Document:

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                                                                    EXHIBIT 10.3

                      DEFENSE DISTRIBUTION DEPOT OGDEN UTAH

               [TENANT'S TRADENAME] - LEASE OF BUILDING 365 (16-A)

                      ICON HEALTH AND FITNESS, INCORPORATED

                                 DATED: 6/29/98

                                     BETWEEN

                LANDLORD:          OGDEN CITY, a Utah Municipal Corporation,
                                   acting as a Local Redevelopment Authority
                                   2484 Washington Blvd., Suite 320
                                   Ogden, UT 84401-2319
                                   Attention: Michael D. Pavich, Director
                                   801/629-8915
                                   801/629-8917 - Fax

                TENANT:            ICON HEALTH AND FITNESS, INCORPORATED
                                   1500 South 1000 West
                                   Logan, Utah 84321

                                   801/750-5000
                                   801/753-0209 - Fax

                GUARANTORS:        _________________________________________

                                   _________________________________________

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>                                                                                                              <C>
      ARTICLE I - SUMMARY OF CERTAIN LEASE PROVISIONS ......................................................      2

      ARTICLE 2 - DEMISE AND PREMISES ......................................................................      4
       2.1  Demise and Premises ............................................................................      4
       2.2  Use of Common Areas ............................................................................      4
       2.3  Improvements ...................................................................................      5

      ARTICLE 3 - TERM AND COMMENCEMENT OF RENT AND OPTIONS ................................................      5

      ARTICLE 4 - RENT .....................................................................................      5

       4.1  Minimum Rent ...................................................................................      5
       4.2  Triple Net Lease ...............................................................................      6

      ARTICLE 5 - SECURITY DEPOSIT .........................................................................      6

       5.1  Security Deposit ...............................................................................      6
       5.2  Transfer of Landlord's Interest ................................................................      7

      ARTICLE 6 - TAXES ....................................................................................      7

       6.1  Real Property Taxes ............................................................................      7
       6.2  Personal Property Taxes ........................................................................      7
       6.3  New Taxes ......................................................................................      7

      ARTICLE 7 - USE ......................................................................................      8

       7.1  Use ............................................................................................      8
       7.2  Suitability ....................................................................................      8
       7.3  Uses Prohibited ................................................................................      9
       7.4  Covenants to Operate ...........................................................................     10
       7.5  Access to DDOU .................................................................................     11

      ARTICLE 8 - UTILITIES, SERVICES ......................................................................     11

       8.1  Landlord's Obligations .........................................................................     11
       8.2  Payment of Utility Services ....................................................................     11
       8.3  Maintenance of Utility Services ................................................................     11
       8.4  Electrical Overload ............................................................................     11

      ARTICLE 9 - MAINTENANCE AND REPAIRS; ALTERATIONS AND ADDITIONS; FIXTURES .............................     11

       9.1  Landlord's Obligations for Maintenance .........................................................     11
       9.2  Tenant's Obligations for Maintenance ...........................................................     13
       9.3  Alterations ....................................................................................     14

      ARTICLE 10 - ENTRY BY LANDLORD .......................................................................     14

      ARTICLE 11 - LIENS ...................................................................................     15

      ARTICLE 12 - INDEMNITY ...............................................................................     16
</TABLE>

TABLE OF CONTENTS - i

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<TABLE>
      <S>                                                                                                                  <C>
       12.1   Assumption of Risks Release ...........................................................................      16
       12.2   Tenant -Indemnification and Hold Harmless .............................................................      16
       12.3   Landlord - Indemnification and Hold Harmless ..........................................................      17
       12.4   Time of Commencement ..................................................................................      17

      ARTICLE 13 -INSURANCE .........................................................................................      17

       13.1   General Liability and Property Damage..................................................................      17
       13.2   Fire and Extended Coverage.............................................................................      17
              13.2.1   Premises......................................................................................      17
              13.2.2   Fixtures......................................................................................      18
              13.2.3   Rent Loss Endorsement.........................................................................      18
       13.3   Form of Policies.......................................................................................      18
       13.4   Waiver of Subordination................................................................................      19

      ARTICLE 14 - DAMAGE OR DESTRUCTION ............................................................................      19

       14.1   Reconstruction of Damaged Premises ....................................................................      19
       14.2   Partial Destruction of Building .......................................................................      19

      ARTICLE 15 - CONDEMNATION .....................................................................................      20

      ARTICLE 16 -ASSIGNMENT AND SUBLEASE ...........................................................................      21

       16.1   By Tenant .............................................................................................      21
       16.2   Excess Rents ..........................................................................................      21
       16.3   Sale of Interest in Tenant ............................................................................      21
       16.4   No Release ............................................................................................      21
       16.5   By Landlord ...........................................................................................      22

      ARTICLE 17 - SUBORDINATION, QUIET ENJOYMENT, ATTORNMENT .......................................................      22

       17.1   Subordination .........................................................................................      22
       17.2   Subordination Agreements ..............................................................................      22
       17.3   Quiet Enjoyment .......................................................................................      23
       17.4   Attornment ............................................................................................      23

      ARTICLE 18 - DEFAULT AND REMEDIES..............................................................................      23

       18.1   Default ...............................................................................................      23
       18.2   Notice ................................................................................................      24
       18.3   Remedies ..............................................................................................      24
       18.4   Special Damages .......................................................................................      26
       18.5   Late Charges ..........................................................................................      26
       18.6   Default by Landlord ...................................................................................      26
       18.7   Bankruptcy ............................................................................................      26
              18.7.1   Chapter 7 ....................................................................................      26
              18.7.2   Chapter 11 ...................................................................................      27
              18.7.3   Subsequent Petitions .........................................................................      28
              18.7.4   Adequate Assurances ..........................................................................      28
              18.7.5   Use and Occupancy Charges ....................................................................      29
              18.7.6   No Transfer Without Consent ..................................................................      29

      ARTICLE 19 - NOTICES ..........................................................................................      29
</TABLE>

TABLE OF CONTENTS - ii

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<TABLE>
      <S>                                                                                                              <C>
      ARTICLE 20 - COMMON AREAS ...................................................................................    29

       20.1   Availability ........................................................................................    29
       20.2   Definition ..........................................................................................    30
       20.3   Landlord's Management and Control ...................................................................    30
       20.4   Employee Parking ....................................................................................    31

      ARTICLE 21 -SIGNS ...........................................................................................    31

      ARTICLE 22 - GENERAL ........................................................................................    31

       22.1   Exclusives...........................................................................................    31
       22.2   Tenant Offset and Estoppel Certificate...............................................................    32
       22.3   Transfer of Landlord's Interest......................................................................    32
       22.4   Captions, Attachments: Defined Terms.................................................................    32
       22.5   Entire Agreement.....................................................................................    33
       22.6   Severability.........................................................................................    33
       22.7   Costs of Suit........................................................................................    34
       22.8   Times; Joint and Several Liability; Guarantors.......................................................    34
       22.9   Binding Effect: Choice of Law........................................................................    34
       22.10  Waive................................................................................................    34
       22.11  Surrender of Premises................................................................................    34
       22.12  Holding Over.........................................................................................    35
       22.13  Force Majeure........................................................................................    35
       22.14  Interest on Past Due Obligations.....................................................................    35
       22.15  Corporate Authority..................................................................................    35
       22.16  Provisions Re: Landlord's Lease......................................................................    35
       22.17  Warranties of Tenant.................................................................................    36
       22.18  Commission Agreements................................................................................    36

      ARTICLE 23 - SPECIAL CONDITIONS AND AGREEMENTS...............................................................    36
</TABLE>

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                      DEFENSE DISTRIBUTION DEPOT OGDEN UTAH

                                 LEASE AGREEMENT

         For and in consideration of the rental and of the covenants and
agreements hereinafter set forth to be kept and performed by the Tenant,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
Premises herein described for the term, at the rental, and subject to and upon
all of the terms, covenants and agreements hereinafter set forth, which shall be
a binding agreement as of the effective date.

         ARTICLE I - SUMMARY OF CERTAIN LEASE PROVISIONS

1.1      EFFECTIVE DATE:  6/29/98

1.2      LANDLORD: Ogden City, a Utah Municipal Corporation, acting as a Local
         Redevelopment Agency

1.3      TENANT: ICON Health and Fitness, Incorporated

1.4      GUARANTOR(s): ______________________________________

1.5      TENANT'S TRADE NAME: ICON Health and Fitness, Incorporated

1.6      LEASE TERM: 1 years; 0 months, 4 extension options of 1 years each

         RENT/TERM COMMENCEMENT DATE:  6/29/98

1.7      RENEWAL OPTIONS: Four (4) - One (1) Year Options

1.8      MINIMUM RENT:

<TABLE>
         <S>       <C>  <C>         <C>          <C>         <C>
         year(s)   1    $469,608    annually;    $39,134     monthly(l.80/sq.ft./year)
                   2    $469,608    annually;    $39,134     monthly(l.80/sq.ft./year)
                   3    $469,608    annually;    $39,134     monthly(1.80/sq.ft./year)
                   4    $469,608    annually;    $39,134     monthly(1.80/sq.ft./year)
</TABLE>

1.9      SECURITY DEPOSIT: $10,000

         PREPAID RENT: $ 39,134 First month's rent due on  6/29, 1998, the Rent
         Commencement Date.

1.10     DESCRIPTION OF PREMISES: See Exhibit A.

1.11     TENANT'S EXPENSES: Among other provisions, refer to Article 6 - Taxes;
         Article 8 - Utilities; and Article 9 - Maintenance and Repairs.

LEASE AGREEMENT -  2

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1.12     USE OF PREMISES:  Warehouse and distribution of fitness equipment.

1.13     ADDRESS FOR NOTICES:

<TABLE>
<CAPTION>
         To Landlord:                                     To Tenant
         <S>                                              <C>
         Ogden City, a Utah Municipal Corporation,        ICON Health and Fitness, Incorporated
         acting as a Local Redevelopment Authority        1500 South 1000 West
         2484 Washington Blvd., Suite 320                 Logan, Utah  84321
         Ogden, UT 84401-2319
         Attention: Michael D. Pavich, Director           Attention:  Kent S. Lundgreen,
                                                                      Materials Manager

         To Landlord's Counsel:                           To Guarantors:

         Andrea W. Lockwood                               ________________________________
         Assistant City Attorney                          ________________________________
         2484 Washington Blvd., Suite 320                 ________________________________
         Ogden, LIT 84401-2319
</TABLE>

ADDENDUM - SPECIAL PROVISIONS: See Addendum attached at end of Lease

EXHIBITS: The following exhibits are an integral part of this lease.

         Exhibit A - Description of the Leased Premises
         Exhibit B - Construction Provisions
         Exhibit C - Sign Standards
         Exhibit D - Estoppel Certificate
         Exhibit E - Guarantor's Obligations
         Exhibit F - Basic Rules and Regulations

         The foregoing is a summary only and reference should always be made to
the full lease provisions. Each reference in this Lease to any of the summarized
lease provisions contained in Article I shall be construed to incorporate all of
the terms provided under each summarized lease provision and in case of any
conflict with the balance of the Lease, the latter shall control.

LEASE AGREEMENT -  3

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         ARTICLE 2 - DEMISE AND PREMISES

         2.1  Demise and Premises.

              2.1.1 Landlord hereby leases and lets to Tenant, and Tenant hereby
rents from Landlord, upon and subject to the terms, conditions, covenants and
provisions hereof, that certain parcel of land and the building or buildings
located thereon (hereinafter the "Building") (hereinafter the land and Building
may be collectively referred to as the "Leased Premises" or "Premises") within
the Federal installation now known as Defense Distribution Depot Ogden, Utah
("DDOU") in Weber County, Utah, together with and subject to all conditions,
restrictions, obligations, rights, privileges, easements and appurtenances
thereto, including without limitation those created pursuant to the Department
of the Army Interim Lease Under Base Realignment and Closure between the United
States (hereinafter the "Government") and Landlord (the "Landlord's Lease"). A
description of the Premises, along with a general site plan showing, among other
things, the Premises and some of the principal improvements which comprise DDOU,
is attached as Exhibit A.

              2.1.2 Tenant acknowledges that the site plan shown on Exhibit A is
tentative and that Landlord may change the shape, size, location, number and
extent of the improvements shown thereon and eliminate or add any improvements
to any portion of DDOU. Landlord reserves the absolute right to effect such
other tenancies in DDOU as Landlord in the exercise of its sole business
judgment shall determine to best promote the interest of DDOU. Tenant does not
rely on the fact nor does Landlord represent that any specific tenant or number
of tenants shall during the term of this Lease occupy any space in DDOU.

              2.1.3 Tenant acknowledges that Landlord is negotiating with the
Government to obtain fee title to DDOU. If Landlord becomes the owner of DDOU,
Landlord shall have the absolute right to subdivide the property comprising
DDOU, including the right to subdivide such property in such a manner that
affects the description of Tenant's Premises; provided that no change will be
made without consent of Tenant which:

                    a. Affects the footprint of the Building (or any material
part thereof) located on the Premises; or

                    b. Eliminates or significantly affects approved access to
the Premises or approved parking on the Premises; or

                    c. Affects any improvements installed or constructed by
Tenant.

         2.2  Use of Common Areas. As more fully set forth in Article 20, the
use and occupancy by the Tenant of the Leased Premises shall include the use in
common, with others entitled thereto, of the common areas, as may be designated
from time to time by the Landlord, subject, however, to the terms and conditions
of this Agreement and to reasonable rules and regulations for the use thereof as
prescribed from time to time by the Landlord. Tenant and its

LEASE AGREEMENT - 4

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employees shall park their cars only in areas specifically designated from time
to time by Landlord for that purpose.

         2.3 Improvements. The obligations of Landlord, if any, and Tenant to
perform the work and supply material and labor to prepare the Premises for
occupancy are set forth in detail on Exhibit B. Landlord and Tenant shall expend
all funds, and do all acts required of them in Exhibit B and shall have the work
performed promptly and diligently in a first-class workmanlike manner.

         ARTICLE 3 - TERM AND COMMENCEMENT OF RENT AND OPTIONS

         3.1 This Lease shall be effective and shall be a binding and
enforceable agreement upon the date of its execution and each of the parties
shall have all rights and remedies at law for any breach or anticipatory breach
hereof. The initial term of this Lease shall be for One (1) years as specified
in Article 1.6 (the "Term"). The initial One (1) year term and each extension
term shall terminate one (1) day prior to the day of the year which is the day
of the year of termination and expiration of the Landlord's ground lease. The
day of the year when Landlord's Lease terminates is August 27. The Term, and
Tenant's obligation to pay rent, shall commence on the date specified in Article
1.6 (the "Commencement of Rent").

         3.2 In the event that the Commencement of Rent does not occur on the
first day of the month, then Tenant shall pay rent for the fractional month on a
per diem basis (calculated on the basis of a thirty (30) day month) until the
first day of the following month; and thereafter the Minimum Rent shall be paid
in advance in equal monthly installments on the first day of each and every
month.

         3.3 If a right to renew is granted in 1.8 above and providing Tenant is
not in default, Tenant may extend the term of this Lease for up to Four (4)
consecutive option terms of One (1) years each on the same terms and conditions,
except length of term and the rental terms, as the initial term as provided in
1.8 above. Such right of extension may be exercised by Tenant giving written
notice to Landlord to extend such term at least six (6) months prior to the
August 27 termination date; provided that if the year of termination is in the
year 2002, 2007, 2012 or 2017, as applicable, Tenant shall provide at least two
hundred (200) days prior written notice of such election to renew.

         3.4 Unless Tenant has timely notified Landlord of its election to renew
the Lease, Landlord may choose not to extend its Landlord's Lease for a
corresponding option term. Tenant acknowledges that Landlord must exercise its
option to extend its Landlord's Lease at least six (6) months prior to the
expiration (August 27) of the Landlord's Lease Term or Option Term then in
effect.

         ARTICLE 4 - RENT

         4.1 Minimum Rent. Tenant shall pay without deduction or offset of any
kind, except such specific offsets, if any, as may be expressly agreed to in the
Addendum to this Lease, to

LEASE AGREEMENT - 5

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Landlord as Minimum Rent for the Premises during the Term the amount specified
in Article 1.8. Such Minimum Rent shall be payable in equal monthly installments
during the Term with such amounts to be paid in advance on the first day of each
calendar month from the Commencement of Rent and thereafter throughout the term
of the Lease including any renewal periods, if any. All rent to be paid by
Tenant to Landlord shall be in lawful money of the United States of America and
shall be paid without prior notice or demand, and at such place or places as may
be designated from time to time by Landlord.

         4.2 Triple Net Lease. This Lease is a triple net lease and in addition
to the rent, due hereunder, Tenant shall be responsible for all insurance,
taxes, and maintenance expenses (except for maintenance expenses specifically
excluded pursuant to Section 9.1) as hereinafter in this Lease more particularly
described, it being generally understood and agreed that Landlord shall not be
responsible for any costs or expenses in connection with the Premises during the
term of this Lease and shall be entitled to a net return of the rental herein
specified undiminished by the cost of insurance, taxes and assessments described
in Article 6 or water, electrical, gas, sewer or other utility charges or levies
or any kind or nature whatsoever, and operation, repair, upkeep, renewal,
improvement, alteration or reconstruction of the building and/or appurtenances
thereto, now or at any time hereafter, during the term of this Lease or any
renewal or extension hereof, except where otherwise specifically provided to the
contrary herein.

         ARTICLE 5 - SECURITY DEPOSIT

         5.1 Security Deposit. The Landlord acknowledges receipt of the amount
set forth in Article 1.9 which it is to retain as security for the faithful
performance of all the covenants, conditions and agreements of this Lease, but
in no event shall the Landlord be obliged to apply the same upon rents or other
charges in arrears or upon damages for the Tenant's failure to perform the said
covenants, conditions and agreements; the Landlord may so apply the Security
Deposit, at its option; and the Landlord's right to the possession of the
Premises for non-payment of rents or for other reasons shall not in any event be
affected by reason of the fact that the Landlord holds this Security Deposit.
The Security Deposit, if not applied toward the payment of rents in arrears or
toward the payment of damages suffered by the Landlord by reason of the Tenants
breach of the covenants, conditions and agreements of this Lease, is to be
returned to Tenant without interest when this Lease is terminated, according to
these terms, and in no event is the Security Deposit to be returned until Tenant
has vacate the Premises and delivered possession to the Landlord.

         In the event that the Landlord repossesses the Premises because of the
Tenant's default or because of the Tenant's failure to carry out the covenants,
conditions and agreements of this Lease, Landlord may apply the Security Deposit
toward damages as may be suffered or shall accrue thereafter by reason of the
Tenant's default or breach. In the event of bankruptcy or other debtor-creditor
proceedings against Tenant, the Security Deposit shall be deemed to be applied
first to the payment of Rents and other charges due Landlord for the earliest
possible periods prior to the filing of such proceedings. The Landlord shall not
be obliged to keep the Security Deposit as a separate fund, but may mix the same
with its own funds.

LEASE AGREEMENT - 6

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     5.2   Transfer of Landlord's Interest. Landlord may deliver the Security
Deposit, subject to the terms of this Lease, to the purchaser or assignee of
Landlord's interest in the Premises and thereupon Landlord shall be discharged
from any further liability with respect to the Security Deposit. This Section
5.2 shall also apply to any subsequent transfers of Landlord's interest in the
Premises.

     ARTICLE 6 - TAXES

     6.1   Real Property Taxes. In addition to the rents provided for in Article
4 above, and commencing with the term of this Lease, Tenant agrees to pay all
taxes (including any privilege tax imposed under (S)59-4-101, Utah Code Ann.,
and other fees or charges hereinafter defined as New Taxes) and assessments,
whether general or special, levied and assessed for any year within the Lease
Term upon the Premises and the underlying realty. With respect to any
assessments which may be levied against or upon the Premises or which under the
laws then in force may be evidenced by improvement or other bonds, or may be
paid in annual installments, only the amount of such annual installment (with
appropriate proration for any partial year) and statutory interest shall be
included within the computation of the annual estimate of taxes and assessments
levied against the Premises. Taxes for the first and last year of the term
hereof shall be prorated between the Landlord and Tenant as of the commencement
and expiration of the term.

     6.2   Personal Property Taxes. Tenant shall pay, before delinquency, all
taxes, assessments, license fees and public charges levied, assessed or imposed
upon or measured by the value of its business operation, including but not
limited to the furniture, fixtures, leasehold improvements, equipment and other
property of Tenant at any time situated on or installed in the Premises by
Tenant. If any time during the term of this Lease any of the foregoing are
assessed as a part of the real property of which the Premises are a part, Tenant
shall pay to Landlord upon demand the amount of such additional taxes as may be
levied against said real property of which the Premises are a part. Upon such
payment, Landlord shall pay such amounts to the entity responsible for
collection of such taxes. For the purpose of determining said amount, figures
supplied by the County Assessor as to the amount so assessed shall be
conclusive.

     6.3   New Taxes. In addition to rent and other charges to be paid by Tenant
hereunder, Tenant shall reimburse to Landlord, within thirty (30) days of the
mailing of notice of a demand therefor, any and all new taxes and assessments
payable by Landlord (other than net income, estate and inheritance taxes)
whether or not now customary or within the contemplation of the parties hereto:

           6.3.1 upon, allocable to, or measured by the area of the Premises or
on the rent payable hereunder, including without limitation, any gross rental
income tax or excise tax levied by the State, any political subdivision thereof,
City or Federal Government with respect to the receipt of such rent, or

LEASE AGREEMENT -  7

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             6.3.2 upon or with respect to the possession, leasing, operations,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises or any portion thereof, or

             6.3.3 upon this transaction or any documents to which Tenant is a
party creating or transferring an interest or an estate in the Premises; or

             6.3.4 any fees or charges levied against Landlord or the Premises
by or on behalf of any governmental (either public or quasi-public) entity for
services rendered by or on behalf of any governmental (public or quasi-public)
entity, including those established in place of property taxes, whether called
"fees" or otherwise, including but not limited to, the Premises' prorated share
of any Municipal Improvement District assessments.

