Document:

exv10w2

 

Exhibit 10.2

[FORM OF STOCK AND WARRANT PURCHASE AGREEMENT (NON-U.S. PURCHASER)

	 	 	 
	To:

	 	Natural Health Trends Corp.
	 

	 	2050 Diplomat Drive
	 

	 	Dallas, Texas 75234
	From:

	 	The Undersigned Purchaser

The undersigned (the “Purchaser”), hereby confirms its agreement with you as follows:

     1. This Stock and Warrant Purchase Agreement (the “Agreement”) is made as of the date set
forth below between Natural Health Trends Corp., a Delaware corporation (the “Company”), and the
Purchaser.

     2. The Company has authorized the sale and issuance to certain purchasers in a private
placement (the “Offering”) of (a) up to 1,631,000 (as amended, 1,761,900) shares (the “Shares”), of
Series A Convertible Preferred Stock of the Company, US$0.001 par value per share, which shall have
the preferences, rights, privileges and restrictions, and shall initially be convertible into an
equivalent number of shares of Common Stock of the Company, par value US$0.001 per share (the
“Common Stock”), all as set forth in substantially the form of the Certificate of Designations,
Preferences and Rights attached hereto as Exhibit A (the “Certificate of Designations”),
and (b) warrants in substantially the form attached hereto as Exhibit B (the “Warrants”)
evidencing the right to purchase up to 1,631,000 (as amended, 1,761,900) shares of Common Stock.
The shares of Common Stock into which the Shares are convertible and for which the Warrants are
exercisable are hereinafter referred to as the “Underlying Shares.” The Purchaser acknowledges
that the form of the Certificate of Designations and the form of the Warrant attached hereto
contain certain blanks and bracketed language relating to information that will not be known until
the Closing (as defined below) of the sale and purchase of the Shares and the Warrants. The
Purchaser does hereby authorize the Company to complete such blanks and to substitute final
documentary language consistent with the bracketed language at the Closing of the sale and purchase
of the Shares and Warrants.

     3. The Company and the Purchaser agree that the Purchaser will purchase from the Company and
the Company will issue and sell to the Purchaser (a)                      Shares at a purchase price of
US$1.70 per Share, and (b) a Warrant to purchase the same number of shares of Common Stock at a
purchase price of US$0.00001 per Underlying Share for which the Warrant is exercisable, for an
aggregate purchase price of US$                                        , pursuant to the Terms and Conditions for
Purchase of Shares and Warrant attached hereto as Annex I and incorporated herein by this reference
as if fully set forth herein. Unless otherwise requested by the Purchaser, the certificate or
certificates representing the Shares and the Warrant purchased by the Purchaser will be registered
in the Purchaser’s name and address as set forth below.

     4. The Purchaser hereby acknowledges that it has received, read and is familiar with this
Agreement (consisting of these “Subscription Pages,” Annex I and all exhibits thereto), including
but not limited the representations and warranties of the Company set forth in Section 3 of Annex
I, and has received, read and is familiar with the Company’s Annual Report on Form 10-K for the
year ended December 31, 2006 and the Current Reports on Form 8-K and all other

 

 

reports filed by the Company under the U.S. Securities Exchange Act of 1934 between January 1, 2007
and April 16, 2007 (the “SEC Reports”), including without limitation the “Risk Factors” set forth
under the caption “Item 1A. Risk Factors” commencing on page 11 of the above referenced Form 10-K.
Further, the Purchaser acknowledges that it has received, read, and is familiar with the
additional “Offering Risk Factors” included with the Company’s Disclosure Package that incorporates
the SEC Reports (the “Offering Risk Factors”). Purchaser acknowledges that certain statements
contained in the SEC Reports constitute “Forward-Looking Statements,” as referenced under the
caption “Forward-Looking Statements” set forth in the introduction to the Form 10-K and, as
described therein, Purchaser acknowledges that the Company’s actual results could differ materially
from those anticipated in these forward-looking statements as a result of various factors,
including the risk factors described under the caption “Risk Factors” and elsewhere in the Form
10-K, as well as the Offering Risk Factors. The Purchaser acknowledges that its investment in the
Shares and the Warrant (as well as all Underlying Shares) are subject to the risk factors set forth
in the Form 10-K, as well as the Offering Risk Factors.

     5. The Purchaser hereby represents and warrants to the Company as follows:

          (a) The Purchaser has adequate means of providing for Purchaser’s current needs and any
unexpected needs in the future even without the funds that Purchaser might invest pursuant to this
Agreement. The Purchaser neither has nor anticipates any need to sell the Shares or the Warrant in
the foreseeable future. The Purchaser is able to bear the economic risks of this investment, is
able to hold the Shares and the Warrant for an indefinite period of time, and has a sufficient net
worth to sustain a loss of the entire investment in the Shares and the Warrant in the event that
such a loss occurs. The Purchaser’s commitment in the Shares and the Warrant and other
non-marketable investments will not be a disproportionate part of Purchaser’s net worth.

          (b) The Purchaser, either alone or with one or more of its representatives, has such knowledge
and experience in financial and business matters that the Purchaser is capable of evaluating the
merits and risks of an investment in the Company.

          (c) The Purchaser confirms that, if requested by Purchaser, all documents, records and books
pertaining to this proposed investment in the Company have been made available to the Purchaser and
his advisors, and they have made such examinations of the foregoing as the Purchaser and his
advisors have deemed necessary in connection with such investment in the Company.

          (d) The Purchaser has had an opportunity to ask questions of and receive answers from the
officers of the Company concerning the terms and conditions of this investment, and such officers
of the Company have answered all such questions to the full satisfaction of the Purchaser.

          (e) The Shares and the Warrant (and any Underlying Shares) will be acquired for the
Purchaser’s own account for investment, and not for the account of any other person nor with a view
to resell, distribute, or participate in any distribution of the Shares, the Warrant or the
Underlying Shares in a manner which would require the registration of the Shares, the Warrant or
the Underlying Shares under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or
any applicable state securities laws.

2

 

          (f) The Purchaser understands that no U.S. or other securities administrator has made any
finding or determination relating to the merits or fairness of an investment in the Shares or the
Warrant, and no such securities administrator has or will recommend or endorse any offering of the
Shares or the Warrant.

          (g) It has been called to the Purchaser’s attention, both in this Agreement and by those
individuals with whom the Purchaser has dealt in connection with investing in the Company, that the
Purchaser’s investment in the Company is a speculative investment and involves a degree of risk
which might result in the loss of the Purchaser’s entire investment. The Purchaser acknowledges
that the Company has made available to the Purchaser or the Purchaser’s representative(s) the
opportunity to obtain additional information with which to evaluate the merits and risks of this
investment. By reason of the Purchaser’s business and financial experience, the Purchaser has
acquired the capacity to protect the Purchaser’s interest in investments of this nature. In
reaching the conclusion that the Purchaser desires to acquire the Shares and the Warrant, the
Purchaser has carefully evaluated its financial resources and investment position and the risks
associated with this investment.

          (h) In making the Purchaser’s investment decision, the Purchaser has relied solely upon the
Company’s filings with the SEC and the representations and warranties of the Company contained
herein, as well as any investigations of the Company made by the Purchaser and the Purchaser’s
representatives, if any. The Purchaser has received no representations from Chief China Resources,
Ltd., the Company, or their respective principals, officer or directors other than the
representations contained in this Agreement.

          (i) No representations have been made to the Purchaser concerning projected results, expected
yields or any other prospective information concerning operation of the Company.

          (j) The Purchaser is not a “U.S. person” (as that term is defined in Regulation S (“Regulation
S”) promulgated under the Securities Act), and is not acting for the account or benefit of a “U.S.
person.”

          (k) The Purchaser, if an individual, is a bona fide citizen and resident of the country set
forth in the “Purchaser Information” section of this Agreement, and the addressees set forth in the
“Purchaser Information” section of this Agreement are the true and correct business and home
addresses of the Purchaser. The Purchaser, if not an individual, is a corporation, partnership,
limited liability company, trust or other entity incorporated or otherwise organized in the
jurisdiction set forth in the “Purchaser Information” section of this Agreement, and the address
set forth in the “Purchaser Information section of this Agreement is the true and correct business
address of the Purchaser.

          (l) Purchaser was not located in the United States at the time that (i) any offer to purchase
the Shares and the Warrant was made to the Purchaser, and (ii) the buy order for the Shares and the
Warrant was made.

     6. The Purchaser hereby acknowledges and agrees to the following:

          (a) Each certificate representing Shares issued to the Purchaser shall be stamped or otherwise
imprinted with a legend in substantially the following form:

3

 

“The shares of Series A Convertible Preferred Stock represented by this
certificate (the “Series A Preferred”) and the Common Stock issuable upon
conversion thereof have not been registered under the U.S. Securities Act of
1933, as amended (the “Securities Act”), or any other securities laws. No
transfer of the shares represented by this certificate shall be valid or
effective unless (a) such transfer is made pursuant to an effective
registration statement under the Securities Act and in compliance with any
applicable securities laws, or (b) the Holder shall deliver to the Company
an opinion of counsel in form and substance reasonably acceptable to the
Company that such proposed transfer is exempt from the registration
requirements of the Securities Act and of any applicable securities laws,
whether pursuant to the provisions of Regulation S promulgated under the
Securities Act or otherwise. Hedging transactions involving shares of the
Series A Preferred or the Common Stock of the Company are prohibited, unless
such transactions are conducted in compliance with the Securities Act.”

“The shares of Series A Preferred represented by this certificate and the
Common Stock issuable upon conversion thereof may be subject to certain
rights and obligations provided for in that certain Certificate of
Designations, Preferences and Rights filed with the Secretary of State of
the State of Delaware on [THE CLOSING DATE] (the “Certificate of
Designations”) and that certain Stock and Warrant Purchase Agreement (the
“Purchase Agreement”) dated [THE CLOSING DATE], between the Company and the
initial holders of the Series A Preferred Stock. Such rights and
obligations under the Purchase Agreement include certain obligations of the
Company to register the resale of the Common Stock issuable upon conversion
of the Series A Preferred. A copy of the Certificate of Designations and
the Purchase Agreement shall be furnished without charge by the issuer
hereof to the holder hereof upon written request.”

          (b) Each Warrant issued to the Purchaser shall be stamped or otherwise imprinted with a legend
in substantially the following form:

“Neither this Warrant nor any shares of Common Stock issuable upon exercise
hereof have been registered under the U.S. Securities Act of 1933, as
amended (the “Securities Act”), or any applicable securities laws. No
transfer of this Warrant or of the shares of Common Stock issuable upon
exercise hereof shall be valid or effective unless (a) such transfer is made
pursuant to an effective registration statement under the Securities Act and
in compliance with any applicable securities laws, or (b) the holder of this
Warrant shall deliver to the Company an opinion of counsel in form and
substance reasonably acceptable to the Company that such transfer is exempt
from the registration requirements of the Securities Act

4

 

(whether pursuant to Regulation S promulgated thereunder or otherwise) and
of any applicable securities laws.”

