory of Purchaser</I>: /s/ Owen Littman
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Authorized Signatory: Owen Littman
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Title of Authorized Signatory: Authorized Signatory
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Email Address of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Facsimile Number of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Notice of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Delivery of Securities for Purchaser (if not same as address for notice):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Subscription Amount: $439,985.92
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Principal Amount <I>(Subscription Amount multiplied by 1.1364)</I>: $500,000
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Warrant Shares:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EIN Number:
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Purchaser: Cranshire Capital, L.P.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Signature of Authorized Signatory of Purchaser</I>: /s/ Mitchell Kopin
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Authorized Signatory: Mitchell Kopin<BR>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Title of Authorized Signatory: President &#150; Downsview Capital, the General Partner
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Email Address of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Facsimile Number of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Notice of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Delivery of Securities for Purchaser (if not same as address for notice):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Subscription Amount: $439,985.92
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Principal Amount <I>(Subscription Amount multiplied by 1.1364)</I>: $500,000
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Warrant Shares:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EIN Number:
</DIV>


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<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Purchaser: GEMIMI MASTER FUND, LTD.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By: GEMINI STRATEGIES, LLC as investment manager
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Signature of Authorized Signatory of Purchaser</I>: /s/ Peter Weisman
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Authorized Signatory: Peter Weisman
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Title of Authorized Signatory: Managing Director
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Email Address of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Facsimile Number of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Notice of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Delivery of Securities for Purchaser (if not same as address for notice):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Subscription Amount: $219,992.96
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Principal Amount <I>(Subscription Amount multiplied by 1.1364)</I>: $250,000
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Warrant Shares:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EIN Number:
</DIV>



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</DIV>




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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>d50652exv10w2.htm
<DESCRIPTION>FORM OF REGISTRATION RIGHTS AGREEMENT
<TEXT>
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<TITLE>exv10w2</TITLE>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT
10.2</B>
</DIV>


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


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Registration Rights Agreement (this &#147;<U>Agreement</U>&#148;) is made and entered into as of
October&nbsp;19, 2007, between Natural Health Trends Corp., a Delaware corporation (the
&#147;<U>Company</U>&#148;) and each of the several purchasers signatory hereto (each such purchaser, a
&#147;<U>Purchaser</U>&#148; and, collectively, the &#147;<U>Purchasers</U>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof, between the Company and each Purchaser (the &#147;<U>Purchase Agreement</U>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company and each Purchaser hereby agrees as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>Definitions</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Capitalized terms used and not otherwise defined herein that are defined in the Purchase
Agreement shall have the meanings given such terms in the Purchase Agreement. </B>As used in this
Agreement, the following terms shall have the following meanings:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Advice</U>&#148; shall have the meaning set forth in Section&nbsp;6(d).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Effectiveness Date</U>&#148; means, with respect to the Initial Registration Statement
required to be filed hereunder, the 120<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> calendar day following the date hereof
(or, in the event of a &#147;full review&#148; by the Commission, the 150<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> calendar day
following the date hereof) and with respect to any additional Registration Statements which
may be required pursuant to Section&nbsp;3(c), the 90<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> calendar day following the
date on which an additional Registration Statement is required to be filed hereunder;
<U>provided</U>, <U>however</U>, that in the event the Company is notified by the
Commission that one or more of the above Registration Statements will not be reviewed or is
no longer subject to further review and comments, the Effectiveness Date as to such
Registration Statement shall be the fifth Trading Day following the date on which the
Company is so notified if such date precedes the dates otherwise required above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Effectiveness Period</U>&#148; shall have the meaning set forth in Section&nbsp;2(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Event</U>&#148; shall have the meaning set forth in Section&nbsp;2(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Event Date</U>&#148; shall have the meaning set forth in Section&nbsp;2(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Filing Date</U>&#148; means, with respect to the Initial Registration Statement
required hereunder, the 30<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> calendar day following the date hereof and, with
respect to any additional Registration Statements which may be required pursuant to Section
3(c), the earliest practicable date on which the Company is permitted by SEC Guidance to
file such additional Registration Statement related to the Registrable Securities, but in no
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">event less than 30 calendar days after the need for filing an additional Registration
Statement is determined.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Holder</U>&#148; or &#147;<U>Holders</U>&#148; means the holder or holders, as the case may be,
from time to time of Registrable Securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indemnified Party</U>&#148; shall have the meaning set forth in Section&nbsp;5(c).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indemnifying Party</U>&#148; shall have the meaning set forth in Section&nbsp;5(c).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Initial Registration Statement</U>&#148; means the initial Registration Statement filed
pursuant to this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Initial Shares</U>&#148; means a number of Registrable Securities equal to the lesser
of (i)&nbsp;the total number of Registrable Securities and (ii)&nbsp;one-third of the number of issued
and outstanding shares of Common Stock that are held by non-affiliates of the Company on the
day immediately prior to the filing date of the Initial Registration Statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Losses</U>&#148; shall have the meaning set forth in Section&nbsp;5(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Plan of Distribution</U>&#148; shall have the meaning set forth in Section&nbsp;2(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Prospectus</U>&#148; means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration statement in reliance
upon Rule&nbsp;430A promulgated by the Commission pursuant to the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Registrable Securities</U>&#148; means (i)&nbsp;all of the shares of Common Stock issuable
upon conversion in full of the Debentures (assuming on the date of determination the
Debentures are converted in full without regard to any conversion limitations therein), (ii)
all shares of Common Stock issuable as interest or principal on the Debentures assuming all
permissible interest and principal payments are made in shares of Common Stock and the
Debentures are held until maturity, but only to the extent such shares can be issued without
Shareholder Approval or such Shareholder Approval has been obtained, (iii)&nbsp;all Warrant
Shares (assuming on the date of determination the Warrants are exercised in full without
regard to any exercise limitations therein), (iv)&nbsp;any additional shares of Common Stock
issuable in connection with any anti-dilution provisions in the Debentures or the Warrants
(in each case, without giving effect to any limitations on conversion set forth in the
Debentures or limitations on exercise set forth in the Warrant) but only to the extent
 such shares can be issued without Shareholder Approval or such Shareholder Approval
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">has been obtained, and (v)&nbsp;any securities issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event with respect to the
foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Registration Statement</U>&#148; means the registration statement required to be filed
hereunder and any additional registration statements contemplated by Section&nbsp;3(c), including
(in each case) the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in such
registration statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Rule&nbsp;415</U>&#148; means Rule&nbsp;415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Rule&nbsp;424</U>&#148; means Rule&nbsp;424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Selling Shareholder Questionnaire</U>&#148; shall have the meaning set forth in Section
3(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>SEC Guidance</U>&#148; means (i)&nbsp;any written or oral guidance, comments, requirements
or requests of the Commission staff and (ii)&nbsp;the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>Shelf Registration</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) On or prior to each Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of all or such maximum portion of
the Registrable Securities as permitted by SEC Guidance (provided that the Company shall use
diligent efforts to advocate with the Commission for the registration of all of the
Registrable Securities in accordance with the SEC Guidance, including without limitation,
the Manual of Publicly Available Telephone Interpretations D.29) that are not then
registered on an effective Registration Statement for an offering to be made on a continuous
basis pursuant to Rule&nbsp;415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in accordance herewith)
and shall contain (unless otherwise directed by at least an 85% majority in interest of the
Holders) substantially the &#147;<U>Plan of Distribution</U>&#148; attached hereto as <U>Annex
A</U>. Subject to the terms of this Agreement, the Company shall use its best efforts to
cause a Registration Statement to be declared effective under the Securities Act as promptly
as possible after the filing thereof, but in any event prior to the applicable Effectiveness
Date, and shall use its best efforts to keep such Registration Statement continuously
effective under the Securities Act until all Registrable Securities covered by such
Registration Statement have been sold, or may be sold without volume
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">restrictions pursuant to Rule&nbsp;144(k), as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed to the Transfer Agent and the
affected Holders (the &#147;<U>Effectiveness Period</U>&#148;). The Company shall telephonically
request effectiveness of a Registration Statement as of 5:00 p.m. New York City time on a
Trading Day. The Company shall immediately notify the Holders via facsimile or by e-mail
of the effectiveness of a Registration Statement on the same Trading Day that the Company
telephonically confirms effectiveness with the Commission, which shall be the date requested
for effectiveness of such Registration Statement. The Company shall, by 9:30 a.m. New York
City time on the Trading Day after the effective date of such Registration Statement, file a
final Prospectus with the Commission as required by Rule&nbsp;424. Failure to so notify the
Holder within 1 Trading Day of such notification of effectiveness or failure to file a final
Prospectus as foresaid shall be deemed an Event under Section&nbsp;2(b). Notwithstanding any
other provision of this Agreement and subject to the payment of liquidated damages pursuant
to Section&nbsp;2(b), if any SEC Guidance sets forth a limitation on the number of Registrable
Securities permitted to be registered on a particular Registration Statement (and
notwithstanding that the Company used diligent efforts to advocate with the Commission for
the registration of all or a greater portion of Registrable Securities), unless otherwise
directed in writing by a Holder as to its Registrable Securities, the number of Registrable
Securities to be registered on such Registration Statement will first be reduced by shares
issuable upon in lieu of interest, second by Registrable Securities represented by Warrant
Shares (applied, in the case that some Warrant Shares may be registered, to the Holders on a
pro rata basis based on the total number of unregistered Warrant Shares held by such
Holders), third by Short-Term Warrant Shares (applied, in the case that some Short-Term
Warrant Shares may be registered, to the Holders on a pro rata basis based on the total
number of unregistered Short-Term Warrant Shares held by such Holders) and fourth by
Registrable Securities represented by Conversion Shares (applied, in the case that some
Conversion Shares may be registered, to the Holders on a pro rata basis based on the total
number of unregistered Conversion Shares held by such Holders); <U>provided</U>,
<U>however</U>, that, prior to any reduction in the number of Registrable Securities
included in a Registration Statement as set forth in this sentence, the number of shares of
Common Stock set forth on <U>Schedule&nbsp;6(b)</U> hereto which shall have been included on
such Registration Statement shall be reduced by up to 100%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If: (i)&nbsp;the Initial Registration Statement is not filed on or prior to its Filing
Date (if the Company files the Initial Registration Statement without affording the Holders
the opportunity to review and comment on the same as required by Section 3(a) herein, the
Company shall be deemed to have not satisfied this clause (i)), or (ii)&nbsp;the Company fails to
file with the Commission a request for acceleration of a Registration Statement in
accordance with Rule&nbsp;461 promulgated by the Commission pursuant to the Securities Act,
within five Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that such Registration Statement will not be
&#147;reviewed&#148; or will not be subject to further review, or (iii)&nbsp;prior to the effective date of
a Registration Statement, the Company fails to file a pre-effective amendment or otherwise
respond in writing to comments made by the Commission in respect of such Registration
Statement within 15 calendar days after the receipt of
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">comments by or notice from the Commission that such amendment is required in order for
such Registration Statement to be declared effective, or (iv)&nbsp;as to, in the aggregate among
all Holders on a pro-rata basis based on their purchase of the Securities pursuant to the
Purchase Agreement, a Registration Statement registering for resale all of the Initial
Shares is not declared effective by the Commission by the Effectiveness Date of the Initial
Registration Statement, or (v)&nbsp;all of the Registrable Securities are not registered for
resale pursuant to one or more effective Registration Statements on or before June&nbsp;30, 2008,
or (vi)&nbsp;after the effective date of a Registration Statement, such Registration Statement
ceases for any reason to remain continuously effective as to all Registrable Securities
included in such Registration Statement, or the Holders are otherwise not permitted to
utilize the Prospectus therein to resell such Registrable Securities, for more than 20
consecutive calendar days or more than an aggregate of 30 calendar days (which need not be
consecutive calendar days) during any 12-month period (any such failure or breach being
referred to as an &#147;<U>Event</U>&#148;, and for purposes of clause (i), (iv)&nbsp;and (v)&nbsp;the date on
which such Event occurs, and for purpose of clause (ii)&nbsp;the date on which such five Trading
Day period is exceeded, and for purpose of clause (iii)&nbsp;the date which such 15 calendar day
period is exceeded, and for purpose of clause (vi)&nbsp;the date on which such 20 or 30 calendar
day period, as applicable, is exceeded being referred to as &#147;<U>Event Date</U>&#148;), then, in
addition to any other rights the Holders may have hereunder or under applicable law, on each
such Event Date and on each monthly anniversary of each such Event Date (if the applicable
Event shall not have been cured by such date) until the applicable Event is cured, the
Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as
a penalty, equal to 2% of the aggregate purchase price paid by such Holder pursuant to the
Purchase Agreement for any unregistered Registrable Securities then held by such Holder
until the first anniversary of the Closing Date and 1% per month thereafter; provided, that
no further liquidated damages shall accrue after the second anniversary of the Closing Date.
The parties agree that the Company shall not be liable for liquidated damages under this
Agreement with respect to any Warrants or Warrant Shares. If the Company fails to pay any
partial liquidated damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser
maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily
from the date such partial liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The partial liquidated damages pursuant to the terms
hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of
an Event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U>Registration Procedures</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Company&#146;s registration obligations hereunder, the Company shall:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Not less than 5 Trading Days prior to the filing of each Registration Statement and
not less than one Trading Day prior to the filing of any related Prospectus or any amendment
or supplement thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i)&nbsp;furnish to each Holder copies of
substantially complete forms of all such documents
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">proposed to be filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders and (ii)&nbsp;cause its
officers and directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective counsel to
each Holder, to conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file a Registration Statement or any such Prospectus or any amendments
or supplements thereto to which the Holders of a majority of the Registrable Securities
shall reasonably object in good faith, provided that the Company is notified of such
objection in writing no later than 5 Trading Days after the Holders have been so furnished
copies of a Registration Statement or 1 Trading Day after the Holders have been so furnished
copies of any related Prospectus or amendments or supplements thereto. During any periods
that the Company is unable to meet its obligations hereunder with respect to the
registration of the Registrable Securities solely because it is diligently and in good faith
responding to any such objection, any liquidated damages that are accruing at such time
shall be tolled and any Event that may otherwise occur solely because of such delay shall be
suspended as to such Holder only, until such information is delivered to the Company or such
objection is withdrawn. Each Holder agrees to furnish to the Company a completed
questionnaire in the form attached to this Agreement as <U>Annex B</U> (a &#147;<U>Selling
Shareholder Questionnaire</U>&#148;) not less than two Trading Days prior to the Filing Date or
by the end of the fourth Trading Day following the date on which such Holder receives draft
materials in accordance with this Section.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) (i)&nbsp;Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii)&nbsp;cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the terms of this
Agreement), and, as so supplemented or amended, to be filed pursuant to Rule&nbsp;424; (iii)
respond as promptly as reasonably possible to any comments received from the Commission with
respect to a Registration Statement or any amendment thereto and provide as promptly as
reasonably possible to the Holders true and complete copies of all correspondence from and
to the Commission relating to a Registration Statement (provided that the Company may excise
any information contained therein which would constitute material non-public information as
to any Holder which has not executed a confidentiality agreement with the Company); and (iv)
comply in all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by a Registration
Statement during the applicable period in accordance (subject to the terms of this
Agreement) with the intended methods of disposition by the Holders thereof set forth in such
Registration Statement as so amended or in such Prospectus as so supplemented.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If during the Effectiveness Period, the number of Registrable Securities at any
time exceeds 100% of the number of shares of Common Stock then registered in a Registration
Statement, then the Company shall file as soon as reasonably practicable, but
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">in any case prior to the applicable Filing Date, an additional Registration Statement
covering the resale by the Holders of not less than the number of such Registrable
Securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Notify the Holders of Registrable Securities to be sold (which notice shall,
pursuant to clauses (iii)&nbsp;through (vi)&nbsp;hereof, be accompanied by an instruction to suspend
the use of the Prospectus until the requisite changes have been made) as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than one Trading Day prior
to such filing) and (if requested by any such Person) confirm such notice in writing no
later than one Trading Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed to be filed;
(B)&nbsp;when the Commission notifies the Company whether there will be a &#147;review&#148; of such
Registration Statement and whenever the Commission comments in writing on such Registration
Statement; and (C)&nbsp;with respect to a Registration Statement or any post-effective amendment,
when the same has become effective; (ii)&nbsp;of any request by the Commission or any other
federal or state governmental authority for amendments or supplements to a Registration
Statement or Prospectus or for additional information; (iii)&nbsp;of the issuance by the
Commission or any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv)&nbsp;of the receipt by the
Company of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; (v)&nbsp;of the occurrence of any
event or passage of time that makes the financial statements included in a Registration
Statement ineligible for inclusion therein or any statement made in a Registration Statement
or Prospectus or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to a Registration Statement,
Prospectus or other documents so that, in the case of a Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading; and (vi)&nbsp;of the occurrence or existence of any pending corporate development
with respect to the Company that the Company believes may be material and that, in the
determination of the Company, makes it not in the best interest of the Company to allow
continued availability of a Registration Statement or Prospectus, provided that any and all
of such information shall remain confidential to each Holder until such information
otherwise becomes public, unless disclosure by a Holder is required by law;
<U>provided</U>, <U>further</U>, that notwithstanding each Holder&#146;s agreement to keep such
information confidential, each such Holder makes no acknowledgement that any such
information is material, non-public information.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of (i)&nbsp;any order stopping or suspending the effectiveness of a Registration Statement, or
(ii)&nbsp;any suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Furnish to each Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by reference to
the extent requested by such Person, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission; provided, that any such item which is
available on the EDGAR system need not be furnished in physical form.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Subject to the terms of this Agreement, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto, except after the giving of any notice
pursuant to Section&nbsp;3(d).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) The Company shall cooperate with any broker-dealer through which a Holder proposes
to resell its Registrable Securities in effecting a filing with the FINRA Corporate
Financing Department pursuant to NASD Rule&nbsp;2710, as requested by any such Holder, and the
Company shall pay the filing fee required by such filing within 2 Business Days of request
therefor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Prior to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption from the Registration or
qualification) of such Registrable Securities for the resale by the Holder under the
securities or Blue Sky laws of such jurisdictions within the United States as any Holder
reasonably requests in writing, to keep each registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of the
Registrable Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction where it is
not then so qualified, subject the Company to any material tax in any such jurisdiction
where it is not then so subject or file a general consent to service of process in any such
jurisdiction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) If requested by a Holder, cooperate with such Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall be free, to
the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such names as any
such Holder may request.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) Upon the occurrence of any event contemplated by Section&nbsp;3(d), as promptly as
reasonably possible under the circumstances taking into account the Company&#146;s good faith
assessment of any adverse consequences to the Company and its
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">stockholders of the premature disclosure of such event, prepare a supplement or
amendment, including a post-effective amendment, to a Registration Statement or a supplement
to the related Prospectus or any document incorporated or deemed to be incorporated therein
by reference, and file any other required document so that, as thereafter delivered, neither
a Registration Statement nor such Prospectus will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading. If the Company notifies the Holders in accordance with clauses (iii)&nbsp;through
(vi)&nbsp;of Section 3(d) above to suspend the use of any Prospectus until the requisite changes
to such Prospectus have been made, then the Holders shall suspend use of such Prospectus.
The Company will use its best efforts to ensure that the use of the Prospectus may be
resumed as promptly as is practicable. The Company shall be entitled to exercise its right
under this Section 3(k) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant
to Section&nbsp;2(b), for a period not to exceed 60 calendar days (which need not be consecutive
days) in any 12&nbsp;month period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) Comply with all applicable rules and regulations of the Commission.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) The Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such Holder and,
if required by the Commission, the natural persons thereof that have voting and dispositive
control over the shares. During any periods that the Company is unable to meet its
obligations hereunder with respect to the registration of the Registrable Securities solely
because any Holder fails to furnish such information within three Trading Days of the
Company&#146;s request, notwithstanding the Company&#146;s reasonable efforts to diligently obtain
such information, then, (y)&nbsp;until such information is delivered to the Company, (i)&nbsp;any
liquidated damages that are accruing at such time shall be tolled, and (ii)&nbsp;the Company may
withhold such liquidated damages as to such Holder, and (iii)&nbsp;any Event that may otherwise
occur solely because of such delay shall be suspended as to such Holder only and (z)&nbsp;the
Company may exclude such Holder and such Holder&#146;s Registrable Securities from the
Registration Statement, provided that once such information is delivered to the Company, the
Company shall use reasonable efforts to include such Holder and such Holder&#146;s Registrable
Securities in the Registration Statement or a subsequent Registration Statement as soon as
practicable thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<U>Registration Expenses</U>. All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i)&nbsp;all registration and
filing fees (including, without limitation, fees and expenses of the Company&#146;s counsel and
auditors) (A)&nbsp;with respect to filings made with the Commission, (B)&nbsp;with respect to filings
required to be made with any Trading Market on which the Common Stock is then listed for trading,
(C)&nbsp;in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the
Company in writing (including, without limitation, fees and disbursements of counsel for the
Company in connection with Blue Sky qualifications or exemptions of the Registrable
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities) and (D)&nbsp;if not previously paid by the Company in connection with an Issuer Filing, with
respect to any filing that may be required to be made by any broker through which a Holder intends
to make sales of Registrable Securities with the FINRA pursuant to NASD Rule&nbsp;2710, so long as the
broker is receiving no more than a customary brokerage commission in connection with such sale,
(ii)&nbsp;printing expenses (including, without limitation, expenses of printing certificates for
Registrable Securities), (iii)&nbsp;messenger, telephone and delivery expenses, (iv)&nbsp;fees and
disbursements of counsel for the Company, (v)&nbsp;Securities Act liability insurance, if the Company so
desires such insurance, and (vi)&nbsp;fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or accounting duties), the
expense of any annual audit and the fees and expenses incurred in connection with the listing of
the Registrable Securities on any securities exchange as required hereunder. In no event shall the
Company be responsible for any broker or similar commissions of any Holder or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the Holders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U>Indemnification</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Indemnification by the Company</U>. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees (and any other Persons
with a functionally equivalent role of a Person holding such titles, notwithstanding a lack
of such title or any other title) of each of them, each Person who controls any such Holder
(within the meaning of Section&nbsp;15 of the Securities Act or Section&nbsp;20 of the Exchange Act)
and the officers, directors, members, shareholders, partners, agents and employees (and any
other Persons with a functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title) of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable attorneys&#146; fees) and
expenses (collectively, &#147;<U>Losses</U>&#148;), as incurred, arising out of or relating to (1)
any untrue or alleged untrue statement of a material fact contained in a Registration
Statement, any Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading or (2)&nbsp;any violation or alleged
violation by the Company of the Securities Act, the Exchange Act or any state securities
law, or any rule or regulation thereunder, in connection with the performance of its
obligations under this Agreement, except to the extent, but only to the extent, that (i)
such untrue statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Holder or such Holder&#146;s proposed method of distribution of Registrable Securities and
was reviewed and expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved Annex A hereto for this purpose) or (ii)&nbsp;in the case
of an occurrence of an event of the type specified in Section&nbsp;3(d)(iii)-(vi), the use by
such Holder of an outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section&nbsp;6(d). The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding arising from or
in connection with the transactions contemplated by this Agreement of which the Company is
aware.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Indemnification by Holders</U>. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section&nbsp;15 of the Securities Act and
Section&nbsp;20 of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and against all
Losses, as incurred, to the extent arising out of or based solely upon: (x)&nbsp;such Holder&#146;s
failure to comply with the prospectus delivery requirements of the Securities Act or (y)&nbsp;any
untrue or alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein not
misleading (i)&nbsp;to the extent, but only to the extent, that such untrue statement or omission
is contained in any information so furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or such Prospectus or (ii)&nbsp;to the
extent that such information relates to such Holder&#146;s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in a Registration Statement (it being understood that the Holder has
approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement
thereto or (ii)&nbsp;in the case of an occurrence of an event of the type specified in Section
3(d)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus after the
Company has notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section&nbsp;6(d). In no event
shall the liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Conduct of Indemnification Proceedings</U>. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an &#147;<U>Indemnified
Party</U>&#148;), such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the &#147;<U>Indemnifying Party</U>&#148;) in writing, and the Indemnifying Party shall have
the right to assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified Party to
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">give such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is not subject
to appeal or further review) that such failure shall have prejudiced the Indemnifying Party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties unless: (1)&nbsp;the
Indemnifying Party has agreed in writing to pay such fees and expenses; (2)&nbsp;the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)&nbsp;the
named parties to any such Proceeding (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall
reasonably believe that a material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense of the Indemnified Party and the reasonable
fees and expenses of no more than one separate counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any
such Proceeding effected without its written consent, which consent shall not be
unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect
of which any Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the subject matter
of such Proceeding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within
ten Trading Days of written notice thereof to the Indemnifying Party; provided, that the
Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such
fees and expenses applicable to such actions for which such Indemnified Party is judicially
determined to be not entitled to indemnification hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U>Contribution</U>. If the indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless
for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the parties&#146;
relative intent, knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result of any
Losses shall be deemed to include, subject to the limitations set forth in this Agreement,
any reasonable attorneys&#146; or other fees or expenses incurred by such party in connection
with any Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to such party in
accordance with its terms.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any other method
of allocation that does not take into account the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the provisions of this Section&nbsp;5(d),
no Holder shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the net proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The indemnity and contribution agreements contained in this Section are in addition to
any liability that the Indemnifying Parties may have to the Indemnified Parties.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Remedies</U>. In the event of a breach by the Company or by a Holder of any of their
respective obligations under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under this Agreement,
including recovery of damages, shall be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for specific performance in
respect of such breach, it shall not assert or shall waive the defense that a remedy at law would
be adequate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>No Piggyback on Registrations; Prohibition on Filing Other Registration
Statements</U>. Except as set forth on <U>Schedule&nbsp;6(b)</U> attached hereto, neither the Company
nor any of its security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in any Registration Statements other than the Registrable
Securities. The Company shall not file any other registration statements until the Initial
Registration Statement is declared effective by the Commission, provided that this Section 6(b)
shall not prohibit the Company from filing amendments to registration statements filed prior to the
date of this Agreement.
</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;(c) <U>Compliance</U>. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to a Registration Statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U>Discontinued Disposition</U>. By its acquisition of Registrable Securities, each
Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section&nbsp;3(d)(iii) through (vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under a Registration Statement until it is advised in
writing (the &#147;<U>Advice</U>&#148;) by the Company that the use of the applicable Prospectus (as it may
have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure
that the use of the Prospectus may be resumed as promptly as is practicable. The Company agrees
and acknowledges that any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the provisions of Section
2(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <U>Piggy-Back Registrations</U>. If, at any time during the Effectiveness Period, there
is not an effective Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the Commission a registration statement relating
to an offering for its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in connection with the
Company&#146;s stock option or other employee benefit plans, then the Company shall deliver to each
Holder a written notice of such determination and, if within fifteen days after the date of the
delivery of such notice, any such Holder shall so request in writing, the Company shall include in
such registration statement all or any part of such Registrable Securities such Holder requests to
be registered; <U>provided</U>, <U>however</U>, that the Company shall not be required to
register any Registrable Securities pursuant to this Section 6(e) that are eligible for resale
pursuant to Rule 144(k) promulgated by the Commission pursuant to the Securities Act or that are
the subject of a then effective Registration Statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <U>Amendments and Waivers</U>. The provisions of this Agreement, including the provisions
of this sentence, may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of at least 67% of the then outstanding Registrable
Securities (including, for this purpose any Registrable Securities issuable upon exercise or
conversion of any Security). If a Registration Statement does not register all of the Registrable
Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then
the number of Registrable Securities to be registered for each Holder shall be reduced pro rata
among all Holders and each Holder shall have the right to designate which of its Registrable
Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of a Holder or some Holders and that does not directly or indirectly
affect the rights of other Holders may be given by such Holder or Holders of all of the Registrable
Securities to which such waiver or consent relates; <U>provided</U>, <U>however</U>, that 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"> provisions of this sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the first sentence of this Section&nbsp;6(f).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <U>Notices</U>. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <U>Successors and Assigns</U>. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder. The Company may not assign (except by merger) its rights or obligations
hereunder without the prior written consent of all of the Holders of the then outstanding
Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and
to the Persons as permitted under the Purchase Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <U>No Inconsistent Agreements</U>. Neither the Company nor any of its Subsidiaries has
entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities, that would have
the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except as set forth on <U>Schedule&nbsp;6(i)</U>, neither the Company nor
any of its Subsidiaries has previously entered into any agreement granting any registration rights
with respect to any of its securities to any Person that have not been satisfied in full.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <U>Execution and Counterparts</U>. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission or by e-mail delivery of a &#147;.pdf&#148; format data
file, such signature shall create a valid and binding obligation of the party executing (or on
whose behalf such signature is executed) with the same force and effect as if such facsimile or
&#147;.pdf&#148; signature page were an original thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) <U>Governing Law</U>. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be determined in accordance with the provisions of the
Purchase Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) <U>Cumulative Remedies</U>. The remedies provided herein are cumulative and not exclusive
of any other remedies provided by law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) <U>Severability</U>. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /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;(n) <U>Headings</U>. The headings in this Agreement are for convenience only, do not
constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) <U>Independent Nature of Holders&#146; Obligations and Rights</U>. The obligations of each
Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and
no Holder shall be responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Holders are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled
to protect and enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as an additional party
in any proceeding for such purpose.
</DIV>