         ARTICLE 7 - USE

         7.1 Use. Tenant shall use the Premises solely for the purposes outlined
under Article 1.12 and under the trade name, if any, as specified in Article
1.5. The Tenant shall not use or permit the Premises to be used for any other
purpose or under any other trade name whatsoever without the prior written
consent of the Landlord. Without limiting the generality of the foregoing,
Landlord may withhold its consent if the intended use:

             7.1.1 would violate or conflict with the DDOU Reuse Plan, as
adopted by the Ogden City Council; or

             7.1.2 would be inconsistent with the existing or desired tenant mix
within DCOU; or

             7.1.3 would place an unreasonable burden upon the common areas,
such as increased parking and traffic, and/or would be unreasonably burdensome
on other properties located within DDOU; or

             7.1.4 would be in violation of the use restrictions set forth in
this Lease or in the Landlord's Lease; or

             7.1.5 would interfere with or adversely affect the Government in or
about the property.

         The foregoing is not intended as an exclusive list of reasons
authorizing the Landlord to withhold its consent in the exercise of its
reasonable business judgment.

         7.2 Suitability. Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation or warranty with respect to the
Premises or with respect to the suitability of the Premises or DDOU for the
conduct of Tenant's business, nor has Landlord agreed to undertake any
modification, alteration or improvement to the Premises except as specifically
provided in this Lease. Tenant shall inspect the Premises prior to taking
possession

LEASE AGREEMENT - 8

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and shall give Landlord written notice specifying in reasonable detail the
respects in which the Premises are not in satisfactory condition. The taking by
Tenant of possession of the Promises shall conclusively establish that the
Premises were at such time in satisfactory condition.

         7.3      Uses Prohibited.

                  7.3.1 Tenant further covenants and agrees that it will not use
or suffer or permit any person or persons to use the Premises or any part
thereof for any use prohibited by the Landlord's Lease, or restrictions
contained in leases of other existing tenants of DDOU, including without
limitation, restrictions upon the sale of drugs, sexual paraphernalia, alcoholic
beverages, pornographic literature and tapes; or for conducting therein a
theater, bowling alley, skating rink, bawdy house, nightclub, bar, tavern, adult
bookstore, automotive repair, dance hall, pool hall, game parlor, massage
parlor, car wash, renting, leasing or sale of motor vehicles or trailers,
gambling, liquor store, second-hand store, auction, distress or fire sale or
bankruptcy or going-out-of business sale, or for any use or purpose in violation
of the laws of the United States of America or the City, County, and/or State in
which the Premises is located, or the ordinances, regulations and requirements
of such governmental (public or quasi-public entities) or other lawful
authorities, and that during said term the Premises, and every part thereof,
shall be kept by the Tenant in a clean and wholesome condition, free of any
objectionable noises, odors or nuisances, and that all health, safety, and
policy regulations shall, in all respects and at all times, be fully complied
with by the Tenant. Notwithstanding the restriction on second-hand stores, or
distress sales, Tenant may conduct incidental sales of seconds or refurbished
warehouse inventories of exercise equipment, in conjunction with the main
warehousing function.

                  7.3.2 Tenant may not display or sell merchandise or allow
carts, portable signs, devices or any other objects to be stored or to remain
outside the defined exterior walls and permanent doorways of the building
constructed on the Premises. Tenant further agrees not to install any exterior
lighting, shades or awnings, amplifiers or similar devices or use in or about
the Premises any advertising medium or promotional materials or facilities which
may be distributed, heard or seen outside the Premises, such as flyers, flashing
lights, searchlights, loudspeakers, phonographs or radio broadcasts or make any
changes to the front and/or facade of the Building without Landlord's prior
written consent. Tenant shall not conduct or permit to be conducted any sale by
auction in, upon or from the Premises, whether said auction be voluntary,
involuntary, pursuant to any assignment for the payment of creditors or pursuant
to any bankruptcy or other insolvency proceeding.

                  7.3.3 Tenant shall not do or permit anything to be done in or
about the Premises nor bring or keep anything therein which will in any way
increase the existing rate or affect any fire or other insurance upon the
Premises or any building of which the Premises may be a part, or DDOU, or any of
its contents (unless Landlord has consented in writing to such use and Tenant
pays any increased premium as a result of such use or acts), or cause a
cancellation of any insurance policy covering the Premises or any building of
which the Premises may be a part, or DDOU, or any of its contents, nor shall
Tenant sell or permit to be kept, used or sold in or about said Premises any
articles which may be prohibited by an extended coverage policy of fire and
other casualty insurance.

LEASE AGREEMENT - 9

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                  7.3.4 Tenant shall not do or permit anything to be done in or
about the Premises which will in any way obstruct or interfere with the rights
of the Government or of other tenants or occupants in DDOU, create undue noise
and disruption, or injure or annoy them or use or allow the Premises to be used
for unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, or about the Premises. Tenant shall not commit or suffer
to be committed any waste in or upon the Premises.

                  7.3.5 Tenant shall not use the Premises or permit anything to
be done in or about the Premises which will in anyway conflict with any law,
statute, ordinance or governmental rule or regulation or requirement of duly
constituted public authorities now in force or which may hereafter be enacted or
promulgated. Tenant shall at its sole cost and expense promptly comply with all
laws, statutes, ordinances and governmental rules, regulations or requirements
now in force or which may hereafter be in force and with the requirements of any
board of fire underwriters or other similar body now or hereafter constituted
relating to or affecting the condition, use or occupancy of the Premises,
excluding structural changes not relating to or affecting the condition, use or
occupancy of the Premises, or not related or afforded by Tenant's improvements
or acts. The judgment of any court of competent jurisdiction or the admission of
Tenant in any action against Tenant, whether Landlord be a party thereto or not,
that Tenant has violated any law, statute, ordinance or governmental rule,
regulation or requirement, shall be conclusive of the fact as between Landlord
and Tenant.

                  7.3.6 Any provision in the foregoing notwithstanding Tenant
shall have no right to rely upon the restrictions provided herein and Landlord,
at its sole discretion except as limited in the Landlord's Lease, may modify,
and approve any uses and activities of DDOU set forth in Section 7.3. Any such
consent given with respect to another tenant or use shall not be deemed to be a
waiver of such requirement with regard to Tenant hereunder except with
Landlord's express written approval.

                  7.3.7 Landlord represents and warrants to Tenant that the
Landlord's Lease and current zoning of the Premises allow the operation of a
warehousing, distributing, and manufacturing of fitness and related equipment on
the Premises.

         7.4      Covenants to Operate.

                  7.4.1 Tenant covenants and agrees that, continuously and
uninterruptedly from and after the commencement of the term of this Lease, it
will operate and conduct within the Premises, during customary operating hours
as established from time to time, the business which it is permitted to operate
and conduct under the provisions hereof, except while the Premises are
untenantable by reason of fire or other casualty.

                  7.4.2 Tenant shall refrain from dumping, disposal, reduction,
incineration or other burning of trash, refuse or garbage of any kind in or
about the Premises. Tenant shall store all trash and garbage within the Premises
or at a location designated by Landlord in covered metal containers so located
as not to be visible to customers or business invitees in DDOU.

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Tenant shall also arrange for and bear the expense of the prompt and regular
removal of such trash and garbage from the Premises.

                  7.4.3 Tenant shall complete, or cause to be completed, all
deliveries, loading, unloading and services at locations approved by Landlord,
during times designated by Landlord, and in a manner that will not interfere
with Landlord, other tenants, or employees or customers of Landlord or other
tenants, or activities for damages resulting from roof leakage unless Landlord
after written notice from Tenant fails to use reasonable diligence in attempting
to identify sources of such leakage and to reasonably implement repairs.

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         9.2      Tenant's Obligations for Maintenance.

                  9.2.1 Except as provided in Section 9.1, Tenant agrees at all
times, from and after delivery of possession of the Premises to the Tenant, and
at its own cost and expense, to maintain, repair and/or replace in good and
tenantable condition the Premises and the Building including, but without
limitation, the exterior and interior portion of all doors, door checks,
windows, plate glass, all plumbing and sewage facilities within the Building,
including free flow to the main sewer line, fixtures, heating and air
conditioning system and equipment, and electrical wiring and equipment and
interior walls, floors, ceilings and insulation. Tenant shall keep and maintain
the Premises in a clean, sanitary and safe condition in accordance with
applicable laws and in accordance with all directions, rules and regulations of
the health officer, fire marshall, insurance underwriter or rating bureau
designated by Landlord, building inspector, or other proper officials of the
governmental agencies having jurisdiction, at the sole cost and expense of
Tenant; and Tenant shall comply with all requirements of law, ordinance and
otherwise, affecting the Premises. Tenant shall decorate and paint, in a manner
satisfactory to Landlord, as necessary to maintain at all times a clean and
sightly appearance.

                  9.2.2 The Tenant further covenants and agrees that if Tenant
refuses or neglects to make repairs and/or maintain the Premises, or any part or
component thereof, in a manner reasonably satisfactory to Landlord then Landlord
may (but is not obligated to) go upon the Premises and make any necessary
repairs or maintenance to the Premises or any part or component thereof and
perform any work therein including that which may be necessary to comply with
any laws, ordinances, rules or regulations of any public authority or of the
City Planning Commission or of any similar body, or that the Landlord may deem
necessary to prevent waste or deterioration in connection with the Premises if
the Tenant does not make or cause such repairs to be made or performed or cause
such work to be performed promptly after receipt of written demand from the
Landlord. Nothing herein contained shall imply any duty on the part of the
Landlord to do any such work which under any provision of this Lease the Tenant
may be required to do, nor shall it constitute a waiver of Tenant's default in
failing to do the same. No exercise by the Landlord of any rights herein
reserved shall entitle the Tenant to any damage for an injury or inconvenience
occasioned thereby nor to any abatement of rent. In the event Landlord makes or
causes any such repairs to be made or performed, as provided herein, Tenant
shall pay the cost thereof to Landlord, forthwith, as additional rent upon
receipt of a bill therefor, and such cost shall include interest at the rate
provided for on Past Due Obligations as provided in Section 22.14 from the date
of completion of the repairs or earlier payment by Landlord for services or
costs associated therewith.

                  9.2.3 Upon the expiration or earlier termination of this
Lease, Tenant shall surrender the Premises in broom clean condition and
otherwise in good condition, ordinary wear and tear and damage by fire,
earthquake, act of God or the elements alone excepted, and shall promptly remove
or cause to be removed at Tenant's expense from the Premises and the Building
any signs, notices and displays placed by Tenant. Tenant agrees to repair any
damage to the Premises or DDOU caused by or in connection with the removal of
any articles of personal

LEASE AGREEMENT - 13

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property, business or trade fixtures, machinery, equipment, cabinetwork, signs,
furniture, moveable partitions or permanent improvements or additions, including
without limitation thereto, repairing the floor and patching and painting the
walls where required by Landlord to Landlord's reasonable satisfaction, all at
Tenants sole cost and expense. In repairing such damage, Tenant shall only be
obligated to restore the Premises to its state of condition existing at the
commencement of this Lease, normal wear and tear excepted. Tenant shall
indemnify the Landlord against any loss or liability resulting from the delay by
Tenant in so surrendering the Premises, including without limitation, any claims
made by any succeeding tenant founded on such delay.

         9.3      Alterations.

                  9.3.1 Tenant shall not make any substantial or structural
alterations or additions to the Premises nor make any contract therefor without
first procuring the written consent of both the Landlord and, if applicable, the
District Engineer and the said officer (Commander, DDOU, and/or its successor
entity or the officer having immediate jurisdiction over the Leased Premises)
pursuant to the provisions of the Landlord's Lease.

                  9.3.2 All work with respect to any alterations, additions and
changes must be done in a good and workmanlike manner and diligently prosecuted
to completion to the end that the Premises shall at all times be a complete unit
except during the period of work.

                  9.3.3 Any such changes, alterations and improvements shall be
performed and done strictly in accordance with the laws and ordinances relating
thereto. In performing the work of any such alterations, additions or changes or
of any construction, Tenant shall have the work performed in such a manner as
not to be a nuisance to Landlord or any other tenant or the Government and shall
not obstruct the access to DDOU or the premises of any other tenant in DDOU.

                  9.3.4 Before commencing any such construction in or about the
Premises, Tenant shall notify Landlord in writing of the expected date of
commencement thereof. Landlord shall have the right at any time and from time to
time to post and maintain on the Premises such notices as Landlord deems
necessary to protect the Premises and Landlord from mechanics' liens,
materialmen's liens, or any other liens.

         ARTICLE 10 - ENTRY BY LANDLORD

         10.1     Landlord and the authorized representatives of Landlord may
enter the Premises during normal business hours and upon twenty-four (24) hours
prior notice for the purposes of exhibiting the same to prospective purchasers
or other interested parties.

         10.2     Tenant acknowledges that under Section 17 of the Landlord's
Lease the right is reserved to the Government, its officers, agents and
employees to enter upon the Premises at any time and for any purpose necessary
or convenient in connection with Government purposes; to make inspections, to
make any other use of the lands (DDOU) as may be necessary in connection

LEASE AGREEMENT - 14

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with Government purposes, and Tenant shall have no claim for damages against
either Landlord or the Government or any officer, agent or employee of Landlord
or the Government on account thereof.

         10.3 Landlord and its agents shall have reasonable access to the
Premises during normal business hours for the purpose of examining the same to
ascertain if they are in good repair, and at its option to make reasonable
repairs, but only after notice and failure to cure by Tenant, which Landlord may
be authorized to make hereunder and Tenant hereby grants to Landlord such
licenses and easements as necessary or expedient to effectuate the foregoing.
Tenant hereby further grants to Landlord such licenses or easements in and over
the Premises or any portion thereof as shall be reasonably required for the
installation or maintenance of mains, conduits, pipes or other facilities to
serve DDOU or any part thereof, provided, however, that Landlord shall pay for
any alteration required on the Premises as a result of any such exercise,
occupancy under or enjoyment of any such license or easement and shall not
unduly disrupt Tenant's business.

         ARTICLE 11 - LIENS

         11.1 Tenant agrees it will pay or cause to be paid all costs for work
done by it on the Premises, and Tenant will keep the Premises free and clear of
all mechanics' liens on account of work done by Tenant or persons claiming under
Tenant. Tenant agrees to and shall indemnify and save Landlord and the
Government free and harmless against claims, liability, loss, damage, costs,
attorneys' fees, and all other expenses on account of claims of lien or
materialmen or others for work performed or materials or supplies furnished to
Tenant or persons claiming under Tenant. It is hereby acknowledged and
understood that no lien may be placed against property owned by the Government
or against property or property interests owned by the Ogden City, so long as
Ogden City, acting as a Local Redevelopment Authority, is the Landlord. If there
is such a lien, and it arises due to the acts, omissions or neglect of the
Tenant, the Tenant has responsibility to clear the title.

         11.2 If Tenant shall desire to contest any claim of lien, it shall
furnish Landlord adequate security for the value or in the amount of one hundred
fifty percent (150%) the claim, plus estimated costs and interests, or a bond or
responsible corporate surety in such amount conditioned on the discharge of the
lien. If a final judgment establishing the validity or existence of lien for any
amount is entered, Tenant shall pay and satisfy the same at once.

         11.3 If Tenant shall be in default in paying any charge for which a
mechanics' lien claim and suit to foreclose the lien have been filed, and shall
not have given Landlord security to protect the property and Landlord against
such claim of lien, Landlord may (but shall not be so required to) pay the claim
and any costs. The amount so paid, together with reasonable attorneys' fees
incurred in connection therewith, shall be immediately due and owing from Tenant
to Landlord, and Tenant agrees to and shall pay the same with interest at the
rate provided for on Past Due Obligations as provided in Section 22.14 from the
dates of Landlord's payments.

LEASE AGREEMENT - 15

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         11.4 Should any claims of lien be filed against the Premises or any
action affecting the title to the Premises be commenced, the party receiving
notice of such lien or action shall forthwith give the other party written
notice thereof.

         11.5 Landlord and its representative shall have the right to go upon
and inspect the Premises, including the Building, at all reasonable times, and
shall have the right to post and keep posted thereon notice which Landlord may
deem to be proper for the protection of Landlord's interest in the Premises.
Tenant shall, before the commencement of any work which might result in any such
lien, give to Landlord written notice of its intention to do so in sufficient
time to enable Landlord to file and record such notices.

         ARTICLE 12 - INDEMNITY

         12.1 Assumption of Risks Release. Tenant and all those claiming through
or under Tenant shall store their property in and shall occupy and use the
Premises and the common areas solely at their own risk. Tenant and all those
claiming through or under Tenant hereby release Landlord, and as respective
officers, employees and agents, from all claims of every kind, including loss of
life, personal or bodily injury, damage to merchandise, equipment, fixture or
other property, or damage to business (including business interruption) arising,
directly or indirectly, out of or from or on account of such occupancy and use
or resulting from any present or future conditions or state of repair thereof,
except to the extent such claims are directly caused by the negligence of
Landlord (or its respective officers, employees or agents). Landlord, and its
respective officers, employees and agents, shall not be responsible or liable
for damages to Tenant, or to those claiming through or under Tenant for any loss
of life, bodily or personal injury, or damage to property or business that may
be occasioned by or through the acts, omissions or negligence of any other
person including, without limitation, other tenants, occupants or customers of
any portion of DDOU. Moreover, except to the extent directly caused by the
negligence of Landlord (or its respective officers, employees or agents),
Landlord shall not be responsible or liable for damages at any fine for loss of
life, or injury or damage to any person or to any property or to the business of
Tenant, or those claiming through or under Tenant, caused by or resulting from
(i) the bursting, release, breaking, leaking, overflowing or backing up of
utility lines or any sprinkler system; (ii) water, steam, gas, sewage, snow or
ice in any part of DDOU; (iii) acts of God or the elements; or (iv) any defect
or negligence in the construction, operation or use of any buildings or
improvements in DDOU, including the Premises, or any of the pipes, sprinklers,
wires, plumbing, air conditioning, lighting, or any other equipment, fixtures,
machinery, appliances or apparatus therein.

         12.2 Tenant -Indemnification and Hold Harmless. Except to the extent
directly caused by the negligence of Landlord (and its respective officers,
employees and agents), Tenant hereby agrees to defend, pay, indemnify and hold
Landlord (and its respective officers, employees and agents) and the Government
harmless from and against any and all claims, demands, fines, suits, actions,
proceedings, orders, decrees, judgments and liabilities of every kind, and all
reasonable expenses incurred in investigating and resisting the same (including
reasonable attorneys' fees), resulting from or in connection with loss of life,
bodily or personal injury or property damage (i) arising out of or on account of
any occurrence in or on the

LEASE AGREEMENT - 16

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Premises, including, specifically without limitation, arising out of the
bursting, release, breaking, leaking, overflowing or backing up of utility lines
or any sprinkler system within the Premises, or (ii) occasioned wholly or in
part through the use and occupancy of the Premises or any improvements therein
or appurtenances thereto, or (iii) occasioned wholly or in part by any act or
omission or negligence of Tenant or any assignee, subtenant, concessionaire,
licensee, invitee, or customer of Tenant, or their respective employees, agents
or contractors in the Premises or in the doorways thereof or on the sidewalks
adjacent thereto or in other areas of DDOU, including the common areas and those
portions thereof owned, leased, subleased or controlled by others.

         12.3 Landlord - Indemnification and Hold Harmless. To the extent
directly caused by the negligence of Landlord (and its respective officers,
employees and agents), Landlord hereby agrees to defend, pay, indemnify and hold
Tenant (and its respective officers, employees and agents) harmless from and
against any and all claims, demands, fines, suits, actions, proceedings, orders,
decrees, judgments and liabilities of every kind, and all reasonable expenses
incurred in investigating and resisting the same (including reasonable
attorneys' fees), resulting from or in connection with loss of life, bodily or
personal injury or property damage (i) occasioned wholly or in part through the
use and occupancy of the Premises or any improvements therein or appurtenances
thereto by Landlord (and its respective officers, employees or agents), or (ii)
occasioned by any act or omission or negligence of Landlord, or its respective
employees, agents or contractors in the Premises or in the doorways thereof or
on the sidewalks adjacent thereto or in other areas of DDOU, including the
common areas and those portions thereof owned, leased, subleased or controlled
by Landlord.

         12.4 Time of Commencement. The parties expressly acknowledge that all
of the foregoing provisions of this Article 12 shall apply and become effective
from and after the date Tenant first enters upon DDOU for any purpose related to
this Lease.

         ARTICLE 13 -INSURANCE

         13.1 General Liability and Property Damage. Tenant shall at all times
during the term of this Lease and at its own cost and expense procure and
continue in force workmen's compensation insurance, and comprehensive general
liability insurance adequate to protect Landlord and naming Landlord as an
additional insured in the liability contract against liability for injury or
death of any person in connection with the construction of the improvements,
use, operation or condition of the Premises (and related sidewalks, loading
docks and other appurtenances). Such insurance at all times shall be in an
amount of not less than Two Million Dollars ($2,000,000.00) combined single
limit for bodily injury and property damage. The limits of such insurance shall
not limit the liability of Tenant.

         13.2 Fire and Extended Coverage.

              13.2.1 Premises. Tenant shall procure and maintain at its cost and
expense during the term of this Lease, Fire, Windstorm and Extended Coverage
Insurance together with an endorsement for Difference In Conditions (with
additional perils to be covered at Landlord's option) on the Premises in amounts
not less than one hundred percent (100%) of the insurable

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value of the Building and related improvements above foundations, naming the
Landlord and, at Landlord's election, its Lender as additional insured therein.
If Tenant's operation is the type that could lead to environmental cleanup as
established by the Landlord and the Government, Tenant will procure and maintain
hazardous waste insurance in an amount judged by the Landlord to be sufficient
according to the risk of the operation. Landlord's reasonable estimate of the
insurable value shall be binding on Tenant for the purposes of establishing the
amount of insurance coverage due hereunder.

