exv10w1



 




Exhibit 10.1


SECURITIES PURCHASE AGREEMENT




     This Securities Purchase Agreement (this “Agreement”) is dated as of October 19, 2007
between Natural Heath Trends Corp., a Delaware corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively the “Purchasers”).



     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 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.



     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:



ARTICLE I.

DEFINITIONS




     1.1 Definitions. 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) the following terms have the meanings set forth in this
Section 1.1:




     “Action” shall have the meaning ascribed to such term in Section 3.1(j).




     “Affiliate” 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 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.




     “Board of Directors” means the board of directors of the Company.




     “Business Day” 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.




     “Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.



 









 





     “Closing Date” 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) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities have been satisfied or waived.



     “Commission” means the Securities and Exchange Commission.



     “Common Stock” 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.



     “Common Stock Equivalents” 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.



     “Company Counsel” means Gary C. Wallace, with offices located at 2050 Diplomat
Drive, Dallas, Texas 75234.



     “Conversion Price” shall have the meaning ascribed to such term in the
Debentures.



     “Debentures” means the Variable Rate Convertible Debentures due, subject to the
terms therein, 2 years from their date of issuance, issued by the Company to the Purchasers
hereunder, in the form of Exhibit A attached hereto.



     “Disclosure Schedules” shall have the meaning ascribed to such term in Section
3.1.



     “Effective Date” 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.



     “Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).



     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.



     “Exempt Issuance” means the issuance of (a) shares of Common Stock or options
issued under either the Company’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’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



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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) 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) up to an aggregate of 100,000 shares of Common
Stock in any 12 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.




     “FWS” means Feldman Weinstein & Smith LLP with offices located at 420 Lexington
Avenue, Suite 2620, New York, New York 10170-0002.



     “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).



     “Indebtedness” shall have the meaning ascribed to such term in Section 3.1(aa).



     “Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).



     “Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).



     “Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.



     “Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).



     “Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).



     “Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.



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     “Participation Maximum” shall have the meaning ascribed to such term in Section
4.12.



     “Person” 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.



     “Pre-Notice” shall have the meaning ascribed to such term in Section 4.12.



     “Principal Amount” shall mean, as to each Purchaser, the amounts set forth
below such Purchaser’s signature block on the signature pages hereto and next to the heading
“Principal Amount,” in United States Dollars, which shall equal such Purchaser’s
Subscription Amount multiplied by 1.1364.



     “Proceeding” 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.



     “Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.



     “Registration Rights Agreement” means the Registration Rights Agreement, dated
the date hereof, among the Company and the Purchasers, in the form of Exhibit B
attached hereto.



     “Registration Statement” 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.



     “Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).



     “Required Minimum” 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.



     “Rule 144” means Rule 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.



     “SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).



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     “Securities” means the Debentures, the Warrants, the Warrant Shares and the
Underlying Shares.



     “Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.



     “Shareholder Approval” 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.



     “Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or reservation
of borrowable shares of Common Stock). 



     “Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Debentures and Warrants purchased hereunder as specified below such Purchaser’s
name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.



     “Subsequent Financing” shall have the meaning ascribed to such term in Section
4.12.



     “Subsequent Financing Notice” shall have the meaning ascribed to such term in
Section 4.12.



     “Subsidiary” means any subsidiary of the Company as set forth on Schedule
3.1(a) and shall, where applicable, include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.



     “Trading Day” means a day on which the NASDAQ Global Market is open for
trading.



     “Trading Market” 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.



     “Transaction Documents” 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.



     “Transfer Agent” means American Stock Transfer and Trust Company, the current
transfer agent of the Company with a mailing address of 6201 15th Ave.,



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Brooklyn, NY 11219 and a facsimile number of (718) 921-8334, and any successor transfer
agent of the Company.




     “Underlying Shares” 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.




     “Variable Rate Transaction” shall have the meaning ascribed to such term in
Section 4.13(b).




     “VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) 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)  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) 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 “Pink Sheets”
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) 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.