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


<P align="center" style="font-size: 10pt"><!-- Folio -->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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>NATURAL HEALTH TRENDS CORP.</B></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>
    <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">By:</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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Name:<br>
Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;SIGNATURE PAGE OF HOLDERS FOLLOWS&#093;
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /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">&#091;SIGNATURE PAGE OF HOLDERS TO BHIP RRA&#093;
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Name of Holder: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Signature of Authorized Signatory of Holder</I>: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Name of Authorized Signatory: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Title of Authorized Signatory: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;SIGNATURE PAGES CONTINUE&#093;
</DIV>


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</DIV>

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




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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>Plan of Distribution</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Selling Stockholder (the &#147;<U>Selling Stockholders</U>&#148;) of the common stock and any of
their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on the Nasdaq Stock Market or any other stock exchange, market or
trading facility on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods
when selling shares:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate the
transaction;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">an exchange distribution in accordance with the rules of the applicable
exchange;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">privately negotiated transactions;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">a combination of any such methods of sale; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">any other method permitted pursuant to applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Selling Stockholders may also sell shares under Rule&nbsp;144 under the Securities Act of 1933,
as amended (the &#147;<U>Securities Act</U>&#148;), if available, rather than under this prospectus.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this
Prospectus, in the case of an agency transaction not in excess of a customary brokerage
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /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">commission in compliance with FINRA NASD Rule&nbsp;2440; and in the case of a principal transaction
a markup or markdown in compliance with NASD IM-2440.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the sale of the common stock or interests therein, the Selling Stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The Selling Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Selling Stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be &#147;underwriters&#148; within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it
does not have any written or oral agreement or understanding, directly or indirectly, with any
person to distribute the Common Stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent (8%).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because Selling Stockholders may be deemed to be &#147;underwriters&#148; within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act
including Rule&nbsp;172 thereunder. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule&nbsp;144 under the Securities Act may be sold under Rule&nbsp;144 rather
than under this prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the Selling Stockholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We agreed to keep this prospectus effective until the earlier of (i)&nbsp;the date on which the
shares may be resold by the Selling Stockholders without registration and without regard to any
volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii)&nbsp;all of the shares have been sold pursuant to this prospectus or Rule&nbsp;144 under the
Securities Act or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /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;Under applicable rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in Regulation&nbsp;M, prior
to the commencement of the distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations thereunder, including
Regulation&nbsp;M, which may limit the timing of purchases and sales of shares of the common stock by
the Selling Stockholders or any other person. We will make copies of this prospectus available to
the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to
each purchaser at or prior to the time of the sale (including by compliance with Rule&nbsp;172 under the
Securities Act).
</DIV>


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</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>Annex B</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>Selling Securityholder Notice and Questionnaire</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned beneficial owner of common stock (the &#147;<U>Registrable Securities</U>&#148;) of
Natural Helath Trends Corp., a Delaware corporation (the &#147;<U>Company</U>&#148;), understands that the
Company has filed or intends to file with the Securities and Exchange Commission (the
&#147;<U>Commission</U>&#148;) a registration statement (the &#147;<U>Registration Statement</U>&#148;) for the
registration and resale under Rule&nbsp;415 of the Securities Act of 1933, as amended (the
&#147;<U>Securities Act</U>&#148;), of the Registrable Securities, in accordance with the terms of the
Registration Rights Agreement (the &#147;<U>Registration Rights Agreement</U>&#148;) to which this document
is annexed. A copy of the Registration Rights Agreement is available from the Company upon request
at the address set forth below. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Registration Rights Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel regarding the
consequences of being named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned beneficial owner (the &#147;<U>Selling Securityholder</U>&#148;) of Registrable
Securities hereby elects to include the Registrable Securities owned by it in the Registration
Statement.
</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">The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:
</DIV>


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

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="95%">&nbsp;</TD>
</TR>
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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>1.</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Name.</B></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">(a)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Full Legal Name of Selling Securityholder</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 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">&nbsp;</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>
    <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">(b)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Full Legal Name of Registered Holder (if not the same as (a)&nbsp;above) through
which Registrable Securities are held:</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 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">&nbsp;</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>
    <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">(c)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by this Questionnaire):</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 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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Address for Notices to Selling Securityholder:</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="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="92%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" 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 align="left" 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 style="font-size: 1px">
    <TD colspan="7" 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 align="left" 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 style="font-size: 1px">
    <TD colspan="7" 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 align="left" 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="5" valign="top" align="left">Telephone:</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 align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fax:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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 style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap colspan="5" valign="top" align="left">Contact Person:</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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. Broker-Dealer Status:</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Are you a broker-dealer?</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Yes <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#111;</FONT>
</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="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If &#147;yes&#148; to Section&nbsp;3(a), did you receive your Registrable Securities as
compensation for investment banking services to the Company?</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Yes <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#111;</FONT>
</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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="94%">&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">Note:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">If &#147;no&#148; to Section&nbsp;3(b), the Commission&#146;s
staff has indicated that you should be
identified as an underwriter in the
Registration Statement.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Are you an affiliate of a broker-dealer?</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Yes <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#111;</FONT>
</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="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If you are an affiliate of a broker-dealer, do you certify that you purchased
the Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Yes <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#111;</FONT>
</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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="94%">&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">Note:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">If &#147;no&#148; to Section&nbsp;3(d), the Commission&#146;s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. Beneficial Ownership of Securities of the Company Owned by the Selling Securityholder.</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><I>Except as set forth below in this Item&nbsp;4, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the securities issuable
pursuant to the Purchase Agreement.</I>
</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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="94%">&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">(a)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Type and Amount of other securities beneficially owned by the Selling
Securityholder:</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 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">&nbsp;</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>
    <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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. Relationships with the Company:</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="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="95%">&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"><I>Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.</I></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 valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">State any exceptions here:</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 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 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>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof at any time while the
Registration Statement remains effective.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 5 and the inclusion of such information in the
Registration Statement and the related prospectus and any amendments or supplements thereto. The
undersigned understands that such information will be relied upon by the Company in connection with
the preparation or amendment of the Registration Statement and the related prospectus.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned acknowledges that it has an understanding of Regulation&nbsp;M promulgated under
the U.S. Securities Exchange Act of 1934 and will conduct any resale of the Registrable Securities
that are registered under the Registration Statement in compliance with Regulation&nbsp;M. Further, the
undersigned acknowledges that it understands that the undersigned may not conduct a short sale of
the Company&#146;s Common Stock before the effective date of the Registration Statement where such short
sale is covered with Registrable Securities to be registered for resale under the Registration
Statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly authorized agent.
</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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">Date:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" valign="top" align="left">Beneficial Owner:</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"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><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 align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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 align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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 style="font-size: 1px">
    <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>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <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>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left">Name:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left">Title:</TD>
</TR>
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</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL
BY OVERNIGHT MAIL, TO:</B>
</DIV>



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<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>d50652exv10w3.htm
<DESCRIPTION>FORM OF VARIABLE RATE CONVERTIBLE DEBENTURE
<TEXT>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT
10.3</B>
</DIV>



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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
&#147;SECURITIES ACT&#148;), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Original Issue Date: October&nbsp;19, 2007<BR>
Original Conversion Price (subject to adjustment herein): <B>$2.50</B>
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">$_______________
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NATURAL HEALTH TRENDS CORP.<BR>
VARIABLE RATE CONVERTIBLE DEBENTURE</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS DEBENTURE is one of a series of duly authorized and validly issued Variable Rate
Convertible Debentures of Natural Health Trends Corp., a Delaware corporation, (the
&#147;<U>Company</U>&#148;), having its principal place of business at 2050 Diplomat Drive, Dallas, Texas,
75234, designated as its Variable Rate Convertible Debenture (this debenture, the
&#147;<U>Debenture</U>&#148; and, collectively with the other debentures of such series, the
&#147;<U>Debentures</U>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED, the Company promises to pay to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> or its registered
assigns (the &#147;<U>Holder</U>&#148;), or shall have paid pursuant to the terms hereunder, the principal
sum of $<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> on October&nbsp;19, 2009 (the &#147;<U>Maturity Date</U>&#148;) or such earlier date as
this Debenture is required or permitted to be repaid as provided hereunder, or such later date as
may be permitted by the Holder as set forth in Section&nbsp;2 hereof, and to pay interest to the Holder
on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance
with the provisions hereof. This Debenture is subject to the following additional provisions:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1</U>. <U>Definitions</U>. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture, (a)&nbsp;capitalized terms not otherwise defined herein shall have
the meanings set forth in the Purchase Agreement and (b)&nbsp;the following terms shall have the
following meanings:
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Alternate Consideration</U>&#148; shall have the meaning set forth in Section&nbsp;5(e).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Bankruptcy Event</U>&#148; means any of the following events: (a)&nbsp;the Company or any
Significant Subsidiary (as such term is defined in Rule&nbsp;1-02(w) of Regulation&nbsp;S-X) thereof
commences a case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Company or any Significant Subsidiary thereof; (b)&nbsp;there
is commenced against the Company or any Significant Subsidiary thereof any such case or
proceeding that is not dismissed within 60&nbsp;days after commencement; (c)&nbsp;the Company or any
Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered; (d)&nbsp;the Company or any
Significant Subsidiary thereof suffers any appointment of any custodian or the like for it
or any substantial part of its property that is not discharged or stayed within 60 calendar
days after such appointment; (e)&nbsp;the Company or any Significant Subsidiary thereof makes a
general assignment for the benefit of creditors; (f)&nbsp;the Company or any Significant
Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g)&nbsp;the Company or any Significant Subsidiary
thereof, by any act or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Base Conversion Price</U>&#148; shall have the meaning set forth in Section&nbsp;5(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Business Day</U>&#148; means any day except any Saturday, any Sunday, any day which
shall be a federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Buy-In</U>&#148; shall have the meaning set forth in Section&nbsp;4(d)(v).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Change of Control Transaction</U>&#148; means the occurrence after the date hereof of
any of (i)&nbsp;an acquisition after the date hereof by an individual or legal entity or &#147;group&#148;
(as described in Rule&nbsp;13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Company, by contract
or otherwise) of in excess of 40% of the voting securities of the Company (other than by
means of conversion or exercise of the Debentures and the Securities issued together with
the Debentures), or (ii)&nbsp;the Company merges into or consolidates with any other Person, or
any Person merges into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such transaction own less
than 66% of the aggregate voting power of the Company or the successor entity of such
transaction, or (iii)&nbsp;the Company sells or transfers all or substantially all of its assets
to another Person and the stockholders of the Company immediately prior to such transaction
own less than 40% of the aggregate voting power of the acquiring entity immediately after
the transaction, or (iv)&nbsp;when, during any period of thirty-six (36)&nbsp;consecutive months, the
individuals who, at the
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">beginning of such period, constitute the Board of Directors (the &#147;Incumbent Directors&#148;)
cease for any reason other than death to constitute at least a majority thereof, provided,
however, that a director who was not a director at the beginning of such 36-month period
shall be deemed to have satisfied such 36-month requirement (and be an Incumbent Director)
if such director was elected by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors either actually
(because they were directors at the beginning of such 36-month period) or through the
operation of this provision, or (v)&nbsp;the execution by the Company of an agreement to which
the Company is a party or by which it is bound, providing for any of the events set forth
in clauses (i)&nbsp;through (iv)&nbsp;above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Conversion Date</U>&#148; shall have the meaning set forth in Section&nbsp;4(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Conversion Price</U>&#148; shall have the meaning set forth in Section&nbsp;4(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Conversion Shares</U>&#148; means, collectively, the shares of Common Stock issuable
upon conversion of this Debenture in accordance with the terms hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Debenture Register</U>&#148; shall have the meaning set forth in Section&nbsp;2(c).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Dilutive Issuance</U>&#148; shall have the meaning set forth in Section&nbsp;5(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Dilutive Issuance Notice</U>&#148; shall have the meaning set forth in Section&nbsp;5(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Effectiveness Period</U>&#148; shall have the meaning set forth in the Registration
Rights Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Equity Conditions</U>&#148; means, during the period in question, (i)&nbsp;the Company shall
have duly honored all conversions and redemptions scheduled to occur or occurring by virtue
of one or more Notices of Conversion of the Holder, if any, (ii)&nbsp;the Company shall have paid
all liquidated damages and other amounts owing to the Holder in respect of this Debenture,
(iii)&nbsp;there is an effective Registration Statement covering the resale of all of the Common
Stock issuable pursuant to the Transaction documents to which the Equity Conditions apply
pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all
of the shares issuable pursuant to the Transaction Documents (and the Company believes, in
good faith, that such effectiveness will continue uninterrupted for the foreseeable future),
(iv)&nbsp;the Common Stock is trading on a Trading Market and all of the shares issuable pursuant
to the Transaction Documents are listed or quoted for trading on such Trading Market (and
the Company believes, in good faith, that trading of the Common Stock on a Trading Market
will continue uninterrupted for the foreseeable future), (v)&nbsp;there is a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of
all of the shares issuable pursuant to the Transaction Documents, (vi)&nbsp;there is no existing
Event of Default or no existing event which, with the passage of time or the giving of
notice, would constitute an Event of Default, (vii)&nbsp;the issuance of the shares in question
(or, in the case of an Optional or Monthly Redemption, the shares issuable upon conversion
in full of the
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Optional or Monthly Redemption Amount) to the Holder would not violate the limitations
set forth in Section&nbsp;4(c)(i) and Section&nbsp;4(c)(ii) herein, (viii)&nbsp;there has been no public
announcement of a pending or proposed Fundamental Transaction or Change of Control
Transaction that has not been consummated, (ix)&nbsp;the Holder is not in possession of any
information provided by the Company that constitutes, or may constitute, material non-public
information, (x)&nbsp;for each Trading Day in a period of 20 consecutive Trading Days prior to
the applicable date in question, the daily trading volume for the Common Stock on the
principal Trading Market exceeds (A) $150,000 per Trading Day in the case of an Optional
Redemption pursuant to Section 6(a) herein and a Forced Conversion pursuant to Section 6(d)
herein, (B) $50,000 per Trading Day in the case of a Monthly Redemption pursuant to Section
6(b) herein, and (C) $25,000 per Trading Day in the case of interest payments pursuant to
Section&nbsp;2 herein, and (xi)&nbsp;the issuance in question does not exceed 20% of the total trading
volume of the Common Stock during the 20 consecutive Trading Days immediately prior to the
date in question.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Event of Default</U>&#148; shall have the meaning set forth in Section&nbsp;8.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Forced Conversion</U>&#148; shall have the meaning set forth in Section&nbsp;6(d).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Forced Conversion Date</U>&#148; shall have the meaning set forth in Section&nbsp;6(d).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Forced Conversion Notice</U>&#148; shall have the meaning set forth in Section&nbsp;6(d).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Forced Conversion Notice Date</U>&#148; shall have the meaning set forth in Section
6(d).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Fundamental Transaction</U>&#148; shall have the meaning set forth in Section&nbsp;5(e).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Conversion Rate</U>&#148; means 90% of the lesser of (a)&nbsp;the average of the
VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately
prior to the applicable Interest Payment Date or (b)&nbsp;the average of the VWAPs for the 20
consecutive Trading Days ending on the Trading Day that is immediately prior to the date the
applicable Interest Conversion Shares are issued and delivered if such delivery is after the
Interest Payment Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Conversion Shares</U>&#148; shall have the meaning set forth in Section&nbsp;2(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Notice Period</U>&#148; shall have the meaning set forth in Section&nbsp;2(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Payment Date</U>&#148; shall have the meaning set forth in Section&nbsp;2(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Period</U>&#148; means, initially, the period beginning on and including the
Original Issue Date and ending on and including December&nbsp;31, 2007 and each successive period
as follows: the period beginning on and including January 1 and ending on and including
March&nbsp;31; the period beginning on and including April 1 and ending on and including June&nbsp;30;
and the period beginning on and including July 1 and ending on and
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">including September&nbsp;30; and the period beginning on October 1 and ending on and
including December&nbsp;31.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Share Amount</U>&#148; shall have the meaning set forth in Section&nbsp;2(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Late Fees</U>&#148; shall have the meaning set forth in Section&nbsp;2(d).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>LIBOR</U>&#148; means, for each Interest Period (i)&nbsp;the six-month London Interbank
Offered Rate for deposits in U.S. dollars, as shown on such the Trading Day immediately
prior to the beginning of such Interest Period in The Wall Street Journal (Eastern Edition)
under the caption &#147;Money Rates &#151; London Interbank Offered Rates (LIBOR)&#148;; or (ii)&nbsp;if The
Wall Street Journal does not publish such rate, the offered one-month rate for deposits in
U.S. dollars which appears on the Reuters Screen LIBO Page as of 10:00&nbsp;a.m., New York time,
the Trading Day immediately prior to the beginning of such Interest Period, provided that if
at least two rates appear on the Reuters Screen LIBO Page on any such Trading Day, the
&#147;LIBOR&#148; for such day shall be the arithmetic mean of such rates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Mandatory Default Amount</U>&#148; means the sum of (i)&nbsp;the greater of (A)&nbsp;115% of the
outstanding principal amount of this Debenture, plus 100% of accrued and unpaid interest
hereon, or (B)&nbsp;the outstanding principal amount of this Debenture, plus all accrued and
unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default
Amount is either (a)&nbsp;demanded (if demand or notice is required to create an Event of
Default) or otherwise due or (b)&nbsp;paid in full, whichever has a lower Conversion Price,
multiplied by the VWAP on the date the Mandatory Default Amount is either (x)&nbsp;demanded or
otherwise due or (y)&nbsp;paid in full, whichever has a higher VWAP, and (ii)&nbsp;all other amounts,
costs, expenses and liquidated damages due in respect of this Debenture.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Monthly Conversion Period</U>&#148; shall have the meaning set forth in Section 6(b)
hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Monthly Conversion Price</U>&#148; shall have the meaning set forth in Section 6(b)
hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Monthly Redemption</U>&#148; means the redemption of this Debenture pursuant to Section
6(b) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Monthly Redemption Amount</U>&#148; means, as to a Monthly Redemption,
$&#95;&#95;&#95;<SUP style="font-size: 85%; vertical-align: text-top">1</SUP>, plus accrued but unpaid interest, liquidated damages and any other
amounts then owing to the Holder in respect of this Debenture.
</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"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>1/24<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> of the original principal amount of
this Debenture.</TD>
</TR>

</TABLE>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Monthly Redemption Date</U>&#148; means the 1st of each month, commencing November&nbsp;1,
2008, and terminating upon the full redemption of $<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><SUP style="font-size: 85%; vertical-align: text-top">2</SUP> principal amount of
this Debenture.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Monthly Redemption Notice</U>&#148; shall have the meaning set forth in Section 6(b)
hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>New York Courts</U>&#148; shall have the meaning set forth in Section&nbsp;9(d).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Notice of Conversion</U>&#148; shall have the meaning set forth in Section&nbsp;4(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Optional Redemption</U>&#148; shall have the meaning set forth in Section&nbsp;6(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Optional Redemption Amount</U>&#148; means the sum of (i)&nbsp;115% of the then outstanding
principal amount of the Debenture, (ii)&nbsp;accrued but unpaid interest and (iii)&nbsp;all liquidated
damages and other amounts due in respect of the Debenture.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Optional Redemption Date</U>&#148; shall have the meaning set forth in Section&nbsp;6(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Optional Redemption Notice</U>&#148; shall have the meaning set forth in Section&nbsp;6(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Optional Redemption Notice Date</U>&#148; shall have the meaning set forth in Section
6(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Original Issue Date</U>&#148; means the date of the first issuance of the Debentures,
regardless of any transfers of any Debenture and regardless of the number of instruments
which may be issued to evidence such Debentures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Permitted Indebtedness</U>&#148; means (a)&nbsp;the indebtedness evidenced by the
Debentures, (b)&nbsp;the Indebtedness existing on the Original Issue Date and set forth on
<U>Schedule&nbsp;3.1(aa)</U> attached to the Purchase Agreement, (c)&nbsp;lease obligations and
purchase money indebtedness of up to $250,000, in the aggregate, incurred in connection with
the acquisition of capital assets and lease obligations with respect to newly acquired or
leased assets and (d)&nbsp;indebtedness that (i)&nbsp;is expressly subordinate to the Debentures
pursuant to a written subordination agreement with the Purchasers that is acceptable to each
Purchaser in its sole and absolute discretion and (ii)&nbsp;matures at a date later than the
Maturity Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Permitted Lien</U>&#148; means the individual and collective reference to the
following: (a)&nbsp;Liens for taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges or levies being contested
in good faith and by appropriate proceedings for which adequate reserves (in the good faith
judgment of the management of the Company) have been established in accordance with GAAP;
(b)&nbsp;Liens imposed by law which were incurred in the ordinary course of the
</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"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>50% of the original principal amount of this Debenture.</TD>
</TR>