                  13.2.2 Fixtures. Tenant shall at all times during the term
hereof, and at its cost and expense, (i) maintain in effect policies of
insurance covering its fixtures and equipment, and leasehold improvements
located on the Premises, in an amount not less than one hundred percent (100%)
of their full replacement cost from time to time during the term of this Lease,
providing protection against any peril included within the classification Fire
and Extended Coverage, together with insurance against sprinkler damage,
vandalism and malicious mischief and (ii) be responsible for the maintenance,
repair, and replacement of the plate glass on the Premises but shall have the
option either to insure the risk or to self insure and (iii) procure and
maintain in full force and effect boiler and machinery insurance on all air
conditioning equipment, boilers, and other pressure vessels and systems, whether
fired or unfired, located in or serving the Premises; and if the said objects
and the damage that may be caused by them or result from them are not covered by
Tenant's Extended Coverage Insurance, then such insurance shall be in amount not
less than One Hundred Thousand Dollars ($100,000.00). The proceeds of such
insurance shall be used to repair or replace the fixtures, equipment and glass
so covered.

                  13.2.3 Rent Loss Endorsement. Landlord may require that the
above described policies of insurance shall be written with rent loss
endorsements in favor of Landlord and business interruption endorsements in
favor of Tenant to cover a period not less than twelve (12) months in amounts
sufficient to pay Tenant's obligations hereunder including, without limitation,
the Minimum Rent, real property taxes on the Premises, insurance premiums and
utility costs excluding only Tenant's and/or Landlord's avoided costs.

         13.3     Form of Policies. All insurance required to be carried by
Tenant hereunder shall be with companies rated A+ IX or better in "Best's
Insurance Guide" or accepted by the U.S. Department of Housing and Urban
Development, and shall be on forms and with loss payable clauses satisfactory to
Landlord naming Landlord, Landlord's mortgagee or other specified lender, and
any other persons, firms or corporations designated by Landlord as additional
insureds as their interests may appear, and copies of policies of such insurance
or certificates issued by the insurance company evidencing the existence and
amounts of such insurance shall be delivered to Landlord by Tenant at least
fifteen (15) days prior to Tenant occupying the Premises. If the Premises are
part of a larger property, said insurance shall have a Landlord's Protective
Liability endorsement attached thereto. All such policies shall be written as
primary policies, not contributing with and not in excess of coverage which
Landlord may carry. No such policies shall be cancelable (or coverage reduced),
except after thirty (30) days written notice to Landlord. Tenant shall, at least
thirty (30) days prior to the expiration of such policies, furnish Landlord with
renewals or "binders" thereof or, if after written notice and demand Tenant
shall fail to provide such insurance, then Landlord may order such insurance and
charge the cost

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thereof to Tenant, which amount shall be payable by Tenant upon demand and shall
bear interest at the rate provided for Past Due Obligations as provided in
Section 22.14, from the date of payment by Landlord. Tenant shall have the right
to provide such insurance coverage pursuant to blanket policies obtained by
Tenant provided such blanket policies expressly afford coverage to the Premises
and to the Landlord as required by this Lease and contains the other
requirements set forth herein.

         13.4 Waiver of Subordination. Landlord and Tenant each hereby waive any
and all rights of recovery against such other party and the officers, employees,
agents and representatives of such other party for loss of or damage to such
waiving party of its property or the property of others covered under the form
of fire insurance policy with all permissible extensions and endorsements
covering additional perils or under any other policy of insurance carded by such
waiving party in lieu thereof. Tenant shall obtain and furnish evidence to
Landlord of the waiver by Tenant's workmen's compensation carrier and other
carriers of any right of subrogation against Landlord.

         ARTICLE 14 - DAMAGE OR DESTRUCTION

         14.1 Reconstruction of Damaged Premises. In the event the Premises
shall be partially or totally destroyed by fire or other casualty insurable
under full standard extended coverage insurance, so as to become partially or
totally untenantable, the same shall be repaired as speedily as possible at the
expense of Landlord, unless Landlord shall not elect to rebuild as hereinafter
provided, and a just and proportionate part of the Minimum Rent shall be abated
until ten (10) days after notice from the Landlord to Tenant that the Premises
have been substantially so repaired. The obligation of the Landlord hereunder
shall be limited to the Building and in addition, the Tenant's permanent
improvements as certified by Tenant at commencement of the rental term, but
excluding Tenants trade fixtures, inventory and personal property. In no case
will Landlord's reconstruction obligation include murals, works of art, or
abnormal decorative treatments of Tenants Premises. In case Tenant has failed to
pay to Landlord Tenant's share of fire or other casualty insurance premiums,
Landlord's obligations will be limited to reconstruction of such "Landlord's
Work". Similarly, if Landlord is not responsible to maintain fire or casualty
insurance as to Tenant's "permanent improvements", Landlord shall have no
reconstruction obligation thereunto relating; in which case, Tenant shall be
responsible to "reconstruct" as aforementioned.

         14.2 Partial Destruction of Building. If more than fifty percent (50%)
of the gross leasable areas on the ground floor of the Building shall be
destroyed by fire, or other casualty, then Landlord may, if it so elects,
rebuild or put Building in good condition and fit for occupancy within a
reasonable time after such destruction or damage, or may give notice in writing
terminating this Lease. If Landlord elects to repair or rebuild the Building, it
shall within ninety (90) days after the occurrence of such damage or
destruction, give Tenant thereof notice of its intention to repair, as herein
provided, then proceed with reasonable speed to repair. In case Landlord elects
to rebuild or repair as herein provided, then the obligation of Landlord
hereunder shall be limited to the basic Building and in addition the Tenant's
permanent improvements as certified by Tenant at commencement of rental term,
but excluding Tenant's trade fixtures,

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inventory and personal property. In no case will Landlord's reconstruction
obligation include murals, works of art, or abnormal decorative treatments of
Tenant's premises. In case Tenant has failed to pay to Landlord Tenant's share
of fire or other casualty insurance premiums, Landlord's obligation will be
limited to reconstruction of such "Landlord's Work". Similarly, if Landlord is
not responsible to maintain fire or casualty insurance as to Tenants "permanent
improvements", Landlord shall have no reconstruction obligation thereunto
relating; in which case Tenant shall be responsible to "reconstruct" as
aforementioned.

         Notwithstanding the foregoing, if less then fifty percent (50%) but
more than twenty-five percent (25%) of such gross leasable areas of the Building
shall be damaged or destroyed by fire or other casualty during the last three
(3) years of the Lease Term hereof, then Landlord, at its option, shall have the
right to terminate this Lease by giving written notice to Tenant of its election
to so terminate, such notice to be given within ninety (90) days of the
occurrence of such damage or destruction.

         ARTICLE 15 - CONDEMNATION

         15.1     In the event that part of the Premises shall be taken or
condemned pursuant to applicable law such that:

                 (a) The part so taken includes the Building (or any material
part thereof located on the Premises, or

                 (b) The part so taken eliminates or significantly affects
access to any public street or highway and other alternative access to the
Premises is not available in DDOU, or

                 (c) The total Promises are taken.

         Then and in any of these events, the Tenant shall have the option to
terminate this Lease by written notice to Landlord as herein provided within
thirty (30) days from the date of the physical taking.

         15.2    In the event of a taking where the Tenant elects not to
terminate or where the Tenant has no right of termination, the Minimum Rent
shall be thereafter reduced based upon the value of the land of the Premises
immediately before the taking compared to the value of said land after the
taking and thereafter each respective party shall promptly restore the Premises,
parking area or access thereto, to the extent and as the case may be.

         15.3    In any event both parties shall have the right to pursue a
condemnation award and shall cooperate with each other to do so with the Tenant
being entitled to any award for lost business, moving expenses and the taking of
the improvements on the Premises and the value of its leasehold estate and the
Landlord being entitled to all other amounts awarded, including, but not limited
to loss of rent and the amounts awarded for residual land value after the
Tenant's leasehold estate value.

LEASE AGREEMENT - 20

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         ARTICLE 16 -ASSIGNMENT AND SUBLEASE

         16.1 By Tenant. Tenant shall not voluntarily or by operation of any
law, assign, license, transfer, mortgage or otherwise encumber all or any part
of Tenant's interest in this Lease (except that Landlord will not unreasonably
withhold its consent to Tenant financing with a first leasehold mortgage which
encumbers only Tenant's merchandise, personal property, equipment and removable
trade fixtures) or in the Premises, and shall not sublet or license all or any
part of the Premises without the prior written consent of both Landlord and the
Government in each instance, and any such transfer, mortgage, encumbrance or
subletting without such consent shall be wholly void. Without in any way
limiting Landlord's right to refuse to give reasonable consent, Landlord
reserves the right to refuse to give such consent for any of the reasons set
forth in Section 7.1 hereof or if in Landlord's sole discretion and opinion the
quality of DDOU or the business conducted an the Premises is or maybe in anyway
adversely affected during the term of the Lease or if the financial worth of the
proposed new tenant is less than that of the Tenant executing this Lease.
Without limiting the generality of the foregoing, the Landlord may also withhold
its consent if any proposed assignee or transferee is not able to demonstrate
credit worthiness satisfactory to Landlord, whose proposed use is different than
specified herein, is not compatible with Landlord's desired tenant mix, who
lacks comparable management ability, expertise, and experience, or whose
inventory or business operation is not otherwise of comparable quality.

         16.2 Excess Rents. In the event that Landlord and the Government
consent to the assignment or sublet of the Premises, Landlord shall be entitled
to forty percent (40%) of the payment (as additional rent hereunder) of the
excess rental payable by the assignee or subtenant over the rent payable by
Tenant under the Lease; or, if the entire premises area to be assigned or
sublet, at the election of Landlord the Lease may be terminated in which event
the assignee or subtenant will attorn to Landlord.

         16.3 Sale of Interest in Tenant. Tenant may, without Landlord's
consent, transfer the ownership among the existing shareholders or owners of
Tenant. Any sale by Tenant of an interest in excess of 50% of Tenant's capital
stock or assets to any third party who is not an existing shareholder or owner
of Tenant, shall be regarded as an assignment hereunder, requiring the prior
written consent of Landlord and the Government, which consent of the Landlord
shall not be unreasonably withheld, conditioned, or delayed. Notwithstanding the
foregoing, any issuance of tenant capital stock in connection with a public
offering or other recapitalization shall be deemed preapproved and shall not
require the prior written consent of Landlord and the Government.

         16.4 No Release. No subletting or assignment, even with the consent of
Landlord, shall relieve Tenant of its obligations hereunder, including those to
pay the rents and monetary charges hereunder, and perform all of the other
obligations to be performed by Tenant hereunder, unless the lease is terminated
by Landlord as provided in 16.2 above, or unless a novation is expressly
approved in writing by Landlord. Any sublet of the Premises shall be subordinate
to the terms of this Lease and any sublease of the Premises, or any portion
thereof, shall specify that such sublease shall terminate upon the termination
of this Lease for whatever reason or at the

LEASE AGREEMENT - 21

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sole election of Landlord, shall remain in full force and effect and Landlord,
after the termination of this Lease shall be entitled to receive all rents
payable pursuant to such sublease. The acceptance of rent by Landlord from any
other person shall not be deemed to be a waiver by Landlord of any provision of
this Lease or to be a consent to any assignment, subletting or other transfer.
Consent to one assignment, subletting or other transfer shall not be deemed to
constitute consent to any subsequent assignment, subletting or other transfer.
In the event that Landlord shall consent to a sublease or assignment hereunder,
Tenant shall pay Landlord's reasonable fees and costs incurred in connection
with the processing of documents necessary to the giving of such consent and/or
affecting such assignment or sublease, and shall provide Landlord with sixty
(60) days prior written notice of any request for consent.

         16.5 By Landlord. Landlord shall have the right to sell, assign,
transfer, convey or mortgage its interest in this Lease and in and to the
Premises, provided, however, that any such sale, assignment, transfer,
conveyance or mortgage shall not result in the disruption of Tenants quiet
enjoyment of the Premises and any such sale, assignment, transfer, conveyance or
mortgage shall be subject to the terms of this Lease.

         ARTICLE 17 - SUBORDINATION, QUIET ENJOYMENT, ATTORNMENT

         17.1 Subordination. This Lease, at Landlord's option, shall be subject
and subordinate to all ground or underlying leases or subleases which now exist
or may hereafter be executed affecting the Building or the land or both (the
Premises) and to the lien of any mortgages or deeds of trust in any amount or
amounts whatsoever now or hereafter placed on or against the land or
improvements or either thereof by Landlord, or on or against Landlord's interest
or estate therein, or on or against any ground or underlying lease or sublease
without the necessity of the execution and delivery of any further instruments
on the part of Tenant to effectuate such subordination; provided however, that
so long as Tenant complies with the obligations imposed upon Tenant in this
Lease, neither Tenant nor its successors and assigns (if approved by Landlord
and, if applicable, the Government) shall be disturbed or molested in its
possession of the Premises. If any mortgagee, trustee or ground lessor shall
elect to have this Lease be prior to the lien of its mortgage, deed or trust or
ground lease, and shall give written notice thereof to Tenant, this Lease shall
be deemed prior to such mortgage, deed of trust or ground lease, whether this
Lease is dated prior to, or subsequent to the date of said mortgage, deed of
trust, or ground lease or the date of the recording thereof.

         17.2 Subordination Agreements. Tenant hereby acknowledges that this
Lease is subject to the approval of the Government pursuant to the provisions of
the Landlord' Lease. Tenant further covenants and agrees to execute and deliver
upon demand without charge therefor, such further instruments evidencing the
subordination of this Lease to ground or underlying leases and to the lien of
any such mortgage or deeds of trust as may be required by Landlord or
prospective purchasers or mortgagees of the Premises, provided such instruments
contain customary non-disturbance provisions so long as Tenant is performing all
obligations of Tenant under this Lease. Landlord agrees that any trust deed or
any indebtedness or mortgage of Landlord, shall contain apt provisions under the
terms of which the existence of this Lease shall be recognized, and wherein it
shall be provided that so long as Tenant complies with the

LEASE AGREEMENT - 22

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obligations imposed upon Tenant in this Lease, neither Tenant nor its approved
successors and assigns shall be disturbed or molested in its possession of the
property covered by this Lease and the full enjoyment of this Lease for the term
and renewals or extensions hereof. This provision shall be binding upon trustees
in deeds of trust, mortgagees in mortgages and receivers thereunder and
purchasers at any sale pursuant thereto.

         17.3 Quiet Enjoyment. Landlord covenants that there are no liens upon
its estate other than (a) the effect of covenants, conditions, restrictions,
easements, rights and rights-of-way of record or unrecorded easements and
rights-of-way established by the Government which are attached as an addendum to
this Lease if applicable to Tenant's property or use thereof.) (b) the effect of
any local or state zoning laws; (c) general and special taxes no delinquent; and
(d) other liens, claims and encumbrances which will not affect the Tenant's
quiet enjoyment of the Premises. Landlord agrees that Tenant, upon paying the
rent and other monetary sums due under this Lease and performing the covenants
and conditions of this Lease, may quietly have, hold and enjoy the Premises
during the term hereof or any extension thereof; subject, however, to the
provisions of the hereinbefore referred to, Landlord's Lease, and the mortgages,
or deeds of trust, if any, and subject to provisions of this Lease requiring
Landlord's prior approval to any assignment, sublease, or other use or occupancy
of the Premises. Tenant agrees that as to its leasehold estate it, and all
persons in possession or holding under it, will conform to and will not violate
the terms of the Landlord's Lease.

         17.4 Attornment. In the event any proceedings are brought for default
under ground or any underlying lease or in the event of foreclosure,
receivership or in the exercise of the power of sale under any mortgage or deed
of trust made by Landlord covering the Premises, Tenant shall attorn to the
receiver or any purchaser upon any such foreclosure or rate and recognize such
receiver or purchaser as the Landlord under this Lease, provided said purchaser
expressly agrees in writing to accept Tenant and to be bound by the terms of
this Lease.

         ARTICLE 18 - DEFAULT AND REMEDIES

         18.1 Default. The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant:

              18.1.1 Any failure by Tenant to pay Rent or any other monetary
sums required to be paid hereunder, where such failure continues for ten (10)
days after written notice by Landlord to Tenant;

              18.1.2 The failure to occupy or the abandonment or vacation of the
Premises by Tenant;

              18.1.3 The repudiation of this Lease by Tenant, any action by
Tenant which renders performance by Tenant of its obligations under this Lease
impossible, or any action by Tenant which demonstrates an intent by Tenant not
to perform an obligation under this Lease or not to continue with the
performance of obligations under this Lease.

LEASE AGREEMENT - 23

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              18.1.4 A failure by Tenant to observe and perform any other
provision of this Lease to be observed or performed by Tenant, where such
failure continues for thirty (30) days after written notice thereof by Landlord
to Tenant; provided, however, that if the nature of the default is such that the
same cannot reasonably be cured within said thirty (30) day period, Tenant shall
not be deemed to be in default if Tenant shall within such period commence such
cure and thereafter diligently prosecute the same to completion;

              18.1.5 The making by Tenant of any general assignment or general
arrangement for the benefit of creditors, the filing by or against Tenant of a
petition for relief under, including a petition for reorganization or
arrangement under, any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days),
the appointment of a trustee or receiver to take possession of substantially all
of Tenant's assets or of Tenant's interest in this Lease where possession is not
restored to Tenant within thirty (30) days thereof, the attachment, execution or
other judicial seizure of substantially all of Tenants assets located at the
Premises or of Tenant's interest in this Lease where such seizure is not
discharged within thirty (30) days thereof, or an admission by Tenant in writing
of a failure, or an inability to pay its debts generally as they become due.

         18.2 Notice. If Landlord shall send more than one (1) notice of default
for any event of default, then Tenant shall pay Landlord the sum of One Hundred
Fifty Dollars ($150.00) in addition to any other obligations hereunder for the
cost of sending each Notice of Default.

         18.3 Remedies. In the event of any such material default or breach by
Tenant and after the notice and applicable grace period, if any, provided above,
Landlord may at any time thereafter, without limiting Landlord in the exercise
of any right of remedy at law or in equity which Landlord may have be reason of
such default or breach:

              18.3.1 Maintain this Lease in full force and effect and recover
the Rent and other monetary charges as they become due without terminating
Tenant's right to possession irrespective of whether Tenant shall have abandoned
the Premises. In the event Landlord elects not to terminate this Lease by
judicial process, Landlord shall nevertheless have the right to attempt to
re-let the Premises at such rent and upon such conditions and for such a term,
and to do all acts necessary to maintain or preserve the Premises as Landlord
deems reasonable and necessary without being deemed to have elected to terminate
the Lease, including removal of all persons and property from the Premises.
Tenant's property may be removed and stored in a public warehouse or elsewhere
at the cost of an for the account of Tenant, and if Tenant does not pay for
storage, then sold at public action and the proceeds of such sale shall first be
applied to payment of the expenses of such sale, second to amounts due Landlord
and the balance, if any, to Tenant. In the event any re-letting occurs, Tenant's
right to possession of the Premises under this Lease shall terminate
automatically upon the new Tenant taking possession of the Premises, but Tenant
shall nevertheless be responsible for damages, more particularly described in
Sections 18.3.2 through 18.3.5. Notwithstanding that Landlord fails to elect to
terminate the Lease initially, Landlord may, at any time during the term of this
Lease, elect to terminate this Lease by judicial process by virtue of such
previous, unpaid default of Tenant.

LEASE AGREEMENT - 24

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         18.3.2 Terminate the Lease and Tenant's right to possession through
applicable judicial process and upon issuance of an order of eviction Tenant
shall immediately surrender possession of the Premises to Landlord. In such
event, Landlord shall be entitled to recover from Tenant in any such judicial
process all damages as determined by the court to be incurred by Landlord by
reasons of Tenants default including, without limitation thereto, the following:

                18.3.2.1 the worth at the time of award of any unpaid Rent which
had been earned at the time of such termination; plus

                18.3.2.2 the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that could have been reasonably
avoided; plus

                18.3.2.3 the amount by which the unpaid Rent for the balance of
the term after the time of award exceeds the amount of such rental loss that
could be reasonably avoided; plus

                18.3.2.4 any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenants failure to perform his
obligation under this Lease or which in the ordinary course of events would be
likely to result therefrom including costs and expense incurred by Landlord in
making the Premises ready for a new tenant; plus

                18.3.2.5 at Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time by
applicable law of the State of Utah. Upon any such re-entry, Landlord shall have
the right to make any reasonable repairs, alterations or modifications to the
Premises, which Landlord, in its sole discretion, deems reasonable and
necessary. As used in 18.3.2.1 above, the "worth at the time of award" is
computed by allowing interest at the rate provided for on Past Due Obligations
as provided in Section 22.14 from the date of default The term "Rent," as used
in this section, shall be deemed to be and to mean the rent to be paid pursuant
to Article 4 and all other monetary sums required to be paid by Tenant pursuant
to the terms of this Lease. Without limiting Landlord's discretion as to
re-letting the Premises, the parties understand and agree that Landlord shall
not be obligated to mitigate rental loss by re-letting the Premises following a
default by Tenant so long as Landlord has other similar vacant space in DDOU or
to a new tenant whose use of the Premises would not be consistent with existing
or desired tenant mix within DDOU, would violate the terms of the Landlord's
Lease, or would place an undue burden on the common areas and facilities within
DDOU. Notwithstanding that Landlord fails to elect to terminate the Lease
initially, Landlord may terminate this Lease at any time during the term of this
Lease by virtue of such previous uncured default by Tenant.