     “Warrants” means the Common Stock purchase warrants delivered to the Purchasers
at the Closing in accordance with Section 2.2(a) hereof in the form of Exhibit C
attached hereto.




     “Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.



ARTICLE II.

PURCHASE AND SALE




     2.1 Closing. 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



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Section 2.2 deliverable at the Closing. Upon satisfaction of the conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of FWS or such other location as the
parties shall mutually agree.



     2.2 Deliveries.




     (a) On the Closing Date, the Company shall deliver or cause to be delivered to each
Purchaser the following:




     (i) this Agreement duly executed by the Company;




     (ii) a legal opinion of Company Counsel, in substantially the form of
Exhibit D attached hereto;




     (iii) a Debenture with a principal amount equal to such Purchaser’s Principal
Amount, registered in the name of such Purchaser;




     (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’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 months
and 1 day from the date hereof for a term of seven years;




     (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’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 months
and 1 day from the date hereof for a term of one year; and




     (vi) the Registration Rights Agreement duly executed by the Company.




     (b) On the Closing Date, each Purchaser shall deliver or cause to be delivered to the
Company the following:




     (i) this Agreement duly executed by such Purchaser;




     (ii) such Purchaser’s Subscription Amount by wire transfer to the account as
specified in writing by the Company; and




     (iii) the Registration Rights Agreement duly executed by such Purchaser.



     2.3 Closing Conditions.




     (a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:



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     (i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein;




     (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




     (iii) the delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.




     (b) The respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:




     (i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Company contained herein;




     (ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;




     (iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;




     (iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and




     (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’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.



ARTICLE III.

REPRESENTATIONS AND WARRANTIES




     3.1 Representations and Warranties of the Company.
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



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the corresponding section of the Disclosure
Schedules, the Company hereby makes the following representations and warranties to each Purchaser:





     (a) Subsidiaries. All of the direct and indirect subsidiaries of the Company
are set forth on Schedule 3.1(a). Except as noted in Schedule 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.




     (b) Organization and Qualification. 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) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) 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) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) 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.




     (c) Authorization; Enforcement. 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’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) as limited by



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general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.




     (d) No Conflicts. 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) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (ii) 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) 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) and (iii),
such as could not reasonably be expected to result in a Material Adverse Effect.




     (e) Filings, Consents and Approvals. 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) filings required pursuant to Section 4.6, (ii) the
filing with the Commission of the Registration Statement and any related Prospectus or
Prospectus Supplement, (iii) 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) the filing of Form D with
the Commission and such filings as are required to be made under applicable state securities
laws and (vi) Shareholder Approval (collectively, the “Required Approvals”).




     (f) Issuance of the Securities. 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



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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.




     (g) Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g), which Schedule 3.1(g) 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’s stock option plans, the issuance of shares of Common Stock
under the Company’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 Schedule 3.1(g), 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’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any of the
Company’s stockholders.




     (h) SEC Reports; Financial Statements. Except as disclosed in Schedule 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 “SEC Reports”) 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



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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 (“GAAP”),
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.




     (i) Material Changes. 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 Schedule 3.1(i)
attached hereto, (i) 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) the Company has
not incurred any liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with past practice
and (B) liabilities not required to be reflected in the Company’s financial statements
pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) 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) 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’s third
quarter on September 30, 2007, or as set forth on Schedule 3.1(i), 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.




     (j) Litigation. 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



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administrative
agency or regulatory authority (federal, state, county, local or foreign) (collectively, an
“Action”) which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii) 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.




     (k) Labor Relations. 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’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’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.




     (l) Compliance. Neither the Company nor any Subsidiary (i) 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) is
in violation of any order of any court, arbitrator or governmental body, or (iii) 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.



13









 





     (m) Regulatory Permits. 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 (“Material Permits”), and neither
the Company nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.



     (n) Title to Assets. 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.



     (o) Patents and Trademarks. 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 “Intellectual Property Rights”). 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.



     (p) Insurance. 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.



     (q) Transactions with Affiliates and Employees. 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



14









 







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) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock option plan
of the Company.