“Unless the Warrant and the shares of Common Stock issuable upon exercise
hereof are registered under the Securities Act or an exemption from such
registration is available, (a) this Warrant may not be exercised by or on
behalf of any “U.S. person,” and (b) this Warrant may not be exercised
within the United States and the shares of Common Stock issuable upon
exercise hereof may not be delivered within the United States upon such
exercise, other than in an offering that meets the requirements of an
“offshore transaction” (as defined in Regulation S). In order to exercise
this Warrant, the holder must follow the procedures set forth in Section
1(a) of this Warrant, including the requirement that it deliver to the
Company (x) a written certification that the holder is not a “U.S. person”
(as defined in Regulation S) and that the Warrant is not being exercised on
behalf of a “U.S. person,” or (y) a written opinion of counsel to
the effect that the Warrant and the shares of Common Stock issuable upon
exercise hereof have been registered under the Securities Act or are exempt
from registration thereunder. Hedging transactions involving this Warrant
or the shares of the Company’s Common Stock are prohibited, unless such
transactions are conducted in compliance with the Securities Act.”

“This Warrant and the Common Stock issuable upon exercise hereof may be
subject to certain rights and obligations provided for in that certain Stock
and Warrant Purchase Agreement (the “Purchase Agreement”) dated [THE CLOSING
DATE], between the Company, the initial holder of this Warrant and the
initial holders of other similar warrants. Such rights and obligations
under the Purchase Agreement include certain obligations of the Company to
register the resale of the Common Stock issuable upon exercise hereof. A
copy of the Purchase Agreement shall be furnished without charge by the
issuer hereof to the Holder hereof upon written request. “

          (c) Each certificate representing shares of Common Stock issued to the Purchaser upon
conversion of the Shares or upon exercise of the Warrant shall be stamped or otherwise imprinted
with a legend in substantially the following form:

“The shares represented by this certificate have not been registered under
the U.S. Securities Act of 1933, as amended (the “Securities Act”), or any
other securities laws. No transfer of the shares represented by this
certificate shall be valid or effective unless (a) such transfer is made
pursuant to an effective registration statement under the Securities Act and
in compliance with any applicable securities laws, or (b) the Holder shall
deliver to the Company an opinion of counsel in form and substance
reasonably acceptable to the Company that such proposed transfer is exempt
from the registration requirements of the Securities Act and of any
applicable securities

5

 

laws, whether pursuant to the provisions of Regulation S promulgated under
the Securities Act or otherwise. Hedging transactions involving shares
Company’s Common Stock are prohibited, unless such transactions are
conducted in compliance with the Securities Act.”

“The shares represented by this certificate may be subject to certain rights
and obligations provided for in that certain Stock and Warrant Purchase
Agreement (the “Purchase Agreement”) dated [THE CLOSING DATE], between the
Company and certain purchaser of Warrants and Series A Preferred Stock of
the Company. Such rights and obligations under the Purchase Agreement
include certain obligations of the Company to register the resale of the
Common Stock. A copy of the Purchase Agreement shall be furnished without
charge by the issuer hereof to the holder hereof upon written request.”

          (d) The Purchaser will not exercise the Warrant within the United States and will not accept
delivery of shares of Common Stock issuable upon exercise of the Warrant within the United States,
except in an offering that meets the definition of an “offshore transaction” pursuant to Rule
902(h) of Regulation S.

          (e) The Purchaser will not resell any of the Shares, the Warrant or the Underlying Shares
except (i) in accordance with the provisions of Regulation S, (ii) pursuant to registration under
the Securities Act, or (iii) pursuant to an available exemption from registration.

          (f) The Purchaser will not engage in hedging transactions with regard to the Underlying Shares
unless such transactions are conducted in compliance with the Securities Act.

     7. The Company hereby agrees and covenants with the Purchaser that the Company will not
register any transfer of the Shares, the Warrant or the Underlying Shares, except to the extent
required by the law of any country other than the United States, unless such transfer is made (i)
in accordance with the provisions of Regulation S, (ii) pursuant to registration under the
Securities Act, or (iii) pursuant to an available exemption from registration.

     Please confirm that the foregoing correctly sets forth the agreement between us by signing in
the space provided below for that purpose.

[Purchaser’s Signature and Information Pages Follow]

6

 

     IN WITNESS WHEREOF, this Stock and Warrant Purchase Agreement is entered into by the
undersigned Purchaser and the Company as of the date indicated below.

“PURCHASER”

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	Print Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	Address:
	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

ENGLISH LANGUAGE NOTE TO PURCHASER: This Agreement, including Annex I attached hereto and the
exhibits attached thereto, is set forth exclusively in the English language. The Purchaser
acknowledges and agrees that either alone or with the Purchaser’s advisors, that it fully
understands the contents of these documents and also the contents of the Company’s SEC Reports (as
referenced in Section 4 above).

CHINESE NOTE TO PURCHASER

Purchaser’s Initials

AGREED AND ACCEPTED:

NATURAL HEALTH TRENDS CORP.

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 
	Date:

	 	May 4, 2007	 	 

7

 

STOCK CERTIFICATE AND WARRANT INFORMATION

     Purchaser:       Please provide us with the following information:

	 	 	 	 	 
	1.

	 	The exact name that your Shares
and Warrant are to be registered in
(this is the name that will appear
on your stock certificate(s) and
your Warrant). You may use a
nominee name if appropriate.	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	2.

	 	The relationship between the
Purchaser and the registered holder
listed in response to item 1 above:	 	 
	 

	 	 	 	 

PURCHASER INFORMATION

     The Company must determine that a potential Purchaser meets certain suitability requirements
before offering or selling Shares or Warrants to such Purchaser. The purpose of the following is
to assure the Company that each Purchaser will meet the applicable suitability requirements under
relevant securities laws. The information supplied by you below will be used in determining
whether you meet such criteria, and reliance upon applicable exemptions from registration is based
in part on the information herein supplied. In addition, such information will be relied upon by
the Company, and will in relevant part be included in the “Registration Statement” described in
Section 6 of Annex I attached hereto, which will be filed with the SEC and be made publicly
available.

     By providing the following information, you are representing to the Company that such
information is true and correct and you are authorizing the Company to provide such information to
such parties as the Company deems appropriate in order to ensure that the offer and sale of the
Shares and Warrants will not result in a violation of applicable securities laws, that you
otherwise satisfy the suitability standards applicable to Purchasers of the Shares and Warrants,
and otherwise for purposes of inclusion in the Registration Statement. All potential Purchasers
must provide the information requested below. Please print or type your responses and attach
additional sheets of paper if necessary to complete your answers to any item. 

	 	 	 
	Name:
	 	 
	 

	 	 

	 	 	 
	Business Address:
	 	 
	 

	 	 
	 

	 	(Number and Street)

	 	 	 	 	 	 	 
	 
	 

	 	(City)
	 	(Country)
	 	(Postal Code)

	 	 	 
	Telephone Number: (   )
	 	 
	 

	 	 

8

 

If an Individual:

	 	 	 	 	 
	Resident Address:
	 	 	 	 
	 	 	 
	 

	 	 	 	(Number and Street)

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 
	 	(City)	 	(Country)	 	(Postal Code)

	 	 	 
	Telephone Number: (   )
	 	 
	 

	 	 

	 	 	 	 	 	 	 	 	 	 	 
	Age:

	 	 	 	Citizenship:
	 	 	 	Where registered to vote:	 	 
	 

	 	 
	 	 	 	 
	 	 	 	 

If a corporation, partnership, limited liability company, trust or other entity:

	 	 	 
	Type of Entity: 
	 	 
	 

	 	 

	 	 	 
	Who has authority to buy or sell securities for the Entity?
	 	 
	 

	 	 

	 	 	 
	Who has authority to vote securities held by the Entity?
	 	 
	 

	 	 

	 	 	 	 	 	 	 	 	 	 	 
	Jurisdiction of formation:

	 	 	 	 	 	Date of formation:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Send all correspondence to (check one):

	 	 	 	 	 	Residential Address
	 	 	 	 	 	Business Address
	 

	 	 	 	 
	 	 	 	 	 	 	 	 

     In connection with the registration for resale of the “Underlying Shares” pursuant to the
“Registration Statement,” as contemplated in Section 6 of Annex I attached hereto, the Purchaser
represents that, except as set forth below:

     (a) the Purchaser has had no position, office or other material relationship within the past
three years with the Company or its affiliates,

     (b) neither the Purchaser, nor any group of which the Purchaser is a member or to which the
Purchaser is related, beneficially owns (including the right to acquire or vote) any securities of
the Company,

     (c) the Purchaser has no direct or indirect affiliation or association with any broker or
dealer that is a member of the U.S. National Association of Securities Dealers, Inc. (“NASD”),

     (d) the Purchaser has an understanding of Regulation M promulgated under the U.S. Securities
Exchange Act of 1934 and will conduct any resale of the “Underlying Shares” that are registered
under the “Registration Statement” in compliance with Regulation M, and

     (e) the Purchaser understands that the Purchaser may not conduct a “short sale” of the
Company’s Common Stock before the effective date of the Registration Statement where such “short
sale” is covered with “Underlying Shares” to be registered for resale under the Registration
Statement.

Exceptions To Any of the Above Paragraphs (a)-(e):

 

 

(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)

9

 

ANNEX I

TERMS AND CONDITIONS FOR PURCHASE OF SHARES AND WARRANT

1. AGREEMENT TO SELL AND PURCHASE THE SHARES AND WARRANT; SUBSCRIPTION DATE.

     1.1 PURCHASE AND SALE. At the Closing (as defined in Section 2.1), the Company will sell and
issue to the Purchaser, and the Purchaser will purchase and acquire from the Company, upon the
terms and conditions hereinafter set forth, the number of Shares and the Warrant covering the
indicated number of Underlying Shares, as referenced on the subscription pages to which these Terms
and Conditions for Purchase of Shares and Warrant are attached as Annex I (the “Subscription
Pages”), all at the purchase price set forth on such Subscription Pages.

     1.2 OTHER PURCHASERS. As part of the Offering, the Company proposes to enter into
substantially this same form of Stock and Warrant Purchase Agreement with certain other purchasers
(the “Other Purchasers”), and the Company expects to complete sales of Shares and Warrants to them.
The Purchaser and the Other Purchasers are hereinafter sometimes collectively referred to as the
“Purchasers,” and this Agreement and the Stock and Warrant Purchase Agreements executed by the
Other Purchasers are hereinafter sometimes collectively referred to as the “Agreements.” The
Company will accept executed Agreements from Purchasers for the purchase of Shares and Warrants
commencing upon April 16, 2007 and concluding upon the date (the “Subscription Date”) on which the
Company has notified (i) the Purchaser, with respect to the offer and sale of the Shares and
Warrants inside the United States, or (ii) the Purchaser and/or the Company’s placement consultant
for the Shares and Warrants outside of the United States (the “Placement Consultant”), with respect
to the offer and sale of the Shares and Warrants outside the United States, in each case, in
writing that it is no longer accepting Agreements for the purchase of Shares and Warrants in the
Offering.

     1.3 PLACEMENT CONSULTANT FEE. The Purchaser acknowledges that the Company intends to pay the
Placement Consultant a fee in respect of its placement activities in connection with the offer and
sale of the Shares and Warrants outside the United States.