         18.3.3 Tenant's lender has previously placed liens upon certain
personal property belonging to the Tenant that will be stored on the Leased
Premises. Tenant's lender has required landlord lien waivers from all landlords
from whom Tenant leases facilities. A copy of this landlord's lien waiver is
attached as Exhibit G. Landlord agrees to execute a landlord's lien waiver in
substantially the same form as that contained on Exhibit G.

LEASE AGREEMENT - 25

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         18.4   Special Damages. In addition to the damages for breach of this
Lease described in Section 18.3, Tenant agrees that Landlord shall be entitled
to receive from Tenant any and all costs in connection with Tenant's default
hereunder, including without limitation, administrative costs of Landlord
associated with Tenants default, costs of repairing and/or remodeling the
Premises for new tenants and leasing commissions for any leasing agent engaged
to re-let the Premises.

         18.5   Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of Rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which are now
and will be extremely difficult to ascertain other than such charges and late
charges which may be imposed on Landlord by the terms of any mortgage or trust
deed covering the Premises. Accordingly, if any installment of Rent or any other
sums due from Tenant shall not be received by Landlord or Landlord's designee
within ten (10) days after such amount shall be due, Tenant shall pay to
Landlord a late charge equal to ten percent (10%) of the amount(s) past due and
additionally all such installments of Rent or other sums due shall bear interest
at the rate provided for on Past Due Obligations as provided in Section 22.14
from the date the same became due and payable. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant. Acceptance of such late charge
by Landlord shall in no event constitute a waiver of Tenant's default with
respect to such overdue amount, except to the amounts so paid, nor prevent
Landlord from exercising any of the other rights and remedies granted hereunder.

         18.6   Default by Landlord. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event later than thirty (30) days after written notice by Tenant
to Landlord and to the holder of any mortgage or deed of trust covering the
Premises furnished to Tenant in writing, specifying wherein Landlord has failed
to perform such obligations; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for performance,
then Landlord shall not be in default if Landlord commences performance within
such thirty-day period and thereafter diligently prosecutes the same to
completion; provided further, that in the event that Landlord has defaulted in
the payment(s) of a monetary obligation and Tenant has advanced monies to pay
such obligation, Landlord shall pay Tenant interest on such monies advanced at a
rate provided for on Past Due Obligations as provided in Section 22.14 from the
date the money was advanced by Tenant.

    18.7 Bankruptcy

         18.7.1 Chapter 7. In the event that Tenant shall become a debtor in a
case filed under Chapter 7 of the Bankruptcy Code, and Tenants trustee or Tenant
shall elect to assume this Lease for the purpose of assigning the same or
otherwise, such election and assignment may be made only if the provisions of
Sections 18.7.2,18.7.4 and 18.7.5 are satisfied. If Tenant or Tenants trustee
shall fail to elect to assume this Lease within sixty (60) days after the filing
of such petition or such additional time as provided by the court within such
60-day period, this

LEASE AGREEMENT - 26

<PAGE>

Lease shall be deemed to have been rejected. Immediately thereupon Landlord
shall be entitled to possession of the Premises without further obligation to
Tenant or Tenant's trustee and this Lease, upon the election of Landlord, shall
terminate, but Landlord's right to be compensated for damages (including,
without limitation, damages pursuant to this Article 18) in any such proceeding
shall survive whether or not the Lease is terminated.

         18.7.2 Chapter 11. In the event that Tenant shall become a debtor in a
case filed under Chapter 11 of the Bankruptcy Code, or in a case filed under
Chapter 7 of this Bankruptcy Code which is converted to Chapter 11, Tenants
trustee or Tenant, as debtor-in-possession, must elect to assume this Lease
within sixty (60) days from the date of the filing of the petition under Chapter
11 or conversion thereto, or Tenant's trustee or the debtor-in-possession shall
be deemed to have rejected the Lease. Immediately thereupon Landlord shall be
entitled to possession of the Premises without further obligation to Tenant or
Tenant's trustee and this Lease, upon the election of Landlord, shall terminate
but Landlord's right to be compensated for damages (including, without
limitation, damages pursuant to this Article 18) in any such proceeding shall
survive whether or not the Lease is terminated.

                18.7.2.1 In the event that Tenant, Tenant's trustee or the
debtor-in-possession has failed to perform all of Tenant's obligations under
this Lease within the time periods (excluding grace periods) required for such
performance, no election by Tenant's trustee or the debtor-in-possession to
assume this Lease, whether under Chapter 7 or Chapter 11, shall be permitted or
effective unless each of the following conditions has been satisfied:

                18.7.2.2 Tenants trustee or the debtor-in-possession has cured
all defaults under the Lease, or has provided Landlord with Assurance (as
defined below) that it will cure all defaults susceptible of being cured by the
payment of money within ten (10) days from the date of such assumption and that
it will cure all other defaults under this Lease which are susceptible of being
cured by the performance of any act promptly after the date of such assumption.

                18.7.2.3 Tenant's trustee or the debtor-in-possession has
compensated, or has provided Landlord with Assurance that within ten (10) days
from the date of such assumption that it will compensate Landlord for any actual
pecuniary loss incurred by Landlord arising from the default of Tenant, Tenants
trustee, or the debtor-in-possession indicated in any statement of actual
pecuniary loss sent by Landlord to Tenant's trustee or the debtor-in-possession.

                18.7.2.4 Tenant's trustee or the debtor-in-possession has
provided Landlord with Assurance of the future performance of each of the
obligations under this Lease by Tenant, Tenant's trustee or the
debtor-in-possession, and if Tenant's trustee or the debtor-in-possession has
provided such Assurance, Tenant's trustee or the debtor-in-possession shall also
deposit with Landlord, as security for the timely payment of Rent hereunder, an
amount equal to six (6) monthly installment payments of the Minimum Rent, which
shall be applied to the last installments of Minimum Rent that shall become due
under this Lease, provided all the terms and provisions of this Lease shall have
been complied with. The obligations imposed upon Tenant's

LEASE AGREEMENT - 27

<PAGE>

trustee or the debtor-in-possession by this paragraph shall continue with
respect to such parties, Tenant or to any assignee of this Lease during or after
the completion of bankruptcy proceedings.

                18.7.2.5 Such assumption will not breach or cause a default
under any provision of any other lease, mortgage, financing arrangement or other
agreement by which Landlord is bound relating to the Premises.

                18.7.2.6 For purposes of this Section 18.7, Landlord and Tenant
acknowledge that "Assurance" shall mean no less than: (i) Tenants trustee or the
debtor-in-possession has and will continue to have sufficient unencumbered
assets after the payment of all secured obligations and administrative expenses
to assure Landlord that sufficient funds will be available to fulfill the
obligations of Tenant under this Lease; (ii) there shall have been deposited
with Landlord, or the Bankruptcy Court shall have entered an order segregating
sufficient cash payable to Landlord, and/or Tenants trustee or
debtor-in-possession shall have to Landlord granted a valid and perfected first
lien and security interest and/or mortgage in property of Tenant, Tenants
trustee or the debtor-in-possession, acceptable as to value and kind to
Landlord, sufficient to secure to Landlord the obligations of Tenant; and (iii)
Tenants trustee or the debtor-in-possession has sufficient funds available to
cure the defaults under this Lease, monetary and/or non-monetary, as provided
and within the time periods set forth above.

         18.7.3 Subsequent Petitions. In the event that this Lease is assumed in
accordance with Section 18.7.2, and thereafter Tenant is liquidated or files or
has filed against it a subsequent petition under Chapter 7 or Chapter 11 of the
Bankruptcy Code, Landlord may, at its option, terminate this Lease and all
rights of Tenant hereunder, by giving Tenant notice of its election to so
terminate within thirty (30) days after the occurrence of either of such events.

         18.7.4 Adequate Assurances. If Tenants trustee or the
debtor-in-possession has assumed the Lease pursuant to the terms and provisions
of Sections 18.7.1, 18,7.2, and 18.7.3 for the purposes of assigning (or elects
thereafter to assign) this Lease, this Lease may be so assigned only if the
proposed assignee has provided adequate assurance of future performance of all
of the terms, covenants and conditions of this Lease to be performed by Tenant.
Landlord shall be entitled to receive all cash proceeds of such assignment. As
used herein, "adequate assurance of future performance" shall mean that all such
requirements as set forth in Section 365 of the Title 11, U.S. Code (as may be
amended) are met, and further mean that no less than each of the following
conditions has been satisfied:

                18.7.4.1 The proposed assignee has furnished Landlord with
either (i) a current financial statement audited by a certified public
accountant indicating a net worth and working capital in amounts which Landlord
reasonably determines to be sufficient to assure the future performance by such
assignee of Tenant's obligations under this Lease, or (ii) a guarantee or
guarantees, in form and substance satisfactory to Landlord, from one or more
persons with a net worth which Landlord reasonably determines to be sufficient
to secure the Tenant's obligations hereunder, and information with respect to
the proposed assignee's management ability, expertise and experience in Tenant's
business and Landlord has reasonably determined

LEASE AGREEMENT - 28

<PAGE>

that the proposed Assignee has the management expertise and experience to
operate the business conducted on the Premises.

                18.7.4.2 Landlord has obtained all consents or waivers from
others required under any lease, mortgage financing arrangements or other
agreement by which Landlord is bound to permit Landlord to consent to such
assignment without violating the terms of any such agreement.

                18.7.4.3 The proposed assignment will not release or impair any
guaranty of the obligations of Tenant (including the proposed assignee) under
this Lease.

         18.7.5 Use and Occupancy Charges. When, pursuant to the Bankruptcy
Code, Tenant's trustee or the debtor-in-possession shall be obliged to pay
reasonable use and occupancy charges for the use of the Premises, such charges
shall not be less than the Minimum Rent and other charges due hereunder. No
acceptance by Landlord of said use and occupancy charges, or of rent hereunder
shall constitute a waiver of any of the provisions of this Section 18.7 or any
of the Landlord's rights thereunder.

         18.7.6 No Transfer Without Consent. Neither the whole nor any portion
of Tenant's interest in this Lease or its estate in the Premises shall pass to
any trustee, receiver, assignee for the benefit of creditors, or any other
person or entity, or otherwise by operation of law under the laws of any state
having jurisdiction of the person or property of Tenant unless the requirement
and conditions of this Section 18.7 are fully met or unless Landlord and the
Government shall have otherwise consented to such transfer in writing. No
acceptance by Landlord of installment payments of Rent or any other payments
from any such trustee, receiver, assignee, person or other entity shall be
deemed to constitute such consent by Landlord nor shall it be deemed a waiver of
Landlord's rights under this Section 18.7 including the right to terminate this
Lease for any transfer of Tenants interest under this Lease without such
consent.

         ARTICLE 19 - NOTICES

         All notices or demands of any kind required or desired to be given by
or to Landlord, Tenant or Guarantors hereunder shall be in writing and shall be
deemed delivered forty-eight (48) hours after depositing the notice or demand in
the United States mail, certified or registered, postage prepaid, addressed to
the Landlord, Tenant, or the Guarantors respectively at the address set forth in
Article 1.13 of this Lease.

         ARTICLE 20 - COMMON AREAS

         20.1   Availability. Landlord may make available during the term of
this Lease, on such portion of DDOU as Landlord shall from time to time
designate or relocate such automobile parking and common areas, if any (jointly
referred to as "common areas," as that term is hereinafter defined), as Landlord
may from time to time deem appropriate. If so designated, Tenant shall have the
non-exclusive right during the term of this Lease to use the common areas for
itself, its employees, agents, customers, invitees and licensees.

LEASE AGREEMENT - 29

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         20.2   Definition. The term "common areas" generally means the portions
of DDOU which have at the time in question been designated and improved for
common use by or for the benefit of more than one tenant of DDOU, including and
if applicable, the land and facilities utilized for or as parking areas and
access and perimeter roads, but excluding any portion of DDOU so included within
the common areas when designated by Landlord for a non-common use.

         20.3   Landlord's Management and Control. All common areas, including
those located on the Premises, shall be subject to the exclusive control and
management of Landlord or such other persons or nominees as Landlord may have
delegated or assigned to exercise such management or control, in whole or in
part, in Landlord's place and stead, and Landlord and Landlord's nominees and
assignees shall have the right to establish, modify, amend and enforce
reasonable rules and regulations with respect to the common areas. Tenant agrees
to abide by and conform with such rules and regulations, to cause its employees
and agents so to abide and conform, and to use its best efforts to cause its
customers, invitees and licensees to so abide and conform. It shall be the duty
of the Tenant to keep all of said areas free and clear of any obstructions
created or permitted by Tenant or resulting from Tenants operation and in no
event shall Tenant have the right to sell or solicit in any manner in any of the
common areas.

                20.3.1 Landlord shall have the right to close, if necessary, all
or any portion of the common areas to such extent as may, in the opinion of
Landlord's counsel, be legally necessary to prevent a dedication thereof or the
accrual of any rights of any person or of the public therein; to use portions of
the common areas while engaged in making additional improvements or repairs or
alterations to DDOU, and to do and perform such other acts in, to, and with
respect to, the common areas as in the use of good business judgment Landlord
shall determine to be appropriate for DDOU.

                20.3.2 Landlord shall have the right to increase or reduce the
common areas, to rearrange the parking spaces and improvements on the common
areas, and to make such changes therein and thereto from time to time which, in
its opinion, are deemed to be desirable and for the best interests of all
persons using said common area, provided, however, access to the Premises are
not materially and adversely affected and the improvements on the specific
parcel on which the Premises are located are not materially changed.

                20.3.3 The Landlord shall have the right to establish, and from
time to time change, alter and amend, and to enforce against the Tenant and the
other users of said common areas such reasonable rules and regulations as may be
deemed necessary or advisable for the proper and efficient operation and
maintenance of said common areas. The rules and regulations may include, without
limitation, the hours during which the common areas shall be open for use.
Landlord may, if, in its opinion, the same be advisable, establish a system or
systems of validation or other type operation, including a system of charges
against non-validated parking checks of users, and the Tenant agrees to conform
to and abide by all such rules and regulations in its use and the use of its
customers and patrons with respect to said common areas; provided, however, that
all such rules and regulations and such types of operation or validation of
parking

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<PAGE>

checks and other matters affecting the customers and patrons of the Tenant shall
apply equally and without discrimination to all persons entitled to the use of
said common areas.

                20.3.4 Any reference in this Section 20.3 to Landlord shall be
deemed to include the Government.

         20.4   Employee Parking. Tenant shall cause its employees to park in
areas that do not interfere with parking for customers and/or suppliers to other
property owners or tenants in DDOU. Tenant and its employees shall park their
cars only on the Premises, or in those portions of the parking areas, if any,
designated for the purpose by Landlord. If Tenant or its employees fail to park
their cars in designated parking areas, then Landlord may charge Tenant
Twenty-Five Dollars ($25.00) per day for each day or partial day per car parked
in any areas other than those designated, plus any costs involved in towing such
cars away, unless arrangements approved by Landlord have been made to tow such
cars away at the employee's expense.

         ARTICLE 21 -SIGNS

         21.1   Tenant may provide a suitable exterior signboard, sign or signs
of such size, design and character, and in such location as Landlord shall
approve in writing, such Landlord approval not to be unreasonably withheld.
Tenant hereby expressly covenants and agrees that such signage shall, unless
otherwise expressly permitted in writing by Landlord, also comply with all laws,
rules, regulations and zoning ordinances and requirements. Attached as Exhibit C
are Landlord's standard sign criteria which Tenant shall generally follow as to
sign types, color, materials and type of construction. Tenant agrees to
indemnify and hold Landlord harmless from any liability or damage arising or
resulting from the use of or erection of any such sign(s). In the event of
violation of any ordinance applicable to any signs so erected or constructed,
Tenant agrees to forthwith correct such violation and comply with any such
ordinances.

         21.2   If Tenant shall erect, install or maintain any signs, lights, or
other forms of inscription of advertising, display, or illuminating device
outside, in or upon the Premises in violation of this Article, or the standards
set forth on Exhibit C and shall not immediately upon notice from Landlord cause
the same to be removed or discontinued, Landlord, in addition to any other
rights or remedies to which it may be entitled hereunder or as a matter of law
or in equity, may enter upon the Premises, without thereby causing an eviction
of Tenant from said Premises or interference with Tenants right of quiet use and
enjoyment thereof, and cause said sign, lights, or other form of inscription or
advertising or display device to be removed or discontinued, and the costs of
such removal or discontinuance shall be paid by Tenant, as additional Rent, on
the first day of the month following said removal or discontinuance and if not
so paid, such sums shall bear interest at the rate provided for on Past Due
Obligations as provided in section 22.14 from the due date.

         ARTICLE 22 - GENERAL

         22.1   Exclusives. It is herewith agreed that this Lease contains no
restrictive covenants or exclusives in favor of Tenant.

LEASE AGREEMENT - 31

<PAGE>

         22.2   Tenant Offset and Estoppel Certificate.

                22.2.1 Tenant shall, at any time within ten (10) days after
written notice from Landlord, execute, acknowledge and deliver to Landlord a
statement in writing in the form attached as Exhibit E or such similar or
modified form as Landlord shall reasonably request (i) certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified, is
in full force and effect) and the date to which the rent and other charges are
paid in advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults if they are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser, lender or other encumbrancer of the Premises.
Landlord shall, at any time within ten (10) days after written notice from
Tenant, provide a certificate containing such similar information as Tenant may
reasonably request.

                22.2.2 Tenant's failure to deliver such statement within such
time shall be conclusive upon Tenant (i) that this Lease is in full force and
effect, without modification except as may be represented by Landlord, (ii) that
there are no uncured defaults in Landlord's performance, and (iii) that not more
than an amount equal to one month's rent has been paid in advance.

                22.2.3 If Landlord, after acquiring said property from the
Government, desires to sell, finance, or refinance the Premises, DDOU or any
part thereof, Tenant hereby agrees to deliver to any purchaser or lender
designated by Landlord such financial statements of Tenant as may be reasonably
required by such purchaser or lender. All such financial statements shall be
received by Landlord in confidence and shall be used only for the purpose herein
set forth.

         22.3   Transfer of Landlord's Interest. In the event of a sale or
conveyance by Landlord or Landlord's interest in DDOU and/or the Premises, other
than a transfer for security purposes only, Landlord shall be relieved from and
after the date specified in any such notice of transfer of all obligations and
liabilities accruing thereafter on the part of the Landlord, provided that any
funds in the hands of Landlord at the time of transfer in which Tenant has an
interest, shall be delivered to the successor of Landlord. This Lease shall not
be affected by any such sale and Tenant agrees to attorn to the purchaser or
assignee provided all Landlord's obligations hereunder are assumed in writing by
the transferee. Upon the sale of the Premises, Tenant, upon notice of any such
transfer, shall change the name insured under the insurance policies described
in Article 13 to the new Landlord.

         22.4   Captions, Attachments: Defined Terms.

                22.4.1 The captions of the sections of this Lease are for
convenience only and shall not be deemed to be relevant in resolving any
question of interpretation or construction of any section of this Lease.

LEASE AGREEMENT - 32

<PAGE>

          22.4.2 Exhibits attached hereto and addenda and schedules are deemed
by attachment and/or reference to constitute part of this Lease and are
incorporated herein as an integral part of this Lease.

          22.4.3 The words "Landlord," "Tenant" and "Guarantor," as used herein,
shall include the plural as well as the singular. Words used in neuter gender
include the masculine and the feminine. Words used in the masculine or feminine
gender include the neuter. If there be more than one Landlord, Tenant or
Guarantor, the obligations hereunder imposed upon Landlord, Tenant or Guarantor
shall be joint and several; as to a Tenant or Guarantor which consists of
husband and wife, the obligations shall extend individually to their sole and
separate property as well as community property. The term "Landlord" shall mean
only the owner or owners at the time in question of the fee title or a lessee's
interest in a superior lease of the Premises. The obligations contained in this
Lease to be performed by Landlord shall be binding on Landlord's successors and
assigns only during their respective periods of ownership.

     22.5 Entire Agreement. This instrument, along with any exhibits and
attachments hereto, constitutes the entire agreement between Landlord and Tenant
relative to the Premises and there are no oral agreements or representations
between the parties hereto affecting this Lease, and this Lease supersedes and
cancels any and all previous negotiations, arrangements, brochures, agreements
or representations and understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease. There are no
other representations or warranties between the parties or the parties and their
agents or representatives and all reliance with respect to representations is
solely upon the representations and agreements contained in this document. This
agreement and the exhibits and attachments may be altered, amended or revoked
only by an instrument in writing signed by both Landlord and Tenant.

     22.6 Severability. If any term or provision of this Lease shall, to any
extent be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, and
each term and provision of this Lease shall be valid and be enforceable to the
fullest extent permitted by low; and it is the intention of the parties hereto
that if any provision of this Lease is capable of two constructions, one of
which would render the provision void and the other of which would render the
provision valid, then the provision shall have the meaning which renders it
valid.

LEASE AGREEMENT - 33

<PAGE>

     22.7  Costs of Suit

           22.7.1 If Tenant or Landlord shall bring any action for relief
against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of rent or possession of the
Premises, the losing party shall pay the successful party a reasonable sum for
attorneys' fees which shall be deemed to have accrued on the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment.

           22.7.2 Should Landlord, without fault on Landlord's part, be made a
party to any litigation instituted by Tenant or by any third party against
Tenant, or by or against any person holding under or using the Premises, by
license of Tenant, or for the foreclosure of any lien for labor or materials
furnished to or for Tenant or any such other person or otherwise arising out of
or resulting from any act or transaction of Tenant or of any such other person,
Tenant covenants to save and hold Landlord harmless from any judgment rendered
against Landlord or the Premises or any part hereof, and all costs and expenses,
including reasonable attorneys' fees incurred by Landlord in or in connection
with such litigation.