     (r) Sarbanes-Oxley; Internal Accounting Controls. 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 Schedule 3.1(r) attached hereto, the
Company and the Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with management’s
general or specific authorization, and (iv) 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 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’s rules and forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end of the
period covered by the Company’s most recently filed periodic report under the Exchange Act
(such date, the “Evaluation Date”). 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’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’s internal control over financial reporting.



     (s) Certain Fees. Except for fees set forth on Schedule 3.1(s)
attached hereto, no brokerage or finder’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.



15









 





     (t) Private Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 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.



     (u) Investment Company. 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 “investment company” 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.



     (v) Registration Rights. Other than each of the Purchasers and as set forth on
Schedule 3.1(v) 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.



     (w) Listing and Maintenance Requirements. 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
Schedule 3.1(w) attached hereto, the Company has not, in the 12 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.



     (x) Application of Takeover Protections. 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’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’s
issuance of the Securities and the Purchasers’ ownership of the Securities.



     (y) Disclosure. 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



16









 







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 3.2 hereof.



     (z) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 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) the Securities Act which would require the
registration of any such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated. 



     (aa) Solvency. 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) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they
mature, (ii) the Company’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) 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. Schedule 3.1(aa) 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, “Indebtedness” means (a) 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) all guaranties, endorsements



17









 







and other
contingent obligations in respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’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) 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.



     (bb) Tax Status. 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.



     (cc) No General Solicitation. 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 “accredited investors” within the meaning of Rule 501
under the Securities Act.



     (dd) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) 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) 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) violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.



     (ee) Accountants. The Company’s accounting firm is Lane Gorman Trubitt LLP.
To the knowledge and belief of the Company, such accounting firm (i) is a registered public
accounting firm as required by the Exchange Act and (ii) shall express its opinion with
respect to the financial statements to be included in the Company’s Annual Report for the
year ending December 31, 2007.



     (ff) Seniority. 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).



     (gg) No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company



18









 







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’s ability to perform any of its obligations under any of the
Transaction Documents.



     (hh) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an
arm’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’ purchase of the Securities. The Company further represents to each Purchaser
that the Company’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.



     (ii) Acknowledgment Regarding Purchasers’ Trading Activity. Notwithstanding
anything in this Agreement or elsewhere herein to the contrary (except for Sections 3.2(f)
and 4.15 hereof), it is understood and acknowledged by the Company that (i) 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 “derivative”
securities based on securities issued by the Company or to hold the Securities for any
specified term, (ii) past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and
counter-parties in “derivative” transactions to which any such Purchaser is a party,
directly or indirectly, may presently have a “short” position in the Common Stock, and (iv)
each Purchaser shall not be deemed to have any affiliation with or control over any arm’s
length counter-party in any “derivative” transaction. The Company further understands and
acknowledges that (a) 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’
equity interests in the Company at and after the time that the hedging activities are being
conducted.  The Company acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction Documents.



     (jj) Regulation M Compliance.  The Company has not, and to its knowledge no one
acting on its behalf has, (i) 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) sold, bid for,



19









 







purchased, or
paid any compensation for soliciting purchases of, any of the securities of the Company or
(iii) 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) and
(iii), compensation paid to the Company’s placement agent in connection with the placement
of the Securities.



     (kk) FDA. As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as
amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged,
labeled, tested, distributed, sold, and/or marketed by the Company or any of its
Subsidiaries (each such product, a “Pharmaceutical Product”), 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’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) 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) 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) enjoins production at any facility of the Company or any of its
Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction
with the Company or any of its Subsidiaries, or (vi) 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.  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.



     (ll) Form S-3 Eligibility. The Company meets the eligibility requirements set
forth in General Instruction I.A to Form S-3 promulgated under the Securities Act.



20









 





     3.2 Representations and Warranties of the Purchasers. 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:




     (a) Organization; Authority. 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) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies and (iii) insofar as indemnification and contribution provisions
may be limited by applicable law.




     (b) Own Account. Such Purchaser understands that the Securities are
“restricted securities” 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’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.