2. THE CLOSING.

     2.1 DELIVERY OF THE SHARES AND WARRANTS AT CLOSING. The completion of the purchase and sale
of the Shares and Warrants (the “Closing”) shall occur at a place and time to be specified by the
Company (the “Closing Date”). At the Closing, the Company shall deliver to the Purchaser (a) one
or more stock certificates representing the number of Shares set forth on the Subscription Pages,
and (b) a Warrant, duly executed by the Company, to purchase the number of Underlying Shares set
forth on the Subscription Pages, each such certificate(s) and Warrant to be registered in the name
of the Purchaser in accordance with the instructions set forth on the Subscription Pages.

10

 

     2.2 CONDITIONS TO THE COMPANY’S OBLIGATION TO CLOSE. The Company’s obligation to issue and
sell the Shares and the Warrant described on the Subscription Pages to the Purchaser shall be
subject to the following conditions, any one or more of which may be waived by the Company: (a)
receipt by the Company of the purchase price for the Shares and the Warrant being purchased
hereunder as set forth on the Subscription Pages; (b) completion of purchases and sales under the
Agreements with the Other Purchasers; (c) the accuracy of the representations and warranties made
by the Purchasers and the fulfillment of those undertakings of the Purchasers to be fulfilled prior
to the Closing; (d) the Company’s determination that the offer and sale of the Shares and Warrants
does not require the approval of the Company’s holders of Common Stock; and (e) the absence of any
order, writ, injunction, judgment or decree that questions the validity of the Agreements or the
right of any of the Purchasers to enter into such agreements or to consummate the transactions
contemplated hereby and thereby.

     2.3 CONDITIONS TO THE PURCHASER’S OBLIGATION TO CLOSE. The Purchaser’s obligation to purchase
the Shares and the Warrant described on the Subscription Pages shall be subject to the following
conditions, any one or more of which may be waived by the Purchaser: (a) the representations and
warranties of the Company contained in Section 3 being true and correct on and as of such Closing
with the same effect as though such representations and warranties had been made on and as of the
date of such Closing; (b) all authorizations, approvals or permits, if any, of any governmental
authority or regulatory body of the United States or any state thereof that are required in
connection with the lawful issuance and sale of the Shares and the Warrant pursuant to this
Agreement shall be obtained and effective as of the Closing; (c) the Company shall have filed the
Certificate of Designations with the Secretary of State of Delaware on or prior to the Closing,
which shall continue to be in full force and effect as of the Closing; and (d) the absence of any
order, writ, injunction, judgment or decree that questions the validity of the Agreements or the
right of the Company to enter into such agreements or to consummate the transactions contemplated
hereby and thereby.

     2.4 ELECTION OF DIRECTOR. Unless the Nominating Committee of the Board of Directors does not
approve the nomination of Mr. Ken Wang, within 10 business days following the Company’s 2007 Annual
Meeting of Common Stockholders the Company shall cause Mr. Wang to be elected to the Board of
Directors of the Company. If the Nominating Committee does not so approve the nomination of Mr.
Wang, then the Company shall promptly notify the Purchasers in writing to such effect and the
holders of a majority of the Shares shall be entitled to nominate a substitute nominee within
thirty (30) days of such notice by providing to the Company the name of the substitute nominee and
the other information specified in Section 6 of the Certificate of Designations, in which event the
substitute nominee shall be evaluated by the Nominating Committee and, if approved, the Company
shall cause the substitute nominee to be elected to the Board of Directors. Mr. Wang or any
substitute nominee shall be extended indemnification protection by the Company for his service as a
director of the Company on terms substantially similar to the indemnification protection generally
afforded other members of the Board of Directors. The position held by Mr. Wang or any substitute
nominee on the Board of Directors shall thereafter be subject to the right of the holders of a
majority of the Shares to designate an appropriate individual for nomination to the Board of
Directors, as provided in Section 6 of the Certificate of Designations.

11

 

     3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as otherwise described in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2006 (and any amendments thereto filed prior to the date hereof) (the “Form 10-K”) and
the Current Reports on Form 8-K and other reports filed between January 1, 2007 and April
16, 2007 with the U.S. Securities and Exchange Commission, which are included in the Disclosure
Package distributed herewith (collectively, the “SEC Reports”), the Company represents and warrants
to Purchaser on and as of the date hereof and as of the Closing as follows:

     3.1 CORPORATE EXISTENCE AND POWER. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, with the requisite corporate
power and authority to own and use its properties and assets and to carry on its business as
currently conducted. The Company is duly qualified to do business and is in good standing 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, would not, individually or in the aggregate have or result in a Material Adverse
Effect (as defined below). The Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by the Agreements, the Warrants and the
Certificate of Designations as filed with the Secretary of State of the State of Delaware
(collectively, the “Transaction Documents”), and otherwise to carry out its obligations hereunder
and thereunder, including, without limitation, the issuance of the Shares and the Warrant and the
subsequent issuance of the Underlying Shares upon conversion of the Shares and exercise of the
Warrant. For purposes of this Agreement, “Material Adverse Effect” means a material adverse effect
on the assets, businesses, properties, operations or financial condition of the Company and its
subsidiaries, taken as a whole.

     3.2 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by the Company
of the Agreements and each of the other Transaction Documents, the issuance and delivery of the
Shares and the Warrant, and, upon conversion of the Shares or exercise of the Warrant (as
applicable), the issuance and delivery of the Underlying Shares, and the performance of the
transactions contemplated by the Agreements and the Transaction Documents (a) have been duly
authorized by all necessary corporate or other action of the Company; (b) do not and will not
violate or result in a violation of, conflict with or constitute or result in a default (whether
after the giving of notice, lapse of time or both) or loss of benefit under any provision of the
certificate of incorporation or the bylaws of the Company; (c) do not and will not violate or
result in a violation of, conflict with or constitute or result in any breach, default or
contravention of (or with due notice or lapse of time or both would result in any breach, default
or contravention of), or loss of benefit under, any contract or obligation to which the Company or
any of its subsidiaries is a party or by which its or any of its subsidiaries assets are bound, or
cause the creation of any claim upon any of the assets of the Company, and do not and will not
violate, conflict with or result in a violation of, or constitute a default (whether after the
giving of notice, lapse of time or both) under, any judgment, injunction, writ, award, decree or
order of any nature of, or any restriction imposed by, any court or governmental authority against,
binding upon or otherwise applicable to the Company, or, to the Company’s knowledge, any provision
of United States law, regulation or rule, except where a waiver has been obtained for any such
conflict or violation or any such conflict, violation, breach, default or contravention

12

 

has not resulted or would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect; (d) do not and will not require from the Company any
notice to, declaration or filing with, or consent or approval of any United States federal or state
governmental authority (other than such filings as may be required with the SEC, any U.S. state
securities authorities or The Nasdaq Stock Market); and (e) do not and will not violate or result
in a violation of, or constitute a default (whether after the giving of notice, lapse of time or
both) under, accelerate any obligation under, or give rise to a right of termination of, any
permit, license or authorization to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound.

     3.3 BINDING EFFECT. The Agreements and the other Transaction Documents have been duly
executed and all such agreements constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally and
by general principles of equity relating to enforceability (regardless of whether considered in a
proceeding at law or in equity), and except that rights to indemnification and contribution may be
limited by federal or state securities laws or public policy relating thereto.

     3.4 CAPITALIZATION. The capitalization of the Company as of December 31, 2006 is as described
in the Form 10-K. The Company has not issued any capital stock since January 1, 2007, other than
pursuant to the exercise of employee and director stock options, if any, disclosed in the SEC
Reports. The outstanding shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassesseable, and were not issued in violation of
any preemptive rights or similar rights to subscribe for or purchase securities. Except for such
options and warrants as were outstanding on December 31, 2006 and are as described in the Form
10-K, and such options as may have been issued or may be issued to the Company’s directors,
officers or employees under the Company’s stock option or incentive plans, and such Warrants as may
be sold under the Agreements, there are no outstanding subscriptions, commitments, rights
(including, without limitation, preemptive rights, rights of first refusal, put or call rights or
obligations), warrants or options to acquire, or instruments convertible into or exchangeable for,
any unissued shares of capital stock or other equity interest in the Company, or any contract,
commitment, agreement, understanding or arrangement of any kind, in either case to which the
Company is a party and providing for the issuance or sale of any capital stock of the Company, any
such convertible or exchangeable securities or any such rights, warrants or options. Without
limiting the foregoing, no preemptive right, co-sale right, right of first refusal or other similar
right exists with respect to the issuance and sale of the Shares, Warrants and Underlying Shares.
Except as may be otherwise disclosed in the Form 10-K, there are no rights to have the Company’s
capital stock registered for sale to the public in connection with the laws of any jurisdiction,
and there are no documents, instruments or agreements relating to the voting of the Company’s
voting securities or restrictions on the transfer of the Company’s capital stock other than such
documents, instruments or agreements expressly referenced herein.

     3.5 AUTHORIZATION, VALIDITY AND ISSUANCE OF SECURITIES. The Shares and Warrants are duly and
validly authorized, and when issued, sold and delivered to the Purchasers after payment therefor,
will be validly issued and delivered, fully paid and non-assessable and not subject to any rights
of first refusal, preemptive rights or similar rights, and

13

 

will be free and clear of all liens other than those created by the Transaction Documents.
The Underlying Shares have been duly and validly authorized and reserved for issuance upon
conversion of the Shares or exercise of the Warrants and, when issued in compliance with the
provisions of the Shares or Warrants, will be validly issued, fully paid and non-assessable and not
subject to any rights of first refusal, preemptive rights or similar rights, and will be free and
clear of all liens other than those created by the Transaction Documents.

     3.6 REPORTS; FINANCIAL STATEMENTS.

     (a) The Common Stock is registered pursuant to Section 12 of the U.S. Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and is listed on Nasdaq. The SEC Reports constitute all
reports, schedules, forms, statements and other documents required to be filed by the Company with
the SEC pursuant to the reporting requirements of the Exchange Act, including pursuant to Sections
13, 14 or 15(d) thereof, since January 1, 2007. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the U.S. Securities Act of 1933, as
amended (the “Securities Act”), and the Exchange Act and the rules and regulations of the SEC
promulgated thereunder, 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 light of the circumstances under which they were made, not
misleading. Nothing has come to the attention of the Company since such respective dates that
would indicate that the SEC Reports are not true and correct in all material respects as of the
applicable dates thereof.

     (b) The audited consolidated financial statements of the Company and its subsidiaries (balance
sheet and statements of operations, cash flow and shareholders’ equity, together with the notes
thereto) for the fiscal year ended December 31, 2006 set forth in the Form 10-K contains the
unqualified report of the Company’s independent certified public accountants (the “Company
Financial Statements”), are true, complete and correct in all material respects, consistent in all
material respects with the books and records of the Company and its subsidiaries, and have been
prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) applied
on a consistent basis throughout the periods indicated. Except as may be otherwise specified in
the Company Financial Statements or the notes thereto, the Company Financial Statements fairly
present in all material respects the financial condition, operating results and cash flows of the
Company and its subsidiaries as of the dates and for the periods indicated in accordance with GAAP.
Nothing has come to the attention of the Company since such respective dates that would indicate
that any such financial statements are not true and correct in all material respects as of the
applicable dates thereof.