     22.8  Times; Joint and Several Liability; Guarantors. Time is of the
essence of this Lease and each and every provision hereof. All the terms,
covenants and conditions contained in this Lease to be performed by either
party, if such party shall consist of more than one person or organization,
shall be deemed to be joint and several, and all rights and remedies of the
parties shall be cumulative and non-exclusive of any other remedy at law or in
equity. Any Guarantors, if any, executing this Lease covenant and agree that
they bind themselves by their signatures hereon as principals with joint and
several liability and not as sureties all as more particularly provided on
Exhibit E.

     22.9  Binding Effect: Choice of Law. The parties hereto agree that all the
provisions hereof are to be construed as both covenants and conditions as though
the words importing such covenants and conditions were used in each separate
paragraph hereof. Subject to any provisions hereof restricting assignment or
subletting by Tenant and subject to section 22.3, all of the provisions hereof
shall bind and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns. This Lease shall be
governed by the laws of the State of Utah as an agreement to be performed in
Utah and as an agreement between domiciliaries of said state.

     22.10 Waiver. No covenant, term or condition or the breach thereof shall be
deemed waived, except by written consent of the party against whom the waiver is
claimed, and any waiver of the breach of any covenant term or condition shall
not be deemed to be a waiver of any other covenant, term or condition herein.
Acceptance by Landlord of any performance by Tenant after the time the same
shall have become due shall not constitute a waiver by Landlord of the breach or
default of any such covenant, term or condition unless otherwise expressly
agreed to by Landlord in writing.

     22.11 Surrender of Premises. The voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation thereof, shall not work a merger and shall,
at the option of

LEASE AGREEMENT - 34

<PAGE>

Landlord terminate all or any existing subleases or subtenancies, or may, at the
option of Landlord, operate as an assignment to it of any or all such subleases
or subtenancies.

     22.12 Holding Over. This Lease shall terminate and shall become null and
void without further notice upon the expiration of the term herein specified,
and any holding over by Tenant after such expiration shall not constitute a
renewal hereof or give Tenant any rights under this Lease. If Tenant shall hold
over for any period after the expiration of said term, Landlord may, at its
option, exercised by written notice to Tenant, treat Tenant as a Tenant from
month to month commencing on the first day following the expiration of this
Lease, subject to the terms and conditions herein contained except that the
Minimum Rent, which shall be payable in advance monthly, shall be one hundred
fifty percent (150%) of the Minimum Rent applicable at the date of expiration.
If Tenant fails to surrender the Leased Premises upon the expiration of this
Lease, Tenant shall indemnify and hold Landlord harmless from all loss or
liability, including without limitation, any claims made by any succeeding
tenant founded on or resulting from such failure to surrender.

     22.13 Force Majeure. 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, enemy or hostile governmental action, civil
commotion, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform, shall excuse the performance by such
party for a period equal to any such prevention, delay or stoppage except the
obligations imposed with regard to Rent and other charges to be paid to Tenant
pursuant to this Lease.

     22.14 Interest on Past Due Obligations. Except as otherwise expressly
herein provided, any amounts due to Landlord not paid when due shall bear
interest at the rate which is greater of (a) three (3) points over the prime
rate of interest at First Security Bank, (or such other state or federal
chartered bank doing business in Utah as may be specified in a written notice to
Tenant hereafter) or (b) eighteen percent (18%) an a per annum basis from the
due date; provided, however, that notwithstanding the foregoing, such interest
shall not, in any event, exceed the highest rate permitted by applicable law.
Payment of interest shall not excuse or cure any default by Tenant under this
Lease, except to the extent of amounts paid by Tenant and accepted by Landlord.

     22.15 Corporate Authority. If Tenant and/or Guarantor is a corporation,
each individual executing this Lease and/or the guaranty attached as Exhibit E
on behalf of said corporation represents and warrant that he is duly authorized
to execute and deliver this Lease and/or guaranty on behalf of said corporation
in accordance with a duly adopted resolution of the Board of Directors of said
corporation or in accordance with the Bylaws of said corporation, and that this
Lease and/or guaranty is binding upon said corporation in accordance with its
terms.

     22.16 Provisions Re: Landlord's Lease. Tenant acknowledges and agrees that
this Lease is subject to the conditions and term of the Department of the Army
Interim Lease Under Base Realignment and Closure between the Secretary of the
Army and Landlord (the "Landlord's Lease") and that, in case of any conflict
between the instruments, the Landlord's Lease will

LEASE AGREEMENT - 35

<PAGE>

control. Upon request of the Landlord herein, Tenant will cause the fee owner of
the real property (the "United States") to be designated as an additional
insured under the policies of insurance carded by Tenant pursuant to the
provisions hereof. In each instance wherein Tenant under the provisions of this
lease holds Landlord harmless, or waives claims or rights of subrogation against
Landlord such provisions shall also be deemed applicable to and in favor of the
Government in like manner as applicable to Landlord herein. Tenant agrees not to
knowingly violate, cause to be violated or cause Landlord to be in violation of
Landlord's obligations to the Government and consistent with quiet enjoyment of
the Premises under this lease, should such ground lease be prematurely
terminated Tenant will acknowledge and accept the Government as Landlord under
this Lease. In the event Landlord shall acquire fee title to the real property
upon which the Premises are located, this Lease shall continue in effect as a
sublease and the leasehold estate of Landlord under such ground lease shall not
merge with fee title, but shall continue in effect unless Landlord by recorded
document elects to terminate said ground lease. Should Landlord acquire fee
title to the real property upon which the Premises are located and elect by
instrument recorded to terminate such ground lease, this Lease shall then
continue in full force and effect as a direct Lease (as distinguished from a
sublease) between Landlord and Tenant.

     22.17 Warranties of Tenant. Tenant warrants and represents to Landlord, for
the express benefit of Landlord, that (a) Tenant has undertaken, to the extent
it deems necessary for its purposes, an independent evaluation of the risks
inherent in the execution of this Lease and the operation of the Leased Premises
for the use permitted hereby, and that, based upon said independent evaluation,
Tenant has elected to enter into this Lease and accept the Premises.

     22.18 Commission Agreements. Each party represents to the other that no
brokers have been involved in this transaction. If any claims for brokerage or
leasing commissions are ever made against Landlord or Tenant in connection with
this transaction, each such claim shall be handled and paid by the parties whose
actions or commitments form the basis of such claim.

     ARTICLE 23 - SPECIAL CONDITIONS AND AGREEMENTS

     The special conditions and/or agreements, if any, with respect to this
Lease shall be as set forth in the Addendum.

     22.18 Commission Agreements. Each party represents to the other that no
brokers have been involved in this transaction. If any claims for brokerage or
leasing commissions are ever made against Landlord or Tenant in connection with
this transaction, each such claim shall be handled and paid by the parties whose
actions or commitments form the basis of such claim.

     ARTICLE 23 - SPECIAL CONDITIONS AND AGREEMENTS

     The special conditions and/or agreements, if any, with respect to this
Lease shall be set forth in the Addendum.

LEASE AGREEMENT - 36

<PAGE>

     IN WITNESS WHEREOF, Landlord, Tenant and Guarantors, if any, have executed
this Lease to be effective the date and year first above written.

LANDLORD:                             OGDEN CITY, a Utah Municipal Corporation,
                                      acting as a Local Redevelopment Authority

                                      By:    /s/ Glann J. Mecham
                                           ------------------------------
                                           Glenn J. Mecham, Mayor

ATTEST:

     /s/ ILLEGIBLE
----------------------------
CITY RECORDER

APPROVED AS TO FORM:

    /s/ ILLEGIBLE
----------------------------
CITY ATTORNEY

                                      ICON Health and Fitness, Incorporated

                                      By:  /s/ Fred Beck
                                         ---------------------------------------
                                         Fred Beck, Chief Financial Officer

GUARANTORS:

                                      __________________________________________

                                      __________________________________________

STATE OF UTAH     )
                  ) SS.
COUNTY OF WEBER   )

LEASE AGREEMENT - 37

<PAGE>

     The foregoing instrument was acknowledged before me this 9th day of July ,
1998, by GLENN J. MECHAM, the Major of Ogden City, a Utah Municipal Corporation.

                                        /s/ DeAnn Wallwork
                                      ------------------------------------------
                                      NOTARY PUBLIC

STATE OF  UTAH     )
         ------
                      )  SS
COUNTY OF  CACHE   )
          -------

     The foregoing instrument was acknowledged before me this 29 day of June,
1998, by Fred Beck, the Chief Financial Officer of the ICON Health and Fitness
Corporation.

                                        /s/ Denise Lott
                                      ------------------------------------------
                                      NOTARY PUBLIC

LEASE AGREEMENT - 38

<PAGE>

                                    ADDENDUM

                        Special Provisions Per Article 23

     23.1 Environmental Protection.

          23.1.1 Incorporation of Environmental Provisions of Landlord's Lease.
Tenant and Landlord each acknowledge and agree to abide by and comply with the
environmental provisions set forth in Sections 26 through 30 of the Landlord's
Lease, as follows:

          26.    ENVIRONMENTAL PROTECTION

                 a. The Lessee will use all reasonable means available to
          protect the environment and natural resources, and where damage
          nonetheless occurs from activities of the Lessee, the Lessee shall be
          liable to restore the damaged resources. The Lessee shall not
          discharge waste or effluent from the Leased Premises in such a manner
          that the discharge will contaminate streams or other bodies of water
          or otherwise become a public nuisance.

                 b. The Lessee shall be responsible for obtaining and paying for
          any environmental or other permits required for its operations under
          the Lease, independent of any existing permits.

                 c. The Governments rights under this Lease specifically include
          the right for Government officials to inspect, upon reasonable notice,
          the Leased Premises for compliance, with environmental, safety, and
          occupational health laws and regulations, whether or not the
          Government is responsible for enforcing them. Such inspections are
          without prejudice to the right of duly constituted enforcement
          officials to make such inspections. The Government normally will give
          the Lessee twenty-four (24) hours prior notice of its intention to
          enter the Leased Premises unless it determines the entry is required
          for safety, environmental, operations, or security purposes. The
          Lessee shall have no claim on account of any entries against the
          United States or any officer, agent, employee, or contractor thereof.

                 d. The Government acknowledges that DDOU has been identified as
          a National Priorities List Site under the Comprehensive Environmental
          Response, Compensation, and Liability Act (CERCLA) of 1980, as
          amended. The Lessee acknowledges that the Government has provided it
          with a copy of the DDOU Federal Facility Agreement Under CERCLA
          Section 120 (FFA) entered into by the United States Environmental
          Protection Agency Region VIII, the Utah Department of Health, and the
          Defense Logistics Agency, and effective on November 30, 1989, and will
          provide the Lessee with a copy of any amendments thereto. The Lessee
          agrees that should any conflict arise between the terms of the FFA, as
          it presently exists or may be amended, and the provisions of this
          Lease,

LEASE AGREEMENT - 39

<PAGE>

          the terms of the FFA will take precedence. The Lessee further agrees
          that notwithstanding any other provision of the Lease, the Government
          assumes no liability to the Lessee should implementation of the FFA
          interfere with the Lessee's use of the Leased Premises. The Lessee
          shall have no claim on account of any such interference against the
          United States or any officer, agent, employee or contractor thereof,
          other than for abatement of rent.

                 e. The Secretary, Defense Logistics Agency, EPA, and UDEQ,
          their officers, agents, employees, contractors and subcontractors have
          the right, upon reasonable notice to the Lessee, and to parties in
          possession, to enter upon the Leased Premises for purposes consistent
          with the applicable provisions of the FFA, and for the following
          purposes:

                           (1) to conduct investigations and surveys, including,
          where necessary, drilling, soil and water sampling, test pitting, soil
          boring tests and other activities related to the DDOU Installation
          Restoration Program (IRP), FFA or Interagency Agreement (IAG):

                           (2) to inspect field activities of the Army and its
          employees, agents, contractors and subcontractors in implementing that
          DDOU IRP, FFA or IAG;

                           (3) to conduct any test or survey required by EPA or
          UDEQ relating to the implementation of the FFA or environmental
          conditions at the Leased Premises, or to verify any data submitted to
          the EPA or the UDEQ by the Army relating to such conditions;

                           (4) to construct, operate, maintain or undertake any
          other response or remedial action as required or necessary under the
          IRP, FFA, or IAG, including, but not limited to, monitoring wells,
          soil removal, pumping wells and treatment facilities; and

                           (5) to conduct Environmental Compliance Assessment
          System Surveys (ECAS).

                 f. The Lessee shall comply with the provisions of any health or
          safety plan in effect under the IRP or the FFA during the course of
          the above described response or remedial actions. Any inspection,
          survey, investigation, or other response or remedial action will, to
          the extent practicable, be coordinated with representatives designated
          by the Lessee. The Lessee shall have no claim on account of such
          entries against the United States or any officer, agent, employee,
          contractor, or subcontractor thereof. In addition, the Lessee shall
          comply with all applicable Federal, state and local occupational
          safety and health regulations.

LEASE AGREEMENT - 40

<PAGE>

                 g. The Lessee shall strictly comply with the hazardous waste
          permit requirements under the Resource Conservation and Recovery Act
          (RCRA), or its Utah equivalent and any other applicable laws, rules or
          regulations. Except as specifically authorized by the Government in
          writing, the Lessee must provide, at its own expense, hazardous waste
          management facilities, including storage, treatment or disposal
          facilities, complying with all applicable laws and regulations.
          Government hazardous waste management facilities will not be available
          to the Lessee. Any violation of the requirements of this Condition
          shall be deemed a material breach of this Lease.

                 h. Department of Defense (DOD) Component accumulation points
          for hazardous and other wastes will not be used by the Lessee. The
          Lessee will not permit its hazardous waste to be commingled with
          hazardous waste of the DOD Component.

                 i. The Lessee shall prepare and maintain a Government-approved
          plan for responding to hazardous waste, fuel and other chemical spills
          prior to commencement of operations on the Leased Premises. Such plan
          shall be independent of DDOU and shall not rely an use of installation
          personnel or equipment should the Government provide any personnel or
          equipment, whether for initial fire response and/or spill containment,
          or otherwise on the request of the Lessee or because the Lessee was
          not, in the opinion of the Said Officer, conducting timely cleanup
          actions, the Lessee agrees to reimburse the Government for its costs.
          The plan may be developed in phases as sublease activities are
          identified. Sublessees shall provide to the Lessee a plan to cover
          their activities and portion of the Leased Premises prior to
          commencement of operations on the subleased portion, which will be
          incorporated by the Lessee into the overall plan.

                 j. The Lessee shall not construct or make or permit its
          sublessees or assigns to construct or make any alterations, additions,
          or improvements to, or installations upon or otherwise modify or alter
          the Leased Premises in anyway which may adversely affect the
          environment program, environmental cleanup, human health, the
          environment, cultural and historic resources, or endangered or
          threatened species without the prior written consent of the
          Government. Such consent may include a requirement to provide the
          Government with a performance and payment bond satisfactory to it in
          all respects and other requirements deemed necessary to protect the
          interests of the Government for construction or alterations,
          additions, modifications, improvements, or installations in the
          proximity of operable units that are part of a National Priorities
          List (NPL) site, such consent may include a requirement for written
          approval by the Secretary's Remedial Project Manager. Except as such
          written approval shall expressly provide otherwise, all such approved
          alterations, additions, modifications, improvements, and installations
          shall become Government property when annexed to the Leased Premises.

LEASE AGREEMENT - 41

<PAGE>

                 k. The Lessee shall not conduct or permit its sublessees to
          conduct any subsurface excavation, digging, drilling, or other
          disturbance of the surface without the prior written approval of the
          Government.

                 l. The Lessee shall not use the Leased Premises for the storage
          or disposal of non-Department of Defense owned hazardous or toxic
          materials, as defined in 10 U.S.C. (S) 2692, unless authorized under
          10 U.S.C. (S) 2692 and approved by the Government.

                 m. Access to the polychlorinated Biphenyls (PCB) vaults and
          transformers are restricted except to authorized and qualified utility
          purveyors.

                 n. The Government may impose any additional environmental
          protection conditions and restrictions during the term of this Lease
          that it deems necessary by providing written notice of such
          restrictions to the Lessee.

          27.    HAZARDOUS SUBSTANCES NOTICE

                 To the extent such information is available on the basis of a
          complete search of Army files, notice regarding hazardous substances
          stored for one year or more, known to have been released, or disposed
          of on the Leased Premises is provided in Exhibit G, attached hereto.
          The Lessee should consult the Condition Survey and the EBB for more
          detailed information.

          28.    LEAD-BASED PAINT WARNING

                 a. The Leased Premises do not contain residential dwellings and
          are not being leased for residential purposes. The Lessee is notified
          that the Leased Premises contains buildings built prior to 1978 that
          contain lead-based paint. Such property may present exposure to lead
          from lead-based paint that may place young children at risk of
          developing lead poisoning. Lead poisoning in young children may
          produce permanent neurological damage, including learning
          disabilities, reduced intelligence quotient, behavioral problems and
          impair memory. A risk assessment is recommended prior to execution of
          this Lease.

                 b. Available information concerning known lead-based paint
          and/or lead-based paint hazards, the location of lead-based paint
          and/or lead-based paint hazards, and the condition of painted surfaces
          is contained in the EBS, which has been provided to the Lessee.
          Additionally, the Lessee has been provided with a copy of the
          federally-approved pamphlet on lead poisoning prevention. The Lessee
          hereby acknowledges receipt of all the information described in this
          subparagraph.

LEASE AGREEMENT - 42

<PAGE>

                 c. The Lessee acknowledges that it has been provided an
          opportunity to conduct a risk assessment or inspection for the
          presence of lead-based paint and/or lead-based paint hazards prior to
          execution of this Lease.

                 d. The Lessee shall not permit use of any buildings or
          structures on the Leased Premises for residential habitation without
          first obtaining the written consent of the Army. As a condition of its
          consent, the Army may require the Lessee to (i) inspect for the
          presence of lead-based paint and/or lead-based paint hazards; (ii)
          abate and eliminate lead-based paint hazards by treating any defective
          lead-based paint surface in accordance with all applicable laws and
          regulations; and (iii) comply with the notice and disclosure
          requirements under applicable Federal and state law. The Lessee agrees
          to be responsible for any future remediation of lead-based paint found
          to be necessary on the Leased Premises.

          29.    ASBESTOS

                 a. The Lessee is hereby informed and does acknowledge that
          friable and non-friable asbestos or asbestos-containing materials
          (ACM) has been found on the Leased Premises, as described in the Final
          Environmental Baseline Survey and CERFA Letter Report. The ACM on the
          Leased Premises does not currently pose a threat to human health or
          the environment. All friable asbestos that posed a risk to human
          health has either been removed or encapsulated.

                 b. Unprotected or unregulated exposures to asbestos have been
          associated with asbestos-related diseases. Both the Occupational
          Safety and Health Administration (OSHA) and the Environmental
          Protection Agency (EPA) regulate asbestos because of the potential
          hazards associated with exposure to airborne asbestos fibers. Both
          OSHA and EPA have determined that such exposure increases the risk of
          asbestos -related diseases, which include certain cancers and which
          can result in disability or death.

                 c. The Lessee acknowledges that it has inspected the Leased
          Premises as to its asbestos content and condition and any hazardous or
          environmental conditions relating thereto, as part of the Condition
          Survey, described in the Condition on CONDITION OF THE PREMISES. The
          Lessee shall be deemed to have relied solely on its own judgment in
          assessing the overall condition of all or any portion of the property,
          including, without limitation, any asbestos hazards or concerns.

                 d. As stated in the Condition on CONDITION OF THE LEASED
          PREMISES, and specifically with regard to ACM, no warranties, either
          express or implied, are given with regard to the condition of the
          property, including, without limitation, whether the Leased Premises
          does or does not contain asbestos or is or is not safe for a
          particular purpose. The failure of the Lessee to Inspect, or to be
          fully informed as to the condition of all or any portion of the
          property

LEASE AGREEMENT - 43

<PAGE>

          offered, will not constitute grounds for any claim or demand against
          the United States.

                 e. In addition to the general indemnity contained in the
          Condition on HOLD HARMLESS AND INDEMNITY, with regard specifically to
          ACM, the United States assumes no responsibility for remediation of
          asbestos and no liability for damages for personal injury, illness,
          disability, or death to the Lessee's successors, assigns, employees,
          invitees, or any other person subject to Lessee's control or direction
          or to any other person, including members of the general public,
          arising from or incident the purchase, transportation, removal,
          handling, use, disposition, or other activity causing or leading to
          contact of any kind whatsoever with asbestos on the Leased Premises,
          whether the Lessee has properly warned or failed to properly warn the
          individual(s) injured.

                 f. The Lessee further agrees that in its use and occupancy of
          the Leased Premises it will comply with all federal, state, and local
          laws relating to asbestos. The Lessee agrees to be responsible for any
          future remediation of asbestos found to be necessary on the Leased
          Premises.

          30.    OTHER ENVIRONMENTAL RESTRICTIONS

                 a. The Lessee must obtain approval in writing from the DDOU
          pest management coordinator or Said Officer before any pesticides or
          herbicides are applied to the Leased Premises. Only U.S. Environmental
          Protection Agency approval pesticides or herbicides will be
          authorized, and application must be in accordance with the
          manufacturer's instructions. Empty containers or unused pesticides or
          herbicides must be disposed of off the installation in accordance with
          EPA disposal standards.

                 b. The Lessee and/or authorized sublessees shall not use the
          facilities for residential uses and/or non-residential uses commonly
          used by children under seven years of age.