     (c) Purchaser Status. 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) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such
Purchaser is not required to be registered as a broker-dealer under Section 15 of the
Exchange Act.




     (d) Experience of Such Purchaser. 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



21









 






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.




     (e) General Solicitation. 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.




     (f) Short Sales and Confidentiality Prior To The Date Hereof. 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, 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 (“Discussion Time”). 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’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’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).



ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES




     4.1 Transfer Restrictions.




     (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 144, to the Company or in connection with a pledge
as contemplated in Section 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.



22









 





     (b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:


[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [NOT] 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 “SECURITIES ACT”), 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] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.




     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 “accredited
investor” 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’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.



     (c) Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i) while a registration
statement (including the Registration Statement) covering the resale of such security is
effective under the Securities Act, or (ii) following any sale of such Underlying Shares
pursuant to Rule 144, or (iii) if such Underlying Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by the staff of
the



23









 







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 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 “Legend Removal Date”), 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’s prime broker with the Depository Trust Company System as directed by such
Purchaser.




     (d) In addition to such Purchaser’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 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’s right to pursue actual damages for the Company’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.




     (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 4.1 is predicated upon the
Company’s reliance upon this understanding.



     4.2 Acknowledgment of Dilution. 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



24









 







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.



     4.3 Furnishing of Information. Until the earliest of the time that (i) the
requirements of Rule 144(k) have been met with respect to the Securities or (ii) 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 144.



     4.4 Integration. 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 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.



     4.5 Conversion and Exercise Procedures. 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.



     4.6 Securities Laws Disclosure; Publicity. 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 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



25









 







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) as required by federal securities law in connection with (A)
any registration statement contemplated by the Registration Rights Agreement and (B) the filing of
final Transaction Documents (including signature pages thereto) with the Commission and (ii) 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).



     4.7 Shareholder Rights Plan. 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 “Acquiring Person”
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.



     4.8 Non-Public Information. 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.



     4.9 Use of Proceeds. Except as set forth on Schedule 4.9 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) the satisfaction of any portion of the Company’s
debt (other than payment of trade payables in the ordinary course of the Company’s business and
prior practices), (b) the redemption of any Common Stock or Common Stock Equivalents or (c) the
settlement of any outstanding litigation.



     4.10 Indemnification of Purchasers. Subject to the provisions of this Section 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 15 of the Securities Act and
Section 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 “Purchaser Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts
paid in



26









 







settlements, court costs and reasonable attorneys’ fees and costs of investigation that any
such Purchaser Party may suffer or incur as a result of or relating to (a) 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) 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’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) the employment thereof has
been specifically authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii) 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’s prior written consent, which
shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser Party’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.



     4.11 Reservation and Listing of Securities.




     (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.




     (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’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.




     (c) The Company shall, if applicable: (i) 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



27









 






the
Required Minimum on the date of such application, (ii) 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) 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’s 2008 annual shareholder meeting for
the purpose of obtaining Shareholder Approval, with the recommendation of the Company’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.



     4.12 Participation in Future Financing.




     (a) From the date hereof until the date that is the 12 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 “Subsequent Financing”), 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 “Participation Maximum”) on the same terms, conditions and price
provided for in the Subsequent Financing.




     (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 (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it
wants to review the details of such financing (such additional notice, a “Subsequent
Financing Notice”). 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.




     (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
5th 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’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



28









 






Company receives no notice from a Purchaser as of such 5th Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate.




     (d) If by 5:30 p.m. (New York City time) on the 5th 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.




     (e) If by 5:30 p.m. (New York City time) on the 5th 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.  “Pro Rata Portion” means
the ratio of (x) the Subscription Amount of Securities purchased on the Closing Date by a
Purchaser participating under this Section 4.12 and (y) the sum of the aggregate
Subscription Amounts of Securities purchased on the Closing Date by all Purchasers
participating under this Section 4.12.




     (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 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.




     (g) Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of (i)
an Exempt Issuance, (ii) an underwritten public offering of Common Stock, or (iii) 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’s Common
Stock outstanding immediately prior to the closing of such Subsequent Financing.