     3.7 NO MATERIAL ADVERSE CHANGE; ORDINARY COURSE OF BUSINESS. Except as set forth in the SEC
Reports filed prior to the date hereof or as contemplated by the Transaction Documents or as set
forth in the Company Financial Statements, (a) since January 1, 2007, neither the Company nor any
of its subsidiaries has participated in any transaction (including, without limitation, amendments
to or changes in its Certificate of Incorporation or Bylaws; incurrences, assumptions or guarantees
of any debt for borrowed money; issuances or sales of securities, other than pursuant to
compensatory plans; discharges or satisfactions of material liens; declarations or payments of
dividends or distributions to stockholders; sales, assignments or transfers of material assets;
waivers of any rights of substantial value; and

14

 

material changes in officer compensation) material to the financial condition of the Company
and its subsidiaries taken as a whole which is outside the ordinary course of business, (b) since
January 1, 2007, neither the Company nor any of its subsidiaries has created or assumed any lien,
mortgage or similar claim on an asset of the Company or any of its subsidiaries that is material to
the Company and its subsidiaries, taken as a whole, and is outside of the ordinary course of
business, (c) since January 1, 2007, there has not been any event, action, omission or other
development or change that, individually or in the aggregate, has had a Material Adverse Effect,
(d) since January 1, 2007, there has not occurred a material change in the Company’s or any of its
subsidiaries’ accounting principles or practice except as required by reason of a change in GAAP,
(e) since January 1, 2007, there has not occurred any resignation, termination or removal of any
officer or director of the Company or any of its subsidiaries or loss of personnel of the Company
or any of its subsidiaries or change in the terms and conditions of the employment of the Company’s
or any of its subsidiary’s officers or key personnel that has had or could reasonably be expected
to have a Material Adverse Effect, and (f) since January 1, 2007, there has been no damage,
destruction or loss, whether or not covered by insurance, that would, individually or in the
aggregate, have or would be reasonably likely to have, a Material Adverse Effect on the Company and
its subsidiaries.

     3.8 BROKER’S, FINDER’S OR SIMILAR FEES. Except for the fee due to the Placement Consultant in
respect of its placement activities in connection with the offer and sale of the Shares and
Warrants outside the United States, there are no brokerage commissions, finder’s fees or similar
fees or commissions payable by the Company in connection with the transactions contemplated hereby.

     3.9 TAX MATTERS. The Company and its subsidiaries, (a) except where any failure has not had
and could not reasonably be expected to have a Material Adverse Effect, have timely and properly
filed all federal, state, local and foreign tax returns required to be filed by any of them through
the date hereof and as of the closing, and all such tax returns filed by the Company or any such
subsidiaries are true, correct and complete in all material respects; (b) have paid or caused to be
paid all federal, state, local, foreign and other taxes, including without limitation, income
taxes, estimated taxes, alternative minimum taxes, excise taxes, sales taxes, franchise taxes,
employment and payroll related taxes, withholding taxes, transfer taxes, and all deficiencies, or
other additions to tax, interest, fines and penalties owed by any of them (collectively, “Taxes”),
required to be paid by any of them through the date hereof and as of the closing whether disputed
or not, except Taxes that have not yet accrued or otherwise become due; and (c) and have not
received notice of any audit or of any proposed deficiencies from the Internal Revenue Service or
any other taxing authority (other than routine audits undertaken in the ordinary course and that
have been finally resolved on or prior to the date hereof).

     3.10 INTELLECTUAL PROPERTY. The Company or one or more of its subsidiaries exclusively owns
or possesses adequate and enforceable rights to use all of the intellectual property assets
(including, but not limited to, any and all patents, trademarks, trade names, trade dress,
registered and unregistered trademarks and service marks, registered copyrights in both published
and unpublished works, know-how, trade secrets and confidential or proprietary information
(collectively, the “Intellectual Property Assets”) necessary for the operation of its business.

15

 

     3.11 LITIGATION. There is no litigation or governmental or administrative proceeding or
investigation pending or, to the knowledge of the Company, threatened in writing against the
Company or any of its subsidiaries or affecting the properties or assets of the Company or any of
its subsidiaries, or, as to matters related to the Company or any of its subsidiaries, against any
of their respective officers, directors or key employees, nor, to the knowledge of the Company, has
there occurred any event or does there exist any condition on the basis of which any such claim may
be asserted, that has had or could reasonably be expected to have a Material Adverse Effect.

     3.12 NO DEFAULTS. The Company and its subsidiaries are not, nor have they received notice
that they would be with the passage of time, giving of notice, or both, (a) in violation of any
provision of their respective Certificates of Incorporation or Bylaws (or other applicable
organizational documents) or (b) in default or violation of any material term, condition or
provision of (i) any judgment, decree, order, injunction or stipulation applicable to the Company
or its subsidiaries or (ii) any material agreement, note, mortgage, indenture, contract, lease or
instrument, permit, concession, franchise or license to which the Company or its subsidiaries are a
party or by which the Company or its subsidiaries or their properties or assets may be bound, and
no circumstances exist which would entitle any party to any material agreement, note, mortgage,
indenture, contract, lease or instrument to which the Company or its subsidiaries are a party, to
terminate such, as a result of the Company or its subsidiaries having failed to meet any provision
thereof which individually, or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.

     3.13 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no judgment, injunction, order or decree
binding upon the Company or its subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of the Company or its
subsidiaries, any acquisition of property by the Company or its subsidiaries or the conduct of
business by the Company or its subsidiaries as currently conducted or as currently proposed to be
conducted by the Company.

     3.14 INSURANCE. The insurance policies providing insurance coverage to the Company or its
subsidiaries, including any policies in respect of product liability, are, in the reasonable
opinion of the Company, adequate for the business conducted by the Company and its subsidiaries,
taken as a whole. All of such policies are in full force and effect and are valid and enforceable
in accordance with their terms, and the Company and its subsidiaries have complied with all
material terms and conditions of such policies, including premium payments. None of the insurance
carriers has indicated to the Company or its subsidiaries an intention to cancel any such policy.

     3.15 LICENSES; COMPLIANCE WITH REGULATORY REQUIREMENTS. Except as disclosed in the SEC
Reports, the Company holds all material authorizations, consents, approvals, franchises, licenses
and permits required under applicable law or regulation for the operation of the business of the
Company and its subsidiaries as presently operated (collectively, the “Governmental
Authorizations”), except where the failure to hold any such Governmental Authorizations has since
January 1, 2007 or could reasonably be expected to have a Material Adverse Effect.

16

 

     3.16 DISCLOSURE. No representation or warranty made by the Company in this Agreement or the
Transaction Documents or in any Schedule or Exhibit hereto or thereto, contains or will contain any
untrue statement of a material fact, or omits to state a material fact necessary to make the
statements or facts contained herein or therein not misleading in light of the circumstances under
which they were furnished.

4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.

     4.1 PURCHASER ACKNOWLEDGEMENT. The Purchaser, for itself only, represents and warrants to,
and covenants with, the Company that: (a) the Purchaser understands that the Shares and the
Warrants (and the related Underlying Shares) are “restricted securities” and have not been
registered under the Securities Act or under applicable state securities or blue sky laws and
Purchaser is acquiring the number of Shares and Warrants set forth on the Subscription Pages in the
ordinary course of its business and for its own account for investment only, and not with a view
to, or for sale in connection with, any distribution thereof, nor with the intention of
distributing or reselling same; provided, however, that by making the foregoing
representation, the Purchaser does not agree to hold any of the securities for any minimum or other
specific term, and reserves the right to dispose of the securities at any time in accordance with
or pursuant to a Registration Statement or an exemption under the Securities Act; (b) the Purchaser
will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares or Warrants
(or the related Underlying Shares) except in compliance with the Securities Act and other
applicable securities laws and the respective rules and regulations promulgated thereunder; (c) the
Purchaser has answered all questions on the Subscription Pages and the answers thereto are true and
correct as of the date hereof and will be true and correct as of the Closing Date and the related
information may be relied upon by the Company for inclusion in the Registration Statement; (d) the
Purchaser will notify the Company immediately of any change in any of such information until such
time as the Purchaser has sold all of its Underlying Shares or until the Company is no longer
required to keep the Registration Statement effective; (e) the Purchaser has, in connection with
its decision to purchase the number of Shares and Warrants set forth on the Subscription Pages,
relied only upon the representations and warranties of the Company contained herein and the
information set forth in the Disclosure Package, including the SEC Reports; and (f) the Company’s
representations and warranties set forth in this Agreement are made only as of the date of this
Agreement and the Closing Date, and Purchaser’s subsequent decision to convert the Shares into
Underlying Shares or to exercise the Warrant for Underlying Shares are made in the sole discretion
of the Purchaser in accordance with the terms of the Shares and Warrant and the Company hereby
expressly disclaims any obligation to provide to the Purchaser any additional representations,
warranties or information. Purchaser understands that the issuance of the Shares and Warrants to
the Purchaser (and the issuance of the related Underlying Shares) has not been registered under the
Securities Act, or registered or qualified under any other securities laws in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of
the Purchaser’s investment intent as expressed herein. The Placement Consultant is not authorized
to make any representation or use any information in connection with the placement, purchase and
sale of the Shares and Warrants, and no person is authorized to provide any representation which is
inconsistent or in addition to those in the Disclosure Package or the SEC Reports. The Purchaser
acknowledges that it has not received or relied on any such representations.

17

 

     4.2 REGISTRATION REQUIRED. The Purchaser hereby covenants with the Company not to make any
sale of the Shares, Warrants or Underlying Shares without complying with the provisions of this
Agreement, including Section 6.3 hereof, and without effectively causing the prospectus delivery
requirement under the Securities Act to be satisfied (unless the Purchaser is selling its
Underlying Shares in a transaction not subject to the prospectus delivery requirement), and the
Purchaser acknowledges that the certificates evidencing the Shares, Warrants and Underlying Shares
will be imprinted with a legend that prohibits their transfer except in accordance therewith. The
Purchaser acknowledges that as set forth in, and subject to the provisions of, Section 6.3, there
may occasionally be times when the Company, based on the advice of its counsel, determines that it
must suspend the use of the prospectus forming a part of the Registration Statement until such time
as an amendment to the Registration Statement has been filed by the Company and declared effective
by the SEC or until the Company has amended or supplemented such prospectus.

     4.3 POWER AND AUTHORITY. The Purchaser further represents and warrants to, and covenants
with, the Company that (i) the Purchaser has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby and has taken all
necessary action to authorize the execution, delivery and performance of this Agreement, and (ii)
this Agreement constitutes a valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Purchasers herein may be
legally unenforceable.