          23.1.2 Landlord's Representation. Landlord, to the best of
Landlord's knowledge, and other than as disclosed to Tenant in the form of the
Condition Survey prepared by the Government, which Condition Survey the Tenant
acknowledges receiving, represents that no toxic or hazardous substances as
defined by any applicable federal or state law has been discharged, stored,
disposed of or allowed to escape on the Premises, that no underground storage
tanks are located on or in the Premises, or were located on the Premises and
subsequently removed or filled and that the Premises are in compliance with all
applicable federal, state and local statutes, laws and regulations regarding
toxic or hazardous substances.

LEASE AGREEMENT - 44

<PAGE>

     23.2 Lease-Offsets.

          23.2.1 During the first term of the Lease, the actual cost of work
done by Tenant that is determined by the Landlord to be necessary to establish
Tenant's business on the Leased Premises may be allowed as an offset to rent,
subject to the approval of the Landlord and the Government.

          23.2.2 In order to receive such rental offset, Tenant shall submit to
Landlord a request for lease offset, including a complete description of work to
be accomplished, design drawings if construction is involved, a detailed cost
estimate of the work to be completed or the actual cost if already completed,
and any other data as may be requested by the Landlord or the Government, acting
through the District Engineer. In no event shall an offset be approved which
does not qualify under Landlord's lease for use of rental payments.

          23.2.3 An approved offset shall be prorated in equal monthly
installments over the remainder of the first term. If the actual cost for the
work is less than the approved estimates, adjustment will be made to the
prorated amount. If approval is based on estimated costs, the actual amount of
the offset shall not exceed the estimated cost without prior approval of the
Landlord and the Government.

          23.2.4 Within thirty (30) days after completion of any work approved
for rental offset, Tenant shall provide Landlord with substantiation of the
actual costs incurred in completing the work. Any approved offset may be
terminated by Landlord for failure to provide such substantiation or for failure
to complete such improvements within the time frames as indicated in Exhibit B.

     23.3 Right of First Refusal. The Landlord is not the present owner and has
applied to acquire the property from the United States through an economic
development conveyance. If Landlord gains fee title, Landlord covenants and
agrees that in the event Landlord shall at any time during the term of the
Lease, as the same is extended from time to time, and so long as Tenant is not
in default of this Lease, intend to or desire to sell Landlord's leasehold
estate in the Premises, or if Landlord shall receive a bona fide offer to
purchase the Premises, then Landlord shall first notify Tenant of its desire and
intent to sell or of the receipt of notice from Landlord, to elect to purchase
the estate in the Premises and all of Landlord's fight, title and interest
therein for such price and upon such stated terms and conditions. Tenant's right
of first refusal as herein contained shall remain in force and be binding upon
any subsequent owner or owners of the demised Premises to the same extent as if
said subsequent owner or owners were the Tenant named herein. Notwithstanding
the foregoing, Tenant's right of first refusal shall not apply to any sale of
the Premises as part of the sale of some or all of the entire DDOU, even though
such sale includes the Premises, and it shall only apply to a sale solely of
Landlord's interest in the demised Premises. In the event that Landlord shall
provide notice to Tenant of its desire and intent to sell and/or of the receipt
of an offer which it is willing to accept and if Tenant shall decline such
offer, then this right of first refusal shall be extinguished and shall be of no
further force or effect. This Right of First Refusal does not obligate the
Government.

LEASE AGREEMENT - 45

<PAGE>

         23.4 Lease Renewal. Notwithstanding the provisions of 3.3, the right of
extension for the second term may be exercised by Tenant giving written notice
to Landlord to extend such term at least thirty (30) days prior to the August
27, 1998, termination date.

          23.5 Termination Provision. The Tenant shall have the right to
terminate this Lease upon providing to Landlord a written notice of termination
sixty (60) days in advance.

          23.6 Miscellaneous Clarifications.

               23.6.1 Where the term "Building" is used in this Lease, it shall
refer to the warehouse building located on the Premises.

               23.6.2 It is understood that Tenant may operate its business on a
24 hours per day, 7 days a week basis.

               23.6.3 Notwithstanding anything herein to the contrary, Lessee
agrees to be responsible for any future remediation required as a result of
Lessee's bringing hazardous materials onto the Premises, or as a result of any
Lessee-initiated disturbance of previously encapsulated or protected hazardous
materials on the Premises. Lessee shall not be responsible for future
remediation of hazardous materials that existed on the Premises prior to
Lessee's possession thereof.

LEASE AGREEMENT - 46

<PAGE>

                                    EXHIBIT A
                              DDOU LEASE AGREEMENT
                         DESCRIPTION OF LEASED PREMISES

1.   Building 365 (16-A) and all property associated with it (see attached map).

     238 South Clark Ave.
     Ogden, UT 84407

together with the yard areas between the Building and the adjacent streets,
including all sidewalks, landscaped areas, open space areas and designated
parking lots to be used by Tenant

LEASE AGREEMENT - 47

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                                [GRAPHIC OMITTED]

LEASE AGREEMENT - 48

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                                    EXHIBIT B
                              DDOU LEASE AGREEMENT
                             CONSTRUCTION PROVISIONS

     1.   Improvements.

          1.1 Construction and Construction Costs. Tenant covenants and agrees
to construct (with a contractor accepted by Landlord in writing, which
acceptance shall not be unreasonably withheld) and in a good and workmanlike
manner, certain agreed upon improvements to the Building on the Premises
according to the Plans and Specifications referred to subsequently herein (which
certain agreed improvements to be constructed on and to become a part of the
Premises shall be referred to herein as the "Improvements"). Tenant's
construction activities will not interfere unreasonably with the use of DDOU by
other tenants, employees, customers or invitees thereof or with other
construction activities with DDOU. The staging area for Tenants construction
shall be only on the Premises unless Landlord shall designate in writing other
areas as additional staging areas. Personnel working on the construction of any
improvements on the Premises shall park only on the Premises or in those
locations designated by Landlord when a particular phase of construction makes
padding on the Premises impractical or dangerous.

          The cost of the Improvements, which shall be paid by Tenant, shall
include all costs and expenses associated with the construction of the
Improvements within the Premises including, without limitation, materials, labor
and other hard construction costs, site preparation, pad compaction, utility
charges, meter fees, connection fees, fire service fees, building permit fees,
all other fees, permits, licenses and approvals associated with the construction
within the Premises, architectural and engineering fees, power from transformer
to Building, professional fees, and all other costs and expenses incurred by
Tenant in connection with the construction within the Premises.

Tenant accepts the Premises "as is" based on its own inspections.

     2.   Construction Timetable/Procedures.

          2.1 Plans and Specifications. Tenant shall provide to Landlord, for
Landlord's approval, a complete set of plans and specifications for the
Improvements to be constructed within the Premises by Tenant, including site and
landscape plans and building elevations. The plans and specifications shall be
consistent with the schematic site plans and architectural elevations of
Tenant's building as submitted to the appropriate approval authorities for
required consents and permits ("Approvals"). Government approval of construction
is required by Landlord's Lease. Landlord shall approve or request modifications
to the Plans and Specifications within ten (10) days of receipt of approval from
the Government's District Engineer of same. If Landlord is requesting
modification, such notice shall include a detailed explanation of the requested
reasonable changes. After all of the plans and specifications are approved, such
final plans and specifications (the "Plans and Specifications") shall be
incorporated by reference as a part of this Lease without attachment. The
approved Plans and

LEASE AGREEMENT - 49

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Specifications shall be initiated by both Landlord and Tenant. The Plans and
Specifications shall not be modified, by change order or otherwise, without
Landlord's written consent. Construction of the Improvements by Tenant or
Tenant's contractor shall start within sixty (60) days after Landlord approves
Tenant's Plans and Specifications.

          2.2 Government Approvals. Tenant shall obtain all necessary
governmental approvals, including building permits, for the construction of the
improvements. Landlord shall have the right to review and approve all such
governmental approvals. Tenant shall pay all permits and approval fees
associated with the Building.

LEASE AGREEMENT - 50

<PAGE>

                                    EXHIBIT C
                              DDOU LEASE AGREEMENT
                             GENERAL SIGN STANDARDS

     These criteria have been established for the mutual benefit of all tenants.
Conformance will be strictly enforced and any installed nonconforming or
unapproved signs must be removed or brought into conformance at the expense of
Tenant. This criteria may be modified only with Landlord's written approval in
Landlord's sole discretion. Pursuant to the Landlord's Lease Tenant shall not
construct or place any structure, improvement or advertising sign on the
Premises without prior written approval of the District Engineer.

A.   GENERAL REQUIREMENTS:

     1. Tenant shall submit or cause to be submitted to the Landlord for
approval before fabrication at least three copies (at least one to contain color
copy) of detailed drawings indicating the location on the Tenants space and the
layout design and color of the proposed signs, including all lettering and/or
graphics.

     2. All permits for Tenants signs and their installation shall be obtained
by the Tenant or the Tenants' representative and shall conform to all local
building and electrical codes.

     3. All signs shall be constructed and installed at Tenant's expense.

     4. No billboards or outdoor advertising is permitted.

B.   LOCATION OF SIGNS:

     Only one exterior sign per Tenant space shall be permitted, unless
otherwise approved with the prior written consent of Landlord. Such sign shall

     1. Be place only on or along one facade of the main building on the
Premises;
     2. Be parallel to the applicable building facade; and
     3. Be in such location only as Landlord shall approve in writing at its
sole discretion.

C.   DESIGN REQUIREMENTS:

     The design of all signs, including style, placement and height of
letterings, size, color, and materials, method and amount of illumination shall
be subject to the approval of Landlord. General design guidelines are as follows
(and may be supplemented in the future by further guidelines):

     1. Signs should be either free-standing or wall-mounted. All free-standing
signs should be monument style with concealed support (no poles), and should
have associated

LEASE AGREEMENT - 51

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landscaping. All-mounted and free-standing identification signs should be an
extension of the architectural style of buildings.

     2. Wall-mounted signs should extend no more than 16' beyond the face of the
building or above the parapet or eaves of the buildings.

     3. Total size of the sign used for business identification shall be limited
to 25 square feet or one square foot for each lineal foot of the street frontage
of the building, whichever is larger. A company logo (not to exceed 16 square
feet in area) may be allowed in addition to the business identification signage.

     4. The amount of sign-face covered with letters should not exceed 30%.

     5. If illumination is provided, it should be constant rather than animated
or flashing.

     6. No exposed lamps, tubing, animated, flashing, audible signs, exposed
raceways, crossovers, conduit or brackets will be permitted. All cabinets,
conductor, transformers and other equipment shall be concealed.

D.   CONSTRUCTION REQUIREMENTS:

     1. Exterior facade signs, bolts, fastenings, and clips shall be enameled
iron with enamel finish, stainless steel, aluminum, brass or bronze or other
rust-free metal. No black iron materials of any type will be permitted.

     2. Exterior facade signs, which are exposed to the weather, shall be spaced
off the wall a minimum of one-quarter inch (1/4") to permit proper dirt and
water drainage away from the building unless otherwise directed by Landlord.

     3. Location of all openings for conduit in sign panels on building walls
shall be indicated by the sign contractor on drawings submitted to Landlord. All
penetrations of the building structure required for sign installation shall be
neatly sealed in a watertight conditions. No labels will be permitted on the
exposed surface of signs except those required by local ordinance which shall be
applied in an inconspicuous location.

LEASE AGREEMENT - 52

<PAGE>

                                    EXHIBIT D
                              DDOU LEASE AGREEMENT
                              ESTOPPEL CERTIFICATES

                     TENANT OFFSET AND ESTOPPEL CERTIFICATE

TO:       __________________
          __________________
          __________________

RE:  Lease dated _________ 199_, by and between Ogden City, a Utah Municipal
     Corporation, acting as a Local Redevelopment Authority, as Landlord and
     ___________, as Tenant, on Premises located in the Defense Distribution
     Depot, Ogden, Utah.

Gentlemen:

     The undersigned tenant (the `Tenant") and landlord (the "Landlord") certify
and represent unto the addressee hereof (hereinafter referred to as the
"Purchaser" or "Lender"), its attorneys and representatives, with respect to the
above-described lease, a true and correct copy of which is attached as Exhibit A
hereto, (the "Lease") as follows:

     1. All space covered by the Lease has been furnished to the satisfaction of
Tenant, all conditions required under the Lease have been met, and there is no
default by Landlord or Tenant and Tenant has accepted and taken possession of
the premises covered by the Lease.

     2. The Lease is for a total term of ___________ (_) years, __________(_)
months commencing , 199_, has not been modified, altered or amended on any
respect and contains the entire agreement between Landlord and Tenant except as
follows:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(list amendments and modifications other than those, if any, attached to and
forming a part of the attached Lease as well as any verbal agreements; or write
"None").

     3. As of the date hereof, the Minimum Rent under the Lease is $ ________
monthly.

     4. No rent has been paid by Tenant in advance under the Lease except for $
__________, which amount represents rent for the period beginning __________,
19_ and ending ____________, 19 and Tenant has no charge or claim of offset
under said Lease or otherwise, against rents or other amounts due or to become
due thereunder. No "discounts", "free rent" or "discounted rent" have been
agreed to or are in effect except for

LEASE AGREEMENT - 53

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     5.  A Security Deposit of $____________ has been made and is currently
being held by Landlord.

     6. Tenant has no claim against Landlord for any deposit or prepaid rent
except as provided in Paragraphs 4 and 5 above.

     7.  The Landlord has satisfied all commitments, arrangements or
understandings made to induce Tenant to enter into the Lease, and Landlord is
not in any respect in default in the performance of the terms and provisions of
the Lease, nor is there now any fact or condition which, with notice or lapse of
time or both, would become such a default.

     8.  Tenant is not in any respect in default under the terms and provisions
of the Lease (nor is there now any fact or condition which, with notice or lapse
of time or both, would become such a default) and has not assigned, transferred
or hypothecated its interest under the Lease, except as follows:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

     9.  Except as expressly provided in the Lease or in any amendment or
supplement to the Lease, Tenant:

         (i)   does not have any right to renew or extend the term of the Lease,

         (ii)  does not have any option or preferential right to purchase all or
any part of the Premises or all or any part of the building or premises of which
the Premises are a part, and

         (iii) does not have any right, title, or interest with respect to the
Premises other than as Tenant under the Lease.

There are no understandings, contracts, agreements, subleases, assignments, or
commitments of any kind whatsoever with respect to the Lease of the Premises
covered thereby except as expressly provided in the Lease or in any amendment of
supplement to the Lease set forth in Paragraph 2 above, copies of which are
attached hereto.

     10. The Lease is in full force and effect and Tenant has no defenses,
setoffs, or counterclaims against Landlord arising out of the Lease or in any
way relating thereto or arising out of any other transaction between Tenant and
Landlord.

     11. The Tenant has not received any notice, directly or indirectly, of a
prior assignment hypothecation or pledge by Landlord of the rents or the Lease
to a person or entity.

     12. The current address to which all notices to Tenant as required under
the Lease should be sent is:

LEASE AGREEMENT - 54

<PAGE>

     13. Addressee's rights hereunder shall inure to its successors and assigns.

     14. Tenant acknowledges that Addressee is acquiring ownership of the
Premises. Tenant agrees that upon Addressee acquiring ownership, Tenant will
attorn and does attorn and agrees to recognize and does recognize Addressee as
Landlord on the condition that Addressee agrees to recognize the Lease referred
to in this document as long as Tenant is not in default thereunder, provided,
however, that Addressee shall have no liability or responsibility under or
pursuant to the terms of the Lease for any cause of action or matter not
disclosed herein or that accrues after Addressee ceases to own a fee interest in
the property covered by the Lease.

     15. The Tenant agrees to execute reasonable modifications to the Lease and
such documents as Addressee may request for the purpose of subordinating the
Lease to any mortgage or deed of trust to be placed upon the property by
Addressee from time to time and any estoppel certificates requested by Addressee
from time to time in connection with the sale or encumbrance of the Premises.

     16. Tenant makes this certificate with the understanding that the Addressee
is contemplating acquiring the Premises, and that if Addressee acquires the
Premises, it will do so in material reliance on this certificate and Tenant
agrees that the certifications and representations made herein shall survive
such acquisition.

Executed on the ________   day of ____________________,       199_.

TENANT:                                LANDLORD:

________________________________       OGDEN CITY, a Utah Municipal Corporation,
                                       acting as a Local Redevelopment Authority

By:_____________________________       By:______________________________
Its:____________________________       Its:_____________________________

LEASE AGREEMENT - 55

<PAGE>

                                    EXHIBIT E
                              DDOU LEASE AGREEMENT
                             GUARANTOR'S OBLIGATIONS

LEASE AGREEMENT - 56

<PAGE>

                                    GUARANTY

         To induce Ogden City, a Utah Municipal Corporation, acting as a Local
Redevelopment Authority, to enter into that certain Lease Agreement dated the _
day of ________, 1998 by and between Ogden City, as Landlord, and ___________ as
Tenant (the "Lease"), ____________ (whether individually or collectively
"Guarantor") agrees with Landlord as follows:

         1 . Guaranty of Payment. The Guarantor hereby absolutely and
unconditionally guarantees to Landlord the due and punctual payment of all rent
and all other sums when and as the same shall become due and payable under the
Lease. This guaranty is an absolute, unconditional, continuing guaranty of
payment and not of collectibility, and is in no way conditioned or contingent
upon any matter or occurrence whatsoever, including any attempt to collect the
obligations from Tenant, from any other person, firm or corporation obligated
with respect thereto, or of any other guarantor thereof. If Tenant fails to pay
punctually any rent or other sum due under the Lease when and as the same
becomes due and payable, the Guarantor shall, upon notice of such failure,
immediately pay the same to Landlord.

         2. Guaranty of Performance. The Guarantor hereby absolutely and
unconditionally guarantees to Landlord that Tenant will duly and punctually
perform and comply with all terms or obligations to be performed or complied
with by Tenant under the Lease and any other agreements entered into subsequent
thereto relating to Tenant's obligations under the Lease. If Tenant fails to
perform or comply with any such term or obligation, the Guarantor shall, upon
notes of such failure, forthwith perform or comply with such term or obligation
or cause the same forthwith to be performed or complied with.

         3. Costs and Expenses. The Guarantor shall pay all costs and expenses
incurred by or on behalf of Landlord (including without limitation attorneys'
fees and expenses) in enforcing either the obligations of the Guarantor under
this agreement or the obligations of Tenant with respect to the Lease.

         4. Subsequent Occurrences. The obligation of the Guarantor under this
agreement shall remain in full force and effect without regard to and shall not
be affected or impaired in any respect by any amendment, modification, or
termination of the Lease; any exercise, nonexercise, waiver, release or
cancellation by Landlord of any right, remedy, power or privilege under or
related to the Lease; any consent, extension, indulgence or other action,
inaction or omission under or related to the Lease; any insolvency, bankruptcy,
liquidation, reorganization, arrangement dissolution or other proceeding
involving or affecting Tenant or any other Guarantor, any consent to assignment
or subletting of the Tenant's interest under the Lease; or any other cause or
circumstance whatsoever which would or might in any manner or to any extent vary
the risk of the Guarantor or which would or might otherwise operate as a
discharge of the Guarantor as a matter of law, whether or not the Guarantor has
notice or knowledge of any of the foregoing.

         5. Waive.  The Guarantor unconditionally waives; (a) notice of any of
the matters referred to in paragraph 4 hereof, (b) all notices that may be
required by statute, rule or law, or

LEASE AGREEMENT - 57

<PAGE>

otherwise to preserve any rights of Landlord against Tenant, the Guarantor or
any other party obligated in connection with the Lease, including without
limitation presentment to, demand of payment from, and protest to, Tenant the
Guarantor or any such other party; (c) any right to the enforcement, assertion,
exercise or nonexercise by Tenant of any right, power or remedy conferred in the
Lease or any other instrument whatsoever, (d) any right of subrogation by virtue
of payment made hereunder, and (e) notice of acceptance of this guaranty.

         6. Miscellaneous. This writing is intended by Guarantor and Landlord as
the final expression of their agreement of guaranty and is intended as a
complete and exclusive statement of the terms of their agreement. Neither this
agreement nor any term hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. This
agreement is delivered in the State of Utah and shall be governed by and
construed with the laws of the State of Utah. The Guarantor hereby consents to
the jurisdiction of Utah courts over all matters relating to this agreement. The
obligations and liabilities of the Guarantor hereunder shall be joint and
several.

         DATED this _ day of ____________________,   1998.

         GUARANTOR:

STATE OF UTAH              )
                           )
COUNTY OF ___________      )

         The foregoing instrument was acknowledged before me this ____ day of
______________ , 1998 by ______________.
                                (Name)

                                  _______________________________
                                  NOTARY PUBLIC

LEASE AGREEMENT - 58

<PAGE>

                                    EXHIBIT F
                           BASIC RULES AND REGULATIONS

         At all times during the lease term, Tenant will comply with the
following rules and regulations at its sole cost and expense:

         1. Tenant will maintain the Premises in clean, neat sanitary and
orderly condition.

         2. Tenant will comply with all of the rules and regulations of the
American Insurance Association, the state Insurance Bureau and any similar
bodies. Tenant will not commit any action or permit any condition to be
continued on the Premises which might increase the existing rate of any
insurance policy held by Landlord. Tenant will not do or keep anything that will
cause cancellation of (or be prohibited by) Landlord's insurance policies.

         3. Tenant will refrain from burning waste materials of any kind or
otherwise creating noxious odors. All odor and moisture producing areas must be
adequately exhausted, so that odors and moisture do not travel beyond the
Premises. Exhaust and make-up air systems will be subject to Landlord's
inspection. Tenant will be responsible for the utilities and other costs of all
exhaust air and special cooling and heating systems (such as refrigeration,
walk-in coolers, make-up air and other equipment serving Tenants special needs).