     4.13 Subsequent Equity Sales.




     (a) From the date hereof until 60 days after the Effective Date, neither the Company
nor any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
provided, however, the 60 day period set forth in this Section 4.13 shall be
extended for the number of Trading Days during such period in which (i) trading in the
Common Stock is suspended by any Trading Market, or (ii) 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.




     (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



29









 






to effect any
Subsequent Financing involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company issues or sells (i) 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) 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) 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) 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.




     (c) From the date hereof until the earlier of (i) the date that Shareholder Approval is
obtained and deemed effective and (ii) 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).




     (d) Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of an
Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.



     4.14 Equal Treatment of Purchasers. 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.



30









 





     4.15 Short Sales and Confidentiality After The Date Hereof. 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 4.6.  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 4.6,
such Purchaser will maintain the confidentiality of the existence and terms of this transaction and
the information included in the Disclosure Schedules.  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 65, Section A, of the Manual of
Publicly Available Telephone Interpretations, dated July 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 4.6.  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’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’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.



     4.16 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation 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 “Blue Sky” laws of the states of
the United States, and shall provide evidence of such actions promptly upon request of any
Purchaser.



     4.17 Capital Changes. 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.



ARTICLE V.

MISCELLANEOUS




     5.1 Termination.  This Agreement may be terminated by any Purchaser, as to such
Purchaser’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 31, 2007; provided, however, that such
termination will not affect the right of any party to sue for any breach by the other party (or
parties).



31









 





     5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse Rockmore
Investment Master Fund Ltd. (“Rockmore”) 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.



     5.3 Entire Agreement. 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.



     5.4 Notices. 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) 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) 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) the second Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d) 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.



     5.5 Amendments; Waivers. 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.



     5.6 Headings. 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.



     5.7 Successors and Assigns. 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



32









 







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 “Purchasers.”



     5.8 No Third-Party Beneficiaries. 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 4.10.



     5.9 Governing Law. 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’ fees and other
costs and expenses incurred with the investigation, preparation and prosecution of such action or
proceeding.



     5.10 Survival. The representations and warranties shall survive the Closing and the
delivery of the Securities for the applicable statue of limitations.



     5.11 Execution. 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 “.pdf” 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
“.pdf” signature page were an original thereof.



33









 





     5.12 Severability. 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.



     5.13 Rescission and Withdrawal Right. 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; provided, however, 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.



     5.14 Replacement of Securities. 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.



     5.15 Remedies. 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.



     5.16 Payment Set Aside. 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



34









 







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.



     5.17 Usury. 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 “Maximum Rate”), 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’s election.



     5.18 Independent Nature of Purchasers’ Obligations and Rights. 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.



     5.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated
damages or other amounts owing under the Transaction Documents is a continuing obligation of



35









 







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.



     5.20 Saturdays, Sundays, Holidays, etc. 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.



     5.21 Construction. 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.



     5.22 Waiver of Jury Trial. 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.



(Signature Pages Follow)




36









 








     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.



	 	 	 	 	 	 	 	 	 
	NATURAL HEALTH TRENDS CORP.	 	 	 	Address for Notice:	 	 
	 

	 	 	 	 	 	
2050 Diplomat Drive
	 	 
	 

	 	 	 	 	 	Dallas, TX 75234	 	 
	By:

	 	/s/ Chris Sharng
	 	 	 	Fax: 972-243-5428	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Name: Chris Sharng	 	 	 	 	 	 
	 

	 	Title: President	 	 	 	 	 	 





With a copy to (which shall not constitute notice):




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]





37











 





[PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT]




     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.



Name of Purchaser: Rockmore Investment Master Fund Ltd.




Signature of Authorized Signatory of Purchaser: /s/ Bruce Bernstein




Name of Authorized Signatory: Bruce Bernstein





Title of Authorized Signatory: President




Email Address of Purchaser:




Facsimile Number of Purchaser:




Address for Notice of Purchaser:



Address for Delivery of Securities for Purchaser (if not same as address for notice):




Subscription Amount: $879,971.84



Principal Amount (Subscription Amount multiplied by 1.1364): $1,000,000




Warrant Shares:



EIN Number:




 









 








[PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT]




     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.