     4.4 NO DISPOSITIONS. Except with the prior written consent of the Company, the Purchaser will
not, prior to the effectiveness of the Registration Statement, engage in any hedging or other
transaction which is designed to or could reasonably be expected to lead to or result in a
disposition of Common Stock of the Company by the Purchaser or any other person or entity. Such
prohibited hedging or other transactions would include, without limitation, effecting any short
sale or having in effect any short position (whether or not such sale or position is against the
box and regardless of when such position was entered into) or any purchase, sale or grant of any
right (including, without limitation, any put or call option) with respect to the Common Stock of
the Company or with respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the Common Stock of the
Company.

     4.5 RECEIPT AND REVIEW OF DISCLOSURE PACKAGE. The Purchaser, either alone or with
one or more advisers, has such knowledge and experience in financial and business matters that the
Purchaser is capable of evaluating the merits and risks of an investment in the Company and has
evaluated such merits and risks. Purchaser has received, read and is familiar with this Agreement
(consisting of the Subscription Pages, Annex I and all exhibits hereto), including but not limited
to the representations and warranties of the Company set forth in Section 3 of Annex I, and has had
the opportunity to thoroughly review the Disclosure Package,

18

 

including the SEC Reports. The Purchaser confirms that it and its advisers have examined the
foregoing materials as the Purchaser and its advisers have deemed necessary in connection with the
investment in the Shares and Warrant. The Purchaser has had an opportunity to ask questions of and
receive answers from the principals, officers and directors of the Company concerning the terms and
conditions of the Offering, and such principals, officers and directors of the Company have
answered all such questions to the full satisfaction of the Purchaser.

     4.6 NO TAX OR LEGAL ADVICE. The Purchaser understands that nothing in this Agreement, or any
other materials presented to the Purchaser in connection with the purchase and sale of Shares and
Warrants constitutes legal, tax or investment advice. The Purchaser has consulted such legal, tax
and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of Shares and Warrants.

5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

Notwithstanding any investigation made by any party to this Agreement or by the Placement
Consultant, all covenants, agreements, representations and warranties made by the Company and the
Purchaser herein shall survive the execution of this Agreement, the delivery to the Purchaser of
the Shares and Warrants being purchased and the payment therefor.

6. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.

     6.1 REGISTRATION PROCEDURES AND EXPENSES. The Company shall:

          (a) subject to receipt of necessary information from the Purchasers, prepare and file with the
SEC, as soon as practicable, but in no event later than sixty (60) days after the Closing Date
(such date, the “Filing Date”), a registration statement to enable the resale of all of the
Underlying Shares (the “Registration Statement”);

          (b) use its reasonable best efforts, subject to the receipt of necessary information from the
Purchasers, to cause the Registration Statement to become effective as soon as practicable after
the filing thereof, but in any event within four (4) calendar months of the Closing Date if the
Registration Statement is not reviewed by the SEC and within six (6) calendar months of the Closing
Date if the Registration Statement is reviewed by the SEC (the “Effectiveness Deadline”); provided
that if and to the extent that any of the Underlying Shares are not included in the Registration
Statement at the time it is declared effective for reasons other than the failure of the Purchaser
to furnish to the Company the information required by the next to last paragraph of this Section
6.1, the Company shall use its reasonable best efforts, subject to the receipt of necessary
information from the Purchasers, to prepare and file with the SEC such additional Registration
Statements as the Company in its reasonable judgment shall deem viable for the purpose of
effectively registering for resale under the Securities Act all of the Underlying Shares;

          (c) use its reasonable best efforts to prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection therewith (the
“Prospectus”) as may be necessary to keep the Registration Statement

19

 

current and effective for a period from the date the Registration Statement is declared effective
by the SEC until the earliest of (i) the date when all Underlying Shares covered by such
Registration Statement have been sold and (ii) the date on which the Purchasers may sell all of the
Underlying Shares acquired or which the Purchaser has the right to acquire without restriction
pursuant to Rule 144(k) under the Securities Act (or any successor provision thereof having similar
effect) (the “Effectiveness Period”);

          (d) furnish, without charge, to the Purchaser with respect to the Underlying Shares registered
under the Registration Statement such number of copies of the Registration Statement, each
amendment and supplement thereto (in each case including all exhibits), Prospectuses (including
supplemental prospectuses) and preliminary versions of the Prospectus filed with the SEC
(“Preliminary Prospectuses”) in conformity with the requirements of the Securities Act and such
other documents as the Purchaser may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Underlying Shares by the Purchaser;

          (e) file documents required of the Company for normal blue sky clearance in U.S. states
reasonably specified in writing by the Purchaser prior to the effectiveness of the Registration
Statement, provided, however, that the Company shall not be required to qualify to
do business or consent to service of process in any jurisdiction in which it is not now so
qualified or has not so consented;

          (f) bear and pay all expenses (other than professional fees incurred by the Purchasers and
underwriting discounts and commissions, if any) incident to the performance of or compliance with
this Agreement by the Company under Section 6.1 or Section 6.3, whether or not the Registration
Statement is filed or becomes effective and whether or not any Underlying Shares are sold pursuant
to the Registration Statement;

          (g) advise the Purchasers, promptly (but in any event within five (5) business days) after it
shall receive notice or obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the initiation of any proceeding
for that purpose; and it will promptly use its commercially reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop
order should be issued.

          (h) use its reasonable best efforts to cause all such Underlying Shares covered by such
Registration Statement to be listed on a national securities exchange or trading system and each
securities exchange and trading system (if any) on which similar securities issued by the Company
are then listed;

          (i) provide a transfer agent and registrar for all Underlying Shares registered pursuant to
this Agreement and provide a CUSIP number for all such Underlying Shares, in each case not later
than the effective date of such registration;

          (j) notify the Purchaser, promptly after the Company receives notice thereof (but in any event
within five (5) business days), of the time when such Registration

20

 

Statement has been declared effective or a supplement to any Prospectus forming a part of such
registration statement has been filed;

          (k) cooperate with the Purchaser to facilitate the timely preparation and delivery of
certificates representing the Underlying Shares sold pursuant to a Registration Statement, which
certificates shall be free, to the extent sold in compliance with the “plan of distribution” set
forth in the Registration Statement and to the extent permitted by applicable law and the Purchase
Agreement, of all restrictive legends, and to enable such Underlying Shares to be in such
denominations and registered in such names as any Purchaser may request; and

          (l) with a view to making available to the Purchaser the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the SEC that may at any time permit the
Purchaser to sell the Underlying Shares to the public without registration, the Company covenants
and agrees to: (i) make and keep public information available, as those terms are understood and
defined in Rule 144, until the earlier of (A) such date as all of the Underlying Shares acquired or
that may be acquired by the Purchaser may be resold pursuant to Rule 144(k) or any other rule of
similar effect or (B) such date as all of the Underlying Shares acquired or that may be acquired by
the Purchaser shall have been resold; (ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the Exchange Act; and (iii)
furnish to the Purchaser upon request, as long as the Purchaser owns any Shares, Warrants or
Underlying Shares, (A) a written statement by the Company that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (B) a copy of the Company’s most recent
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may
be reasonably requested in order to avail the Purchaser of any rule or regulation of the SEC that
permits the selling of any such Shares without registration.

     It shall be a condition precedent to the obligations of the Company to take any action
pursuant to this Section 6.1 that the Purchaser shall furnish to the Company such information
regarding himself, herself or itself, the Underlying Shares to be sold by such Purchaser pursuant
to the Registration Statement, and the intended method of disposition of such Underlying Shares as
shall be required to effect the registration thereof. If the Registration Statement refers to any
Purchaser by name or otherwise as the holder of any securities of the Company, then such Purchaser
shall have the right to require (if such reference to such Purchaser by name or otherwise is not
required by the Securities Act or similar federal statute then in force) the deletion of the
reference to such Purchaser in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.

     The Company understands that the Purchaser disclaims being an underwriter, but the Purchaser
being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has
hereunder.

6.2 REGISTRATION DEFAULT PENALTIES

          (a) The Company and the Purchaser agree that the Purchaser will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and if the

21

 

Registration Statement is not maintained in the manner contemplated herein during the Effectiveness
Period. The Company and the Purchaser further agree that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if the Registration Statement is not filed on
or prior to the Filing Date, or the Registration Statement is filed with and declared effective by
the SEC but thereafter ceases to be effective as to the Underlying Shares covered thereby at any
time prior to the expiration of the Effectiveness Period due to an intentional and willful act by
the Company without being succeeded immediately by a subsequent Registration Statement filed with
the SEC covering such Underlying Shares (any such failure being referred to as a “Section 6.2(a)
Event”), the Company shall pay in cash as liquidated damages for such failure and not as a penalty
to the Purchaser an amount equal to two percent (2%) of the product of U.S. $1.70 times the number
of Shares purchased by the Purchaser pursuant to this Agreement (the “Damage Amount”). Payments to
be made pursuant to this Section 6.2(a) shall be due and payable immediately upon demand in
immediately available cash funds. The parties agree that the Damage Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the amount of damages
that will be incurred by the Purchaser if a Section 6.2(a) Event as described herein has occurred.
Notwithstanding the foregoing, the Company shall remain obligated to cure the breach or correct the
condition that caused the Section 6.2(a) Event to the extent otherwise consistent with its
obligations under Section 6.1, and the Purchaser shall have the right to take any action necessary
or desirable to enforce such obligations.

          (b) The Company and the Purchaser agree that the Purchaser will suffer damages if the
Registration Statement is not declared effective with respect to all of the Underlying Shares on or
prior to the Effectiveness Deadline as set forth in Section 6.1(b). The Company and the Purchaser
further agree that it would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if the Registration Statement is not declared effective with respect to all of the
Underlying Shares on or prior to the Effectiveness Deadline, the Company shall pay in cash as
liquidated damages for such failure and not as a penalty to the Purchaser an amount equal to two
percent (2%) of the product of U.S. $1.70 times the number of Underlying Shares (as adjusted for
any stock splits, stock dividends, recapitalizations, reclassifications, combinations or similar
transactions) that the Purchaser obtained the right to acquire upon the purchase of the
Shares and the Warrant pursuant to this Agreement and that were not registered under the
Registration Statement (the “Effectiveness Damage Amount”); provided, however,
that, with respect to the Underlying Shares that the Purchaser has the right to acquire upon
exercise of the Warrant only, in no event shall any Effectiveness Damage Amount be due and payable
with respect to any such Underlying Shares unless and until such time as the Registration Statement
continues not to be effective with respect to some or all of such Underlying Shares and the closing
per share market price of the Common Stock, as reported on the Nasdaq Global Market (or any
successor exchange or other market on which the Common Stock is then traded), exceeds the then
applicable per share “Exercise Price” of the Warrant. Payments to be made pursuant to this Section
6.2(b) shall be due and payable immediately upon demand in immediately available cash funds. The
parties agree that the amounts set forth in this Section 6.2(b) represent a reasonable estimate on
the part of the parties, as of the date of this Agreement, of the amount of damages that will be
incurred by the Purchaser if the Registration Statement is not declared effective with respect to
all of the Underlying Shares on or prior to its Effectiveness Deadline. Notwithstanding the
foregoing, the Company shall remain obligated to

22

 

cause the Registration Statement to become effective in accordance with its obligations set forth
in Section 6.1, and the Purchaser shall have the right to take any action necessary or desirable to
enforce such obligations.

     6.3 TRANSFER OF SECURITIES AFTER REGISTRATION; SUSPENSION.

          (a) The Purchaser agrees that it will not effect any disposition of the Shares, Warrants or
Underlying Shares that would constitute a sale within the meaning of the Securities Act, other than
transactions exempt from the registration requirements of the Securities Act, except as
contemplated in the Registration Statement referred to in Section 6.1 and as described below, and
that it will promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding the Purchaser or its plan of distribution.

          (b) Except in the event that paragraph (c) below applies, the Company shall: (i) if deemed
necessary by the Company, prepare and file from time to time with the SEC a post-effective
amendment to the Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other required document
so that such Registration Statement will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the statements therein
not misleading, and so that, as thereafter delivered to purchasers of the Underlying Shares being
sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; (ii) provide the Purchaser
copies of any documents filed pursuant to Section 6.3(b)(i); and (iii) upon request, inform each
Purchaser who so requests that the Company has complied with its obligations in Section 6.3(b)(i)
(or that, if the Company has filed a post-effective amendment to the Registration Statement which
has not yet been declared effective, the Company will notify the Purchaser to that effect, will use
its reasonable efforts to secure the effectiveness of such post-effective amendment as promptly as
possible and will promptly notify (but in any event within five (5) business days) the Purchaser
pursuant to Section 6.3(b)(i) hereof when the amendment has become effective).

          (c) Subject to paragraph (d) below, in the event: (i) of any request by the SEC or any other
U.S. Federal or U.S. state governmental authority during the period of effectiveness of the
Registration Statement for amendments or supplements to a Registration Statement or related
Prospectus or for additional information; (ii) of the issuance by the SEC or any other Federal or
state governmental authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification or exemption from
qualification of any of the Underlying Shares for sale in any jurisdiction or the initiation of any
proceeding for such purpose; or (iv) that the financial statements included in the Registration
Statement become ineligible for inclusion therein or in the event of the occurrence of any event or
circumstance which the Company believes necessitates the making of any changes in the Registration
Statement or Prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will not

23

 

contain any untrue statement of a material fact or any omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading, and that in the
case of the Prospectus, it will not contain any untrue statement of a material fact or any omission
to state a material fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading; then the Company
shall promptly deliver a certificate in writing to the Purchaser (the “Suspension Notice”) to the
effect of the foregoing and, upon receipt of such Suspension Notice, the Purchaser will discontinue
disposition of Underlying Shares pursuant to the Registration Statement (a “Suspension”) until the
Purchaser’s receipt of copies of a supplemented or amended Prospectus prepared and filed by the
Company, or until it is advised in writing by the Company that the current Prospectus may be used,
and has received copies of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such Prospectus. In the event of any Suspension, the Company will
use its reasonable best efforts to cause the use of the Prospectus so suspended to be resumed as
soon as reasonably practicable within 30 days after delivery of a Suspension Notice to the
Purchasers.

          (d) Provided that a Suspension is not then in effect the Purchaser may sell Underlying Shares
under the Registration Statement, provided that it arranges for delivery of a current Prospectus to
the transferee of such Shares. Upon receipt of a request therefor, the Company will provide an
adequate number of current Prospectuses to the Purchaser and to any other parties requiring such
Prospectuses.

          (e) In the event of a sale of Underlying Shares by the Purchaser, unless such requirement is
waived by the Company in writing, the Purchaser must also deliver to the Company’s transfer agent,
with a copy to the Company, a “certificate of subsequent sale” in substantially in the form
provided or approved by the Company, so that the Underlying Shares may be properly transferred.

     6.4 INDEMNIFICATION.

     (a) For the purpose of this Section 6.4:

     (i) the term “Selling Stockholder” shall include the Purchaser, each of its
members, partners, officers, directors, shareholders and each person, if any, who
controls the Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act;

     (ii) the term “Registration Statement” shall include any preliminary or final
Prospectus, exhibit, supplement or amendment included in or relating to, and any
document incorporated by reference in, the Registration Statement (or deemed to be a
part thereof) referred to in Section 6.1; and

     (iii) the term “Untrue Statement” shall include any untrue statement or alleged
untrue statement, or any omission or alleged omission to state in the Registration
Statement a material fact required to be stated therein or necessary to

24

 

make the statements therein, in the light of the circumstances under which they were
made, not misleading.

          (b) The Company agrees to indemnify and hold harmless each Selling Stockholder from and
against any and all losses, claims, damages or liabilities (collectively, “Losses”), as incurred,
to which such Selling Stockholder may become subject (under the Securities Act, the Exchange Act or
otherwise) insofar as such Losses (or actions or proceedings in respect thereof) arise out of, or
are based upon or related to (i) any untrue statement of a material fact contained in or omitted
from the Registration Statement (ii) any material inaccuracy in the representations and warranties
of the Company contained in the Agreement or the failure of the Company to perform its obligations
hereunder, or (iii) any material failure by the Company to fulfill any material undertaking
included in the Registration Statement, and the Company will reimburse such Selling Stockholder for
any reasonable legal or other costs and expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided, however, that
the Company shall not be liable in any such case to the extent that such Loss arises out of, or is
based upon or related to, an Untrue Statement made in such Registration Statement in reliance upon
and in conformity with written information furnished to the Company by or on behalf of such Selling
Stockholder specifically for use in preparation of the Registration Statement or the failure of
such Selling Stockholder to comply with his, her or its covenants and agreements contained in this
Agreement or any statement or omission in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Purchaser prior to the pertinent sale or sales by the
Purchaser.

          (c) The Purchaser agrees (severally and not jointly with any other Purchaser) to indemnify and
hold harmless the Company (and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement
and each director of the Company) from and against any and all Losses to which the Company (or any
such officer, director or controlling person) may become subject (under the Securities Act or
otherwise), insofar as such Losses (or actions or proceedings in respect thereof) arise out of, or
are based upon or related to, (i) any failure by the Purchaser to comply with his, her or its
covenants and agreements contained in this Agreement, or (ii) any Untrue Statement of a material
fact contained in or omitted from the Registration Statement if and only if such Untrue Statement
was made in reliance upon and in conformity with written information furnished by or on behalf of
the Purchaser specifically for use in preparation of the Registration Statement, and the Purchaser
will reimburse the Company (or such officer, director or controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim; provided, however, that the aggregate amount that the
Purchaser shall be required to pay pursuant to this Section 6.4(c) shall in no event be greater
than the amount of the net proceeds received by the Purchaser upon the sale of Underlying Shares
pursuant to the Registration Statement giving rise to such Losses less amounts previously paid by
the Purchaser with respect to any such Losses.

          (d) Promptly after receipt by any indemnified person of a notice of a claim or the beginning
of any action in respect of which indemnity is to be sought against an indemnifying person pursuant
to this Section 6.4, such indemnified person shall notify the

25

 

indemnifying person in writing of such claim or of the commencement of such action, but the
omission to so notify the indemnifying party will not relieve it from any liability which it may
have to any indemnified party under this Section 6.4 (except to the extent that such omission
materially and adversely affects the indemnifying party’s ability to defend such action) or from
any liability otherwise than under this Section 6.4. Subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person, the indemnifying person
shall be entitled to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, shall be entitled to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof (unless it has failed to assume
the defense thereof and appoint counsel reasonably satisfactory to the indemnified party), such
indemnifying person shall not be liable to such indemnified person for any legal expenses
subsequently incurred by such indemnified person in connection with the defense thereof, provided,
however, that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the reasonable opinion of counsel to the indemnified person, for the same counsel
to represent both the indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such
indemnifying person; provided, however, that no indemnifying person shall be responsible for the
fees and expenses of more than one separate counsel (together with appropriate local counsel) for
all indemnified parties. In no event shall any indemnifying person be liable in respect of any
amounts paid in settlement of any action unless the indemnifying person shall have approved the
terms of such settlement; provided that such consent shall not be unreasonably withheld. No
indemnifying person shall, without the prior written consent of the indemnified person, effect any
settlement of any pending or threatened proceeding in respect of which any indemnified person is or
could reasonably have been a party and indemnification could have been sought hereunder by such
indemnified person, unless such settlement includes an unconditional release of such indemnified
person from all liability on claims that are the subject matter of such proceeding.

     (e) If the indemnification provided for in this Section 6.4 is unavailable to an indemnified
party under subsection (b) or (c) above in respect of any Losses (or actions or proceedings in
respect thereof) referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such indemnified party as a
result of such Losses (or actions in respect thereof) in such proportion as is appropriate to
reflect the relative fault of the indemnified party on the one hand and the indemnifying party on
the other in connection with the statements or omissions or other matters which resulted in such
Losses (or actions in respect thereof), as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether any action in
question, including any Untrue Statement, has been taken or made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such action or Untrue
Statement. The Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (e) were determined by pro rata allocation (even if the
Purchasers were treated as one entity for such purpose) or by any other method of allocation which
does not take into account the equitable considerations referred to

26

 

above in this subsection (e). The amount paid or payable by an indemnified party as a result of
the Losses (or actions in respect thereof) referred to above in this subsection (e) shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. The Purchasers’ obligations in this
subsection to contribute are several in proportion to their sales of Underlying Shares to which
such loss relates and not joint. Notwithstanding anything to the contrary contained herein, the
Purchaser shall be required to contribute under this Section 6.4(e) for only that amount as does
not exceed the net proceeds to such Purchaser as a result of the sale of Underlying Shares pursuant
to such Registration Statement.

          (f) The parties to this Agreement hereby acknowledge that they are sophisticated business
persons who were represented by counsel during the negotiations regarding the provisions hereof
including, without limitation, the provisions of this Section 6.4, and are fully informed regarding
such provisions. The parties further acknowledge that the provisions of this Section 6.4 fairly
allocate the risks in light of the ability of the parties to investigate the Company and its
business in order to assure that adequate disclosure is made in the Registration Statement as
required by the Securities Act and the Exchange Act.

     6.5 TERMINATION OF CONDITIONS AND OBLIGATIONS. The conditions precedent imposed by Section 4
or this Section 6 upon the transferability of the Underlying Shares shall cease and terminate as to
any particular number of the Underlying Shares when the sale of such Underlying Shares shall have
been effectively registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition set forth in the Registration Statement covering
such Shares or at such time as an opinion of counsel satisfactory to the Company shall have been
rendered to the effect that such conditions are not necessary in order to comply with the
Securities Act.