         4. Tenant will maintain adequately-sized grease interceptors on sinks,
dishwashers, drains or plumbing units as required by applicable building codes.
Tenant will be responsible for disposing of all waste products and other matter
so as to avoid any clogging or interference with DDOU utility systems.

         5. Tenant will store all trash and garbage within the Premises in
containers acceptable to Landlord so located as not to be visible to customers
and business Invitees in the Building and to avoid any health or fire hazard,
and arrange for their prompt and regular removal during hours to be specified by
Landlord.

         6. Tenant will refrain from doing anything on or about the Premises
that will cause an overload. If Landlord believes there is an overload, Landlord
may select a qualified electrician whose opinion will control regarding any
overload of electrical circuits or a qualified engineer or architect whose
opinion will control regarding floor overloads or other stresses. Tenant will
promptly comply with any actions recommended by the electrician, engineer or
architect.

         7. Tenant shall not place any sign, awning, canopy, marquee,
advertising matter, decoration, lettering or other thing of any kind on any
window or exterior door or wall, without the prior written consent of Landlord
and the District Engineer.

         8. Tenant shall have the right, at its expense, to maintain advertising
matter appropriate to the conduct of Tenant's business within the boundaries of
the Premises subject to

LEASE AGREEMENT - 59

<PAGE>

the approval of the District Engineer. However, Tenant shall immediately remove
any sign, advertisement, decoration, lettering or notice placed on or viewed
within the Premises which Landlord deems objectionable or offensive, and if
Tenant fails or refuses to do so, Landlord will enter the Premises and remove
the same at Tenant's expense. In this connection, Tenant acknowledges that the
premises is a part of DDOU and maintenance of uniformity, propriety and the
aesthetic values are essential to the successful operation of both Landlord's
and Tenant's businesses.

         9.  Tenant shall not use any advertising or promotional medium which
can be heard or experienced outside the Premises, including (without limitation)
flashing lights, loud speakers, phonographs, radios and/or televisions. No
leaflets, handbills or other advertising material will be placed on cars in the
parking area or distributed outside the Premises.

         10. Without the written consent of Landlord, Tenant shall not permit
any sale by auction to be conducted on or about the Premises, whether voluntary,
involuntary or pursuant to any assignment for the benefit of creditors, or
pursuant to any bankruptcy or other insolvency proceeding. No fire, bankruptcy,
lost lease and/or going-out-of-business sale shall be conducted.

         11. Any Building employee to whom premises is entrusted by or on behalf
of Tenant shall be deemed to be acting as Tenant's agent. Landlord shall not be
liable for any damage to any property entrusted by employees of the Building,
for the loss or damage to any premises of Tenant by theft or otherwise.

         12. Tenant will refrain from keeping, displaying, advertising or
selling any merchandise outside the boundaries of the Premises, or on any
portion of any sidewalks, walkways or other portion of the Building and adjacent
premises, except as specifically approved in writing by Landlord.

LEASE AGREEMENT - 60

<PAGE>

                                   EXHIBIT "G"
                                LANDLORD'S WAIVER

NAME OF OWNER OF REAL PROPERTY:                   Ogden City, a Utah Municipal
            ("Landlord")                          Corporation, acting as a Local
                                                  Redevelopment Authority

ADDRESS OF REAL PROPERTY:                         Defense Distribution Depot
                                                  Building #365 (16-A)
                                                  Ogden, Utah
                                                           (the "Premises")

         This Landlord's Waiver is made as of the date on the signature page
hereof. Landlord is the owner of the Premises and has entered into that certain
Lease, dated January 1, 1998 by and between Landlord and ICON HEALTH & FITNESS,
INC., a Delaware corporation as Tenant (together with its successors and
assigns, whether by operation of law or otherwise the "Company") (the "Lease"),
under which the Company has acquired a leasehold interest in all or a portion of
the Premises.

         General Electrical Capital Corporation, individually and as agent
("Agent") for other lenders ("Lenders"), has entered into certain financing
transactions with the Company. Pursuant to that certain Security Agreement
entered into in connection therewith (as amended or modified, the "Security
Agreement") by and among the Company, Guarantors, and Agent, on behalf of itself
and Lenders, the Company has granted to Agent, for the benefit of itself and
Lenders, a security interest in the personal property of the Company, consisting
of, all accounts, chattel paper, contracts, deposit accounts, documents, general
intangibles, instruments, inventory, equipment, machinery, other personal
property of any kind, money, cash or cash equivalent and proceeds and products,
which are now or in the future may become located at the Premises (the
"Collateral").

         As an inducement for Agent and Lenders to enter into such financing
transactions, in consideration of the Company's entering into its leases,
agreements and arrangements with Landlord and for other good and valuable
consideration, the receipt and sufficiency of which Landlord hereby
acknowledges, Landlord hereby agrees as follows:

         1.       The Lease is valid and is in full force and effect and has not
been assigned, modified, supplemented or amended in any way.

         2.       To the best of Landlord's knowledge, neither Landlord nor the
Company is in default under the terms of the Lease and the Lease expires on
December 31, 1998.

         3.       The Collateral may be stored, placed, kept, utilized and/or
installed at the Premises and shall not be deemed a fixture or part of the real
estate but shall at all times be

<PAGE>

considered personal property, whether or not any of the Collateral becomes so
related to the real estate that an interest therein arises under real estate
law.

         4. Until such time as all of the obligations of the Company to Agent
and Lenders are indefeasibly paid in full, Landlord disclaims any interest in
the Collateral, confirms that it has no lien or security interest therein, and
agrees not to levy upon any of the Collateral or to assert any claim against the
Collateral for any reason.

         5. Agent, on behalf of itself and Lenders, shall have access to and may
enter upon the Premises at any time from time to time to inspect, liquidate or
remove the Collateral. Neither Agent nor Lenders shall be liable for any
diminution in value of the Premises caused by the absence of the Collateral
actually removed or by any necessity of replacing the Collateral.

         6. Landlord agrees to provide Agent with written notice of any
termination of the Lease. Landlord will permit Agent to remain on the Premises
for a period of up to sixty (60) days following receipt by Agent of written
notice from Landlord that Landlord has terminated the Lease, subject, however,
to the payment to Landlord by Agent, on behalf of itself and Lenders, of the
rent and other monetary amounts due under the Lease for the actual period of
occupancy by Agent, prorated on a per diem basis determined on a thirty (30) day
month. Agent's right to occupy the Premises under the preceding sentence shall
be extended for any time period Agent is prohibited from selling the Collateral
due to the imposition of the automatic stay by the filing of bankruptcy
proceedings by or against the Company, so long as Agent remits to Landlord the
rents and other monetary amounts due under the Lease for such additional period
of time as provided in the previous sentence (without giving effect to any rent
acceleration clause, if any, contained in the Lease). Notwithstanding any of the
provisions of this Landlord's Waiver, neither Agent nor any Lender shall be
under any obligation to make any payment or cure any default by the Company
under the Lease.

         7. This Landlord's Waiver shall inure to the benefit of Agent and
Lenders, their respective successors and assigns, and shall be binding upon
Landlord, mortgagees of the Premises and the successors and assigns of Landlord
and such mortgagees.

         8. Landlord agrees to disclose this Landlord's Waiver to any purchaser
or successor to Landlord's interest in the Premises.

         9. All notices to Agent hereunder shall be in writing, sent by
certified mail, and shall be addressed to Agent at the following address:

         GENERAL ELECTRIC CAPITAL CORPORATION
         105 West Madison, Suite 1600
         Chicago, Illinois 60602
         Attention: ICON Account Manager
         Telecopier No. (312) 419-5977
         Telephone No.  (312) 419-0985

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Landlord's Waiver as of this __ day __________,    1998.

                                              LANDLORD:
                                              ---------

                                              OGDEN CITY, a Utah Municipal
                                              Corporation, acting as a Local
                                              Redevelopment Authority

                                              By:_______________________________

                                              Name:_____________________________

                                              Title:____________________________

                                              TENANT:

                                              ICON HEALTH & FITNESS, INC.,
                                              a Delaware Corporation

                                              By:  /s/ Fred Beck
                                                 -------------------------------

                                              Name:_____________________________

                                              Title:____________________________

cc:      General Electric Capital Corporation
         105 West Madison, Suite 1600
         Chicago, Illinois 60602
         Attn: ICON Account Manager

<PAGE>

                          AMENDMENT TO LEASE AGREEMENT

         THIS AMENDMENT TO LEASE AGREEMENT (this "Addendum") is entered into
effective as of this 25 day September, 1998, by and between OGDEN CITY, a
Municipal Corporation, acting as a Local Redevelopment Authority ("Landlord")
and ICON HEALTH AND FINESS, INCORPORATED, a Delaware Corporation ("Tenant").

         WHEREAS, the parties have entered into a Sublease Agreement dated June
29, 1998, (the "Sublease") pertaining to Building 365 (16B) and associated real
property located at the site known as the "Defense Distribution Depot" in Ogden,
Utah, such buildings and real property being more particularly described in the
Sublease;

         WHEREAS, the parties wish to amend the Sublease in certain respects, on
the terms and conditions described herein.

         IT IS THEREFORE agreed as follows:

1.       The term "Building" and "Leased Premises" are hereby amended to refer
to and include Bay 3 of Building 357 (Building 15A) (the "Additional Space")
during the Lease Term set forth in Section 2 below.

2.       Notwithstanding the provisions of the Sublease, the initial Lease Term
for the Additional Space shall commence on 25 September, 1998 and end on
December 31, 1998, with 2 renewal options of 6 months each, subject to
termination of the Landlord's Lease. Renewal notices must be given in writing by
Tenant at least 60 days prior to the expiration of each Lease Term.

3.       The Minimum Rent applicable to the Additional Space shall be $6,522
monthly (43,482 sq. ft. @ .15/sq.ft/month). First months rent and rent for any
days in September 1998 ($217.40 per day) will be due upon signing. Rent
inflation rate shall be two per cent (2%) exercised at the second renewal
option.

4.       Tenant shall not be entitled to offset against Minimum Rent for
improvements to the Additional Space absent a separate written agreement
authorizing such offset.

5.       Except where such terms or conditions are clearly inapplicable, all
other terms and conditions of the Sublease remain unmodified, and all such terms
and conditions shall apply to the lease of the Additional Space hereunder.

<PAGE>

         IN WITNESS WHEREOF, Landlord and Tenant have executed this Addendum to
be effective the date and year first above written.

                                         Dated this 24th day of  November ,1998
                                                     ----        ----------

                                         LANDLORD:

                                         OGDEN CITY, a Utah Municipal
                                         Corporation, acting as a Local
                                         Redevelopment Authority

                                               By:  /s/ Glenn J. Mecham
                                                  ------------------------
                                                    Glenn J. Mecham, Mayor

ATTEST:

 /s/ ILLEGIBLE
------------------------
CITY RECORDER

APPROVED AS TO FORM:

CITY ATTORNEY

                                         TENANT:

                                         ICON HEALTH AND FITNESS INCORPORATED

                                         By:  /s/ Fred Beck
                                            ------------------------------------
                                              Fred Beck, Chief Financial Officer

<PAGE>

STATE OF UTAH              )
                           )  SS
COUNTY OF WEBER            )

The foregoing instrument was acknowledged before me this 24th day of November,
1998, by GLENN J. MECHAM, the Mayor of Ogden City, a Utah Municipal Corporation.

                                                      /s/ DeAnn Wallwork
                                                     ---------------------------
                                                     NOTARY PUBLIC

My Commission Expires:  3/14/02
                       ---------
in: Ogden, Utah
    -------------------

STATE OF   Utah            )
         --------------
                           )  SS
COUNTY OF   Cache          )
          -------------

The foregoing instrument was acknowledged before me 13th day November, 1998 by
Fred Beck, the Chief Financial Officer of the ICON Health and Fitness
Incorporated.

                                                      /s/ Denise Lott
                                                     ---------------------------
                                                     NOTARY PUBLIC

My Commission Expires:   1/26/99
                       -------------
in:   Logan, Ut
    -----------------------

<PAGE>

                          AMENDMENT TO LEASE AGREEMENT

     THIS AMENDMENT TO LEASE AGREEMENT (this "Addendum") is entered into
effective as of 9th day July, 1998, by and between OGDEN CITY, a Municipal
Corporation, acting as a Local Redevelopment Authority ("Landlord") and ICON
HEALTH AND FINESS, INCORPORATED, a Delaware Corporation ("Tenant").

     WHEREAS, the parties have entered into a Sublease Agreement dated June 29,
1998, (the "Sublease") pertaining to Building 365 (16B) and associated real
property located at the site known as the "Defense Distribution Depot" in Ogden,
Utah, such buildings and real property being more particularly described in the
Sublease;

     WHEREAS, the parties wish to amend the Sublease in certain respects, on the
terms and conditions described herein.

     IT IS THEREFORE agreed as follows:

1.   The term "Building" and "Leased Premises" are hereby amended to refer to
and include Bay 3 of Building 357 (Building 15A) (the "Additional Space") during
the Lease Term set forth in Section 2 below.

2.   Notwithstanding the provisions of the Sublease, the initial Lease Term for
the Additional Space shall commence on 30 June, 1998 and end on December 31,
1999, with month-to-month thereafter, subject to termination of the Landlord's
Lease. Renewal notices must be given in writing by Tenant at least 60 days prior
to the expiration of each Lease Term.

3.   The Minimum Rent applicable to the Additional Space shall be $6,522 monthly
(43,482 sq. ft. @ .15/sq.ft/month). First months rent and rent for any days in
June 1999 ($217.40 per day) will be due upon signing. Rent inflation rate shall
be two per cent (2%) exercised at the second renewal option.

4.   Tenant shall not be entitled to offset against Minimum Rent for
improvements to the Additional Space absent a separate written agreement
authorizing such offset.

5.   Except where such terms or conditions are clearly inapplicable, all other
terms and conditions of the Sublease remain unmodified, and all such terms and
conditions shall apply to the lease of the Additional Space hereunder.

<PAGE>

         IN WITNESS WHEREOF, Landlord and Tenant have executed this Addendum to
be effective the date and year first above written.

                                       Dated this  9th day July, 1998
                                                  -----   ------

                                       LANDLORD:

                                       OGDEN CITY, a Utah Municipal Corporation,
                                       acting as a Local Redevelopment Authority

                                       By:  /s/ Glann J. Mecham
                                           -------------------------------------
                                            Glenn J. Mecham, Mayor

ATTEST:

    /s/ ILLEGIBLE
----------------------------
CITY RECORDER

APPROVED AS TO FORM:

    /s/ ILLEGIBLE
----------------------------
CITY ATTORNEY

                                       TENANT:

                                       ICON HEALTH AND FITNESS INCORPORATED

                                       By:  /s/ Fred Beck
                                           -------------------------------------
                                            Fred Beck, Chief Financial Officer

<PAGE>

STATE OF UTAH               )
                            )  SS
COUNTY OF WEBER             )

The foregoing instrument was acknowledged before me 9th day July 1998, by GLENN
J. MECHAM, the Mayor of Ogden City, a Utah Municipal Corporation.

                                                      /s/ DeAnn Wallwork
                                                     ---------------------------
                                                     NOTARY PUBLIC

My Commission Expires:   3/14/02
                       ----------
in: Ogden, Ut
    ---------------
STATE OF __________         )
                            )  SS
COUNTY OF _________         )

The foregoing instrument was acknowledged before me 30th day of June, 1998 by
Fred Beck, the Chief Financial Officer of the ICON Health and Fitness
Incorporated.

                                                      /s/ Mary Lynn Hathaway
                                                     ---------------------------
                                                     NOTARY PUBLIC

My Commission Expires: ____________
in: _______________

<PAGE>

                          AMENDMENT TO LEASE AGREEMENT

     THIS AMENDMENT TO LEASE AGREEMENT (this "Addendum") is entered into
effective as of this 1 day August, 1998, by and between OGDEN CITY, a Municipal
Corporation, acting as a Local Redevelopment Authority ("Landlord") and ICON
HEALTH AND FINESS, INCORPORATED, a Delaware Corporation ("Tenant").

     WHEREAS, the parties have entered into a Sublease Agreement dated November
19, 1998, (the "Sublease") pertaining to Building 365 (16A) and associated real
property located at the site known as the "Defense Distribution Depot" in Ogden,
Utah, such buildings and real property being more particularly described in the
Sublease;

     WHEREAS, the parties wish to amend the Sublease in certain respects, on the
terms and conditions described herein.

     IT IS THEREFORE agreed as follows:

1.   The agreement is amended to replace Exhibit "A" with the Exhibit "A"
attached to this amendment and by this reference incorporated herein.

2.   Notwithstanding the provisions of the Sublease, the initial Lease Term for
the Additional Space shall commence on 1 August, 1999 and end on December 31,
1999. This Lease Amendment is a month to month lease for the Additional Space,
whereby Icon Health and Fitness, at its option, may provide thirty (30) days
written notification of intent to cancel this Lease Amendment anytime during the
term. Upon expiration of the initial term, renewal options shall be governed as
per Sections 1.7 and 3.3 of the Sublease.

3.   The Minimum Rent applicable to the Additional Space shall be $6,522 monthly
(43,482 sq. ft. @ .15/sq.ft/month). First months rent will be due upon signing.
The daily rate for the Additional Space is $217.40 per day.

4.   Tenant shall not be entitled to offset against Minimum Rent for
improvements to the Additional Space absent a separate written agreement
authorizing such offset.

5.   Except where such terms or conditions are clearly inapplicable, all other
terms and conditions of the Sublease remain unmodified, and all such terms and
conditions shall apply to the lease of the Additional Space hereunder.

<PAGE>

         IN WITNESS WHEREOF, Landlord and Tenant have executed this Addendum to
be effective the date and year first above written.

                                      Dated this  18th day of   October  ,1999
                                                 ------       -----------

                                      LANDLORD:

                                      OGDEN CITY, a Utah Municipal Corporation,
                                      acting as a Local Redevelopment Authority

                                      By:   /s/ Glenn J. Mecham
                                           --------------------------------
                                            Glenn J. Mecham, Mayor

<PAGE>

ATTEST:

  /s/ ILLEGIBLE
------------------------------------
CITY RECORDER

APPROVED AS TO FORM:

     /s/ ILLEGIBLE
------------------------------------
CITY ATTORNEY

                                                 TENANT:

                                                 ICON HEALTH AND FITNESS
                                                 INCORPORATED

                                                 By:   /s/ ILLEGIBLE
                                                     ---------------------------

STATE OF UTAH       )
                    )  SS
COUNTY OF WEBER     )

The foregoing instrument was acknowledged before me 18th day October ,1998, by
GLENN J. MECHAM, the Mayor of Ogden City, a Utah Municipal Corporation.

                                                      /s/ DeAnn Wallwork
                                                     ---------------------------
                                                     NOTARY PUBLIC

My Commission Expires:    3/14/02
                       -------------
in: Ogden, Ut
    --------------

<PAGE>

STATE OF  UTAH        )
         ---------    )  SS
COUNTY OF CACHE       )
          ------

The foregoing instrument was acknowledged before me 22nd day of September, 1998
by KENT LUNDGREEN , the MATERIALS MANAGER , of the Icon Health and Fitness. ICON
Health and Fitness Incorporated.

                                                        /s/ Kimberly Langley
                                                     ---------------------------
                                                     NOTARY PUBLIC

My Commission Expires:______________                 Residing at Newton, Utah

in:________________

<PAGE>

                                    EXHIBIT A
                              DDOU LEASE AMENDMENT
                         DESCRIPTION OF LEASED PREMISES

1.       Building 365 (16A), and all associated property (see attached map) and
         Bay 6 of Building 357 (Building 15A) (the "Additional Space") during
         the Lease Term set forth in Section 2 of the amendment.

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

together with the yard areas between the Building and the adjacent streets,
including all sidewalks, landscaped areas, open space and designated parking
lots to be used by Tenant.

EXHIBIT A TO LEASE AMENDMENT - PAGE 1

<PAGE>

                                [GRAPHIC OMITTED]

EXHIBIT A TO LEASE AMENDMENT - PAGE 1<PAGE>

                                                                    Exhibit 10.4

                                 LEASE AGREEMENT
                         (Build-to-Suit Facility) - 2000

ARTICLE ONE.  BASIC TERMS.

       This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read in conjunction with the Basic Terms.

       Section 1.01. Date of Lease:

       Section 1.02. Landlord : Panattoni/Hillwood Development Company, LLC, a
                                Texas limited liability company

              Address of Landlord: 5310 Harvest Hill Road, Suite 180 Dallas,
                                   Texas 75230

       Section 1.03. Tenant (include legal entity): ICON Health and Fitness,
                                                    Inc., a Delaware corporation

              Address of Tenant: -     Attn: Jace Jergensen
                                       ICON Health & Fitness.  Inc.
                                       4010 Distribution Drive, Suite 200
                                       Garland, Texas 75041

                                       and

                                       Attn: Brad H. Bearnson
                                       ICON Health & Fitness, Inc.
                                       1500 South 1000 West
                                       Logan, Utah 84321

       Section 1.04. Property: The Property is Landlord's real property
development known as Skyline Building III (the "Building"), Skyline Business
Park, located on approximately 18.86 acres, Mesquite, Texas, and described or
depicted in Exhibit "A" (the "Project"). The Project includes the land, the
approximately 400,000 square foot Building and all other improvements to be
located on the land, and the common areas described in Paragraph 4.05(a). It is
understood and agreed that Tenant will have the right to require Landlord to
reduce the area of the Building to either 300,000 square feet or 350,000 square
feet, by giving written notice thereof within fifteen (15)days after the date
hereof. If Tenant so exercises such right, the Base Rent payable under Section
1.11(A) under this Lease will be recalculated on the following basis and other
amounts payable by Tenant under this Lease will be appropriately adjusted and
the parties will execute an amendment to this Lease reflecting such changes:

                                                    Tenant JJ  Landlord JH     1

<PAGE>

               Years          300,000 sf        350,000 sf
               -----          ----------        ----------
                1-5              $4.18            $3.96
                6-10             $4.81            $4.55

       Section 1.05. Lease Term: One Hundred Twenty (120) months beginning on
November 15, 2000, or such other date as is specified in this Lease.

