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<SEC-DOCUMENT>0001015769-02-000176.txt : 20020416
<SEC-HEADER>0001015769-02-000176.hdr.sgml : 20020416
ACCESSION NUMBER:		0001015769-02-000176
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		10
CONFORMED PERIOD OF REPORT:	20011231
FILED AS OF DATE:		20020416

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NATURAL HEALTH TRENDS CORP
		CENTRAL INDEX KEY:			0000912061
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-EDUCATIONAL SERVICES [8200]
		IRS NUMBER:				592705336
		STATE OF INCORPORATION:			FL
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-26272
		FILM NUMBER:		02612565

	BUSINESS ADDRESS:	
		STREET 1:		2161 HUTTON DR
		STREET 2:		SUITE 126
		CITY:			CARROLLTON
		STATE:			TX
		ZIP:			75006
		BUSINESS PHONE:		3036824637

	MAIL ADDRESS:	
		STREET 1:		2001 WEST SAMPLE ROAD
		STREET 2:		STE 201
		CITY:			POMPANO BEACH
		STATE:			FL
		ZIP:			33064
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>a10ksb123101.txt
<TEXT>
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                  -------------
                                   FORM 10-KSB


(Mark one)
 X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
   1934.

                   For the fiscal year ended December 31, 2001
                                       OR
   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
   OF 1934.

              For the transition period from ________ to ________.

                         Commission file number 0-011228

                           NATURAL HEALTH TRENDS CORP.
                 (Name of Small Business Issuer in Its Charter)

           Florida                                       59-2705336
      (State or Other Jurisdiction of                 (I.R.S. Employer
        Incorporation or Organization)                 Identification No.)

                     5605 N. MacArthur Boulevard, 11th Floor
                               Irving, Texas 75038
                     (Address of principal executive office)

                                 (972) 819-2035
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

         Title of Each Class                        Name of Each Exchange
                               On Which Registered
              None                                         None

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                          Common Stock, par value $.001
                                (Title of Class)

                                Class A Warrants
                                (Title of Class)

                                Class B Warrants
                                (Title of Class)

                                      Units
                                (Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)has been
subject to such filing requirements for the past 90 days. Yes X No ____

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this Form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB or any amendment to this Form 10-KSB.

Issuer's revenues for its most recent fiscal year: $24,794,036.

The number of shares of Common Stock held by nonaffiliates of the registrant
(as determined for the purpose of this Form 10-KSB only) as of April 1, 2002 was
290,633,450 with an approximate aggregate market value of $7,236,773, (based
upon the closing price  of such shares as of such date). The number of shares of
the Common Stock of the issuer outstanding as of April 1, 2002 was 290,633,450.


<PAGE>

                           Natural Health Trends Corp.
                         2001 Form 10-KSB Annual Report


           Table of Contents                                          Page

                                     Part I

Item 1    Description of Business                                       1
Item 2    Description of Property                                      10
Item 3    Legal Proceedings                                            10
Item 4    Submission of Matters to a
           Vote of Security Holders                                    11

                                     Part II

Item 5    Market for Common Equity and
           Related Stockholder Matters                                 11
Item 6    Management's Discussion and
           Analysis or Plan of Operation                               13
Item 7    Financial Statements and Supplementary Data                  16
Item 8    Changes in and Disagreements
           with Accountants on Accounting
           and Financial Disclosure                                    16

                                    Part III

Item 9    Directors, Executive Officers,
           Promoters and Control Persons;
           Compliance With Section 16(a)                               16
Item 10   Executive Compensation                                       18
Item 11   Security Ownership of Certain
           Beneficial Owners and Management                            20
Item 12   Certain Relationships and Related
           Transactions                                                21
Item 13   Exhibits, Lists
           Schedules, and Reports on Form 8-K                          22
Signatures                                                             23


                                      -1-


<PAGE>




                                     PART I


ITEM 1.          DESCRIPTION OF BUSINESS.

Corporate History

     Natural  Health Trends Corp.  ("NHTC") is a Florida  corporation.  NHTC was
incorporated on December 1, 1988 as "Florida Institute of Massage Therapy, Inc."
and changed its name to "Natural  Health Trends Corp." on June 24, 1993.  NHTC's
common stock,  par value $0.001 per share (the "Common  Stock") is listed on the
Over-the-Counter Bulletin Board (the "OTCBB") under the symbol "NHTC".

     NHTC is a holding  company that operates two  businesses  which  distribute
products  that  promote  health,   wellness  and  sexual  vitality  through  the
multi-level  marketing  ("MLM") channel.  NHTC's largest  operation is by Lexxus
International,  Inc.,  ("Lexxus"),  a Delaware  corporation and a majority-owned
subsidiary  of NHTC.  Lexxus  sells  products  that  heighten  mental and sexual
arousal,  particularly  in  women.  NHTC's  other  business,   eKaire.com,  Inc.
("eKaire"),  distributes,  nutritional  supplements  aimed at general health and
wellness  through the internet and other channels.  eKaire consists of companies
operating  in the U.S.,  in Canada as Kaire  International  Canada Ltd.  ("Kaire
Canada"),  in Australia as Kaire  Nutraceuticals  Australia  Pty.  Ltd.  ("Kaire
Australia"),  in New Zealand as Kaire Nutraceuticals New Zealand Limited ("Kaire
New Zealand"), and in Trinidad as Kaire Trinidad, Ltd. ("Kaire Trinidad").

     In  January   2001,   NHTC  entered  into  a  joint   venture  with  Lexxus
International and formed a new majority-owned subsidiary,  Lexxus International,
Inc.,  a  Delaware  corporation.  "(Lexxus"), the  original  founders  of Lexxus
International received an aggregate of 10,000,000 shares of Common Stock.

     In February 1999,  through a wholly-owned  subsidiary NHTC acquired certain
assets (the "Kaire Assets") of Kaire International, Inc., a Delaware corporation
("KII").  The assets  included,  but not limited  to, the  corporate  name,  all
variations and any other product name,  registered and unregistered  trademarks,
tradenames,  servicemarks, patents, logos and copyrights of KII, and independent
associate  lists.  In exchange  for the Kaire  Assets,  NHTC made the  following
issuances:

o        to 11 secured creditors of KII,  $2,800,000  aggregate  stated value of
         Series F preferred stock, par value $1,000 per share, of NHTC (the
         "Series F Preferred Stock");

o        to two secured  creditors of KII,  $350,000  aggregate  stated value of
         Series G preferred  stock, par value $1,000 per share, of NHTC (the
         "Series G Preferred Stock");

o        to Kaire International, Inc., five-year warrants to purchase 200,000
         shares of NHTC's Common Stock exercisable at $4.06 per share.

     In March 2001, Global Health Alternatives, Inc., a Delaware corporation and
wholly-owned subsidiary of NHTC ("GHA"), and Ellon, Inc., a Delaware corporation
and  wholly-owned  subsidiary of GHA  ("Ellon"),  filed for Chapter 7 bankruptcy
liquidation in the United States  Bankruptcy  Court of the Northern  District of
Texas.  Neither GHA nor Ellon had operations during the years 2000 or 2001. Both
GHA and Ellon were dissolved in June 2001.

      In the second quarter of 2001, NHTC incorporated Lexxus International
(SW Pacific) Pty. Ltd., an Australian corporation and majority-owned subsidiary
of NHTC, which does business in Australia ("Lexxus Australia"). In addition,
NHTC incorporated Lexxus International (New Zealand) Limited, a New Zealand
corporation and majority-owned subsidiary of NHTC, which does business in New
Zealand ("Lexxus New Zealand").

      In June 2001, NHTC incorporated Lighthouse Marketing Corporation ("LMC"),
a Delaware Corporation and a wholly-owned subsidiary of NHTC. As of December 31,
2001, LMC had not conducted any business, but intends to conduct business in the
future.

                                      -2-
<PAGE>

      In June 2001, NHTC sold 100% of the Common Stock in Kaire Nutraceuticals,
Inc., Delaware Corporation, to a South African firm for a purchase price of the
greater of (i) $50,000 per year for a period of five years, or (ii) for five
years, a percentage of net income based on a progressive scale of net sales
figures of the South African firm. As of December 31, 2001, no income has been
recognized on this transaction.

      On November 16, 2001,  NHTC  incorporated  Lexxus  International  Co.,
Ltd., a  corporation  organized  under the laws of the Republic of China and a
majority-owned subsidiary of NHTC ("Lexxus Taiwan").

      On January 28, 2002, NHTC incorporated MyLexxus Europe AG, a corporation
organized under the laws of Switzerland and is a majority-owned subsidiary of
NHTC ("Lexxus Europe"). This company manages the sales of product into sixteen
eastern European countries, including Russia.

      In March 2002, NHTC incorporated  Lexxus  International  Co., Ltd., a
corporation  organized under the laws of Hong Kong and a majority-owned
subsidiary of NHTC ("Lexxus Hong Kong").


Industry Overview

         Natural Health and "Quality of Life" Products

     NHTC believes that there is a general  desire in today's  marketplace to be
fit, stay healthy,  look younger, and lead a more satisfying life. Consumers are
finding that factors  contributing to a longer life can be controlled by changes
in lifestyle, which include a regiment of vitamins and supplements, exercise and
relaxation  and  pampering.  Consumers are looking for a healthier  lifestyle in
this  fast-paced  society.  They are also looking for the quick fix (eating out,
working out,  quick  luxuries).  NHTC  believes  that this general  mindset will
create a positive and profitable market for the products of Lexxus and eKaire.

      The market for natural products and supplements is driven by the media
which continues to highlight problems with diet, including the fact that
consumers are becoming increasingly disenchanted with and skeptical about many
conventional medical approaches to disease treatment, growing consumer interest
in and acceptance of natural and alternative therapies and products, and recent
clarifications and changes of food and drug laws that have significantly eased
the regulatory burdens associated with the introduction and sale of dietary
supplements.

     NHTC believes that public  awareness of the positive effects of nutritional
supplements  and  natural  remedies  on  health  has been  heightened  by widely
publicized  reports and  medical  research  findings  indicating  a  correlation
between  the  consumption  and use of a wide  variety of  nutrients  and natural
remedies and the reduced incidence of certain diseases.

     NHTC believes that the aging of the United States population, together with
an increased focus on preventative  and alternative  health care measures,  will
continue to fuel increased demand for certain  nutritional  supplement  products
and natural  remedies.  Management  also believes that the  continuing  shift to
managed  healthcare  delivery  systems  will place  greater  emphasis on disease
prevention and health maintenance,  areas with which natural health products are
most identified.

     While distribution of natural health products, through small to large sized
natural health food stores remains significant, the bulk of the growth is in the
mass  merchandisers and health food chains,  such as General Nutrition  Centers,
which now represent the majority of sales and are the fastest  growing  channels
of distribution.

                                      -3-

<PAGE>

Products

      The following is a list of our principal products.

Lexxus

     Viacreme TM is a topically  applied  creme  designed to increase the sexual
satisfaction of women and accounted for approximately 70% of Lexxus' revenues in
2001. In the fall of 2001, Lexxus introduced two new "quality of life" products,
LexLips  and La Vie.  LexLips is a lip  enhancing  gloss for women  designed  to
create the effect of fuller lips and to reduce wrinkles around the mouth. La Vie
is a dietary supplement described as a non-alcoholic  Bordeaux. In January 2002,
Lexxus  launched a  revolutionary  "30-minute  non-surgical  facelift"  product,
Skindulgence  TM, that  management  expects will rival Viacreme TM in popularity
and sales volume.

eKaire

Energizing Products

      The energizing product line consists primarily of natural stimulants
designed to enhance and increase vitality and endurance both mentally and
physically. Products in this category include Ginkgo Shield and Momentum.

o          Ginkgo Shield assists in mental alertness and the circulatory system.

o          Momentum helps increase and balance energy levels.

Enhancing Products

     The enhancing product line is designed to support an individual's overall
health and includes such products as Immunol, Colloidal SilverKaire, Synerzyme,
Arthrokaire, Osteo Formula, Royal Hawaiian Noni and SlimKaire.

o          Immunol is a shark liver oil based capsule which NHTC believes aids
           in the human immune system. This product is imported exclusively by
           eKaire into the United States.

o          Colloidal Silverkaire is a solution of silver particles
           electro-magnetically suspended in deionized water that provides
           dietary support for the immune system.

o          Synerzyme, a combination of naturally occurring enzymes and trace
           minerals that enhance the efficacy of, enzymes that assists the body
           with the breakdown and assimilation of various foods and fats.

o          ArthroKaire is a dietary supplement containing glucosamine, which
           helps to maintain the structural integrity of cartilage, tendons and
           blood vessels.

o          Osteo Formula is a dietary supplement that contains calcium which
           aids in bone strength and overall skeletal system health.

o          Noni is derived from a fruit grown only in the Central and South
           Pacific, and contains high levels of naturally occurring vitamins,
           minerals, trace elements, enzymes, and phytochemicals.

o          Slimkaire is a time-release, thermogenic weight management program
           with five herbal blends, including a thyroid support blend.
           Slimkaire is designed to assist in safe weight loss while giving the
           user a higher level of vitality and maintaining a healthy body. This
           product contains Ma Huang, a natural ephedrine extract. NHTC
           believes that its proprietary formula is superior to competitor
           blends for the health conscious individual, because it has no
           synthetic stimulant.

                                      -4-
<PAGE>

           Kaire also offers a thermogenic weight management  program, SK II,
           for individuals seeking a product without Ma Huang (ephedrine).

Optimizing Products

      The optimizing product line provides many of the basic vitamins and
nutrients, which are missing in the typical adult diet, through products such as
MSM Complex, Bio10 and Celltonic Plus.

o          MSM Complex supports an increased production of collagen and elastin
           fibers and increases cell permeability.

o          Bio10 is a live source of all 12 lactobacillus  bacteria  which helps
           improve digestion, and the process and  absorption of nutrients.

o          Celltonic Plus is an organic mineral solution containing over 72
           minerals and trace elements within an electrolyte drink.

Renewing Products

     The renewing product line consists of moisturizing products designed to
soothe  and  refresh.  These  products  include  Aloe  Gel and  DermaKaire  with
Pycnogenol(R).

o          Aloe Gel is a topical creme that soothes and refreshes the skin.

o          DermaKaire with Pycnogenol(R) is a moisturizing, whole-leaf Aloe
           product combined with a powerful antioxidant to maintain healthy-
           looking skin.


Reviving Products

      The reviving product line consists primarily of nutritional supplements
based on antioxidants including Maritime Prime with Pycnogenol (R) and EnzoKaire
Complete.

o          Maritime Prime with Pycnogenol (R) is a dietary supplement that
           contains Pycnogenol (R) which helps maintain healthy circulation by
           strengthening capillary walls, by protecting against free radical
           damage caused by stress, pollution and chemical additives, and by
           improving skin and collagen texture, elasticity and smoothness.
           Pycnogenol (R) is a patented extract from the bark of the Maritime
           Prime trees grown in southwestern France.

o          EnzoKaire Complete is a dietary supplement containing Enzogenol TM
           which is a natural antioxidant that provides protection for cells
           against the effects of free radicals. It also increases energy and
           endurance, and slows the aging process. Enzogenol TM is derived from
           the bark of the New Zealand pine tree, Pinus radiata.

     Most  of the  products  in this  product  line  are  based  on  proprietary
formulations  in several  combinations  containing  natural  products  including
Pycnogenol (R) and Enzogenol TM. Products containing Pycnogenol (R) have not yet
been approved for direct importation into Australia.

     Viacreme TM and  Pycnogenol  (R) and  Enzogenol  TM are  trademarks  of our
manufacturers.

                                      -5-
<PAGE>

Marketing and Distribution

      NHTC, through it subsidiaries Lexxus and eKaire, seeks to be a leader in
the personal health and wellness marketplace by driving its products into as
many venues and into as many markets as possible through its multi-level
marketing ("MLM") operations. NHTC's two-tiered mission is to enrich the lives
of the users of its products while enabling associates to take control of their
financial future and personal lives. In light of the wide variety of products
that NHTC and its subsidiaries offer, neither are dependent on any one specific
customer.

      Each of NHTC's subsidiaries is set up as a MLM company using a network of
associates to sell products. Associates are independent contractors who purchase
products directly from the respective subsidiary for resale to retail consumers
or for personal consumption. Associates may elect to work on a full-time or a
part-time basis. The growth of an associate's business depends largely upon the
ability to recruit down-line associates and the strength of NHTC's products in
the marketplace.

     To become a Lexxus  associate,  a person must sign an  agreement  to comply
with the policies and procedures of the applicable  subsidiary and pay a nominal
$100 fee. To be considered "active",  the associate must order a minimum of $100
of  products  from the  appilcable  Lexxussubsidiary  during  each year.  Lexxus
currently has approximately 24,000 "active" associates.

      To become an eKaire associate, a person must sign an agreement to comply
with the policies and procedures of the applicable subsidiary. To remain
"active", the associate must order a minimum of $50 of products from such
subsidiary during each year. Out of an approximately 60,000 accounts, eKaire
currently has approximately 6,000 "active" associates.

      NHTC pays commissions to qualified associates based on sales volumes for
each commission period. NHTC offers one of the highest payouts in the MLM
sector, a 60% commission rate on Lexxus product orders and 40% commission rate
on eKaire product orders. NHTC believes that the uniqueness and efficacy of its
products, combined with the highest payout in the business, creates a highly
desirable business opportunity and work environment for its associates.

      Additionally, Lexxus is implementing a new marketing plan by developing
vending machines for the distribution of Viacreme TM in such venues as
pharmacies, hotels and nightclubs. NHTC plans to debut the machines in the
marketplace during the third quarter of 2002. The machines will be closely
monitored to determine the venues where they are the most successful. This data
will be compiled and will provide NHTC with detailed data to assist in the
development of the rollout strategy for the machines.

      NHTC sponsors opportunity meetings and participates in motivational
training events in key cities. These events are designed to inform prospective
and existing associates about both existing and new product lines and selling
techniques. Associates share their MLM experiences, their individual selling
styles, and their recruiting methods. Prospective associates are educated about
the structure, dynamics and benefits of the network marketing industry. NHTC
continues to develop marketing strategies and programs to motivate associates.
These programs are designed to increase associates' monthly product sales and
the recruiting of new associates.

      To help maintain communication with the associate network, NHTC offers the
following support programs to its associates:

 Touchtalk and Faxback

      Touchtalk is an automated telephone system that associates can call 24
hours a day to receive reports on the sales activity of their organization and
listen to selected messages on special offers, marketing program updates, and
product information. Certain information is also available via facsimile to the
associate.

                                      -6-

<PAGE>

 Weekly Teleconference

     Both Lexxus and eKaire hold a weekly teleconference with company management
and associate field leadership on various subjects such as technical product
discussions, associate organization building and management techniques.

 Internet

      NHTC maintains web-sites at www.nhtc.ws, www.kaire.com,
www.lexxusinternational.com and www.mylexxus.com. On each website, the user can
read company news, learn more about various products, place orders and sign up
to be an associate.

 Product Literature

      NHTC offers a variety of literature to its associates, including product
catalogs, informational brochures, pamphlets, and posters for individual
products.

 Toll Free Access

     Kaire  offers a toll  free  number,  to place  orders  and to  sponsor  new
associates. Both eKaire and Lexxus offer "live" consumer support.

 Broadcast Fax/Broadcast E-mail

      Announcements about Lexxus and eKaire and product specials are
automatically sent via facsimile and/or e-mail to associates.

Direct Selling

     According to the Direct Selling  Association,  network  marketing is one of
the fastest  growing  segments  for the  distribution  of  products.  The Direct
Selling Association reports that, over 38.7 million individuals are now involved
in direct selling  worldwide (of which network marketing is a major segment) and
that those  involved in direct  selling  generate  $82  billion in annual  sales
around the world.  Network marketing sales in the United States are estimated to
be approximately $25.6 billion annually.

      Currently, NHTC has associates in all fifty states, the District of
Columbia, Puerto Rico, Guam, Canada, Australia, New Zealand, Trinidad and
Tobago, Taiwan, Hong Kong, and sixteen countries in eastern Europe, including
Russia, in order to maximize its direct selling efforts. NHTC believes that
significant market potential exists for its products in additional international
markets.

New Product Development

      In January 2002, Lexxus introduced a "30-minute non-surgical facelift",
Skindulgence TM. The 30-Minute FaceLift process temporarily creates a more
youthful appearance by toning and firming facial muscles, diminishing fine lines
and wrinkles and by improving skin tone and color through a unique blend of
botanical extracts from both plants and trees. The masque is coupled with a
cleanser and moisturizer.

      In early 2002, eKaire introduced a new Whey Protein product, a
pharmaceutical-grade milk serum protein isolate which enhances the immune
system.

      Management believes that its ability to introduce new products increases
its associates' visibility and competitiveness in the marketplace. NHTC
maintains its own product review and evaluation staff and relies upon
independent research consultants and vendor research departments for product
research, development and formulation.

                                      -7-

<PAGE>

Competition

     NHTC competes with a significant number of other retailers that are engaged
in similar lines of business,  including both sellers of health-related products
and MLMs. The two most well known and established of the MLMs are Avon Products,
Inc. and Amway Corp., each with over three million associates  worldwide.  Other
non-MLM  retailers with which NHTC competes include retail pharmacies and health
stores such as GNC and Internet companies such as VitaminShoppe.com.  The market
for nutritional  supplements is rapidly growing and is highly  competitive.  The
MLM channel  tends to sell  products at a higher  price  compared to  retailers,
which does pose a degree of  competitive  risk with respect to price points.  In
the case of NHTC,  however,  several of NHTC's  products  are  patented,  or are
exclusive  formulations.  As a result,  NHTC believes  that it is  significantly
insulated from this risk because duplication of the exact blends and proportions
of  ingredients  used by NHTC in its  patented  and  exclusive  formulations  is
extremely difficult.

      The market for Lexxus products shows tremendous potential, especially for
NHTC's flagship product, Viacreme TM. According to the Journal of the American
Medical Association, 46% of women have reportedly indicated to their physicians
that they have an interest in a product that would increase sexual desire and
satisfaction.

     The  eKaire  products  target  consumers  in  the  vitamin,   mineral,  and
nutritional  supplement  market,  which  generates  nearly $50 billion per year.
eKaire offers a variety of nutraceutical products, some of which are proprietary
and exclusive to NHTC, making duplication very difficult.

Seasonality

     NHTC believes  that the  recruitment  of  associates  and the general sales
volume fluctuates on a pattern opposite of typical retail sales. Since NHTC is a
home-based  business,  the associates  tend to take "typical"  vacations such as
summer and winter  holidays,  thus,  slowing down the sales  volume  during such
vacation periods.

Manufacturing

     NHTC does not intend to develop its own  manufacturing  capabilities due to
the fact that NHTC  believes the  availability  of  manufacturing  services from
third parties on a contract basis is adequate to meet its anticipated production
needs.

      NHTC currently purchases all products from third parties that manufacture
such products to meet specific criteria and standards. All nutritional
supplements, raw materials and finished products are subject to sample testing,
weight testing and purity testing by independent laboratories.

     Lexxus has a contractual arrangement with the manufacturer,  40 J's L.L.C.,
of Viacreme TM through the end of 2002.  The  arrangement  grants  worldwide MLM
rights to NHTC to sell the  product,  Viacreme  TM.  The  arrangement  calls for
perpetuity unless both parties agree to terminate the relationship.

     For other products, NHTC places orders for finished goods and manufacturing
services  to meet the  demand of the  market.  These  orders  are based on price
quotations and other terms obtained from selected manufacturers.

Intellectual Property

     In November 2001, Lexxus' product Viacreme TM was awarded a patent to its
formulator.

     Most of the  eKaire  and  Lexxus  products  are  packaged  under a "private
label." NHTC has registered  trademarks for the names, logos and various product
names in the  countries  into  eKaire and  Lexxus  currently  operate.  NHTC has
applied for trademark registration for names, logos and various product names in
several  countries that into which eKaire and Lexxus are considering  expanding.
NHTC currently has approximately 15 trademark registrations in the United States
and  approximately  two  trademark  applications  pending with the United States
Patent  and  Trademark  Office.  NHTC's  registered  trademark  expire or become
renewalble  between the date ranges of March 2005 to October 2008. NHTC's policy
is to pursue registrations for all the

                                      -8-

<PAGE>

trademarks associated with its key products and try to protect its legal rights
concerning its trademarks. NHTC relies on common law trademark rights to protect
its unregistered trademarks. These common law trademark rights do not provide
NHTC with the same level of protection as afforded by a United States federal
registration trademark. Common law trademark rights are limited to the
geographic area in which the trademark is actually utilized, while a United
States federal registration of a trademark enables the registrant to discontinue
the unauthorized use of the trademark by a third party anywhere in the United
States even if the registrant has never used the trademark in the geographic
area where the trademark is being used, provided however, that the unauthorized
third party user has not, prior to the registration date, perfected its common
law rights in the trademark in that geographic area.

Government Regulation

      NHTC believes that all of our existing products are either cosmetics or
dietary supplements which do not require governmental approvals prior to
marketing in the United States though they are regulated by the Food & Drug
Administration ("FDA"). The processing, formulation, packaging, labeling and
advertising of such products, however, are subject to regulation by one or more
federal agencies including the FDA, the Federal Trade Commission, the Consumer
Products Safety Commission, the Department of Agriculture, the Department of
Alcohol, Tobacco and Firearms and the Environmental Protection Agency. NHTC's
activities are also subject to regulation by various agencies of the states and
localities in which its products are sold. In addition, the sale of NHTC's
products by associates in foreign markets are subject to regulation and
oversight by various federal, state and local agencies in those markets. At any
time, the FDA may increase the regulation of NHTC's products by deeming certain
ingredients used in the products to be drugs.

     In January 2000, the FDA issued a final ruling, effective February 7, 2000,
related to structure/function statements that may be claimed on dietary
supplement product labels. The rule provides for clarification of when a
structure/function claim may be made without prior FDA approval and when a claim
constitutes disease related claims. The final rule provides for the adoption of
previously issued language by the Nutrition Labeling and Education Act ("NLEA")
for 'disease or health related conditions' and among other things allows for
express and implied disease claims to be made through the name of a product,
through a statement about the formulation of a product, or through the use of
pictures, vignettes, or symbols. The finalized rule now interprets DSHEA to
permit structure/function claims for the effects of "natural states" or common
conditions associated with natural states and may include such phrases as
"maintains a healthy circulatory system".

     NHTC believes that the above finalized rule loosens the restrictions on its
labeling of products regarding dietary supplements and structure/function claims
provided that any such statements by NHTC do not suggest that the supplement is
intended to augment or replace a specific prescription drug or therapy for a
disease.

      NHTC is unaware of any legal actions pending or threatened by the FDA or
any other governmental authority against NHTC or any of its products.

      Certain ingredients utilized in our weight management products, primarily
ephedrine, are increasingly subject to regulations being promulgated by various
state agencies. These regulations generally limit the amount of the ingredient
or require a conspicuous warning label be affixed to each product. In addition,
certain states have prohibited the sale of ephedrine-based products to minors or
at all. There can be no assurances that NHTC will not be subject to additional
regulation on its weight management product line.

      Direct selling activities are regulated by various governmental agencies.
These laws and regulations are generally intended to prevent fraudulent or
deceptive schemes, often referred to as "pyramid" or "chain sales" schemes, that

                                      -9-

<PAGE>

promise quick rewards for little or no effort, require high entry costs, use
high pressure recruiting methods and/or do not involve legitimate products.

      Based on research conducted in opening its existing markets the nature and
scope of inquiries from government regulatory authorities and our history of
operations in such markets to date, NHTC believes that its methods of
distribution are in compliance in all material respects with the laws and
regulations relating to direct selling activities of the countries in which it
currently operates. Even though NHTC believes that laws governing direct selling
are generally becoming more permissive, many countries currently have laws in
place that would prohibit NHTC from conducting business in such markets. There
can be no assurance that NHTC will be allowed to continue to conduct business in
each of its existing markets that it currently services or any new market it may
enter in the future.

      NHTC believes that it is in material compliance with all regulations
applicable to our products and operations. Despite this belief, NHTC may be
found not to be in material compliance with existing regulations as a result of,
among other things, the considerable interpretative and enforcement discretion
given to regulators or misconduct by associates. There can be no assurances that
NHTC will not be subject to inquiries and regulatory investigations or disputes
and the effects of any adverse publicity resulting therefrom. Any assertion or
determination that NHTC or any of its associates are not in compliance with
existing laws or regulations could have a material adverse effect on the
business and results of operations. In addition, in any country or jurisdiction,
the adoption of new laws or regulations or changes in the interpretation of
existing laws or regulations could generate negative publicity and/or have a
material adverse effect on the business and results of operations. NHTC cannot
determine the effect, if any, that future governmental regulations or
administrative orders may have on the business and results of operations.
Moreover, governmental regulations in countries where NHTC may commence or
expand its operations may prevent, delay or limit market entry of certain
products or require the reformulation of such products. Regulatory action,
whether or not it results in a final determination adverse to NHTC, has the
potential to create negative publicity, with detrimental effects on the
motivation and recruitment of associates and consequently, on sales and
earnings.

Research and Development

      NHTC has incurred minimal research and development costs in the years
ended December 31, 2001 and December 31, 2000. NHTC purchases finished goods
from manufacturers and sells directly to its associates for their resale or
personal consumption.

Environmental Matters

     There  are  no  environmental   hazards  that  NHTC  believes  effects  its
operations.

Employees

     NHTC  has its  principle  offices  in  Irving,  Texas,  and the  subsidiary
companies  have a total of eight  offices in both the U.S. and abroad.  NHTC has
offices and warehouses in Queensland,  Australia, Auckland, New Zealand, British
Columbia, Canada, Kaohsiung, Taiwan, Moscow, Russia and Zurich, Switzerland. The
combined  total of  employees  for Lexxus and eKaire is 43 at December 31, 2001,
including  eight  senior  management,   five  administrative  assistants,   five
warehouse  employees,  and 25 "general  operations"  employees,  which  includes
employees in customer  service and  administrative  roles.  Forty  employees are
full-time  and  five  are  part-time.   NHTC  has  approximately  30,000  active
associates  (combined  Lexxus and eKaire),  who act as  independent  contractors
selling NHTC's products and who are not employees of NHTC. None of the employees
are represented by a union, and NHTC believes that employee relations are good.

                                      -10-

<PAGE>

Product Warranties and Returns

Lexxus

      The Lexxus refund policies and procedures closely follow industry
standards. Associates may return unopened product in resalable condition for a
partial refund. All product purchased prior to October 1, 2001 had a 30-day
refund policy. All products purchased after October 1, 2001 must be returned
within twelve months of the original purchase date for refund eligibility.
Lexxus must be notified of the return in writing and such written requests will
be considered termination notice of the distributorship.

eKaire

      eKaire product warranties and refund policies are similar to those of
other companies in the industry. If an associate is not satisfied with the
product then he/she can return to eKaire within 90 days of the first time the
product was purchased for a full refund. An associate may return or exchange
products that are unopened and in resalable condition for 30 days after the date
of purchase.

Management Information Systems

      NHTC utilizes a third party to process associate orders and to calculate
the associate commission payments. The eKaire commission system provides each
associate with a detailed monthly accounting of all sales and recruiting
activity. These statements eliminate the need for substantial record keeping on
behalf of the associate. Lexxus maintains a web-based system to communicate
volume and commissions to its associates.

Insurance

      NHTC currently carries general liability insurance in the amount of
$1,000,000 per occurrence and $1,000,000 in the aggregate. There can be no
assurance, however, that this insurance will be sufficient to cover potential
claims or that an adequate level of coverage will be available in the future at
a reasonable cost, if at all. A successful claim could have a material adverse
effect on NHTC.



                                      -11-
<PAGE>




ITEM  2. DESCRIPTION OF PROPERTY.

     NHTC  utilizes  approximately  1,000 square feet of office space in Irving,
Texas on an as needed basis,  through an arrangement  with Regus Business Centre
which  provides  business  solutions for  companies.  NHTC pays a minimum annual
rental fee of $2,100.  Lexxus leases an aggregate of approximately 16,000 square
feet of office  and  warehouse  space in  Dallas,  Texas.  The lease  term is 38
months,  expiring on September 30, 2004,  and the current rent is  approximately
$151,500  per year.  Additional  warehousing  for Lexxus is located in  Branson,
Missouri  where Lexxus  utilizes  approximately  35,000 square feet of warehouse
space.  The lease term is on a  month-to-month  basis at a rent of  $18,000  per
year. The Canadian office and warehouse of Lexxus and eKaire leases office space
in Langley,  British  Columbia,  totaling  approximately  3,600 square feet. The
lease term is 36 months,  expiring on  December 1, 2004 and the current  rent is
approximately $25,000 per year.

     Kaire Australia, Kaire New Zealand, Lexxus Australia and Lexxus New Zealand
lease office space and warehouse facilities of approximately 2,475 square feet
in Queensland, Australia. The lease term is 60 months, expiring on January 1,
2007, and the current rent is approximately $20,000 per year.

     In March 2002, Lexxus Taiwan entered into a two-year lease for 6,314 square
feet of office space at a current rent of approximately $75,000 per year.

     Kaire Trinidad leases approximately 1,100 square feet of office space in
downtown Port-of-Spain, Trinidad. The lease term is on a month-to-month basis.

     NHTC is currently in the process of finding adequate office space for its
subsidiaries in Hong Kong and Russia.

     NHTC believes that such properties are suitable and adequate for the
current operating needs.

ITEM  3. LEGAL PROCEEDINGS.

     On August 4, 1997, Samantha Haimes brought an action in the Fifteenth
Judicial Circuit of Palm Beach County, Florida, against NHTC and National Health
Care Centers of America, Inc., a wholly-owned subsidiary of NHTC. NHTC asserted
counterclaims against Samantha Haimes and Leonard Haimes. The complaint arises
out of the defendants' alleged breach of contract in connection with NHTC's
natural health care center, which was located in Boca Raton, Florida. NHTC
agreed to settle such actions for shares of Common Stock with a fair market
value of $325,000, but not less than 125,000 shares of Common Stock and agreed
to register such shares. On October 10, 2000, due to noncompliance with the
settlement, a judgment was taken against NHTC in the amount of $325,000 plus
interest. On October 12, 2001, NHTC entered into a payment arrangement to settle
this obligation. NHTC has recorded a liability of $325,000 plus interest at ten
percent (10%) per annum, which is included in the financial statements for the
year ended December 31, 2001.

     On July 10, 2000, the State of Texas obtained a judgment against NHTC in
the amount of $109,170 for unpaid sales taxes, penalties, interest, and attorney
fees. NHTC has entered into a voluntary payment arrangement and has recorded a
liability of $109,170 plus interest at seven percent (7%) per annum, which is
included in the financial statements for the year ended December 31, 2001.

     On December 29, 2000, Merrill Corporation obtained a judgment against NHTC
in the amount of $145,497, plus interest at eight percent (8%) per annum, which
is included in the financial statements for the year ended December 31, 2001.

     On  October  30,  2001,  Omni  Group  LLC  filed an  action in the State of
Vermont,  Addison  Superior  Court against NHTC,  alleging that NHTC  tortuously
interfered  with  Omni  Groups's  existing  contractual  relationships  and made
representations  about  Omni Group  that were  untrue.  Omni Group is seeking $5
million in

                                      -12-

<PAGE>

compensatory damages and $5 million in punitive damages. NHTC is defending this
action. NHTC filed an answer on April 2, 2002 in which NHTC denied any
wrongdoing.

     On November 22, 2001,  Pfizer,  Inc.  filed an action in the United  States
District  Court,  Southern  District of New York,  against Lexxus  alleging that
Lexxus'  distribution  and  marketing  of  Viancreme  TM  infringes  on Pfizer's
federally registered  trademark,  Viagra (R). Pfizer's complaint alleges federal
false designation of origin and unfair competition,  federal trademark dilution,
federal  false  advertising  and  unfair   competition,   common  law  trademark
infringement,  trademark  dilution and  deceptive  acts and  practices.  NHTC is
defending this action and is currently in settlement discussions with Pfizer.

     On March 21, 2002, NFL  Properties,  Inc.  brought an action in the Supreme
Court of the  County  of  Onondaga  in the  State of New York  against  NHTC and
Natural Health Laboratories in the amount of approximately  $126,000 for alleged
breach of contract.  NHTC's management believes that the action naming NHTC as a
defendant was a case of mistaken identity,  and is currently trying to have NHTC
removed as a defendant in this action.

ITEM  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     During the last quarter of 2001, NHTC did not submit any matter to the vote
of the shareholders.


ITEM  5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

                           PRICE RANGE OF COMMON STOCK

     NHTC's Common Stock is currently quoted on the OTCBB under the symbol
"NHTC". NHTC's Common Stock was delisted from the NASDAQ Small Cap Market in
July 2000 for failure to meet the NASDAQ requirements for continued listing. The
following table sets forth the range of high and low closing sale prices as
reported by the NASDAQ Small Cap Market through June 2000 and the high and low
bid prices as reported by the OTCBB since June 2000.

                             NASDAQ SMALL CAP MARKET



          Date                 High Closing        Low Closing

          2000

First Quarter                           2.000             1.219
Second Quarter                          1.219             0.281

                                      OTCBB

          Date                   High Bid            Low Bid

          2000
Third Quarter                           0.438             0.031
Fourth Quarter                          0.078             0.016

          2001

First Quarter                           0.047             0.016
Second Quarter                          0.150             0.016
Third Quarter                           0.070             0.030
Fourth Quarter                          0.050             0.020

                                      -13-
<PAGE>

     The OTCBB quotations reflect inter-dealer prices, without retail mark-ups,
mark-downs or commissions, and may not represent actual transactions.

     In January 2001, NHTC increased the number of authorized shares of its
Common Stock to 500,000,000 by a majority vote of its Board of Directors.

Holders

     As of March 4, 2002, NHTC had approximately 263 record holders of Common
Stock and approximately 1,200 beneficial holders of Common Stock.

Dividends

     NHTC has not paid any cash dividends on Common Stock to date and does not
anticipate declaring or paying any cash dividends in the foreseeable future. In
addition, future financing arrangements, if any, may preclude or otherwise
restrict the payment of dividends.

Recent Sales of Unregistered Securities

     In April 2001, NHTC issued 50 shares of Series H Preferred Stock with a
face value of $1,000 per share to an accredited investor, pursuant to Section
4(2) of the Securities Act of 1933, as amended (the "Act") and/or Rule 506 of
Regulation D, as promulgated by the Act.

     In April 2001, NHTC issued 500,000 shares of Common Stock to certain
management employees, pursuant to Section 4(2) of the Act.

     In May 2001, NHTC issued 50 shares of Series H preferred stock with a face
value of $1,000 per share, to an accredited investor, pursuant to Section 4(2)
of the Act and/or Rule 506 of Regulation D, as promulgated by the Act.

     During 2001,  NHTC issued  35,523,045  shares of Common Stock to accredited
investors upon conversion of $946,768, face amount of Series E Preferred Stock
pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D, as
promulgated by the Act.

     During 2001, 51,559,177 shares of Common Stock to accredited investors upon
conversion of  $1,416,408,  face amount of Series F Preferred  Stock pursuant to
Section 4(2) of the Act and/or Rule 506 of Regulation D, as
promulgated by the Act.

      During 2001, NHTC issued 15,732,164 shares of Common Stock to accredited
investors upon conversion of $344,200, face amount of Series G Preferred Stock
pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D, as
promulgated by the Act.

     During 2001, NHTC issued 27,699,368 shares of Common Stock to accredited
investors upon conversion of $614,542, face amount of Series H Preferred Stock
pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D, as
promulgated by the Act.

    During 2001, NHTC issued 12,260,376 shares of Common Stock to an accredited
investor upon conversion of $206,194, face amount of Series J Preferred Stock
pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D, as
promulgated by the Act.


                                      -14-

ITEM  6.          MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

BACKGROUND

     Prior to August 1997, the operations of NHTC consisted of the operation of
natural health care centers and vocational schools. Upon the acquisition of GHA
on July 23, 1997, NHTC commenced the marketing and distribution of a line of
natural, over-the-counter homeopathic pharmaceutical products. Upon the
acquisition of certain Kaire assets in 1999, NHTC started the marketing and
distribution of a line of natural, herbal-based dietary supplements and personal
care products through a network marketing distribution system. NHTC discontinued
the operations of GHA during the fourth quarter of 1999 and filed for Chapter 7
bankruptcy in March 2001 on behalf of GHA and Ellon. In January 2001, NHTC
acquired Lexxus, which primarily sells "quality-of-life" products.

RESULTS OF OPERATIONS

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

 Revenues

     Revenues for the year ended December 31, 2001 were approximately
$24,794,000 as compared to revenues for the year ended December 31, 2000 of
approximately $8,320,000, an increase of approximately $16,474,000 or
approximately 298%. The increased sales for the year ended December 31, 2001
were primarily from the sale of Lexxus products with eKaire showing a slight
rise in sales from the year ended December 31, 2000.

 Cost of Sales

     Cost of sales for the year ended December 31, 2001 was approximately
$5,876,000 or 24% of revenues. Cost of sales for the year ended December 31,
2000 was $2,410,000 or 29% of revenues. The total cost of sales increased by
approximately $3,466,000 or 244% most of which was attributable to Lexxus
product mix and sales volume compared to 2000 sales of only eKaire products. The
decrease in the cost of sales as a percentage of revenues is attributable to
lower manufactured cost of Lexxus products in conjunction with the higher sales
volume of Lexxus products are eKaire products.

 Gross Profit

     Gross profit increased from approximately $5,910,000 in the year ended
December 31, 2000 to approximately $18,918,000 in the year ended December 31,
2001. The increase was approximately $13,008,000 or 320%. The increase was
attributable to the increase in gross sales by both Lexxus and eKaire.

 Commissions

     Associate commissions were approximately $12,449,000 or 50% of revenues in
the year ended December 31, 2001 compared with approximately $3,682,000 or 44%
of revenues for the year ended December 31, 2000. The increase of commission
expense is directly related to the increase in gross sales and the terms of the
compensation plans. Lexxus carries an average payout of 60% of product sales
whereas eKaire has an average payout of 40% of product sales.

 Selling, General and Administrative Expenses

     Selling, general and administrative costs decreased from approximately
$5,777,000 or 69% of revenues in the year ended December 31, 2000 to
approximately $5,187,000 or 21% of revenues in the year ended December 31, 2001,
a decrease of approximately $590,000 or 11% which is attributable to the
downsizing of eKaire operations and shared overhead costs between Lexxus and
eKaire.



                                       15
<PAGE>

Interest Expense

     Interest expense was approximately $260,000 or 3% of revenues in the year
ended December 31, 2000 compared with approximately $157,000 or 1% of revenues
in the year ended December 31, 2001, a decrease of approximately $103,000 due to
a decrease in debt borrowings, a decrease in the beneficial conversion feature
of certain debt instruments, and conversion of convertible debt into Common
Stock in 2001.

 Income Taxes

     Income tax benefits were not reflected in either period. The anticipated
benefits of utilizing net operating losses against future profits was not
recognized in the years ended December 31, 2001 or 2000 under the provisions of
Financial Standards Board Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", utilizing its loss carry forwards as a component
of income tax expense. A valuation allowance equal to the net deferred tax asset
has been recorded as management has not been able to determine that it is more
likely than not that the deferred tax assets will be realized.

  Income (Loss) from Continuing Operations

     Net income from continuing operations was approximately $1,202,000 in the
year ended December 31, 2001 or approximately 5% of revenues as compared to the
net loss from continuing operations of approximately $12,803,000 or
approximately (154) % of revenues in the year ended December 31, 2000.

Discontinued Operations

     NHTC discontinued the operations of its wholly-owned subsidiary in the
United Kingdom in February 2000 and recognized a loss of $15,000 on the
liquidation of this asset for the year ended December 31, 2000.

Gain on Forgiveness of Debt

     During the year ended December 31, 2001, NHTC realized a gain of
approximately $820,000 on the various debt and payables related to the sale of
Kaire Nutraceuticals, Inc. During the year ended December 31, 2000, NHTC
realized a gain of approximately $2,148,000 on the various debt and payables of
GHA due to the filing of a Chapter 7 bankruptcy.

Liquidity and Capital Resources

     NHTC has funded the working capital and capital expenditure requirements
primarily from cash provided through sales of products, borrowings from
institutions and individuals, and from the sale of securities in private
placements.

     In March 2000, NHTC sold 1,000 shares of Series J Preferred Stock, par
value $1,000 per share, (the "Series J Preferred Stock") realizing net proceeds
of $1,000,000. Series J Preferred Stock pays a dividend at the rate of 10% per
annum. Series J Preferred Stock and the accrued dividends thereon are
convertible into shares of Common Stock at a conversion price equal to the lower
of the closing bid price on the conversion date or 70% of the average closing
bid price of the Common Stock for the lowest three trading days during the
twenty day period immediately preceding the date on which NHTC receives notice
of conversion from a holder thereof. In connection with the offering of the
Series J Preferred Stock, NHTC issued warrants to purchase 141,907 shares of
Common Stock at an exercise price of $1.41 per share. During 2001, $206,194,
face amount of Series J Preferred Stock was converted into 12,260,376 shares of
Common Stock.

     In May 2000, NHTC borrowed $20,700 from Tyler Pipeline, Inc. This
indebtedness was evidenced by NHTC's issuance of a convertible promissory note.
The note bears interest at 10% per annum and is payable on demand. The note is
convertible into shares of Common Stock at a discount equal to 60% of the
average closing bid price of the Common Stock on the three days preceding notice
of conversion of the note. In April 2001, this note was fully satisfied through
conversion into an aggregate of 2,163,710 shares of Common Stock.



                                       16
<PAGE>

     In October 2000, NHTC issued 50 shares of Series H Preferred Stock for
$50,000 realizing net proceeds of $43,500. The Series H Preferred Stock pays
dividends of 10% per annum and is convertible into shares of Common Stock at the
lower of the closing bid price on the conversion date or 75% of the market value
of the Common Stock on the conversion date.

     In October 2000, NHTC borrowed $10,000 from Meridian Investments, Inc. This
indebtedness was evidenced by NHTC's issuance of a convertible promissory note.
The note bears interest at 10% per annum and is payable on demand. The note is
convertible into shares of Common Stock at a discount equal to 60% of the
average closing bid price of the Common Stock on the three days preceding notice
of conversion. The note was repaid in November 2001.

     In November 2000, NHTC borrowed $25,000 from Filin Corp. This indebtedness
was evidenced by NHTC's issuance of a convertible promissory note. The note
bears interest at 10% per annum and is payable on demand. The note is
convertible into shares of Common Stock at a discount equal to 60% of the
average closing bid price of the Common Stock on the three days preceding notice
of conversion. The note was converted into an aggregate of 1,452,805 shares of
Common Stock in August 2001.

           In January 2001, NHTC entered into a joint venture with Lexxus
International and formed a new majority-owned subsidiary, Lexxus. The original
founders of Lexxus International received an aggregate of 10,000,000 shares of
Common Stock.

           In April 2001, NHTC borrowed $100,000 from Augusta Street LLC. This
indebtedness was evidenced by NHTC's issuance of a convertible promissory note.
The note bears interest at 10% per annum and is payable on demand. The note is
convertible into shares of Common Stock at a discount equal to 75% of the
average closing bid price of the Common Stock on the five days preceding notice
of conversion.

      In April 2001, NHTC issued an aggregate of 200,000 shares of Common Stock
to an individual in exchange for a loan of $50,000.

     In April 2001, NHTC issued 50 shares of Series H Preferred Stock for
$50,000 realizing net proceeds of $43,500. The Series H Preferred Stock pays
dividends of 10% per annum and is convertible into shares of Common Stock at the
lower of the closing bid price on the conversion date or 75% of the market value
of the Common Stock on the conversion date.

     In May 2001, NHTC issued 50 shares of Series H Preferred Stock for $50,000
realizing net proceeds of $43,500. The Series H Preferred Stock pays dividends
of 10% per annum and is convertible into shares of Common Stock at the lower of
the closing bid price on the conversion date or 75% of the market value of the
Common Stock on the conversion date

     At December 31, 2001, the ratio of current assets to current liabilities
was .31 to 1.0 and NHTC had a working capital deficit of approximately
$3,522,000.

     Cash provided by operations for the period ended December 31, 2001 was
approximately  $35,000.  Cash used by investing activities during the period was
approximately  $302,000,  which  primarily  relates to the  acquisition of fixed
assets of  approximately  $141,000 and websites of  $133,000.  Cash  provided by
financing  activities  during the period was approximately  $449,000,  primarily
from the issuance of preferred  stock of $100,000 and notes payable of $382,000.
Total cash increased by approximately $216,000 during the year.

                                       17


<PAGE>
ITEM  7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     NHTC's consolidated financial statements, including the notes thereto,
together with the report of independent certified public accountants thereon,
are presented beginning at page F-1.


ITEM  8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.


         None.



                                    PART III


ITEM  9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a).

                                   MANAGEMENT

Directors and Executive Officers

     The following table sets forth certain information concerning the directors
and executive officers.

  Name                     Age                  Position

Mark D. Woodburn            31       President, Chief Financial Officer,
                                     Secretary and sole director


The following is a brief summary of NHTC's sole executive officer and director:

Mark D. Woodburn  became  Secretary of NHTC in April 1999. In August 2000,  Mr.
Woodburn also became a director of NHTC.  Mr.  Woodburn became the President of
NHTC in September  2000.  Between April 1999 and September  2000, Mr. Woodburn
served as NHTC's Chief Financial Officer.  Since 1992,  Mr.  Woodburn  served as
a director and the  Secretary of Kaire  International,  Inc.  Currently,  Mr.
Woodburn serves as Chief Financial Officer of Lexxus International, Inc. and
eKaire.com, Inc.

Compliance with Section 16(a) of the Exchange Act

Based solely upon a review of (i) Forms 3 and 4 and amendments thereto furnished
to the Company pursuant to Rule 16a-3(e), promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"), during the Company's fiscal year
ended December 31, 2001, and (ii) Forms 5 and amendments thereto and/or written
representations furnished to NHTC by any director, officer or ten percent
security holder of NHTC (collectively "Reporting Persons") stating that he or
she was not required to file a Form 5 during the fiscal year ended December 31,
2001, it has been determined that no Reporting Person is delinquent with respect
to his or her reporting obligations set forth in Section 16(a) of the Exchange
Act.

ITEM 10.  EXECUTIVE COMPENSATION.


NHTC does not have a bonus, profit sharing, or deferred compensation plan for
the benefit of employees, officers or directors.

                                       18
<PAGE>


                  The following table provides a summary of cash and non-cash
compensation for each of the last three fiscal years ended December 31, 2001,
2000 and 1999 with respect to the following officers.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                        Long Term Compensation
                                                    Annual Compensation                          Awards
  Name and Other Principal Position      Year    Salary ($) Bonus     Other Annual     Restricted     Securities
                                                              ($)     Compensation        Stock       Underlying
                                                                         ($)(1)       Award(s) ($)   Options/SARs
                                                                                                          (#)
<S>                <C>                   <C>      <C>
  Mark D. Woodburn (2)                   2001     17,000       -            -              -               -
  President                              2000     34,000       -            -              -               -
                                         1999     55,750       -            -              -               -


  Terry LaCore (3)                       2001    115,000       -            -              -          3,000,000
  CEO of Lexxus International, Inc.      2000    100,000       -          16,016           -               -
                                         1999     80,769       -            -              -               -

  Robert L. Richards, (4)                2001       -          -            -              -               -
  Former President & CEO                 2000     68,692       -            -              -               -
                                         1999     96,923       -            -              -               -


  Joseph P. Grace (5)                    1999    133,333       -            -              -               -
</TABLE>



(1)  Excludes perquisites and other personal benefits that in the aggregate do
     not exceed 10% of each of such individual's total annual salary and bonus.
(2)  Mr.  Woodburn  became NHTC's  President in September  2000. He became
     NHTC's  Secretary in April 1999.  Between April 1999 and September 2000, he
     served as NHTC's Chief Financial Officer.
(3)  Mr. LaCore is the CEO of Lexxus.
(4)  Mr. Richards became NHTC's President in September 1999 and resigned in
     August 2000.
 (5) Mr. Grace resigned in September 1999.

                                       19
<PAGE>


Stock Options

         In January 2001, NHTC granted the following options to purchase Common
Stock to the executive officers named above.

<TABLE>
<CAPTION>


         Name                Number of         Percent of total    Exercise base price     Expiration Date
                             securities          options/SARs           ($/share)
                             underlying           granted to
                        options/SARs granted     employees in
                                                  fiscal year

<S>     <C>
Mark Woodburn                    -                     -                    -                     -

Terry LaCore                 3,000,000               100%              $.011/share          January 2011

</TABLE>
(1) Does not include the 3,000,000 options issued to Benchmark Consulting Group.

         During the fiscal year ended December 31, 2001, Mr. LaCore had not
exercised any of these options. The shares issued to Mr. LaCore have certain
anti-dilutive features. The anti-dilutive provision provides for additional
options to be granted in the event NHTC issues additional Common Stock.

Consulting Agreement

     In January 2001, NHTC entered into a consulting contract with Benchmark
Consulting Group, pursuant to which Benchmark agreed to advise NHTC in
connection with the acquisition of, startup of, and/or merger with other
companies introduced to NHTC by Benchmark, and any divesture of NHTC's assets,
subsidiaries, or the sale of NHTC itself. NHTC issued to Benchmark options to
purchase an aggregate of 3,000,000 shares of Common Stock at an exercise price
of $.011 per share. These shares have certain anti-dilutive features. The
anti-dilutive provision provides for additional options to be granted in the
event NHTC issues additional Common Stock.

Directors' Compensation

         Neither the director of NHTC nor those of any of its subsidiaries
receive any fixed compensation for their services as directors. Directors are
reimbursed for their reasonable out-of-pocket expenses incurred in connection
with performance of their duties. Neither NHTC nor any of its subsidiaries paid
its directors any cash or other form of compensation for acting in such
capacity, although directors who were also executive officers received cash
compensation for acting in the capacity of executive officers.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.


     The following table sets forth certain information as to the Common Stock
ownership of each of the directors, executive officers, all executive officers
and directors as a group, and all persons known to us to be the beneficial
owners of more than five percent of NHTC's Common Stock as of January 31, 2002.


 Name and address of          Amount and nature of           % of Class
  Beneficial Owner              Beneficial Owner

 Mark D. Woodburn                      -                         *
 c/o NHTC
 5605 N. MacArthur Blvd.
 11th Floor
 Irving, TX 75038

                                       20
<PAGE>

 The Endeavour Capital             25,349,643                   9.9%
 Investment Fund SA
 Cumberland House
 #27 Cumberland Street
 Nassau, New Providence,
 The Bahamas

 All Executive Officers and            -                         *
 Directors as a Group (1 person)

* Owns less than one (1%) percent.

     Unless otherwise noted, all persons named in the table have sole voting and
     dispositive power with respect to all shares of Common Stock beneficially
     owned by them.

     The table does not include shares of Common Stock issuable upon the
     conversion of the Series F, H, and J preferred stock, which are the only
     classes of Preferred Stock that have not been entirely converted into
     shares of Common Stock. Pursuant to the terms of the Series F, H, and J
     preferred stock, the holders thereof generally are not entitled to convert
     such instruments to the extent that such conversion would increase the
     holders' beneficial ownership of Common Stock to an amount in excess of
     4.9%, except in the event of mandatory conversion. On the date of a
     mandatory conversion of the Series F, H, and J preferred stock, a change in
     control may occur, based upon the number of shares of Common Stock issuable
     to such holders.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      As of December 31, 2001, NHTC owed approximately $70,000 to Robert L.
Richards, its former president and a former director, in connection with
liabilities assumed in connection with the KII acquisition.

     NHTC believes that the transactions between NHTC and any of the officers,
directors and/or five percent (5%) stockholders have been on terms no less
favorable to NHTC than could have been obtained from independent third parties.
Future transactions, if any, between NHTC and any of its officers, directors,
and/or five percent (5%) stockholders will be on terms no less favorable to NHTC
than could be obtained from independent third parties and will be approved by a
majority of the independent, disinterested directors. In addition, any
forgiveness of indebtedness of officers, directors or five percent (5%)
stockholders will be approved by a majority of disinterested directors who do
not have an interest in the transactions and who have access, at NHTC's expense,
to counsel.


ITEM  13.         EXHIBITS, LISTS AND REPORTS ON FORM 8-K.

         (a) Exhibits

Index to Exhibits

NUMBER  DESCRIPTION OF EXHIBIT

2.2      Acquisition Agreement among NHTC, NHTC Acquisition
         Corp. and Kaire International, Inc. (the "Acquisition
         Agreement").(3)

                                       21
<PAGE>

2.3      Acquisition Agreement among NHTC and Lexxus International *
3.1      Amended and Restated Certificate of Incorporation of the
         Company.(4)
3.2      Amended and Restated By-Laws of NHTC.(4)
4.1      Specimen Certificate of NHTC's Common Stock.(4)
4.2      Form of Class A Warrant.(4)
4.3      Form of Class B Warrant.(4)
4.4      Form of Warrant Agreement between NHTC and
         Continental Stock Transfer & Trust Company for Class A and B
         Warrants.(4)
4.5      1994 Stock Option Plan.(4)
4.6      1997 Stock Option Plan.(11)
4.7      1998 Stock Option Plan.(11)
4.8      Articles of Amendment of Articles of Incorporation of the
         Company.(6)
4.9      Articles of Amendment of Articles of Incorporation- Series C
         Preferred Stock.(7)
4.10     Articles of Amendment of Articles of Incorporation- Series E
         Preferred Stock.(3)
4.11     Articles of Amendment of Articles of Incorporation- Series F
         Preferred Stock.(3)
4.12     Articles of Amendment of Articles of Incorporation- Series G
         Preferred Stock.(3)
4.13     Articles of Amendment of Articles of Incorporation- Series H
         Preferred Stock.(3)
4.14     Form of Warrant in connection with the Acquisition
         Agreement.(3)
4.15     Articles of Amendment of Articles of Incorporation - Series J Preferred
         Stock (13)
4.16     Stock Option Agreement among NHTC and Terry LaCore *
4.17     Stock Option Agreement among NHTC and Benchmark Consulting Group *
10.17    Convertible Promissory Note among NHTC and Augusta Street LLC *
10.18    Convertible Promissory Note among NHTC and Augusta Street LLC *
10.19    Consulting Agreement between NHTC and Summit Trading Limited *
10.20    Lease for Registrant's Irving, Texas facility *
10.21    Distributor Agreement-40J's *
21.1     List of Subsidiaries.*


- --------------
 (*)     Filed herewith.

 (3)     Previously  filed with NHTC's  Proxy  Statement on Schedule 14A,
         dated January 25, 1999.

(4)      Previously filed with Registration Statement No. 33-91184.

(5)      Previously filed with NHTC's Form 8-K dated August 7, 1997.

(6)      Previously filed with NHTC's Form 10-QSB dated June 30, 1997.

(7)      Previously  filed  with  the  Company's Form 10-QSB dated September 30,
         1998.

(8)      Previously  filed  with  the  Company's  Form 10-KSB for the year ended
         December 31, 1996.

(9)      Previously filed with NHTC's Form 10-KSB for the year ended
         December 31, 1998.

(11)     Previously filed with NHTC's Registration Statement, File
         No. 333-80465.

(13)     Previously filed with NHTC's Form 8-K dated March 17, 2000.

         (b)      Reports on Form 8-K

               No reports on Form 8-K were filed during the quarter ended
               December 31, 2001.
                                       22
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, we have duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

                           Natural Health Trends Corp.


Signature                                   Title                   Date


/s/ Mark D. Woodburn         President and Chief Financial
- --------------------------   Officer                             April 16, 2002
    Mark D. Woodburn         (Principal Financial and Accounting
                              Officer)





     Pursuant to the requirements of Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature                                  Title                    Date

/s/ Mark D. Woodburn                   Sole Director             April 16, 2002
- -------------------------
    Mark D. Woodburn
                                       23
<PAGE>
                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
                          INDEX TO FINANCIAL STATEMENTS


The following  consolidated  financial statements of Natural Health Trends Corp.
are included in response to Item 7:



                                                                         PAGE


Report of Independent Auditors........................................... F-2

Consolidated Balance Sheet................................................F-3

Consolidated Statements of Operations.....................................F-4

Consolidated Statements of Stockholders' Deficit..........................F-5

Consolidated Statements of Cash Flows.....................................F-6

Notes to Consolidated Financial Statements................................F-7



                                       F-1




<PAGE>

                          INDEPENDENT AUDITORS' REPORT



Board of Directors
Natural Health Trends Corp. and Subsidiaries
Irving, Texas

         We have audited the accompanying consolidated balance sheet of Natural
Health Trends Corp. and Subsidiaries as of December 31, 2001 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the years ended December 31, 2001 and 2000. These financial statements are the
responsibility of NHTC's management. Our responsibility is to express an opinion
on these financial statements based on our audit.

         We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, the financial position of Natural Health Trends Corp. and Subsidiaries
as of December 31, 2001 and the results of its operations and its cash flows for
the years ended December 31, 2001 and 2000, in conformity with accounting
principles generally accepted in the United States of America.

        The accompanying financial statements have been prepared assuming that
NHTC will continue as a going concern. The Company had incurred a loss in year
ended December 31, 2000 and as more fully described in Note 2, the Company
anticipates that additional funding will be necessary to sustain the Company's
operations through the fiscal year ending December 31, 2001. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                                   /s/ Feldman Sherb & Co., P.C.
                                                       Feldman Sherb & Co., P.C.
                                                    Certified Public Accountants

New York, New York
April 5, 2001


                                       F-2
<PAGE>

                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2001


Current Assets
       Cash                                                          $324,315
       Account receivables                                            119,817
       Inventories                                                    924,761
       Prepaid expenses and other current assets                      247,191
                                                             -----------------
                Total Current Assets                                1,616,084

       Restricted cash                                                100,809
       Property and Equipment, net                                    147,919
       Goodwill                                                       207,765
       Website                                                         99,750
       Deposits and Other Assets                                      324,685
                                                             -----------------
                Total Assets                                       $2,497,012
                                                             =================

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
       Accounts payable                                            $4,035,674
       Accrued expenses                                               146,048
       Accrued bonus payable                                          119,852
       Notes Payable                                                  558,088
       Current portion of long term debt                              171,070
       Other current liabilities                                      107,223
                                                             -----------------
                Total Current Liabilities                           5,137,955

       Long Term Notes Payable                                        292,313
                                                             -----------------
                Total Liabilities                                   5,430,268
                                                             -----------------

Stockholders' Deficit:
       Preferred stock                                              2,324,298
       Common stock                                                   220,938
       Additional paid in capital                                  29,218,823
       Accumulated deficit                                       (34,278,824)
       Deferred compensation                                        (416,250)
       Cumulative currency translation adjustment                     (2,241)
                                                             -----------------
                Total Stockholders' Deficit                       (2,933,256)
                                                             -----------------
            Total Liabilities and Stockholders' Deficit           $2,497,012
                                                             =================



                 See Notes to Consolidated Financial Statements

                                       F-3


<PAGE>




                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                              2001                   2000
                                                        ------------------    -------------------

<S>                                                      <C>                  <C>
   Revenues                                              $       24,794,036   $          8,320,105
   Cost of Sales                                                  5,875,970              2,410,096
                                                          ------------------    -------------------
   Gross Profit                                                  18,918,066              5,910,009
   Associate commissions                                         12,449,357              3,681,646
   Write-down of patents and goodwill                                     -              9,002,582
   Selling, general and administrative expenses                   5,186,633              5,777,474
                                                          ------------------    -------------------
   Operating income (loss)                                        1,282,076            (12,551,693)
   Minority Interest in Loss of Subsidiary                          105,686                      -
   Gain (loss) on foreign exchange                                   (5,861)                 9,076
   Other income (expense)                                           (23,229)                     -
   Interest (net)                                                  (156,549)              (260,160)
                                                          ------------------    -------------------
   Income (loss) from continuing operations                       1,202,123            (12,802,777)

   Discontinued Operations:
   Loss on disposal                                                       -                (15,000)
                                                          ------------------    -------------------
   Income (loss) before extraordinary gain                        1,202,123            (12,817,777)
   Extraordinary gain - forgiveness of debt                         820,498              2,148,478
                                                          ------------------    -------------------
   Net income (loss)                                              2,022,621            (10,669,299)

   Preferred stock dividends                                      1,089,231              1,277,251
                                                          ------------------    -------------------
   Net income (loss) to common shareholders             $           933,390   $        (11,946,550)
                                                          ==================    ===================

   Basic income (loss) per common share:
   Continuing Operations                                $              0.01   $              (1.47)
   Discontinued Operations                                             0.00                   0.00
   Extraordinary gain                                                  0.00                   0.22
                                                          ------------------    -------------------
   Net income (loss) to common shareholders             $              0.01   $              (1.25)
                                                          ==================    ===================
   Basic weighted common shares used                            134,206,832              9,588,718
                                                          ==================    ===================

   Diluted income (loss) per common share:
     Continuing Operations                              $              0.00   $             (1.47)
     Discontinued Operations                                           0.00                  0.00
  Extraordinary gain                                                   0.00                  0.22
                                                          ------------------    -------------------
   Net income (loss) to common shareholders             $              0.00   $             (1.25)
                                                          ==================    ===================
   Diluted weighted common shares used                          239,317,475             9,588,718
                                                          ==================    ===================
</TABLE>



                 See Notes to Consolidated Financial Statements.

                                       F-4

<PAGE>
<TABLE>
<CAPTION>
                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                        Common Stock          Preferred Stock                 Accumulated   Foreign    Deferred
                      Shares      Amount    Shares     Amount       APIC        Deficit     Currency     Comp       Total
<S>                  <C>          <C>       <C>     <C>         <C>          <C>                       <C>         <C>
           BALANCE   7,989,846    $7,990    5,164   $5,163,696  $21,443,914  $(23,165,664)        -    $(666,000)  $2,783,936
     -December 31,
              1999
       Issuance of           -         -    1,000    1,000,000      (62,530)            -         -            -      937,470
       Convertible
          Series J
   Preferred stock
       Issuance of           -         -        -            -      100,000      (100,000)        -            -            -
      Common Stock
          warrants
     Conversion of     434,660       435     (359)    (359,154)     385,068       (26,349)        -            -            -
          Series H
   Preferred stock
     Conversion of   3,935,171     3,934        -            -    1,216,053             -         -            -     1,219,987
  Notes Payable to
      Common Stock
     Conversion of   2,984,122     2,984      (94)     (93,232)      90,248             -          -           -             -
          Series E
   Preferred Stock
     Conversion of     279,852       280       (6)      (5,800)       5,520             -          -           -             -
          Series G
   Preferred Stock
       Issuance of           -         -       50       50,000            -             -          -           -        50,000
       Convertible
          Series H
   Preferred stock
     Conversion of     138,318       138       (3)      (3,100)       2,962             -          -           -             -
          Series F
   Preferred stock
        Write down           -         -        -            -     (555,000)            -          -     555,000             -
          deferred
      compensation
          Amortize           -         -        -            -            -             -          -     111,000       111,000
          Deferred
      Compensation
  Foreign currency           -         -        -            -            -             -    (37,203)          -       (37,203)
       translation
   Preferred Stock           -         -        -            -    1,250,902    (1,250,902)         -           -             -
          Dividend
       Adjust Note           -         -        -            -     (133,333)            -          -           -      (133,333)
    Payable due in
      Common Stock
          Net Loss           -         -        -            -            -   (10,669,299)         -           -   (10,669,299)

 BALANCE -December
          31, 2000  15,761,970    15,761    5,752    5,752,410   23,743,804   (35,212,214)   (37,203)          -    (5,737,442)

     Conversion of  35,523,045    35,523     (947)    (946,768)     911,245             -          -           -             -
       Convertible
          Series E
   Preferred stock
     Conversion of  51,559,177    51,559   (1,416)  (1,416,408)   1,364,849             -          -           -             -
       Convertible
          Series F
   Preferred Stock
     Conversion of 15,732,164     15,732     (344)    (344,200)     328,468             -          -           -             -
       Convertible
          Series G
   Preferred Stock
     Conversion of 27,699,368     27,700     (615)    (614,542)     586,842             -          -           -             -
       Convertible
          Series H
   Preferred Stock
       Issuance of          -          -      100      100,000            -             -          -           -       100,000
       Convertible
          Series H
   Preferred stock
          Series J 12,260,376     12,261     (206)    (206,194)     193,933             -          -           -             -
     Conversion of
   Note Payable to 22,887,006     22,887        -            -      400,126             -          -           -       423,013
      Common Stock
 Shares Issued for 21,224,601     21,225        -            -      500,325             -          -        (416,250)  105,300
          Services
         Penalties  8,290,013      8,290        -            -            -             -          -           -         8,290
   Preferred Stock          -          -        -            -    1,089,231    (1,089,231)         -           -             -
         Dividends
  Foreign currency          -          -        -            -            -             -      34,962          -        34,962
       translation
       Acquisition 10,000,000     10,000        -            -      100,000             -           -          -       110,000
        Net Income          -          -        -            -            -     2,022,621           -          -     2,022,621
                   -----------------------------------------------------------------------------------------------------------
BALANCE-December  220,937,720   $220,938    2,324   $2,324,298  $29,218,823  $(34,278,824)    $(2,241) $(416,250)  $(2,933,256)
      31, 2001     ===========================================================================================================
</TABLE>

                 See Notes to Consolidated Financial Statements.
                                       F-5


<PAGE>

                           NATURAL HEALTH TRENDS CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                 Year Ended December 31,
                                          --------------------------------------
                                                2001                  2000
                                          ---------------     ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                           $ 2,022,621            $(10,669,299)

Adjustments to reconcile net income
(loss) to net cash provided by (used
 in) operating activities:
  Loss on dissolution                                 -                  15,000
  Depreciation and amortization                  90,578                 364,400
  Loss on disposal of fixed asset                     -                (666,856)
   Write down of patents and goodwill                 -               9,002,582
   Gain on forgiveness of debt                 (820,498)             (2,148,478)
  Issuance of common stock in
   settlement of interest                             -                   6,059
  Minority interest in loss of subsidiary      (105,686)                      -
  Common stock issued for
   services and penalties                       529,840                       -
     Changes in assets and liabilities:
 Accounts receivable                            (68,049)                355,722
 Inventories                                   (727,692)                863,065
 Prepaid expenses                              (229,599)                157,117
 Deposits and other assets                     (237,646)                (11,432)
 Accounts payable and cash overdraft          1,209,237                 683,473
 Accrued expenses                            (1,332,182)                 52,731
 Accrued consulting contract                          -                 666,000
 Deferred revenue                              (119,413)               (408,418)
 Other current liabilities                     (177,432)                  7,545
                                       -----------------     -------------------
    Total Adjustments                        (1,988,542)              8,938,510
                                       ------------------    -------------------
NET PROVIDED BY (USED IN)
 OPERATING ACTIVITIES                            34,079              (1,730,789)
                                       ------------------    -------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                         (141,199)                 (7,421)
  Proceeds from the sale of
   fixed assets                                       -                  10,533
  Business acquisitions,
   net of cash acquired                               -                 (27,587)
  Purchase of websites                         (133,000)                      -
  Increase in restricted cash                   (27,975)                      -
                                       ------------------    -------------------
NET CASH USED IN INVESTING
 ACTIVITIES                                    (302,174)                (24,475)
                                       ------------------    -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Increase from cash overdraft                         -                 (43,284)
 Decrease in restricted cash                          -                  79,671
 Proceeds from preferred stock                  100,000               1,050,000
 Proceeds from notes payable
  and long-term debt                            382,216                 512,976
 Payments of notes payable
  and long-term debt                            (33,187)               (169,743)
 Redemption of preferred stock                        -                       -
                                       ------------------    -------------------
NET CASH PROVIDED BY
 FINANCING ACTIVITIES                           449,029               1,429,620
                                       ------------------    -------------------

Effect of Exchange rates                         34,962                       -

NET INCREASE IN CASH                            215,896                (325,644)

CASH, BEGINNING OF YEAR                         108,419                 434,063

                                       -------------------   -------------------
CASH, END OF YEAR                             $ 324,315               $ 108,419
                                       ===================   ===================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:

SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:

 Conversion of preferred stock to common
  stock                                       $3,528,112          $    461,286
                                              ==============    ================
 Conversion of debentures, notes payable
  and related accrued interest
  to common stock                             $  521,550          $  1,219,987
                                              ==============    ================
 Preferred stock dividends                    $1,089,231          $  1,277,251
                                              ==============    ================
 Common stock issued for acquisition          $  110,000          $       -
                                              ==============    ================


                See Notes to Consolidated Financial Statements.
                                       F-6
<PAGE>
                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 and 2000.


1. ORGANIZATION

     Natural  Health Trends Corp.  ("NHTC") is a Florida  corporation.  NHTC was
incorporated on December 1, 1988 as "Florida Institute of Massage Therapy, Inc."
and changed its name to "Natural  Health Trends Corp." on June 24, 1993.  NHTC's
common stock,  par value $0.001 per share (the "Common  Stock") is listed on the
Over-the-Counter Bulletin Board (the "OTCBB") under the symbol "NHTC".

     NHTC is a holding  company that operates two  businesses  which  distribute
products  that  promote  health,   wellness  and  sexual  vitality  through  the
multi-level  marketing  ("MLM")  channel.  NHTC's  largest  operation  is Lexxus
International,  Inc.  ("Lexxus"),  a Delaware  corporation and a  majority-owned
subsidiary  of NHTC.  Lexxus  sells  products  that  heighten  mental and sexual
arousal,  particularly  in  women.  NHTC's  other  business,   eKaire.com,  Inc.
("eKaire"),  distributes  nutritional  supplements  aimed at general  health and
wellness  through the Internet and other channels.  eKaire consists of companies
operating  in the U.S.,  in Canada as Kaire  International  Canada Ltd.  ("Kaire
Canada"),  in Australia as Kaire  Nutraceuticals  Australia  Pty.  Ltd.  ("Kaire
Australia"),  in New Zealand as Kaire Nutraceuticals New Zealand Limited ("Kaire
New Zealand"), and in Trinidad as Kaire Trinidad, Ltd. ("Kaire Trinidad").

     In  January   2001,   NHTC  entered  into  a  joint   venture  with  Lexxus
International and formed a new majority-owned subsidiary,  Lexxus International,
Inc.  ("Lexxus"),  a  Delaware  corporation.  The  original  founders  of Lexxus
International received an aggregate of 10,000,000 shares of Common Stock.

     In February 1999, NHTC, through a wholly-owned subsidiary, acquired certain
assets (the "Kaire Assets") of Kaire International, Inc., a Delaware corporation
("KII").  The assets  included,  but not limited  to, the  corporate  name,  all
variations and any other product name,  registered and unregistered  trademarks,
trade names, servicemarks, patents, logos and copyrights of KII, and independent
associate  lists.  In exchange  for the Kaire  Assets,  NHTC made the  following
issuances:

   o      to 11 secured creditors of KII, $2,800,000 aggregate stated value of
          Series F preferred  stock,  par value  $1,000 per share,  of NHTC (the
          "Series F Preferred Stock");

   o      to two secured creditors of KII, $350,000  aggregate stated value of
          Series G preferred  stock,  par value  $1,000 per share,  of NHTC (the
          "Series G Preferred Stock");

   o      to Kaire International, Inc., 5 year warrants to purchase 200,000
          shares of NHTC's Common Stock exercisable at $4.06 per share.

     In March 2001, Global Health Alternatives, Inc., a Delaware corporation and
wholly-owned subsidiary of NHTC ("GHA"), and Ellon, Inc., a Delaware corporation
and  wholly-owned  subsidiary of GHA  ("Ellon"),  filed for Chapter 7 bankruptcy
liquidation in the United States  Bankruptcy  Court of the Northern  District of
Texas.  Neither GHA nor Ellon had operations during the years 2000 or 2001. Both
GHA and Ellon were dissolved in June 2001.

     In the second quarter of 2001, NHTC incorporated  Lexxus  International (SW
Pacific) Pty. Ltd., an Australian  corporation and majority-owned  subsidiary of
NHTC, which does business in Australia ("Lexxus Australia").  In addition,  NHTC
incorporated   Lexxus   International  (New  Zealand)  Limited,  a  New  Zealand
corporation and  majority-owned  subsidiary of NHTC,  which does business in New
Zealand ("Lexxus New Zealand").

     In June 2001, NHTC incorporated Lighthouse Marketing Corporation ("LMC"), a
Delaware  Corporation and a wholly-owned  subsidiary of NHTC. As of December 31,
2001, LMC had not conducted any business, but intends to conduct business in the
future.


                                       F-7
<PAGE>

     In June 2001,  NHTC sold 100% of the Common Stock in Kaire  Nutraceuticals,
Inc., Delaware Corporation,  to a South African firm for a purchase price of the
greater of (i)  $50,000  per year for a period of five  years,  or (ii) for five
years,  a  percentage  of net income based on a  progressive  scale of net sales
figures of the South  African  firm. As of December 31, 2001, no income has been
recognized on this transaction.

     On November 16, 2001, NHTC incorporated  Lexxus  International Co., Ltd., a
corporation   organized   under  the  laws  of  the  Republic  of  China  and  a
majority-owned subsidiary of NHTC ("Lexxus Taiwan").

     On January 28, 2002,  NHTC  incorporated  MyLexxus Europe AG, a corporation
organized under the laws of Switzerland and a majority-owned  subsidiary of NHTC
("Lexxus  Europe").  This  company  manages  the sales of product  into  sixteen
eastern European countries, including Russia.

     In  March  2002,  NHTC  incorporated  Lexxus  International  Co.,  Ltd.,  a
corporation  organized  under  the  laws  of  Hong  Kong  and  a  majority-owned
subsidiary of NHTC ("Lexxus Hong Kong").


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          A.  Principles  of  Consolidation  -  The  accompanying   consolidated
          financial  statements  include the accounts of Natural  Health  Trends
          Corp. and its subsidiaries.  All material  inter-company  transactions
          have been eliminated in consolidation.

          B.  Accounts  Receivable  -  Accounts  receivable  are  stated  net of
          allowance for doubtful accounts of approximately $0.

          C.  Inventories  -  Inventories  consisting  primarily of  nutritional
          supplements  and "quality of life" products are stated at the lower of
          cost or  market.  Cost is  determined  using the  first-in,  first-out
          method.

          D.  Property  and  Equipment - Property and  equipment  are carried at
          cost. Depreciation is computed using the straight-line method over the
          useful lives of the various assets.

          E.  Cash  Equivalents  - Cash  equivalents  consist  of  money  market
          accounts and commercial paper with an initial term of fewer than three
          months.  For purposes of the statement of cash flows,  NHTC  considers
          highly  liquid debt  instruments  with  original  maturities  of three
          months or less to be cash equivalents.

          F. Earnings (Loss) Per  Share-Accounting  Standards No. 128, "Earnings
          Per Share"  SFAS 128  requires a  presentation  of "Basic"  and (where
          applicable)  "Diluted" earnings per share.  Generally,  Basic earnings
          per share is computed on only the  weighted  average  number of common
          shares  actually  outstanding  during  the  period,  and  the  Diluted
          computation  considers  potential  shares  issuable  upon  exercise or
          conversion  of other  outstanding  instruments  where  dilution  would
          result.  Diluted  earnings  per share is not  being  shown in the year
          ended  December 31, 2000 due to the fact that this year has a net loss
          and the conversion of the preferred stock and Common Stock outstanding
          during that year would be anti-dilutive.

          G. Accounting  Estimates - The preparation of financial  statements in
          accordance  with generally  accepted  accounting  principles  requires
          management to make estimates and assumptions  that affect the reported
          amounts  of  assets  and  liabilities  at the  date  of the  financial
          statements  and the reported  amounts of revenues and expenses  during
          the reported period. Actual results could differ from those estimates.

          H.  Income   Taxes-Pursuant  to  Statement  of  Financial   Accounting
          Standards No. 109 ("SFAS 109")  "Accounting  for Income  Taxes",  NHTC
          accounts  for  income  taxes  under the  liability  method.  Under the
          liability  method,  a deferred tax asset or  liability  is  determined
          based upon the tax effect of the  differences  between  the  financial
          statement and tax basis of assets and  liabilities  as measured by the
          enacted rates which will be in effect when these differences reverse.


                                       F-8
<PAGE>

          I. Fair Value of Financial  Instruments-The  carrying amounts reported
          in the balance sheet for cash, receivables,  accounts payable, accrued
          expenses,  and  notes  payable  approximate  fair  value  based on the
          short-term maturity of these instruments.

          J. Stock Based  Compensation-NHTC  accounts for stock  transactions in
          accordance  with APB Opinion No. 25,  "Accounting  For Stock Issued To
          Employees."  In  accordance  with  Statement of  Financial  Accounting
          Standards  No.  123  ("SFAS   123"),   "Accounting   For   Stock-Based
          Compensation,"  NHTC adopted the pro forma disclosure  requirements of
          SFAS 123.

          K. Impairment of Long-Lived  Assets-NHTC  reviews  long-lived  assets,
          certain  identifiable assets and goodwill related to those assets on a
          quarterly basis for impairment  whenever  circumstances and situations
          change such that there is an indication that the carrying  amounts may
          not be recovered. At December 31, 2000, NHTC recorded a charge against
          patents, customer lists and goodwill upon such review.

          L. Basis of  Presentation - NHTC had a working  capital  deficiency of
          approximately  $3,522,000  and  $5,864,000 as of December 31, 2001 and
          2000,  respectively,  and had  recorded  net  losses of  approximately
          $10,669,000   for  the  year  ended  December  31,  2000,  that  raise
          substantial doubt about NHTC's ability to continue as a going concern.
          NHTC's  continued  existence  is  dependent  on its  ability to obtain
          additional  debt or equity  financing  and to  generate  profits  from
          operations.

          M.  Royalty  Expense-Royalties  that are  incurred  on a per unit sold
          basis  are  included  in Cost of  Sales.  Additional  royalty  amounts
          incurred to meet contractual minimum levels are classified as Selling,
          General and Administrative Expenses.

          N.  Reclassifications-NHTC  has  reclassified  certain expenses in its
          consolidated statements of operations for the years ended December 31,
          2001 and 2000 as a result of the  closure of Kaire  Europe and related
          facilities.  These  changes had no  significant  impact on  previously
          reported results of operations or stockholders' equity.

          O.   Foreign   Currency   Translations-Assets   and   liabilities   of
          subsidiaries  are  translated at the rate of exchange in effect on the
          balance sheet date; income and expenses of subsidiaries are translated
          at the average rates of exchange  prevailing during the year or period
          then ended.  The related  translation  adjustments  are reflected as a
          cumulative  translation   adjustment  in  consolidated   stockholders'
          equity.  Foreign currency gains and losses resulting from transactions
          are  included  in  results  of  operations  in the period in which the
          transaction occurred.

          P.  Revenue  Recognition  - The  subsidiaries  of NHTC  sell  products
          directly to  independent  distributors.  Sales are  recorded  when the
          products are shipped.

          Q.  Concentration of Risk-NHTC  maintains its cash accounts in several
          bank  accounts.  Accounts  in the  United  States  are  insured by the
          Federal Deposit Insurance Corporation ("FDIC") up to $100,000.  NHTC's
          cash  balance  in some of its  bank  accounts  generally  exceeds  the
          insured limits.

          Lexxus and eKaire sell products through network  marketers  throughout
          the United States,  Canada, New Zealand,  Australia,  and Trinidad and
          Tobago.  Credit is extended  for returned  checks  and/or until credit
          card purchases have cleared the bank.

          Credit  losses,  if  any,  have  been  provided  for in the  financial
          statements and are based on management's expectations. NHTC's accounts
          receivable  are subject to  potential  concentrations  of credit risk.
          NHTC does not believe that it is subject to any unusual or significant
          risk, in the normal course of business.





                                       F-9
<PAGE>


          R. Restricted Cash - NHTC is required to maintain three (3) restricted
          cash accounts (i) two with credit card processing  companies,  one for
          each subsidiary. The primary purpose of these accounts is to provide a
          reserve for potential  uncollectible amounts and chargebacks by Lexxus
          and eKaire credit card customers. The credit card processing companies
          may periodically  increase the restricted cash account.  The amount on
          deposit  is  calculated  at 2% of net sales  over a rolling  six month
          average and (ii) a third account is maintained with a Canadian bank as
          security  for a  bank  drafting  process  utilized  by  eKaire  in the
          ordinary  course  of  business.

          S. Recently Issued  Accounting  Standards-In  July 2001, the Financial
          Accounting  Standards  Board  ("FASB")  issued  Statement on Financial
          Accounting  Standards No. 141 ("SFAS 141"),  "Business  Combinations."
          SFAS No. 141 requires the purchase  method of accounting  for business
          combinations   initiated  after  June  30,  2001  and  eliminates  the
          pooling-of-interest  method.  NHTC  believes that the adoption of SFAS
          No.  141  will  not  have  a  significant   impact  on  the  financial
          statements.

          In July 2001, FASB issued Statement of Financial  Accounting standards
          Board No. 142,  "Goodwill  and Other  Intangible  Assets",  ("SFAS No.
          142"),  which is effective for fiscal years  beginning  after December
          15, 2001. SFAS 142 requires, among other things, the discontinuance of
          goodwill  amortization.  In addition, the standard includes provisions
          upon adoption for the  reclassification of certain existing recognized
          intangibles as goodwill,  reassessment of the useful lives of existing
          recognized intangibles, reclassification of certain intangibles out of
          previously  reported  goodwill and the testing for the  impairment  of
          existing goodwill and other intangibles.  NHTC is currently  assessing
          but has not yet determined the impact of SFAS No. 142 on the financial
          position and results of operations.

          In August 2001,  the FASB issued  Statement  of  Financial  Accounting
          standards   Board  No.   143,   "Accounting   for   Asset   Retirement
          Obligations", (SFAS No. 143"), which is effective for all fiscal years
          beginning after June 15, 2002; however,  early adoption is encouraged.
          In August 2001,  the FASB issued  Statement  of  Financial  Accounting
          Standards Board No. 144, "Accounting for the Impairment or Disposal of
          Long-Lived  Assets",  ("SFAS  144").  This  statement is effective for
          fiscal years beginning after December 15, 2001 and supercedes SFAS 121
          while retaining many of its requirements.

          In October  2001,  the FASB issued  Statement of Financial  Accounting
          Standards  No. 144 ("SFAS  144"),  "Accounting  for the  Impairment or
          Disposal  of  Long-Lived   Assets,"  which  supercedes   Statement  of
          Financial Accounting  Standards No. 121 ("SFAS 121"),  "Accounting for
          the Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be
          Disposed Of" and certain  provisions of APB Opinion No. 30, "Reporting
          Results of Operations - Reporting the Effects of Disposal of a Segment
          of a Business and  Extraordinary,  Unusual and Infrequently  Occurring
          Events and Transactions."  SFAS 144 requires that long-lived assets to
          be disposed of by sale, including discontinued operations, be measured
          at the  lower of  carrying  amount or fair  value,  less cost to sell,
          whether   reported  in  continuing   operations  or  in   discontinued
          operations.  SFAS 144 also  broadens  the  reporting  requirements  of
          discontinued  operations  to include all  components of an entity that
          have  operations  and cash flows  that can be  clearly  distinguished,
          operationally and for financial reporting  purposes,  from the rest of
          the entity.  The provisions of SFAS 144 are effective for fiscal years
          beginning  after  December  15,  2001.  Management  believes  that the
          implementation  of this standard will have no impact on NHTC's results
          of operations and financial position.







                                      F-10


<PAGE>

3. PROPERTY AND EQUIPMENT

         Property and Equipment consisted of the following:

                                        Estimated Useful
     Type of Property or Equipment           Lives                  Amount
  -------------------------------      ------------------      -----------------
Equipment, furniture and
fixtures                                      5 to 7        $       113,514
Computers and peripherals                       3                   105,694
Software                                     3 to 5                   4,307
Leasehold improvements                       3 to 5                   3,489
                                                                ----------------
Property and Equipment                                      $       227,004
Less: Accumulated depreciation                                      (79,085)
                                                                ----------------
Property and Equipment, net                                 $       147,919
                                                                ================



4. NOTES PAYABLE

         Notes Payable consisted of the following at December 31, 2001:
<TABLE>
<CAPTION>

         Note Payable Amount

<S>                           <C>                    <C>                                <C>
      (i)  Augusta Street LLC $100,000 note payable, 10% interest                       $ 100,000
     (ii)  Augusta Street LLC $138,000 note payable, 4.75% interest                     $ 138,000
    (iii)  Naline Thompson $50,000 note payable, 12% interest                             $50,000
           Merrill  Corporation  $145,496  note payable,  8% interest,  due upon        $ 145,496
           demand
           Aloe Commodities International, Inc.,
           non-interest bearing, due upon demand                                         $ 52,500
     (iv)  Lightfoot                                                                     $ 40,967
           Life Dynamics, Inc. note payable, interest-free                                $31,125
                                                                                        ---------
                                      Notes Payable                                     $ 558,088
                                                                                        =========
</TABLE>


(i)Payee of the note is  entitled,  at its option,  to convert at any time,  the
principal amount of this note at a conversion price equal to 75% of the five-day
average  closing  bid  price  of the  Common  Stock  for the five  trading  days
immediately  preceding the applicable conversion date. The beneficial conversion
feature of $ 33,333 was recorded in the financial  statements.  This note is due
upon demand.




                                      F-11


<PAGE>

(ii)Payee of the note is entitled,  at its option,  to convert at any time,  the
principal amount of this note at a conversion price equal to 75% of the five-day
average  closing  bid  price  of the  Common  Stock  for the five  trading  days
immediately  preceding the applicable conversion date. The beneficial conversion
feature of $ 46,000 was recorded in the financial  statements.  This note is due
December 31, 2002.

(iii) The  investor  received  200,000  shares of NHTC Common Stock as well as a
warrant to purchase  200,000  shares of the Common  Stock of NHTC at an exercise
price of $0.05 per share for three years.

(iv) Note due to  Michael  and Linda  Lightfoot,  bears  interest  at prime plus
1.75%, monthly payments are being made.

5. LONG-TERM DEBT

         Long-term debt consisted of the following at December 31, 2001:


         Debt Instrument                                            Amount
         -------------------------------------                  -------------
(i)      Samantha Haimes, $325,000, 10% interest                  $ 296,892
(ii)     State of Texas, $114,278, 7% interest                      $96,738
(iii)    Robert L. Richards, interest-free                          $69,753
                                                                -------------
              Total Debt                                          $ 463,383
              Less: current portion of Long-term Debt             $ 171,070
                                                                -------------
              Long-term Debt                                      $ 292,313
                                                                =============

(i) NHTC is making monthly  payments of $12,000 through July 2002 and thereafter
$15,000  per  month  until  repaid in full  with  interest.  (ii) NHTC is making
monthly  payments of $2,200  until repaid in full with  interest.  (iii) NHTC is
making monthly payments of $1,333 until repaid in full with interest.


                Date                       Amount
               -----                   -------------
                2002                     $ 171,070
                2003                     $ 199,517
                2004                       $39,134
                2005                       $40,807
                2006 and thereafter        $12,855



As of December 31, 2001, NHTC owed approximately  $70,000 to Robert L. Richards,
a former  president and a director,  in connection with  liabilities  assumed in
connection with the KII acquisition.

                                      F-12


<PAGE>

6.  PAYROLL TAX LIABILITIES

    During  2000 and 1999,  Kaire  Nutraceuticals,  Inc.  did not make  payroll
tax deposits  with the Internal  Revenue  Service  ("IRS") and the various state
taxing  authorities on a timely basis. Kaire  Nutraceuticals,  Inc. did file all
required payroll tax returns. This liability of approximately  $630,000 is fully
reserved for in the financial statements.

7. STOCKHOLDERS' EQUITY

     A. Common Stock - NHTC is authorized to issue 500,000,000  shares of Common
     Stock, $.001 par value.

     B.  Preferred  Stock - NHTC is  authorized  to issue a maximum of 1,500,000
     shares of $1,000  par value  preferred  stock,  in one or more  series  and
     containing  such  rights,  privileges  and  limitations,  including  voting
     rights, dividend rates, conversion privileges, redemption rights and terms,
     redemption prices and liquidation preferences, as NHTC's board of directors
     may, from time to time, determine.

     Series E Preferred Stock.

          In August 1998,  NHTC issued 1,650 shares of Series E Preferred  Stock
     with a  stated  value  of  $1,000  per  share  realizing  net  proceeds  of
     $1,439,500.  The  preferred  stock and the  accrued  dividends  thereon are
     convertible  into shares of NHTC's Common Stock at a conversion price equal
     to the lower of 75% of the average  closing  bid price of the Common  Stock
     for the five trading days immediately preceding the conversion date or 100%
     of the  closing  bid price on the day of  funding.  This series of stock is
     convertible  commencing  60  days  after  issuance.  Due to the  beneficial
     conversion  features in the issuance of this series of preferred  stock, an
     imputed dividend of $550,000 has been recorded.

          Pursuant  to the terms of the Series E Preferred  Stock,  if NHTC does
     not have an effective  registration statement within 120 days subsequent to
     the issuance of Series E Preferred  Stock,  a 2% penalty on the face amount
     of $1,650,000  accrues for every 30 days without an effective  registration
     statement.  As of the year ended  December  31,  2000,  NHTC had recorded a
     charge of $635,471 due to non-compliance with this clause.

          In the year ended December 31, 2000, $103,715 in accrued dividends was
     recorded for the period such stock was outstanding.

          During the year ended December 31, 2000,  NHTC had converted 93 shares
     of the Series E Preferred Stock into 2,984,122 shares of Common Stock.

          In the year ended December 31, 2001,  $33,780 in accrued dividends was
     recorded for the period such stock was outstanding.

          During the year ended December 31, 2001, NHTC had converted 947 shares
     of the Series E Preferred Stock into 35,523,045 shares of Common Stock.

     Series F Preferred Stock.

          In February 1999, NHTC issued 2,800 shares of Series F Preferred Stock
     with  a  stated  value  of  $1,000  per  share  realizing  a net  value  of
     $2,800,000.  This  issuance  is  in  accordance  with  the  asset  purchase
     agreement of KII. The  preferred  stock pays a dividend at 6% per annum and
     is payable upon conversion into either cash or common stock.  The preferred
     stock and the accrued  dividends thereon are convertible into shares of the
     Company's  Common Stock at a  conversion  price equal to 95% of the average
     closing  bid  price  of  the  Common  stock  for  the  three  trading  days
     immediately  preceding the date on which NHTC receives notice of conversion
     from a holder. NHTC is permitted at any time, on five days prior to written
     notice,  to redeem the outstanding  preferred  stock at a redemption  price
     equal to the stated value and the accrued dividends thereon.

                                      F-13
<PAGE>


          In the year ended  December 31, 2000,  NHTC had  converted 3 shares of
     the Series F Preferred Stock into 138,318 shares of Common Stock.

          In the year ended December 31, 2001,  $32,732 in accrued dividends was
     recorded for the period such stock was outstanding.

          During the year ended  December 31,  2001,  NHTC had  converted  1,416
     shares of the Series F  Preferred  Stock into  51,559,177  shares of Common
     Stock.

     Series G Preferred Stock.

          In February 1999,  NHTC issued 350 shares of Series G Preferred  Stock
     with a stated value of $1,000 per share  realizing a net value of $350,000.
     The  preferred  stock  pays a  dividend  at the rate of 6% per  annum.  The
     preferred  stock and the accrued  dividends  thereon are  convertible  into
     shares of NHTC's  Common  Stock at a  conversion  price equal to 95% of the
     average  closing bid price of the common  stock for the three  trading days
     immediately  preceding  the date on which the  Company  receives  notice of
     conversion.  NHTC is  permitted  at any time,  on five days  prior  written
     notice,  to redeem the outstanding  preferred  stock at a redemption  price
     equal to the stated value and the accrued dividends thereon.

          During the year ended  December 31, 2000,  NHTC had converted 6 shares
     of the Series G  Preferred  Stock and  accrued  dividends  of $20,942  into
     279,852 shares of Common Stock.

          In the year ended December 31, 2001,  $7,198 in accrued  dividends was
     recorded for the period such stock was outstanding.

          During the year ended December 31, 2001, NHTC had converted 344 shares
     of the Series G Preferred Stock into 15,732,164 shares of Common Stock.

     Series H Preferred Stock.

          In March and April  1999,  the Company  sold 1,400  shares of Series H
     Preferred  Stock  with a stated  value of $1,000  per share  realizing  net
     proceeds of $1,201,015.  In October 2000, the Company sold an additional 50
     shares of Series H Preferred  Stock with a stated value of $1,000 per share
     realizing net proceeds of  $43,500.The  preferred  stock pays a dividend at
     the rate of 8% per annum.  The  preferred  stock and the accrued  dividends
     thereon are  convertible  into shares of the  Company's  common  stock at a
     conversion price equal to the lower of the closing bid price on the date of
     issuance  or 75% of the average  closing bid price of the common  stock for
     the three trading days immediately  preceding the date on which the Company
     receives notice of conversion from a holder.

          In April 2001,  NHTC issued 50 shares of Series H Preferred  Stock for
     $50,000  realizing  net proceeds of $43,500.  The Series H Preferred  Stock
     pays  dividends of 10% per annum and is  convertible  into shares of Common
     Stock at the lower of the closing bid price on the  conversion  date or 75%
     of the market value of the Common Stock on the conversion date.

          In May 2001,  NHTC  issued 50 shares of Series H  Preferred  Stock for
     $50,000  realizing  net proceeds of $43,500.  The Series H Preferred  Stock
     pays  dividends of 10% per annum and is  convertible  into shares of Common
     Stock at the lower of the closing bid price on the  conversion  date or 75%
     of the market value of the Common Stock on the conversion date

          Pursuant  to the terms of the Series H Preferred  Stock,  if NHTC does
     not have an effective  registration statement within 120 days subsequent to
     the issuance of Series H Preferred  Stock,  a 2% penalty on the face amount
     of $1,400,000  accrues for every 30 days without an effective  registration
     statement.  As of the year ended  December  31,  2001,  NHTC had recorded a
     charge of $12,000 due to non-compliance with this clause.


                                      F-14
<PAGE>


          In the year ended December 31, 2000, NHTC recorded an imputed dividend
     of  $16,667  due to the  beneficial  conversion  features  in the  Series H
     Preferred  Stock. An additional  $49,686 in accrued  dividends was recorded
     for the period such stock was outstanding.

          During the year ended December 31, 2000, NHTC had converted 359 shares
     of the Series H Preferred Stock into 434,660 shares of Common Stock.

          In the year ended  December  31,  2001,  NHTC  recorded an  additional
     $19,611 in accrued  dividends  was  recorded  for the period such stock was
     outstanding.

          During the year ended December 31, 2001, NHTC had converted 615 shares
     of the Series H Preferred Stock into 27,699,368 shares of Common Stock.

     Series J Preferred Stock.

          In March 2000, NHTC sold 1,000 shares of Series J Preferred Stock with
     a stated value of $1,000 per share realizing net proceeds of $936,000.  The
     preferred  stock pays a dividend  at the rate of 10% per annum,  payable in
     cash or stock  at  NHTC's  option.  The  preferred  stock  and the  accrued
     dividends thereon are convertible into shares of the Company's common stock
     at a  conversion  price  equal to the lower of the closing bid price on the
     date of  issuance  or 70% of the  average  closing  bid price of the common
     stock for the  lowest  three  trading  days  during  the  twenty day period
     immediately  preceding the date on which NHTC receives notice of conversion
     from a holder.

          Pursuant  to the terms of the Series J Preferred  Stock,  if NHTC does
     not have an effective  registration statement within 120 days subsequent to
     the issuance of Series J Preferred  Stock,  a 2% penalty on the face amount
     of $1,000,000  accrues for every 30 days without an effective  registration
     statement.  As of the year ended  December  31,  2001,  NHTC had recorded a
     charge of $411,890 due to non-compliance with this clause.

          In the year ended  December  31,  2001,  NHTC  recorded an  additional
     $17,051 in accrued  dividends  was  recorded  for the period such stock was
     outstanding.

          During the year ended December 31, 2001, NHTC had converted 206 shares
     of the Series J Preferred Stock into 12,260,376 shares of Common Stock.


     C.  Convertible  Debentures - During  2001,  NHTC  converted  approximately
     $385,409 of its  promissory  notes,  plus accrued  interest of $37,604 into
     22,887,006 shares of Common Stock.

          NHTC  issued  500,000  shares of Common  Stock to  certain  management
     employees in April 2001 and recorded $30,500 of compensation expense.

          NHTC issued  200,000  shares of Common Stock in a verbal  agreement to
     Capital  Development  S.A., a  consulting  firm in August 2001 and recorded
     $11,800 of consulting expense.

          In August  2001,  NHTC  issued  20,000,000  shares of Common  Stock to
     Summit Trading Ltd., a consulting  firm, as part of a long-term  consulting
     agreement.  This issuance was recorded as deferred compensation and will be
     amortized over the life of the agreement.

          In  January  2001,  NHTC  entered  into a joint  venture  with  Lexxus
     International   and  formed  a  new   majority-owned   subsidiary,   Lexxus
     International,  Inc.,  a Delaware  corporation.  The  original  founders of
     Lexxus  International  received an aggregate of 10,000,000 shares of NHTC's
     Common Stock, par value of $0.001.



                                      F-15
<PAGE>

8.   INCOME TAXES

     NHTC  accounts for income taxes under the  provisions of SFAS 109. SFAS No.
     109 requires the  recognition  of deferred tax assets and  liabilities  for
     both the expected impact of differences between the financial statement and
     tax  basis of assets  and  liabilities,  and for the  expected  future  tax
     benefit to be derived from tax loss and tax credit carryforwards.  SFAS 109
     additionally requires the establishment of a valuation allowance to reflect
     the likelihood of realization of deferred tax assets. At December 31, 2001,
     NHTC had net deferred  tax assets of  approximately  $4,400,000.  NHTC has
     established a valuation  allowance for the full amount of such deferred tax
     assets at December 31, 2001, as management of the Company has not been able
     to  determine  that it is more likely than not that the deferred tax assets
     will be realized.


     The following table reflects  NHTC's deferred tax assets and  (liabilities)
     at December 31, 2001:

                                                             December 31, 2001
                                                             -----------------
           Net operating loss deduction                   $       4,400,000
           Valuation allowance                                   (4,400,000)
                                                             -----------------
                                                          $           --
                                                             =================

     The provision for income taxes (benefits) differs from the amount computed
     by applying the statutory federal income tax rate to income loss before
     income taxes as follows:

<TABLE>
<CAPTION>
                                                                       For the year Ended
                                                                          December 31,
                                                       ---------------------------------------------------
                                                                2001                         2000
                                                       ------------------------       --------------------
<S>                                                 <C>                           <C>
      Income tax (benefit) computed at statutory    $               (1,500,000)   $            (3,500,000)
      rate
      Effect of permanent differences                                1,500,000                  3,500,000
                                                       ------------------------       --------------------
      Provision for income taxes (benefit)          $                     -       $                  -
                                                       ========================       ====================

</TABLE>

     The net operating loss  carryforward at December 31, 2001 was approximately
     $12,000,000 and expires in the years 2012 to 2020.


9. COMMITMENTS AND CONTINGENCIES

A.  Leases

          NHTC  utilizes  approximately  1,000  square  feet of office  space in
     Irving,  Texas on an as needed  basis,  through an  arrangement  with Regus
     Business Centre which provides business solutions for companies.  NHTC pays
     a minimum  annual  rental  fee of $2,100.  Lexxus  leases an  aggregate  of
     approximately  16,000 square feet of office and warehouse  space in Dallas,
     Texas. The lease term is 38 months, expiring on September 30, 2004, and the
     current rent is approximately $151,500 per year. Additional warehousing for
     Lexxus is located in Branson,  Missouri where Lexxus utilizes approximately
     35,000   square  feet  of  warehouse   space.   The  lease  term  is  on  a
     month-to-month basis at a rent of $18,000 per year. The Canadian office and
     warehouse  of Lexxus and eKaire  leases  office  space in Langley,  British
     Columbia,  totaling  approximately  3,600 square feet. The lease term is 36
     months,  expiring on December 1, 2004 and the current rent is approximately
     $25,000 per year.

                                      F-16
<PAGE>


          Kaire  Australia,  Kaire New Zealand,  Lexxus Australia and Lexxus New
     Zealand lease office space and warehouse  facilities of approximately 2,475
     square feet in Queensland, Australia. The lease term is 60 months, expiring
     on January 1, 2007, and the current rent is approximately $20,000 per year.

          In March 2002,  Lexxus Taiwan  entered into a two-year lease for 6,314
     square feet of office space at a current rent of approximately  $75,000 per
     year.

          Kaire Trinidad leases  approximately 1,100 square feet of office space
     in downtown Port-of-Spain,  Trinidad. The lease term is on a month-to-month
     basis.

          NHTC is currently in the process of finding  adequate office space for
     its subsidiaries in Hong Kong and Russia.

          NHTC believes that such  properties  are suitable and adequate for the
     current operating needs.

B. Litigation

          On August 4, 1997,  Samantha Haimes brought an action in the Fifteenth
     Judicial Circuit of Palm Beach County,  Florida,  against NHTC and National
     Health Care Centers of America,  Inc., a  wholly-owned  subsidiary of NHTC.
     NHTC asserted counterclaims against Samantha Haimes and Leonard Haimes. The
     complaint  arises out of the  defendants'  alleged  breach of  contract  in
     connection  with NHTC's  natural  health care center,  which was located in
     Boca  Raton,  Florida.  NHTC  agreed to settle  such  actions for shares of
     Common  Stock  with a fair  market  value of  $325,000,  but not less  than
     125,000  shares of Common  Stock and agreed to  register  such  shares.  On
     October 10, 2000, due to noncompliance with the settlement,  a judgment was
     taken against NHTC in the amount of $325,000 plus interest.  On October 12,
     2001,  NHTC entered into a payment  arrangement to settle this  obligation.
     NHTC has  recorded a  liability  of $325,000  plus  interest at ten percent
     (10%) per annum, which is included in the financial statements for the year
     ended December 31, 2001.

          On July 10, 2000, the State of Texas obtained a judgment  against NHTC
     in the amount of $109,170 for unpaid sales taxes, penalties,  interest, and
     attorney fees.  NHTC has entered into a voluntary  payment  arrangement and
     has recorded a liability of $109,170  plus  interest at seven  percent (7%)
     per annum, which is included in the financial statements for the year ended
     December 31, 2001.

          On December 29, 2000, Merrill Corporation  obtained a judgment against
     NHTC in the amount of  $145,497,  plus  interest at eight  percent (8%) per
     annum,  which is included in the  financial  statements  for the year ended
     December 31, 2001.

          On October  30,  2001,  Omni Group LLC filed an action in the State of
     Vermont, Addison Superior Court, against NHTC alleging that NHTC tortuously
     interfered with existing contractual relationships and made representations
     about  Omni  Group  that are  untrue.  Omni  Group is seeking $5 million in
     compensatory damages and $5 million in punitive damages.  NHTC is defending
     this action. NHTC filed an answer on April 2, 2002 in which NHTC denied any
     wrongdoing.

          On  November  22,  2001,  Pfizer,  Inc.  filed an action in the United
     States  District  Court,  Southern  District  of New  York  against  Lexxus
     alleging that Lexxus'  distribution  and marketing of Viacreme TM infringes
     on Pfizer's federally registered trademark,  Viagra (R). Pfizer's complaint
     alleges federal false designation of origin and unfair competition, federal
     trademark  dilution,  federal  false  advertising  and unfair  competition,
     common law trademark  infringement,  trademark  dilution and deceptive acts
     and practices. NHTC is defending this action and is currently in settlement
     discussions with Pfizer.

          On March 21,  2002,  NFL  Properties,  Inc.  brought  an action in the
     Supreme  Court of the County of Onondaga  in the State of New York  against
     NHTC  and  Natural  Health  Laboratories  in the  amount  of  approximately
     $126,000 for alleged breach of contract.  NHTC's  management  believes that
     the action  naming NHTC as a defendant was a case of mistaken identity, and
     is currently trying to have NHTC removed as a defendant in the action.



                                      F-17
<PAGE>


C. Major Supplier

          NHTC currently buys all of its Pycnogenol(R),  an important  component
     of its products, from a single supplier, Natural Health Sciences, L.L.C.

          Although  there  are  a  limited  number  of   manufacturers  of  this
     component,  management  believes that other suppliers could provide similar
     components  on  comparable  terms.  NHTC does not maintain any  contractual
     commitments or similar arrangements with other suppliers.

          NHTC purchases its products from  manufacturers and suppliers on an as
     needed  basis.  Should these  relationships  terminate,  NHTC's  supply and
     ability to meet consumer demands would not be adversely affected.

10. STOCK OPTION PLANS AND WARRANTS

          The  following  table  summarizes  the changes in options and warrants
     outstanding,  and the related  exercise  price for shares of NHTC's  Common
     Stock:

<TABLE>
<CAPTION>

                                                    Weighted                                        Weighted
                                                     Average                                       Exercisable
                                                    Exercise                                        Average
                                                   Price Stock                                      Exercise
                                      Shares         Options        Exercisable      Shares          Price           Warrants
                                  -------------  --------------   -------------- ------------    -------------  --------------
Outstanding at
<S>      <C> <C>                        <C>     <C>                     <C>          <C>       <C>                  <C>
December 31, 1999                       339,100 $          6.01         339,100      2,813,257 $         7.00       2,813,257
  Granted                                     -               -               -        138,889           1.44         138,889
  Cancelled                           (295,000)            3.50       (295,000)              -              -               -
                                  -------------  --------------   -------------- ------------    -------------  --------------
Outstanding at
December 31, 2000                        44,100 $         15.68          44,100      2,952,146 $         6.74       2,952,146
  Granted                             6,200,000             .01       6,200,000              -              -               -
  Cancelled                                   -               -               -              -              -               -
                                  -------------  --------------   -------------- ------------    -------------  --------------
Outstanding at
December 31, 2001                    6,244,100  $           .12       6,244,100      2,952,146 $         6.74       2,952,146

</TABLE>

     The following table summarizes information about exercisable stock options
and warrants at December 31, 2001:

<TABLE>
<CAPTION>

                                                   Remaining       Average        Average
                   Range of          Number        Contractual     Exercise       Number       Exercise
                 Exercise Price      Outstanding   Life             Price        Exercisable    Price
               ----------------------------------------------------------------------------------------
<S>              <C>     <C>            <C>         <C>             <C>            <C>          <C>
     Options:    $ .01 - 101.20      6,244,100     1- 10             $ .12      6,244,100       $  .12
     Warrants:   $1.00 - 113.75      2,952,146     0 - 5             $6.74      2,952,146        $6.74

</TABLE>


                                      F-18

<PAGE>

          For  disclosure  purposes in  according  with  Statement  of Financial
     Accounting  Standards  123  ("SFAS  123"),  the fair  value of  options  is
     estimated on the date of grant using the Black-Scholes option pricing model
     with the  following  weighted  average  assumptions  used for stock options
     granted  during the years ended  December  31, 2001 and 2000  respectively:
     annual dividends of $0; expected volatility of 50%; risk free interest rate
     of 7% and expected  life of 10 years.  The  weighted  average fair value of
     stock options granted during the years ended December 31, 2001 and 2000 was
     $0.12 and $0,respectively. If NHTC had recognized compensation cost of
     stock options in accordance  with SFAS 123, NHTC's proforma income (loss)
     and net income (loss) per share would have been as follows:

                                                      Year Ended December 31,
                                                --------------------------------
                                                  2001                  2000
                                                -----------         ------------
Net income (loss) to Common Stockholders
  As reported                                  $  2,022,621        $(10,396,557)
  Pro forma                                    $  1,947,621        $(10,525,683)
Net income (loss) from continuing operations:
  As reported                                  $  1,202,123        $(12,140,043)
  Pro forma                                    $  1,127,123        $(12,269,169)
Net income (loss) per share to common
stockholders
  Basic
   As reported                                    $0.01             $(1.04)
   Pro forma                                      $0.01             $(1.10)
  Diluted
   As reported                                    $0.00             $(1.26)
   Pro forma                                      $0.00             $(1.72)
Net income (loss) per share to common
 stockholders continuing operations:
  Basic
   As reported                                    $0.01             $(1.26)
   Pro forma                                      $0.01             $(1.72)
  Diluted
   As reported                                    $0.00             $(1.26)
   Pro forma                                      $0.00             $(1.72)


11. FORGIVENESS OF DEBT

          During  the year  ended  December  31,  2001 NHTC  realized  a gain of
     approximately $820,000 due to the sale of Kaire Nutraceuticals, Inc.

          During  the year  ended  December  31,  2000 NHTC  realized  a gain of
     approximately  $2,148,000  due to the filing of Chapter 7 bankruptcy by GHA
     and its various wholly-owned subsidiaries.


12. FOREIGN SALES

          NHTC has substantially  increased its  international  presence both in
     sales and long-lived assets.  NHTC's sales and long-lived assets by country
     as of December 31, 2001 are as follows:


<TABLE>
<CAPTION>
                                      United         Australia and           Other
                                      States         New Zealand         Subsidiaries     Consolidated
<S>                                    <C>                <C>                      <C>            <C>
Sales to unaffiliated customers      $22,535,109        $2,258,927           $-0-         $24,794,036

Long-lived assets at   December 31,
   2001                                 $825,904           $55,026           $-0-            $880,930

</TABLE>

13. FOURTH QUARTER ADJUSTMENTS

        Fourth quarter adjustments include the following:

           Penalties on Preferred Stock     $ 1,586,000



                                      F-19

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.3
<SEQUENCE>3
<FILENAME>foundercompagt.txt
<DESCRIPTION>STOCK PURCHASE AGREEMENT-LEXXUS
<TEXT>
                         FOUNDER COMPENSATION AGREEMENT


         THIS FOUNDER COMPENSATION AGREEMENT ("Agreement") is made this ___ day
of , 2001 by and between LEXXUS INTERNATIONAL INC., a Delaware corporation
("Lexxus"), NATURAL HEALTH TRENDS CORP., a Florida corporation ("NHTC"), Rodney
Sullivan and Pam Sullivan (sometimes collectively referred to herein as
"Sullivan"), Michael Bray ("Bray") and Jeff Provost ("Provost").

                                   BACKGROUND

A.  Sullivan,  Bray and Provost have  provided  services to Lexxus in connection
with the formation, organization and financing of Lexxus.

B. In  consideration  of the  above  services,  Lexxus  has  agreed  to  provide
compensation to Sullivan,  Bray and Provost in accordance with the terms of this
Agreement.

C. In addition, NHTC, as the majority shareholder of Lexxus, has agreed to
secure the payment by Lexxus of certain of its obligations hereunder and, as
additional compensation for services that directly benefitted NHTC, to issue
common stock of NHTC to Sullivan, Bray and Provost upon the occurrence of
certain milestones as set forth herein.

                                    AGREEMENT

         NOW, THEREFORE, in order to properly document the consideration
promised for services previously performed by Sullivan, Bray and Provost on
behalf of Lexxus and NHTC and for Sullivan, Bray and Provost's willingness to
enter into a Settlement Agreement with NHTC and the other parties thereto, the
parties hereto agree as follows:

1.       Cash Compensation.

        (a)      Beginning on the date hereof, Lexxus shall pay:

                 (i)  to Provost, $1,000 per week for the remainder of
                     Provost's life,

                 (ii) to Rodney  Sullivan,  $2,000 per week for the  remainder
                     of Rodney  Sullivan's life, and

                 (iii) to Bray, $2,000.00 per week for the remainder of Bray's
                       life.

        (b)      The  amounts  payable by Lexxus  pursuant  to  paragraph  1(a)
above,  shall be paid by Friday of each week on or before 5:00 p.m. E.S.T.

        (c) In the event of the death of Rodney Sullivan, Bray or
Provost, Lexxus shall pay to such person's estate any monies owed hereunder as
of the date of death.

2. Non-Cash Compensation. In addition to the cash compensation described in
paragraph 1 above, Lexxus agrees to notify Sullivan at least fourteen (14) days
prior to any Lexxus corporate event and, if Sullivan notifies Lexxus of a desire
to attend any such event, Lexxus shall pay for all expenses (excluding airfare)
incurred by Sullivan in connection with Sullivan's attendance at such event,
including rental car, lodging and meal expenses.
<PAGE>


3.       Issuance of Stock.

         (a) NHTC agrees to issue 333,334 shares of its common stock to Sullivan
(as tenants by the entirety), and 333,333 shares of its common stock to each of
Bray and Provost for every $1,000,000 in gross revenues received by Lexxus, up
to a maximum of 10,000,000 shares of stock in the aggregate being issued to
Sullivan, Bray and Provost hereunder. The parties acknowledge that, as of the
date hereof, $1,600,000.00 shall be deemed to have been received by Lexxus as
gross revenues, which shall include all revenues generated by Product Brokers
Com, Inc. from the distribution of Viacream. On a monthly basis, Lexxus shall
determine its gross revenues and shall provide NHTC, Sullivan, Bray and Provost
with a report listing (i) the gross revenues for the preceding month, and (ii)
the aggregate gross revenues (including all amounts received by Lexxus since
NHTC last issued shares to Sullivan, Bray and Provost hereunder) received by
Lexxus. Within fourteen (14) days after receipt of a report, NHTC shall issue to
Sullivan, Bray and Provost the shares of NHTC common stock, if any, required to
be issued hereunder.

         (b) Upon execution of this Agreement, NHTC will issue 333,334 shares of
its common stock to Sullivan (as tenants by the entirety) and 333,333 shares of
its common stock to each of Bray and Provost, as a result of aggregate gross
revenues having exceeded $1,000,000 as of the date hereof.

4. Stock Pledge Agreement. Simultaneously herewith, NHTC agrees to enter into a
Stock Pledge Agreement in favor of Sullivan, Bray and Provost, pursuant to which
NHTC shall pledge its shares of common stock in Lexxus in order to secure the
payment by Lexxus of amounts due pursuant to paragraph 1 above to Sullivan,
Bray, and Provost. In the event of a default in payment by Lexxus hereunder,
which default is the result of a court or administrative order, including but
not limited to a cease and desist order from a state or federal attorney general
or an injunction (an "Order") prohibiting Lexxus from expending any funds,
Sullivan, Bray and Provost agree that they will not exercise their rights under
the Stock Pledge Agreement during the pendency of such Order.

5. Pledge and Security Agreements. Simultaneously herewith, Lexxus agrees to
enter into Pledge and Security Agreements in favor of Sullivan, Bray and
Provost, pursuant to which Lexxus shall pledge all of its assets in order to
secure the payment by Lexxus of amounts due pursuant to paragraph 1 above to
Sullivan, Bray, and Provost. In the event of a default in payment by Lexxus
hereunder, which default is the result of a court or administrative order,
including but not limited to a cease and desist order from a state or federal
attorney general or an injunction (an "Order") prohibiting Lexxus from expending
any funds, Sullivan, Bray and Provost agree that they will not exercise their
rights under the Pledge and Security Agreements during the pendency of such
Order.

<PAGE>

6. Additional Agreements. Lexxus agrees that it will not terminate the
distributor positions held by Sullivan, Bray and Provost (ID Nos. 1016 and 1017)
in Lexxus, unless such termination is in accordance with Lexxus' policies and
procedures as applicable to all distributors.

7. No Further Obligation. Lexxus acknowledges and agrees that any and all
services performed by Sullivan, Bray and Provost as a condition to the
compensation described herein have been completed to the satisfaction of Lexxus.
None of Sullivan, Bray or Provost shall be required to perform any additional
services of any type for or on behalf of Lexxus, unless in accordance with a
separate written agreement for such services.

8. Binding  Effect.  This Agreement  shall be binding upon the parties and their
successors, assigns or heirs, as the case may be.

9. Applicable Law,  Jurisdiction and Venue.  This Agreement shall be governed by
and  construed  in  accordance  with the laws of the State of  Texas.  Exclusive
jurisdiction and venue for any dispute arising out of this Agreement shall be in
the state court in and for Dallas, Texas or the federal court in and for Dallas,
Texas, as applicable.

10. Modifications.  No modification of this Agreement shall be binding unless it
is in writing and signed by an  authorized  representative  of the party against
whom enforcement of the modification is sought.

11. Attorneys Fees. In the event any litigation or arbitration between the
parties arises out of or results in connection with this Agreement, the
prevailing party in such proceeding shall be entitled to recover from the other
party its reasonable attorneys' fees and expenses, including appellate
proceedings or post-judgment collection proceedings.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.

LEXXUS INTERNATIONAL INC.                           NATURAL HEALTH TRENDS CORP.



By:__________________________                     By:___________________________
Name: _______________________                     Name: ________________________
Title: ______________________                     Title: _______________________


- ---------------------------------                 ------------------------------
     Michael Bray                                     Rodney Sullivan


- ---------------------------------                 ------------------------------
     Jeff Provost                                     Pam Sullivan




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.16
<SEQUENCE>4
<FILENAME>stockoptagrtlacore.txt
<DESCRIPTION>STOCK OPTION AGREEMENT-LACORE
<TEXT>
                             STOCK OPTION AGREEMENT


         This Agreement, dated as of January 18, 2001 by and between Natural
Health Trends Corp., a Florida corporation (the "Company"), and Terry L. LaCore
(the "Optionee").

                              W I T N E S S E T H :


         WHEREAS, the Company considers it to be in its best interests and in
the best interests of its stockholders that the Optionee be given the
opportunity to acquire a proprietary interest in the Company by possessing an
option to purchase certain shares of common stock, par value $.001 per share
(the "Common Stock"), of the Company in accordance with the provisions set forth
below;

         NOW, THEREFORE, in consideration of the premises and mutual promises
contained herein, it is agreed by and between the parties as follows:

1. Grant of Option. The Company hereby grants to Optionee the right, privilege
and option (the "Option") to purchase all or any part of 3,000,000 shares of
Common Stock (the "Option Shares") at a purchase price of $.011 per share in
the manner and subject to the conditions provided herein.

2. Time of  Exercise  of Option.  The Option is  exercisable  in full
commencing  on the date  hereof  through  January 18, 2011 subject to the terms
of this Agreement.

3. Method of Exercise. The Option shall be exercised by written notice directed
to the Company at the Company's principal place of business, accompanied by a
check in payment of the option price for the number of Option Shares specified
and paid for in full. The Company shall make prompt delivery of such Option
Shares once payment clears, provided that if any law or regulation requires the
Company to take any action with respect to the Option Shares specified in such
notice before the issuance thereof, then the date of delivery of such Option
Shares shall be extended for the period necessary to take such action. If the
Optionee fails to pay for any of the Option Shares specified in such notice or
fails to accept delivery thereof, the Optionee's right to purchase such Option
Shares may be terminated by the Company. The date specified in the Optionee's
notice as the date of exercises shall be deemed the date of exercise of the
Option, provided that payment in full for the Option Shares to be purchased upon
such exercise shall have been received by such date. No fractional shares may be
purchased hereunder.

<PAGE>

4. Cashless Exercise. At any time during the term, the Optionee may, at its
election, exchange these options, in whole or in part (an "Option Exchange"),
into the number of shares determined in accordance with this paragraph 4 by
surrendering these Options at the principal office of the Company, accompanied
by a notice stating the Optionee's intent to effect such exchange, the number of
shares to be exchanged and the date on which the Optionee requests that such
Option Exchange occur (the "Notice of Exchange"). The Option Exchange shall take
place on the date specified in the Notice of Exchange or, if later, the date the
Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the shares issuable upon such Option Exchange and, if
applicable, a new Option of like tenor evidencing the balance of the shares
remaining subject to this Option, shall be issued as of the Exchange Date and
delivered to the Optionee within seven (7) business days following the Exchange
Date. In connection with any Option Exchange, the Option shall represent the
right to subscribe for and acquire the number of shares (rounded to the next
highest integer) equal to (i) the number of shares specified by the Optionee in
its Notice of Exchange (the "Total Number") less (ii) the number of shares equal
to the quotient obtained by dividing (A) the product of the Total Number and the
then existing exercise price by (B) the current market value of a share of the
Company's common stock.

5. Non-Dilution. This Option shall be non-dilutable equal to ten percent (10%)
of the outstanding shares of the Company. For a period of ten years after the
date hereof, the Company on each issuance of new shares of the Company shall
heretofore grant an additional option to the Optionee for ten percent (10%) of
the new shares issued at an exercise price equal to price of the new shares
issued. By way of illustration and not in limitation of the foregoing, if
$100,000 face value of the Company's convertible preferred stock is converted
into 5,000,000 shares of Company's common stock, an additional option is granted
to the Optionee for 500,000 shares at $.02 per share.

6. Termination of Option. The Option and all rights granted by this Agreement,
to the extent such rights have not been exercised, will terminate and become
null and void ten years from the date hereof or upon ninety (90) days after the
termination of the Optionee.

7. Adjustments in Event of Change in Common Stock. In the event of any change in
the Common Stock by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting the Common Stock, the number and kind
of Option Shares subject to Option hereunder and the purchase price per Option
Share thereof shall be appropriately adjusted consistent with such change in
such manner as the Committee may reasonably deem equitable.

8. Piggyback  Registration  Rights.  Simultaneous  herewith,  the Company  shall
grant to the  Optionee  Piggyback  Registration Rights, as set forth in Exhibit
"A" annexed hereto.

9. Rights Prior to Exercise of Option. The Optionee shall have no rights as a
stockholder of the Company with respect to the Option Shares until full payment
of the option price and delivery of such Option Shares as herein provided.
Nothing contained herein or in the Plan shall be construed as creating or
evidence of any agreement on the part of the Company to continue to employ or
retain the Optionee in any capacity.

<PAGE>

10. Investment Representation. The Optionee, as a condition to the Optionee's
exercise of this Option, shall represent to the Company that the shares of
Common Stock that the Optionee acquires hereunder are being acquired by the
Optionee for investment and not with a view to distribution or resale thereof,
unless counsel for the Company is then of the opinion that such a representation
is not required under the Securities Act of 1933, as amended, or any other
applicable law, regulation or rule of any governmental agency, except that this
representation shall not apply to any transaction by Optionee pursuant to a
registration statement under the Securities Act.

11.  Waiver;  Entire  Agreement.  No waiver of any breach or  condition  of this
Agreement  shall be deemed to be a waiver of any other or  subsequent  breach or
condition,  whether of like or different nature. This Agreement  constitutes the
entire agreement between the parties with respect to the subject matter hereof.

12. Governing Law. The validity, construction, interpretation and effect of this
Agreement shall exclusively be governed by and determined in accordance with the
internal laws of the State of Texas, which is the sole jurisdiction in which any
issues relating to this Agreement may be litigated.

13. Binding Effect.  This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs,  executors,  administrators,
successors and assigns.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date and year first above written.


                                         NATURAL HEALTH TRENDS CORP.


                                By:______________________________________
                                Name:
                                Title:



                                THE OPTIONEE



                                Terry L. LaCore



<PAGE>

                                    EXHIBIT A

         The Investor shall have piggy-back registration rights with respect to
the Investor Shares then held by the Investor (collectively, the "Remaining
Investor Shares"), subject to the conditions set forth below. If, at any time
the Company participates (whether voluntarily or by reason of an obligation to a
third party) in the registration of any shares of the Company's stock (other
than a registration on Form S-4 or Form S-8), the Company shall give written
notice thereof to the Investor and the Investor shall have the right,
exercisable within ten (10) business days after receipt of such notice, to
demand inclusion of all or a portion of the Investor's Remaining Investor Shares
in such registration statement. If the Investor exercises such election, the
Remaining Investor Shares so designated shall be included in the registration
statement at no cost or expense to the Investor (other than any costs or
commissions which would be borne by the Investor under the terms of the
Registration Rights Agreement). If, in connection with any underwritten offering
for the account of the Company the managing underwriter or underwriters thereof
(collectively, the "Underwriter") shall impose a limitation on the number of
shares of Common Stock which may be included in the registration statement
because, in the Underwriter's judgement, such limitation is necessary to effect
an orderly public distribution of securities covered thereby, then the Company
shall be obligated to include in such registration only such limited portion of
the Registrable Securities for which such Investor has requested inclusion
hereunder as the Underwriter shall permit. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided, however, that the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities the Investors of which are not entitled by
right to inclusion of securities in such registration statement; and provided
further, however, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
Investors of other securities having the right to include such securities in
such registration statement. The Investor's rights under this Section shall
expire at such time as the Investor can sell all of the Remaining Investor
Shares under Rule 144 (k) without volume or other restrictions or limit.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.17
<SEQUENCE>5
<FILENAME>stockoptagtbench.txt
<DESCRIPTION>STOCK OPTION AGREEMENT-BENCHMARK
<TEXT>
                             STOCK OPTION AGREEMENT


         This Agreement, dated as of January 18, 2001 by and between Natural
Health Trends Corp., a Florida corporation (the "Company"), and Benchmark
Consulting Group (the "Optionee").

                              W I T N E S S E T H :


         WHEREAS, the Company considers it to be in its best interests and in
the best interests of its stockholders that the Optionee be given the
opportunity to acquire a proprietary interest in the Company by possessing an
option to purchase certain shares of common stock, par value $.001 per share
(the "Common Stock"), of the Company in accordance with the provisions set forth
below;

         NOW, THEREFORE, in consideration of the premises and mutual promises
contained herein, it is agreed by and between the parties as follows:

1. Grant of Option. The Company hereby grants to Optionee the right, privilege
and option (the "Option") to purchase all or any part of 3,000,000
shares of Common Stock (the "Option Shares") at a purchase price of $.011 per
share in the manner and subject to the conditions provided herein.

2. Time of Exercise of Option.  The Option is exercisable in full  commencing on
the date hereof through January 18, 2011 subject to the terms of this Agreement.

3. Method of Exercise. The Option shall be exercised by written notice directed
to the Company at the Company's principal place of business, accompanied by a
check in payment of the option price for the number of Option Shares specified
and paid for in full. The Company shall make prompt delivery of such Option
Shares once payment clears, provided that if any law or regulation requires the
Company to take any action with respect to the Option Shares specified in such
notice before the issuance thereof, then the date of delivery of such Option
Shares shall be extended for the period necessary to take such action. If the
Optionee fails to pay for any of the Option Shares specified in such notice or
fails to accept delivery thereof, the Optionee's right to purchase such Option
Shares may be terminated by the Company. The date specified in the Optionee's
notice as the date of exercises shall be deemed the date of exercise of the
Option, provided that payment in full for the Option Shares to be purchased upon
such exercise shall have been received by such date. No fractional shares may be
purchased hereunder.

<PAGE>

4. Cashless Exercise. At any time during the term, the Optionee may, at its
election, exchange these options, in whole or in part (an "Option Exchange"),
into the number of shares determined in accordance with this paragraph 4 by
surrendering these Options at the principal office of the Company, accompanied
by a notice stating the Optionee's intent to effect such exchange, the number of
shares to be exchanged and the date on which the Optionee requests that such
Option Exchange occur (the "Notice of Exchange"). The Option Exchange shall take
place on the date specified in the Notice of Exchange or, if later, the date the
Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the shares issuable upon such Option Exchange and, if
applicable, a new Option of like tenor evidencing the balance of the shares
remaining subject to this Option, shall be issued as of the Exchange Date and
delivered to the Optionee within seven (7) business days following the Exchange
Date. In connection with any Option Exchange, the Option shall represent the
right to subscribe for and acquire the number of shares (rounded to the next
highest integer) equal to (i) the number of shares specified by the Optionee in
its Notice of Exchange (the "Total Number") less (ii) the number of shares equal
to the quotient obtained by dividing (A) the product of the Total Number and the
then existing exercise price by (B) the current market value of a share of the
Company's common stock.

5. Non-Dilution. This Option shall be non-dilutable equal to ten percent (10%)
of the outstanding shares of the Company. For a period of ten years after the
date hereof, the Company on each issuance of new shares of the Company shall
heretofore grant an additional option to the Optionee for ten percent (10%) of
the new shares issued at an exercise price equal to price of the new shares
issued. By way of illustration and not in limitation of the foregoing, if
$100,000 face value of the Company's convertible preferred stock is converted
into 5,000,000 shares of Company's common stock, an additional option is granted
to the Optionee for 500,000 shares at $.02 per share.

6. Termination of Option. The Option and all rights granted by this Agreement,
to the extent such rights have not been exercised, will terminate and become
null and void ten years from the date hereof or upon ninety (90) days after the
termination of the Optionee.

7. Adjustments in Event of Change in Common Stock. In the event of any change in
the Common Stock by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting the Common Stock, the number and kind
of Option Shares subject to Option hereunder and the purchase price per Option
Share thereof shall be appropriately adjusted consistent with such change in
such manner as the Committee may reasonably deem equitable.

8. Piggyback Registration Rights. Simultaneous herewith, the Company shall grant
to the  Optionee  Piggyback  Registration  Rights,  as set forth in Exhibit  "A"
annexed hereto.

9. Rights Prior to Exercise of Option. The Optionee shall have no rights as a
stockholder of the Company with respect to the Option Shares until full payment
of the option price and delivery of such Option Shares as herein provided.
Nothing contained herein or in the Plan shall be construed as creating or
evidence of any agreement on the part of the Company to continue to employ or
retain the Optionee in any capacity.

<PAGE>

10. Investment Representation. The Optionee, as a condition to the Optionee's
exercise of this Option, shall represent to the Company that the shares of
Common Stock that the Optionee acquires hereunder are being acquired by the
Optionee for investment and not with a view to distribution or resale thereof,
unless counsel for the Company is then of the opinion that such a representation
is not required under the Securities Act of 1933, as amended, or any other
applicable law, regulation or rule of any governmental agency, except that this
representation shall not apply to any transaction by Optionee pursuant to a
registration statement under the Securities Act.

11.  Waiver;  Entire  Agreement.  No waiver of any breach or  condition  of this
Agreement  shall be deemed to be a waiver of any other or  subsequent  breach or
condition,  whether of like or different nature. This Agreement  constitutes the
entire agreement between the parties with respect to the subject matter hereof.

12. Governing Law. The validity, construction, interpretation and effect of this
Agreement shall exclusively be governed by and determined in accordance with the
internal laws of the State of Texas, which is the sole jurisdiction in which any
issues relating to this Agreement may be litigated.

13. Binding Effect.  This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs,  executors,  administrators,
successors and assigns.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date and year first above written.


                                      NATURAL HEALTH TRENDS CORP.


                                      By:______________________________________
                                      Name:
                                      Title:



                                      THE OPTIONEE



                                      Benchmark Consulting Group

<PAGE>




                                    EXHIBIT A



         The Investor shall have piggy-back registration rights with respect to
the Investor Shares then held by the Investor (collectively, the "Remaining
Investor Shares"), subject to the conditions set forth below. If, at any time
the Company participates (whether voluntarily or by reason of an obligation to a
third party) in the registration of any shares of the Company's stock (other
than a registration on Form S-4 or Form S-8), the Company shall give written
notice thereof to the Investor and the Investor shall have the right,
exercisable within ten (10) business days after receipt of such notice, to
demand inclusion of all or a portion of the Investor's Remaining Investor Shares
in such registration statement. If the Investor exercises such election, the
Remaining Investor Shares so designated shall be included in the registration
statement at no cost or expense to the Investor (other than any costs or
commissions which would be borne by the Investor under the terms of the
Registration Rights Agreement). If, in connection with any underwritten offering
for the account of the Company the managing underwriter or underwriters thereof
(collectively, the "Underwriter") shall impose a limitation on the number of
shares of Common Stock which may be included in the registration statement
because, in the Underwriter's judgement, such limitation is necessary to effect
an orderly public distribution of securities covered thereby, then the Company
shall be obligated to include in such registration only such limited portion of
the Registrable Securities for which such Investor has requested inclusion
hereunder as the Underwriter shall permit. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided, however, that the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities the Investors of which are not entitled by
right to inclusion of securities in such registration statement; and provided
further, however, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
Investors of other securities having the right to include such securities in
such registration statement. The Investor's rights under this Section shall
expire at such time as the Investor can sell all of the Remaining Investor
Shares under Rule 144 (k) without volume or other restrictions or limit.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>6
<FILENAME>augusta100.txt
<DESCRIPTION>AUGUSTA NOTE
<TEXT>

                                 PROMISSORY NOTE

THESE SECURITIES AND THE SHARES ISSUABLE UPON CONVERSION HEREOF, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.


$100,000                                                         April 27, 2001


                  FOR VALUE RECEIVED, NATURAL HEALTH TRENDS CORP., a Florida
corporation, having an office at 2161 Hutton Drive, Suite 126, Carrollton, Texas
75006 (the "Maker"), hereby promises to pay to the order of Augusta Street LLC,
(the "Payee"), at the office of the Payee or at such other place as the Payee of
this Note may designate in writing from time to time, the principal sum of
$100,000 together with interest thereon at the rate of 10% per annum on demand.

         The following shall be deemed "Events of Default" hereunder:

         (a) If any payment hereunder shall not be made when due;

         (b) if the Maker shall fail to perform or comply with any of the other
         terms, covenants, or conditions of this Note;

         (c) if Maker ceases doing business as a going concern, or makes or
         sends notice of an intended bulk sale or makes an assignment for the
         benefit of creditors;

         (d) if any proceedings are commenced by or against Maker under any
         bankruptcy, reorganization, arrangement, insolvency, readjustment of
         debt, receivership, liquidation or dissolution law or statute of any
         jurisdiction, whether now or hereafter in effect; or

         (e) if a receiver, trustee or conservator be appointed for any of
         Maker's property.

                  Unless the Payee otherwise elects, in the Payee's sole
discretion, this Note shall automatically become immediately due and payable,
without further notice or demand, upon the occurrence of any event of default
hereinabove described. Upon the acceleration of the entire or any portion of the
unpaid balance of this Note, the holder, without prejudice to any other rights,
is authorized to proceed against Maker and shall not be required to have
recourse to any security given for payment of this Note.

<PAGE>

                  In the event that this Note is not paid within five (5) days
of demand, this Note shall bear additional interest at the rate of 1.5% per
month.

                  Nothing contained in this Note shall require the Maker to pay
interest at a rate exceeding the maximum rate permitted by applicable law. If
the amounts payable to the Payee on any date shall exceed the maximum
permissible amount, such amounts shall be automatically reduced to the maximum
permissible amount, and the payments for any subsequent period, to the extent
less than that permitted by applicable law, shall, to that extent, be increased
by the amount of such reduction. In the event that the period from the due date
of such payment is not long enough to cause the payments due hereunder not to
exceed the maximum amount permitted by applicable law, then the Payee at its
option shall have the right (i) to extend the amount of time for such payment
such that the payments shall not be deemed to exceed the maximum amount
permitted by applicable law or (ii) to reduce the amounts payable under this
Note.

                  Except as otherwise expressly provided herein, Payee hereby
waives presentment, demand for payment, dishonor, notice of dishonor, protest
and notice of protest.

                  Except as otherwise provided herein at the option of Maker,
the unpaid balance of this Note may be prepaid in whole or in part, from time to
time, without penalty or premium.

                  The liability of Maker hereunder shall be unconditional. No
act, failure or delay by the Payee hereof to declare a default as set forth
herein or to exercise any right or remedy it may have hereunder, or otherwise,
shall constitute a waiver of its rights to declare such default or to exercise
any such right or remedy at such time as it shall determine in its sole
discretion.

                  Maker further agrees to pay all costs of collection, including
a reasonable attorney's fee and all costs of levy or appellate proceedings or
review, or both, in case the principal or any interest thereon is not paid at
the respective maturity thereof, or in case it becomes necessary to protect the
security hereof, whether suit be brought or not.

                  Any and all notices or other communications required or
permitted to be given under this Note shall be in writing and shall be deemed to
have been duly given upon personal delivery or the mailing thereof by certified
or registered mail (a) if to Maker, addressed to it at its address set forth
above; and (b) if to Payee, addressed to it at its address set forth above or at
such other address any person or entity entitled to receive notices may specify
by written notice given as aforesaid.

                  This Note may not be amended, modified, supplemented or
terminated orally.

                  This Note shall be binding upon Maker, its legal
representatives, successors or assigns and shall inure to the benefit of Payee
and its successors, endorsees, assigns or holder(s) in due course.

<PAGE>

                  The Payee of this Note is entitled, at its option, to convert
at any time, the principal amount of this Note at a conversion price equal to
seventy-five percent (75%) of the five day average closing bid price of the
Common Stock, as reported by The NASDAQ SmallCap Market, or other applicable
exchange, for the five trading days immediately preceding the applicable
Conversion Date (the "Conversion Price"). Conversion shall be effectuated by
surrendering the Note to be converted to the Maker with the form of conversion
notice attached hereto as Exhibit A (the "Conversion Notice"), executed by the
Payee of the Note evidencing the Payee's intention to convert this Note or a
specified portion (as above provided) hereof, and accompanied, if required by
the Maker. by proper assignment hereof in blank. No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded to the nearest whole share. The date on which
notice of conversion is given (the "Conversion Date") shall be deemed to be the
date on which the Payee has delivered this Note, with the Conversion Notice duly
executed, to the Maker. Facsimile delivery of the Conversion Notice shall be
accepted by the Maker. Certificates representing shares of Common Stock upon
conversion will be delivered within five (5) business days from the Conversion
Date.

                  The shares to be issued pursuant to this Note shall contain
unlimited piggyback registration rights. Payee's piggyback registration rights
shall commence on the date hereof and shall terminate three (3) years after the
date hereof. The Maker shall bear the costs of such registrations. In the event
of the sale of the shares contemplated hereunder, Payee shall pay any and all
underwriting commissions and non-accountable expenses of any underwriter
selected by Payee to sell the common stock (the "Registrable Securities"). As to
Payee's registration rights, the Maker agrees to qualify or register the
Registrable Securities in such additional states as are reasonably requested by
Payee and the Maker shall bear all costs and expenses, of the qualification of
registration of the Registrable Securities in such additional states as are
reasonably requested by the Payee. In no event shall the Maker be required to
register the Registrable Securities in more than five (5) states or in a state
in which such registration would cause (i) the Maker to be obligated to do
business in such state, or (ii) the principal stockholders of the Maker to be
obligated to escrow any of their securities.

                  The certificates for the shares of Common Stock shall bear the
following legend:

                  THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
                  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
                  ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
                  OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
                  REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
                  COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
                  SUCH REGISTRATION IS NOT REQUIRED.

<PAGE>

                  The Payee of the Note, by acceptance hereof, agrees that this
Note is being acquired for investment and that such Payee will not offer, sell
or otherwise dispose of this Note or the shares of Common Stock issuable upon
conversion thereof except under circumstances which will not result in a
violation of the Act or any applicable state Blue Sky or foreign laws or similar
laws relating to the sale of securities.

                  This Note shall be governed by and construed in accordance
with the laws of the State of Texas, without giving effect to principles of
conflicts of law. By signing below, Maker hereby irrevocably submits to the
jurisdiction of such state and to service of process by certified or registered
mail at Maker's last known address. No provision of this Note may be changed
unless in writing signed by the Payee and Maker.

                  IN WITNESS WHEREOF, Maker has caused this Note to be duly
executed and delivered by its duly authorized representative as of the date and
year first above written.



                                                   NATURAL HEALTH TRENDS CORP.

                                                   By: ________________________

                                                       Name: Mark Woodburn
                                                       Title: CFO


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>7
<FILENAME>augusta138.txt
<DESCRIPTION>AUGUSTA NOTE
<TEXT>
                           CONVERTIBLE PROMISSORY NOTE

THESE SECURITIES AND THE SHARES ISSUABLE UPON CONVERSION HEREOF, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.


$138,000                                                      December 31, 2001


                  FOR VALUE RECEIVED, NATURAL HEALTH TRENDS CORP., a Florida
corporation, having an office at 5605 North MacArthur Boulevard, 11th floor,
Irving, TX 75038 (the "Maker"), hereby promises to pay to the order of Augusta
Street LLC, (the "Payee"), at the office of the Payee or at such place as the
Payee of this Note may designate in writing from time to time on December 31,
2002 ("Due Date"), the principal sum of One Hundred Thirty-Eight Thousand
Dollars ($138,000) together with interest thereon at the prime rate as published
in the Wall Street Journal on the date hereof 4.75%.

         The following shall be deemed "Events of Default" hereunder:

         (a) If any payment hereunder shall not be made when due upon demand;

         (b) if the Maker shall fail to perform or comply with any of the other
         terms,  covenants,  or  conditions of this Note;

         (c) if Maker ceases doing business as a going concern, or makes or
         sends notice of an intended bulk sale or makes an assignment for the
         benefit of creditors;

         (d) if any proceedings are commenced by or against Maker under any
         bankruptcy, reorganization, arrangement, insolvency, readjustment of
         debt, receivership, liquidation or dissolution law or statute of any
         jurisdiction, whether now or hereafter in effect; or

         (e) if a receiver, trustee or conservator is appointed for any of
         Maker's property.

                  Unless the Payee otherwise elects, in the Payee's sole
discretion, this Note shall automatically become immediately due and payable,
without further notice or demand, upon the occurrence of any event of default
hereinabove described. Upon the acceleration of the entire or any portion of the
unpaid balance of this Note, the holder, without prejudice to any other rights,
is authorized to proceed against Maker and shall not be required to have
recourse to any security given for payment of this Note.

<PAGE>

                  In the event that this Note is not paid within five (5) days
of demand, this Note shall bear additional interest at the rate of 1.5% per
month.


<PAGE>

                  Nothing contained in this Note shall require the Maker to pay
interest at a rate exceeding the maximum rate permitted by applicable law. If
the amounts payable to the Payee on any date shall exceed the maximum
permissible amount, such amounts shall be automatically reduced to the maximum
permissible amount, and the payments for any subsequent period, to the extent
less than that permitted by applicable law, shall, to that extent, be increased
by the amount of such reduction. In the event that the period from the due date
of such payment is not long enough to cause the payments due hereunder not to
exceed the maximum amount permitted by applicable law, then the Payee at its
option shall have the right (i) to extend the amount of time for such payment
such that the payments shall not be deemed to exceed the maximum amount
permitted by applicable law or (ii) to reduce the amounts payable under this
Note.

                  Except as otherwise expressly provided herein, Payee hereby
waives presentment, demand for payment, dishonor, notice of dishonor, protest
and notice of protest.

                  Except as otherwise provided herein at the option of Maker,
the unpaid balance of this Note may be prepaid in whole or in part, from time to
time, without penalty or premium.

                  The liability of Maker hereunder shall be unconditional. No
act, failure or delay by the Payee hereof to declare a default as set forth
herein or to exercise any right or remedy it may have hereunder, or otherwise,
shall constitute a waiver of its rights to declare such default or to exercise
any such right or remedy at such time as it shall determine in its sole
discretion.

                  Maker further agrees to pay all costs of collection, including
a reasonable attorney's fee and all costs of levy or appellate proceedings or
review, or both, in case the principal or any interest thereon is not paid at
the respective maturity thereof, or in case it becomes necessary to protect the
security hereof, whether suit be brought or not.

                  Any and all notices or other communications required or
permitted to be given under this Note shall be in writing and shall be deemed to
have been duly given upon personal delivery or the mailing thereof by certified
or registered mail (a) if to Maker, addressed to it at its address set forth
above; and (b) if to Payee, addressed to it at its address set forth above or at
such other address any person or entity entitled to receive notices may specify
by written notice given as aforesaid.

                  This Note may not be amended, modified, supplemented or
terminated unless by written instrument signed by both parties.

                  This Note shall be binding upon Maker, its legal
representatives, successors or assigns and shall inure to the benefit of Payee
and its successors, endorsees, assigns or holder(s) in due course.


<PAGE>



                  For and in consideration of the mutual covenants and
obligations set forth in this Promissory Note and other good and valuable
consideration, the receipt of which is hereby acknowledged, Maker hereby
releases and forever discharges, and by these presents does for its
subsidiaries, if any (direct or indirect), and itself and its predecessors,
successors, affiliates and assigns ("Releasors"), remise, release and forever
discharge and hold harmless Payee and each of its predecessors, affiliates,
subsidiaries (direct or indirect), shareholders, members, officers, directors,
employees, agents or attorneys, advisers, successors and assigns ("Lenders"), of
and from and against all manner of action and actions, cause and causes of
action (whether individual, derivative or representative), suits, debts, dues,
sums of money, accounts, fees, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, damages, costs, expenses, claims
and demands whatsoever, in law or in equity which the Releasors ever had, now
have, or which hereinafter can, shall or may have by reason of any matter, claim
or cause of action of any kind whatsoever, from the beginning of the world to
the date of this Agreement, whether known or unknown, including, without
limitation, those relating in any way to: (i) this Promissory Note or (ii) the
prosecution of any claim, defense, setoff, or counterclaim which the Releasors
ever had, now have or may have against Lenders in prior financings or
investments, provided, however, that nothing herein shall be construed or deemed
to release any covenants or agreements of the Maker contained in this Promissory
Note.

                  The Payee of this Note is entitled, at its option, to convert
at any time, the principal amount of this Note at a conversion price equal to
seventy-five percent (75%) of the five day average closing bid price of the
Common Stock, as reported by BLOOMBERG, L.P. for the five trading days
immediately preceding the applicable Conversion Date (the "Conversion Price").
Conversion shall be effectuated by delivery (via facsimile) of the form of
conversion notice attached hereto as Exhibit A (the "Conversion Notice"),
executed by the Payee of the Note evidencing the Payee's intention to convert
this Note or a specified portion (as above provided) hereof, and accompanied, if
required by the Maker by proper assignment hereof in blank. No fractional shares
or scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share. The date
on which notice of conversion is given (the "Conversion Date") shall be deemed
to be the date on which the Payee has delivered the Conversion Notice duly
executed, to the Maker. Facsimile delivery of the Conversion Notice shall be
accepted by the Maker. Certificates representing shares of Common Stock upon
conversion will be delivered within five (5) business days from the Conversion
Date.

                  The shares to be issued pursuant to this Note ("Registrable
Securities") shall contain unlimited piggyback registration rights. Payee's
piggyback registration rights in the form of Annex A hereto, which shall
commence on the date hereof and shall terminate three (3) years after the date
hereof. The Maker shall bear the costs of such registrations.

                  The certificates for the shares of Common Stock shall bear the
following legend:

                  THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
                  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
                  ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
                  OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
                  REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
                  COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
                  SUCH REGISTRATION IS NOT REQUIRED.

<PAGE>

                  The Payee of the Note, by acceptance hereof, agrees that this
Note is being acquired for investment and that such Payee will not offer, sell
or otherwise dispose of this Note or the shares of Common Stock issuable upon
conversion thereof except under circumstances which will not result in a
violation of the Act or any applicable state Blue Sky or foreign laws or similar
laws relating to the sale of securities.

                  This Promissory Note shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Promissory Note and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Maker hereby irrevocably
submits to the jurisdiction of such state and to service of process by certified
or registered mail at Maker's last known address. The Maker and Payee hereby
irrevocably waive a trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other in respect of any
matter arising out of or in connection with this Note.

                  IN WITNESS WHEREOF, Maker has caused this Note to be duly
executed and delivered by its duly authorized representative as of the date and
year first above written.



                                                    NATURAL HEALTH TRENDS CORP.


                                                By:_____________________________
                                                    Name: Mark Woodburn
                                                    Title: President



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>8
<FILENAME>summitagrt.txt
<DESCRIPTION>SUMMIT AGREEMENT
<TEXT>
                                PAYMENT AGREEMENT


THIS AGREEMENT is among NATURAL HEALTH TRENDS CORP., a corporation organized
under the laws of the State of Florida, whose address is 2161 Hutton Drive,
Suite 126, Carrollton, Texas 75006 (hereinafter referred to as the "Company");
and SUMMIT TRADING LIMITED, a international business corporation with its
principal office at Charlotte House, Charlotte Street, Nassau, Bahamas, as the
Financing Agent (hereinafter referred to as "STC").

         WHEREAS, the STC is in the business of assisting public companies in
funding financial advisory, strategic business planning, and investor and public
relations services designed to make the investing public knowledgeable about the
benefits of stock ownership in the Company; and

         WHEREAS, the Company has had presented to it one or more plans of
public and investor relations to utilize other business entities to achieve the
Company's goals ofmaking the investing public knowledgeable about the benefits
of stock ownership in the Company; and

         WHEREAS, the Company recognizes that the STC is not in the business of
stock brokerage, investment advice, activities which require registration under
either the Securities Act of 1933 (hereinafter "the Act") or the Securities and
Exchange Act of 1934) (hereinafter "the Exchange Act"), underwriting, banking,
is not an insurance Company, nor does it offer services to the Company which may
require regulation under federal or state securities laws; and

         WHEREAS, the parties agree, after having a complete understanding of
the financing desired to be provided to the Company and Company desires to have
STC fund a plan of public and investor relations which have been selected by the
Company;

         NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties agree as follows:

         1. Duties and Involvement.

The Company has engaged a Consultant to provide a plan, and for coordination in
executing the agreed-upon plan, for using various investor and public relations
services as agreed by both parties within the United States. After agreeing upon
such plan Company desires to have STC undertake to pay its monetary obligations
to the Consultant. STC in return for the compensation hereinafter described has
agreed to undertake to pay the Company's obligations to the Consultant selected
by the Company.

<PAGE>

         2. Relationship Among the Parties.

STC acknowledges that it is not an officer, director or agent of the Company, it
is not, and will not, be responsible for any management decisions on behalf of
the Company, and may not commit the Company to any action. The Company
represents that STC does not have, through stock ownership or otherwise, the
power to control the Company, nor to exercise any dominating influence over its
management.

STC understands and acknowledges that this Agreement shall not create or imply
any agency relationship among the parties, and STC will not commit the Company
in any manner except when a commitment has been specifically authorized in
writing by the Company.

The Company and the Consultant agree that the relationship among the parties
shall be that of independent contractor.

         3. Effective Date

This Agreement shall be effective on July 15,2001 and shall terminate on July
14,2003.

         4. Compensation.

The Company  agrees to pay to STC, or its designee,  the total sum of 20,000,000
shares of common stock of the Company.  The stock will be restricted pursuant to
Rule 144. This payment will be considered total and complete  consideration  for
arranging  to pay for the  costs  of the  Consultant  and for the a  public  and
investor  relations  campaign  developed by the  Consultant and agreed to by the
Company.  The payment shall be deemed earned upon the signing of this  agreement
and shall be issued no later than August  1,2001.  Upon payment of such stock to
STC, STC will arrange for payment on behalf of the Company to the Consultant for
the services to be provided,  and obtain from the  consultant an agreement  that
the Company shall have no other obligation to the consultant for payment (or the
public or investor  relations  firms  approved by the  Company),  excepting  any
obligation for additional  compensation which arises after the execution of this
agreement.

         5. Investment Representation.

         i. The Company represents and warrants that it has provided STC with
access to all information available to the Company concerning its condition,
financial and otherwise, its management, its business and its prospects. The
Company represents that it has provided STC with all copies of the Company's
filings for the prior twelve (12) months, if any, (the "Disclosure Documents")
made under the rules and regulations promulgated under the Act, as amended, or
the Exchange Act, as amended. STC acknowledge that the acquisition of the
securities to be issued to STC involves a high degree of risk. STC represents
that it and its advisors have been afforded the opportunity to discuss the
Company with its management. The Company represents that it has and will
continue to provide STC with any information or documentation necessary to
verify the accuracy of the information contained in the Disclosure Documents,
and will promptly notify STC



Page 2

<PAGE>

upon the filing or any registration statement or other periodic reporting
documents filed pursuant to the Act or the Exchange Act. This information will
include DTC sheets, which shall be provided to the STC no less than every two
(2) weeks. The Company hereby represents that it does not currently have any of
its securities in registration.

         ii. The STC represents that neither it nor its officers, directors, or
employees is not subject to any disciplinary action by either the National
Association of Securities Dealers or the Securities and Exchange Commission by
virtue of any violations of their rules and regulations and that to the best of
its knowledge neither is its affiliates nor subcontractors subject to any such
disciplinary action.

         iii. If required by United States law or regulation, STC will take
necessary steps to prepare and file any necessary forms to comply with the
transfer of the shares of stock from Company to STC, including, if required,
form 13( d).

         6. Regulation D.

         The Company agrees that during the term of this Agreement it will not
issue any stock pursuant to Regulation D of the General Regulations of the
Securities and Exchange Commission or any registration of the Company's
securities by means of a Form S-8 registration statement without the written
consent of the Consultant which consent shall not be unreasonably withheld. This
provision shall not apply to an employee stock option plan or other management
stock options.

         7. Registration of Securities and Liquidated Damages.

         The Company shall have ten (10) business days to deliver opinion
letters to STC when presented with proper documentation by STC. In the event
that the Company fails to deliver such opinion letters, STC shall be entitled,
as liquidated damages, to ten percent (10%) of the total number of shares issued
herein for each thirty (30) day delay in providing such opinion letter( s ). In
the event of a delay of less than a full thirty (30) day period, STC shall be
entitled to a pro-rata allocation of additional shares.

         STC understands and acknowledges that the shares of common stock are
being acquired by STC for its own account, and not on behalf of any other
person, and are being acquired for investment purposes and not for distribution.
STC represents that the common stock will be a suitable investment for STC,
taking into consideration the restrictions on transferability affecting the
common stock.

         Company will undertake to comply with the various states' securities
laws with respect to the registration of the Shares referred to herein. Company
undertakes to make available for review and comment, on a timely basis and prior
to submission to any regulatory agency, copies of the registration statement.




Page 3

<PAGE>

         8. " Piggyback Registration. "

         If the Company proposes to register any equity securities under the
Securities Act for sale to the Public for cash, whether for its own account or
for the account of other security holders, or both, on each such occasion the
Company will give written notice to STC no less than fifteen (15) business days
prior to the anticipated filing date of its intention to do so. Upon the written
request of STC, received by the Company no later than the tenth (lOth) business
day after receipt by STC of the notice sent by the Company, to register, on the
same terms and conditions as the securities otherwise being sold pursuant to
such registration, any of its registerable securities (which request shall state
the intended method of disposition thereof), the Company will cause the
registerable securities as to which registration shall have been so requested to
be included in the securities to be covered by the registration statement
proposed to be filed by the Company, on the same terms and conditions as any
similar securities included therein, all to the extent requisite to permit the
sale or other disposition by STC (in accordance with its written request) of
such registerable securities so registered; provided, however, that the Company
may, at any time prior to the effectiveness of any such registration statement,
in its sole discretion and with the consent of STC, abandon the proposed
offering in which STC had requested to participate.

         9. Anti-Dilution.

         In the event that the Company shall sell any shares of the common stock
of the Company during the time period of this Agreement, and ending six (6)
months after this Agreement has ended, then Company will issue additional shares
of stock to Consultant pursuant to this anti-dilution clause. The number of
additional shares of common stock to be issued to Consultant shall be equal to
the number of shares which are issued after the effective date of this agreement
and 6 months after the termination of this agreement multiplied by a fraction,
the numerator of which shall be the number of shares of common stock issued for
consideration in this agreement, and the denominator of which shall be the
number of shares of common stock outstanding on the effective date of this
agreement. This anti-dilution agreement shall not apply in the event that the
Company makes an asset purchase with common stock of the Company when the
appraised value of the asset is equal to or greater than the market value of the
stock used to purchase the asset.

         10. Miscellaneous Provisions

         Section a. Time  Time is of the essence of this Agreement.

         Section b. Presumption. This Agreement or any section thereof shall not
be construed against any party due to the fact that said Agreement or any
section thereof was drafted by said party.

         Section c. Computation of Time. In computing any period of time
pursuant to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday or a legal holiday, in which event the period shall begin to
run on the next day which is not a Saturday, Sunday or a legal holiday, in which
event


Page 4

<PAGE>


the period shall run until the end of the next day thereafter which is not a
Saturday, Sunday or legal holiday.

         Section d. Titles and Captions. All article, section and paragraph
titles or captions contained in this Agreement are for convenience only and
shall not be deemed part of the context nor affect the interpretation of this
Agreement.

         Section e. Pronouns and Plurals. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the Person or Persons may require.

         Section f Further Action. The parties hereto shall execute and deliver
all documents, provide all information and take or forbear from all such action
as may be necessary or appropriate to achieve the purposes of this Agreement.

         Section g. Good Faith, Cooperation and Due Diligence. The parties
hereto covenant, warrant and represent to each other good faith, complete
cooperation, due diligence and honesty in fact in the performance of all
obligations of the parties pursuant to this Agreement. All promises and
covenants are mutual and dependant.

         Section h. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.

         Section i .Assignment This Agreement may not be assigned by either
party hereto without the written consent of the other, but shall be binding upon
the successors of the parties.

         Section j. Arbitration

         i. If a dispute arises out of or relates to this Agreement, or the
breach thereof, and if said dispute cannot be settled through direct discussion,
the parties agree to first endeavor to settle the dispute in an amicable manner
by mediation under the Commercial Mediation Rules of the American Arbitration
Association before resorting to arbitration. Thereafter, any unresolved
controversy or claim arising out of or relating to this Agreement or a breach
thereof shall be settled by arbitration in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
Arbitrator may be entered in any court having jurisdiction thereof.

         ii. Any provisional remedy which would be available from a court of law
shall be available to the parties to this Agreement from the Arbitrator pending
arbitration.

         iii. The situs of the arbitration shall be Forsyth County, North
Carolina.





Page 5
<PAGE>

         iv. In the event that a dispute results in an arbitration, the parties
agree that the prevailing  party shall be entitled to reasonable  attorneys fees
to be fixed by the arbitrator .

         Section k. Notices All notices required or permitted to be given under
this Agreement shall be given in writing and shall be delivered, either
personally or by express delivery service, to the party to be notified. Notice
to each party shall be deemed to have been duly given upon delivery, personally
or by courier ( such as Federal Express or similar express delivery service),
addressed to the attention of the officer at the address set forth heretofore,
or to such other officer or addresses as either party may designate, upon at
least ten (10) days' written notice, to the other party.

         Section l. Governing law The Agreement shall be construed by and
enforced in accordance with the laws of the State of Texas.

         Section m. Entire agreement This Agreement contains the entire
understanding and agreement among the parties. There are no other agreements,
conditions or representations, oral or written, express or implied, with regard
thereto, This Agreement may be amended only in writing signed by all parties.

         Section n. Waiver A delay or failure by any party to exercise aright
under this Agreement, or a partial or single exercise of that right, shall not
constitute a waiver of that or any other right.

         Section o. Counterparts This Agreement may be executed in duplicate
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement. In the event that the
document is signed by one party and faxed to another the parties agree that a
faxed signature shall be binding upon the parties to this agreement as though
the signature was an original.

         Section p. Successors The provisions of this Agreement shall be binding
upon all parties, their successors and assigns.

         Section q. Counsel The parties expressly acknowledge that each has been
advised to seek separate counsel for advice in this matter and has been given a
reasonable opportunity to do so.

         IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement to be effective as of the day and year provided herein.

COMPANY :                                   STC
                                            For and on behalf of
NATURAL HEALTH TRENDS CORP.                 SUMMIT TRADING LIMITED

BY: __________________                      BY: ____________________
    Mark D.Woodburn, President

                                             Business Management Limited/

                                             Business Administration

                                            Limited Corporate Directors

Page 6


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>9
<FILENAME>officelease.txt
<DESCRIPTION>OFFICE LEASE-IRVING TX
<TEXT>

                           COMMERCIAL LEASE AGREEMENT

                                     BETWEEN

                     AIP-SWAG Operating Partnership, L.P .,

                         a Delaware Limited Partnership


                                   as Landlord


                                       and

                           Lexxus International, Inc.,

                             a Delaware Corporation


                                    as Tenant


                             Dated: July 17th, 2001



<PAGE>


                             TABLE OF CONTENTS
                                                                        Page

         ARTICLE 1 -       BASIC LEASE PROVISIONS                        2

         ARTICLE 2 -       TERM AND POSSESSION                           4

         ARTICLE 3 -       RENT                                          6

         ARTICLE 4 -       SECURITY DEPOSIT                              8

         ARTICLE 5 -       OCCUPANCY AND USE                             8

         ARTICLE 6 -       UTILITIES AND SERVICES                       13

         ARTICLE 7 -       MAINTENANCE, REPAIRS, ALTERATIONS AND
                           IMPROVEMENTS                                 14

         ARTICLE 8 -       INSURANCE, FIRE AND CASUALTY                 16

         ARTICLE 9 -       CONDEMNATION                                 19

         ARTICLE 10 -      LIENS                                        20

         ARTICLE 11-       TAXES ON TENANT'S PROPERTY                   20

         ARTICLE 12 -      SUBLETTING AND ASSIGNING                     20

         ARTICLE 13 -      SUBORDINATION AND TENANTS ESTOPPEL
                           CERTIFICATE                                  21

         ARTICLE 14 -      DEFAULT                                      22

         ARTICLE 15 -      NOTICES                                      25

         ARTICLE 16 -      MISCELLANEOUS PROVISIONS                     25

                               EXHIBITS AND RIDERS

                  Exhibit A         Site Plan of Premises
                  Exhibit B         Acceptance of Premises Memorandum
                  Exhibit C         Rules and Regulations


                  Addendum 1        HV AC Maintenance/Service Contract
                                    Requirements


                  Rider 1           Renewal Option



<PAGE>
                           COMMERCIAL LEASE AGREEMENT


This Commercial Lease Agreement (hereinafter called this "Lease") is made this
17th day of July , 2001 between AIP-SWAG Operating Partnership, L.P ., a
Delaware Limited Partnership (hereinafter called "Landlord"), and Lexxus
International, Inc., a Delaware Corporation (hereinafter called "Tenant").

ARTICLE 1 BASIC LEASE PROVISIONS AND DEFINITIONS

1.       Building:
           a.  Name: Valley View Commerce Park
           b.  Address: 12901 Hutton
           c.  Property Number: N/A
           d.  Agreed Rentable Area: 138,374 square feet
2.       Premises:
           a.  Suite Number: N/A
           b.  Agreed Rentable Area: 16,134 square feet
3.       Term:    Thirty-eight (38) months

4.       Commencement Date: August 1, 2001
5.       Expiration Date: September 30, 2004
6.       Base Rent:

              Rental Period                                   Base Monthly Rent
              -------------                                   ------------------
              Commencement Date to September 30,2004*              $9,008.15

7.       Additional Rent, Expense Stops and Pro Rata Share Percentage:
           a.  Operating Expense Stop: $0.00
           b.  Real Estate Taxes Expense Stop: $0.00
c.       Tenant's Pro Rata Share Percentage: .11.7%

The following chart is provided as an estimate of Tenant's initial monthly
payment broken down into its components. This chart, however, does not supersede
the specific provisions contained elsewhere in this lease.

         Initial Monthly Base Rent                                  $ 9,008.15

         Initial Monthly Estimated Operating Expense Escrow         $ 1,747.85

         Initial Monthly Estimated Real Tax Escrow                  $ 1,734.41

         Other                                                        $ 134.45

         Total Initial Monthly Payment                             $ 12.624.86
                                                                   ------------

8.  Security Deposit: $12,624.86
9.  Permitted Use: Office and distribution related to the healthcare field.
10. Landlord's Broker: Robert Lynn Company, a Texas Corporation
11. Landlord's Broker is represented by: Mark D. Miller
12. Tenant's Broker: Gilbert Commercial
13. Tenant's Broker is represented by: John Gilbert
14. Payments: All payments shall be sent to Landlord at: P. 0. Box 971799, Dept.
9921, Dallas, TX 75397- 1799, or such other place as Landlord may designate from
time to time.
15. Lease Guarantor: N/A
16. Notices: Addresses for notices due under this Lease:

<PAGE>




LANDLORD:                                                     TENANT:
AIP-SW AG OPERA TING PARTNERSHIP , L.P.              PRIOR TO COMMENCEMENT DATE:
a Delaware Limited Partnership
c/o American Industrial Properties REIT             Lexxus International, Inc.,
Attention: Mr. Richard E. Brown                       a Delaware Corporation
3300 Enterprise Parkway                                 Attn: Mark Woodburn
Beachwood, OH 44122                                    2161 Hutton Dr., #126
(216) 755-1570: FAX                                     Carrollton, TX 75006
                                                           (214) 241-4367


PROPERTY MANAGER:

American Industrial Properties REIT              ON OR AFTER COMMENCEMENT DATE:
6210 North Beltline, Suite #170
Irving, TX 75063-2656                                     The Premises:
Attention: Beth Cupit                               Attention: Mark Woodburn
(972) 756-0704: Fax                               _______________________ : Fax



                   [Remainder of Page Intentionally Left Blank


<PAGE>


                                    ARTICLE 2

                               TERM AND POSSESSION

SECTION 2.1       LEASE OF PREMISES, COMMENCEMENT AND EXPIRATION:

         2.1.1 Lease of Premises: In consideration of the mutual covenants
herein, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord,
subject to all the terms and conditions of this Lease, the portion of the
Building (as described in Item I of Article I) described as the Premises in Item
2 of Article I and that is more particularly described by the crosshatched area
on Exhibit A attached hereto (hereinafter called the "Premises"). The agreed
rentable area of the Premises is hereby stipulated to be the "Agreed Rentable
Area" of the Premises set forth in Item 2b of Article I, irrespective of whether
the same should be more or less. The agreed rentable area of the Building is
hereby stipulated to be the "Agreed Rentable Area" of the Building set forth in
Item Ic of Article I, irrespective of whether the same should be more or less.
The Building, the land on which the Building is situated and all improvements
and appurtenances to the Building and the land are referred to collectively
herein as the "Property" .

         2.1.2 Initial Term and Commencement: The initial term of this Lease
shall be the period of time specified in Item 3 of Article I. The initial term
shall commence on the Commencement Date (herein so called) set forth in Item 4
of Article I and, unless sooner terminated pursuant to the terms of this Lease,
the initial term of this Lease shall expire, without notice to Tenant, on the
Expiration Date (herein so called) set forth in Item 5 of Article I (as such
Commencement Date and/or Expiration Date may be adjusted pursuant to Exhibit B
attached hereto). Notwithstanding anything to the contrary contained herein, the
Lease will expire in the last day of the last month of the Term.

SECTION 2.2  INSPECTION  AND DELIVERY OF PREMISES,  CONSTRUCTION  OF LEASE SPACE
IMPROVEMENTS AND POSSESSION :

         2.2.1 Delivery and Completion: Tenant hereby acknowledges that Tenant
has inspected the Common Area (as hereinafter defined) and the Premises, and
hereby (i) accepts the Common Area in " AS IS" condition for all purposes and
(ii) subject to Landlord's completion of its obligations under the Work Letter
(herein so called) attached hereto as Exhibit D, Tenant hereby accepts the
Premises for all purposes (including the suitability of the Premises for the
Permitted Use). Landlord will perform or cause to be performed the work and/or
construction of Tenant's Improvements (as defined in the Work Letter) in
accordance with the terms of the Work Letter and will use commercially
reasonable efforts to Substantially Complete (as defined in the Work Letter)
Tenant's Improvements by the Commencement Date. If Tenant's Improvements are not
Substantially Complete - by the Commencement Date set forth in Item 6 of Article
I for any reason whatsoever, Tenant's sole remedy shall be an adjustment of the
Commencement Date and the Expiration Date to the extent permitted under the Work
Letter. The Premises shall be delivered to Tenant on the Commencement Date;
provided, however, Landlord will permit the Tenant to have access to the
Premises prior to the Commencement Date. Any such occupancy will not affect the
Commencement Date; however, such occupancy will be subject to all other
provisions of this Lease, including without limitation the indemnity provisions
set forth in Section 8.5.1. hereof. Landlord will be responsible for delivering
the space with the HV AC, plumbing, and all mechanical systems in good working
order .

         2.2.2 Common Area: "Common Areas" will mean all areas, spaces,
facilities, and equipment (whether or not located within the Building) made
available by Landlord for the common and joint use of Landlord, Tenant and
others designated by Landlord using or occupying space in the Building or at the
Property, as applicable, to the extent same are not expressly made apart of the
Premises, and are made available for use of all tenants in the Building. Tenant
is hereby granted a nonexclusive right to use the Common Areas during the term
of this Lease for its intended purposes, in common with others designated by
Landlord, subject to the terms and conditions of this Lease, including, without
limitation, the Rules and Regulations. The Common Areas will be at all times
under the exclusive control, management and operation of the Landlord.



<PAGE>

         2.2.3 Acceptance of Premises Memorandum: Upon Substantial Completion
(as defined in the Work Letter) of Tenant's Improvements, Landlord and Tenant
shall execute the Acceptance of Premises Memorandum (herein so called) attached
hereto as Exhibit B. If Tenant occupies the Premises without executing an
Acceptance of Premises Memorandum, Tenant shall be deemed to have accepted the
Premises for all purposes and Substantial Completion shall be deemed to have
occurred on the earlier to occur of: (i) actual occupancy, (ii) the Commencement
Date set forth in Item 4 of Article I, or (iii) the date Tenant commences doing
business at the Premises if Landlord consents to an early occupancy as set forth
in Section 2.2.1.

SECTION 2.3 REDELIVERY OF THE PREMISES: Upon the expiration or earlier
termination of this Lease, or upon the exercise by Landlord of its right to
re-enter the Premises without terminating this Lease, Tenant shall immediately
deliver to Landlord the Premises in a safe, "broom clean", neat, sanitary and
operational condition, normal wear and tear excepted, together with all keys and
parking and access cards. Tenant shall, by the Expiration Date or the date this
Lease is earlier terminated in accordance with the terms hereof, remove from the
Premises, at the sole expense of Tenant: (i) unless Landlord is asserting its
lien rights therein, any equipment, machinery, trade fixtures and personalty
installed or placed in the Premises by or on behalf of Tenant and (ii) if
requested by Landlord, all or any part of the improvements made to the Premises
by or on behalf of Tenant. All removals described above shall be accomplished in
a good and workmanlike manner so as not to damage the Premises or the primary
structure or structural qualities of the Building or the plumbing, electrical
lines or other utilities. Tenant shall, at its expense, promptly repair any
damage caused by such removal, provided that in the case of improvements that
Tenant is required to remove, Tenant shall restore the Premises to the condition
existing prior to the installation of such improvements. If Tenant fails to
deliver the Premises in the condition aforesaid, then Landlord may restore the
Premises to such a condition at Tenant's expense. All property required to be
removed pursuant to this Section not removed within time period required
hereunder shall thereupon be conclusively presumed to have been abandoned by
Tenant, and Landlord may, at its option, take over possession of such property
and either (a) declare the same to be the property of Landlord or (b) at the
sole cost and expense of Tenant, remove and store and/or dispose of the same or
any part thereof in any manner that Landlord shall choose without incurring
liability to Tenant or any other person. .

SECTION 2.4 HOLDING OVER: In the event Tenant, or any party under Tenant
claiming rights to this Lease, retains possession of the Premises after the
expiration or earlier termination of this Lease, such possession shall
constitute and be construed as a tenancy at will only, subject, however, to all
of the terms, provisions, covenants and agreements on the part of Tenant
hereunder; such parties shall be subject to immediate eviction and removal, and
Tenant or any such party covenants and agrees to pay Landlord as rent for the
period of such holdover an amount equal to one and one half (1 1/2) times the
Base Monthly Rent and Additional Rent (as hereinafter defined) in effect
immediately preceding expiration or termination, as applicable, prorated on a
daily basis. Tenant covenants and agrees to also pay any and all damages
sustained by Landlord as a result of such holdover. The rent during such
holdover period shall be payable to Landlord from time to time on demand;
provided, however, if no demand is made during a particular month, holdover rent
accruing during such month shall be paid in accordance with the provisions of
this Section 2.4. Tenant will vacate the Premises and deliver same to Landlord
immediately upon Tenant's receipt of notice from Landlord to so vacate. No
holding over by Tenant, whether with or without consent of Landlord, shall
operate to extend the term of this Lease. No payments of money by Tenant to
Landlord after the expiration or earlier termination of this Lease shall
reinstate, continue or extend the term of this Lease. No payments of money by
Tenant, other than the holdover rent accruing during such holdover period paid
in accordance with the provisions of this Section 2.4, to Landlord after the
expiration or earlier termination of this Lease shall constitute full payment of
rent under the terms of this Lease, and Tenant further agrees that any such
payment(s), other than the holdover rent accruing in accordance with the
provisions of this Section 2.4, to Landlord shall constitute a default and
breach of this Lease by Tenant pursuant to Article 14 herein. No extension of
this Lease after the expiration or earlier termination thereof shall be valid
unless and until the same shall be evidenced by a writing signed by both
Landlord and Tenant.


<PAGE>


                                    ARTICLE 3

                                      RENT

SECTION 3.1 BASE RENT: Tenant shall pay as rent for the Premises the applicable
Base Monthly Rent shown in Item 6 of Article 1. The Base Monthly Rent shall be
payable in monthly installments equal to the applicable Base Monthly Rent shown
in Item 6 of Article 1 in advance, without notice, demand, offset or deduction.
The required monthly installments shall commence on the Commencement Date and
shall continue on the first (1st) day of each calendar month thereafter until
the Expiration Date. If the Commencement Date is specified to occur or otherwise
occurs on a day other than the first day of a calendar month, the Base Monthly
Rent for such partial month shall be prorated.

SECTION 3.2 ADDITIONAL RENT:

         3.2.1 Definitions: For purposes of this Lease, the following
               definitions shall apply:


         (a) "Additional Rent", for a particular year, shall equal the product
of Tenant's Pro Rata Share Percentage (as set forth in Item 7c of Article 1),
multiplied by the sum of (i) the amount by which all Operating Expenses for the
applicable calendar year exceed Tenant's Operating Expense Stop (as set forth in
Item 7a of Article 1) plus (ii) the amount by which the Real Estate Taxes for
the applicable calendar year exceed Tenant's Real Estate Taxes Expense Stop as
set forth in Item 7b of Article 1).

         (b) "Operating Expenses" shall mean (without duplication of any costs
and expenses of which Tenant is responsible under Section 6.1 or subsection
7.2.1 below) (i) all of the costs and expenses Landlord incurs, pays or becomes
obligated to pay in connection with operating, managing, maintaining, repairing
and insuring the Property for a particular calendar year or portion thereof as
determined by Landlord in accordance with generally accepted accounting
practices, including, if applicable, if the Property is less than one hundred
percent (100%) occupied, all additional costs and expenses of operating,
managing, maintaining, repairing and insuring the Property which Landlord
determines that would have been paid or incurred during the particular calendar
year or portion thereof if the Property had been one hundred percent (100%)
occupied, (ii) wages, salaries, employee benefits and taxes for personnel
working full or part-time in connection with the operation, maintenance and
management of the Building and the Common Areas, (iii) costs of maintenance,
repair and care of rail spur areas, if any, shared with other tenants of the
Building, (iv) the cost of any capital improvement made to the Building by
Landlord after the date of this Lease that is required under any governmental
law or regulation, together with an amount equal to interest at the rate of
twelve percent (12%) per annum (the "Amortization Rate") on the unamortized
balance thereof, (v) the cost of any capital improvement made to the Common
Areas of the Building after the date of this Lease that is required under the
interpretations or regulations issued from time to time under the provisions of
the Americans With Disabilities Act of 1990, 42 U.S.C. ss. 120101-12213 or
comparable laws of the State and local agencies in which the Property is located
(collectively, the "Disability Acts"), amortized over such period as Landlord
shall reasonably determine, together with an amount equal to interest at the
Amortization Rate on the unamortized balance thereof, (vi) the cost of any
labor-saving or energy-saving device or other equipment installed in the
Building after the date hereof, amortized over such period as is reasonably
determined by Landlord, together with an amount equal to interest at the
Amortization Rate on the unamortized balance thereof, (vii) the charges assessed
against the Property pursuant to any contractual covenants or recorded
declaration of covenants or the covenants, conditions and restrictions of any
other similar instrument affecting the Property, and ( viii) all other costs and
expenses which would generally be regarded as operating, maintenance, repair and
management costs and expenses, including those which would normally be amortized
over a period not to exceed five (5) years. Operating Expenses shall not include
Real Estate Taxes (hereinafter defined).
<PAGE>


         (c) "Real Estate Taxes" shall mean all real estate taxes and other
taxes or assessments, which are levied with respect to the Property or any
portion thereof for each calendar year and shall include any tax, surcharge or
assessment which shall be levied in addition to or in lieu of real estate taxes,
the costs and expenses of a consultant, if any, and/or of contesting the
validity or amount of such real estate or other taxes, and shall also include
any rental, excise, sales, transaction, privileged, or other tax or levy,
however denominated, imposed upon or measured by the rental payable hereunder or
on Landlord's business of leasing the Premises, any non-progressive tax on or
measured by gross rentals received from the rental of space in the Building, and
any tax in this transaction or any documents to which Tenant is a party creating
or transferring an interest in the Premises, excepting only Landlord's net
income taxes (collectively, "Real Estate Taxes").

         (d) "Tenant's Operating Expense Stop" shall be the total Operating
Expenses for the applicable calendar year set forth in item 7a of Article l or
if no year is so stated, the total dollar amount stated in Item 7a of Article 1.

         (e) "Tenant's Real Estate Taxes Expense Stop" shall be the total of all
Real Estate Taxes for the applicable calendar year set forth in Item 7b of
Article 1 or if no year is so stated, the total dollar amount stated in Item 7b
of Article 1

         3.2.2 Payment Obligation: In addition to the Base Rent specified in
this Lease, Tenant shall pay to Landlord the Additional Rent, in each calendar
year or partial calendar year, payable in monthly installments as hereinafter
provided. On or prior to the Commencement Date and at least thirty (30) days
prior to each calendar year thereafter (or as soon thereafter as is reasonably
possible), Landlord shall give Tenant written notice of Tenant's estimated
Additional Rent for the applicable calendar year and the amount of the monthly
installment due for each month during such year. Tenant shall pay to Landlord on
the Commencement Date and on the first day of each month thereafter the amount
of the applicable monthly installment, without notice, demand, offset or
deduction, provided, however, if the applicable installment covers a partial
month, then such installment shall be prorated on a daily basis. If Landlord
fails to give Tenant notice of its estimated payments of Additional Rent in
accordance with this subsection for any calendar year, then Tenant shall
continue making monthly estimated payments in accordance with the estimate for
the previous calendar year until a new estimate is provided by Landlord. If
Landlord determines that, because of unexpected increases in Operating Expenses
or other reasons, Landlord's estimate of Operating Expenses was too low, then
Landlord shall have the right to give a new statement of the estimated
Additional Rent due from Tenant for the applicable calendar year or the balance
thereof and to bill Tenant for any deficiency which may have accrued during such
calendar year or portion thereof, and Tenant shall thereafter pay monthly
installments of Additional Rent based on such new statement. Within a reasonable
time after the end of each calendar year and the Expiration Date, Landlord shall
prepare and deliver to Tenant a statement showing Tenant's actual Additional
Rent for the applicable calendar year, provided that with respect to the
calendar year in which the Expiration Date occurs, (x) that calendar year shall
be deemed to have commenced on January 1 of that year and ended on the
Expiration Date (the "Final Calendar Year") and (y) Landlord shall have the
right to estimate the actual Operating Expenses allocable to the Final Calendar
Year. If Tenant's total monthly payments of Additional Rent for the applicable
calendar year are less than Tenant's actual Additional Rent, then Landlord shall
credit the amount of such overpayment to Tenant, provided, however, with respect
to the Final Calendar Year, Landlord shall pay to Tenant the amount of such
excess payments, less any additional amounts then owed to Landlord. Unless
Tenant takes written exception to any item within thirty (30) days after the
furnishing of an annual statement, such statement shall be considered as final
and accepted by Tenant. Any amount due Landlord as shown on any such statement
shall be paid by Tenant within twenty (20) days after it is furnished to Tenant.

SECTION 3.3 RENT DEFINED AND NO OFFSETS: The Base Monthly Rent, the Additional
Rent and all other sums required to be paid to Landlord by Tenant under this
Lease, including any sums due under the Work Letter, shall constitute rent and
are sometimes collectively referred to as "Rent". Tenant shall pay each payment
of Rent when due, without prior notice or demand therefore and without deduction
or offset.
<PAGE>

SECTION 3.4 LATE CHARGES: If any installment of Base Monthly Rent or Additional
Rent or any other payment of Rent under this Lease shall not be paid when due, a
"Late Charge" of five percent (5%) of the amount overdue may be charged by
Landlord to defray Landlord's administrative expense incident to the handling of
such overdue payments. Each Late Charge shall be payable by Tenant on demand of
Landlord.

                                    ARTICLE 4

                                SECURITY DEPOSIT

Tenant will pay Landlord on the date this Lease is executed by Tenant the
Security Deposit set forth in Item 8 of Article 1 as security for the
performance of the terms hereof by Tenant. Tenant shall not be entitled to
interest thereon and Landlord may commingle such Security Deposit with any other
funds of Landlord. It is expressly understood and agreed that the Security
Deposit is not an advance payment of Rent or a measure of Landlord's damages in
case of default by Tenant. If Tenant defaults with respect to any provisions of
this Lease, Landlord may, but shall not be required to, from time to time,
without prejudice to any other remedy, use, apply or retain all or any part of
the Security Deposit for the payment of any Rent or any other sum in default, or
for the payment of any other amount which Landlord may spend or become obligated
to spend by reason of Tenant's default, or to compensate Landlord for any other
loss or damage which Landlord may suffer by reason of Tenant's default,
including, without limitation, costs and attorneys' fees incurred by Landlord to
recover possession of the Premises. Upon the occurrence of any event of default
by Tenant, Landlord may, from time to time, without prejudice to any other
remedy provided herein or provided by law, use such fund to the extent necessary
to make good any arrears of rentals and any other damage, injury, expense or
liability caused to Landlord by such event of default, and Tenant shall pay to
Landlord on demand the amount so applied in order to restore the security
deposit to its original amount. If Tenant shall fully and faithfully perform
every provision of this Lease to be performed by it, the Security Deposit shall
be returned to Tenant within sixty (60) days after the Expiration Date, or the
termination of the Lease pursuant to Sections 8.1, 9.1 or 9.2. Tenant agrees
that it will not assign or encumber or attempt to assign or encumber the monies
deposited with Landlord as the Security Deposit and that Landlord and its
successors and assigns shall not be bound by any such actual or attempted
assignment or encumbrance.

                                    ARTICLE 5

                                OCCUPANCY AND USE

SECTION 5.1  USE OF PREMISES:

         5.1.1 General: The Premises shall, subject to the remaining provisions
of this Section, be used solely for the purpose specified in Item 9 of Article
1. Prior to commencement of any work pursuant to the Work Letter (or if no work
is to be performed pursuant to a Work Letter, then prior to Tenant's occupancy
of the Premises), Tenant shall satisfy itself and Landlord that the Permitted
Use will comply with all applicable zoning ordinances, rules and regulations.
Without in any way limiting the foregoing, Tenant shall not use any part of the
Premises for sleeping quarters, or for the generation of hazardous or toxic
chemical or materials, and will not use, occupy or permit the use or occupancy
of the Premises for any purpose which is forbidden by or in violation of any
zoning ordinance, law, rule or regulation or any other law, ordinance, or
governmental or municipal regulation, order, or certificate of occupancy, or
which may be dangerous to life, limb or property; or permit the maintenance of
any public or private nuisance; or do or permit any other thing which may
disturb the quiet enjoyment of any other tenant of the Building; or keep any
substance or carry on or permit any operation which might emit offensive odors
or conditions from the Premises; or commit, suffer or permit any waste in or
upon the Premises, or at any time sell, purchase or give away or permit the
sale, purchase or gift of food in any form by or to any of Tenant's agents or
employees or other parties in the Premises except through vending machines in
employees' lunch or rest areas within the Premises for use by Tenant's employees
only; or use an apparatus which might make undue noise or set up vibrations in
the Building; or permit anything to be done which would increase the fire and
extended coverage insurance rate on the Building or contents, and if there is
any increase in such

<PAGE>

rate by reason of acts of Tenant, then Tenant agrees to pay such increase upon
demand therefore by Landlord. Payment by Tenant of any such rate increase shall
not be a waiver of Tenant's duty to comply herewith. TENANT SHALL INDEMNIFY AND
HOLD LANDLORD HARMLESS FROM ANY AND ALL COSTS, EXPENSES (INCLUDING REASONABLE
ATTORNEYS FEES), CLAIMS AND CAUSES OF ACTION ARISING FROM TENANT'S FAILURE TO
COMPLY WITH SECTION. Outside storage, including without limitation, storage in
non-operative or stationary trucks, trailers and other vehicles, and vehicle
maintenance or repair is prohibited without Landlord's prior written consent.
Tenant shall keep the Premises neat and clean at all times. Tenant shall
promptly correct any violation of a governmental law, rule or regulation with
respect to the Premises. Tenant shall comply with any direction of any
governmental authority having jurisdiction which imposes any duty upon Tenant or
Landlord with respect to the Premises, or with respect to the occupancy or use
thereof and shall comply with all matters of record affecting the Premises which
may impose additional restrictions and/or obligations on the Landlord or the
Tenant.

         5 .1.2 Hazardous and Toxic Materials:

(a) Tenant shall not incorporate into, use, release or other\vise place or
dispose of at, in, on, under or near the Premises, the Building or the Property
any hazardous or toxic materials except that Tenant may use and temporarily
store cleaning and office supplies used in the ordinary course of Tenant's
business and then only if (i) such materials are in small quantities, properly
labeled and contained, (ii) such materials are handled and disposed of off-site
at properly authorized facilities in accordance with the highest accepted
industry standards for safety, storage, use and disposal, (iii) notice of and a
copy of the current material safety data sheet is first delivered to, and
written consent is obtained from, Landlord for each such hazardous or toxic
material and (iv) such materials are used, transported, stored, handled and
disposed of off-site at properly authorized facilities in accordance with all
applicable governmental laws, rules and regulations, including without
limitation, applicable Environmental Laws, as defined below. Landlord may
condition its consent to Tenant's storage or use of any hazardous or toxic
materials at, on, or in the Premises, upon Tenant's payment of an additional
deposit to Landlord, which deposit shall be in an amount estimated by Landlord
as sufficient security for the payment of costs and expenses arising from or
related to the potential release of hazardous or toxic materials in connection
with Tenant's use or occupancy of the Premises, which deposit, less any costs or
expenses incurred or estimated to be incurred in response to such release, shall
be returned to Tenant after removal of the hazardous or toxic materials and
proper closure or remediation of any area affected by or containing any such
hazardous or toxic materials, in compliance with applicable governmental
regulations, including without limitation, applicable Environmental Laws. Under
no circumstances shall Tenant cause or allow the disposal of hazardous or toxic
materials at, in, on, under or about the Building, the Property, or Premises.
Tenant shall not (i) occupy or use the Premises, nor permit any portion of the
Premises to be occupied or used (A) except in compliance with all laws,
ordinances, governmental or municipal regulations, and orders, including without
limitation Environmental Laws, or (B) in a manner which may be dangerous to
life, limb or property; or (ii) cause or permit the maintenance of any public or
private nuisance; or (iii) cause or permit anything to be done which would in
any way increase the rate of fire, liability, or any other insurance coverage on
the Premises, the Building, or its contents. Landlord shall have the right to
periodically inspect, take samples for testing and otherwise investigate the
Premises for the presence of hazardous or toxic materials. If Tenant ever has
knowledge of the presence in the Premises or the Building or the Property of
hazardous or toxic materials which affect the Premises, Tenant shall notify
Landlord thereof in writing promptly after obtaining such knowledge. For
purposes of this Lease, hazardous or toxic materials shall mean asbestos
containing materials ("ACM") and all other materials, substances, wastes and
chemicals classified, defined, listed, or regulated as, or containing, a
"hazardous substance," "hazardous waste," "toxic substance," "pollutant,"
"contaminant," "oil," "hazardous material," "solid waste," and/or "regulated
substance" under any Environmental Law. As used herein, the term "Environmental
Laws" shall mean any and all statutes, rules, regulations, ordinances, orders,
permits, licenses, and other applicable legal
<PAGE>

requirements, relating directly or indirectly to human health or safety or the
environment, or the presence, handling, treatment, storage, disposal, recycling,
reporting, remediation, investigation, or monitoring of hazardous or toxic
materials. As used herein, the term "release" shall have the same meaning as
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, 42 U.S.C. Section 9601 et seq.

(b) Prior to commencement of any tenant finish work to be performed by Landlord,
Tenant shall have the right to make such studies and investigations and conduct
such non-destructive or non-invasive environmental tests and surveys of the
Premises as Tenant deems necessary or appropriate, subject to the conditions
that all such studies and investigations shall be completed prior to the
commencement of any tenant finish work to be performed by landlord. TENANT SHALL
RESTORE THE PREMISES AND HOLD LANDLORD HARMLESS FROM AND INDEMNIFY LANDLORD
AGAINST ALL LOSS, DAMAGES, AND CLAIMS RESULTING FROM OR RELATING TO TENANT'S
STUDIES, TESTS AND INVESTIGATIONS. If such study, test, investigation or survey
evidences hazardous or toxic materials which affect the Premises, Tenant shall
have the right to terminate this Lease provided such right shall be exercised,
if at all, prior to the commencement of any tenant finish work to be performed
by Landlord and within five (5) days after Tenant receives the evidence of
hazardous or toxic materials. If Tenant takes occupancy of the Premises prior to
exercising such right, Tenant's right to terminate this Lease shall be null and
void and of no further force and effect. By its occupancy of the Premises,
Tenant agrees that it will accept the Premises in its AS IS - WHERE IS
condition, WITH ALL FAULTS. Tenant acknowledges that Landlord makes no, and
expressly disclaims any, representations and/or warranties, express or implied,
regarding the presence or absence of hazardous or toxic materials at, in, on,
under, or about the Premises, the Building or the Property, the status of
compliance of the Property, the Building or the Premises or any part of them
with Environmental Laws, and Tenant acknowledges and agrees that any presence of
any hazardous or toxic materials shall not constitute an eviction, actual or
constructive, of Tenant nor entitle Tenant to an offset against its obligations
hereunder .

(c) If Tenant or its employees, agents, contractors, invitees, or visitors shall
ever violate the provisions of paragraph (a) of this subsection 5.1.2 or
otherwise contaminate the Premises or the Property, then Tenant shall promptly,
diligently, and expeditiously investigate, clean up, remove and dispose of the
material causing the violation, in compliance with all applicable governmental
standards, laws, rules and regulations, including without limitation, applicable
Environmental Laws and then prevalent industry practice and standards and shall
repair any damage to the Premises or the Building or the Property as soon as
practicable. Tenant shall notify Landlord in advance of its method, time and
procedure for any investigation, remediation or monitoring of hazardous or toxic
materials and Landlord shall have the right to require reasonable changes in
such method, time or procedure as Landlord considers appropriate to prevent
interference with any use, occupancy, care, appearance or maintenance of the
Property or the Building, or the rights of other tenants or to require the same
to be done after normal business hours. Under no circumstances shall any re
mediation by Tenant leave any hazardous or toxic materials at, in, on, or under
the Premises, the Property, or the Building without first obtaining the prior
written consent of Landlord. If (1) any lender, insurer, prospective purchaser,
governmental agency, or other person shall ever require testing or Landlord
shall ever undertake testing to ascertain whether or not there has been any
release of hazardous or toxic materials due to the acts or omissions of Tenant,
or any of its agents, invitees, licensees, or employees, and (2) such testing
reveals evidence of such releases, then Tenant's obligations under this
subsection 5.1.2(c) shall survive the expiration or sooner termination of this
Lease. Tenant represents to Landlord that, except as has been disclosed to
Landlord in writing, none of Tenant or any of its owners, partners, managers,
members, shareholders, or venturers has ever been cited for or convicted of any
violations under applicable laws, rules or regulations, including without
limitation Environmental Laws.

(d) TENANT  AGREES TO DEFEND,  INDEMNIFY  AND HOLD  HARMLESS THE  LANDLORD,  ITS
OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES,

<PAGE>

AGENTS, SUCCESSORS, AND ASSIGNS FROM AND AGAINST ALL OBLIGATIONS (INCLUDING
REMOVAL AND REMEDIAL ACTIONS), LOSSES, CLAIMS, SUITS, JUDGMENTS, LIABILITIES
(INCLUDING WITHOUT LIMITATION STRICT LIABILITIES ARISING PURSUANT TO
ENVIRONMENTAL LAWS OR OTHER'VISE), PENALTIES, DAMAGES (INCLUDING CONSEQUENTIAL
AND PUNITIVE DAMAGES), COSTS AND EXPENSES (INCLUDING ATTORNEYS' AND CONSULTANTS'
FEES AND EXPENSES) OF ANY KIND OR NATURE WHATSOEVER THAT MAY AT ANY TIME BE
INCURRED BY, IMPOSED ON OR ASSERTED AGAINST SUCH INDEMNITEES DIRECTLY OR
INDIRECTLY BASED ON, OR ARISING OR RESULTING FROM (A) THE ACTUAL OR ALLEGED
PRESENCE OR RELEASE OF HAZARDOUS OR TOXIC MATERIALS ON, AT, IN, UNDER, FROM OR
NEAR THE PREMISES, THE BUILDING, OR THE PROPERTY WHICH IS CAUSED OR PERMITTED BY
TENANT OR ITS LICENSEES OR INVITEES OR ANY PERSON ACTING UNDER, ON BEHALF OF, OR
AT THE DIRECTION OR PERMISSION OF TENANT AND/OR (B) OPERATION OR USE OF THE
PREMISES OR NON-COMPLIANCE WITH ENVIRONMENTAL LAWS, OR THE CONDUCT OF
OBLIGATIONS HEREUNDER, BY TENANT, OR ITS LICENSEES OR INVITEES OR ANY PERSON
ACTING UNDER, ON BEHALF OF, OR AT THE DIRECTION OR PERMISSION OF TENANT, AND IN
EACH CASE UNDER EITHER (A) OR (B) REGARDLESS OF WHETHER ATTRIBUTABLE IN WHOLE OR
IN PART TO ANY OF THE INDEMNITEES' SOLE, CONTRIBUTORY, COMPARATIVE, ACTIVE OR
PASSIVE NEGLIGENCE OR STRICT LIABILITY.

(e) THE  PROVISIONS OF THIS SECTION 5.1.2 SHALL SURVIVE THE EXPIRATION OR SOONER
TERMINATION OF THIS LEASE.

         5.1.3 Building Inspection Survey: Tenant hereby acknowledges that:
               ----------------------------

(a) Landlord has heretofore engaged one or more independent contractors
(collectively "BIS Consultants") to perform limited building inspection surveys
("BIS") of the Building to determine if hazardous or toxic materials exist on,
at, or under the Building, and that prior to execution of this Lease, Tenant has
had the opportunity to review and has reviewed the BIS, and that after execution
of this Lease such BIS are made available upon written request and within a
reasonable time at the office of the Property Manager, for Tenant's inspection
during normal business hours.

(b) The purpose of the BIS is to provide information pursuant to 29 C.F.R.
ss.1910.1001, and no other duties of disclosure or notification are created or
implied by Landlord's providing an opportunity for review of the BIS by Tenant,
indicate the presence or absence of hazardous or toxic materials (as defined in
the Lease) on, at, or under the Building based on the present levels or content
of said hazardous or toxic materials as presently set by the U.S. Environmental
Protection Agency ("EPA") or the U.S. Occupational Safety and Health
Administration ("OSHA"), however, Tenant acknowledges that neither extensive
testing nor sampling of any portion of the Property was performed in connection
with the BIS.

(c) Landlord has been advised by its BIS Consultants that any such presence of
said hazardous or toxic materials does not violate lawful levels for such
materials or require removal or controls beyond those already implemented by
Landlord. Tenant agrees and acknowledges that Landlord makes no express or
implied representations or warranties whatsoever regarding the BIS, including
but not limited to the contents, accuracy, scope or recommendations contained
therein. In addition, Landlord is not aware of any studies, evaluations, tests,
surveys, or investigations concerning the presence of hazardous or toxic
materials at, in, or under the Building other than the BIS on file with the
Property Manager or any information that makes the BIS inaccurate in any
material respect.

(d) Landlord has implemented an Operations and Maintenance  Program ("OMP") with
respect  to any  asbestos  containing  materials  ("ACM") or  presumed  asbestos
containing material
<PAGE>


("PACM") located in the Building, and the terms of such OMP is set forth in a
written document located in the Property Manager's office. To reduce the risk
that any PACM or ACM in the Building will be improperly disturbed or handled by
untrained persons, Tenant agrees and acknowledges that:

1. Removal of the thermal  system  insulation  (TSI) and  surfacing ACM and PACM
(i.e.,  sprayed-on or  troweled-on  material,  e.g.,  textured  ceiling paint or
fireproofing material);

2.  Removal  of ACM or PACM that are not TSI or  surfacing  ACM and PACM such as
vinyl floor covering;

3. Repair and  maintenance  of operations  that are likely to disturb any ACM or
PACM; and

4. Custodial and housekeeping activities where even minimal contact with any ACM
or PACM may occur,

shall be undertaken and conducted only upon thirty (30) days prior written
notice to Landlord of such activity and in full accordance with the OMP. In
addition, Tenant shall insure and hereby agrees that all contractors and
subcontractors engaged by Tenant agree in writing to be bound by and will
undertake and conduct all work in full compliance with the OMP , and Tenant
agrees to fully cooperate with Landlord in all reasonable procedures or actions
necessary for the conduct of the OMP .

         TENANT HEREBY ACKNOWLEDGES THAT IT SHALL TAKE ALL APPROPRIATE MEASURES
TO ENSURE THAT THE PRESENCE OF ANY PACM OR ACM PRESENT IN, AT, OR UNDER THE
PREMISES WILL NOT CONSTITUTE AN UNDUE RISK TO ITSELF, ITS EMPLOYEES, AGENTS,
CONTRACTORS, INVITEES, OR. LICENSES, AND TENANT WARRANTS AND REPRESENTS THAT,
UPON TAKING POSSESSION OF THE PREMISES, IT HAS FULLY SATISFIED ITSELF THAT THE
PREMISES ARE ACCEPTABLE AND SUITABLE WITH REGARDS TO HAZARDOUS OR TOXIC
MATERIALS.

         TENANT AGREES TO PROVIDE LANDLORD WITH TRUE AND CORRECT COPIES OF ANY
AND ALL STUDIES, EVALUATIONS, TESTS, SURVEYS, OR INVESTIGATIONS PERFORMED BY OR
ON BEHALF OF TENANT AT ANY TIME INVOLVING THE PREMISES, AND TENANT SHALL NOT
PERFORM ANY INVASIVE OR DESTRUCTIVE INVESTIGATIONS OR ANALYSES WITHOUT
LANDLORD'S PRIOR WRITTEN CONSENT, WHICH CONSENT MAY BE WITHHELD, OR GIVEN
SUBJECT TO ANY CONDITIONS OR RESTRICTIONS, AS LANDLORD SHALL DEEM APPROPRIATE IN
ITS SOLE DISCRETION. IF LANDLORD CONSENTS TO ANY INVASIVE OR DESTRUCTIVE
INVESTIGATION OR ANALYSIS, TENANT SHALL FULLY RESTORE ALL AREAS AND IMPROVEMENTS
WHERE SAMPLES WERE TAKEN OR WORK PERFORMED. REGARDLESS OF THE TYPE OF
INSPECTIONS OR ANALYSES WHICH TENANT MAY CAUSE TO BE PERFORMED, TENANT SHALL
IMMEDIATELY REPAIR ALL DAMAGE RESULTING FROM ANY OF THE SAME AND SHALL INDEMNIFY
AND HOLD LANDLORD, ITS OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS,
SUCCESSORS, AND ASSIGNS HARMLESS FROM AND AGAINST ALL CLAIMS, ACTIONS,
LIABILITIES, DAMAGES, LOSSES, INJURIES OR DEATHS IN CONNECTION WITH OR ARISING
OUT OF OR FROM ANY INSPECTION, TESTING, SAMPLING, OR SIMILAR OR DISSIMILAR
ACTIVITY CONDUCTED BY TENANT, TENANT'S AGENTS OR CONTRACTORS AT, ON, OR UNDER
THE PREMISES FOR HAZARDOUS OR TOXIC MATERIALS, WHETHER UNDER THIS RIDER OR
OTHERWISE UNDER OR IN CONNECTION WITH THE LEASE.

<PAGE>

SECTION 5.2 RULES AND REGULATIONS: Tenant will comply with such rules and
regulations (the "Rules and Regulations") generally applying to tenants in the
Building as may be adopted from time to time by Landlord for the management,
cleanliness of, and the preservation of good order and protection of property
in, the Premises and the Building and the Property .A current copy of the Rules
and Regulations applicable to the Building is attached hereto as Exhibit C. All
such Rules and Regulations are hereby made a part hereof. All changes and
amendments to the Rules and Regulations sent by Landlord to Tenant in writing
and conforming to the foregoing standards shall be carried out and observed by
Tenant. Landlord hereby reserves all rights necessary to implement and enforce
the Rules and Regulations and each and every provision of this Lease.

SECTION 5.3 ACCESS; RIGHT OF ENTRY: Without being deemed or construed as
committing an actual or constructive eviction of Tenant and without abatement of
Rent, Landlord or its authorized agents shall have the right to enter the
Premises, upon reasonable notice (except in emergency situations where no prior
notice is required), to inspect the Premises, to show the Premises to
prospective lenders, purchasers or tenants and to fulfill Landlord's obligations
or exercise its rights under this Lease; provided, however, no notice shall be
required to inspect or show the Premises within the six ( 6) month period prior
to expiration of this Lease. Tenant hereby waives any claim for damages for any
injury or inconvenience or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby. Landlord shall have the right to use any and all means which Landlord
may deem proper to enter the Premises in an emergency without liability
therefor.

SECTION 5.4 QUIET POSSESSION: Provided Tenant timely pays Rent and observes and
performs all of the covenants, conditions and provisions on Tenant's part to be
observed and performed hereunder, Tenant shall have the quiet possession of the
Premises until the Expiration Date, subject to all of the provisions of this
Lease and all laws, encumbrances, liens and restrictive covenants to which the
Property is subject.

                                    ARTICLE 6

                             UTILITIES AND SERVICES

SECTION 6.1 UTILITIES: Except for Landlord's "obligation under the last two
sentences of this Section 6.1, Tenant shall be responsible for providing all
utilities to the Premises. Without limiting the foregoing, Tenant shall heat the
Premises as necessary to prevent any freeze damage to the Premises or any
portion thereof. Tenant shall directly pay for all utilities used on the
Premises which are separately metered, and reimburse Landlord for sub-metered
utilities (if any) together with any maintenance charges for utilities. The cost
of any utilities which are not separately metered or sub-metered to the Premises
shall be an Operating Expense and charged to Tenant in accordance with Article
3. Tenant's use of electric current shall at no time exceed the capacity of the
feeders or lines to the Building or the risers or wiring installation of the
Building or the Premises. Landlord shall in no event be liable for any
interruption or failure of, and Tenant shall not be entitled to any abatement or
reduction of Rent by reason of, any interruption or failure of utilities or
other services to the Premises, nor shall any such interruption or failure in
any such utility or service be construed as an eviction (constructive or actual)
of Tenant or as a breach of the implied warranty of suitability, or relieve
Tenant from the obligation to perform any covenant or agreement herein, and in
no event shall Landlord be liable for damage to persons or property (including,
without limitation, business interruption), or in default hereunder, as a result
of any such interruption or failure. However, if any such interruption is caused
by a break or other damage to any utility lines located on the Property and
outside of the Building that are under the exclusive control of Landlord, upon
receipt of written notice of such interruption Landlord shall use reasonable
efforts to perform or cause to be performed the necessary repairs within such
time frame as may be reasonable under the circumstances in order to restore the
affected service to the Premises. In addition, if any such interruption is
caused by a break or other damage to any utility line located on the Property
and controlled by a governmental, private or public utility, Landlord will
cooperate with such utility so that the interrupted service is restored to the
Premises as soon as is reasonably possible.

<PAGE>

SECTION 6.2 SERVICES: Landlord shall be under no obligation to provide any
services to the Building or Premises, except that Landlord shall provide routine
maintenance and cleaning in the Common Areas and utility service lines and
hookups to the Building.

                                    ARTICLE 7

               MAINTENANCE, REPAIRS, ALTERATIONS AND IMPROVEMENTS

SECTION 7.1 LANDLORD'S OBLIGATION TO MAINTAIN AND REPAIR: Landlord shall
(subject to Section 8.1, Section 8.4, Article 9 and Landlord's rights under
Section 3.2, and except for ordinary wear and tear) maintain load bearing walls
and foundation and repair or replace the roof of the Building when necessary
(with the cost of roof repairs an Operating Expense, and charged to Tenant
pursuant to Section 3.2.1. (b)). Except for maintaining the structural soundness
of the load bearing walls and foundation of the Building located within the
Premises, Landlord shall not be required to maintain or repair any other portion
of the Premises.

SECTION 7.2       TENANT'S OBLIGATIONS TO MAINTAIN AND REPAIR:

         7.2.1 Tenant's Obligation: Subject to Sections 7.1,8.1 and 8.4 and
Article 9, Tenant shall, at Tenant's sole cost and expense, and with Landlord's
supervision, repair and, as appropriate, replace any damage or injury done to
the Premises caused by Tenant, Tenant's agents, employees, licensees, invitees
or visitors and shall otherwise keep and maintain in good condition, appearance
and repair (including replacements), the Premises, which obligation shall
include, but not be limited to, the maintenance, repair and, as appropriate,
replacement of (a) all security, fire (including fire sprinkler), heating and
air conditioning systems and fixtures serving the Premises, (b) all plumbing,
sewage, mechanical and electrical systems and fixtures serving the Premises, (c)
all fixtures, walls, ceilings, floors, doors, overhead and dock loading doors,
windows, plate glass, skylights, lamps, fans and all other appliances and
equipment of every kind and nature located in, upon or about the Premises and
(d) the rail spur(s), if any, exclusively serving the Premises. TENANT SHALL
INDEMNIFY A1"'D HOLD LANDLORD HAR1\1LESS FROM ANY AND ALL COSTS, EXPENSES
(INCLUDING REASONABLE ATTORNEYS' FEES), CLAIMS AND CAUSES OF ACTION ARISING FROM
OR INCURRED BY AND/OR ASSERTED IN CONNECTION WITH ANY SUCH MAINTENANCE, REPAIRS,
REPLACEMENTS, DAMAGE OR INJURY OR TENANT'S BREACH OF ITS OBLIGATIONS UNDER THIS
SECTION 7.2. All repairs and replacements performed by or on behalf of Tenant
shall be performed in a good and workmanlike manner acceptable in all aspects to
Landlord, and in accordance with Landlord's standards applicable to alterations
or improvements performed by Tenant. Tenant shall continue to pay Rent, without
abatement, during any period that repairs or replacements are performed or
required to be performed by Tenant under this Section 7.2. Tenant shall make no
repairs to or penetrations of the roof of the Premises without Landlord's
consent.

         7 .2.2 Rights of Landlord: Any maintenance, repairs or replacements to
be performed by Tenant under Section 7.2.1 above and any service which Tenant is
required to provide under Section 6.1 above may, upon written notice from
Landlord to. Tenant, be performed by Landlord for Tenant's benefit, in which
event Tenant shall reimburse Landlord for all expenses and costs incurred by
Landlord in performing same plus an additional five percent (5%) of such amount
to compensate Landlord for Landlord's overhead and administrative costs relating
to such work. Landlord shall have the same rights with respect to repairs
performed by Tenant as Landlord has with respect to improvements and alterations
performed by Tenant under subsection 7.3.3. In the event Tenant fails, in the
reasonable judgment of Landlord, to maintain the Premises in good order,
condition and repair, or otherwise satisfy its repair and replacement
obligations under subsection 7.2.1 or fails to provide the services required
under Section 6.1 above, and such failure continues beyond a reasonable period
of time, Landlord shall have the right to perform such maintenance, repairs and
replacements or provide such services, at Tenant's sole cost and expense. Tenant
shall pay to Landlord on demand any such expense incurred by Landlord plus an
additional five percent (5%) of such amount to compensate Landlord for
Landlord's overhead and administrative costs relating to such work, together
with interest thereon at the rate specified in Section 16.9 from the date of
demand until paid. All such amounts owing pursuant to this Section 7.2.2 shall
be deemed Rent hereunder.

SECTION 7.3 IMPROVEMENTS AND ALTERATIONS:

         7 .3.1 Landlord's Construction Obligation: Landlord's sole construction
obligation  under this Lease is as set forth in the Work Letter  attached hereto
as Exhibit D.
<PAGE>

         7 .3.2 Alteration of Building by Landlord: New Construction: Landlord
hereby reserves the right and at all times shall have the right to repair,
change, redecorate, alter, improve, modify, renovate, enclose or make additions
to any part of the Property (including structural elements and load bearing
elements within the Premises), to enclose and/or change the arrangement and/or
location of driveways or parking areas or landscaping or other Common Areas of
the Property, and to construct new improvements on adjacent parcels of land, all
without having committed an actual or constructive eviction of Tenant or breach
of the implied warranty of suitability and without an abatement of Rent (the
"Reserved Right"). When exercising the Reserved Right, Landlord will use
reasonable efforts to minimize interference with Tenant's use and occupancy of
the Premises.

         7 .3.3 Alterations. Additions. Improvements and Installations bv
Tenant: Tenant shall not, without the prior written consent of Landlord, which
will not be unreasonably withheld, make any changes, modifications, alterations,
additions or improvements (other than Tenant's Improvements under the Work
Letter) to, nor install any equipment or machinery (other than office equipment
and unattached personal property) on, the Premises (all such changes,
modifications, alterations, additions, improvements other than Tenant's
Improvements under the Work Letter and installations approved by Landlord are
herein collectively referred to as "Installations") if any such Installations
would (i) affect structural or load bearing portions of the Premises, (ii)
result in a material increase of electrical usage above the normal type and
amount of electrical current to be provided by Landlord, (iii) result in an
increase of Tenant's usage of heating or air conditioning, (iv) impact
mechanical, electrical or plumbing systems in the Premises or the Building, (v)
affect areas of the Premises which can be viewed from Common Areas, (vi) require
greater or more difficult cleaning work (e.g., kitchens, reproduction rooms, and
interior glass partitions) or (vii) violate any provision in Article 5 or
Exhibit B attached hereto. All Installations shall be at Tenant's sole cost and
expense. Without in any way limiting Landlord's consent rights, Landlord's
consent shall be conditioned on (a) Landlord approving the contractor or person
making such Installations and approves such contractor's insurance coverage to
be provided in connection with the work, (b) Landlord's supervision of the work,
(c) Landlord approving final and complete plans and specifications for the work
and ( d) the appropriate governmental agency, if any, having final and complete
plans and specifications for such work. All work performed by Tenant or its
contractor relating to the Installations shall conform to applicable
governmental laws, rules and regulations, including, without limitation, the
Disability Acts. Upon completion of the Installations, Tenant shall deliver to
Landlord "as built" plans. All Installations that constitute improvements
constructed within the Premises shall be surrendered with the Premises at the
expiration or earlier termination of this Lease, unless Landlord requests that
same be removed pursuant to Section 2.3 of this Lease. TENANT SHALL INDEMNIFY
AND SAVE LANDLORD HARMLESS FROM ANY AND ALL COSTS, EXPENSES (INCLUDING
REASONABLE ATTORNEYS' FEES AND COSTS), DEMANDS, CLAIMS, CAUSES OF ACTION AND
LIENS ARISING FROM OR IN CONNECTION WITH ANY INSTALLATIONS PERFORMED BY OR ON
BEHALF OF TENANT. All Installations performed by or on behalf of Tenant will be
performed diligently and in a first-class workmanlike manner, and in compliance
with all applicable laws, ordinances, regulations and rules of any public
authority having jurisdiction over the Building and/or Tenant's and Landlord's
insurance carriers. Landlord will have the right, but not the obligation, to
inspect periodically the work on the Premises and may require changes in the
method or quality of the work.

         7 .3.4 Approvals: Any approval by Landlord (or Landlord's architect
and/or engineers) of any of Tenant's contractors or Tenant's drawings or plans
or specifications which are prepared in connection with any construction of
improvements (including without limitation, Tenant's Improvements) in the
Premises shall not in any way be construed as or constitute a representation or
warranty of Landlord as to the abilities of the contractor or the adequacy or
sufficiency of such drawings, plans or specifications or the improvements to
which they relate, for any use, purpose or condition.

                                    ARTICLE 8

                          INSURANCE, FIRE AND CASUALTY

SECTION 8.1 TOTAL OR PARTIAL DESTRUCTION OF THE BUILDING OR THE PREMISES: Tenant
covenants and agrees to immediately give Landlord telephonic and written notice
of any fire or other casualty affecting the Premises or the Building. In the
event that the Building should be totally destroyed by


<PAGE>



rebuilding or repairs cannot be completed, in Landlord's reasonable opinion,
within two hundred seventy (270) days of Landlord's becoming aware of the
applicable fire or casualty, either Landlord or Tenant may, at its option,
terminate this Lease, by written notice to the other, with Tenant's notice to be
given within ten (10) days after being advised by Landlord that the rebuilding
or repairs cannot be completed within two hundred seventy (270) days. In the
event the Building or the Premises should be damaged by fire or other casualty
and, in Landlord's reasonable opinion, the rebuilding or repairs can be
completed within two hundred seventy (270) days of Landlord's becoming aware of
the applicable fire or casualty, or if the damage should be more serious but
neither Landlord nor Tenant elect to terminate this Lease pursuant to this
Section, Landlord shall, within sixty (60) days after the date of receipt of
notice of such damage, commence to rebuild or repair the Building and the
Premises (including Tenant's Improvements, but only to the extent of insurance
proceeds actually received by Landlord for the repair of Tenant's Improvements),
and shall pursue with reasonable diligence the repair and restoration of the
Building and the Premises to substantially the same condition which existed
immediately prior to the happening of the casualty , except that Landlord shall
not be required to rebuild, repair or replace any part of the furniture,
equipment, fixtures, inventory, supplies or any other personalty or any other
improvements ( except Tenant's Improvements, but only to the extent of insurance
proceeds actually received by Landlord for the repair of Tenant's Improvements
which shall be first utilized by Landlord before any proceeds of Landlord's
insurance) which may have been placed by Tenant or other tenants within the
Building or at the Premises. Landlord shall allow Tenant a proportionate
diminution of Base Rent and Additional Rent as may be fair and reasonable under
the circumstances during any period of reconstruction or repair of the Premises
due to an occurrence contemplated in this Section 8.1; provided, that Base Rent
and Additional Rent shall be abated only to the extent Landlord is compensated
for such Base Rent and Additional Rent by loss of rents insurance, if any.
Notwithstanding Landlord's restoration obligation, in the event any mortgagee
under a deed of trust, security agreement or mortgage on the Building should
require that the insurance proceeds be used to retire or reduce the mortgage
debt or if the insurance company issuing Landlord's fire and casualty insurance
policy fails or refuses to pay Landlord the proceeds under such policy, Landlord
have no obligation to rebuild and this Lease shall terminate upon notice by
Landlord to Tenant. Any insurance which may be carried by Landlord or Tenant
against loss or damage to the Building or to the Premises shall be for the sole
benefit of the party carrying such insurance and under its sole control. Upon
termination of the Lease pursuant to this Section, Base Rent and Additional Rent
shall be abated from the date of the fire or casualty.

SECTION 8.2 TENANT'S INSURANCE:

         8.2.1 Types of Coverage: Tenant covenants and agrees that from and
after the date of delivery of the Premises from Landlord to Tenant, Tenant will
carry and maintain, at its sole cost and expense, the insurance set forth below:

         (a) Liability Insurance: Commercial General Liability Insurance
covering the Premises and Tenant's use thereof against claims for personal or
bodily injury or property damage occurring upon, in or about the Premises
(including contractual indemnity and liability coverage), such insurance to
insure both Tenant and, as additional named insureds, Landlord and its
subsidiaries, directors, agents and employees and the Property Manager, with
limits of not less than $1,000,000.00 per occurrence and $2,000,000.00 in the
aggregate, combined single limit, with respect to injury to any number of
persons and all property damage, without a deductible. If the Agreed Rentable
Area of the Premises is more than 20,000 square feet, then, in addition to and
not in lieu of the above-stated coverage, Tenant shall carry umbrella or
so-called excess coverage in an amount not less than $1,000,000.00 over Tenant's
base coverage amount with no deductible. This insurance coverage shall extend to
any liability of Tenant arising out of the indemnities provided for in this
Lease.

         (b) Property Insurance: Property insurance on an "all-risk" coverage
basis covering all fixtures, equipment and personalty located in the Premises,
in an amount not less than one hundred percent (100%) of full replacement cost
thereof, with a deductible not to exceed $1,000.00. Such policy will be written
in the names of Tenant, Landlord, and any other parties reasonably designated by
Landlord from time to time, as their respective interests may appear.

         (c) Workers Compensation Insurance: Worker's compensation insurance
including  Employer's  Liability  Insurance with limits in amounts not less than
$500,000 per accident, $500,000 per individual, and

<PAGE>
         $500,000 per policy-disease. Said policy shall insure against and
         satisfy Tenant's obligations and I liabilities under the worker's
         compensation laws of the state where the Property is located.

         (d) Such other insurance as Landlord may reasonably require from time
         to time.

8.2.2 Other Requirements of Insurance: All such insurance will be issued and
underwritten by companies with an A.M. Best rating of not less than A- VIII
licensed to do business in the state where the Premises is located and will
contain endorsements that (a) such insurance may not lapse with respect to
Landlord or Property Manager or be canceled or amended with respect to Landlord
or Property Manager without the insurance company giving Landlord and Property
Manager at least sixty (60) days prior written notice of such cancellation or
amendment, (b) Tenant will be solely responsible for payment of premiums, ( c)
in the event of payment of any loss covered by such policy, Landlord or
Landlord's designees will be paid first by the insurance company for Landlord's
loss and (d) Tenant's insurance is primary in the event of overlapping coverage
which may be carried by Landlord.

8.2.3 Proof of Insurance: Tenant shall deliver to Landlord duplicate originals
of certificates (policies at Landlord's request) of insurance required by this
Section 8.2 prior to the Commencement Date and duly executed originals of
binders of such insurance evidencing in-force coverage, within ten (10) days
prior to the commencement of construction of Tenant's Improvements. Further,
Tenant shall deliver to Landlord renewals thereof at least thirty (30) days
prior to the expiration of the respective policy terms.

SECTION 8.3 LANDLORD'S INSURANCE:

         8.3.1 Types of Coverage: Landlord covenants and agrees that from and
after the date of delivery of the Premises from Landlord to Tenant, Landlord
will carry and maintain the insurance set forth below:

         (a) Liability Insurance: Commercial General Liability Insurance
covering the Building and all Common Areas, insuring against claims for personal
or bodily injury or property damage occurring upon, in or about the Building or
Common Areas with limits of not less than $1,000,000.00 per occurrence and
$2,000,000.00 in the aggregate, combined single, limit, with respect to injury
to any number of persons and property damage. This insurance coverage shall
extend to any liability of Landlord arising out of the indemnities provided for
in this Lease.

         (b ) Property Insurance: Landlord shall at all times during the term
hereof maintain in effect a policy or policies covering the Building ( excluding
property required to be insured by Tenant) on an "all risk" basis in such
amounts as Landlord may from time to time determine, providing protection
against perils included within the standard form of "all risk" insurance policy
promulgated in the State where the Property is located, and such other risks as
Landlord may from time to time determine and with any such deductibles as
Landlord may from time to time determine.

         8.3.2 Self-lnsurance: Any insurance provided for in subsection 8.3.1
may be effected by self-insurance or by a policy or policies of blanket
insurance covering additional items or locations or assureds, provided that the
requirements of this Section 8.3 are otherwise satisfied. Tenant shall have no
rights in any policy or policies maintained by Landlord.

SECTION 8.4 WAIVER OF SUBROGATION:

LANDLORD AND TENANT EACH HEREBY WAIVE ANY RIGHTS THEY MAY HA YE AGAINST THE
OTHER (INCLUDING, BUT NOT LIMITED TO, A DIRECT ACTION FOR DAMAGES) ON ACCOUNT OF
ANY LOSS OR DAMAGE OCCASIONED TO LANDLORD OR TENANT, AS THE CASE MAY BE (WHETHER
OR NOT SUCH LOSS OR DAMAGE IS CAUSED BY THE FAULT, NEGLIGENCE OR OTHER TORTIOUS
CONDUCT, ACTS OR OMISSIONS OF LANDLORD OR TENANT OR THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR INVITEES), to their respective property , the
Premises, its contents or to any other portion of the Building or the Property
arising from any risk covered by the current form of property insurance and fire
and extended coverage insurance promulgated by the applicable insurance board or
commission in the State where the Property is located and required to be carried
by Tenant and Landlord, respectively under subsections 8.2.1

<PAGE>

and 8.3.1 of this Lease. If a party waiving rights under this Section is
carrying an "all-risk" coverage --insurance policy in the promulgated form used
in the state where the Property is located and an amendment to such promulgated
form is passed, such amendment shall be deemed not a part of such promulgated
form until it applies to the policy being carried by the waiving party. The
parties hereto each, on behalf of their respective insurance companies insuring
the property of either Landlord or Tenant against any such loss, waive any right
of subrogation that Landlord or Tenant or their respective insurers may have
against the other party or their respective officers, directors, employees,
agents or invitees and all rights of their respective insurance companies based
upon an assignment from its insured. Each party to this Lease agrees immediately
to give to each such insurance company written notification of the terms of the
mutual waivers contained in this Section, and to have said insurance policies
properly endorsed, if necessary , to prevent the invalidation of said insurance
coverage by reason of said waivers. The foregoing waiver shall be effective
whether or not the parties maintain the required insurance.

SECTION 8.5 INDEMNITY:

         8.5.1 Tenant's Indemnity: TENANT COVENANTS AND AGREES TO INDEMNIFY AND
HOLD LANDLORD, PROPERTY MANAGER AND THEIR RESPECTIVE PARTNERS, TRUST MANAGERS,
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS HARMLESS FROM ALL CLAIMS, DEMANDS,
ACTIONS, DAMAGES, LOSS, LIABILITIES, JUDGMENTS, COSTS AND EXPENSES, INCLUDING
WITHOUT LIMITATION, ATTORNEYS' FEES AND COURT COSTS (EACH A "CLAIM" AND
COLLECTIVELY THE "CLAIMS") WHICH (i) ARE SUFFERED BY, RECOVERED FROM OR ASSERTED
AGAINST LANDLORD, (ii) ARE NOT PAID BY INSURANCE CARRIED BY TENANT OR LANDLORD
(WITHOUT IN ANY WAY AFFECTING THE REQUIREMENTS OF OR LANDLORD'S RIGHTS UNDER
SECTION 8.2 AND (iii) ARISE FROM OR IN CONNECTION WITH (a) THE USE OR OCCUPANCY
OF THE PREMISES AND/OR ANY ACCIDENT, INJURY OR DAl\1AGE OCCURRING IN OR AT THE
PREMISES OR (b) ANY BREACH BY TENANT OF ANY REPRESENTATION OR COVENANT IN THIS
LEASE; PROVIDED, HOWEVER, SUCH INDEMNIFICATION OF LANDLORD BY TENANT SHALL NOT
INCLUDE ANY CLAIM WAIVED BY LANDLORD UNDER SECTION 8.4 HEREOF, ANY CLAIM TO THE
EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY
CLAIM RELATING TO HAZARDOUS OR TOXIC MATERIALS EXCEPT TO THE EXTENT SUCH CLAIM
ARISES OUR OF A BREACH BY TENANT OF ANY OF THE PROVISIONS OF SUBSECTION 5.1.2.

         8.5.2 Landlord's Indemnity: LANDLORD WILL INDEMNIFY AND HOLD TENANT AND
ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS HARMLESS FROM ALL CLAIMS .WHICH
ARE SUFFERED BY, RECOVERED FROM OR ASSERTED AGAINST TENANT AND WHICH ARE NOT
PAID BY PROCEEDS OF INSURANCE CARRIED BY LANDLORD OR TENANT AND WHICH ARISE FROM
OR IN CONNECTION WITH (a) THE USE OF THE COMMON AREAS AND/OR ANY ACCIDENT,
INJURY OR DAMAGE OCCURRING IN OR ON THE COMMON AREAS OR (b) ANY BREACH BY
LANDLORD OF ANY REPRESENTATION OR COVENANT IN THIS LEASE; PROVIDED, HOWEVER,
SUCH INDEMNIFICATION OF TENANT BY LANDLORD SHALL NOT INCLUDE ANY CLAIM WAIVED BY
TENANT UNDER SECTION 8.4 HEREOF, ANY CLAIM TO THE EXTENT CAUSED BY THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF TENANT OR ANY CLAIM RELATING TO HAZARDOUS OR
TOXIC MATERIALS EXCEPT TO THE EXTENT SUCH CLAIM ARISES OUT OF A BREACH BY
LANDLORD OF ANY OF THE PROVISIONS OF SUBSECTION 5.1.2.

<PAGE>
                                    ARTICLE 9
                                  CONDEMNATION

SECTION 9.1 CONDEMNATION OF THE PROPERTY: If the Property or any portion thereof
that, in Landlord's reasonable opinion, is necessary to the continued efficient
and/or economically feasible use of the Property shall be taken or condemned in
whole or in part for public purposes, or sold to a condemning authority in lieu
of taking, then the term of this Lease shall, at the option of Landlord upon
written notice to Tenant, forthwith cease and terminate.

SECTION 9.2 CONDEMNATION OF PREMISES: In the event that all or substantially all
of the Premises are taken or condemned or sold in lieu thereof or Tenant will be
unable to use a substantial portion of the Premises for a period exceeding two
hundred seventy (270) consecutive days by reason of a temporary taking, either
Landlord or Tenant may terminate this Lease by delivering written notice thereof
to the other within ten (10) business days after the taking, condemnation or
sale in lieu thereof.

SECTION 9.3 CONDEMNATION WITHOUT TERMINATION: If upon a taking or condemnation
or sale in lieu of the taking of all or less than all of the Property which
gives either Landlord or Tenant the right to terminate this Lease pursuant to
Section 9.1 or 9.2 and neither Landlord nor Tenant elect to exercise such
termination right, then this Lease shall continue in full force and effect,
provided that, if the taking, condemnation or sale includes any portion of the
Premises or the Building, the Base Rent and Additional Rent shall be
redetermined on the basis of the remaining square feet of Agreed Rentable Area
of the Premises or the Building. Landlord, at Landlord's sole option and
expense, shall restore and reconstruct the Building to substantially its former
condition to the extent that the same may be reasonably feasible, but such work
shall not be required to exceed the scope of the work done by Landlord in
originally constructing the Building, nor shall Landlord in any event be
required to spend for such work in an amount in excess of the amount received by
Landlord as compensation or damages (in excess of amounts retained by the
mortgagee of the Property relating to the property taken) for the part of the
Building or the Premises so taken.

SECTION 9.4 CONDEMNATION PROCEEDS: Landlord shall receive the entire award
(which shall include sales proceeds) payable as a result of a condemnation,
taking or sale in lieu thereof. Tenant hereby expressly assigns to Landlord any
and all right, title and interest of Tenant now or hereafter arising in and to
any such award. Tenant shall, however, have the right to recover from such
authority through a separate award which does not reduce the Landlord's award,
any compensation as may be awarded to Tenant on account of moving and relocation
expenses and depreciation to and removal of Tenant's physical property.


<PAGE>


                                   ARTICLE 10
                                      LIENS

Tenant shall keep the Premises free from all liens arising out of any work
performed, materials furnished or obligations incurred by or for Tenant and
TENANT SHALL INDEMNIFY AND HOLD LANDLORD HARMLESS FROM ANY AND ALL CLAIMS,
CAUSES OF ACTION, DAMAGES, EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEE AND
COSTS), ARISING FROM OR IN CONNECTION WITH ANY SUCH LIENS. In the event that
Tenant shall not, within ten (10) days following notification to Tenant of the
imposition of any such lien, cause the same to be released of record by payment
or the posting of a bond in amount, form and substance acceptable to Landlord,
Landlord shall have, in addition to all other remedies provided herein and by
law, the right but not the obligation, to cause the same to be released by such
means as it shall deem proper, including payment of or defense against the claim
giving rise to such lien. All amounts paid or incurred by Landlord in connection
therewith shall be paid by Tenant to Landlord on demand and shall bear interest
from the date of demand until paid at the rate set forth in Section 16.9.
Nothing in this Lease shall be deemed or construed in any way as constituting
the consent or request of Landlord, express or implied, by inference or
otherwise, to any contractor, subcontractor, laborer or materialman for the
performance of any labor or the furnishing of any materials for any specific
improvement, alteration or repair of or to the Building or the Premises or any
part thereof, nor as giving Tenant any right, power or authority to contract for
or permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of any mechanic's or other liens against the
interest of Landlord in the Property or the Premises.



                                   ARTICLE 11

                           TAXES ON TENANT'S PROPERTY

Tenant shall be liable for and shall pay, prior to their becoming delinquent,
any and all taxes and assessments levied against, and any increases in Real
Estate Taxes as a result of, any personal property or trade or other fixtures
placed by Tenant in or about the Premises and any improvements (excluding
Tenant's Improvements) constructed in the Premises by or on behalf of Tenant. In
the event Landlord, at its sole election, pays any such additional taxes, or
increases, Tenant will, within ten (10) days after demand, reimburse Landlord
for the amount thereof. Such amounts shall bear interest from the date paid by
Landlord until reimbursed by Tenant at the rate set forth in Section 16.9.



                                   ARTICLE 12

                            SUBLETTING AND ASSIGNING

SECTION 12.1 SUBLEASE AND ASSIGNMENT: Tenant shall not assign this Lease, or
allow it to be assigned, in whole or in part, by operation of law or otherwise
(it being agreed that for purposes of this Lease, assignment shall include,
without limitation the transfer of a majority interest of stock, partnership or
other forms of ownership interests, merger or dissolution) or mortgage or pledge
the same, or sublet the Premises or any part thereof or permit the Premises to
be occupied by any firm, person, partnership or corporation or any combination
thereof, other than Tenant, without the prior written consent of Landlord, which
will not be unreasonably withheld. In no event shall any assignment or sublease
ever release Tenant from any obligation or liability hereunder. No assignee or
sublessee of the Premises or any portion thereof may assign or sublet the
Premises or any portion thereof. Consent by Landlord to one or more assignments
or sublettings shall not operate as a waiver of Landlord's rights as to any
subsequent assignments and/or sublettings. All reasonable legal fees and
expenses incurred by Landlord in connection with any assignment or sublease
proposed by Tenant will be the responsibility of Tenant and will be paid by
Tenant within twenty (20) days of receipt of an invoice from Landlord. In
addition, Tenant will pay to Landlord an administrative overhead fee of not less
than $500.00 in consideration for Landlord's review of any requested assignment
or sublease.

SECTION 12.2 LANDLORD'S RIGHTS RELATING TO ASSIGNEE OR SUBTENANT: If this Lease
or any part hereof is assigned or the Premises or any part thereof are sublet,
Landlord may at its option collect directly from such assignee or sublessee all
rents becoming due to Tenant under such assignment or sublease and apply such
rent against any sums due to Landlord by Tenant hereunder, with Landlord
retaining any

<PAGE>

excess rent for Landlord's sole benefit. Tenant hereby authorizes and directs
any such assignee or sublessee to make such payments of rent directly to
Landlord upon receipt of notice from Landlord, and Tenant agrees that any such
payments made by an assignee or sublessee to Landlord shall, to the extent of
the payments so made, be a full and complete release and discharge of rent owed
to Tenant by such assignee or sublessee. No direct collection by Landlord from
any such assignee or sublessee shall be construed to constitute a novation or a
release of Tenant or any guarantor of Tenant from the further performance of its
obligations hereunder. Receipt by Landlord of rent from any assignee, sublessee
or occupant of the Premises or any part thereof shall not be deemed a waiver of
the above covenant in this Lease against assignment and subletting or a release
of Tenant under this Lease. In the event that, following an assignment or
subletting, this Lease or the rights and obligations of Tenant hereunder are
terminated for any reason, including without limitation in connection with
default by or bankruptcy of Tenant (which, for the purposes of this Section
12.2, shall include all persons or entities claiming by or through Tenant),
Landlord may, at its sole option, consider this Lease to be thereafter a direct
lease to the assignee or subtenant of Tenant upon the terms and conditions
contained in this Lease.

                                   ARTICLE 13

                                SUBORDINATION AND

                          TENANT'S ESTOPPEL CERTIFICATE

SECTION 13.1 SALE OF THE PROPERTY: In the event of a sale or conveyance by
Landlord of the Property, the same shall operate to release Landlord from any
and all liability under this Lease arising after the date of such sale, provided
that if a Security Deposit has been paid by Tenant, Landlord shall not be
released from liability with respect thereto unless Landlord transfers or
credits the Security Deposit to the applicable purchaser .

SECTION 13.2 SUBORDINATION, ATTORNMENT AND NOTICE: This Lease is subject and
subordinate to any lease wherein Landlord is the tenant and to the liens of any
and all mortgages or deeds of trust, regardless of whether such lease, mortgages
or deeds of trust now exist or may hereafter be created with regard to all or
any part of the Property, and to any and all advances to be made thereunder, and
to the interest thereon, and all modifications, consolidations, renewals,
replacements and extensions thereof. Tenant also agrees that any lessor,
mortgagee or trustee may elect (which election shall be revocable) to have this
Lease superior to any lease or lien of its mortgage or deed of trust, and in the
event of such election and upon notification by such lessor, mortgagee or
trustee to that effect, this Lease shall be deemed superior to the said lease,
mortgage or deed of trust, whether this Lease is dated prior to or subsequent to
the date of said lease, mortgage or deed of trust. Tenant shall, in the event of
the sale or assignment of Landlord's interest in the Premises (except in a
sale-leaseback financing transaction), or in the event of a termination of any
lease in a sale-leaseback financing transaction \\"herein Landlord is the
lessee, attorn to and recognize such purchaser, assignee or mortgagee as
Landlord under this Lease. Tenant shall, in the event of any proceedings brought
for the foreclosure of, or in the event of the exercise of the power of sale
under, any mortgage or deed of trust covering the Premises, attorn to and
recognize purchaser at such sale, assignee, or mortgagee, as the case may be, as
Landlord under this Lease. Tenant shall not seek to enforce any remedy it may
have for any default on the part of Landlord without giving written notice
specifying the default in reasonable detail to any lessor, mortgagee or trustee
whose address has been delivered to Tenant, and affording such lessor, mortgagee
or trustee a reasonable opportunity to perform and/or cure Landlord's default.
Tenant further agrees that any lessor, mortgagee, trustee or purchaser at
foreclosure shall not be liable for any acts of Landlord, shall not be liable
for the Security Deposit if not actually received by any such party, be bound by
any amendment of this Lease to which it did not consent in \\"citing or be
obligated to recognize Tenant's payment of any Rent which is paid to Landlord
more than thirty (30) days in advance of its due date. The above subordination
and attornment clauses shall be self-operative and no further instruments of
subordination or attornment need be required by any mortgagee, trustee, lessor,
purchaser or assignee. In confirmation thereof, Tenant agrees that, upon the
request of Landlord, or any such lessor, mortgagee, trustee, purchaser or
assignee, Tenant shall execute and deliver whatever instruments may be required
for such purposes and to carry out the intent of this Section 13.2.

SECTION 13.3 TENANT'S ESTOPPEL  CERTIFICATE:  Tenant shall, within ten (10) days
of the receipt of a request of Landlord or any  mortgagee of  Landlord,  without
additional consideration, deliver an

<PAGE>

estoppel certificate, consisting of reasonable statements required by Landlord,
any mortgagee or purchaser of I any interest in the Property, which statements
may include but shall not be limited to the following: the commencement date of
this Lease; the amount of any security deposit; that this Lease is in full force
and effect, with rental paid through the current date specified by Tenant and
that Tenant is not in default; that this Lease has not been modified or amended;
that Landlord is not in default and has fully performed all of its obligations
hereunder. If Tenant is unable to make any of the statements contained in the
estoppel certificate because the same is untrue, Tenant shall with specificity
state the reason why such statement is untrue. Tenant shall, if requested by
Landlord or any such mortgagee, deliver to Landlord a fully executed instrument
in form reasonably satisfactory to Landlord evidencing the agreement of Tenant
to the mortgage or other hypothecation by Landlord of the interest of Landlord
hereunder.

                                   ARTICLE 14
                                     DEFAULT

SECTION 14.1 DEFAULTS BY TENANT: The occurrence of any of the events described
in subsections 14.1.1 through 14.1.7 shall constitute a default and breach of
this Lease by Tenant.

         14.1.1 Failure to Pay Rent: Any failure by Tenant to pay Rent or to
make any other payment required to be made by Tenant hereunder when due, no
notice being required for default in payment of Rent.

         14.1.2   Failure to Perform:  Except for failure Covered by subsection
14.1.1 or 14.1.3,  any failure by Tenant to observe and perform any provision of
this Lease to be observed or performed by Tenant where such ~" failure continues
for fifteen  (15) days after  written  notice to Tenant,  provided  that if such
failure cannot be cured within said fifteen (15) day period, Tenant shall not be
in default  hereunder so long as Tenant  commences  curative  action within such
fifteen  (15) day period,  diligently  and  continuously  pursues  the  curative
action, and fully and completely cures the failure within thirty (30) days after
such written notice to Tenant. I

         14.1.3 Continual Failure to Perform: The third failure by Tenant to
perform and observe a particular provision of this Lease to be observed or
performed by Tenant (other than the failure to pay Rent, which in all instances
will be covered by subsection 14.1.1), no notice or cure period being required
or afforded for any such third failure.


         14.1.4 Bankruptcy, Insolvency, Etc: Tenant or any Guarantor of Tenant's
obligations hereunder, cannot meet its obligations as they become due; or is
declared insolvent according to any law; or an assignment of Tenant's or
Guarantor's property is made for the benefit of creditors; or a receiver or
trustee is appointed for Tenant or Guarantor or their respective properties; or
the interest of Tenant or Guarantor under this Lease is levied on under
execution or under other legal process; or any petition is filed by or against
Tenant or Guarantor to declare Tenant or Guarantor bankrupt or to delay, reduce
or modify Tenant's or Guarantor's debts or obligations; or any petition is filed
or other action taken to reorganize or modify Tenant's or Guarantor's capital
structure if either Tenant or Guarantor be a corporation or other entity
(provided that no such levy, execution, legal process or petition filed against
Tenant or Guarantor shall constitute a breach of this Lease if Tenant or
Guarantor shall vigorously contest the same by appropriate proceedings and shall
remove or vacate the same within sixty (60) days from the date of its creation,
service or filing).


         14.1.5 Abandonment: Vacation: The abandonment of the Premises by
Tenant, or the vacating of the Premises by Tenant, which shall be conclusively
presumed if Tenant is absent from the Premises for ten (10) consecutive days or
more or if Tenant shall fail to move into or take possession of the Premises
within ten (10) days after the date on which Rent is to commence under the terms
of this Lease.
         14.1.6 Loss of Right to do Business: If Tenant fails to maintain its
right to do business in the state in which the Property is located or fails to
pay any applicable annual franchise or other applicable taxes or assessments as
and when the same become finally due and payable.


         14.1.7 _Dissolution or Liquidation: Tenant dissolves or liquidates or
otherwise  fails  to  maintain  its  corporate  or  partnership  structure,   as
applicable.

<PAGE>

SECTION 14.2 REMEDIES OF LANDLORD: Upon the occurrence of any default by tenant
specified in Section 14.1, Landlord, at its option, may in addition to all other
rights and remedies provided herein or at law or in equity, exercise one or more
of the remedies set forth in subsections 14.2.1, 14.2.2 or 14.2.3.

         14.2.1 Termination of the Lease: Upon the occurrence of a default
hereunder, Landlord may terminate this Lease and Tenant's right of possession of
the Premises by giving written notice thereof to Tenant (whereupon all
obligations and liabilities of Landlord hereunder shall terminate) and, without
further notice and without liability, repossess the Premises. Landlord shall be
entitled to recover all loss and damage Landlord may suffer by reason of such
termination, whether through inability to relet the Premises on satisfactory
terms or otherwise, including without limitation, the following (without
duplication of any element of damages):

         (a) accrued Rent to the date of termination and Late Charges, plus
interest thereon at the rate established under Section 16.9 from the date due
through the date paid or date of any judgment or award by any court of competent
jurisdiction, the unamortized cost of Tenant's Improvements, brokers' fees and
commissions, attorneys' fees, moving allowances, and any other costs incurred by
Landlord in connection with making or executing this Lease, the cost of
recovering the Premises and the costs of reletting the Premises (including
without limitation advertising costs, brokerage fees, leasing commissions,
reasonable attorneys' fees, and refurbishing costs and other costs in readying
the Premises for a new tenant); and

         (b) the present value of the Rent (discounted at a rate of interest
equal to six percent (6%) per annum (the "Discount Rate")) that would have
accrued under this Lease for the balance of the Lease term but for such
termination, reduced by the reasonable fair market rental value of the Premises
for such balance of the Lease term (determined from the present value of the
actual base rents, discounted at the Discount Rate, received and to be received
from Landlord's reletting of the Premises or, if the Premises are not relet, the
base rents, discounted at the Discount Rate, that would be received from a
comparable lease and comparable tenant for a comparable term and taking into
account among other things, the condition of the Premises, market conditions and
the period of time the Premises may reasonably remain vacant before Landlord is
able to re-lease the same to a suitable replacement tenant, it being agreed that
Landlord shall have no obligation to relet or attempt to relet the Premises);
and

         (c) any other costs or amounts necessary to compensate Landlord for its
             damages.

         14.2.2 Repossession and Re-Entry: Upon the occurrence of a default
hereunder, Landlord may, without judicial process, immediately terminate
Tenant's right of possession of the Premises (whereupon all obligations and
liability of Landlord hereunder shall terminate), but not terminate this Lease,
and, without notice, demand or liability, enter upon the Premises or any part
thereof, take absolute possession of the same, expel or remove Tenant and any
other person or entity who may be occupying the Premises and change the locks
and other security systems. If Landlord terminates Tenant's possession of the
Premises under this subsection 14.2.2, (i) Landlord shall have no obligation
whatsoever to tender to Tenant a key or other form of access for the new locks
and other security systems installed in the Premises, (ii) Tenant shall have no
further right to possession of the Premises, and (iii) Landlord shall have no
obligation whatsoever to relet or attempt to relet the Premises. Landlord may,
however, at its sole option relet the Premises or any part thereof for such
terms and such rents as Landlord may in its sole discretion elect. If Landlord
elects to relet the Premises, rent received by Landlord from such reletting
shall be applied first, to the payment of any indebtedness other than Rent due
hereunder from Tenant to Landlord (in such order as Landlord shall designate),
second, to the payment of any cost of such reletting, including, without
limitation, refurbishing costs, reasonable attorneys' fees, advertising costs,
brokerage fees and leasing commissions, and third, to the payment of Rent due
and unpaid hereunder (in such order a Landlord shall designate), and Tenant
shall satisfy and pay to Landlord any deficiency upon demand therefore from time
to time. Landlord shall not be responsible or liable for any failure to relet
the Premises or any part thereof or for any failure to collect any rent due upon
any such reletting. No such re-entry or taking of possession of the Premises by
Landlord shall be construed as an election on Landlord's part to terminate this
Lease unless a written notice of such termination is given to Tenant pursuant to
subsection 14.2.1. If Landlord relets the Premises, either before or after the
termination of this Lease, all such rentals received from such lease shall be
and remain the exclusive property of Landlord,
<PAGE>

 and Tenant shall not be, at any time, entitled to recover any such rental.
Landlord may at any time after a reletting elect to terminate this Lease. To the
maximum extent permitted by applicable laws, Landlord is under no obligation to
mitigate its damages by reletting the Premises, and Tenant hereby waives any
requirement of Landlord to mitigate its damages by reletting the Premises. In
the event Landlord is required, by Law, to mitigate its damages, Tenant agrees
and acknowledges that the following actions of the Landlord constitute
"objectively reasonable efforts:"


         (a) within forty-five (45) days after Tenant no longer occupies the
Premises, placing a "For Lease" sign at the Premises; placing the Premises on
Landlord's inventory of available space, if any; making Landlord's inventory
available to area brokers; advertising the Premises for lease in a suitable
trade journal; and Showing the Premises to prospective tenants who request to
see it.

         14.2.3: Cure of Default: Landlord may enter upon the Premises, without
having any liability therefore, and do whatever Tenant is obligated to do under
the terms of this Lease and Tenant agrees to reimburse Landlord on demand for
any expenses which Landlord may incur in effecting compliance with Tenant's
obligations under this Lease and Tenant further agrees that Landlord shall not
be liable for any damages resulting to Tenant from such action, WHETHER CAUSED
BY THE NEGLIGENCE OF LANDLORD OR OTHERWISE.



         14.2.4 Continuing Obligations: No repossession of or re-entering upon
the Premises or any part thereof pursuant to subsection 14.2.2 or 14.2.3 of this
Section or otherwise and no reletting of the Premises or any part thereof
pursuant to subsection 14.2.2 shall relieve Tenant or any Guarantor of its
liabilities and obligations hereunder, all of which shall survive such
repossession or re-entering. In the event of any such repossession of or
re-entering upon the Premises or any part thereof by reason of the occurrence of
a default, Tenant will continue to pay to Landlord Rent required to be paid by
Tenant.


         14.2.5 Cumulative Remedies: No right or remedy herein conferred upon or
reserved to Landlord is intended to be exclusive of any other right or remedy,
and each and every right and remedy shall be cumulative and in addition to any
other right or remedy given hereunder or now or hereafter existing at law or in
equity or by statute. In addition to the other remedies provided in this Lease,
Landlord shall be entitled, to the extent permitted by applicable law, to
injunctive relief in case of the violation, or attempted or threatened
violation, of any of the covenants, agreements conditions or provisions of this
Lease, or to a decree compelling performance of any of the covenants,
agreements, conditions or provisions of this Lease, or to any other remedy
allowed to Landlord at law or in equity.


SECTION 14.3 DEFAULTS BY LANDLORD: Landlord shall be in default under this Lease
if Landlord .fails to perform any of its obligations hereunder and said failure
continues for a period of thirty (30) days after Tenant delivers written notice
thereof to Landlord (to each of the addresses required by this Section) and each
mortgagee who has a lien against any portion of the Property and whose name and
address has been provided to Tenant, provided that if such failure cannot
reasonably be cured within said thirty (30) day period, Landlord shall not be in
default hereunder if the curative action is commenced within said thirty (30)
day period and is thereafter diligently pursued until cured. In no event shall
(i) Tenant claim a constructive or actual eviction or that the Premises have
become unsuitable hereunder or (ii) a constructive or actual eviction or breach
of the implied warranty of suitability be deemed to have occurred under this
Lease, prior to the expiration of the notice and cure periods provided under
this Section 14.3. Any notice of a failure to perform by Landlord shall be sent
to Landlord at the addresses and to the attention of the parties set forth in
Item 14 of Article 1. Any notice of a failure to perform by Landlord not sent to
Landlord at all addresses and/or to the attention of all parties required under
this Section and to each mortgagee who is entitled to notice or not sent in
compliance with Article 15 shall be of no force or effect.

SECTION 14.4      LANDLORD'S LIABILITY:


         14.4.1 Limitations of Recourse: Tenant is granted no contractual right
of termination by this Lease, except to the extent and only to the extent set
forth in Sections 8.1 and 9.2, or in any Rider which may be attached hereto. If
Tenant shall recover a money judgment against Landlord, such judgment shall be
satisfied only out of the right, title and interest of Landlord in the Property
as the same may then be encumbered and Landlord, its trust managers, partners,
officers, employees and shareholders shall not be liable for any
<PAGE>


deficiency or other property of Landlord be levied for execution. In no event
shall Landlord be liable to Tenant for consequential or special damages by
reason of a failure to perform (or a default) by Landlord hereunder or
otherwise.

         14.4.2 Limitations on Landlord's Liability: Unless covered by Section
8.5.2, Landlord shall not be liable to Tenant for any claims, actions, demands,
costs, expenses or damage or liability of any kind arising from (i) the use,
occupancy or enjoyment of the Premises by Tenant or any person therein or
holding under Tenant or by or through the acts or omissions of any of their
respective employees, officers, agents, invitees, or contractors; (ii) fire,
explosion, falling sheetrock, gas, electricity, water, rain, or snow, or
dampness or leaks in any part of the Premises, (iii) the pipes, appliances or
plumbing works or from heating, ventilation or air conditioning equipment, the
roof, street, or subsurface, or (iv) tenants or any persons either in the
Premises or elsewhere in the Building (other than Common Areas), or by occupants
of Property adjacent to the Building or Common Areas, or by the public or by the
construction of any private, public, or quasi-public work. In no event shall
Landlord be liable to Tenant for any loss of or damage to property of Tenant or
of others located in the Premises or the Building by reason of theft or
burglary.


                                     ARTICLE
                                       15
                                     NOTICES

Any notice required or permitted in this Lease shall be given in writing, sent
by (a) personal delivery, or (b) Federal Express or similar overnight carrier
with proof of delivery, or (c) United States mail, postage prepaid, addressed as
provided in Item 14 of Article 1 and Section 14.3 hereof, or to such other
address or to the attention of such other person as shall be designated from
time to time in writing by the applicable party and sent in accordance herewith.
Notice also may be given by telex or fax, provided each transmission is
confirmed (and such confirmation is supported by documented evidence) as
received and further provided a telex or fax number, as the case may be, is set
forth in Item 14 of Article I. Any such notice or communication shall be deemed
to have been given either at the time of receipt of personal delivery or, in the
case of overnight courier service or mail, as of the date of first attempted
delivery at the address and in the manner provided herein, or in the case of
telegram or telex or fax, upon receipt.


                                     ARTICLE
                                       16
                            MISCELLANEOUS PROVISIONS

SECTION 16.1 BUILDING NAME AND ADDRESS: Tenant shall not, without the prior
written consent of Landlord, use the name of the Building for any purpose other
than as the address of the business to be conducted by Tenant in the Premises,
and in no event shall Tenant acquire any rights in or to such names. Landlord
shall have the right at any time to change the name, number, address, or
designation by which the Building is known.

SECTION 16.2 SIGNAGE: Tenant shall not without the prior written consent of
Landlord, which will not be unreasonably withheld, erect, inscribe, paint, affix
or display anything or other insignia upon any part of the Property or any
portion of the Premises. Without in any way limiting the foregoing, any signs
erected by Tenant shall conform to all laws, ordinances, statutes, rules,
regulations or other governmental or quasi-governmental or restrictive covenant
requirements and standard signage criteria that Landlord has prescribed for the
Property. Once approved by Landlord and erected by Tenant, Tenant shall keep and
maintain such signs in good repair and remove the same and restore the Premises
(and/or Property) prior to the Expiration Date (as set forth in Item 5 of
Article I) to their original condition.

SECTION 16.3 NO WAIVER: No waiver by Landlord or by Tenant of any provision of
this Lease shall be deemed to be a waiver by either party of any other provision
of this Lease. No waiver by Landlord or Tenant of any breach by the other shall
be deemed a waiver of any subsequent breach by such party of the same or any
other provision. The failure of Landlord or Tenant to insist at any time upon
the strict performance of any covenant or agreement or to exercise any option,
right, power or remedy contained in this Lease shall not be construed as a
waiver or a relinquishment thereof for the future. Landlord's or Tenant's
consent to or approval of any act by the other party requiring the other party's
consent or approval shall not be

<PAGE>

deemed to render unnecessary the obtaining consent to or approval of any
subsequent act of the other party. No act or thing done by Landlord or
Landlord's agents during the term of this Lease shall be deemed an acceptance of
a surrender of the Premises, unless done in writing signed by Landlord. The
delivery of the keys or access cards to any employee or agent of Landlord shall
not operate as a termination of this Lease or a surrender of the Premises. The
acceptance of any Rent by Landlord following a breach of this Lease by Tenant
shall not constitute a waiver by Landlord of such breach or any other breach. No
waiver by Landlord or Tenant of any provision of this Lease shall be deemed to
have been made unless such waiver is expressly stated in writing signed by the
waiving party. No payment by Tenant or receipt by Landlord of a lesser amount
than the monthly installment of Rent due under this Lease shall be deemed to be
other than on account of the earliest Rent due hereunder, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as Rent be deemed an accord and satisfaction and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such Rent or pursue any other remedy which may be available to
Landlord.

SECTION 16.4 APPLICABLE LAW: This Lease shall be governed by and construed in
accordance with the laws of the state where the Property is located.
Furthermore, this Lease shall not be construed against either party more or less
favorably by reason of authorship or origin of language.

SECTION 16.5 SUCCESSORS AND ASSIGNS: Subject to Article 12 hereof, all of the
covenants, conditions and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
personal representative, successors and assigns.

SECTION 16.6 BROKERS: Tenant warrants that it has had no dealings with any real
estate broker or agent in connection with the negotiation of this Lease,
excepting only the broker named in Item 11 of Article I, and that it knows of no
other real estate brokers or agents who are or might be entitled to a commission
in connection with this Lease. TENANT AGREES TO INDEMNIFY AND HOLD HARMLESS
LANDLORD FROM AND AGAINST ANY LIABILITY OR CLAIM, WHETHER MERITORIOUS OR NOT,
ARISING IN RESPECT TO BROKERS AND/OR AGENTS NOT SO NAMED. Landlord has agreed to
pay the fees of the brokers (but only the brokers} named in Items 10 and 11 of
Article 1 to the extent that Landlord has agreed to do so pursuant to a written
agreement with such brokers.

SECTION 16.7 SEVERABILITY: If any provision of this Lease or the application
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the application of such provisions to other persons or circumstances and
the remainder of this Lease shall not be affected thereby and shall be enforced
to the greatest extent permitted by law.

SECTION 16.8 EXAMINATION OF LEASE: Submission by Landlord of this instrument to
Tenant for examination or signature does not constitute a reservation of or
option for lease. This Lease will be effective as a lease or otherwise only upon
execution by and delivery to both Landlord and Tenant.

SECTION 16.9 INTEREST ON TENANT'S OBLIGATIONS: In addition to the late charges
specified in Section 3.4, any amount due from Tenant to Landlord which is not
paid on or before the date due shall bear interest at the lower of (i} eighteen
percent (18%} per annum or (ii} the highest rate from time to time allowed by
applicable law, from the date such payment is due until paid, but the payment of
such interest shall not excuse or cure the default.

SECTION 16.10 TIME: Time is of the essence in this Lease and in each and all of
the provisions hereof. Whenever a period of days is specified in this Lease,
such period shall refer to calendar days unless otherwise expressly stated in
this Lease.

SECTION 16.11 DEFINED TERMS AND MARGINAL HEADINGS: The words Landlord and Tenant
as used herein shall include the plural as well as singular. If more than one
person is named as Tenant, the obligations of such persons are joint and
several. The headings and titles to the articles, sections and subsections of
this Lease are not apart of this Lease and shall have no effect upon the
construction or interpretation of any part of this Lease.

<PAGE>

SECTION 16.12 AUTHORITY OF TENANT: Tenant and each person signing this Lease on
behalf of Tenant represents to Landlord as follows: Tenant and its general
partners and managing members, if applicable, are each duly organized and
legally existing under the laws of the state of its incorporation and is duly
qualified to do business in the state where the Property is located. Tenant and
its general partners and managing members, if applicable, each has all requisite
power and all governmental certificates of authority, licenses, permits,
qualifications and other documentation to lease the Premises and to carry on its
business as now conducted and as contemplated to be conducted. Each person
signing on behalf of Tenant is authorized to do so.

SECTION 16.13 FORCE MAJEURE: Whenever a period of time is hereby prescribed for
action to be taken by Landlord or Tenant, the party taking the action shall not
be liable or responsible for, and there shall be excluded from the computation
of any such period of time, any delays due to strikes, riots, acts of God,
shortages of labor or materials, war, governmental laws, regulations or
restrictions or any other causes of any kind whatsoever which are beyond the
reasonable control of such party; provided, however, in no event shall the
foregoing apply to the financial obligations of either Landlord or Tenant to the
other under this Lease, including Tenant's obligation to pay Base Monthly Rent,
Additional Rent or any other amount payable to Landlord hereunder.

SECTION 16.14 RECORDING: This Lease shall not be recorded. However, Landlord
shall have the right to record a short form or memorandum hereof, at Landlord's
expense, at any time during the terms hereof, and, if requested, Tenant agrees
(without charge of Landlord) to join in the execution thereof.

SECTION 16.15 NO REPRESENTATIONS: LANDLORD AND LANDLORD'S AGENTS HAVE MADE NO
WARRANTIES, REPRESENTATIONS OR PROMISES (EXCEPT OR IMPLIED) WITH RESPECT TO THE
PREMISES, THE BUILDING OR ANY OTHER PART OF THE PROPERTY (INCLUDING, WITHOUT
LIMITATION, THE CONDITION, USE OR SUITABILITY OF THE PREMISES, THE BUILDING OR
THE PROPERTY), EXCEPT AS HEREIN EXPRESSLY SET FORTH AND NO RIGHTS, EASEMENTS OR
LICENSES ARE ACQUIRED BY TENANT BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY
SET FORTH IN THE PROVISIONS OF THIS LEASE.

SECTION 16.16 PARKING: The parking areas and any parking structures shall be
designated for automobile parking on a non-exclusive basis for all Property
tenants (including Tenant) and their respective employees, customers, invitees
and visitors. Parking and delivery areas for all vehicles shall be in accordance
with parking regulations established from time to time by Landlord with which
Tenant agrees to conform. Tenant shall only permit parking by its employees,
customers and agents of appropriate vehicles in appropriate designated parking
areas.

SECTION 16.17 ATTORNEYS' FEES: In the event of any legal action or proceeding
brought by either party against the other arising out of this Lease, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred in such action (including, without limitation, all costs of
appeal) and such amount shall be included in any judgment rendered in such
proceeding,

SECTION 16.18 NO LIGHT, AIR OR VIEW EASEMENT: Any diminution or shutting off of
light, air or view by any structure which may be erected on the Property or
lands adjacent to the Property shall in no way affect this Lease or impose any
liability on Landlord (even if Landlord is the adjacent land owner).

SECTION 16.19 SURVIVAL OF INDEMNITIES: Each indemnity agreement and hold
harmless agreement contained herein shall survive the expiration or termination
of the Lease.

SECTION 16.20 TENANT HEREBY WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS & COMMERCE
CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER
CONSULTATION WITH AN ATTORNEY/LEGAL COUNSEL OF TENANT'S OWN SELECTION, TENANT
VOLUNTARILY CONSENTS TO THIS WAIVER.

<PAGE>


TENANT COVENANTS, REPRESENTS AND WARRANTS THAT TENANT'S ATTORNEY/LEGAL COUNSEL W
AS NOT DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY LANDLORD OR
AN AGENT OF LANDLORD.

SECTION 16.21 TENANT AND LANDLORD EACH: (1) AGREE NOT TO ELECT A TRIAL BY JURY
WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP
BETWEEN THE PARTIES AS TENANT AND LANDLORD THAT IS TRIABLE OF RIGHT BY A JURY;
AND (2) WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE
EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO
TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH
THE BENEFIT OF COMPETENT LEGAL COUNSEL.

SECTION 16.22 WITH RESPECT TO THE BUILDING OR ANY PORTION THEREOF, TENANT HEREBY
WAIVES ALL RIGHTS UNDER SECTIONS 41.413 AND 42.015 OF THE TEXAS TAX CODE OR ANY
SIMILAR OR CORRESPONDING LAW: (1) TO PROTEST A DETERMINATION OF APPRAISED VALUE
OR TO APPEAL AN ORDER DETERMINING A PROTEST; AND (2) TO RECEIVE NOTICES OF
REAPPRAISALS.

SECTION 16.23 ENTIRE AGREEMENT: This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease,
and no prior agreement, understanding or representation pertaining to any such
matter shall be effective for any purpose. No provision of this Lease may be
amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest.

SECTION 16.24 [Intentionally omitted]

SECTION 16.25 [Intentionally omitted]

SECTION 16.26 [Intentionally omitted]


[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>


SECTION  16.27  LEASE  CONTENTS:  This lease  consists of sixteen  Articles  and
Exhibits "A" through .'C", Riders 1, and Addendum 1.

SECTION 16.28: If Tenant requires additional lease space and Landlord has a
large vacancy available, Landlord will work in good faith to accommodate
Tenant's requirements.

SECTION 16.29: Subject to the terms and conditions contained herein, Tenant
shall have a one time right of first offer ("Right of First Offer") to purchase
the property located at and known as 12901 Hutton (the "Property") upon the
following terms and conditions. If at any time during the tern of this Lease,
Landlord shall desire to sell the Property, then Landlord shall provide notice
to Tenant of the proposed sale (the "Offer Notice") and offer the Property for
sale to Tenant (the "Offer"). The Offer Notice shall contain the offer price
(the "Offer Price") and other relevant business terms upon which Landlord is
willing to sell the Property. Tenant shall have five (5) days (the "Offer
Period") from the date of the Offer Notice to deliver a notice (the "Acceptance
Notice") to Landlord accepting the terms of the Offer Notice. If Landlord timely
receives Tenant's Acceptance Notice, then the parties shall enter into an
agreement of sale in form and substance reasonably acceptable to Landlord and
Tenant within five (5) business days after the date of the Acceptance Notice.
Closing for the Property shall occur within sixty (60) days after the date of
the Acceptance Notice. If Tenant shall (i) fail to deliver the Acceptance Notice
to Landlord prior to the expiration of the Offer Period or (ii) deliver a
counteroffer to Landlord or if the parties fail to enter into an agreement of
sale as aforesaid, then the Right of First Offer shall become void and of no
further force or effect and Landlord shall be free to sell the Property to any
third party free and clear, released from and not subject to the Right of First
Offer, provided that the sale price for the Property is equal to or greater than
ninety (90%) percent of the Offer Price. If Landlord intends to sell the
Property for less than ninety (90%) percent of the Offer Price, then it shall
send a new Offer Notice to Tenant and Tenant shall have (a) five (5) business
days to deliver an Acceptance Notice accepting all of the terms of the new
Offer, and (b) an additional five (5) business days after accepting the new
Offer to enter into an agreement of sale reasonably acceptable to Landlord and
Tenant. If either such event in (a) or (b) in the preceding sentence shall fail
to occur, then the Right of First Offer shall become void and of no further
force or effect and Landlord shall be free to sell the Property to any third
party free and clear, released from and not subject to the Right of First Offer.
Tenant acknowledges that its Right of First Offer shall be void and of no
further force or effect if (x) an [Event of Default] shall occur or (y) Tenant
shall sublease any or all of the [Leased Premises] or assign its interest under
this Lease. Upon the occurrence of either such event, Landlord shall be free to
sell the Property to any third party free and clear, released from and not
subject to the Right of First Offer. Notwithstanding anything to the contrary
contained herein, the Right of First Offer shall not apply to any sale of the
Property which is part of a sale of multiple buildings (including the Property
and anyone or more buildings owned by Landlord and/or its affiliates). Landlord
shall be free solicit and complete such a sale of multiple buildings (including
the Property) at any time without any prior notice to Tenant. The parties
acknowledge that time is of the essence of each provision contained in this
Section 16.29.


SECTION 16.30: Landlord shall provide a finish allowance equal to $25,250.00.
Such amount shall be provided assuming Tenant is not in default of the Lease.

<PAGE>


IN WITNESS WHEREOF, the parties hereto have executed and delivered this Lease as
of the date specified in the introductory paragraph of this Lease.




                                    LANDLORD:

                                    AIP-SWAG OPERATING PARTNERSHIP, L.P.,
                                       a Delaware Limited Partnership

                                    By: AIP- SWAG GP, a Texas Corporation, its
                                        general partner



                                    By: ______________________
                                        Name: Richard E. Brown
                                       Title: Senior Vice President


                                        Date:    July 17th, 2001


                                     TENANT:

                                     Lexxus International, Inc.,
                                      a Delaware Corporation

                                        By:

                                            Name: Mark Woodburn
                                            Title: CFO

                                            Date:     July 11, 2001

<PAGE>


                                    EXHIBIT A
                              SITE PLAN OF PREMISES










                                       A-l


<PAGE>

                                    EXHIBIT B
                        ACCEPTANCE OF PREMISES MEMORANDUM

This Acceptance of Premises Memorandum is being executed pursuant to that
certain Commercial Lease Agreement (the "Lease") dated the _______ day
of__________, 19__ , between AIP-SWAG OPERATING PARTNERSHIP, L.P., a Delaware
Limited Partnership (Landlord"), and Lexxus International, Inc., a Delaware
Corporation ("Tenant"), pursuant to which Landlord leased to Tenant and Tenant
leased from Landlord certain space in the building located at 12901 Hut ton,
Landlord and Tenant hereby agree that:

1. Landlord has fully completed the construction work required under the terms
of the Lease, except for the Punch List Items (as may be shown on the attached
Punch List).

2. The Premises are tenantable, Landlord has no further obligation for
construction (except with respect to Punch List Items), and Tenant acknowledges
that the Building, the Premises and Tenant's Improvements are satisfactory in
all respects, except for the Punch List Items, and are suitable for the
Permitted Use.

3. The Commencement Date of the Lease is the 1st day of August, 2001. If the
date set forth in Item 4 of Article 1 of the Lease is different than the date
set forth in the preceding sentence, then Item 4 of Article 1 of the Lease is
hereby amended to be the Commencement Date set forth in the preceding sentence.
The Base Rent Schedule contained in Item 6 of Article 1 of the Lease is hereby
amended and restated to be and read as follows:

4. The Expiration Date of the Lease is the 30th day of September, 2004. If the
date set forth in Item 5 of Article 1 of the Lease is different than the date
set forth in the preceding sentence, then Item 5 of Article 1 of the Lease is
hereby amended to be the Expiration Date set forth in the preceding sentence.

5. Tenant represents to Landlord that Tenant has obtained a Certificate of
Occupancy covering the Premises, a copy of which is attached hereto as Exhibit
B-1.

6. Tenant acknowledges that it has been given the opportunity to inspect the
Premises and has conducted such inspections and investigations of the Premises
as it deems necessary and appropriate and accepts the Premises in an " AS IS,
WHERE IS" condition, that the buildings and improvements comprising the Premises
are suitable for the purpose for which the Premises are being leased hereby and
that Landlord makes no warranty as the habitability, fitness or suitability of
the Premises for a particular purpose nor as to the absence of any toxic or
otherwise hazardous substances.

7. All capitalized  terms not defined herein shall have the meaning  assigned to
them in the Lease.



Agreed and Executed this 11th day of July, 2001

LANDLORD:                                                    TENANT:

AIP-SWAG OPERATING PARTNERSHIP, L.P.,             Lexxus International, Inc.,
A Delaware Limited Partnership, L.P.,               a Delaware Corporation


By:
Name: Richard E. Brown                            Name: Mark Woodburn
Title: Senior Vice President                      Title: CFO


<PAGE>

                                    EXHIBIT C

                              RULES AND REGULATIONS

(1)  No loud speakers. television, phonograph, radios or other devices shall be
     used in a manner so as to be heard or seen outside the Premises without
     prior consent of Owner.

(2) Tenant shall not use the public or common area in the office complex for
business purposes.

(3)  Tenant shall not place or suffer to be placed displays or decorations in
     front of the Premises or in any common area.

(4)  Tenant and Tenant emp1oyees and agents shall not distribute any handbills
     or other advertising matter in automobiles parked in the parking area, or
     in any other common areas of the Projects.

(5)  No entries or passageways shall be obstructed, nor shall any material of
     any nature be placed in these areas, or such areas be used at any time
     except for the access or egress by Tenant, Tenant's agents, employees or
     invitees.

(6)  No portion of Tenant's area or any other part of Building shall at any time
     be used or occupied as sleeping or lodging quarters.

(7) Owner will be permitted in the public corridors or on corridor doors or
entrances to Tenant's space.

(8)  Owner will not be responsible for lost or stolen personal property from
     Tenant's area or public rooms regardless of whether or not such loss occurs
     when area is locked against entry or not.

(9)  No draperies, shutters, or other window covering shall be installed on
     exterior windows or walls or windows and doors facing public corridors
     without Owner's written approval.

(l0) Tenant will refer all contractors, contractor's representatives and
     installation technicians, rendering any service on or to the leased
     Premises for Tenant, to Owner for Owner's approval and supervision before
     performance of any contractual service. This provision shall apply to all
     work performed in the Building including installation of telephones,
     telegraph equipment, electrical devices and attachments and installation of
     any nature affecting floors, walls, woodwork, trim, windows, ceilings,
     equipment of any other physical portion of the Building.

(l1) Tenant shall not place, install or operate on the leased Premises or in any
     other part of the Building, any engine, stove or machinery, or conduct
     mechanical operations or cook thereon or therein, or place or use in or out
     the leased Premises any explosives, gasoline, kerosene oil, acids,
     caustics, or any inflammable, explosive, or hazardous material without
     written consent of Owner.

(12) The movement of furniture, equipment, merchandise or materials within, into
     our out of the Building shall be restricted to time, method and routing of
     movement as determined by Owner upon request from Tenant and Tenant shall
     assume all liability and risk in such movement. Safes and other heavy
     equipment shall be moved into leased premises only with Owner's written
     consent and placed where directed by Owner. Any damage done to building by
     taking in or removing any safe, or from overloading any floor in any way,
     shall be placed upon the Tenant.

(13) Owner shall provide all locks for doors in each Tenant's premises, at the
     cost of such Tenant, and no additional locks shall be placed on any door in
     Building without written consent of Owner. A reasonable number of keys to
     leased Premises will be furnished by Owner and neither Tenant, its agents,
     or employees, shall have any duplicate keys made. Owner may at all times
     keep a pass key to leased Premises. All keys shall be returned to Owner
     promptly upon termination of this Lease.
<PAGE>


(14) Tenant shall have the non-exclusive use in common with the Owner, other
     tenants, their guests and invitees, of the uncovered automobile surface
     parking areas, subject to reasonable rules and regulations for the use
     thereof as prescribed from time to time by Owner. Owner shall have the
     right to designate parking areas for the use of the Building's Tenant and
     their employees.

(15) AII alterations or miscellaneous job orders shall at all times be directed
     to the Property Manager's office in order that the management may provide
     for the orderly and otherwise proper processing of such work in accordance
     with any covenants of the Lease Agreement applicable thereto.

(16) Corridor doors, when not in use, shall be kept closed.

{17) Tenant shall cooperate with Owner's employees in keeping its leased
     Premises neat and clean.

(18) No birds, fowls, or animals shall be brought into or kept in or about the
     Building.

(19) The Water closets and other water fixtures shall not be used for any
     purpose other than those for which they arc constructed, and any damage to
     them from misuse or by the defacing or injury of any part of the Building
     shall be borne by the person who shall occasion it. No person shall waste
     water by interfering with the faucets or otherwise.

(20) Agents of the Landlord shall at all times be allowed admittance to said
     leased Premises.

(21) No smoking will be allowed in any area of the Building including common
     areas, restrooms, and tenant premises.

(22) Owner may amend or add new rules and regulations.



_______________________
Tenant

<PAGE>

                                   ADDENDUM 1

HV AC Maintenance/Service Contract Requirements. The service contract must
become effective within thirty (30) days of the date of occupancy of the
facility and must be performed on at least a quarterly basis.

Please  be sure  that  your  contractor  includes  the  following  items in your
maintenance contract:
1.       Adjust belt tension;
2.       Lubricate all moving parts, as necessary;
3.       Inspect and adjust all temperature and safety controls;
4.       Check refrigeration systems for leaks and operation;
5.       Check refrigeration system for moisture;
6.       Inspect compressor oil level and crank heaters;
7.       Inspect air filters and replace when necessary;
8.       Check space conditions;
9.       Check condensation drains and drain pans and clean, if necessary;
10.      Inspect and adjust all valves;
11.      Check and adjust dampers;
12.      Run machine through complete cycle.



<PAGE>
                                     RIDER 1

                                 RENEWAL OPTION




1. If, and only if, on the Expiration Date and the date Tenant notifies Landlord
of its intention to renew the term of this Lease (as provided below), (i) Tenant
is not in default under this Lease, (ii) Tenant then occupies and the Premises
consisting of at least all the original Premises, and (iii) this Lease is in
full force and effect, then Tenant, but not any assignee or subtenant of Tenant,
shall have and may exercise an option to renew this Lease for one (1) additional
term of three (3 years (the "Renewal Term") upon the same terms and conditions
contained in this Lease with the exceptions that (x) this Lease shall not be
further available for renewal, and (y) the rental for the Renewal Term shall be
the "Renewal Rental Rate", but in no event will the Base Monthly Rent be less
than the Base Monthly Rent for the last twelve (12) calendar months of the
initial term of the Lease. The Renewal Rental Rate is hereby defined to mean the
then prevailing market rent (including, without limitation, those similar to the
Base Monthly Rent and Additional Rent) for the Building as determined by
Landlord.

2. If Tenant desires to renew this lease, Tenant must notify Landlord in writing
of its intention to renew on or before the date which is at least six (6) months
but no more than nine (9) months prior to the Expiration Date. Landlord shall,
within the next sixty (60) days, notify Tenant in writing of Landlord's
determination of the Renewal Rental Rate and Tenant shall, within the next
twenty (20) days following receipt of Landlord's determination of the Renewal
Rental Rate, notify Landlord in writing of Tenant's acceptance or rejection of
Landlord's determination of the Renewal Rental Rate. If Tenant timely notifies
Landlord of Tenant's acceptance of Landlord's determination of the Renewal
Rental Rate, this Lease shall be extended as provided herein and Landlord and
Tenant shall enter into an amendment to this Lease to reflect the extension of
the term and changes in Rent in accordance with this Rider. If (x) Tenant timely
notifies Landlord in writing of Tenant's rejection of Landlord's determination
of the Renewal Rental Rate or (y) Tenant does not notify Landlord in writing of
Tenant's acceptance or rejection of Landlord's determination of the Renewal
Rental Rate within such twenty (20) day period, this Lease shall end on the
Expiration Date and Landlord shall have no further obligation or liability
hereunder.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>10
<FILENAME>lexxusagrt.txt
<DESCRIPTION>DISTRIBUTOR AGREEMENT-40J'S
<TEXT>

                         LEXXUS INTERNATIONAL AGREEMENT


This Distributorship Agreement, made and executed on the 1st day of March, 2002,
is between 40 J's L.L.C., a Limited Liability Company, organized and existing
under the laws of the Commonwealth of Kentucky, with its principal office
located at 110 Stanberry Ridge, Ft. Thomas, Campbell County, Kentucky 41075
("SELLER"), and LEXXUS INTERNATIONAL, INC. A corporation organized and existing
under the laws of the State of Delaware, with its principal office located at
12901 Hutton Drive, Dallas, Dallas County, Texas 75234 ("DISTRIBUTOR")

This agreement is intended to replace a prior Distributorship Agreement between
the parties made on July 11, 2001. Upon execution of this agreement the prior
Distributorship Agreement shall be null and void and have no further effect.

In consideration of the matters described above, and of the mutual benefits and
obligations set forth in this agreement, the parties agree as follows:

                                   SECTION ONE

                                 RIGHTS GRANTED

Seller grants the following contingent rights to Distributor:

Exclusive worldwide distribution rights to sell Seller's Product currently known
as "Viacreme"(TM) as defined on Exhibit "A" attached hereto through Multi Level
Marketing channels of distribution. Distributor will develop a new product name
selected by Distributor and Distributor may use this name only for as long as
this Agreement is in effect. Upon termination of this Agreement, Distributor
shall discontinue use, for any purpose, of the new product name or similar name.

Multi Level Marketing (MLM), as referred to in this agreement, shall mean
distribution of Seller's products utilizing a variety of individual, independent
contractors or agents (Independent Distributors), who are appointed, supervised
and/or terminated by Distributor, and who sell such products on a person to
person basis rather than through traditional retail stores or other means of
distribution.

The parties specifically acknowledge that the above grant of distribution rights
only gives Distributor rights to distribute via MLM, and notwithstanding the
above, Distributor shall not have any rights to distribute via MLM or otherwise
in Japan and shall not sell to any parties who may sell Seller's products into
Japan. In the event that 40 J's fails to establish distribution in Japan by
September 1, 2002, then exclusive MLM rights for Japan will revert to Lexxus.

Initials____________________
<PAGE>

                                   SECTION TWO

                                PRODUCT COVERAGE

As used in this agreement, the term "Seller's product" shall mean and be limited
to Seller's product currently known as "Viacreme" as defined on Exhibit "A"
attached hereto or an identical product with a different name selected by
Distributor which is covered under one or more of Seller's patents and patent
applications. Seller represents and warrants that it will enforce Sellers
patents in the United States and shall prosecute patent applications in
international markets.

                                  SECTION THREE

                                  TERMS OF SALE

All sales of Seller's products to Distributor shall be made under and subject to
the provisions of this agreement. Resale prices shall be determined solely by
Distributor.

Distributor agrees to purchase, on execution of this agreement, 375,000 2-ml.
pillows ("Pillows") from current inventory for $75,000. Distributor agrees to
purchase 225,000 Pillows from current inventory and 2 barrels of Seller's
product on March 15, 2002 for $87,500. Distributor agrees to purchase 600,000
Pillows from current inventory on March 30, 2002 for $87,500. Seller and
Distributor understand that the 1,200,000 pillows referenced above have an
expiration date of August 2002. Seller will supply to Distributor documentation
in form satisfactory to Distributor from the manufacturer that the pillows have
an additional life of at least 12 months. Distributor will purchase 74 barrels
of Seller's product @ $22,500 each through the end of 2003 according to the
following schedule. Terms are FOB warehouse located in Columbus, Indiana and
Cash on Delivery (C.O.D.).

         Date                               Quantity

         April 30, 2002                     Balance of Pillows Approximately
                                            700,000  @ $112,500
         June 30, 2002                      5 Barrels
         August 15, 2003                    9 Barrels

         2003
         January 31, 2003                   15 Barrels
         April 30, 2003                     15 Barrels
         July 31, 2003                      15 Barrels
         September 30, 2003                 15 Barrels

After December 31, 2003, the price cannot increase or decrease more than 10% per
calendar year. Distributor can renew this agreement annually for an additional
period of 12 months with a purchase commitment of 15 barrels per quarter. Seller
and Distributor agree to work in good faith during each renewal period to reach
a mutually agreeable price. Distributor agrees to purchase all of Distributors
inventory from Seller and will not sell competitive and/or similar products.
Failure to purchase any of this inventory will result in an automatic
termination of this Agreement. Upon termination, Distributor may continue to use
new product name selected by Distributor if Distributor purchases Seller's
product @ $45,000 per barrel to distribute on a non-exclusive basis, only into
existing markets that have been previously established as of the termination
date. Lexxus must provide proof to 40J's of established markets.

Initials_____________
<PAGE>

If Seller decides to market a similar product through means of distribution
other than through MLM the parties understand that the pricing structure for
Seller's product would be similar to competitive products in the industry, i.e.
approximately $24.99 for a 15-ml. product.

Seller represents and warrants that it is the owner of the trademark "Viacreme"
in the United States and will not sell any product, as defined on Exhibit "A"
with the name Viacreme other than to Distributor.


                                  SECTION FOUR

               SALES, MARKETING, ADVERTISING & PROMOTION POLICIES

Distributor acknowledges that the sale of Seller's product could be regulated by
the Food and Drug Administration, and other governmental and regulatory agencies
domestically and worldwide. Distributor agrees to comply with all regulations
and will be solely responsible to comply with all governmental and regulatory
requirements in selling, marketing and promoting Seller's product. Distributor
agrees to hold Seller harmless in any and all non-compliance issues.


                                  SECTION FIVE

                            PRODUCT WARRANTY POLICIES

         A. Seller's products are sold to Distributor at prices that contemplate
that such products are free from defect in manufacture and workmanship at the
time of sale. In the event that any product is proved to have been defective at
time of sale, Seller will replace product or refund the original sales price of
such product at its discretion.

         B. Seller agrees to protect Distributor and hold Distributor harmless
from any loss or claim arising out of inherent defects in any of Seller's
product existing at the time such product is sold by Seller to Distributor,
provided that Distributor gives Seller notice of any such loss or claim and
cooperates fully with Seller in the handling of the same. Distributor agrees to
protect Seller and hold Seller harmless and indemnify Seller from any loss or
claim arising out of the negligence, nonfeasance, misfeasance or malfeasance of
Distributor, employees or representatives in the installation, use, sale,
servicing or advertising of Seller's products.

Initials________________
<PAGE>

                                   SECTION SIX

                              USE OF SELLER'S NAMES

Neither Distributor nor Independent Distributors shall use, authorize or permit
the use of the name "Viacreme" or any other trademark owned by Seller as part of
its firm, corporate or business name or in any way. Seller will seek to prevent
others from using this name to avoid any confusion relating to Seller's products
and other parties' products.


                                  SECTION SEVEN

                           RELATIONSHIP OF THE PARTIES

The parties to this agreement recognize each other as independent contractors
and, except as expressly described elsewhere in this agreement, agree to hold
the other harmless for all liabilities associated with their respective actions.
Each party (the "Indemnifying Party") shall hold harmless, indemnify and defend
the other party (the "Indemnified Party"), the Indemnified Party's agents and
employees against any and all claims, causes of actions, injuries and damages
including, but not limited to, personal injury and property damage, caused to
any extent by any act or omission on the part of the Indemnifying Party, its
agents, contractors or employees, related in any manner to the agreement, except
to the extent the same is caused solely by the negligent acts of the Indemnified
Party. This indemnity shall include all costs and disbursements, including
without limitation, court costs, and reasonable attorneys' fees, and shall
survive the expiration or earlier termination of this agreement. Neither party
shall be construed in any manner whatsoever to be an employee or agent of the
other, nor shall this agreement be construed as a contract of employment or
agency.

                                  SECTION EIGHT

                                TERM OF AGREEMENT

This agreement shall continue in full force and effect from and after the date
as of which this agreement has been executed and continue unless terminated by
either party under the provisions of Section Nine.

                                  SECTION NINE

                                   TERMINATION

         A. This agreement shall terminate as to any part if such party (1)
admits in writing its inability to pay its debts generally as they become due;
(2) has a liquidator, receiver, conservator or statutory successor of such party
appointed by any court or governmental authority having jurisdiction over it;
(3) commences a proceeding under any federal or state bankruptcy, insolvency,
reorganization or similar law, or has such a proceeding commenced against it and
either has an order of insolvency or reorganization entered against it or has
the proceeding remain undismissed and unstayed for 90 days; (4) makes an
assignment for the benefit of creditors; or (5) has a receiver or trustee
appointed for it or for the whole or any substantial part of its property.

Initials_________________
<PAGE>

         B. In the event either party breaches this agreement by materially
failing to perform its duties as required herein (the "Breaching Party"), the
non-Breaching Party may give written notice to the Breaching Party of such
material failure to perform and demand performance. If the Breaching Party fails
to cure such material non-performance required by this agreement within thirty
(30) days of such written notice, the non-Breaching Party may terminate this
agreement without waiver of any rights that such party may have against the
Breaching Party for such failure to perform.

         C. Termination  of this  agreement  shall not affect the  continuation
            of the  obligations  of either  party incurred during the term of
            the agreement.

         D. This  agreement  shall also  terminate  automatically  (without  any
            notice  being  required)  if Distributor fails to purchase inventory
            from Seller described in Section Three.

                                   SECTION TEN

                           OBLIGATIONS ON TERMINATION

On termination of this agreement, Distributor shall cease to be an authorized
Distributor and;

         A. All amounts owing by Distributor  to Seller shall, notwithstanding
            prior terms of sale,  become immediately due and payable;

         B. All unshipped orders shall be cancelled without liability of either
            party to the other;

         C. Neither party shall be liable to the other because of such
            termination for compensation, reimbursement or damages on account of
            the loss of prospective profits or anticipated sales, or on account
            of expenditures, investments, leases or commitments in connection
            with the business or good will of Seller, Distributor, or
            Independent Distributors or for any other reason whatsoever growing
            out of such termination.

Initials________________
<PAGE>

                                 SECTION ELEVEN

                                ACKNOWLEDGEMENTS

Each party acknowledges that no representation or statement, and no
understanding or agreement, has been made, or exists, and that in entering into
this agreement the party has not relied on anything done or said or on any
presumption in fact or in law: (1) with respect to this agreement, or to the
duration, termination or renewal of this agreement, or with respect to the
relationship between the parties, other than as set forth in this agreement; or
(2) that in any way tends to change or modify any of the terms of this agreement
or to prevent this agreement becoming effective; or (3) that in any way affects
or relates to the subject matter of this agreement, other than as set forth in
this agreement, and the parties agree that each of the terms of this agreement
are reasonable and fair and equitable.


                                 SECTION TWELVE

                         TERMINATION OF PRIOR AGREEMENTS

This agreement terminates and supersedes all prior Seller-Distributor agreements
between the parties to this agreement.

                                SECTION THIRTEEN

                                   ASSIGNMENT

Neither this agreement nor any right under this agreement nor interest in this
agreement may be assigned by Distributor or Seller without the prior express
written approval of the other party, which consent will not be unreasonably
withheld.

                                SECTION FOURTEEN

                               NO IMPLIED WAIVERS

Except as provided in this agreement, waiver by either party, or failure by
either party to claim a breach, of any provision of this agreement shall not be,
or held to be, a waiver of any breach or subsequent breach, or as affecting in
any way the effectiveness of such provision.

<PAGE>

                                 SECTION FIFTEEN

                                     NOTICES

Any notice required or permitted by this agreement, or given in connection with
it, shall be in writing and shall be given to the appropriate party by personal
delivery or by first-class registered mail, postage prepaid. Notices to Seller
shall be delivered to the office of the Seller at:

                           Robert Hassman
                           40 J's LLC
                           95 Orchard Hill Road
                           Ft. Thomas, KY  41075

Notices to Distributor shall be delivered to the office of the Distributor at:

                           Mark Woodburn
                           Lexxus International
                           12901 Hutton Drive
                           Dallas, TX   75234


                                 SECTION SIXTEEN

                                    AMENDMENT

This agreement has been signed by Distributor and sent to Seller for final
approval and execution, and will be signed and delivered on behalf of Seller.
The parties to this agreement intend this agreement to be executed as an
agreement made and executed in Kentucky and to be construed in accordance with
the laws of Texas.

The parties have executed this agreement on the day and year first above
written.


                                     SELLER:

                                     40 J's, L.L.C.


                                     By:___________________________________
                                        Robert Hassman, President


                                     DISTRIBUTOR:

                                     LEXXUS INTERNATIONAL, INC.


                                     By:___________________________________
                                       Mark D. Woodburn, Chief Financial Officer


<PAGE>



                                   Exhibit `A'

                    Thompson Patent Filing Program - VIACREME
<TABLE>
<CAPTION>

Docket No.          Title                                     Serial No.                Status
- ---------           -------                                   ----------                ------
<S>                  <C>                                      <C>                       <C>
Thompson-1           Device to Enhance Clitoral               09/340,227                U.S. Patent
                     Stimulation During                                                 6,179,755
                     Intravaginal Intercourse

Thompson-2           Medication Delivery and                  09/414,250                U.S. Patent
                     Clitoral Stimulation device                                        6,224,541

Thompson-3           Clitoral Sensitization                   09/469,959                U. S. Patent
                     Arrangement Using                                                   6,322,493
                     Compound of Menthol
                     and L-Arginine

Thompson-3A          Clitoral Sensitization                   09/878,583                Pending
                     Arrangement Using
                     Compound of Menthol
                     and L-Arginine

Thompson-4      Exp. Clitoral Sensitizing                     09/520,110                Pending
                    Compound with Method
                    and Apparatus for the
                  Delivery of those Compounds

Thompson-5A     Clitoral Sensitizing                          09/736,973                Pending
                      Arrangements

Foreign Filing of Thompson-5A Worldwide                                                 Pending

</TABLE>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>11
<FILENAME>listofsubs.txt
<DESCRIPTION>SUBSIDIARIES
<TEXT>
                           List of NHTC's Subsidiaries


eKaire.com, Inc.

Kaire International Canada Ltd.

Kaire Nutraceuticals Australia Pty. Ltd.

Kaire Nutraceuticals New Zealand Limited

Kaire Trinidad Ltd.

Lexxus International, Inc.

Lexxus International (SW Pacific) Pty. Ltd.

Lexxus International (New Zealand) Limited

Lighthouse Marketing Corporation

Lexxus International Co. Ltd. (Taiwan)

MyLexxus Europe AG

Lexxus International Co. Ltd. (Hong Kong)






</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