</TABLE>


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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; margin-left: 2%">Company&#146;s business, such as carriers&#146;, warehousemen&#146;s and mechanics&#146; Liens, statutory
landlords&#146; Liens, and other similar Liens arising in the ordinary course of the Company&#146;s
business, and which (x)&nbsp;do not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use thereof in the operation of
the business of the Company and its consolidated Subsidiaries or (y)&nbsp;are being contested in
good faith by appropriate proceedings, which proceedings have the effect of preventing for
the foreseeable future the forfeiture or sale of the property or asset subject to such Lien;
(c)&nbsp;Liens incurred in connection with Permitted Indebtedness under clauses (a), (b)&nbsp;and (c)
thereunder, provided that such Liens are not secured by assets of the Company or its
Subsidiaries other than the assets so acquired or leased; and (d)&nbsp;Liens described in
Schedule&nbsp;3.1(aa) to the Purchase Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Pre-Redemption Conversion Shares</U>&#148; shall have the meaning set forth in Section
6(b) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Purchase Agreement</U>&#148; means the Securities Purchase Agreement, dated as of
October&nbsp;19, 2007, among the Company and the original Holders, as amended, modified or
supplemented from time to time in accordance with its terms.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Registration Rights Agreement</U>&#148; means the Registration Rights Agreement, dated
as of the date of the Purchase Agreement, among the Company and the original Holders, as
amended, modified or supplemented from time to time in accordance with its terms.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Registration Statement</U>&#148; means a registration statement that registers the
resale of all Conversion Shares and Interest Conversion Shares of the Holder, names the
Holder as a &#147;selling stockholder&#148; therein, and meets the requirements of the Registration
Rights Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Securities Act</U>&#148; means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Share Delivery Date</U>&#148; shall have the meaning set forth in Section&nbsp;4(d).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Shareholder Approval</U>&#148; shall have the meaning set forth in the Purchase
Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsidiary</U>&#148; shall have the meaning set forth in the Purchase Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Threshold Period</U>&#148; shall have the meaning set forth in Section&nbsp;6(d).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Trading Day</U>&#148; means a day on which the principal Trading Market is open for
business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Trading Market</U>&#148; means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American Stock
</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; margin-left: 2%">Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, or the New York Stock Exchange.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Transaction Documents</U>&#148; shall have the meaning set forth in the Purchase
Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>VWAP</U>&#148; means, for any date, the price determined by the first of the following
clauses that applies: (a)&nbsp;if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted for
trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time)); (b)&nbsp; if the OTC Bulletin Board is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c)&nbsp;if the Common Stock is not then quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in
the &#147;Pink Sheets&#148; published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (d)&nbsp;in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith by the Holder
and reasonably acceptable to the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><U>Section&nbsp;2</U>. <U>Interest, Extension of Maturity Date</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <U>Interest Rate</U>. The rate of interest on the outstanding principal amount of
this Debenture shall be the greater of (i)&nbsp;LIBOR for the applicable Interest Period plus 4%
and (ii)&nbsp;10%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>Payment of Interest in Cash or Kind</U>. The Company shall pay interest to the
Holder on the aggregate unconverted and then outstanding principal amount of this Debenture
at the rate per annum equal to the greater of (i)&nbsp;LIBOR for the applicable Interest Period
plus 4% and (ii)&nbsp;10%, or such lesser rate as shall be the highest rate permitted by
applicable law, payable quarterly on January&nbsp;1, April&nbsp;1, July 1 and October&nbsp;1, beginning on
the first such date after the Original Issue Date, on each Monthly Redemption Date (as to
that principal amount then being redeemed), on each Conversion Date (as to that principal
amount then being converted), on each Optional Redemption Date (as to that principal amount
then being redeemed) and on the Maturity Date (each such date, an &#147;<U>Interest Payment
Date</U>&#148;) (if any Interest Payment Date is not a Business Day, then the applicable payment
shall be due on the next succeeding Business Day), in cash or, at the Company&#146;s option, in
duly authorized, validly issued, fully paid and non-assessable shares of Common Stock at the
Interest Conversion Rate (the dollar amount to be paid in shares, the &#147;<U>Interest Share
Amount</U>&#148;) or a combination thereof; <U>provided</U>, <U>however</U>, that payment in
shares of Common Stock may only occur if (i)&nbsp;all of the Equity Conditions have been met
(unless waived by the Holder in writing) during the 20 Trading Days immediately prior to the
applicable Interest Payment Date (the &#147;<U>Interest Notice Period</U>&#148;) and through and
including the date such shares of Common Stock are actually
</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; margin-left: 2%">issued to the Holder, (ii)&nbsp;the Company shall have given the Holder notice in accordance
with the notice requirements set forth below, and (iii)&nbsp;as to such Interest Payment Date,
prior to such Interest Notice Period (but not more than 5 Trading Days prior to the
commencement of such Interest Notice Period), the Company shall have delivered to the
Holder&#146;s account with The Depository Trust Company a number of shares of Common Stock to be
applied against such Interest Share Amount equal to the quotient of (x)&nbsp;the applicable
Interest Share Amount divided by (y)&nbsp;the Interest Conversion Rate assuming for such purposes
the Interest Payment Date is the 2<SUP style="font-size: 85%; vertical-align: text-top">nd</SUP> Trading prior to the Interest Notice Period
(the &#147;<U>Interest Conversion Shares</U>&#148;). Notwithstanding anything herein to the
contrary, until such time as the Company has obtained Shareholder Approval and it is deemed
effective, in no event shall the Company issue any Interest Conversion Shares hereunder to
the extent that such issuance of Interest Conversion Shares would exceed, in the aggregate,
503,967, together with any prior such issuances and issuances of Conversion Shares pursuant
to a Monthly Redemption in excess of the number otherwise issuable if the Monthly Conversion
Price was the Conversion Price (each an &#147;<U>Interest Shares Limited Issuance</U>&#148;). Upon
such Interest Shares Limited Issuance, the Company shall pay interest hereunder in cash
only.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <U>Company&#146;s Election to Pay Interest in Kind</U>. Subject to the terms and
conditions herein, the decision whether to pay interest hereunder in cash, shares of Common
Stock or a combination thereof shall be at the discretion of the Company. Prior to the
commencement of any Interest Notice Period, the Company shall deliver to the Holder a
written notice of its election to pay interest hereunder on the applicable Interest Payment
Date either in cash, shares of Common Stock or a combination thereof and the Interest Share
Amount as to the applicable Interest Payment Date, provided that the Company may indicate in
such notice that the election contained in such notice shall apply to future Interest
Payment Dates until revised by a subsequent notice. During any Interest Notice Period, the
Company&#146;s election (whether specific to an Interest Payment Date or continuous) shall be
irrevocable as to such Interest Payment Date. Subject to the aforementioned conditions,
failure to timely deliver such written notice to the Holder shall be deemed an election by
the Company to pay the interest on such Interest Payment Date in cash. At any time the
Company delivers a notice to the Holder of its election to pay the interest in shares of
Common Stock, the Company shall timely file a prospectus supplement pursuant to Rule&nbsp;424
disclosing such election. The aggregate number of shares of Common Stock otherwise issuable
to the Holder on an Interest Payment Date shall be reduced by the number of Interest
Conversion Shares previously issued to the Holder in connection with such Interest Payment
Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <U>Interest Calculations</U>. Interest shall be calculated on the basis of a
360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily
commencing on the Original Issue Date until payment in full of the outstanding principal,
together with all accrued and unpaid interest, liquidated damages and other amounts which
may become due hereunder, has been made. Payment of interest in shares of Common Stock
(other than the Interest Conversion Shares issued prior to an Interest Notice Period) shall
otherwise occur pursuant to Section&nbsp;4(d)(ii) herein and, solely for purposes of the payment
of interest in shares, the Interest Payment Date shall be deemed the Conversion
</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; margin-left: 2%">Date. Interest shall cease to accrue with respect to any principal amount converted,
provided that the Company actually delivers the Conversion Shares within the time period
required by Section&nbsp;4(d)(ii) herein. Interest hereunder will be paid to the Person in whose
name this Debenture is registered on the records of the Company regarding registration and
transfers of this Debenture (the &#147;<U>Debenture Register</U>&#148;). Except as otherwise provided
herein, if at any time the Company pays interest partially in cash and partially in shares
of Common Stock to the holders of the Debentures, then such payment of cash shall be
distributed ratably among the holders of the then-outstanding Debentures based on their (or
their predecessor&#146;s) initial purchases of Debentures pursuant to the Purchase Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <U>Late Fee</U>. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the
maximum rate permitted by applicable law (&#147;<U>Late Fees</U>&#148;) which shall accrue daily from
the date such interest is due hereunder through and including the date of actual payment in
full. Notwithstanding anything to the contrary contained herein, if on any Interest Payment
Date the Company has elected to pay accrued interest in the form of Common Stock but the
Company is not permitted to pay accrued interest in Common Stock because it fails to satisfy
the conditions for payment in Common Stock set forth in Section 2(a) herein, then, at the
option of the Holder, the Company, in lieu of delivering either shares of Common Stock
pursuant to this Section&nbsp;2 or paying the regularly scheduled interest payment in cash, shall
deliver, within three Trading Days of each applicable Interest Payment Date, an amount in
cash equal to the product of (x)&nbsp;the number of shares of Common Stock otherwise deliverable
to the Holder in connection with the payment of interest due on such Interest Payment Date
multiplied by (y)&nbsp;the highest VWAP during the period commencing on the Interest Payment Date
and ending on the Trading Day prior to the date such payment is actually made. If any
Interest Conversion Shares are issued to the Holder in connection with an Interest Payment
Date and are not applied against an Interest Share Amount, then the Holder shall promptly
return such excess shares to the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <U>Prepayment</U>. Except as otherwise set forth in this Debenture, the Company
may not prepay any portion of the principal amount of this Debenture without the prior
written consent of the Holder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) <U>Extension of Maturity Date</U>. Subject to the Company&#146;s prior right of Optional
Redemption as set forth in Section&nbsp;6(a), the Holder may, in its sole discretion, extend the
Maturity Date of this Debenture for a period of up to 3 additional years as elected by the
Holder in a written notice to the Company delivered prior to the original Maturity Date
(final possible Maturity Date being October&nbsp;19, 2012).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><U>Section&nbsp;3.</U> <U>Registration of Transfers and Exchanges</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <U>Different Denominations</U>. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations, as
</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; margin-left: 2%">requested by the Holder surrendering the same. No service charge will be payable for
such registration of exchange.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>Investment Representations</U>. This Debenture has been issued subject to
certain investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <U>Reliance on Debenture Register</U>. Prior to due presentment for transfer to the
Company of this Debenture, the Company and any agent of the Company may treat the Person in
whose name this Debenture is duly registered on the Debenture Register as the owner hereof
for the purpose of receiving payment as herein provided and for all other purposes, whether
or not this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><U>Section&nbsp;4.</U> <U>Conversion</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <U>Voluntary Conversion</U>. At any time after the Original Issue Date until this
Debenture is no longer outstanding, this Debenture shall be convertible, in whole or in
part, into shares of Common Stock at the option of the Holder, at any time and from time to
time (subject to the conversion limitations set forth in Section&nbsp;4(c) hereof). The Holder
shall effect conversions by delivering to the Company a Notice of Conversion, the form of
which is attached hereto as <U>Annex A</U> (a &#147;<U>Notice of Conversion</U>&#148;), specifying
therein the principal amount of this Debenture to be converted and the date on which such
conversion shall be effected (such date, the &#147;<U>Conversion Date</U>&#148;). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender this Debenture to the Company unless
the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon,
has been so converted. Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Debenture in an amount equal to the applicable
conversion. The Holder and the Company shall maintain records showing the principal
amount(s) converted and the date of such conversion(s). The Company may deliver an
objection to any Notice of Conversion within 1 Business Day of delivery of such Notice of
Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. <B>The Holder, and any assignee
by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of
this paragraph, following conversion of a portion of this Debenture, the unpaid and
unconverted principal amount of this Debenture may be less than the amount stated on the
face hereof.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>Conversion Price</U>. The conversion price in effect on any Conversion Date
shall be equal to <B>$2.50, </B>subject to adjustment herein (the &#147;<U>Conversion Price</U>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <U>Conversion Limitations</U>.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <U>Issuance Limitations</U>. Notwithstanding anything herein to the
contrary, if the Company has not obtained Shareholder Approval, then the Company may
not issue, upon conversion of this Debenture or the issuance of shares of Common
Stock for the payment of principal, interest or liquidated damages, a number of
shares of Common Stock which, when aggregated with any shares of Common Stock issued
on or after the Original Issue Date and prior to such Conversion Date (A)&nbsp;in
connection with the conversion of any Debentures issued pursuant to the Purchase
Agreement or as payment of principal, interest or liquidated damages, would exceed
2,014,862 shares of Common Stock (subject to adjustment for forward and reverse
stock splits, recapitalizations and the like) (such number of shares, the
&#147;<U>Issuable Maximum</U>&#148;). Each Holder shall be entitled to a portion of the
Issuable Maximum equal to the quotient obtained by dividing (x)&nbsp;the original
principal amount of the Holder&#146;s Debenture by (y)&nbsp;the aggregate original principal
amount of all Debentures issued on the Original Issue Date to all Holders. In
addition, each Holder may allocate its pro-rata portion of the Issuable Maximum
among Debentures and Warrants held by it in its sole discretion. Such portion shall
be adjusted upward ratably in the event a Holder no longer holds any Debentures or
Warrants and the amount of shares issued to the Holder pursuant to the Holder&#146;s
Debentures and Warrants was less than the Holder&#146;s pro-rata share of the Issuable
Maximum.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <U>Holder&#146;s Restriction on Conversion</U>. The Company shall not effect
any conversion of this Debenture, and a Holder shall not have the right to convert
any portion of this Debenture, to the extent that after giving effect to the
conversion set forth on the applicable Notice of Conversion, the Holder (together
with the Holder&#146;s Affiliates, and any other person or entity acting as a group
together with the Holder or any of the Holder&#146;s Affiliates) would beneficially own
in excess of the Beneficial Ownership Limitation (as defined below).&nbsp; For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Debenture with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which are
issuable upon (A)&nbsp;conversion of the remaining, unconverted principal amount of this
Debenture beneficially owned by the Holder or any of its Affiliates and (B)&nbsp;exercise
or conversion of the unexercised or unconverted portion of any other securities of
the Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, any other Debentures or
the Warrants) beneficially owned by the Holder or any of its Affiliates.&nbsp; Except as
set forth in the preceding sentence, for purposes of this Section&nbsp;4(c)(ii),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. To the extent
that the limitation contained in this Section&nbsp;4(c)(ii) applies, the determination of
whether this Debenture is convertible (in relation to other securities owned by the
Holder together with any Affiliates) and of which principal amount of this Debenture
is convertible shall be in the sole discretion of the Holder, and the submission of
a
</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; margin-left: 4%">Notice of Conversion shall be deemed to be the Holder&#146;s determination of
whether this Debenture may be converted (in relation to other securities owned by
the Holder together with any Affiliates) and which principal amount of this
Debenture is convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, the Holder will be deemed to
represent to the Company each time it delivers a Notice of Conversion that such
Notice of Conversion has not violated the restrictions set forth in this paragraph
and the Company shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. For purposes of this Section
4(c)(ii), in determining the number of outstanding shares of Common Stock, the
Holder may rely on the number of outstanding shares of Common Stock as stated in the
most recent of the following: (A)&nbsp;the Company&#146;s most recent periodic or annual
report, as the case may be; (B)&nbsp;a more recent public announcement by the Company; or
(C)&nbsp;a more recent notice by the Company or the Company&#146;s transfer agent setting
forth the number of shares of Common Stock outstanding.&nbsp; Upon the written or oral
request of a Holder, the Company shall within two Trading Days confirm orally and in
writing to the Holder the number of shares of Common Stock then outstanding.&nbsp; In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company, including
this Debenture, by the Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The &#147;<U>Beneficial
Ownership Limitation</U>&#148; shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Debenture held by the Holder. The Holder,
upon not less than 61&nbsp;days&#146; prior notice to the Company, may increase or decrease
the Beneficial Ownership Limitation provisions of this Section&nbsp;4(c)(ii), provided
that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon conversion of this Debenture held by the
Holder and the provisions of this Section&nbsp;4(c)(ii) shall continue to apply. Any
such increase or decrease will not be effective until the 61st day after such notice
is delivered to the Company. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of this
Section&nbsp;4(c)(ii) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation herein
contained or to make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this paragraph shall apply
to a successor holder of this Debenture.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">d) <U>Mechanics of Conversion</U>.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <U>Conversion Shares Issuable Upon Conversion of Principal Amount</U>. The
number of Conversion Shares issuable upon a conversion hereunder shall be determined
by the quotient obtained by dividing (x)&nbsp;the outstanding principal amount of this
Debenture to be converted by (y)&nbsp;the Conversion Price.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <U>Delivery of Certificate Upon Conversion</U>. Not later than three
Trading Days after each Conversion Date (the &#147;<U>Share Delivery Date</U>&#148;), the
Company shall deliver, or cause to be delivered, to the Holder (A)&nbsp;a certificate or
certificates representing the Conversion Shares which, on or after the Effective
Date, shall be free of restrictive legends and trading restrictions (other than
those which may then be required by the Purchase Agreement) representing the number
of Conversion Shares being acquired upon the conversion of this Debenture
(including, if the Company has given continuous notice pursuant to Section 2(b) for
payment of interest in shares of Common Stock at least 20 Trading Days prior to the
date on which the Conversion Notice is delivered to the Company, shares of Common
Stock representing the payment of accrued interest otherwise determined pursuant to
Section 2(a) but assuming that the Interest Notice Period is the 20 Trading Days
period immediately prior to the date on which the Conversion Notice is delivered to
the Company and excluding for such issuance the condition that the Company deliver
Interest Conversion Shares as to such interest payment) and (B)&nbsp;a bank check in the
amount of accrued and unpaid interest (if the Company has elected or is required to
pay accrued interest in cash). On or after the Effective Date, the Company shall use
its best efforts to deliver any certificate or certificates required to be delivered
by the Company under this Section&nbsp;4 electronically through the Depository Trust
Company or another established clearing corporation performing similar functions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. <U>Failure to Deliver Certificates</U>. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed by
the applicable Holder by the third Trading Day after the Conversion Date, the Holder
shall be entitled to elect by written notice to the Company at any time on or before
its receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Debenture
delivered to the Company and the Holder shall promptly return to the Company the
Common Stock certificates representing the principal amount of this Debenture
unsuccessfully tendered for conversion to the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. <U>Obligation Absolute; Partial Liquidated Damages</U>. The Company&#146;s
obligations to issue and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any waiver
or consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the Holder
or any other Person of any obligation to the Company or any
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such obligation
of the Company to the Holder in connection with the issuance of such Conversion
Shares; <U>provided</U>, <U>however</U>, that such delivery shall not operate as a
waiver by the Company of any such action the Company may have against the Holder.
In the event the Holder of this Debenture shall elect to convert any or all of the
outstanding principal amount hereof, the Company may not refuse conversion based on
any claim that the Holder or anyone associated or affiliated with the Holder has
been engaged in any violation of law, agreement or for any other reason, unless an
injunction from a court, on notice to Holder, restraining and or enjoining
conversion of all or part of this Debenture shall have been sought and obtained, and
the Company posts a surety bond for the benefit of the Holder in the amount of 150%
of the outstanding principal amount of this Debenture, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall be
payable to the Holder to the extent it obtains judgment. In the absence of such
injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon
a properly noticed conversion. If the Company fails for any reason to deliver to
the Holder such certificate or certificates pursuant to Section&nbsp;4(d)(ii) by the
second Trading Day after the Share Delivery Date, the Company shall pay to the
Holder, in cash, as liquidated damages and not as a penalty, for each $1000 of
principal amount being converted, $10 per Trading Day (increasing to $20 per Trading
Day on the fifth Trading Day after such liquidated damages begin to accrue) for each
Trading Day after such second Trading Day after the Share Delivery Date until such
certificates are delivered. Nothing herein shall limit a Holder&#146;s right to pursue
actual damages or declare an Event of Default pursuant to Section&nbsp;8 hereof for the
Company&#146;s failure to deliver Conversion Shares within the period specified herein
and the Holder shall have the right to pursue all remedies available to it
hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any other Section
hereof or under applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v. <U>Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion</U>. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section&nbsp;4(d)(ii), and if after
such Share Delivery Date the Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise), or the Holder&#146;s brokerage firm
otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by
the Holder of the Conversion Shares which the Holder was entitled to receive upon
the conversion relating to such Share Delivery Date (a &#147;<U>Buy-In</U>&#148;), then the
Company shall (A)&nbsp;pay in cash to the Holder (in addition to any other remedies
available to or elected by the Holder) the amount by which (x)&nbsp;the Holder&#146;s total
purchase price (including any brokerage commissions) for the Common Stock so
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">purchased exceeds (y)&nbsp;the product of (1)&nbsp;the aggregate number of shares of
Common Stock that the Holder was entitled to receive from the conversion at issue
multiplied by (2)&nbsp;the actual sale price at which the sell order giving rise to such
purchase obligation was executed (including any brokerage commissions) and (B)&nbsp;at
the option of the Holder, either reissue (if surrendered) this Debenture in a
principal amount equal to the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock that would have been
issued if the Company had timely complied with its delivery requirements under
Section&nbsp;4(d)(ii). For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion
of this Debenture with respect to which the actual sale price of the Conversion
Shares (including any brokerage commissions) giving rise to such purchase obligation
was a total of $10,000 under clause (A)&nbsp;of the immediately preceding sentence, the
Company shall be required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of the Company, evidence of the amount of such loss.
Nothing herein shall limit a Holder&#146;s right to pursue any other remedies available
to it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company&#146;s failure
to timely deliver certificates representing shares of Common Stock upon conversion
of this Debenture as required pursuant to the terms hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vi. <U>Reservation of Shares Issuable Upon Conversion</U>. The Company
covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock for the sole purpose of issuance upon conversion
of this Debenture and payment of interest on this Debenture, each as herein
provided, free from preemptive rights or any other actual contingent purchase rights
of Persons other than the Holder (and the other holders of the Debentures), not less
than such aggregate number of shares of the Common Stock as shall (subject to the
terms and conditions set forth in the Purchase Agreement) be issuable (taking into
account the adjustments of Section&nbsp;5) upon the conversion of the outstanding
principal amount of this Debenture and payment of interest hereunder. The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly authorized, validly issued, fully paid and nonassessable and, if the
Registration Statement is then effective under the Securities Act, shall be
registered for public sale in accordance with such Registration Statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vii. <U>Fractional Shares</U>. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this Debenture. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon such
conversion, the Company shall at its election, either pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;viii. <U>Transfer Taxes</U>. The issuance of certificates for shares of the
Common Stock on conversion of this Debenture shall be made without charge to the
Holder hereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificates, provided that the Company
shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a
name other than that of the Holder of this Debenture and the Company shall not be
required to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax has
been paid.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><U>Section&nbsp;5</U>. <U>Certain Adjustments</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <U>Stock Dividends and Stock Splits</U>. If the Company, at any time while this
Debenture is outstanding: (A)&nbsp;pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Common Stock on shares of Common Stock or any Common
Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon conversion of, or payment of interest on, the Debentures);
(B)&nbsp;subdivides outstanding shares of Common Stock into a larger number of shares; (C)
combines (including by way of a reverse stock split) outstanding shares of Common Stock into
a smaller number of shares; or (D)&nbsp;issues, in the event of a reclassification of shares of
the Common Stock, any shares of capital stock of the Company, then the Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding any treasury shares of the Company) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination or
re-classification.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>Subsequent Equity Sales</U>. If, at any time while this Debenture is
outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to
purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or
announces any sale, grant or any option to purchase or other disposition), any Common Stock
or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an
effective price per share that is lower than the then Conversion Price (such lower price,
the &#147;<U>Base Conversion Price</U>&#148; and such issuances, collectively, a &#147;<U>Dilutive
Issuance</U>&#148;) (if the holder of the Common Stock or Common Stock Equivalents so issued
shall at any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to warrants, options
or rights per share which are issued in connection with such issuance, be entitled to
receive shares of Common Stock at an effective price per share that is lower than 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; margin-left: 2%">Conversion Price, such issuance shall be deemed to have occurred for less than the
Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be
reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such
Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no
adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. If the
Company enters into a Variable Rate Transaction, despite the prohibition set forth in the
Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock
Equivalents at the lowest possible conversion price at which such securities may be
converted or exercised. The Company shall notify the Holder in writing, no later than 1
Business Day following the issuance of any Common Stock or Common Stock Equivalents subject