Name of Purchaser: Iroquois Master Fund, Ltd.




Signature of Authorized Signatory of Purchaser: /s/ Joshua Silverman




Name of Authorized Signatory: Joshua Silverman




Title of Authorized Signatory: Authorized Signatory




Email Address of Purchaser:




Facsimile Number of Purchaser:



Address for Notice of Purchaser:



Address for Delivery of Securities for Purchaser (if not same as address for notice):




Subscription Amount: $879,971.84



Principal Amount (Subscription Amount multiplied by 1.1364): $1,000,000




Warrant Shares:



EIN Number:




 









 








[PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT]




     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.



Name of Purchaser: Hudson Bay Fund LP




Signature of Authorized Signatory of Purchaser: /s/ Yoav Roth




Name of Authorized Signatory: Yoav Roth




Title of Authorized Signatory: Principal and Portfolio Manager




Email Address of Purchaser:




Facsimile Number of Purchaser:



Address for Notice of Purchaser:



Address for Delivery of Securities for Purchaser (if not same as address for notice):




Subscription Amount: $378,387.89



Principal Amount (Subscription Amount multiplied by 1.1364): $430,000




Warrant Shares:



EIN Number:





 











 





[PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT]




     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.


Name of Purchaser: Hudson Bay Overseas Fund LTD



Signature of Authorized Signatory of Purchaser: /s/ Yoav Roth



Name of Authorized Signatory: Yoav Roth



Title of Authorized Signatory: Principal and Portfolio Manager



Email Address of Purchaser:



Facsimile Number of Purchaser:



Address for Notice of Purchaser:



Address for Delivery of Securities for Purchaser (if not same as address for notice):



Subscription Amount: $501,583.95



Principal Amount (Subscription Amount multiplied by 1.1364): $570,000



Warrant Shares:



EIN Number:




 









 





[PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT]




     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.


Name of Purchaser: Portside Growth and Opportunity Fund



Signature of Authorized Signatory of Purchaser: /s/ Owen Littman



Name of Authorized Signatory: Owen Littman



Title of Authorized Signatory: Authorized Signatory



Email Address of Purchaser:



Facsimile Number of Purchaser:



Address for Notice of Purchaser:



Address for Delivery of Securities for Purchaser (if not same as address for notice):



Subscription Amount: $439,985.92



Principal Amount (Subscription Amount multiplied by 1.1364): $500,000



Warrant Shares:



EIN Number:




 









 





[PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT]




     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.


Name of Purchaser: Cranshire Capital, L.P.



Signature of Authorized Signatory of Purchaser: /s/ Mitchell Kopin



Name of Authorized Signatory: Mitchell Kopin




Title of Authorized Signatory: President – Downsview Capital, the General Partner



Email Address of Purchaser:



Facsimile Number of Purchaser:



Address for Notice of Purchaser:



Address for Delivery of Securities for Purchaser (if not same as address for notice):



Subscription Amount: $439,985.92



Principal Amount (Subscription Amount multiplied by 1.1364): $500,000



Warrant Shares:



EIN Number:




 









 





[PURCHASER SIGNATURE PAGES TO BHIP SECURITIES PURCHASE AGREEMENT]




     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.



Name of Purchaser: GEMIMI MASTER FUND, LTD.



          By: GEMINI STRATEGIES, LLC as investment manager


Signature of Authorized Signatory of Purchaser: /s/ Peter Weisman



Name of Authorized Signatory: Peter Weisman



Title of Authorized Signatory: Managing Director



Email Address of Purchaser:



Facsimile Number of Purchaser:



Address for Notice of Purchaser:



Address for Delivery of Securities for Purchaser (if not same as address for notice):



Subscription Amount: $219,992.96



Principal Amount (Subscription Amount multiplied by 1.1364): $250,000



Warrant Shares:



EIN Number: