<PAGE>   1
                                                                   EXHIBIT 10.36



                                    SUBLEASE

                                 BY AND BETWEEN


                                   FADCO, LLC,
                      A DELAWARE LIMITED LIABILITY COMPANY


                                  "SUBLANDLORD"

                                       AND

                                G.I. JOE'S, INC.,
                              AN OREGON CORPORATION

                                   "SUBTENANT"


                                       AT


                          JAMES VILLAGE SHOPPING CENTER
                               LYNWOOD, WASHINGTON



<PAGE>   2

<TABLE>
<S>                                                                          <C>
 RECITALS ..................................................................   1

 1.     FUNDAMENTAL LEASE PROVISIONS .......................................   2

 2.     SUBLEASE ...........................................................   4

 3.     TERM; CONDITION. ...................................................   9

 4.     RENT. ..............................................................  11

 5.     CONDITION OF PREMISES; CONSTRUCTION; OPENING. ......................  12

 6.     USE OF PREMISES. ...................................................  15

 7.     COMMON AREAS. ......................................................  18

 8.     TAXES. .............................................................  19

 9.     UTILITIES. .........................................................  19

 10.    MAINTENANCE AND REPAIR; ALTERATIONS. ...............................  20

 11.    INSURANCE, WAIVERS, MDEMNIFICATION. ................................  21

 12.    DAMAGE AND DESTRUCTION, CONDEMNATION ...............................  24

 13.    ASSIGNMENT AND SUBLEASE. ...........................................  25

 14.    DEFAULT. ...........................................................  27

 15.    LIMITATION OF LIABILITY. ...........................................  32

 16.    SUBLANDLORD'S ENTRY ON PREMISES. ...................................  32

 17.    SUBORDINATION. .....................................................  33

 18.    WAIVER. ............................................................  34

 19.    SALE OR TRANSFER OF PREMISES. ......................................  34

 20.    SURRENDER OF PREMISES. .............................................  35

 21.    HOLDING OVER. ......................................................  35

 22.    ESTOPPEL CERTIFICATES; FINANCIALS. .................................  35

 23.    DEFINITIONS. .......................................................  36
</TABLE>

<PAGE>   3

<TABLE>
<S>                                                                          <C>
 24.    MISCELLANEOUS. .....................................................  38
</TABLE>


<PAGE>   4
                                    SUBLEASE

        THIS SUBLEASE ("Sublease") is entered into as of this ____ day of
________, 19_ (the "Execution Date"), between FADCO, LLC, a Delaware limited
liability company ("Sublandlord) and G.I. JOE'S, INC., an Oregon corporation
("Subtenant").

                                    RECITALS

        A. Sublandlord shall be the successor tenant under a certain Lease
Agreement dated April 25, 1990 (the "Original Prime Lease") between James
Village Lynnwood, Inc., a Washington corporation, successor-in-interest to
Pacific Coast Properties, Inc., a Washington corporation, as landlord ("Prime
Landlord"), and Ernst Home Center, Inc., a Washington corporation, as tenant
("Prime Tenant") under which Prime Landlord leased to Prime Tenant certain real
property and improvements located in the James Village Shopping Center (the
"Shopping Center"), in the City of Lynnwood, County of Snonomish, State of
Washington, and legally described in Exhibit A of the Original Prime Lease. The
Original Prime Lease has been modified by that First Amendment to Lease
Agreement dated June 8, 1990, that Second Amendment to Lease Agreement dated
June 14, 1991, and that Third Amendment to Lease Agreement March 27, 1992 (the
"Prime Lease Amendments"). The Original Prime Lease and the Prime Lease
Amendments are collectively referred to herein as the "Prime Lease" and are
attached hereto as Exhibit A; the premises leased thereunder are referred to
herein as the "Master Premises." Except as otherwise provided, defined terms
herein shall have the same meaning as such terms under the Prime Lease.

        B. Upon entry of the Court Order (as defined in Paragraph 33(b)(1)
below) and the recordation of that certain Assumption and Assignment of Lease
referenced therein, all right, title and interest of the Prime Tenant under the
Prime Lease will be assigned to Sublandlord.

        C. Pursuant to the terms and conditions of this Sublease, Sublandlord
desires to sublease to Subtenant and Subtenant wishes to sublease from
Sublandlord (1) the land and the approximately Forty-Five Thousand and
Eighty-Two (45,082) square foot building (the "Original Building"), and (2) the
approximately Seventeen Thousand Seventeen (17,017) square foot outside area
adjacent thereto (the "Original Outside Area"). Subtenant intends to construct
upon Seven Thousand Seven Hundred and Sixty-Eight (7,768) square feet of the
Original Outside Area an expansion of the Original Building, whereupon there
shall be Fifty-Two Thousand Eight Hundred and Fifty (52,850) square feet of
building (the "Building") and Nine 


                                                                          PAGE 1


<PAGE>   5
Thousand Two Hundred and Forty-Nine (9,249) square feet of outside area (the
"Outside Area"). Such Building and Outside Area are collectively referred to
herein as the "Demised Premises." The Demised Premises are more particularly
depicted on Exhibit B (the "Site Plan") attached hereto and made a part hereof.

        D. This Sublease selectively incorporates provisions of the Prime Lease.
Where a particular provision of the Prime Lease is "incorporated and made a part
hereof', or words of similar import, that Prime Lease provision, as amended by
any amendments thereto, becomes a part of this Sublease as though it were fully
set forth in the body of this Sublease, but with the references therein to
"Landlord" and "Tenant" referring instead to Sublandlord and Subtenant,
respectively (unless otherwise stated), the references to the "Leased Premises"
referring to the Demised Premises and the references therein to "Lease"
referring instead to this Sublease. Any terms or words in Prime Lease paragraphs
which are incorporated into this Sublease shall have the same meaning as those
terms and words in the Prime Lease and an interpretation of the meaning of such
terms or words under the Prime Lease shall be binding upon Sublessor and
Sublessee under this Sublease.

        NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and Valuable consideration, the parties do hereby for
themselves and their successors and assigns, covenant and agree as follows:

1.      FUNDAMENTAL LEASE PROVISIONS

        The following Fundamental Lease Provisions constitute an integral part
of this Sublease, and each reference herein to the Fundamental Lease Provisions
shall mean the provisions set forth in this Section 1. In the event of any
conflict between the Fundamental Lease Provisions and the remainder of the
Sublease, the latter shall control.


<TABLE>
<S>                                           <C>
        Address of Sublandlord:               FADCO, LLC
                                              3236 Stone Valley Road West, Suite 230
                                              Alamo, CA 94507
                                              Attn:  Donald F. Gaube
                                              Telephone:  (510) 838-0604
                                              Facsimile:  (510) 838-0851
        Copy to:                              Farallon Capital Management, LLC
                                              One Maritime Plaza, Suite 1325
                                              San Francisco, CA  94111
                                              Attn:  Stephen L. Millham
</TABLE>


                                                                          PAGE 2


<PAGE>   6
<TABLE>
<S>                                           <C>
                                              Telephone:  (415) 421-2132
                                              Facsimile:  (415) 421-2133
        Address of Subtenant:                 G.I.JOE'S, INC.
                                              9805 Boeckman Road
                                              Wilsonville, OR 97070
                                              Telephone: (503) 682-2242
        Address of Demised Premises           19310 60th Avenue SW
        (excluding Garden Area):              Lynnwood, WA 98036
        Demised Premises Floor Area:          Approximately 52,850 square feet
        Permitted Use of Demised Premises:    Subject to the provisions  of Section 6.2, for the
                                              sale at retail of (i) sporting and outdoor goods and
                                              equipment (including recreational boats and boat
                                              trailers, and, to the extent and in the manner
                                              required by Law, firearms and related equipment and
                                              supplies), and outdoor, sports and athletic apparel
                                              and footwear; (ii) aftermarket parts, supplies, and
                                              related accessories for automobiles, recreational
                                              vehicles and trucks, and, as incidental thereto, the
                                              installation of automotive and marine accessories,
                                              including, without limitation, batteries, luggage
                                              racks, and boat trailer accessories (such as trailer
                                              tires) only within the boundaries of the Demised
                                              Premises, and vehicles, trailers, and other items on
                                              which such installations are to occur are not to be
                                              parked overnight in the Common Area; and (iii) the
                                              sale at retail, in no more than 2,500 square feet of
                                              the sales area in the Demised Premises, of portable
                                              electronic, cellular and other communications, audio
                                              and video equipment and accessories.
        Primary Term:                         Commencing on the Commencement Date and ending on the
                                              earlier of (i) the twelfth (12th) anniversary of the
                                              Commencement Date or April 10, 2011.
        Option to Extend:                     Four (4) at five (5) years each and, if applicable,
                                              one (1) Additional Option.
        Actual Commencement Date:             _____________, 199__.
        Commencement Date:                    The date of Sublandlord's delivery of sole and
</TABLE>


                                                                          PAGE 3


<PAGE>   7
<TABLE>
<S>                                           <C>
                                              exclusive possession of the Demised Premises to
                                              Subtenant.
        Scheduled Commencement Date:          August 1, 1998.
        Rent Commencement Date:               The earlier of (i) the date Subtenant opens for
                                              business in the Demised Premises or (ii) ninety (90)
                                              days after the Commencement Date.
        Minimum Monthly Rent:                 Period Minimum Monthly Rent
                                              Rent Commencement Date
                                              ("RCD") [or Revised Rent Commencement Date, if
                                              applicable] through the day
                                              immediately preceding the fifth
                                              (5th) anniversary of the RCD. The
                                              fifth (5th) anniversary of the RCD
                                              through the day immediately
                                              preceding the tenth (10th)
                                              anniversary of the RCD. The tenth
                                              (10th) anniversary of the RCD
                                              through the end of the Primary
                                              Term. $63,948.50 Additional Option
                                              $63,948.50 First Five-Year Option
                                              $70,334.54 Second Five-Year Option
                                              $77,381.21 Third Five-Year Option
                                              $85,132.54 Fourth Five-Year Option
                                              $93,632.58
        Percentage Rent:                      See Section 4.2
        Subtenant's Percentage Share:         100%
        Security Deposit:                     None
        Subtenant's Minimum Liability         $2,000,000
        Insurance:
        Definitions:                          Unless otherwise provided, those terms set forth in
                                              Section 23 below.
</TABLE>


2.      SUBLEASE

        2.1 Demise.


                                                                          PAGE 4


<PAGE>   8
               (a) In consideration of the rents to be paid and the covenants
and agreements to be performed and observed by Subtenant, Sublandlord hereby
subleases to Subtenant, and Subtenant hereby subleases and hires from
Sublandlord, the Demised Premises.

               (b) Sublandlord shall have, and hereby reserves the right, to
locate, both vertically and horizontally, install, maintain, use, repair and
replace, pipes, utility lines, ducts, conduits, flues, refrigerant lines,
drains, sprinkler mains and valves, access panels, wires and structural elements
leading through the Demised Premises to and from the remainder of the Master
Premises and/or the Common Area in locations which will not materially interfere
with Subtenant's use of the Demised Premises.

               (c) At anytime within one (1) year after the completion of
Tenant's Work, Sublandlord may measure the Floor Area of the Demised Premises to
determine the correct dimensions. If Sublandlord's measurements reveal a Floor
Area which is different from fifty-two thousand eight and fifty (52,850) square
feet or an Outside Area with dimensions other than nine thousand two hundred
forty nine (9,249) square feet, Subtenant shall have the right to dispute
Sublandlord's measurement, in which event either (a) Sublandlord and Subtenant
shall mutually agree on the Floor Area of the Building and the dimensions of the
Outside Area, or (b) Sublandlord and Subtenant shall agree to have such spaces
measured by an independent architect mutually acceptable to Sublandlord and
Subtenant, at Subtenant's expense, in which event Sublandlord and Subtenant
agree to abide by such measurement. Upon the determination of the actual Floor
Area of the Building and the dimensions of the Outside Area, the Minimum Monthly
Rent, Subtenant's Percentage Share, and all charges payable by Subtenant
hereunder which are based on the Floor Area of the Building shall be adjusted to
reflect the actual Floor Area of the Building and the dimensions of the Outside
Area. If neither Sublandlord nor Subtenant causes its architect to measure the
Building in accordance with this Paragraph 2. 1 (c), the parties shall be deemed
to have accepted the size of the Building as fifty-two thousand eight hundred
fifty (52,850) square feet of Floor Area and the dimensions of the Outside Area
as nine thousand two hundred forty nine (9,249) square feet.

        2.2 Prime Lease.

               (a) Subtenant acknowledges that Subtenant's rights to the Demised
Premises are subject to and subordinate to the Prime Lease and those various
covenants, conditions and restrictions, easements and other matters of record
affecting the Prime Lease, Demised Premises and other parts of the Shopping
Center as fisted 


                                                                          PAGE 5


<PAGE>   9
on Exhibit C (the "Permitted Exceptions"). Accordingly, if the Prime Lease
terminates then this Sublease shall terminate (except as otherwise provided in
any agreement between Prime Landlord and Subtenant) and Sublandlord shall have
no liability therefor, unless such termination occurs because of a breach of
Sublandlord's obligations under this Sublease. If the Prime Lease terminates
because of any default by Sublandlord thereunder, Subtenant shall, at the
election of the Prime Landlord, attorn to and recognize Prime Landlord as
Sublandlord under this Sublease; provided that Prime Landlord has executed, no
later than one (1) month after the Execution Date, a nondisturbance agreement in
form and substance reasonably acceptable to Subtenant.

               (b) Except as expressly provided herein, if Subtenant desires to
take any action, and the Prime Lease would require that Sublandlord obtain Prime
Landlord's consent before undertaking any such action, Subtenant shall not
undertake the same without Prime Landlord's prior written consent, provided,
that upon Subtenant's request, Sublandlord shall diligently and promptly use its
reasonable efforts to obtain Prime Landlord's consent to any such action.

               (c) Sublandlord shall pay each installment of minimum rental and
any other sum when the same is due and payable under the terms of the Prime
Lease and will duly observe and perform every term and condition of the Prime
Lease to the extent that such term and condition is not provided in this
Sublease to be observed or performed by Subtenant, except to the extent that any
failure to so pay or to observe or perform shall have resulted, directly or
indirectly, from any default by Subtenant hereunder (including, without
limitation, the failure of Subtenant to pay any amount of the Minimum Monthly
Rent or Additional Rent due hereunder). Sublandlord shall provide Subtenant with
a copy of any notice given to Sublandlord by Prime Landlord under the Prime
Lease, such notice to be delivered within two (2) business days after
Sublandlord's receipt of such notice. Sublandlord will also give Subtenant a
copy of any notice given by Sublandlord to Prime Landlord under the Prime Lease
concurrently with the delivery of such notice to Prime Landlord.

               (d) At any time and from time to time, Subtenant may, but shall
not be oblige to, make any payment or take any action necessary to cure a
default by Sublandlord under the Lease provided Subtenant has notified
Sublandlord in writing that Subtenant elects to cure default and within two (2)
days after Sublandlord's receipt of such notice, with respect to a monetary
default, and ten (10) days after Sublandlord's receipt of such notice, with
respect to all other defaults, Sublandlord has not either cured such default or
provided evidence reasonably acceptable to subtenant that such default will be
cured before the expiration of the applicable cure period. In the event
Subtenant elects to cure such default as permitted 


                                                                          PAGE 6


<PAGE>   10
herein, the amount of any such payment or the cost of any such action which is
paid or incurred by Subtenant in good faith, including reasonable attorney's
fees, shall be treated as a sum of money advanced by Subtenant to Sublandlord
and shall be repayable by Sublandlord to Subtenant on demand provided Subtenant
has delivered to Sublandlord with such demand a written accounting setting forth
the itemized amounts expended by Subtenant accompanied by copies of actual
supporting invoices documenting the cost, fees and expenses incurred.

               (e) Subtenant acknowledges that (i) except as expressly provided
in this Sublease, Sublandlord (x) does not assume and shall not have any of the
obligations or liabilities of the Prime Landlord under the Prime Lease and (y)
is not making the representations or warranties, if any, made by the Prime
Landlord in the Prime Lease, and (ii) Sublandlord's ability to satisfy certain
of its duties and obligations under this Sublease are conditioned upon the full
and timely performance of the Prime Landlord's obligations under the Prime Lease
and Sublandlord is unwilling to accept any liability whatsoever to Subtenant or
any diminution in its rights under this Sublease as a consequence of Prime
Landlord's failure to perform under the Prime Lease except to the extent
Sublandlord's failure inhibits or prohibits the performance of Subtenant's
obligations or rights hereunder. Notwithstanding the foregoing, if Prime
Landlord defaults on the performance or observance of any of Prime Landlord's
obligations under the Prime Lease, Sublandlord shall, at Sublandlord's election,
(a) make demand of Prime Landlord to obtain performance of Prime Landlord's
obligations (which performance shall be at Sublandlord's reasonable cost and
expense), and if requested in writing by Subtenant, commence and prosecute legal
proceedings (also at Sublandlord's cost and expense) in the name of Sublandlord
or otherwise against Prime Landlord with counsel reasonably satisfactory to
Subtenant and/or (b) assign to Subtenant all of Sublandlord's rights and
benefits under the Prime Lease which are assignable under the Prime Lease or
otherwise to enforce, at Subtenants reasonable cost and expense (subject however
to reimbursement if Sublandlord is entitled to and obtains reimbursement
therefor from Prime Landlord under the terms of the Prime Lease), the
obligations of Prime Landlord under the Prime Lease to the extent necessary to
cause Prime Landlord to cure such default. Notwithstanding clause (b) of the
immediately preceding sentence, Subtenant shall not have the right to terminate
the Prime Lease. Sublandlord and Subtenant agree to discuss such enforcement
proceedings with one another, in good faith, but such proceeding shall be
approved by Sublandlord, which approval shall not be unreasonably withheld,
conditioned or delayed. Any amount of recovery obtained by Subtenant, if
Subtenant enforces Sublandlord's rights under clause (b) of the first sentence
of this subparagraph (e), shall be the property of Subtenant to the extent that
such recovery pertains solely to the Demised Premises.


                                                                          PAGE 7


<PAGE>   11
               (f) Sublandlord shall not modify the Prime Lease or consent to
the modification or creation of any Permitted Exception in any respect which
adversely affects Subtenant, this Sublease or the Demised Premises, or surrender
the Prime Lease, without the prior written consent of Subtenant, which consent
may be granted or withheld in Subtenant's reasonable discretion, and any such
modification or surrender made without such consent shall be null and void and
shall have no effect on the rights of Subtenant under this Sublease. Sublandlord
agrees that if pursuant to the terms of the Prime Lease or otherwise,
Sublandlord shall have the right to cancel or terminate the Prime Lease, then
Sublandlord shall only exercise such rights in accordance with, and only in
accordance with, the written direction of Subtenant.

               (g) Subtenant hereby assumes and agrees to perform for the
benefit of Sublandlord and Prime Landlord, each and every present and future
obligation and duty of Sublandlord under the Prime Lease and the Permitted
Exceptions, as amended with respect to the Demised Premises in accordance with
subparagraph 2.2(f) above, except as follows: (a) Sublandlord, not Subtenant,
shall be responsible for paying minimum rental due under the Prime Lease to
Prime Landlord; and (b) to the extent said obligations or duties arise or relate
to a period (i) after the Term and not in connection with acts or omissions
during the Term; or (ii) before the Execution Date. Subtenant shall not do,
suffer or permit anything to be done which could result in a default under the
Prime Lease or could result in the cancellation or termination of the Prime
Lease. Subtenant shall indemnify, defend and hold harmless Sublandlord from and
against all Claims imposed upon or incurred by or assessed against Sublandlord
by reason of any violation or breach of this Sublease by Subtenant or any of its
Authorized Representatives which has resulted, directly or indirectly, in a
breach of the Prime Lease. Sublandlord shall indemnify, defend and hold harmless
Subtenant from and against all Claims imposed upon or incurred by or assessed
against Subtenant by reason of any violation or breach of this Sublease by
Sublandlord or any of its Authorized Representatives which has resulted,
directly or indirectly, in a breach of the Prime Lease.

        2.3 Sublandlord's Representations and Warranties. As of the Execution
Date, Sublandlord represents and warrants to Subtenant as follows:

               (a) Attached hereto as Exhibit A is a true, correct and complete
copy of the Prime Lease; the Prime Lease is in full force and effect and neither
Prime Landlord nor Sublandlord, to Sublandlord's actual knowledge, is in default
of any of their respective obligations under the Prime Lease.

               (b) Sublandlord has no actual knowledge of any pending or
threatened condemnation or eminent domain proceedings with respect to the Master


                                                                          PAGE 8


<PAGE>   12
Premises. Sublandlord has no actual knowledge that the Master Premises are in
violation of Law, including any Laws relating to Hazardous Substances in, on or
about the Master Premises.

               (c) To Sublandlord's actual knowledge, there is no Hazardous
Substance in, on or about the Master Premises, except as otherwise disclosed in
the Environmental Site Assessment.

               (d) Subject to the receipt of the Prime Landlord's consent and
the entry of the Court Order and said order becoming final and non-appealable
(i) the execution and performance of this Sublease by Sublandlord will not
violate or cause a default under any agreement, instrument, or other transaction
to which Sublandlord is a party or by which Sublandlord and/or the Master
Premises are bound and (ii) Sublandlord has full right and power to execute and
perform this Sublease and to grant the estate demised herein.

               (e) To Sublandlord's actual knowledge, attached hereto as Exhibit
C is a true and complete list of all Permitted Exceptions.

3.      TERM; CONDITION.

        3.1 Period. The primary term of this Sublease (the "Primary Term") shall
be for the period specified in the Fundamental Lease Provisions, unless sooner
terminated pursuant to other provisions hereof.

        3.2 Extension Options.

               (a) Except as set forth in subparagraph 3.2(b) below, Sublandlord
hereby grants to Subtenant four (4) successive options to extend the Primary
Term for additional consecutive periods of five (5) years each, commencing on
the expiration of the Primary Term or the immediately preceding option term, as
the case may be, subject to all of the provisions of this Sublease (the "Option
Term). Subtenant may exercise its option to so extend the Term only by
delivering written notice to Sublandlord of Subtenant's election to so extend
the Term (an "Extension Option Notice"), no later than two hundred seventy (270)
days and no earlier than eighteen (18) months prior to the expiration of the
Primary Term or the then current option period. Notwithstanding anything to the
contrary herein, Subtenant's exercise of an option shall be null and void if at
the time of the exercise of such option or the commencement of such option term,
Subtenant is in material default under this Sublease after notice and the lapse
of any cure period. Further, Subtenant's right to exercise an option shall be
conditioned upon Subtenant's exercise of all prior options. All references in
this Sublease to "Term" shall mean the Primary Term and, upon the 


                                                                          PAGE 9


<PAGE>   13
exercise of any option pursuant to this Paragraph 3.2, the Primary Term as
extended by any such option.

               (b) Notwithstanding anything to the contrary set forth herein, if
the Primary Term ends prior to April 10, 2011, then Subtenant shall have an
additional option ("Additional Option") to extend the Primary Term for the
period from the end of the Primary Term to and including April 10, 2011. Such
option shall be exercised prior to any other option set forth in Section 3.2(a)
above and shall be exercised in accordance with the terms of Section 3.2 (a)
above.

        3.3 Conditions Precedent to Obligations. The obligations of the parties
under this Sublease are expressly conditioned upon the fulfillment of each and
all of the conditions precedent set forth in this Paragraph 3.3 within sixty
(60) days after the Execution Date (or such other period as may be expressly
provided). If any condition remains unsatisfied following the expiration of the
applicable period, then the party for whose benefit such condition is imposed
shall have the right to terminate this Sublease by written notice to the other
party, delivered to such other party within five (5) days after the expiration
of the applicable period, provided the condition giving rise to such termination
has not failed to occur because of a breach of this Sublease by the terminating
party.

               (a) For Subtenant's benefit,

               (i) Subtenant's receipt from First American Title Insurance
Company of a Commitment to issue a Leasehold Owner's Policy of Title Insurance
(which policy shall be paid for 15y Sublandlord) in the amount of Five Hundred
Thousand Dollars ($500,000.00) insuring Subtenant's interest in the Demised
Premises, subject only to the standard general exceptions required by the title
company and the Permitted Exceptions; and

               (ii) For Subtenant's benefit, the receipt of a fully executed and
acknowledged nondisturbance, estoppel and attornment agreement in the form
attached as Exhibit D from the Prime Landlord.

               (b) For the benefit of both Sublandlord and Subtenant,

               (1) the entry on or before the Commencement Date of a Stipulated
Order by the United States Bankruptcy Court, Western District of Washington at
Seattle (Action No. 96-10129) (the "Court Order") in substantially the same form
as Exhibit E attached hereto and made a part hereof Subtenant acknowledges that
while Sublandlord shall use reasonable efforts to effect such Court Order, entry
of the Court Order is conditioned upon various events outside 


                                                                         PAGE 10


<PAGE>   14
Sublandlord's reasonable control and Sublandlord shall have no liability to
Subtenant hereunder in the event such Court Order is not entered for any reason
other than a breach of the Court Order by Sublandlord.

               (2) the Actual Commencement Date has occurred on or before March
1, 1999.

        3.4 Commencement of Term. Sublandlord shall use its reasonable best
efforts to cause the Commencement Date to occur on or before the Scheduled
Commencement Date specified in the Fundamental Lease Provisions. However, this
Sublease shall not be void or voidable, nor shall Sublandlord or its Authorized
Representatives have any liability to Subtenant, by reason of Sublandlord's
failure to deliver the Demised Premises by the Scheduled Commencement Date
specified in the Fundamental Lease Provisions. Postponement of Subtenant's
rental obligation before delivery of possession of the Demised Premises shall be
Subtenants exclusive remedy and in sole satisfaction of all claims Subtenant
might otherwise have by reason of Sublandlord's failure to deliver the Demised
Premises by the Scheduled Commencement Date. Once the Commencement Date is
determined, Sublandlord shall confirm such Commencement Date by written notice
to Subtenant, and Sublandlord is hereby authorized by Subtenant to insert in the
Fundamental Lease Provision the Actual Commencement Date.

4.      RENT.

        4.1 Minimum Monthly Rent.

               (a) Subtenant shall pay to Sublandlord as minimum monthly rent
during the Term, without deduction, setoff, prior notice or demand, the sum
specified in the Fundamental Lease Provisions, in advance, on the first day of
each month commencing on the Rent Commencement Date ("Minimum Monthly Rent").
Minimum Monthly Rent for the first month shall be paid on the Rent Commencement
Date even if such date is not the first day of a month. Minimum Monthly Rent for
any partial month shall be prorated at the rate of 1/30th of the Minimum Monthly
Rent per day. All rent shall be paid to Sublandlord at the address to which
notices to Sublandlord are given.

               (b) Notwithstanding anything to the contrary set forth in this
Sublease, Sublandlord shall have the right, at Sublandlord's option to be
exercised in Sublandlord's sole discretion, upon written notice to Subtenant
("Sublandlord's Rent Notice'), to require Subtenant to commence paying Minimum
Monthly Rent prior to the Rent Commencement Date, commencing on the date set
forth in Sublandlord's Rent Notice, but in no event prior to the first day of
the calendar month immediately 


                                                                         PAGE 11


<PAGE>   15
subsequent to the date of Sublandlord's Rent Notice. Subtenant shall thereupon
commence paying Minimum Monthly Rent on such revised date ("Revised Rent
Commencement Date"). In consideration thereof, the Construction Allowance shall
be increased By the additional amount of Minimum Monthly Rent ("Increased
Allowance") payable by Subtenant for the period between the Revised Rent
Commencement Date and the Rent Commencement Date. Sublandlord shall pay such
Increased Allowance to Subtenant simultaneously with the Sub landlord's Rent
Notice.

        4.2 Percentage Rental. In addition to the Minimum Monthly Rent,
Subtenant shall pay to Sublandlord a "Percentage Rental" in accordance with
Paragraph 3 of the Second Article of the Prime Lease. Paragraph 3 of the Second
Article of the Prime Lease is incorporated herein Subtenant shall deliver to
Sublandlord a statement certified by Subtenant to be correct showing the total
gross sales by calendar months during such Lease Year, together with any
Percentage Rental which is due for such period. The certified statement shall be
delivered, and the Percentage Rental shall be payable and delivered, to
Sublandlord at the place and in the manner specified in Paragraph 4.1 but at
least five (5) days before the date that Sublandlord is required to deliver
Percentage Rental and such a statement to the Prime Landlord under the Prime
Lease. Paragraph 5 of the Second Article of the Prime Lease is incorporated
herein and made a part of this Sublease.

5.      CONDITION OF PREMISES; CONSTRUCTION; OPENING.

        5.1 Acceptance By Subtenant. Subtenant shall accept possession of the
Demised Premises, in an "as is" condition with "all faults" as to all matters,
including the following: physical condition; size or dimensions of the Demised
Premises (subject to Section 2.1(c)); feasibility, desirability or
convertibility of the Demised Premises into any particular use; and the zoning,
building and land use restrictions applicable to the Demised Premises. Subtenant
acknowledges and agrees that Subtenant has conducted its own due diligence
regarding the Demised Premises and that there have been no representations,
warranties or promises to Subtenant by Sublandlord, or its Authorized
Representatives, with respect to the same.

        5.2 Subtenant's Work. Upon the Commencement Date Subtenant shall
commence and thereafter diligently prosecute to completion Subtenant's Work in
accordance with Exhibit F attached hereto and made a part hereof and the
Construction Provisions attached hereto and made a part hereof as Exhibit H.
Subtenant shall substantially complete Subtenant's Work on or before ninety (90)
days after the Commencement Date. Subtenant shall be responsible for applying
for and obtaining all permits and government approvals that may be needed to
permit 


                                                                         PAGE 12


<PAGE>   16
Subtenant to construct the Subtenant's Work and to occupy and use the Demised
Premises for the Permitted Use.

        Subtenant's Work shall be constructed at Subtenant's sole cost and
expense, subject to the Construction Allowance pursuant to Paragraph 5.4 below.

        5.3 Opening Date. Subtenant shall initially open for business to the
public from the Demised Premises no later than March 1, 1999.

        5.4 Construction Allowance.

               (a) Sublandlord shall furnish Subtenant a construction allowance
for S at the Demised Premises of Five Hundred Thousand and no/100 Dollars
($500,000) ("Allowance") provided that in no event shall the Construction
Allowance exceed the actual cost of the improvement work by Subtenant at the
Demised Premises.

               (b) In accordance with the provisions of subparagraph 5.4 (c)
below, Subtenant shall from time to time during the course of construction of
Subtenant's Work, but not more frequently dm once per month, submit to
Sublandlord an application for payment of a portion of the Construction
Allowance (an "Application for Payment") setting forth the amount of all costs
and expenses which have been incurred to the date of such statement in respect
of the actual costs of Subtenant's Work (excluding amounts previously reimbursed
to Subtenant or otherwise paid by Sublandlord pursuant to previous statements),
in form reasonably satisfactory to Sublandlord, together with the following
(herein called "Draw Documents"): (i) an appropriate sworn contractor's
statement; (ii) appropriate waivers of lien and affidavits (both the form and
content of such waivers of hen and affidavits shall be subject to the reasonable
approval of Sublandlord); and (iii) for the last draw only, a certificate of
substantial completion by Subtenant's architect certifying that Subtenant's Work
has been substantially completed in accordance with the Final Plans. Sublandlord
shall cause to be paid to Subtenant or, if direct payment is to be made, the
appropriate contractors, the full amount shown on the Draw Documents within
thirty (30) days after Sublandlord's receipt thereof; provided, (i) the Draw
Documents are complete (and, if the Draw Documents are not complete, payment
shall be made for such portion as is supported by complete Draw Documents), (ii)
Sublandlord has approved the same, such approval not be unreasonably withheld,
delayed or denied, and (iii) Subtenant is not in default of the Sublease.
Sublandlord reserves the right, for reasonable cause, to make or cause to be
made direct payments to contractors from time to time rather than by making
payment or causing payments to be made by reimbursement of Subtenant. A final
disbursement (to recover final 


                                                                         PAGE 13


<PAGE>   17
payment, including retainage) shall be made by Sublandlord upon the satisfaction
of the requirements of Subparagraph 5.4(c) below, upon the issuance of a
certificate of occupancy (in form and substance satisfactory to Sublandlord)
issued by the applicable governmental authorities, upon Subtenant having opened
for business in the Demised Premises, upon Subtenant not being in default of the
Sublease, and upon the delivery to Sublandlord of a reproducible copy of "as
built" plans and specifications for Subtenant's Work in the Demised Premises
prepared and certified by Subtenant's architect. Such final disbursement shall
be made within thirty (30) days after all of said requirements have been
satisfied, provided that Subtenant is not in default under the Sublease on the
date of such disbursement.

               (c) Tenant shall deliver to Sublandlord a request for
disbursement which will include the following:

        1. An Application for Payment, in triplicate using AIA Form G702
        prepared by Subtenant's general contractor and approved in writing by
        Subtenant and Subtenant's architect or, with respect to work not
        performed under the general contract, prepared by Subtenant and approved
        by Subtenant's architect, showing in complete detail the total amount
        due for the contract, the amounts due for work completed at the job site
        through the twenty-fifth (25th) day of the preceding calendar month and
        for which payment is requested, and the balance due to complete the
        contract. Each Application for Payment shall provide for a 10% retainage
        (including 10% retainage on amounts due the general contractor
        thereunder) up to an amount equal to said retainage to be withheld until
        final payment is made. Notwithstanding the foregoing, retainage for any
        subcontractor may be reduced to five (5%) percent at such time as
        Subtenant has verified that ninety (90%) percent of its work has been
        completed, and all retainage to such subcontractor may be paid within
        thirty (30) days after Subtenant's acceptance of such subcontractor's
        work provided Subtenant's architect has certified completion and
        appropriate waivers of lien have been provided. Each Application for
        Payment (including final payment) shall be in such form and detail and
        supported by such evidence of (and representations and/or certifications
        with respect to) its correctness and of Subtenant's or the general
        contractor's right to payment as the Sublandlord may reasonably require.
        Each Application for Payment (including final payment) shall be
        accompanied by the Draw Documents and by supporting waivers of lien, a
        general contractor's sworn statement (all in form and substance
        satisfactory to Sublandlord), and such other releases, receipts,
        affidavits, and other documents (including, without limitation, waivers
        of lien and 


                                                                         PAGE 14


<PAGE>   18
        sworn statements from subcontractors, materialmen and suppliers making
        application for payment through the general contractor) as Sublandlord,
        and/or Sublandlord's lender, if any, shall reasonably require.

        2. A certificate of substantial completion for work done to date issued
        by Subtenant's architect for the benefit of Sublandlord, Sublandlord's
        lender, if any, and Subtenant, together with such other certifications
        from Subtenant's architect as Sublandlord and Sublandlord's mortgagee,
        if any, may reasonably require.

        3. A certificate executed by Subtenant to the effect that (i) all sums
        being requested for disbursement are properly due and owing for actual
        costs of Subtenant's Work, and (ii) all conditions and requirements for
        such disbursement provided for herein have been satisfied.

               (d) Subtenant will keep accurate books of account showing all
actual costs of Subtenant's Work incurred hereunder, which books of account and
all supporting data shall at all reasonable times be open for inspection by
Sublandlord and its Authorized Representatives, and shall be retained and
available for reference for a period of at least two (2) years after the
Subtenant's Work has been completed.

               (e) Without limitation to any other rights or remedies
Sublandlord may have on account thereof, if at the time Sublandlord is prepared
to pay all or any portion of the Construction Allowance, Subtenant owes
Sublandlord any sums under the Sublease, Sublandlord may, at its election, pay
the Construction Allowance but deduct therefrom the amount of any such sums owed
by Subtenant.

               (f) If the Term should end prior to the scheduled expiration date
due to a default by Subtenant; Subtenant shall pay Sublandlord, within sixty
(60) days after the effective date of the early termination, the unamortized
portion of the Construction Allowance, using a straight-line amortization over
the Term.

6.      USE OF PREMISES.

        6.1 Use. Subtenant shall use the Demised Premises solely for the use
specified in the Fundamental Lease Provisions and for no other use without
Sublandlord's prior consent, which consent shall not be unreasonably withheld
but shall be subject to the terms of the Prime Lease and to obtaining the prior
consent of the Prime Landlord.


                                                                         PAGE 15


<PAGE>   19
        6.2 Limitations on Use. Subtenant shall use the Demised Premises for the
purpose permitted by Paragraph 6.1 strictly in accordance with the following:

               (a) Cancellation of Insurance. Subtenant shall not do, bring, or
keep anything in or about the Demised Premises that will cause a cancellation of
any insurance covering the Demised Premises, provided that if Subtenant causes
insurance procured by Subtenant to be canceled, and if such cancellation was not
caused by the willful misconduct or gross negligence of Subtenant, Subtenant
shall not be in violation of this provision if Subtenant replaces such insurance
with comparable insurance within five (5) days after such cancellation.

               (b) Compliance with Laws. Subtenant shall comply with all Laws
concerning the Demised Premises or Subtenant's use of the Demised Premises,
including, without limitation, the obligation, at Subtenant's cost, to alter,
maintain, or restore the Demised Premises and all structural elements thereof
(but only to the extent the Prime Tenant under the Prime Lease is obligated to
alter, maintain or restore such structural elements under the Prime Lease) in
compliance with all Laws relating to the condition, use, or occupancy of the
Demised Premises during the Term.

               (c) Waste, Nuisance. Subtenant shall not use or permit the
Demised Premises to be used in any manner that will constitute waste, nuisance,
or unreasonable annoyance to other tenants in the Shopping Center (including,
without limitation, the use of loudspeakers or sound or light apparatus that can
be heard or seen outside the Demised Premises in more than a de minimis degree).
No machinery, apparatus, or other appliance shall be used or operated in or on
the Demised Premises that will in any manner injure, vibrate, shake, or
otherwise damage the Demised Premises and/or the Shopping Center.

               (d) Operations. Subtenant shall not use or permit the Demised
Premises to be used for any use which is excluded or prohibited in Paragraph 4
of the Sixth Article of the Prime Lease, as amended, including but not limited
to the prohibition of a use as an automotive maintenance or repair facility;
provided, however, that Subtenant shall be permitted to sell recreational boats
and boat trailers if such use is consented to in writing by Prime Landlord and
Albertson's, Inc. Subtenant shall not conduct or operate or permit to be
conducted or operated on the Demised Premises any secondhand store, auction,
distress or fire sale, or going-out-of-business sale, or continuous discount
operation.

        6.3 Hazardous Substances.

               (a) Reportable Uses Require Consent. Subtenant shall not engage
in any activity in, on or about the Demised Premises which constitutes a


                                                                         PAGE 16


<PAGE>   20
Reportable Use of Hazardous Substance without the express prior written consent
of Sublandlord and Prime Landlord and compliance in a timely manner (at
Subtenants sole cost and expense) with all applicable Laws. Notwithstanding the
foregoing, Subtenant may, without Sublandlord's prior consent but in compliance
with all applicable Laws, use any ordinary and customary materials reasonably
required to be used by Subtenant in the normal course of Subtenant's business
permitted in the Building, so long as such use is not a Reportable Use. In
addition, Sublandlord may (but without any obligation to do so) condition its
consent to the use or presence of any Hazardous Substance, activity or storage
tank by Subtenant upon Subtenant's giving Sublandlord such additional assurances
as Sublandlord, in its reasonable discretion, deems necessary to protect itself,
the public, the Demised Premises, the Shopping Center and the environment
against damage, contamination or injury and/or liability therefrom or therefor.

               (b) Duty to Inform. If Subtenant knows, or has reasonable cause
to believe, that a Hazardous Substance, or a condition involving or resulting
from same, has come to be located in, on, under or about the Demised Premises,
other than as previously consented to by Sublandlord, Subtenant shall
immediately give written notice of such fact to Sublandlord, Subtenant shall
also immediately give Sublandlord a copy of any statement, report, notice,
registration, application, permit, business plan, license, claim, action or
proceeding given to, or received from, any governmental authority or private
party, or persons entering or occupying the Demised Premises, concerning the
presence, spill, release, discharge of, or exposure to, any Hazardous Substance
or contamination in, on, or about the Demised Premises, including but not
limited to all such documents as may be involved in any Reportable Uses
involving the Demised Premises.

               (c) Indemnification. Subtenant shall indemnify, protect, defend
and hold Prime Landlord, Sublandlord, their Authorized Representatives and
lenders, harmless from and against any and all loss of rents, Claims and
penalties arising out of or involving any Hazardous Substance or storage tank
brought onto the Demised Premises, or the Shopping Center by or for Subtenant or
under Subtenant's control. Subtenant's obligations under this Paragraph 6.3
shall include, but not be limited to, the effects of any contamination or injury
to person, property or the environment created or suffered by Subtenant, and the
cost of investigation (including consultants and attorney's fees and testing),
removal, remediation, restoration and/or abatement thereof, or of any
contamination therein involved, and shall survive the expiration or earlier
termination of this Sublease. No termination, cancellation or release agreement
entered into by Sublandlord and Subtenant shall release Subtenant from its
obligations under this Sublease with respect to Hazardous Substances or 


                                                                         PAGE 17


<PAGE>   21
storage tanks brought onto the Demised Premises by Subtenant, unless
specifically so agreed by Sublandlord in writing at the time of such agreement.

        6.4 No Continuous Operation. Notwithstanding any other provision of this
Sublease, but subject to Subtenant's obligation to open the Demised Premises
pursuant to Paragraph 6.4, Subtenant does not covenant or agree to any
obligation to continuously use or operate the Demised Premises during the Term,
and nothing in this Sublease shall be deemed to impose any obligation of
continuous use or operation on Subtenant. If a retail business is not being
operated at the Demised Premises for a period of ninety (90) consecutive days or
more (excluding periods of damage or related repairs), then Sublandlord shall
have the right, but not the obligation, to terminate this Sublease upon delivery
of written notice to Subtenant ("Sublandlord Termination Notice"), provided said
notice is received by Subtenant prior to the recommencement of the operation of
a retail business. The termination shall be effective thirty (30) days after
receipt of Sublandlord's Termination Notice. Notwithstanding the foregoing,
Subtenant shall have the right to nullify Sublandlord's Termination Notice by
delivering written notice to Sublandlord ("Subtenant's Reopening Notice") within
fifteen (15) days after receipt of Sublandlord's Termination Notice that
Subtenant shall reopen for business and Subtenant in good faith does open the
Demised Premises for business to the public within ninety (90) days after the
delivery of Subtenant's Reopening Notice. This termination right shall not apply
during, or with respect to, times when the Demised Premises are untenantable by
reason of fire or other casualty.

        6.5 Signs. Subject to obtaining the prior consent of Prime Landlord
under the Prime Lease, Subtenant shall have the right to occupy the existing
Ernst position on each of the two pylon signs referred to in Paragraph 2 of the
Sixth Article of the Prime Lease, provided Subtenant pays to Prime Landlord the
rental required under Paragraph 2 of the Sixth Article of the Prime Lease.
Subject to the terms of the Prime Lease, Subtenant shall have the right to
maintain and/or replace any signs on the Demised Premises as Subtenant may
desire for the advertisement of its business. Notwithstanding the foregoing, all
of Subtenant's exterior signs shall be subject to Sublandlord's prior written
approval as to design, location, size and type, which approval shall not be
unreasonably withheld. During the Term, Subtenant shall not be required to
remove its sign unless required by Law or the Prime Lease or unless the same are
in need of repair or replacement. Subtenant shall maintain all such signs, at
Subtenants sole cost and expense, in good operating condition and repair and
shall remove all signs and appliques upon the expiration or sooner termination
of this Sublease, together with the repair of any damage caused thereby.


                                                                         PAGE 18


<PAGE>   22
7.      COMMON AREAS.

        7.1 Description of Common Areas. The term "Common Areas" means all are
facilities that are provided and designated under the Prime Lease for the
general use and convenience of Sublandlord, as the Prime Tenant, and other
tenants of the Shopping Center including, pedestrian walkways, parking areas,
driveways and roads.

        7.2 Subtenant's Right to Use. Subject to Paragraph 7.3, below, and the
terms of the Prime Lease, Sublandlord grants to Subtenant and its Authorized
Representatives those nonexclusive rights which are granted to Sublandlord under
the Prime Lease to use the Common Areas during the Term. In connection
therewith, the seventh sentence of the Sixteenth Article of the Prime Lease is
incorporated herein and made a part hereof. Sublandlord reserves to itself the
right to use the Common Areas, together with others who are entitled to use the
Common Areas, subject to the provisions of this Sublease. Subtenant shall keep
the Common Areas free and clear of any obstructions created or permitted by
Subtenant or resulting from Subtenant's operations.

        7.3 Maintenance and Management of Common Area. Subtenant acknowledges
that pursuant to the Fourth Article, Seventeenth Article and other Articles of
the Prime Lease, Prime Landlord has various duties and obligations to operate,
maintain, repair, insure and replace the Common Area and that Sublandlord has no
such duty or obligation under this Sublease. Subtenant shall pay to Sublandlord
Subtenant's Percentage Share of all costs and expenses incurred by or payable to
Prime Landlord under the Prime Lease to operate, maintain, repair, insure and
replace the Common Area to the extent that such costs are required to be paid by
Sublandlord as the Prime Tenant under the Prime Lease. Such costs shall be paid
by Subtenant to Sublandlord as and when such costs are required to be paid by
Sublandlord to Prime Landlord under the Prime Lease.

8.      TAXES.

        8.1 "Real Estate Taxes" Defined. The term "Real Estate Taxes" shall mean
all of those taxes, levies, assessments, charges or other similar costs required
to be paid by Sublandlord as the Prime Tenant under the Prime Lease, including
Section (2) of the Second Article thereof.

        8.2 Payment of Real Estate Taxes. Subtenant shall pay to Sublandlord
Subtenant's Percentage Share all Real Estate Taxes as and when such taxes are
required to be paid by Sublandlord to Prime Landlord under the Prime Lease.


                                                                         PAGE 19


<PAGE>   23
        8.3 Personal Property Taxes. Subtenant shall pay before delinquency all
taxes, assessments, license fees, and other charges (collectively, "Taxes") that
are levied or assessed against Subtenant during the Term, including, but not
limited to, Taxes levied or assessed against Subtenant's leasehold interest or
Subtenant's Personal Property, Alterations, Subtenant's Work, or Subtenant's
Trade Fixtures installed or located in or on the Demised Premises. On demand by
Sublandlord, Subtenant shall furnish Sublandlord with satisfactory evidence of
these payments.

9.      UTILITIES.

        Subtenant shall make all arrangements for and pay for all utilities and
services furnished to or used by it, including, without limitation, gas,
electricity, water, telephone service, and trash collection, and for all
connection charges. If the Demised Premises are not separately metered,
Subtenant shall pay a portion of such charges and fees to Sublandlord within ten
(10) days after Sublandlord has delivered notice to Subtenant specifying the
portion of such charges allocable to the Demised Premises. If any such charges
are not paid when due, Sublandlord may, after notice to Subtenant, pay the same,
and any amount so paid by Sublandlord shall thereupon become due to Sublandlord
from Subtenant as additional rent together with interest thereon at the Overdue
Rate. Sublandlord shall not be liable in damages or otherwise for any failure or
interruption of any utility service being furnished to the Demised Premises and
no such failure or interruption shall entitle Subtenant to an abatement of rent
or to terminate this Sublease. In the event of such interruption by the utility
service provider, Sublandlord shall, upon Subtenant's written request and
without additional cost to Sublandlord, cooperate with Subtenant in seeking from
the utility service provider restoration of the utility service.

10.     MAINTENANCE AND REPAIR; ALTERATIONS.

        10.1 Sublandlord's Obligations and Subtenant's Maintenance. Subtenant
hereby acknowledges and agrees that pursuant to the Fourth Article of the Prime
Lease Prime Landlord has no duties and obligations to maintain and repair any
part of the Demised Premises except as otherwise set forth in the Fourth Article
of the Prime Lease, and that any and all duties or obligations with respect
thereto as set forth in the Fourth and Fifth Articles of the Prime Lease shall
be undertaken by Subtenant.

        10.2 Construction of Alterations. Except as provided in Paragraph 5.2
above, Subtenant shall not make any Alterations to the Demised Premises without
Sublandlord's and Prime Landlord's prior written consent, which consent shall
not be unreasonably withheld, conditioned or delayed. Notwithstanding the
foregoing, Subtenant shall have the right (a) to place or install in the Demised
Premises such 


                                                                         PAGE 20


<PAGE>   24
fixtures and equipment as Subtenant shall deem desirable for the conduct of bus
therein and to select the paint color it desires for the interior of the Demised
Premises, and Prime Landlord so consents, to make such further Alterations as
Subtenant reasonably d necessary to operate the Demised Premises as a G. I.
Joe's store consistent with standards apply to other such stores in comparable
locations in the United States. Any such Alterations shall be performed in
accordance with the terms and conditions of Exhibit H. Any Alterations made
remain on and be surrendered with the Demised Premises on expiration or
termination of the Term, except that Sublandlord can elect, by delivery of
written notice, to require Subtenant to remove any Alterations that Subtenant
has made to the Demised Premises. If Sublandlord so elects, Subtenant at its
cost shall remove such Alterations and restore the Demised Premises to the
condition existing prior to such Alteration (but in all events a good condition)
before the last day of the Term. If Subtenant makes any Alterations to the
Demised Premises as provided in this paragraph, the Alterations shall not be
commenced until ten (10) business days after Sublandlord has received written
notice from Subtenant stating the date the installation of the Alterations is to
commence so that Sublandlord and Prime Landlord can post and record an
appropriate notice of nonresponsibility

        10.3 Mechanic's Liens. Subtenant shall pay all costs for construction
done by it or caused to be done by it on the Demised Premises as permitted by
this Sublease. Subtenant shall keep the Demised Premises, the Building and the
Shopping Center free and clear of all mechanics' liens or other liens resulting
from construction done by or for Subtenant. Subtenant shall have the right to
contest the correctness or the validity of any such lien if, immediately on
demand of Sublandlord, Subtenant procures and records a hen release bond issued
by a corporation authorized to issue surety bonds in the State of Washington in
an amount equal to one and one-half times the amount of the claim of lien. The
bond shall meet the requirements of any applicable Law and shall provide for the
payment of any sum that the claimant may recover on the claim (together with
costs of suit, if it recovers in the action).

11.     INSURANCE, WAIVERS, MDEMNIFICATION.

        11.1 Liability Insurance. Subtenant, at its cost, shall maintain
commercial general liability insurance and products liability insurance in the
minimum amount(s) specified in the Fundamental Lease Provisions, insuring
against all liability of Subtenant and its Authorized Representatives arising
out of and in connection with Subtenants use or occupancy of the Demised
Premises or the Shopping Center and the business conducted by Subtenant or any
other persons within the Demised Premises. Such insurance shall include a Broad
Form Contractual liability insurance coverage insuring performance by Subtenant
of the indemnity 


                                                                         PAGE 21


<PAGE>   25
provisions of Paragraph 11.7. All such policies shall be written to apply to all
bodily injury, property damage, personal injury and other covered loss, however
occasioned, occurring during the policy term. Such coverage shall also contain
endorsements: (i) deleting any employee exclusion on personal injury coverage;
(ii) including employees as additional insureds; (iii) deleting any liquor
liability exclusions; and (iv) providing for coverage of employer's automobile
non-ownership liability. All such insurance shall afford coverage for all claims
based on acts, omissions, injury and damage, which claims occurred or arose (or
the onset of which occurred or arose) in whole or in part during the policy
period. Subtenant shall also maintain Workers' Compensation and any other
insurance which may be required in accordance with applicable Law.

        11.2 Subtenant's Personal Property, Fire, and Plate Glass Insurance. At
all times during the Term, Subtenant, at its cost, shall maintain on all
Subtenant's Personal Property, Subtenant's Work and Alterations, in, on, or
about the Demised Premises, a policy of standard fire and extended coverage
insurance, with vandalism and malicious mischief endorsements, to the extent of
at least one hundred percent (100%) of their replacement value. The proceeds
from any such policy shall be used by Subtenant for the replacement of
Subtenant's Personal Property or the restoration of Subtenant's Work or
Alterations. Subtenant shall also, at its cost, maintain full coverage plate
glass insurance on the Demised Premises. Sublandlord, Prime Landlord and their
respective Mortgagees (as defined in Paragraph 14.5) shall be named as insureds
on all such policies.

        11.3 Fire Insurance - Demised Premises. Subtenant hereby acknowledges
and agrees that Prime Landlord has no, duties and obligations regarding fire
insurance for the Demised Premises, and that any and all duties and obligations
of Sublandlord to so insure the Demised Premises shall be undertaken by
Subtenant. Paragraph 5 of the Fifth Article of the Prime Lease is incorporated
herein and made a part of this Sublease. If at any time Prime Landlord provides
such insurance on the Demised Premises, then Subtenant shall be relieved of its
obligation to obtain such insurance, and in lieu thereof Subtenant shall pay to
Sublandlord all premiums and other costs or expenses required to be paid by
Sublandlord to Prime Landlord as the Prime Tenant under the Prime Lease, as and
when such amounts are required to be paid by Sublandlord under the Prime Lease.
If at any time Sublandlord elects to provide such insurance on the Demised
Premises, Subtenant shall pay to Sublandlord all premiums and costs in
connection with such insurance within fifteen (15) days after Sublandlord
delivers to Subtenant an invoice therefor.

        11.4 Other Insurance Matters. All insurance required to be maintained by
Subtenant under this Sublease shall: (a) be issued by insurance companies


                                                                         PAGE 22


<PAGE>   26
authorized to do business in the State of Washington, with a financial rating of
at least A XII as rated in the most recent edition of Best's Insurance Reports;
(b) be issued as a primary policy, and any insurance held by Sublandlord or
Prime Landlord shall be excess insurance; (c) contain an endorsement requiring
thirty (30) days' prior written notice from the insurance company to both
parties, Prime Landlord and the Mortgagee of Sublandlord and the Prime Landlord,
if any, before cancellation or change in the coverage, scope, or amount of any
policy; (d) require Subtenant to deposit with Sublandlord prior to the
commencement of the Term, a certificate of all insurance policies required under
this Sublease (which certificate shall state that Sublandlord may rely thereon)
and Subtenant shall also deliver certificates of renewal not less than thirty
(30) days before expiration of the term of each of the policies; (e) name
Sublandlord and Prime Landlord and Sublandlord's and Prime Landlord's respective
Mortgagee as additional 'insureds; (f) provide for severability of interests and
that an act or omission of one of the parties insured under the policy shall not
reduce or avoid coverage to the other parties insured under the policy; and (g)
be subject to reasonable increase, not more frequently than every two (2) years,
if in the opinion of the insurance broker retained by Sublandlord, the amount of
insurance coverage maintained by Subtenant at that time is not adequate. In such
case, Subtenant shall increase the insurance coverage as reasonably required by
Sublandlord's insurance broker.

        11.5 Waiver of Subrogation. The parties release and waive any Claims
against each other, and their respective officers, directors, partners,
employees, agents, licensees and invitees for right to recovery for damage or
injury to such waiving party or the property of such waiving party or the
property of others under the waiving party's control to the extent such injury
or damage is covered by insurance which is required to be, or which actually is,
carried by the other party. The release and waiver by Subtenant shall expressly
extend to Prime Landlord and Prime Landlord's Authorized Representatives. Each
party shall cause each insurance policy obtained by such party as required under
this Lease to provide that the insurance company waives all right of recovery by
way of subrogation as specified above in connection with any damage or injury
covered by such policy. The parties shall use reasonable efforts to obtain
insurance policies which do not charge an additional premium for such waivers of
subrogation. If, after exercise of such reasonable efforts, an insurer requires
the payment of an additional premium for such waiver of subrogation, the party
undertaking to obtain the insurance shall notify the other party of the amount
of such additional premium. The other party shall have a period of ten (10) days
after receiving the notice to deliver payment of such additional premium to the
other party. If such party refuses to pay the additional premium charged, the
other party is relieved of the obligation to obtain a waiver of subrogation
rights with respect 


                                                                         PAGE 23


<PAGE>   27
to the particular insurance involved, provided, however, the foregoing waiver
and release with respect to injury or damage covered by such policy shall still
apply.

        11.6 Exculpation of Sublandlord. Except to the extent of Sublandlord's
negligence or intentional acts, neither Sublandlord nor Sublandlord's Authorized
Representatives shall be liable to Subtenant for any damage from any cause to
Subtenant or Subtenant's property, including, but not limited to, lost profits
and consequential damages. Subtenant waives and releases all claims against
Sublandlord for damage to person or property, including, but not limited to,
lost profits and consequential damages, arising for any reason, except that
Sublandlord shall be liable to Subtenant for damage to Subtenant resulting from
the negligent acts or omissions of Sublandlord or its Authorized Representatives
acting within the scope of their authority.

        11.7 Indemnification. Subtenant shall indemnify, protect, defend and
hold Sublandlord and Prime Landlord and the Authorized Representatives of
Sublandlord and Prime Landlord harmless from all Claims arising out of the use
of the Demised Premises by, or resulting from the acts or omissions of,
Subtenant or Subtenants Authorized Representatives occurring in, on or about the
Demised Premises and the Shopping Center and from a breach of any duties or
obligations of Subtenant hereunder. Sublandlord shall indemnify, protect, defend
and hold harmless Subtenant and Subtenant! s Authorized Representatives from all
Claims arising out of or resulting from the acts or omissions of Sublandlord or
Sublandlord's Authorized Representatives occurring in, on or about the Demised
Premises and the Shopping Center and from a breach of any duties or obligations
of Sublandlord hereunder.

12.     DAMAGE AND DESTRUCTION, CONDEMNATION

        12.1 Damage and Destruction. If, during the Term, the Demised Premises
are totally or partially damaged or destroyed, Sublandlord shall use reasonable
efforts to cause the Prime Landlord to repair, restore and rebuild the same in
the manner provided under the Prime Lease with all reasonable dispatch and
diligence. Such damage or destruction shall not terminate this Sublease unless
the Prime Landlord has the right to terminate the Prime Lease under the terms of
the Prime Lease. Notwithstanding the foregoing, if the existing Laws do not
permit the restoration, either party can terminate this Sublease immediately by
delivering notice to the other party within sixty (60) days after such damage or
destruction. If the Prime Landlord restores the Demised Premises, Subtenant
shall be required to immediately commence and diligently pursue the restoration
of Subtenant's Work, Subtenant's Trade Fixtures and Subtenant's Personal
Property. Such items shall be the sole responsibility of Subtenant to restore
and Sublandlord shall have no responsibility for 


                                                                         PAGE 24


<PAGE>   28
such restoration. Notwithstanding anything to the contrary herein, Subtenant
shall have the right to terminate this Sublease if the Demised Premises cannot
be restored or are not actually restored within three hundred (300) days after
the damage or destruction, to substantially the same condition which existed
prior to any damage or destruction, as determined in the sole, but reasonable,
discretion of Sublandlord's architect or contractor. If Subtenant desires to so
terminate this Sublease, Subtenant must notify Sublandlord in writing of
Subtenant's election within fifteen (15) days after receipt of Sublandlord's
architect or contractor's estimate of the restoration time period or, if the
restoration period exceeds the three hundred (300) day period, within fifteen
(15) days after the expiration of the three hundred (300) day period, as the
case may be. If Subtenant so notifies Sublandlord, this Sublease shall be deemed
terminated as of the date of such damage or destruction. Notwithstanding any
contrary provision of this Sublease, if damage or destruction to the Demised
Premises occurs during the last eighteen (18) months of the Term and the extent
of the damage is such that Sublandlord as the Prime Tenant under the Prime Lease
has the right to terminate the Prime Lease, either Sublandlord or Subtenant can
terminate this Sublease by delivering notice to the other party not more than
fifteen (15) days after the event causing such damage or destruction, unless
Subtenant exercises any unexercised Options hereunder within ten (10) days after
receipt of Sublandlord's notice terminating this Sublease, in which case this
Sublease shall continue in full force and effect. Unless the damage or
destruction is caused by Subtenant's willful misconduct, Minimum Monthly Rent
shall abate to the extent that, and for so long as, minimum rental is abated
under the Prime Lease. In the event this Sublease is terminated pursuant to this
Section 12, Minimum Monthly Rent, additional rent and all other charges payable
by Subtenant hereunder shall be abated as of the date of the casualty. In the
event of damage or destruction to the Demised Premises which results in the
termination of the Prime Lease (including by exercise of those rights to
terminate the Prime Lease, as more specifically set forth therein), this
Sublease shall similarly terminate without any further liability. The provisions
of this Sublease are intended to exclusively govern the parties' obligations
concerning continuation of the tenancy following damage or destruction to the
Demised Premises. Accordingly, Sublandlord and Subtenant waive the provisions of
any Laws with respect to any damage or destruction of the Demised Premises or
any rights of the parties hereto to terminate this Sublease in the event of such
damage or destruction.

        12.2 Condemnation. In the event any part of the Demised Premises or
Common Area is taken or condemned by any competent authority or is conveyed by
deed in lieu of condemnation (a "Taking") and Sublandlord as the Prime Tenant
has the right to terminate the Prime Lease, Subtenant shall have the right to
terminate this Sublease within forty-five (45) days after the earlier of the
date of title transfer or the date of taking of possession by the condemning
authority. If there is a Taking of a 


                                                                         PAGE 25


<PAGE>   29
portion of the Demised Premises, and this Sublease is not terminated, all of the
terms of this Sublease shall continue in effect, except that Minimum Monthly
Rent shall be reduced to the same extent, and for so long as, minimum rental is
reduced under the Prime Lease. If Subtenant does not elect to terminate this
Sublease as set forth herein and if the Prime Lease is not terminated as
permitted under the terms of the Prime Lease, then Sublandlord shall use
reasonable efforts to cause the Prime Landlord to make all necessary repairs or
alterations to the Demised Premises or the Common Area as required under the
Prime Lease. Subtenant shall not have any right to any portion of the proceeds
of any award for a Taking of the Demised Premises; provided, however, Subtenant
may make separate claim for the Taking of its fixtures, leasehold improvements,
and expenses for moving Subtenant's fixtures, stock in trade and inventory. In
the event of a Taking which results in the termination of the Prime Lease
(including by exercise of those rights to terminate the Prime Lease, as more
specifically set forth therein), this Sublease shall similarly terminate without
any further liability. Sublandlord and Subtenant hereby waive the provisions of
any applicable Law allowing either party to petition the court with jurisdiction
thereof to terminate this Sublease in the event of a Taking of the Demised
Premises or the Common Area.

13.     ASSIGNMENT AND SUBLEASE.

        13.1 Sublandlord's Consent. Subtenant shall not assign this Lease nor
sublet the Demised Premises without the consent of Sublandlord, which consent
shall not be unreasonably withheld; and in the case of any such assignment or
subletting, Subtenant shall nevertheless remain primarily liable to Sublandlord
for all of Subtenant's obligation under this Sublease. Notwithstanding the
foregoing, if Sublandlord consents to an assignment or sublease, Subtenant
acknowledges that Prime Landlords consent is still required under the Prime
Lease and Sublandlord agrees to use reasonable efforts and diligence to obtain
such consent.

        13.2 Right of Recapture. If Subtenant desires to assign its interest in
the Sublease, or sublet any or all of the Demised Premises, to any person or
business organization, then Subtenant shall request Sublandlord's consent to the
intended assignment or subletting and give Sublandlord notice of the intended
assignment or subletting and the intended date thereof and the name of the
business organization involved and the effective date of the intended assignment
or subletting and the amount of the unamortized cost hereinafter referred to.
If, within fifteen (15) days after the giving of such notice by Subtenant to
Sublandlord of such intended assignment or subletting, Sublandlord gives notice
to Subtenant that Sublandlord elects to terminate this Sublease as of said
intended date of said assignment or subletting and Subtenant does not within
five (5) days withdraw its request to assign 


                                                                         PAGE 26


<PAGE>   30
or sublet, then this Sublease shall terminate on said intended date as if said
intended date were the date originally fixed herein for the termination hereof.

        13.3 No Release of Subtenant. No transfer or subletting by Subtenant
shall relieve Subtenant of the obligations to be performed by Subtenant under
this Sublease, whether occurring before or after such consent, transfer or
subletting. The acceptance by Sublandlord of payment from any other person shall
not be deemed to be a waiver by Sublandlord of any provision of this Sublease or
to be a consent to any transfer or sublease, or to be a release of Subtenant
from any obligation under this Sublease. If this Sublease is assigned or
transferred, or if the Demised Premises or any part thereof are sublet or
occupied by any person other than Subtenant, Sublandlord may, after default by
Subtenant; collect the rent from any such transferee, subtenant or occupant and
apply the net amount collected to the rent reserved herein, and no such action
by Sublandlord shall be deemed a consent to such transfer, sublease or
occupancy.

        13.4 Assumption of Obligations. Each transferee of Subtenant shall
assume all obligations of Subtenant under this Sublease and shall be and remain
liable jointly and severally with Subtenant for the payment of the rent and the
performance of all the terms, covenants, conditions and agreements herein
contained on Subtenants part to be performed for the Term. No transfer shall be
binding on Sublandlord unless the transferee or Subtenant delivers to
Sublandlord a counterpart of the instrument of transfer in recordable form which
contains a covenant of assumption by the transferee satisfactory in substance
and form to Sublandlord, consistent with the requirements of this section. The
failure or refusal of the transferee to execute such instrument of assumption
shall not release or discharge the transferee from its liability to Sublandlord
hereunder. Sublandlord shall have no obligation whatsoever to perform any duty
to or respond to any request from any Subtenant; it being the obligation of
Subtenant to administer the terms of its subleases.

        13.5 Involuntary Assignment. No interest of Subtenant in this Sublease
shall be assignable by operation of law, including, without limitation, the
transfer of this Sublease by testacy or intestacy. Each of the following acts
shall be considered an involuntary assignment: (a) if subtenant is or becomes
bankrupt or insolvent makes an assignment for the benefit of creditors, or if a
proceeding under the Bankruptcy Act is instituted in which Subtenant is the
"debtor"; (b) if a writ of attachment or execution is levied on this Sublease;
and (c) if, in any proceeding or action to which Subtenant is a party, a
receiver is appointed with authority to take possession of the Demised Premises.
An involuntary assignment shall constitute an incurable default by Subtenant and
Sublandlord shall have the right to elect to 


                                                                         PAGE 27


<PAGE>   31
terminate this Sublease, in which case this Sublease shall not be treated as an
asset of Subtenant.

        13.6 Deemed Transfers. If Subtenant is a corporation, company or other
legal entity or is an unincorporated association or partnership, the transfer,
assignment or hypothecation of any stock or interest in such corporation,
association or partnership in the aggregate from the date of execution of this
Sublease in excess of fifty percent (50%) shall be deemed an assignment or
transfer within the meaning and provisions of this section.

        13.7 Assignment of Sublease Rents. Subtenant immediately and irrevocably
assigns to Sublandlord all rent from any subletting of all or any part of the
Demised Premises, and Sublandlord, as assignee and as attorney-in-fact for
Subtenant for purposes hereof, or a receiver for Subtenant appointed on
Sublandlord's application, may collect such rents and apply same toward
Subtenant! s obligations under this Sublease; provided, however, that until the
occurrence of an event of default by Subtenant, Subtenant shall have the right
and license to collect such rents.

        13.8 Subletting. Any percentage or similar additional rent payable by
any subtenant, assignee, concessionaire or other licensee of Subtenant or any
party deriving its interest by or through any such party ("Licensee") based on
such Licensee's operations on, from or in connection with the Demised Premises
shall be based solely on such Licensee's gross sales (as defined in the Prime
Lease) rather than such Licensee's income or profit, subject, however, to
deductions and exclusions consistent with the definition of percentage rent or
gross sales in the Prime Lease.

14.    DEFAULT.

        14.1 Subtenant's Default.

               (a) Definition of Default. The occurrence of any of the following
shall constitute a default by Subtenant:

               (1) Failure to pay Rent when due where such failure shall
continue for five (5) business days after notice has been delivered to Subtenant
(which notice shall be in lieu of, and not in addition to, any notice required
under Law to terminate this Sublease or to declare a forfeiture thereof).

               (2) Failure to perform any other provision of this Sublease if
the failure to perform is not cured within thirty (30) days after notice has
been delivered to Subtenant (which notice shall be in lieu of, and not in
addition to, any notice required under Law to terminate this Sublease or to
declare a forfeiture 


                                                                         PAGE 28


<PAGE>   32
thereof). If the failure to perform cannot reasonably be cured within thirty
(30) days, Subtenant shall not be in default of this Sublease if Subtenant
commences to cure the failure to perform within five (5) days after
Sublandlord's notice and diligently and in good faith continues to pursue the
cure to completion.

               (3) (i) The making by Subtenant of any general assignment for the
benefit of creditors, (ii) the filing by or against Subtenant of a petition to
have Subtenant adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Subtenant, the same is dismissed within sixty (60) days),
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Subtenant's assets located at the Demised Premises or of
Subtenant's interest in this Sublease, where possession is not restored to
Subtenant within sixty (60) days, or (iv) the attachment, execution or other
judicial seizure of substantially all of Subtenant's assets located at the
Demised Premises or of Subtenant's interest in this Sublease, where such seizure
is not discharged within sixty (60) days.

        14.2 Sublandlord's Remedies for Subtenant's Default. Sublandlord shall
have the following remedies if Subtenant commits a default. These remedies are
not exclusive and are cumulative and in addition to any remedies now or later
allowed by Law.

               (a) Sublandlord can continue this Sublease in full force and
effect, and the Sublease will continue in effect as long as Sublandlord does not
terminate Subtenant's right to possession, and Sublandlord shall have the right
to collect rent when due, all in accordance with Washington Law. During the
period Subtenant is in default, Sublandlord can enter the Demised Premises and
re-let them, or any part of them, to third parties for Subtenant's account.
Subtenant shall be liable immediately to Sublandlord for all costs Sublandlord
incurs in re-letting the Demised Premises. Re-letting can be for a period
shorter or longer than the remaining term of this Sublease. Subtenant shall pay
to Sublandlord the rent due under this Sublease on the dates the rent is due,
less the rent Sublandlord receives from any re-letting. No act by Sublandlord
allowed by this paragraph shall terminate this Sublease unless Sublandlord
notifies Subtenant in writing that Sublandlord elects to terminate this
Sublease. Sublandlord, as attorney-in-fact for Subtenant, may from time to time
sublet the Demised Premises or any part thereof for such term or terms (which
may extend beyond the Term of this Sublease) and at such rent and such other
terms as Sublandlord in its sole discretion may deem advisable, with the right
to make alterations and repairs to the Demised Premises. Sublandlord shall be
required to use reasonable efforts to re-let the Demised Premises. Sublandlord's
rejection of a prospective replacement tenant based on an offer of rentals below
the rates provided 


                                                                         PAGE 29


<PAGE>   33
in this Sublease, or containing terms less favorable than those contained
herein, shall not give rise to a claim by Subtenant that Sublandlord failed to
make reasonable efforts to re-let the Demised Premises. Upon each subletting,
Subtenant shall be immediately liable to pay to Sublandlord, in addition to
indebtedness other than rent due hereunder, the cost of such subletting and such
alterations and repairs performed by Sublandlord in connection with such
subletting to return the Demised Premises to a good condition. At the option of
Sublandlord, rents received from such subletting shall be applied first, to
payment of any indebtedness other than rent due hereunder, from Subtenant to
Sublandlord; second to the payment of any costs of such subletting and of such
alterations and repairs; third, to payment of rent due and unpaid hereunder; and
the residue, if any, shall be held by Sublandlord and applied in payment of
future rent as the same becomes due hereunder. If the amounts received from such
subletting during that month, as applied by Sublandlord as specified above, are
less than the amounts required to be paid during that month by Subtenant
hereunder, Subtenant shall pay any such deficiency to Sublandlord. Such
deficiency shall be calculated and paid monthly. For all purposes set forth in
this subparagraph, Sublandlord is hereby irrevocably appointed attorney-in-fact
for Subtenant, with power of substitution. Taking possession of the Demised
Premises by Sublandlord, as attorney-in-fact for Subtenant, shall not be
construed as an election on Sublandlord's part to terminate this Sublease unless
a written notice of such intention is given to Subtenant.

               (b) Sublandlord can terminate Subtenant's right to possession of
the Demised Premises at any time. No act by Sublandlord other than giving
written notice to Subtenant shall terminate this Sublease. Acts of maintenance,
efforts to re-let the Demised Premises, or the appointment of a receiver on
Sublandlord's initiative to protect Sublandlord's interest under this Sublease
shall not constitute a termination of Subtenant's right to possession. On
termination, Sublandlord has the right to recover from Subtenant all amounts
permitted by law, including without limitation:

                      (1) The worth, at the time of the award, of the unpaid
rent that had been earned at the time of termination of this Sublease.

                      (2) The worth, at the time of the award, of the amount by
which the unpaid rent that would have been earned after the date of termination
of this Sublease until the time of award exceeds the amount of the loss of rent
that Subtenant proves could have been reasonably avoided;

                      (3) The worth, at the time of the award, of the amount by
which the unpaid rent for the balance of the Term after the time of award
exceeds the 


                                                                         PAGE 30


<PAGE>   34
amount of the loss of rent that Subtenant proves could have been reasonably
avoided, and

                      (4) Any other amount, including legal fees and court
costs, necessary to compensate Sublandlord for all detriment proximately caused
by Subtenant's default.

               "The worth, at the time of the award," as referred to in
subparagraph (3) of this subparagraph, is to be computed by discounting the
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of the award, plus one percent (1%).

               (c) If Subtenant is in default under this Sublease, Sublandlord
shall have the right to have a receiver appointed to collect rent. Neither
filing of a petition for the appointment of a receiver nor the appointment
itself shall constitute an election by Sublandlord to terminate this Sublease.

               (d) Sublandlord, at any time after Subtenant commits a default,
can cure the default at Subtenant's cost. If Sublandlord at any time, by reason
of Subtenants default, pays a sum or does any act that requires the payment of
any sum, the sum paid by Sublandlord shall be due immediately from Subtenant to
Sublandlord at the time the sum is paid, and if paid at a later date shall bear
interest at the Overdue Rate from the date the sum is paid by Sublandlord until
Sublandlord is reimbursed by Subtenant. The sum, together with interest on it,
shall be additional rent.

               (e) All costs and expenses (including attorneys' fees) incurred
by Sub landlord in collecting rent or enforcing Subtenant's obligations under
the Sublease shall be paid by Subtenant to Sublandlord upon demand.

        14.3 Interest on Unpaid Rent. Rent not paid when due shall bear simple
interest Overdue Rate from the date due until paid.

        14.4 Late Charges. Subtenant acknowledges that late payment by Subtenant
to Sublandlord of any amount due under this Sublease or the delivery of a check
by Subtenant which is dishonored or returned by the bank upon which said check
is drawn will cause Sublandlord to incur costs not contemplated by this
Sublease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and
accounting charges, and late charges that may be imposed on Sublandlord by the
terms of any encumbrance and note secured by any encumbrance covering the
Demised Premises. Therefore, if (a) any amount payable by Subtenant is not
received by Sublandlord within five (5) days after the due date thereof, or (b)
Subtenant delivers a check to Sublandlord which 


                                                                         PAGE 31


<PAGE>   35
is dishonored or returned by the bank upon which said check is drawn (with each
event set forth in clauses (a) and (b) being referred to herein as a "late
payment"), Subtenant shall pay to Sublandlord an additional sum of three percent
(3%) of the overdue amount or the amount of such dishonored or returned check,
as the case may be (the "late charge"). The parties agree that this charge
represents a fair and reasonable estimate of the costs that Sublandlord will
incur by reason of such late payment or delivery of such check by Subtenant.
Acceptance of any such charge shall not constitute a waiver of Subtenant's
default with respect to the overdue or unpaid amount, or prevent Sublandlord
from exercising any of the other rights and remedies available to Sublandlord.
If Sublandlord prepares and serves any notice on Subtenant to terminate this
Sublease or to declare a forfeiture thereof, Subtenant also shall pay to
Sublandlord the reasonable cost of preparing and serving such notice.

        14.5 Sublandlord's or Prime Landlord's Default. In the case of a
monetary default by Sublandlord, Sublandlord shall have a period of ten (10)
days after receipt of written notice thereof from Subtenant to cure such
monetary default. In the case of a non-monetary default, Sublandlord shall
commence promptly to cure such default after receipt of written notice from
Subtenant specifying the nature of such default and shall complete such cure
within thirty (30) days provided that if the nature of the non-monetary default
is such that it cannot be cured within the thirty (30) day period, Sublandlord
shall have such additional time as may be reasonably necessary to complete its
performance so long as Sublandlord has proceeded with diligence following
receipt of Subtenant's notice and is then proceeding with diligence to cure such
default. Whenever Subtenant is required to deliver notice to Sublandlord of
Sublandlord's default or contends that Prime Landlord is in default under the
Prime Lease, written notice shall also be delivered at the same time to Prime
Landlord or the holder of any Encumbrance, provided that Sublandlord has
delivered prior notice of the identity and address of such holder or lessor to
Subtenant ("Mortgagee"). The Mortgagee shall have the same time periods within
which to cure such defaults as Sublandlord or Prime Landlord (as the case may
be) has to cure such defaults; provided, however, such periods for the Mortgagee
shall commence to run ten (10) days after the commencement of the periods within
which such default must be cured. In this connection, any representative of the
Mortgagee shall have the right to enter upon the Demised Premises for the
purpose of curing any such default.

15.     LIMITATION OF LIABILITY.

        Notwithstanding anything to the contrary in this Sublease, any judgment
obtained by Subtenant against Sublandlord shall be satisfied only out of
Sublandlord's interest in the Demised Premises, the Prime Lease, any sublease of
the Prime Lease and the rents receivable by Sublandlord therefrom. Neither
Sublandlord nor any of its 


                                                                         PAGE 32


<PAGE>   36
general or limited partners, officers, directors, shareholders, members,
interest holders or beneficiaries shall have any personal liability for any
matter in connection with this Sublease or its obligations as Sublandlord of the
Demised Premises. Subtenant shall not institute, seek or enforce any personal or
deficiency judgment against Sublandlord or any of its general or limited
partners, officers, directors, shareholders, members, interest holders or
beneficiaries and none of their property, except the Sublandlord's right, title
and interest in the Prime Lease and any subleases of the Prime Lease and the
rents receivable by Sublandlord, shall be available to satisfy any judgment
hereunder.

16.     SUBLANDLORD'S ENTRY ON PREMISES.

        16.1 Right of Entry. Upon reasonable advance notice, Prime Landlord,
Sublandlord and Authorized Representatives of Prime Landlord or Sublandlord
shall have the right to enter the Demised Premises at all reasonable times
during Subtenant's normal business hours for any of the following purposes:

               (a) To determine whether the Demised Premises are in good
condition and whether Subtenant is complying with its obligations under this
Sublease;

               (b) To do any necessary maintenance and to make any restoration
to the Demised Premises that Sublandlord has the right or obligation to perform;

               (c) To serve, post, or keep posted any notices required or
allowed under the provisions of this Sublease;

               (d) To post "for sale" signs at any time during the Term, to post
"for rent" or "for lease" signs during the last six (6) months of the Term,
provided such signs are placed on the Demised Premises in an area approved by
Subtenant, which approval shall not be unreasonably withheld, conditioned or
delayed;

               (e) At any time that Subtenant has elected not to continuously
use or operate the Demised Premises, to show the Demised Premises to prospective
brokers, agents, buyers, tenants, or persons interested in an exchange, at any
time during the Term; and

               (f) To shore the foundations, footings, and walls of the Demised
Premises or the Shopping Center and to erect scaffolding and protective
barricades around and about the Demised Premises, but not so as to prevent entry
to the Demised Premises, and to do any other act or thing necessary for the
safety or preservation of the Demised Premises or the building and other
improvements in which the Demised 


                                                                         PAGE 33


<PAGE>   37
Premises are located if any excavation or other construction is undertaken or is
about to be undertaken elsewhere in the Shopping Center or on any adjacent
property or nearby street. Sublandlord's right under this provision extends to
the owner of the adjacent property on which excavation or construction is to
take place and the adjacent property owner's Authorized Representatives.

        16.2 Limited Liability for Entry. Sublandlord shall not be liable in any
manner for an inconvenience, disturbance, loss of business, nuisance, or other
damage arising out of Sublandlord's entry on the Demised Premises as provided in
this paragraph, except damage resulting from a breach of Sublandlord's Entry
Duties (as defined below in this paragraph), the negligence of Sublandlord or
its Authorized Representatives acting within the scope of their authority.
Subtenant shall not be entitled to an abatement or reduction of rent if
Sublandlord exercises any rights reserved in this paragraph, except that if
pursuant to this Section 16.2 Sublandlord denies reasonable access to the
Demised Premises for a reason other than a violation of a provision of this
Sublease by Subtenant, and on account thereof Subtenant cannot reasonably
operate for business at the Demised Premises, and does not operate for business
at the Demised Premises, in excess of two (2) consecutive full business days
after notice to Sublandlord, Minimum Monthly Rent shall abate from the end of
said period until the earlier of the date Subtenant reopens at the Premises or
such time as reasonable access is restored such that Subtenant can again
reasonably operate at the Demised Premises, except the aforesaid abatement shall
not apply to the extent Subtenant carries, or is required to carry, rent (or
business interruption) insurance. Sublandlord shall reasonably conduct its
activities in and about the Demised Premises as allowed in this paragraph in a
manner that will reasonably minimize the inconvenience, annoyance, or
disturbance to Subtenant("Sublandlord's Entry Duties").

17.     SUBORDINATION.

        This Sublease is and shall be subordinate to any ground lease or
Encumbrance recorded after the date of this Sublease affecting the Demised
Premises, provided that the ground lessor, mortgagee or beneficiary execute and
deliver to Subtenant an agreement in a form reasonably acceptable to Subtenant
where such party agrees not to disturb Subtenant's possession of the Demised
Premises so long as Subtenant is not in default under this Sublease after notice
and beyond any applicable cure period. Subtenant shall from time to time, on
request from Sublandlord, execute and deliver any documents or instruments that
may be required by a lender to effectuate any subordination. If Subtenant fails
to execute and deliver any such documents or instruments, Subtenant irrevocably
constitutes and appoints Sublandlord as Subtenant! s special attorney-in-fact to
execute and deliver any such documents or


                                                                         PAGE 34


<PAGE>   38
instruments. Nothing herein shall be construed to waive any breach resulting
from Subtenant's failure to execute documents to effectuate or confirm such
subordination.

18.     WAIVER.

        18.1 No Impairment of Rights. No delay, waiver or omission in the
exercise of any right or remedy of a party hereto on any default by the other
party hereto shall impair such a right or remedy or be construed as a waiver.

        18.2 Acceptance of Rent. The receipt and acceptance by Sublandlord of
delinquent rent shall not constitute a waiver of any other default.

        18.3 No Surrender. No act or conduct of Sublandlord, including, without
limitation, the acceptance of the keys to the Demised Premises, shall constitute
an acceptance of the surrender of the Demised Premises by Subtenant before the
expiration of the Term. Only a written notice from Sublandlord to Subtenant
shall constitute acceptance of the surrender of the Demised Premises and
accomplish a termination of this Sublease.

        18.4 No Waiver of Consent. A party's consent to or approval of any act
by the other party requiring the first party's consent or approval shall not be
deemed to waive or render unnecessary such consent to or approval of any
subsequent act by the other party.

        18.5 Written Waiver. Any waiver by a party hereto of any default by the
other party hereto must be in writing and shall not be a waiver of any other
default concerning the same or any other provision of this Sublease.

19.     SALE OR TRANSFER OF PREMISES.

        If Sublandlord sells or transfers any of Sublandlord's right, title or
interest in or to the Demised Premises or the Prime Lease, on consummation of
the sale or transfer, Sublandlord shall be released from any liability
thereafter accruing under this Sublease if Sublandlord's successor has assumed
in writing, for the benefit of Subtenant, Sublandlord's obligations under this
Sublease, Subtenant is so notified of such sale or transfer and Sublandlord
delivers to Sublandlord's successor any funds in which Subtenant has an
interest.

20.     SURRENDER OF PREMISES.

        20.1 Condition. On expiration of the Term, Subtenant shall surrender to
Sublandlord the Demised Premises and all Subtenants Work and Alterations in good
condition and repair (except for ordinary wear and tear and damage and


                                                                         PAGE 35


<PAGE>   39
destruction to the Demised Premises covered by Section 12) except for
Alterations that Subtenant is obligated to remove under the provisions of
Paragraph 10.2. Subtenant shall remove all of Subtenant' s Personal Property
within the above stated time. Subtenant shall perform all restoration made
necessary by the removal of any Alterations or Subtenant's Personal Property
before the expiration or earlier termination of the Term.

        20.2 Removal of Subtenant's Property. If Subtenant fails to remove all
Alterations that Subtenant is obligated to remove and all Subtenant's Personal
Property and Subtenants Trade Fixtures from the Demised Premises, Sublandlord
can elect, without waiving any rights or remedies Sublandlord has against
Subtenant for such default, to retain or dispose of in any manner such
Alterations, Subtenant's Personal Property or Subtenant's Trade Fixtures.
Subtenant waives all claims against Sublandlord for any damage to Subtenant
resulting from Sublandlord's retention or disposition of any such Alterations or
Subtenant's Personal Property or Subtenant's Trade Fixtures. Subtenant shall be
liable to Sublandlord for Sublandlord's costs for storing, removing, and
disposing of any such Alterations or Subtenants Personal Property or Subtenant's
Trade Fixtures.

        20.3 Damages in Case of Delay. If Subtenant fails to surrender the
Demised Premises to Sublandlord on expiration or earlier termination of the Term
as required by this paragraph, in addition to the provisions of Section 21,
Subtenant shall indemnify, protect, defend and hold Sublandlord harmless from
all claims, demands, damages, losses, liabilities, costs, fees and expenses
including reasonable attorneys' fees resulting from Subtenant's failure to
surrender the Demised Premises, including, without limitation, claims made by a
succeeding tenant from Subtenant's failure to timely surrender the Demised
Premises.

21.     HOLDING OVER.

        The Twelfth Article of the Prime Lease is incorporated herein and made a
part of this Sublease.

22.     ESTOPPEL CERTIFICATES; FINANCIALS.

        22.1 Delivery by Subtenant. Subtenant shall at any time and from time to
time upon not less than seven (7) days' prior written notice from Sublandlord
execute, acknowledge and deliver to Sublandlord a statement in writing (referred
to herein as an "Estoppel Certificate") (i) certifying that this Sublease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Sublease, as so modified, is in full
force and effect) and the dates to which the Minimum Monthly Rent and other
charges are paid in advance, if any, (ii) 


                                                                         PAGE 36


<PAGE>   40
acknowledging that there are not, to Subtenant's knowledge, any uncured defaults
on the part of Sublandlord hereunder, or specifying such defaults if any are
claimed, and (iii) covering such other matters as may be reasonably requested by
Sublandlord or by any present or prospective Sublandlord's Mortgagee. Any such
statement may be relied upon by any prospective purchaser, ground lessor or
encumbrance of the Demised Premises or of all or any portion of the real
property of which the Demised Premises are a part.

        22.2 Failure to Deliver. Subtenants failure to deliver such statement
within such time, and within five (5) days after a second written notice, shall
constitute a material breach of this Sublease and shall be conclusive upon
Subtenant (i) that this Sublease is in full force and effect, without
modification except as may be represented by Sublandlord, (ii) that there are no
uncured defaults in Sublandlord's performance, (iii) that not more than one
month's Minimum Monthly Rent has been paid in advance, and (iv) as to such other
matters as may be specified in the requested statement.

        22.3 Subtenant's Financial Data. Within fifteen (15) days after
Sublandlord's written request, but not more than once in any calendar year,
Subtenant shall furnish Sublandlord and Prime Landlord with financial statements
including, but not limited to, balance sheets, profit and loss statements,
income statements and changes to financial condition, which reflect Subtenant's
current financial condition. Any information obtained from Subtenant's financial
statements shall be confidential and shall not be disclosed to any third party,
other than to carry out the purposes of this Sublease; provided, however,
Sublandlord shall incur no liability for the inadvertent disclosure of any such
information, and Sublandlord may divulge the contents of any financial
statements of Subtenant in connection with any financing arrangement or
assignment of Sublandlord's interest in the Demised Premises or in connection
with any administrative or judicial proceedings or otherwise required by Law.

23.     DEFINITIONS.

        The definitions contained in this Sublease shall be used to interpret
this Sublease. As used herein, the following words and phrases shall have the
following meanings:

        23.1 Alteration. The term "Alteration" shall mean any addition or change
to, or modification of, the Demised Premises made by Subtenant, including,
without limitation, fixtures (but excluding Subtenant's Trade Fixtures) and
Subtenant's Work as such terms are defined herein.


                                                                         PAGE 37


<PAGE>   41
        23.2 Authorized Representative. The term "Authorized Representative"
shall mean any director, officer, agent, partner, employee, or independent
contractor of the specified party or the Prime Landlord or its successors or
assigns authorized to act for or on behalf of the specified party or the Prime
Landlord.

        23.3 Building. The term "Building" shall mean the building on and part
of the Master Premises as defined or referenced under the Prime Lease.

        23.4 Claims. The term "Claims" shall mean all liabilities, obligations,
claims, damages, losses, penalties, causes of action, judgments, costs and
expenses (including without limitation, reasonable attorneys' fees and
expenses).

        23.5 Encumbrance. The term "Encumbrance" shall mean any deed of trust,
mortgage, or other written security device or agreement affecting the Shopping
Center, the Demised Premises, the Prime Lease or this Sublease, and the note or
other obligation secured by it, that constitutes security for the payment of a
debt or performance of an obligation. "Sublandlord's Mortgagee" shall mean the
holder of any such security interest that encumbers the interest of Sublandlord
under the Prime Lease and/or this Sublease.

        23.6 Environmental Site Assessment. The term "Environmental Site
Assessment" shall mean that Environmental Site Assessment dated January 27,
1997, by Engeo, Incorporated, receipt of which is hereby acknowledged.

        23.7 Lease Year. The term "Lease Year" have the same definition as
"lease year" under the Prime Lease, except that if the Rent Commencement Date
occurs on a date other than the first day of such Lease Year, the first Lease
Year shall be a partial lease year running from the Rent Commencement Date to
the end of the Lease Year in which the Rent Commencement Date occurs.

        23.8 Floor Area. The term "Floor Area" shall mean all areas designated
by Sublandlord for the exclusive use of a Subtenant (other than the Common
Areas) measured from the exterior surface of exterior walls (and extensions, in
the case of openings) and to the center of demising walls, and shall include all
restrooms, warehouse or storage areas, clerical or office areas, employee areas
and similar areas.

        23.9 Force Majeure. The term "Force Majeure" shall mean any prevention,
delay or stoppage due to strikes, lockouts, labor disputes, acts of God,
inability to obtain labor or materials or reasonable substitutes therefor,
governmental restrictions, governmental regulations, governmental controls,
judicial orders, enemy 


                                                                         PAGE 38


<PAGE>   42
or hostile governmental action, civil commotion, fire or other casualty, and
other causes (financial inability or operating performance excluded) beyond the
reasonable control of the party obligated to perform.

        23.10 Hazardous Substance. The term "Hazardous Substance" shall mean any
product, substance, chemical, material or waste whose presence, nature, quantity
and/or intensity of existence,

24.     MISCELLANEOUS.

        24.1 Time of Essence. Except as to performance of Sublandlord's work and
delivery to subtenant of possession of the Demised Premises, time is of the
essence of each provision of this Sublease in which time is an element.

        24.2 Consent. Unless otherwise specified in this Sublease, whenever
consent or approval of either party is required, that party shall not
unreasonably withhold such consent or approval.

        24.3 Corporate Authority. Subtenant shall deliver to Sublandlord on
execution of this Sublease a certified copy of a resolution of Subtenants board
of directors authorizing the execution of this Sublease and naming the officers
that are authorized to execute this Sublease on behalf of Subtenant.

        24.4 Successors. Subject to Section 13, this Sublease shall be binding
on and inure to the benefit of the parties and their successors and assigns.

        24.5 Payments. Rent and all other sums payable under this Sublease must
be paid in lawful money of the United States of America. All sums payable to
Sublandlord under this Sublease other than Minimum. Monthly Rent and Percentage
Rent shall be deemed to be additional rent, and Sublandlord shall have the same
remedies against Subtenant for the failure to pay such sums when and as due, as
Sublandlord has for Subtenant's failure to pay Minimum Monthly Rent or
Percentage Rent.

        24.6 Incorporation by Reference. All exhibits referred to are attached
to this Sublease and incorporated by reference.

        24.7 No Merger. No merger shall occur as a result of one entity holding
or acquiring the right, title and interest of the Prime Landlord under the Prime
Lease and the right, title and interest of the Sublandlord hereunder and/or the
Prime Tenant under the Prime Lease unless such party consents to a merger in
writing.


                                                                         PAGE 39


<PAGE>   43
        24.8 Governing Law. This Sublease shall be construed and interpreted in
accordance with the laws of the State of Washington.

        24.9 Severability. The unenforceability, invalidity or illegality of any
provision of this Sublease shall not render the other provisions unenforceable,
invalid, or illegal.

        24.10 Modification Only by Writing. This Sublease contains the entire
agreement of the parties with respect to the subject matter contained herein and
cannot be amended or modified except by a written agreement.

        24.11 Attorneys' Fees. The Twenty-First Article of the Prime Lease is
incorporated herein and made a part of this Sublease except the interest rate
charged thereon shall be at the Overdue Rate rather than the interest rate set
forth therein.

        24.12 Notices. Any notice, demand, request, consent, approval, or
communication that either party desires or is required to give to the other
party or any other person shall be in writing and either served personally or
sent by prepaid, certified or registered mail or by a reputable national
overnight courier service such as Federal Express. Any notice, demand, request,
consent, approval or communication that either party desires or is required to
give to the other party shall be addressed to the other, party at the address
set forth in the Fundamental Lease Provisions. Either party may change its
address by notifying the other party of the change of address in writing. Notice
shall be deemed communicated within forty-eight (48) hours from the time of
mailing if mailed as provided in this paragraph.

        24.13 Brokers. Sublandlord and Subtenant represent and wan-ant to the
other that neither party has had any dealings with any real estate broker or
agent in connection with the negotiation of this Sublease, except that
Sublandlord's listing agent is First American Properties, Inc. and Subtenant is
represented by Grubb & Ellis. Sublandlord has agreed to pay brokerage
commissions to both listing agents in accordance with the terms of a separate
agreement.

        24.14 Recording. Subtenant and Sublandlord agree to execute and
acknowledge the Memorandum of Sublease attached as Exhibit I. The party electing
to record same shall pay all costs of recording.

        24.15 Survival of Subtenant's Obligations. All of Subtenants
indemnities, waivers, assumptions of liability, duties and obligations hereunder
shall survive the expiration or other termination of this Sublease, whether by
expiration of time, operation of law or otherwise, to the extent required for
the full observances and performance thereof.


                                                                         PAGE 40


<PAGE>   44
                            [SIGNATURE PAGE FOLLOWS]


                                                                         PAGE 41


<PAGE>   45
        IN WITNESS WHEREOF, the parties hereto have executed this Sublease the
day and year first above written.

Sublandlord:                                     Subtenant:
FADCO, LLC,                                      G.I. JOE'S, INC.
a Delaware limited liability company             an Oregon corporation

By:     Alamo Group, III, LLC,                   By:   
        a California limited liability           Name: 
        company, Its Member                      Title:

        By:                                      By:   
           -------------------------------          ---------------------------
               Donald F. Gaube,                  Name: 
               President                         Title:


                                                                         PAGE 42


<PAGE>   46
                                 ACKNOWLEDGMENT

STATE OF ________________    )
                             ) SS
COUNTY OF ______________     )



        I do hereby certify that on this 17th day of July, 19__, before me,
_________, a notary public in and for the County and State aforesaid, and duly
commissioned, personally appeared ____________________ known to me to be the
President of G.I. Joe's Inc. who, being by me duly sworn, did depose and say
that he resides in Oregon; that he is the President of G.I. Joe's Inc., the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
the corporate seal of said corporation; that, on behalf of said corporation and
by authority of its bylaws, he signed, sealed and delivered said instrument for
the uses and purposes therein set forth, as its and his free and voluntary act;
and that he signed his name thereto by like order. In Witness Whereof, I have
hereunto set my hand and affixed my official seal the day and year in this
certificate first above written.


                                      -------------------------------
                                      Notary Public
                                      Name:
                                           --------------------------

                                           --------------------------

                                      Residing at:


                                      My Commission expires:

                                           --------------------------


                                                                         PAGE 43


<PAGE>   47
                                 ACKNOWLEDGMENT

STATE OF ________________ )
                          ) SS
COUNTY OF ______________  )



        On July 22, 1998, before me, _________, personally appeared
____________________, personally known to me OR proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s) or the entity upon behalf of which the person(s)
acted, executed the instrument.

        WITNESS my hand and official seal.

Signature                                              (Seal)
          -------------------------------


                                                                         PAGE 44


<PAGE>   48
                                    EXHIBITS


<TABLE>
<CAPTION>
     Exhibit                      Description                    Paragraph            Page
     -------                      -----------                    ---------            ----
<S>                 <C>                                         <C>                   <C>
        A           Prime Lease                                     A.                 1
        B           Site Plan                                       C.                 1
        C           Permitted Exceptions                          2.3(e)               7
        D           Nondisturbance Agreement, Estoppel and      3.3(a)(ii)             9
                    Attornment Agreement
        E           Court Order                                  3.3(b)(1)             9
        F           Subtenant's Work                                5.2                10
        G           Subtenant's Prototypical Signage                6.5                15
        H           Construction Provisions                         5.2                10
        I           Memorandum of Sublease                         24.14               33
</TABLE>


                                    PAGE 45