to this Section&nbsp;5(b), indicating therein the applicable issuance price, or applicable reset
price, exchange price, conversion price and other pricing terms (such notice, the
&#147;<U>Dilutive Issuance Notice</U>&#148;). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section&nbsp;5(b), upon the
occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of
Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive
Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in
the Notice of Conversion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <U>Subsequent Rights Offerings</U>. If the Company, at any time while the
Debenture is outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common
Stock at a price per share that is lower than the VWAP on the record date referenced below,
then the Conversion Price shall be multiplied by a fraction of which the denominator shall
be the number of shares of the Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the number of shares of the
Common Stock outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares issued (assuming
delivery to the Company in full of all consideration payable upon exercise of such rights,
options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights, options or
warrants.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <U>Pro Rata Distributions</U>. If the Company, at any time while this Debenture is
outstanding, distributes to all holders of Common Stock (and not to the Holders) evidences
of its indebtedness or assets (including cash and cash dividends) or rights or warrants to
subscribe for or purchase any security (other than the Common Stock, which shall be subject
to Section&nbsp;5(b)), then in each such case the Conversion Price shall be adjusted by
multiplying such Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a fraction of which
the denominator shall be the VWAP determined as of the record date mentioned above, and of
which the numerator shall be such VWAP on such record date less the then fair market value
at such record date of the portion of such assets or
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">evidence of indebtedness so distributed applicable to 1 outstanding share of the Common
Stock as determined by the Board of Directors of the Company in good faith. In either case
the adjustments shall be described in a statement delivered to the Holder describing the
portion of assets or evidences of indebtedness so distributed or such subscription rights
applicable to 1 share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record date mentioned
above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <U>Fundamental Transaction</U>. If, at any time while this Debenture is
outstanding, (A)&nbsp;the Company effects any merger or consolidation of the Company with or into
another Person, (B)&nbsp;the Company effects any sale of all or substantially all of its assets
in one transaction or a series of related transactions, (C)&nbsp;any tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other securities, cash or
property, or (D)&nbsp;the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a &#147;<U>Fundamental
Transaction</U>&#148;), then, upon any subsequent conversion of this Debenture, the Holder shall
have the right to receive, for each Conversion Share that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of 1 share of Common Stock (the &#147;<U>Alternate
Consideration</U>&#148;). For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of 1 share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price
among the Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common Stock are
given any choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any successor
to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder
a new debenture consistent with the foregoing provisions and evidencing the Holder&#146;s right
to convert such debenture into Alternate Consideration. The terms of any agreement pursuant
to which a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 5(e) and
insuring that this Debenture (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <U>Calculations</U>. All calculations under this Section&nbsp;5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section&nbsp;5, the number of shares of Common Stock deemed to be issued and outstanding
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">as of a given date shall be the sum of the number of shares of Common Stock (excluding
any treasury shares of the Company) issued and outstanding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">g) <U>Notice to the Holder</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <U>Adjustment to Conversion Price</U>. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section&nbsp;5, the Company shall promptly
deliver to each Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <U>Notice to Allow Conversion by Holder</U>. If (A)&nbsp;the Company shall
declare a dividend (or any other distribution in whatever form) on the Common Stock,
(B)&nbsp;the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C)&nbsp;the Company shall authorize the granting to all
holders of the Common Stock of rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights, (D)&nbsp;the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the assets
of the Company, of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property or (E)&nbsp;the Company shall authorize
the voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be filed at each
office or agency maintained for the purpose of conversion of this Debenture, and
shall cause to be delivered to the Holder at its last address as it shall appear
upon the Debenture Register, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x)&nbsp;the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of
which the holders of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y)&nbsp;the date
on which such reclassification, consolidation, merger, sale, transfer or share
exchange is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange,
provided that the failure to deliver such notice or any defect therein or in the
delivery thereof shall not affect the validity of the corporate action required to
be specified in such notice. The Holder is entitled to convert this Debenture
during the 20-day period commencing on the date of such notice through the effective
date of the event triggering such notice.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><U>Section&nbsp;6</U>. <U>Redemption and Forced Conversion</U>.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <U>Optional Redemption at Election of Company</U>. Subject to the provisions of
this Section&nbsp;6, at any time, the Company may deliver a notice to the Holder (an
&#147;<U>Optional Redemption Notice</U>&#148; and the date such notice is deemed delivered hereunder,
the &#147;<U>Optional Redemption Notice Date</U>&#148;) of its irrevocable election to redeem some or
all of the then outstanding principal amount of this Debenture for cash in an amount equal
to the Optional Redemption Amount on the 20<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Trading Day following the Optional
Redemption Notice Date (such date, the &#147;<U>Optional Redemption Date</U>&#148; and such
redemption, the &#147;<U>Optional Redemption</U>&#148;). The Optional Redemption Amount is payable
in full on the Optional Redemption Date. The Company may only effect an Optional Redemption
if each of the Equity Conditions shall have been met (unless waived in writing by the
Holder) on each Trading Day during the period commencing on the Optional Redemption Notice
Date through to the Optional Redemption Date and through and including the date payment of
the Optional Redemption Amount is actually made in full. If any of the Equity Conditions
shall cease to be satisfied at any time during the 20 Trading Day period, then the Holder
may elect to nullify the Optional Redemption Notice by notice to the Company within 3
Trading Days after the first day on which any such Equity Condition has not been met
(provided that if, by a provision of the Transaction Documents, the Company is obligated to
notify the Holder of the non-existence of an Equity Condition, such notice period shall be
extended to the third Trading Day after proper notice from the Company) in which case the
Optional Redemption Notice shall be null and void, <U>ab</U> <U>initio</U>. The Company
covenants and agrees that it will honor all Notices of Conversion tendered from the time of
delivery of the Optional Redemption Notice through the date all amounts owing thereon are
due and paid in full.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>Monthly Redemption</U>. On each Monthly Redemption Date, the Company shall
redeem the Monthly Redemption Amount (the &#147;<U>Monthly Redemption</U>&#148;). The Monthly
Redemption Amount payable on each Monthly Redemption Date shall be paid in cash;
<U>provided</U>, <U>however</U>, as to any Monthly Redemption and upon 30 Trading Days&#146;
prior written irrevocable notice (the &#147;<U>Monthly Redemption Notice</U>&#148;), in lieu of a
cash redemption payment the Company may elect to pay all or part of a Monthly Redemption
Amount in Conversion Shares based on a conversion price equal to the lesser of (i)&nbsp;the then
Conversion Price and (ii)&nbsp;90% of the average of the VWAPs for the 20 consecutive Trading
Days ending on the Trading Day that is immediately prior to the applicable Monthly
Redemption Date (subject to adjustment for any stock dividend, stock split, stock
combination or other similar event affecting the Common Stock during such 20 Trading Day
period) (the price calculated during the 20 Trading Day period immediately prior to the
Monthly Redemption Date, the &#147;<U>Monthly Conversion Price</U>&#148; and such 20 Trading Day
period, the &#147;<U>Monthly Conversion Period</U>&#148;); <U>provided</U>, <U>further</U>, that
the Company may not pay the Monthly Redemption Amount in Conversion Shares unless (y)&nbsp;from
the date the Holder receives the duly delivered Monthly Redemption Notice through and until
the date such Monthly Redemption is paid in full, the Equity Conditions have been satisfied,
unless waived in writing by the Holder, and (z)&nbsp;as to such Monthly Redemption, prior to such
Monthly Conversion Period (but not more than 5 Trading Days prior to the commencement of the
Monthly Conversion Period), the Company shall have delivered to the Holder&#146;s account with
The Depository Trust Company a number of
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">shares of Common Stock to be applied against such Monthly Redemption Amount equal to
the quotient of (x)&nbsp;the applicable Monthly Redemption Amount divided by (y)&nbsp;the lesser of
(1)&nbsp;the then Conversion Price and (2)&nbsp;the Monthly Conversion Price assuming for such
purposes the Monthly Conversion Period ends on the 2<SUP style="font-size: 85%; vertical-align: text-top">nd</SUP> Trading Day immediately
prior to the date of the applicable Monthly Redemption Notice (the &#147;<U>Pre-Redemption
Conversion Shares</U>&#148;). The Holder may convert, pursuant to Section&nbsp;4(a), any principal
amount of this Debenture subject to a Monthly Redemption at any time prior to the date that
the Monthly Redemption Amount, plus accrued but unpaid interest, liquidated damages and any
other amounts then owing to the Holder are due and paid in full. Unless otherwise indicated
by the Holder in the applicable Notice of Conversion, any principal amount of this Debenture
converted during the applicable Monthly Conversion Period until the date the Monthly
Redemption Amount is paid in full shall be first applied to the principal amount subject to
the Monthly Redemption Amount payable in cash and then to the Monthly Redemption Amount
payable in Conversion Shares. Any principal amount of this Debenture converted during the
applicable Monthly Conversion Period in excess of the Monthly Redemption Amount shall be
applied against the last principal amount of this Debenture scheduled to be redeemed
hereunder, in reverse time order from the Maturity Date; <U>provided</U>, <U>however</U>,
if any such conversion is applied against such Monthly Redemption Amount, the Pre-Redemption
Conversion Shares, if any were issued in connection with such Monthly Redemption or were not
already applied to such conversions, shall be first applied against such conversion. The
Company covenants and agrees that it will honor all Notice of Conversions tendered up until
such amounts are paid in full. The Company&#146;s determination to pay a Monthly Redemption in
cash, shares of Common Stock or a combination thereof shall be applied ratably to all of the
holders of the then outstanding Debentures based on their (or their predecessor&#146;s) initial
purchases of Debentures pursuant to the Purchase Agreement. At any time the Company
delivers a notice to the Holder of its election to pay the Monthly Redemption Amount in
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of Common Stock, the Company shall file a prospectus supplement pursuant to Rule&nbsp;424
disclosing such election. Notwithstanding anything herein to the contrary, until such time
as the Company has obtained Shareholder Approval and it is deemed effective, in no event
shall the Company issue any Conversion Shares upon a Monthly Redemption hereunder to the
extent that such issuance of Conversion Shares would exceed, in the aggregate, 503,967,
together with any prior such issuances and issuances of Conversion Shares pursuant to a
Monthly Redemption in excess of the number otherwise issuable if the Monthly Conversion
Price was the Conversion Price (each a &#147;<U>Monthly Redemption Limited Issuance</U>&#148;). Upon
such Monthly Redemption Limited Issuance, the Company shall pay interest hereunder in cash
only.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <U>Redemption Procedure</U>. The payment of cash pursuant to an Optional
Redemption shall be payable on the Optional Redemption Date. If any portion of the payment
pursuant to an Optional Redemption shall not be paid by the Company by the applicable due
date, interest shall accrue thereon at an interest rate equal to the lesser of 18% per annum
or the maximum rate permitted by applicable law until such amount is paid in full.
Notwithstanding anything herein contained to the contrary, if any portion of the Optional
Redemption Amount remains unpaid after such date, the Holder may elect,
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">by written notice to the Company given at any time thereafter, to&nbsp;invalidate such
Optional Redemption, <U>ab</U> <U>initio</U>, and, with respect to the Company&#146;s failure
to honor the Optional Redemption, the Company shall have no further right to exercise such
Optional Redemption. The payment of cash or Common Stock pursuant to a Monthly Redemption
shall be payable on the Monthly Redemption Date. If any portion of the payment pursuant to
a Monthly Redemption shall not be paid by the Company by the applicable due date, interest
shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum
rate permitted by applicable law until such amount is paid in full. Notwithstanding anything
to the contrary in this Section&nbsp;6, the Company&#146;s determination to redeem in cash or its
elections under Section 6(b) shall be applied ratably among the Holders of Debentures. The
Holder may elect to convert the outstanding principal amount of the Debenture pursuant to
Section&nbsp;4 prior to actual payment in cash for any redemption under this Section&nbsp;6 by the
delivery of a Notice of Conversion to the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <U>Forced Conversion</U>. Notwithstanding anything herein to the contrary, if (i)
after the 12&nbsp;month anniversary of the Effective Date, the VWAP for each of any 20
consecutive Trading Days, which period shall have commenced only after the Effective Date
(as to such Forced Conversion, such period the &#147;<U>Threshold Period</U>&#148;), exceeds <B>$7.50</B>,
subject to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after the date of
this Agreement, or (ii)&nbsp;at least 20 Trading Days (but not more than 45) prior to October&nbsp;19,
2012 (assuming the Maturity Date was extended by the Holder pursuant to Section 2(g) (as to
such Forced Conversion, the 20 Trading Day period immediately prior to such date, the
&#147;<U>Threshold Period</U>&#148;) (&#147;<U>Maturity Date Forced Conversion</U>&#148;), the Company may,
within 1 Trading Day after the end of any such Threshold Period as to clause (i)&nbsp;and within
the time period prescribed above as to clause (ii), deliver a written notice to the Holder
(a &#147;<U>Forced Conversion Notice</U>&#148; and the date such notice is delivered to the Holder,
the &#147;<U>Forced Conversion Notice Date</U>&#148;) to cause the Holder to convert all or part of
the then outstanding principal amount of this Debenture plus, if so specified in the Forced
Conversion Notice, accrued but unpaid interest, liquidated damages and other amounts owing
to the Holder under this Debenture at, if pursuant to clause (i), the Conversion Price, and
if pursuant to clause (ii), 90% of the average of the VWAPs during the Threshold Period, it
being agreed that the &#147;Conversion Date&#148; for purposes of Section&nbsp;4 shall be deemed to occur
on, as to clause (i), the third Trading Day following the Forced Conversion Notice Date and
as to clause (ii), October&nbsp;19, 2012 (such date, the &#147;<U>Forced Conversion Date</U>&#148;). The
Company may not deliver a Forced Conversion Notice, and any Forced Conversion Notice
delivered by the Company shall not be effective, unless all of the Equity Conditions are met
(unless waived in writing by the Holder) on each Trading Day occurring during the applicable
Threshold Period through and including the later of the Forced Conversion Date and the
Trading Day after the date such Conversion Shares pursuant to such conversion are delivered
to the Holder. Any Forced Conversion shall be applied ratably to all Holders based on their
initial purchases of Debentures pursuant to the Purchase Agreement, provided that any
voluntary conversions by a Holder shall be applied against the Holder&#146;s pro rata allocation,
thereby decreasing the aggregate amount forcibly converted hereunder if only a portion of
this Debenture is
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">forcibly converted. For purposes of clarification, a Forced Conversion shall be
subject to all of the provisions of Section&nbsp;4, including, without limitation, the provision
requiring payment of liquidated damages and limitations on conversions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;7</U>. <U>Negative Covenants</U>. As long as any portion of this Debenture
remains outstanding, unless the holders of at least 67% in principal amount of the then outstanding
Debentures shall have otherwise given prior written consent, the Company shall not, and shall not
permit any of its subsidiaries (whether or not a Subsidiary on the Original Issue Date) to,
directly or indirectly:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
suffer to exist any indebtedness for borrowed money of any kind, including but not limited
to, a guarantee, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any
Liens of any kind, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) amend its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects any rights of
the Holder;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a
<U>de</U> <U>minimis</U> number of shares of its Common Stock or Common Stock Equivalents
other than as to (a)&nbsp;the Conversion Shares or Warrant Shares as permitted or required under
the Transaction Documents, (b)&nbsp;repurchases of Common Stock or Common Stock Equivalents of
departing officers and directors of the Company, provided that such repurchases shall not
exceed an aggregate of $100,000 for all officers and directors during the term of this
Debenture, and (c)&nbsp;cancellation of Common Stock in satisfaction of withholding tax
obligations on grants of restricted stock under the Company&#146;s 2007 Equity Incentive Plan;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) repay, repurchase or offer to repay, repurchase or otherwise acquire any
Indebtedness, other than the Debentures if on a pro-rata basis, other than regularly
scheduled principal and interest payments as such terms are in effect as of the Original
Issue Date;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) pay cash dividends or distributions on any equity securities of the Company, except
with respect to cash dividends payable pursuant to 160,000 shares of the Company&#146;s 7% Series
A Convertible Preferred Stock outstanding as of the Original Issue Date;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) enter into any transaction with any Affiliate of the Company which would be required
to be disclosed in any public filing with the Commission, unless such
</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; margin-left: 2%">transaction is made on an arm&#146;s-length basis and expressly approved by a majority of
the disinterested directors of the Company (even if less than a quorum otherwise required
for board approval); or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h) enter into any agreement with respect to any of the foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><U>Section&nbsp;8</U>. <U>Events of Default</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) &#147;<U>Event of Default</U>&#148; means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree or order of any court,
or any order, rule or regulation of any administrative or governmental body):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. any default in the payment of (A)&nbsp;the principal amount of any Debenture or
(B)&nbsp;interest, liquidated damages and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise) which default,
solely in the case of an interest payment or other default under clause (B)&nbsp;above,
is not cured within 3 Trading Days;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. the Company shall fail to observe or perform any other covenant or
agreement contained in the Debentures (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion, which
breach is addressed in clause (xi)&nbsp;below) which failure is not cured, if possible to
cure, within the earlier to occur of (A)&nbsp;5 Trading Days after notice of such failure
sent by the Holder or by any other Holder and (B)&nbsp;10 Trading Days after the Company
has become or should have become aware of such failure;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under (A)
any of the Transaction Documents or (B)&nbsp;any other material agreement, lease,
document or instrument to which the Company or any Subsidiary is obligated (and not
covered by clause (vi)&nbsp;below), which default could reasonably be expected to have a
Material Adverse Effect;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. any representation or warranty made in this Debenture, any other
Transaction Documents, any written statement pursuant hereto or thereto or any other
report, financial statement or certificate made or delivered to the Holder or any
other Holder shall be untrue or incorrect in any material respect as of the date
when made or deemed made;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v. the Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vi. the Company or any Subsidiary shall default on any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there may
be secured or evidenced, any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement that (a)&nbsp;involves an obligation greater
than $150,000, whether such indebtedness now exists or shall hereafter be created,
and (b)&nbsp;results in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vii. the Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume listing or quotation
for trading thereon within five Trading Days;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;viii. the Company shall be a party to any Change of Control Transaction or
Fundamental Transaction or shall agree to sell or dispose of all or in excess of 40%
of its assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ix. the Initial Registration Statement (as defined in the Registration Rights
Agreement) shall not have been declared effective by the Commission on or prior to
the 270<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> calendar day after the Closing Date;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;x. if, during the Effectiveness Period (as defined in the Registration Rights
Agreement), either (a)&nbsp;the effectiveness of the Registration Statement lapses for
any reason or (b)&nbsp;the Holder shall not be permitted to resell Registrable Securities
(as defined in the Registration Rights Agreement) under the Registration Statement
for a period of more than 20 consecutive Trading Days or 30 non-consecutive Trading
Days during any 12&nbsp;month period; <U>provided</U>, <U>however</U>, that if the
Company is negotiating a merger, consolidation, acquisition or sale of all or
substantially all of its assets or a similar transaction and, in the written opinion
of counsel to the Company, the Registration Statement would be required to be
amended to include information concerning such pending transaction(s) or the parties
thereto which information is not available or may not be publicly disclosed at the
time, the Company shall be permitted an additional 15 consecutive Trading Days
during any 12&nbsp;month period pursuant to this Section&nbsp;8(a)(x);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;xi. the Company shall fail for any reason to deliver certificates to a Holder
prior to the seventh Trading Day after a Conversion Date or any Forced Conversion
Date pursuant to Section 4(d) or the Company shall provide at any time notice to the
Holder, including by way of public announcement, of the Company&#146;s intention to not
honor requests for conversions of any Debentures in accordance with the terms
hereof; or
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">xii. any monetary judgment, writ or similar final process shall be entered or
filed against the Company, any subsidiary or any of their respective property or
other assets for more than $250,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>Remedies Upon Event of Default</U>. If any Event of Default occurs, the
outstanding principal amount of this Debenture, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date of acceleration, shall
become, at the Holder&#146;s election, immediately due and payable in cash at the Mandatory
Default Amount. Commencing 5&nbsp;days after the occurrence of any Event of Default that results
in the eventual acceleration of this Debenture, the interest rate on this Debenture shall
accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate
permitted under applicable law. Upon the payment in full of the Mandatory Default Amount,
the Holder shall promptly surrender this Debenture to or as directed by the Company. In
connection with such acceleration described herein, the Holder need not provide, and the
Company hereby waives, any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period enforce any and all of its
rights and remedies hereunder and all other remedies available to it under applicable law.
Such acceleration may be rescinded and annulled by Holder at any time prior to payment
hereunder and the Holder shall have all rights as a holder of the Debenture until such time,
if any, as the Holder receives full payment pursuant to this Section&nbsp;8(b). No such
rescission or annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><U>Section&nbsp;9</U>. <U>Miscellaneous</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <U>Notices</U>. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address set forth
above, or such other facsimile number or address as the Company may specify for such purpose
by notice to the Holder delivered in accordance with this Section&nbsp;9. Any and all notices or
other communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of the Holder
appearing on the books of the Company, or if no such facsimile number or address appears, at
the principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)&nbsp;the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section&nbsp;9 prior to 5:30 p.m. (New York City time) on a Trading Day,
(ii)&nbsp;the next Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section&nbsp;9 on a day that is
not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii)&nbsp;the
second Trading
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Day following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (iv)&nbsp;upon actual receipt by the party to whom such notice is required to
be given. The address for such notices and communications shall be as set forth on the
signature pages attached to the Purchase Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>Absolute Obligation</U>. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, liquidated damages and accrued interest, as
applicable, on this Debenture at the time, place, and rate, and in the coin or currency,
herein prescribed. This Debenture is a direct debt obligation of the Company. This
Debenture ranks <U>pari</U> <U>passu</U> with all other Debentures now or hereafter issued
under the terms set forth herein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <U>Lost or Mutilated Debenture</U>. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for
and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost,
stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft
or destruction of such Debenture, and of the ownership hereof, reasonably satisfactory to
the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <U>Governing Law</U>. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without regard to
the principles of conflict of laws thereof. Each party agrees that all legal proceedings
concerning the interpretation, enforcement and defense of the transactions contemplated by
any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York, Borough of Manhattan (the
&#147;<U>New York Courts</U>&#148;). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such New York Courts, or such New
York Courts are improper or inconvenient venue for such proceeding. Each party hereby
consents to process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Debenture and agrees
that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by applicable law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Debenture or the
transactions contemplated hereby. If either party shall commence an
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /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; margin-left: 2%">action or proceeding to enforce any provisions of this Debenture, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for its attorneys
fees and other costs and expenses reasonably incurred in the investigation, preparation and
prosecution of such action or proceeding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <U>Waiver</U>. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Debenture. The
failure of the Company or the Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver by the Company or the Holder must be in writing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <U>Severability</U>. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all
other Persons and circumstances. If it shall be found that any interest or other amount
deemed interest due hereunder violates the applicable law governing usury, the applicable
rate of interest due hereunder shall automatically be lowered to equal the maximum rate of
interest permitted under applicable law. The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or
other law which would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Debenture as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants or the performance of this
indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort to any such
law, hinder, delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has been enacted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) <U>Next Business Day</U>. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h) <U>Headings</U>. The headings contained herein are for convenience only, do not
constitute a part of this Debenture and shall not be deemed to limit or affect any of the
provisions hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i) <U>Assumption</U>.&nbsp; Any successor to the Company or any surviving entity in a
Fundamental Transaction shall (i)&nbsp;assume, prior to such Fundamental Transaction, all of the
obligations of the Company under this Debenture and the other Transaction Documents pursuant
to written agreements in form and substance satisfactory to the Holder (such approval not to
be unreasonably withheld or delayed) and (ii)&nbsp;issue to the Holder a new debenture of such
successor entity evidenced by a written instrument
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /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; margin-left: 2%">substantially similar in form and substance to this Debenture, including, without
limitation, having a principal amount and interest rate equal to the principal amount and
the interest rate of this Debenture and having similar ranking to this Debenture, which
shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or
delayed). &nbsp;The provisions of this Section 9(i) shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j) <U>Usury</U>. This Debenture shall be subject to the anti-usury limitations
contained in the Purchase Agreement.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">*********************

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /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;IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly
authorized officer as of the date first above indicated.
</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="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>NATURAL HEALTH TRENDS CORP.</B></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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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 align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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 style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&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>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>

    <TD align="left" valign="top">Name:</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>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>

    <TD align="left" valign="top">Title:</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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" nowrap>Facsimile No. for delivery of Notices:</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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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 -->31<!-- /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>ANNEX A</B>
</DIV>


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

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby elects to convert principal under the Variable Rate Convertible
Debenture due October&nbsp;19, 2009 of Natural Health Trends Corp., a Delaware corporation (the
&#147;<U>Company</U>&#148;), into shares of common stock (the &#147;<U>Common Stock</U>&#148;), of the Company
according to the conditions hereof, as of the date written below. If shares of Common Stock are to
be issued in the name of a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be charged to the holder
for any conversion, except for such transfer taxes, if any.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By the delivery of this Notice of Conversion the undersigned represents and warrants to the
Company that its ownership of the Common Stock does not exceed the amounts specified under Section
4 of this Debenture, as determined in accordance with Section 13(d) of the Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Conversion calculations:

</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="1%">&nbsp;</TD>
    <TD width="60%">&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 to Effect Conversion:</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">&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">Principal Amount of Debenture to&nbsp;be&nbsp;Converted:</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">&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">Payment of Interest in Common Stock
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>yes <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>no</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"><DIV style="margin-left:21px; "> If yes, $<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> of Interest Accrued on Account of
Conversion at Issue.</DIV></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">&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">Number of shares of Common Stock to&nbsp;be&nbsp;issued:</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">&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">Signature:</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">&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">Name:</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">&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">Address for Delivery of Common Stock Certificates:</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">&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"><U>Or</U></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">&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">DWAC Instructions:</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">&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">Broker No:<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></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">Account No:<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /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>Schedule&nbsp;1</B>
</DIV>


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

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Variable Rate Secured Convertible Debentures due on October&nbsp;19, 2009 in the aggregate principal
amount of $4,500,000 are issued by Natural Health Trends Corp. This Conversion Schedule reflects
conversions made under Section&nbsp;4 of the above referenced Debenture.
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Dated:

</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="34%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Aggregate</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Principal</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Amount</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Remaining</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Subsequent to</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Conversion</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date of Conversion
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(or original</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">(or for first entry,
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Amount of
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Principal</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Original Issue Date)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Conversion
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Amount)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Company Attest</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>d50652exv10w4.htm
<DESCRIPTION>FORM OF SEVEN YEAR AND ONE YEAR WARRANT TO PURCHASE SHARES OF COMMON STOCK
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w4</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

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


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
&#147;SECURITIES ACT&#148;), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
</DIV>


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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NATURAL HEALTH TRENDS CORP.</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="57%">&nbsp;</TD>
    <TD width="3%">&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">Warrant Shares: &#95;&#95;&#95;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Initial Exercise Date: April &#95;&#95;&#95;, 2008</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">Issue Date: October&nbsp;19, 2007</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS COMMON STOCK PURCHASE WARRANT (the &#147;<U>Warrant</U>&#148;) certifies that, for value received,
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> (the &#147;<U>Holder</U>&#148;) is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after the Initial Exercise
Date (as defined above) and on or prior to the close of business on &#091;seven&#093; &#091;one&#093; year anniversary
of the Initial Exercise Date (the &#147;<U>Termination Date</U>&#148;) but not thereafter, to subscribe for
and purchase from Natural Health Trends Corp., a Delaware corporation (the &#147;<U>Company</U>&#148;), up
to<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>shares (the &#147;<U>Warrant Shares</U>&#148;) of Common Stock. The purchase price of one share
of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1</U>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Definitions</U>. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase Agreement (the
&#147;<U>Purchase Agreement</U>&#148;), dated October&nbsp;19, 2007, among the Company and the purchasers
signatory thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2</U>.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Exercise</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Exercise of Warrant</U>. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form annexed hereto (or such
</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; margin-left: 2%">other office or agency of the Company as it may designate by notice in writing to the
registered Holder at the address of the Holder appearing on the books of the Company); and,
within 3 Trading Days of the date said Notice of Exercise is delivered to the Company, the
Company shall have received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier&#146;s check drawn on a United States bank.
Notwithstanding anything herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in full, in which
case, the Holder shall surrender this Warrant to the Company for cancellation within 3
Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial
exercises of this Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding number of
Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant
Shares purchased. The Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. The Company shall deliver any
objection to any Notice of Exercise Form within 1 Business Day of receipt of such notice.
In the event of any dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. <B>The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this
paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number
of Warrant Shares available for purchase hereunder at any given time may be less than the
amount stated on the face hereof.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Exercise Price</U>. The exercise price per share of the Common Stock under this
Warrant shall be <B>$3.52, </B>subject to adjustment hereunder (the &#147;<U>Exercise Price</U>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Cashless Exercise</U>. If at any time after the earlier of (i)&nbsp;the one year
anniversary of the date of the Purchase Agreement and (ii)&nbsp;the completion of the
then-applicable holding period required by Rule&nbsp;144, or any successor provision then in
effect, which would allow &#147;tacking&#148; of the holding period of this Warrant and the Warrant
Shares pursuant to the SEC Manual of Publicly Available Telephone Interpretations or other
Commission rule or guidance, there is no effective Registration Statement registering, or no
current prospectus available for, the resale of the Warrant Shares by the Holder at a time
when such Registration Statement is required to be effective pursuant to the Registration
Rights Agreement, then this Warrant may also be exercised at such time by means of a
&#147;cashless exercise&#148; in which the Holder shall be entitled to receive a certificate for the
number of Warrant Shares equal to the quotient obtained by dividing &#091;(A-B) (X)&#093; by (A),
where:
</DIV>

<DIV align="left" style="margin-left: 9%; text-indent: -5%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">(A) = the VWAP on the Trading Day immediately preceding the date
of such election;</DIV>


<DIV align="left" style="margin-left: 9%; text-indent: -5%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">(B) = the Exercise Price of this Warrant, as adjusted; and</DIV>