     6.6 INFORMATION AVAILABLE. So long as the Registration Statement is effective covering the
resale of Underlying Shares by the Purchaser, the Company will furnish to the Purchaser:

          (a) as soon as practicable after it is available, one copy of (i) its Annual Report to
Stockholders (which Annual Report shall contain financial statements audited in accordance with
generally accepted accounting principles by a national firm of certified public accountants) and
(ii) if not included in substance in the Annual Report to Stockholders, its Annual Report on Form
10-K (the foregoing, in each case, excluding exhibits);

          (b) upon the reasonable request of the Purchaser, an adequate number of copies of the
Prospectuses to supply to any other party requiring such Prospectuses; and the Company, upon the
reasonable request of the Purchaser, will meet with the Purchaser or a representative thereof at
the Company’s headquarters to discuss all information relevant for disclosure in the Registration
Statement covering the Underlying Shares and will otherwise cooperate with the Purchaser conducting
an investigation for the purpose of reducing or eliminating the Purchaser’s exposure to liability
under the Securities Act, including the reasonable production of information at the Company’s
headquarters; provided, that the Company shall not be required to disclose any confidential
information to or meet at its

27

 

headquarters with the Purchaser until and unless the Purchaser shall have entered into a
confidentiality agreement in form and substance reasonably satisfactory to the Company with the
Company with respect thereto.

     6.7 TRANSFERABILITY OF REGISTRATION RIGHTS. The registration rights set forth in this
Agreement are transferable to any transferee of Shares, Warrants or Underlying Shares, as
applicable, so long as such transfer is made in compliance with the terms of this Agreement and
such transferee consents in writing to be bound by the covenants set forth in Section 4 of this
Agreement (to the extent reasonably applicable) and all of the terms and conditions of Section 6
this Agreement.

     7. NOTICES. All notices, requests, consents and other communications hereunder shall be in
writing, shall be mailed (A) if within domestic United States by first-class registered or
certified airmail, or nationally recognized overnight express courier, postage prepaid, or by
facsimile, or (B) if delivered to or from a location outside the United States, by International
Federal Express (or comparable service) or facsimile or email, and shall be deemed given (i) if
delivered by first-class registered or certified mail domestic, three business days after so
mailed, (ii) if delivered by nationally recognized overnight carrier, one (1) business day after so
mailed, (iii) if delivered by International Federal Express (or comparable service), two (2)
business days after so mailed, (iv) if delivered by facsimile or email, upon electric confirmation
of receipt and shall be delivered as addressed as follows:

(a) if to the Company, to:

Natural Health Trends Corp.

2050 Diplomat Drive

Dallas, Texas 75234

Attn: Chief Executive Officer

Phone: (972) 241-4080

Telecopy: (972) 243-5428

     with a copy mailed to:

Natural Health Trends Corp.

2050 Diplomat Drive

Dallas, Texas 75234

Attn: General Counsel

Phone: (972) 241-4080

Telecopy: (214) 451-6149

          (b) if to the Purchaser, at its address on the Signature Page hereto, or at such other
address or addresses as may have been furnished to the Company in writing.

8. CHANGES. This Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Purchasers that have executed Agreements for the purchase of
a majority of the Shares and Warrants sold or to be sold in the Offering.

28

 

9. LANGUAGE. This Agreement (including the Subscription Pages) is set forth in the English
language, which shall control over any versions of this Agreement in any other language. Either
party may at its own expense prepare versions of this Agreement and the other Transaction Documents
in any other language that are deemed necessary, advisable or appropriate.

10. HEADINGS. The headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this Agreement.

11. SEVERABILITY. In case any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.

12. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware, U.S.A., without giving effect to the principles of
conflicts of law.

13. FORUM SELECTION. The Company and Purchasers agree that any dispute, controversy of claim
arising out of or relating to this Agreement, or the breach, termination or invalidity hereof shall
be subject to the exclusive jurisdiction and venue of the federal and state courts located in the
United States, and the Company and the Purchasers do hereby consent to the personal and exclusive
jurisdiction of these courts.

14. FEES AND EXPENSES. Each party hereto shall be solely responsible for the fees and expenses
incurred by such party in connection with the Offering.

15. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute but one instrument,
and shall become effective when one or more counterparts have been signed by each party hereto and
delivered to the other parties.

16. CONFIDENTIAL DISCLOSURE AGREEMENT. Notwithstanding any provision of this Agreement to the
contrary, any confidential disclosure agreement previously executed by the Company and the
Purchaser in connection with the transactions contemplated by this Agreement shall remain in full
force and effect in accordance with its terms following the execution of this Agreement and the
consummation of the transactions contemplated hereby; provided, that the confidentiality
obligations set forth in any such confidential disclosure agreement shall not apply to any
information that is part of the public knowledge or literature (other than by reason of a breach of
such confidential disclosure agreement).

29

 

EXHIBIT A

[See Exhibit 3.1 to this current report on Form 8-K.]

 

 

EXHIBIT B

[See Exhibit 10.3 to this current report on Form 8-K.]exv10w3

 

Exhibit 10.3

			
	 	 	 
	No. 2007 —                     
	 	Issue Date:   May 4, 2007

WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

NATURAL HEALTH TRENDS CORP.

Neither this Warrant nor any shares of Common Stock (as defined below) issuable upon exercise
hereof have been registered under the U.S. Securities Act of 1933, as amended (the “Securities
Act”), or any applicable securities laws. No transfer of this Warrant or of the shares of Common
Stock issuable upon exercise hereof shall be valid or effective unless (a) such transfer is made
pursuant to an effective registration statement under the Securities Act and in compliance with any
applicable securities laws, or (b) the Holder (as defined below) shall deliver to the Company (as
defined below) an opinion of counsel in form and substance reasonably acceptable to the Company
that such transfer is exempt from the registration requirements of the Securities Act (whether
pursuant to Regulation S promulgated thereunder or otherwise) and of any applicable securities
laws.

[ADDITIONAL REGULATION S LEGEND FOR NON-U.S. PURCHASERS: Unless the Warrant and the shares of
Common Stock issuable upon exercise hereof are registered under the Securities Act or an exemption
from such registration is available, (a) this Warrant may not be exercised by or on behalf of any
“U.S. person,” and (b) this Warrant may not be exercised within the United States and the shares of
Common Stock issuable upon exercise hereof may not be delivered within the United States upon such
exercise, other than in an offering that meets the requirements of an “offshore transaction” (as
defined in Regulation S). In order to exercise this Warrant, the Holder must follow the procedures
set forth in Section 1(a) of this Warrant, including the requirement that it deliver to the Company
(x) a written certification that the holder is not a “U.S. person” (as defined in Regulation S) and
that the Warrant is not being exercised on behalf of a “U.S. person,” or (y) a written
opinion of counsel to the effect that the Warrant and the shares of Common Stock issuable upon
exercise hereof have been registered under the Securities Act or are exempt from registration
thereunder. Hedging transactions involving this Warrant or the shares of the Company’s Common
Stock are prohibited, unless such transactions are conducted in compliance with the Securities
Act.]

This Warrant and the Common Stock issuable upon exercise hereof may be subject to certain rights
and obligations provided for in that certain Stock and Warrant Purchase Agreement (the “Purchase
Agreement”) dated May 4, 2007, between the Company, the initial Holder of this Warrant and the
initial holders of other similar warrants. Such rights and obligations under the Purchase
Agreement include certain obligations of the Company to register the resale of the Common Stock
issuable upon exercise hereof. A copy of the Purchase Agreement shall be furnished without charge
by the issuer hereof to the Holder hereof upon written request.

 

 

     This Warrant No.                      (together with any warrants hereafter issued in exchange or
substitution herefor, the “Warrant”) certifies that for value received,
                                         (including any permitted assigns or transferees, the “Holder”) is
entitled to subscribe for and purchase from Natural Health Trends Corp., a Delaware Corporation
(the “Company”), in whole or in part, at any time and from time to time during the Exercise Period
(as defined in Section 1(a) below),                      shares of duly authorized, validly issued, fully
paid and non-assessable of common stock of the Company, par value US$0.001 per share (the common
stock, including any stock into which it may be changed, reclassified or converted, is hereinafter
referred to as the “Common Stock”), at the initial exercise price set forth in Section 1(d) below,
subject, however, to the provisions and upon the terms and subject to the conditions hereinafter
set forth. The number of shares of Common Stock purchasable hereunder and the exercise price
therefor are subject to adjustment as hereinafter set forth. This Warrant and all rights hereunder
shall expire at 5:00 p.m., Dallas, Texas time on May 4, 2013.

     1. Exercise of Warrant.

          (a) Subject to the terms and conditions set forth herein, the Holder shall have the right, at
his, her or its option, to exercise this Warrant, in whole or in part, at any time during the
period (the “Exercise Period”) commencing on the date that is six (6) months after the date hereof
(the “Issue Date”) and ending on May 4, 2013 (the “Expiration Date”). To exercise the Warrant, the
Holder shall deliver to the principal office of Company (i) a notice of exercise substantially in
the form attached hereto as Schedule I (the “Notice of Exercise”) properly completed and executed,
(ii) an amount in cash equal to the Exercise Price, (iii) this Warrant; and [FOR U.S. WARRANT
PURCHASERS: (iv) such documentation as the Company may reasonably require in connection with
establishing an exemption from registration under federal and state securities law for the issuance
of shares of Common Stock to Holder upon the exercise hereof, including, without limitation, an
investor questionnaire, and a letter of securities law representations and warranties concerning
Holder and Holder’s investment in such securities.] [FOR NON-U.S. WARRANT PURCHASERS: (iv) such
documentation as the Company may reasonably require, including (x) a written certification that the
holder is not a “U.S. person” (as defined in Regulation S) and that the Warrant is not being
exercised on behalf of a “U.S. person,” or (y) a written opinion of counsel to the effect
that the Warrant and the shares of Common Stock issuable upon exercise hereof have been registered
under the Securities Act or are exempt from registration thereunder.] At the option of the Holder,
payment of the Exercise Price shall be made: (A) by wire transfer of funds to a bank account
designated by the Company for such purpose; or (B) by certified or official bank check payable to
the order of the Company. Notwithstanding anything contained in this Warrant, the Holder shall not
be entitled to exercise this Warrant to the extent that such exercise, when aggregated with any
shares of Common Stock then beneficially owned by the Holder (as beneficial ownership is determined
pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended), would result in a
“change of control” of the Company within the meaning of Nasdaq Marketplace Rule 4350(i)(1)(B)
(unless any such change in control is approved by the Company’s stockholders in compliance with
applicable Nasdaq Marketplace Rules).

2

 

          (b) Upon receipt of the required deliveries, the Company shall, as promptly as practicable and
no later than five (5) business days after receipt of the Notice of Exercise, cause to be issued
and delivered to the Holder, subject to the terms of the Purchase Agreement, a certificate or
certificates representing shares of Common Stock equal in the aggregate to the number of shares of
Common Stock specified in the Notice of Exercise. In the event that the rights evidenced by this
certificate are exercised in part, the Company will, contemporaneously with the issuance of the
shares of Common Stock issuable upon the exercise of the Warrant so exercised, issue to the Holder
a new Warrant representing the portion of the Warrant that shall not have been exercised, in all
other respects identical to this Warrant. The shares of Common Stock so purchased shall be deemed
to be issued to the Holder, as the record owner of such shares, as of the close of business on the
Exercise Date. The Company shall pay all expenses, taxes and other charges (including, without
limitation, all documentary, stamp, transfer or other transactional taxes, but excluding income
taxes) attributable to the preparation, issuance, execution and delivery of the Warrant and of the
shares of Common Stock issuable upon exercise of the Warrant.

          (c) Except as otherwise provided in this Section 1(c), and unless and until the shares of
Common Stock issued upon the exercise of the Warrant are transferred in compliance with an
effective “Registration Statement” (as defined in the Purchase Agreement), each certificate for
shares of Common Stock initially issued upon the exercise of this Warrant, and each certificate for
shares of Common Stock issued to any subsequent transferee of any such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the following form:

[FOR U.S. WARRANT PURCHASERS: “The shares represented by this certificate have not
been registered under the U.S. Securities Act of 1933, as amended (the “Securities
Act”), or any other securities laws. No transfer of the shares represented by this
certificate shall be valid or effective unless (a) such transfer is made pursuant to
an effective registration statement under the Securities Act and in compliance with
any applicable securities laws, or (b) the Holder shall deliver to the Company an
opinion of counsel in form and substance reasonably acceptable to the Company that
such proposed transfer is exempt from the registration requirements of the
Securities Act and of any applicable securities laws.”]

[FOR NON-U.S. WARRANT PURCHASERS: “The shares represented by this certificate have
not been registered under the U.S. Securities Act of 1933, as amended (the
“Securities Act”), or any other securities laws. No transfer of the shares
represented by this certificate shall be valid or effective unless (a) such transfer
is made pursuant to an effective registration statement under the Securities Act and
in compliance with any applicable securities laws, or (b) the Holder shall deliver
to the Company an opinion of counsel in form and substance reasonably acceptable to
the Company that such proposed transfer is exempt from the registration requirements
of the Securities Act and of any applicable securities laws, whether pursuant to the
provisions of Regulation S promulgated under the Securities Act or otherwise.
Hedging transactions involving shares Company’s Common Stock

3

 

are prohibited, unless such transactions are conducted in compliance with the
Securities Act.”]

[FOR CANADIAN PURCHASERS: “Unless permitted under applicable securities
legislation, the holder of this security must not trade the security before the date
that is 4 months and a day after the later of (i) May 4, 2007 and (ii) the date the
issuer became a reporting issuer in any province or territory of Canada. ”]

[FOR ALL PURCHASERS: “The shares represented by this certificate may be subject to
certain rights and obligations provided for in that certain Stock and Warrant
Purchase Agreement (the “Purchase Agreement”) dated May 4, 2007, between the Company
and certain purchasers of Warrants and Series A Preferred Stock of the Company.
Such rights and obligations under the Purchase Agreement include certain obligations
of the Company to register the resale of the Common Stock. A copy of the Purchase
Agreement shall be furnished without charge by the issuer hereof to the holder
hereof upon written request.”]

Except as otherwise provided in this Section 1(c), each new Warrant issued under Section 6 hereof
shall be stamped or otherwise imprinted with a legend in substantially the form first set forth
above on this Warrant.

Notwithstanding the foregoing, the legend requirements of this Section 1(c) shall terminate as to
any particular Warrant or related shares of Common Stock when the Company shall have received from
the Holder thereof an opinion of counsel in form and substance reasonably acceptable to the Company
that such legend is not required in order to ensure compliance with the Securities Act, any
applicable securities laws and the terms of the Purchase Agreement. Whenever the restrictions
imposed by this Section 1(c) shall terminate, the Holder of this Warrant or the related shares of
Common Stock, as the case may be, shall be entitled to receive from the Company without cost to
such Holder, a new Warrant or stock certificate of like tenor, as the case may be, without such
restrictive legend.

          (d) The “Exercise Price” of the Warrant shall be determined based on the Exercise Date, and
shall be subject to adjustment pursuant to Section 2 hereof. If the Exercise Date is less than
three years after the Issue Date, the Exercise Price shall be US$3.80 per share. If the Exercise
Date is at least three years, but less than four years and six months, after the Issue Date, the
Exercise Price shall be US$4.35 per share. If the Exercise Date is at least four years and six
months after the Issue Date, the Exercise Price shall be US$5.00.

     2. Adjustment of Exercise Price and Number of Shares. The Exercise Price and the
number of shares of Common Stock obtainable upon exercise of this Warrant shall be subject to
adjustment from time to time as provided in this Section 2.

          (a) If the Company at any time after the Issue Date: (i) pays or makes a stock dividend or
makes a distribution on its Common Stock in shares of Common Stock or shares of the Company’s
capital stock other than Common Stock, (ii) subdivides outstanding shares of

4

 

Common Stock into a larger number of shares, (iii) issues any shares of Common Stock by
reclassification of shares of Common Stock, or (iv) effects a reverse stock split of Common Stock,
then this Warrant shall thereafter be exercisable for that number of shares that would have derived
had the Warrant been exercised immediately prior to the events listed in (i), (ii), (iii) or (iv)
above (and the Exercise Price thereof shall be correspondingly adjusted). In the case of a
subdivision or re-classification, any adjustment made pursuant to this Section 2(a) shall become
effective immediately after the effective date of such subdivision or re-classification. Such
adjustments shall be made successively whenever any event listed above shall occur.

          (b) If at any time after the Issue Date, the Common Stock issuable upon the exercise of the
Warrant is changed into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification, exchange, substitution or otherwise, and other than
a capital reorganization, merger or consolidation (the adjustment for which is provided for in
Section 2(c)), in any such event the Holder shall have the right thereafter to exercise this
Warrant into the kind and amount of stock and other securities and property receivable in
connection with such recapitalization, reclassification or other change that it would have been
entitled to receive had it exercised this Warrant immediately prior to such recapitalization,
reclassification, exchange, substitution or other event, all subject to further adjustments as
provided herein or with respect to such other securities or property by the terms thereof (and the
Exercise Price of this Warrant shall be correspondingly adjusted).

          (c) If at any time after the Issue Date, the Common Stock is converted into other securities
or property pursuant to a capital reorganization, merger or consolidation in which the Company is
not the continuing corporation (a “Fundamental Transaction”), then the Holder shall have the right
thereafter to exercise this Warrant into the kind and amount of stock and other securities and
property receivable in connection with such Fundamental Transaction that it would have been
entitled to receive had it exercised this Warrant immediately prior to such Fundamental
Transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of
Directors of the Company) shall be made to the terms of this Warrant to the end that the provisions
in this Section 2 shall thereafter be applicable, as nearly as reasonably may be, in relation to
any stock and other securities and property thereafter deliverable upon the exercise of this
Warrant.

          (d) Holder, by accepting the benefits of this Warrant, agrees that the number of shares for
which this Warrant is exercisable shall be subject to adjustment or reduction as provided in this
Section 2.

     3. Reservation. The Company covenants and agrees that during the Exercise Period, the
Company will, at all times, have authorized and reserved solely for issuance and delivery upon the
exercise of this Warrant sufficient shares of Common Stock to provide for the exercise of the
purchase right represented by this Warrant.

     4. Fully Paid Stock. The Company covenants and agrees that the shares of Common Stock
represented by each and every certificate for its Common Stock to be delivered on the exercise of
the purchase rights herein will, upon issuance, be duly authorized, validly issued and outstanding,
fully paid and nonassessable and free of all issuance or transfer taxes, liens and charges with
respect to the issue thereof.

5

 

     5. Restrictions on Transfer. The Holder, by acceptance hereof, agrees that the
transfer of this Warrant and the shares issuable upon exercise of the Warrant are, under certain
circumstances, subject to the provisions of the Purchase Agreement.

     6. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal
to such fraction multiplied by the then current Market Value of such fractional share. For
purposes of this section, “Market Value” shall mean the closing sale price of one share of Common
Stock on the Nasdaq Global Market (“Nasdaq”) or any successor market on which the Common Stock is
publicly traded on the most recent trading day preceding the Exercise Date. If the Common Stock is
not traded on Nasdaq or any other public market at the time the Market Value is to be determined,
the Market Value shall be determined in good faith by the Board of Directors of the Company.

     7. Replacement Warrants. If this Warrant is mutilated, lost, stolen or destroyed, the
Company shall issue a new Warrant of like date, tenor and denomination and deliver the same in
exchange and substitution for and upon surrender and cancellation of the mutilated Warrant, or in
lieu of the Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company
of the loss, theft or destruction of such Warrant.

     8. Limitation of Liability; Warrant Holder Not a Stockholder. The Company may deem
and treat the person in whose name this Warrant is registered as the Holder hereof for all
purposes, and shall not be affected by any notice to the contrary until proper presentation of this
Warrant for registration or transfer. The Holder shall not be entitled to vote or receive
dividends or be deemed the holder of the Common Stock or any other securities that may at any time
be issuable on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par value, or change of
stock to no par value, consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have
been exercised as provided herein. No provision hereof, in the absence of affirmative action by
the Holder to purchase Common Stock, and no mere enumeration of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the purchase price of any shares of
Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.

     9. Closing of Books. Subject to the terms of this Warrant, the Company will at no
time close its books against the transfer of any Warrant or any shares of Common Stock or other
securities issuable upon the exercise of any Warrant in any manner which interferes with the timely
exercise of the Warrant.

     10. Notices. Except as otherwise expressly provided herein, any notices, consents,
waivers or other communications required or permitted to be given under this Warrant must be in
writing and will be deemed to have been delivered (i) upon receipt, when delivered personally;

6

 

(ii) one day after delivery by facsimile, provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party; or (iii) three
business days after deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. Any communications shall be addressed (a) to
the Company, at its principal executive offices and (b) to the Holder, at the Holder’s address as
it appears in the records of the Company (unless otherwise indicated by the Holder).

     11. Severability. Whenever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective under applicable law, but if any provision of this
Warrant is held to be prohibited by or invalid under applicable law in any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or invalidity, without
invalidating any other provision of this Agreement.

     12. Captions; Governing Law; Forum Selection. The descriptive headings of the various
sections of this Warrant are for convenience only and shall not affect the meaning or construction
of the provisions hereof. All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by the laws of the State of Delaware, without
giving effect to any choice of law or conflict of law provision or rule. Any dispute, difference,
controversy or claim arising in connection with or related or incidental to a matter arising under
this Warrant shall be finally settled in accordance with the forum selection provisions set forth
in the Purchase Agreement.

     13. Waivers and Amendments. This Warrant and any provisions hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the party against whom
enforcement of the same is sought.

     14. Successors. All the covenants and provisions hereof by or for the benefit of the
Holder shall bind and inure to the benefit of his, her or its respective successors and assigns
hereunder.

     15. 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 be a Saturday or a
Sunday or shall be a federal legal holiday in the United States, then such action may be taken or
such right may be executed on the next succeeding day that is not a federal legal holiday in the
United States.

[Signature page follows.]

7

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized
officer and to be dated this 4th day of May, 2007.

	 	 	 	 	 
	 	 	NATURAL HEALTH TRENDS CORP.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

8

 

SCHEDULE I

NOTICE OF EXERCISE

Natural Health Trends Corp.

2050 Diplomat Drive

Dallas, Texas 75234

USA

     The undersigned,                                         , pursuant to the provisions of Warrant No.
2007 —                      issued on May 4, 2007, hereby elects to purchase                                 shares of common stock of
Natural Health Trends Corp. covered by the Warrant described herein.

	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Signature:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Address:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}]]