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</DIV>

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




<DIV align="left" style="margin-left: 9%; text-indent: -5%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">(X) = the number of Warrant Shares issuable upon exercise of this
Warrant in accordance with the terms of this Warrant by means of a cash
exercise rather than a cashless exercise.</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant
shall be automatically exercised via cashless exercise pursuant to this Section&nbsp;2(c).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Holder&#146;s Restrictions</U>. The Company shall not effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any portion of this Warrant,
pursuant to Section&nbsp;2 or otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise, the Holder (together with
the Holder&#146;s Affiliates, and any other person or entity acting as a group together with the
Holder or any of the Holder&#146;s Affiliates), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below).&nbsp; For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by the Holder and its Affiliates
shall include the number of shares of Common Stock issuable upon exercise of this Warrant
with respect to which such determination is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (A)&nbsp;exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder or any of its
Affiliates and (B)&nbsp;exercise or conversion of the unexercised or nonconverted portion of any
other securities of the Company (including, without limitation, any other Common Stock
Equivalents) subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its affiliates.&nbsp; Except as set
forth in the preceding sentence, for purposes of this Section&nbsp;2(d), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder, it being acknowledged by the Holder that the Company is
not representing to the Holder that such calculation is in compliance with Section 13(d) of
the Exchange Act and the Holder is solely responsible for any schedules required to be filed
in accordance therewith. To the extent that the limitation contained in this Section 2(d)
applies, the determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of
a Notice of Exercise shall be deemed to be the Holder&#146;s determination of whether this
Warrant is exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to
the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes of this
Section&nbsp;2(d), in determining the number of outstanding shares of Common Stock, a Holder may
rely on the number of outstanding shares of Common Stock as reflected in (x)&nbsp;the Company&#146;s
most recent periodic or annual report, as the case may be, (y)&nbsp;a more recent public
announcement by the Company or (z)&nbsp;any other notice by the Company or the Company&#146;s Transfer
Agent setting forth the number of shares of Common Stock
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">outstanding.&nbsp; Upon the written or oral request of a Holder, the Company shall within
two Trading Days confirm orally and in writing to the Holder the number of shares of Common
Stock then outstanding.&nbsp; In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the
Company, including this Warrant, by the Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The &#147;<U>Beneficial
Ownership Limitation</U>&#148; shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common Stock
issuable upon exercise of this Warrant. The Beneficial Ownership Limitation provisions of
this Section 2(d) may be waived by the Holder, at the election of the Holder, upon not less
than 61&nbsp;days&#146; prior notice to the Company to change the Beneficial Ownership Limitation to
9.99% of the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of this Warrant, and the
provisions of this Section 2(d) shall continue to apply. Upon such a change by a Holder of
the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the
Beneficial Ownership Limitation may not be further waived by the Holder. The provisions of
this paragraph shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 2(d) to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this paragraph shall
apply to a successor holder of this Warrant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <U>Mechanics of Exercise</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Delivery of Certificates Upon Exercise</U>. Certificates for shares
purchased hereunder shall be transmitted by the transfer agent of the
Company to the Holder by crediting the account of the Holder&#146;s prime broker
with the Depository Trust Company through its Deposit Withdrawal Agent
Commission (&#147;<U>DWAC</U>&#148;) system if the Company is a participant in such
system and there is an effective Registration Statement permitting the
resale of the Warrant Shares by the Holder, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise
within 3 Trading Days from the delivery to the Company of the Notice of
Exercise Form, surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (&#147;<U>Warrant Share Delivery
Date</U>&#148;). This Warrant shall be deemed to have been exercised on the date
the Exercise Price is received by the Company. The Warrant Shares shall be
deemed to have been issued, and Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date the Warrant has been exercised by
payment to the Company of the Exercise Price (or by cashless exercise, if
permitted) and all taxes required to be paid by the Holder, if any, pursuant
to Section&nbsp;2(e)(vi) prior to the issuance of such shares, have been paid. If
the Company fails for any reason to deliver to the Holder certificates
evidencing the Warrant Shares
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">subject to a Notice of Exercise by the second Trading Day after the
Warrant Share Delivery Date, the Company shall pay to the Holder, in cash,
as liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares subject to such exercise (based on the VWAP of the Common Stock on
the date of the applicable Notice of Exercise), $10 per Trading Day
(increasing to $20 per Trading Day on the fifth Trading Day after such
liquidated damages begin to accrue) for each Trading Day after such second
Trading Day after such Warrant Share Delivery Date until such certificates
are delivered.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Delivery of New Warrants Upon Exercise</U>. If this Warrant
shall have been exercised in part, the Company shall, at the request of a
Holder and upon surrender of this Warrant certificate, at the time of
delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase
the unpurchased Warrant Shares called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Rescission Rights</U>. If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section&nbsp;2(e)(i) by the
Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Exercise</U>. In addition to any other rights available
to the Holder, if the Company fails to cause its transfer agent to transmit
to the Holder a certificate or certificates representing the Warrant Shares
pursuant to an exercise on or before the Warrant Share Delivery Date, and if
after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) or the Holder&#146;s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by
the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a &#147;<U>Buy-In</U>&#148;), then the Company shall (1)&nbsp;pay in cash
to the Holder the amount by which (x)&nbsp;the Holder&#146;s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y)&nbsp;the amount obtained by multiplying (A)&nbsp;the number of
Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (B)&nbsp;the price at which the sell
order giving rise to such purchase obligation was executed, and (2)&nbsp;at the
option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise was not honored
or deliver to the Holder the number of shares of Common Stock that would
have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted exercise of shares of
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1)&nbsp;of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a Holder&#146;s
right to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company&#146;s failure to timely
deliver certificates representing shares of Common Stock upon exercise of
the Warrant as required pursuant to the terms hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>No Fractional Shares or Scrip</U>. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of
this Warrant. As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall at its election,
either pay a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up to the
next whole share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vi.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Charges, Taxes and Expenses</U>. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of the Holder or in such
name or names as may be directed by the Holder; <U>provided</U>,
<U>however</U>, that in the event certificates for Warrant Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the Holder; and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vii.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Closing of Books</U>. The Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Stock Dividends and Splits</U>. If the Company, at any time while this Warrant
is outstanding: (A)&nbsp;pays a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant), (B)&nbsp;subdivides
outstanding shares of Common Stock into a larger number of shares, (C)&nbsp;combines (including
by way of reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (D)&nbsp;issues by reclassification of
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">shares of the Common Stock any shares of capital stock of the Company, then in each
case the Exercise Price shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise
Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section
3(a) shall become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination or
re-classification.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Subsequent Equity Sales</U>. If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall sell or grant any option to
purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or
announce any offer, sale, grant or any option to purchase or other disposition) any Common
Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at
an effective price per share less than the then Exercise Price (such lower price, the
&#147;<U>Base Share Price</U>&#148; and such issuances collectively, a &#147;<U>Dilutive Issuance</U>&#148;)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights per share
which are issued in connection with such issuance, be entitled to receive shares of Common
Stock at an effective price per share which is less than the Exercise Price, such issuance
shall be deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to equal the
Base Share Price (provided, that prior to Shareholder Approval, such adjusted Exercise Price
shall not be lower than the Closing Price on the Trading Day immediately prior to the
Closing Date) and the number of Warrant Shares issuable hereunder shall be increased such
that the aggregate Exercise Price payable hereunder, after taking into account the decrease
in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such
adjustment. Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. Notwithstanding the foregoing, no adjustments shall be made, paid
or issued under this Section 3(b) in respect of an Exempt Issuance or, prior to the date
that Shareholder Approval is obtained and deemed effective, for an Exercise Price of less
than $3.52, subject to adjustment for reverse and forward stock splits, stock dividends,
stock combinations and other similar transactions of the Common Stock that occur after the
date of the Purchase Agreement. The Company shall notify the Holder in writing, no later
than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents
subject to this Section&nbsp;3(b), indicating therein the applicable issuance price, or
applicable reset price, exchange price, conversion price and other pricing terms (such
notice the &#147;<U>Dilutive Issuance Notice</U>&#148;). For purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice pursuant to this Section&nbsp;3(b), upon the
occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share Price
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">regardless of whether the Holder accurately refers to the Base Share Price in the
Notice of Exercise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Subsequent Rights Offerings</U>. If the Company, at any time while the Warrant
is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and
not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the VWAP at the record date mentioned below, then the Exercise
Price shall be multiplied by a fraction, of which the denominator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of additional shares of Common Stock offered for subscription or purchase,
and of which the numerator shall be the number of shares of the Common Stock outstanding on
the date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares issued (assuming receipt by the
Company in full of all consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights
or warrants are issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or warrants.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Pro Rata Distributions</U>. If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to Holders of the
Warrants) evidences of its indebtedness or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security other than the Common Stock
(which shall be subject to Section&nbsp;3(b)), then in each such case the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by a fraction
of which the denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then per share
fair market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Fundamental Transaction</U>. If, at any time while this Warrant is outstanding,
(A)&nbsp;the Company effects any merger or consolidation of the Company with or into another
Person, (B)&nbsp;the Company effects any sale of all or substantially all of its assets in one or
a series of related transactions, (C)&nbsp;any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or exchanged for
other securities, cash or property (each &#147;<U>Fundamental Transaction</U>&#148;), then, upon any
subsequent exercise of this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such
</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; margin-left: 2%">exercise immediately prior to the occurrence of such Fundamental Transaction, the
number of shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration (the
&#147;<U>Alternate Consideration</U>&#148;) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. For purposes of any such exercise,
the determination of the Exercise Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate Consideration.
If holders of Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions,
any successor to the Company or surviving entity in such Fundamental Transaction shall issue
to the Holder a new warrant consistent with the foregoing provisions and evidencing the
Holder&#146;s right to exercise such warrant into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions of this
Section 3(e) and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is
(1)&nbsp;an all cash transaction, (2)&nbsp;a &#147;Rule&nbsp;13e-3 transaction&#148; as defined in Rule&nbsp;13e-3 under
the Securities Exchange Act of 1934, as amended, or (3)&nbsp;a Fundamental Transaction involving
a person or entity not traded on a national securities exchange, the Nasdaq Global Select
Market, the Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any successor
entity shall pay at the Holder&#146;s option, exercisable at any time concurrently with or within
30&nbsp;days after the consummation of the Fundamental Transaction, an amount of cash equal to
the value of this Warrant as determined in accordance with the Black Scholes Option Pricing
Model obtained from the &#147;OV&#148; function on Bloomberg L.P. using (i)&nbsp;a price per share of
Common Stock equal to the VWAP of the Common Stock for the Trading Day immediately preceding
the date of consummation of the applicable Fundamental Transaction, (ii)&nbsp;a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining
term of this Warrant as of the date of consummation of the applicable Fundamental
Transaction and (iii)&nbsp;an expected volatility equal to the 100&nbsp;day volatility obtained from
the &#147;HVT&#148; function on Bloomberg L.P. determined as of the Trading Day immediately following
the public announcement of the applicable Fundamental Transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <U>Calculations</U>. All calculations under this Section&nbsp;3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section&nbsp;3, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.
</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; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) <U>Voluntary Adjustment By Company</U>. Subsequent to Shareholder Approval, the
Company may at any time during the term of this Warrant reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h) <U>Notice to Holder</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Adjustment to Exercise Price</U>. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section&nbsp;3, the Company shall
promptly mail to the Holder a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment. If the Company enters into a Variable Rate Transaction (as
defined in the Purchase Agreement), despite the prohibition thereon in the
Purchase Agreement, the Company shall be deemed to have issued Common Stock
or Common Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Notice to Allow Exercise by Holder</U>. If (A)&nbsp;the Company
shall declare a dividend (or any other distribution in whatever form) on the
Common Stock; (B)&nbsp;the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C)&nbsp;the Company shall
authorize the granting to all holders of the Common Stock rights or warrants
to subscribe for or purchase any shares of capital stock of any class or of
any rights; (D)&nbsp;the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E)&nbsp;the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the
Holder at its last address as it shall appear upon the Warrant Register of
the Company, at least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x)&nbsp;the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date
as of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined
or (y)&nbsp;the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record
shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect 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; margin-left: 4%">validity of the corporate action required to be specified in such
notice. The Holder is entitled to exercise this Warrant during the period
commencing on the date of such notice to the effective date of the event
triggering such notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;4</U>. <U>Transfer of Warrant</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Transferability</U>. Subject to compliance with any applicable securities laws
and the conditions set forth in Section 4(d) hereof and to the provisions of Section&nbsp;4.1 of
the Purchase Agreement, this Warrant and all rights hereunder (including, without
limitation, any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent, together
with a written assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant Shares
without having a new Warrant issued.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>New Warrants</U>. This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be issued, signed
by the Holder or its agent or attorney. Subject to compliance with Section&nbsp;4(a), as to any
transfer which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or exchanges
shall be dated the original Issue Date and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Warrant Register</U>. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the &#147;<U>Warrant Register</U>&#148;), in the name
of the record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Transfer Restrictions</U>. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant shall not be
registered pursuant to an effective registration statement under the Securities Act and
under applicable state securities or blue sky laws, the Company may require, as a condition
of allowing such transfer, that the Holder or transferee of this Warrant, as the case may
be, comply with the provisions of Section&nbsp;5.7 of the Purchase Agreement.
</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;<U>Section&nbsp;5</U>. <U>Miscellaneous</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>No Rights as Shareholder Until Exercise</U>. This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof as set forth in Section&nbsp;2(e)(i).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Loss, Theft, Destruction or Mutilation of Warrant</U>. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it (which, in the case of the Warrant, shall not include the
posting of any bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Saturdays, Sundays, Holidays, etc</U>. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein shall not be
a Business Day, then such action may be taken or such right may be exercised on the next
succeeding Business Day.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Authorized Shares</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company covenants that during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of any
purchase rights under this Warrant. The Company further covenants that its issuance
of this Warrant shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights under
this Warrant. The Company will take all such reasonable action as may be necessary
to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon exercise of the purchase rights represented
by this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any 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; margin-left: 4%">the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing, the
Company will (a)&nbsp;not increase the par value of any Warrant Shares above the amount
payable therefor upon such exercise immediately prior to such increase in par value,
(b)&nbsp;take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant Shares
upon the exercise of this Warrant, and (c)&nbsp;use commercially reasonable efforts to
obtain all such authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof as may be necessary to enable the Company to
perform its obligations under this Warrant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Jurisdiction</U>. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance with the
provisions of the Purchase Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Restrictions</U>. The Holder acknowledges that the Warrant Shares acquired upon
the exercise of this Warrant, if not registered, will have restrictions upon resale imposed
by state and federal securities laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Nonwaiver and Expenses</U>. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of such right
or otherwise prejudice Holder&#146;s rights, powers or remedies, notwithstanding the fact that
all rights hereunder terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable attorneys&#146; fees,
including those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Notices</U>. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Limitation of Liability</U>. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise to any liability
of Holder for the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors 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; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Remedies</U>. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific performance of
its rights under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the defense in any action for
specific performance that a remedy at law would be adequate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Successors and Assigns</U>. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of and be binding
upon the successors of the Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders from time to
time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Amendment</U>. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the Holder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Severability</U>. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of this Warrant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Headings</U>. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">********************
</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;IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized as of the date first above indicated.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>NATURAL HEALTH TRENDS CORP.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">__________________________________________
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


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</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

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


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">TO:&nbsp;&nbsp; NATURAL HEALTH TRENDS CORP.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp; The undersigned hereby elects to purchase <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> Warrant Shares of the Company pursuant
to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if any.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;Payment shall take the form of (check applicable box):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><FONT FACE="wingdings">&#111;</font> in lawful money of the United States; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><FONT FACE="wingdings">&#111;</font>
if permitted&#093; the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in subsection
2(c).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;&nbsp;&nbsp; Please issue a certificate or certificates representing said Warrant Shares in the name of
the undersigned or in such other name as is specified below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery
of a certificate to:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp;&nbsp;&nbsp; <U>Accredited Investor</U>. The undersigned is an &#147;accredited investor&#148; as defined in
Regulation&nbsp;D promulgated under the Securities Act of 1933, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&#091;SIGNATURE OF HOLDER&#093;
</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="100%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Name of Investing Entity:</DIV><DIV style="margin-left:140px; text-indent:-0px; border-bottom: 1px solid #000000"></div></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>Signature of Authorized Signatory of Investing Entity</I>:</DIV><DIV style="margin-left:300px; text-indent:-0px; border-bottom: 1px solid #000000"></div></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Name of Authorized Signatory:</DIV><DIV style="margin-left:170px; text-indent:-0px; border-bottom: 1px solid #000000"></div></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title of Authorized Signatory:</DIV><DIV style="margin-left:170px; text-indent:-0px; border-bottom: 1px solid #000000"></div></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:</DIV><DIV style="margin-left:35px; text-indent:-0px; border-bottom: 1px solid #000000"></div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(To assign the foregoing warrant, execute<BR>
this form and supply required information.<BR>
Do not use this form to exercise the warrant.)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED, &#091;&#95;&#95;&#95;&#093; all of or &#091;&#95;&#95;&#95;&#093; shares of the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
</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="7%">&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="14%">&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 nowrap align="right" valign="top">whose address is</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"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD nowrap align="left" valign="top">.</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</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>
    <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="line-height: 30pt"><!-- 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 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 style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</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>
<!-- End Table Body -->
</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="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Dated: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</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="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="41%">&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">Holder&#146;s Signature:</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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><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 align="left" 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 align="left" valign="top">Holder&#146;s Address:</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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><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 align="left" 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 align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><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 align="left" 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>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Signature Guaranteed: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NOTE: The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign the foregoing
Warrant.
</DIV>



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



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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>6
<FILENAME>d50652exv99w1.htm
<DESCRIPTION>PRESS RELEASE
<TEXT>
<HTML>
<HEAD>
<TITLE>exv99w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 18pt">Exhibit 99.1</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>FOR IMMEDIATE RELEASE</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NATURAL HEALTH TRENDS CORP.<BR>
ANNOUNCES PRIVATE PLACEMENT FINANCING</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>DALLAS, October&nbsp;22, 2007 </B>&#151; Natural Health Trends Corp. (NASDAQ: BHIP) announced today that it has
entered into a definitive agreements with certain institutional investors to receive $3.74&nbsp;million
in financing from a private placement of convertible debentures and warrants. Dawson James
Securities, Inc. (&#147;DJS&#148;) served as exclusive placement agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The debentures will have an aggregate face amount of $4,250,000 and can be converted into 1,496,000
shares of the Company&#146;s Common Stock, subject to adjustment. The financing includes seven-year
warrants to purchase 1,496,000 shares of Common Stock at $3.52 per share and one-year warrants to
purchase 1,496,000 shares of Common Stock at $3.52 per share, subject to adjustment. The
debentures bear interest at the greater of LIBOR plus 4% or 10% per annum. Interest-only is
payable quarterly for one year, and one-half of the principal will also be payable monthly during
the second year. The debentures will mature in two years, unless extended by their holders for an
additional three years. Under certain conditions, the Company may be able to pay principal and
interest in shares of its Common Stock. Under certain conditions, the Company also has certain
rights to force conversion or redemption of the debentures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company intends to use the net proceeds from the financing to provide additional working
capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&#147;This financing attests to our strong commitment to our members around the world and provides the
Company with additional resources to invest in the long-term opportunities available to us while
withstanding our shorter-term business volatility,&#148; said Chris Sharng, President of Natural Health
Trends Corp. &#147;Over the summer months, we deliberately kept the Company&#146;s marketing programs in our
China market at a lower profile. At the end of the second quarter, we also began to implement a
change to our commission plan that we believe will promote earlier commission payments. With more marketing
activities in the next few months, we are taking a conservative approach to make sure we can
properly support our members as well as the exciting events we have planned for Hong Kong, China,
and Europe. Finally, we can also use the new financing to facilitate additional cost reduction
measures to further lower our fixed costs in the U.S. and various international markets.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The disclosure about the foregoing financing does not constitute an offer to sell or a solicitation
of an offer to buy any securities of the Company. The offer and sale of such securities have not
been registered under the Securities Act of 1933, and such securities may not be offered or sold in
the United States absent registration or an applicable exemption from registration requirements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>About Natural Health Trends Corp.</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Natural Health Trends Corp. is an international direct-selling and e-commerce company operating
through its subsidiaries throughout Asia, North America, Europe and Latin America.
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company markets premium quality personal care products under the NHT Global brand. Additional
information can be found on the Company&#146;s website, and management encourages interested parties to
register for updated corporate information via email on the Company&#146;s home page,
<u>www.naturalhealthtrendscorp.com.</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 &#151; Forward-looking
statements in this release do not constitute guarantees of future performance. &nbsp;Such
forward-looking statements are subject to risks and uncertainties that could cause our actual
results to differ materially from those anticipated. &nbsp;Such risks and uncertainties include the
risks and uncertainties detailed under the caption &#147;Risk Factors&#148; in our Amendment No.&nbsp;2 to
Registration Statement on Form S-3 filed on August&nbsp;24, 2007 with the Securities and Exchange
Commission. &nbsp;We assume no obligation to update any forward-looking information contained in this
press release or with respect to the announcements described herein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Contact:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Chris Sharng<BR>
President<BR>
Natural Health Trends Corp.<BR>
(972)&nbsp;241-4080

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SOURCE:&nbsp;&nbsp;Natural Health Trends Corp.

</DIV>


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




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