       Section 1.06. Permitted Uses (See Article Five): receiving, storing,
shipping and selling products, materials and merchandise made and/or distributed
by Tenant, and for such other lawful purposes, including assembly and
manufacturing in conformance with the applicable zoning.

       Section 1.07. Tenant's Guarantor: None

       Section 1.08. Brokers (See Article fourteen) (if none, so state):

              Landlord's Broker: None

              Tenant's Broker: Leon Brothers (Al Leon)

       Section 1.09. Parking. A minimum of one parking space will be provided
for every 1,000 square feet of Building area.

       Section 1.10. Initial Security Deposit (See Section 3.02): $144,333.33

       Section 1.11. Rent and Other Charges Payable by Tenant:

       (a) BASE RENT: One Hundred Fifteen Thousand Dollars ($115,000.00) for the
first sixty (60) months of the Lease Term; One Hundred Thirty-Two Thousand Three
Hundred Thirty-Three and 33/100 Dollars ($132,333.33) for the remainder of the
initial Lease Term.

       (b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02);
(ii) Utilities (See Section 4.03), (iii) Insurance Premiums (See Section 4.04);
(iv) Common Area Expenses (See Section 4.05).

       Section 1.12. Landlord's Share of Profit on Assignment or Sublease: (See
Section 9.05): Fifty percent (50%) of the profit (the "Landlord's Share").

       Section 1.13. Exhibits: The following exhibits are attached to and made a
part of this Lease: Exhibit "A" - Description of Land; Exhibit "B" - Building
Expansion; Exhibit "C" - Exclusions from Common Area Costs; Exhibit "D" - Tenant
Signage; Exhibit "E" - Site Plan and Building Specifications; Exhibit "F"
Landlord Waiver and Consent; Exhibit "G" - Expansion Land.

                                                    Tenant JJ  Landlord JH     2

<PAGE>

       Section 1.14. Interior Architectural: Tenant will use RGA Architects or
such other architect as may be mutually agreed upon by both parties (the
"Architect") to complete the architectural work for the tenant improvements,
including the design of all interior improvements ("Leasehold Improvements")
desired by Tenant over and above those included in the Building Improvements
being furnished by Landlord pursuant to Section 6.02(a), and preparation of
final interior construction drawings ("Leasehold Improvement Plans") for the
Leasehold Improvements.

Section 1.15. Leasehold Improvement Allowance: When the Leasehold Improvement
Plans have been approved by Landlord and Tenant pursuant to Section 6.02(c),
Landlord agrees to bid the portions of the Leasehold Improvements subject to the
hereinafter specified allowances to at least three (3) subcontractors (at least
one of which shall be designated by Tenant) and select the lowest qualified bid
while receiving Tenant's input on the decision. There will be no construction
management fee charged to Tenant by Landlord. The costs of the Leasehold
Improvements, and including without limitation all architectural and engineering
fees required to complete the Leasehold Improvement Plans, is referred to as the
"Work Costs". Landlord will be responsible for and will pay for the entire Work
Cost, except that with respect to the following items, Tenant will be solely
responsible for all costs, including associated architectural and engineering
fees, in excess of the indicated allowance:

       (a)    office area - $542,500
       (b)    showroom area - $90,000
       (c)    electrical distribution - $100,000
       (d)    compressed air - $10,000
       (a)    cranes/structural support - $10,000
       (f)    exterior signage per Section 5.04 - $5,000

With respect to each such item, Tenant will be solely responsible for all Work
Costs in excess of the indicated allowance, such excess cost being referred to
as "Tenant's Cost"; provided that Tenant has the option to allocate up to 50% of
the allowance for any particular allowance item to one or more of the other
allowance items. Tenant will pay to Landlord on a monthly basis , the amount of
Tenant's Cost actually invoiced to Tenant. Tenant's monthly payment to Landlord
will be due within 10 days of receiving a written invoice with backup
documentation from Landlord. The amount of Tenant's monthly payment will be
equal to Tenant's pro rata share of the cost of the total Work Costs invoiced
for that month. If the aggregate allowance applied against total Work Costs for
all such allowance items in accordance with the foregoing is less than
$757,500.00, Tenant will receive a Base Rent reduction for the initial Lease
Term calculated at the rate of $0.02 per square foot per annum for each
$100,000.00 of savings, or a proportionate part of $0.02 for fractional part of
$100,000.00 of savings (e.g., $50,000 savings produces reduction of $0.01 per
square foot per annum; $150,000.00 produces a reduction of $0.03 per square foot
per annum).

ARTICLE TWO.  LEASE TERM.

                                                    Tenant JJ  Landlord JH     3

<PAGE>

       Section 2.01. Lease of Property for Lease Term. Landlord leases the
Property from Landlord to Tenant and Tenant leases the Property from Landlord
for the Lease Term. The Lease Term is for the period stated in Section 1.05
above and shall begin and end on the dates specified in Section 1.05 above,
unless the beginning or end of the Lease Term is changed under any provision of
this Lease. The "Commencement Date" shall be the date specified in Section 1.05
above for the beginning of the Lease Term, unless advanced or delayed under any
provision of this Lease.

       Section 2.02. Delay in Commencement. Landlord shall not be liable to
Tenant if Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord's non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. Notwithstanding the foregoing, if the Property is not delivered to Tenant
with the Project substantially completed by March 31, 2001 (as such date may be
extended due to Tenant Delay or Force Majeure), Tenant shall have the option to
terminate this Lease by giving Landlord written notice thereof at any time prior
to such substantial completion and delivery to Tenant. Upon any such
termination, Tenant will have no further obligation to Landlord under this
Lease.

Section 2.03. Early Occupancy. Subject to applicable governmental requirements,
Landlord will make the Property and the Improvements constructed thereon
available to Tenant for the purpose of installing warehouse racks and other
equipment thirty days prior to Landlord's receipt of a certificate of occupancy
for the Property, provided Tenant does not delay completion of the Improvements.
If Tenant occupies the Property prior to the Commencement Date, Tenant's
occupancy of the Property shall be subject to all of the provisions of this
Lease, except that Tenant will not be required to pay Base Rent or other charges
specified in this Lease for the early occupancy period. Early occupancy of the
Property shall not advance the expiration date of this Lease.

       Section 2.04. Renewal Option. Provided that Tenant is not in material
default of any of the terms, covenants and conditions hereof beyond the
expiration of applicable notice and cure periods set forth herein, Tenant will
have the right and option to extend the original term of this Lease for two (2)
further terms of sixty (60) months each. Such extension(s) of the original term
shall be on the same terms, covenants and conditions as provided for in the
original term except for this Section 2.04 and except that the rental rate
specified in Section 1.11 of this Lease during each extended term shall be at
the fair market rental in effect at the beginning of the extended term on
equivalent properties, of equivalent size, in equivalent areas in Dallas County,
Texas ("Fair Market Rent"). Tenant will deliver written notice to Landlord of
Tenant's intent to exercise a renewal option granted herein not more than twelve
(12) months nor less than nine (9) months prior to the expiration of the
original term of this Lease or the first extended term, as the case may be. In
the event Tenant fails to deliver such written notice within the time period set
forth above, Tenant's right to extend the term hereunder shall expire and be of
no further force

                                                    Tenant JJ  Landlord JH     4

<PAGE>

and effect. Failure to exercise the first renewal option shall render the second
renewal option null and void.

If Tenant exercises an option in accordance with the foregoing, the parties will
have until the date that is six (6) months prior to the date that the original
term or the first extension term, as the case may be, will expire in order to
agree on Base Rent during the extension term. If the parties agree on the Base
Rent for the extension term during that period, they shall immediately execute
an amendment to this Lease stating the Base Rent. If the parties are unable to
agree on Base Rent for the extended term during that period, then the Base Rent
for the extension period will be established by appraisal and will be 100% of
Fair Market Rental as determined by the appraisal.

       Landlord and Tenant shall each appoint one appraiser at least five (5)
months prior to the expiration of the original term or first extension term, as
the case may be; provided, however, that if either party fails to designate an
appraiser within the time period specified, then the appraiser who is designated
shall conclusively determine the Fair Market Rental. If two (2) appraisers are
designated, then they shall submit within thirty (30) days after the second
thereof has been designated their appraisals of the Fair Market Rental. Each
appraiser shall prepare a written appraisal report that shall conform with the
standard of professional practice of the American Institute of Real Estate
Appraisers. Landlord and Tenant intend that the "Fair Market Rental" shall be
deemed to be the rent per square foot of rentable area of industrial/office
space that is then being charged for similar space located in buildings in the
area of the Building that are comparable in quality and offer similar amenities
to the Building and involving leases with similar terms and conditions
(including, but not limited to, free rent, brokerage commissions, and all other
monetary and nonmonetary concessions), and involving the use of the premises for
the permitted uses hereunder, but shall not include value added by alterations
and/or improvements made by Tenant, at Tenant's expense. The industrial office
spaces used for comparison shall be comparable in size, quality and design to
the Property, and such industrial office spaces used for comparison shall be
comparable to the Property with respect to their location within such buildings,
the quality and quantity of tenant improvements installed at each landlord's
expense, the services provided by each landlord to such tenant, and the
financial strength of Tenant.

       Should the two appraisers be unable to agree within said thirty (30)
days, the two appraisers shall each submit an independent written appraisal and
together they shall designate one additional person as appraiser within five (5)
days following the expiration of said 30-day period; provided, however, that if
the difference between the two appraisals is five percent (5%) or less of the
lowest appraisal, then an additional appraiser shall not be designated and the
Fair Market Rental shall equal the average of the two appraisals that are
submitted. The third appraiser shall submit an independent written appraisal
within thirty (30) days following his or her appointment. If the two appraisers
cannot agree upon a third appraiser, then either party hereunder may request
that a judge of a Dallas State District Court appoint such third appraiser. The
Fair Market Rental shall be equal to the average of the two written appraisals
which are closest, and the third appraisal shall be disregarded. Each party
shall bear the cost of the appraiser appointed by it and the parties shall share
equally in the cost of the third appraiser. No person shall be appointed or
designated an appraiser unless he or she is an independent appraiser who is a
currently certified member of the American Institute of Real Estate Appraisers
(with

                                                    Tenant JJ  Landlord JH     5

<PAGE>

MAI designation) and unless he or she has at least five (5) years experience as
an appraiser in Dallas County. The third appraiser shall not have ever been
employed (full-time or part-time or on a consulting basis) by Landlord or
Tenant. In the event that the Fair Market Rental is not established before the
commencement of the extended term, Tenant shall continue to pay the Base Rent in
effect at the end of the original term or first extension term, as the case may
be, and when the Fair Market Rental has been established, the new Base Rent
shall be retroactively effective as of the beginning of the extended term and
Tenant shall pay Landlord any deficiency within thirty (30) days after the
establishment of the new Base Rent.

     Section 2.05. Building Expansion. Tenant will have the right to require
Landlord to expand the Building upon the terms and conditions set forth on
Exhibit "B" attached hereto and made a part hereof for all purposes.

     Section 2.06. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify Landlord against all damages which Landlord incurs from
Tenant's delay in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a "month
to month" tenancy, subject to all of the terms of this Lease applicable to a
month-to-month tenancy, except that the Base Rent then in effect shall be
increased by fifty percent (50%).

ARTICLE THREE: BASE RENT.

     Section 3.01. Time and Manner of Payment. On the first day of the second
month of the Lease Term and each month thereafter, Tenant shall pay Landlord the
Base Rent, in advance, without offset, deduction or prior demand. The Base Rent
shall be payable at Landlord's address or at such other place as Landlord may
designate in writing,

     Section 3.02. Security Deposit. Upon the execution of this Lease, and as
the Security Deposit under this Lease, Tenant shall deliver to Landlord an
executed original irrevocable standby letter of credit ("L.C.") in the amount of
$144,333.33, in favor of Landlord, such L.C. to have a term commencing on the
execution of this Lease and ending no less than twelve (12) months from the date
of execution of this Lease (subject to the L.C. extension requirement
hereinafter specified). The L.C. may be drawn upon and used upon each occurrence
of any event of default which remains uncured after applicable notice and cure
periods; Landlord may use all or part of the L.C. to pay past due rent or other
payments due Landlord under this Lease, or to cure any other defaults of Tenant
under this Lease without prejudice to any other remedy provided herein or
provided by law. Such L.C. shall be issued in a form and by a National Banking
Association or other financial institution (located within the continental
United States of America, and if not located in Dallas, Texas, must either agree
in the L.C. to accept presentation of required material for drawing purposes by
Federal Express or other overnight courier, or have a correspondent bank in
Dallas, Texas at which the L.C. may be presented for payment(s)) (hereinafter
the "Issuer"), acceptable to Landlord. With respect to any default occurring
during the term of the Lease, which remains uncured following applicable notice
and cure periods,

                                                    Tenant JJ  Landlord JH     6

<PAGE>

Landlord shall have the right to proceed against the total L.C. at the sole
discretion of Landlord regarding items and the amounts to be drawn upon relating
to any default by Tenant; provided, however, that any drawn amounts not properly
applied by Landlord in accordance with this Section 3.02 shall be deposited and
maintained by Landlord in a separate bank account on account of Tenant's
Security Deposit obligations hereunder. If Landlord uses any part of the L.C.,
Deposit, Tenant shall restore the L.C. to its full amount within ten (10) days
after Landlord's written request. Tenant's failure to do so shall be a material
default under this Lease. No interest shall be paid on any portion of the L.C.
converted to cash pursuant to the provisions hereof. In the event of the sale of
the Property, Landlord will have the obligation to transfer the Security
Deposit, both the L.C. and any cash proceeds thereof, to the vendee, provided
such vendee agrees in a writing delivered to Tenant to accept and hold the same
in compliance with the terms hereof, in accordance with Section 11. The L.C.
shall contain the following terms and conditions:

1.     The L.C. shall be deemed to be automatically extended without amendment
from year to year, with renewal occurring annually, from the date of its
issuance or any future expiration date unless at least 30 days prior to any
future expiration date the bank notifies Landlord, in writing, by certified
mail, return receipt requested, that the issuer intends not to renew the L.C.
for an additional year.

2.     In the event the L.C. is not extended at least 30 days prior to its then
stated expiration date and will therefore expire by its terms and the Lease,
including any or all extensions or renewals, has not expired, then (unless
Tenant has, prior to drafting by Landlord, deposited with Landlord cash or a
substitute L.C. in the amount of the Security Deposit) Landlord shall be allowed
to draft upon issuer for the full amount of the L.C., subject to the terms and
provisions hereinabove set forth.

3.     The L.C. shall be subject to the "Uniform Customs and Practices for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500.

4.     The amount of the L.C. shall be payable at sight to Landlord within three
(3) business days of presentation of the sight draft, in whole or partial
drawings; upon presentation to the issuer of the following documents:

       a.     Landlord's written demand for payment making reference to the date
              and number of the L.C.;

       b.     Landlord's signed certificate that the amount drawn is required to
              satisfy an event of default which has remained uncured beyond
              applicable notice and grace periods, as set forth in the Lease, or
              that Tenant has failed to deposit cash or a substitute L.C. as
              required under subsection 2 above; and

       c.     The original L.C. for endorsement of the amount paid and if the
              draft is for the full amount the L.C. is to be surrendered to the
              issuer.

                                                    Tenant JJ  Landlord JH     7

<PAGE>

5.     The issuer shall not modify the L.C. without prior written consent of the
Landlord. An extension of the L.C. shall not be deemed a modification under the
above provisions.

6.     Landlord shall have the right to assign and transfer its right and
interests in the L.C. only to a purchaser of the Project; provided such
purchaser issues a written receipt therefor delivered to Tenant.

       Section 3.03. Termination; Advance Payments. Upon termination of this
Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default, and after Tenant
has vacated the Property in the manner required by this Lease, Landlord shall
refund or credit to Tenant (or Tenants successor) the unused portion of the
Security Deposit, any advance rent or other advance payments made by Tenant to
Landlord, and any amounts paid for real property taxes and other reserves which
apply to any time periods after termination of the Lease.

ARTICLE FOUR:   OTHER CHARGES PAYABLE BY TENANT.

       Section 4.01. Additional Rent. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.

       Section 4.02. Property Taxes.

       (a)    Real Property Taxes. Tenant shall pay all real property taxes on
the Property (including without limitation any fees, taxes or assessments
against, or as a result of, any tenant improvements installed on the Property by
or for the benefit of Tenant) during the Lease Term. Such payment shall be made
at least ten (10) days prior to the delinquency date of the taxes. Within such
ten (10)-day period, Tenant shall furnish Landlord with satisfactory evidence
that the real property taxes have been paid. Landlord shall reimburse Tenant for
any real property taxes paid by Tenant covering any period of time prior to or
after the Lease Term. If Tenant fails to pay the real property taxes when due,
Landlord may pay the taxes and Tenant shall reimburse Landlord for the amount of
such tax payment as Additional Rent. It is understood that Tenant is applying
for tax abatement from the appropriate governmental authorities. Landlord agrees
to reasonably cooperate at no cost to Landlord.

       (b)    Definition of "Real Property Tax." "Real Property Tax" means: (i)
any fee, license fee, license tax, business license fee, commercial rental tax,
levy charge, assessment, penalty or tax imposed by any taxing authority against
the Property; (ii) any tax on the Landlord's right to receive, or the receipt
of, rent or income from the Property or against Landlord's business of leasing
the Property; (iii) any tax or charge for fire protection, streets, sidewalks,
road maintenance, refuse or other services provided to the Property by any
governmental agency; (iv) any tax imposed upon this transaction or based upon a
re-assessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Property; (v) any assessments levied with respect to the Property by a property
owner's association or otherwise under any applicable restrictive

                                                    Tenant JJ  Landlord JH     8

<PAGE>

covenants of record, and (vi) and any charge or fee replacing any tax previously
included within the definition of real property tax. "Real property tax" does
not, however, include Landlord's federal or state income, franchise, inheritance
or estate taxes.

       (c)    Joint Assessment. If the Property is not separately assessed,
Landlord shall reasonably determine Tenant's share of the real property tax
payable by Tenant under Paragraph 4.02(a) from the assessor's worksheets or
other reasonably available information. Tenant shall pay such share to Landlord
within fifteen (15) days after receipt of Landlord's written statement.

       (d)    Personal Property Taxes.

              (i)    Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the Property.

              (ii)   If any of Tenant's personal property is taxed with the
Property, Tenant shall pay Landlord the taxes for the personal property within
fifteen (15) days after Tenant receives a written statement from Landlord for
such personal property taxes.

       Section 4.03. Utilities. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property.

       Section 4.04. Insurance Policies.

       (a)    Liability Insurance. During the Lease Term, Tenant shall maintain
a policy of commercial general liability insurance (sometimes known as broad
form comprehensive general liability insurance) insuring Tenant against
liability for bodily injury, property damage (including loss of use of property)
and personal injury arising out of the operation, use or occupancy of the
Property. Tenant shall name Landlord as an additional insured under such policy.
The initial amount of such insurance shall be ONE MILLION DOLLARS
($1,000,000.00) per occurrence and shall be subject to reasonable periodic
increase based upon inflation, increased liability awards, recommendation of
Landlord's professional insurance advisers and other relevant factors. The
liability insurance obtained by Tenant under this Paragraph 4.04(a) shall (i) be
primary and non-contributing; (ii) contain cross-liability endorsements; and
(iii) insure Landlord against Tenant's performance under Section 5.05, if the
matters giving rise to the indemnity under Section 5.05 result from the
negligence of Tenant. The amount and coverage of such insurance shall not limit
Tenant's liability nor relieve Tenant of any other obligations under this Lease.
Landlord may also obtain comprehensive public liability insurance in an amount
and with coverage determined by Landlord insuring Landlord against liability
arising out of ownership, operation, use or occupancy of the Property. The
policy obtained by Landlord shall not be contributory and shall not provide
primary insurance.

       (b)    Property and Rental Income Insurance. During the Lease Term,
Landlord shall maintain policies of insurance covering loss of or damage to the
Property in the full amount

                                                    Tenant JJ  Landlord JH     9

<PAGE>

of its replacement value. Such policy shall contain an Inflation Guard
Endorsement and shall provide protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief,
special extended perils (all risk), sprinkler leakage and any other perils which
Landlord deems reasonably necessary. Landlord shall have the right to obtain
flood and earthquake insurance if required by any lender holding a security
interest in the Property. Landlord shall not obtain insurance for Tenant's
fixtures or equipment or building improvements installed by Tenant on the
Property. During the Lease Term, Landlord shall also maintain a rental income
insurance policy, with loss payable to Landlord, in an amount equal to one (1)
year's Base Rent, plus estimated real property taxes and insurance premiums.
Tenant shall be liable for the payment of any deductible amount under Landlord's
or Tenant's insurance policies maintained pursuant to this Section 4.04, in an
amount not to exceed TWENTY THOUSAND DOLLARS ($20,000.00). Tenant shall not do
or permit anything to be done which invalidates any such insurance policies.

       (c)    Payment of Premiums. Subject to Section 4.08, Tenant shall pay all
premiums for the insurance policies described in Paragraphs 4.04(a) and (b)
(whether obtained by Landlord or Tenant) within fifteen (15) days after Tenant's
receipt of a copy of the premium statement or other evidence of the amount due.
If insurance policies maintained by Landlord cover improvements on real property
other than the Property, Landlord shall deliver to Tenant a statement of the
premium applicable to the Property showing in reasonable detail how Tenant's
share of the premium was computed. If the Lease Term expires before the
expiration of an insurance policy maintained by Landlord, Tenant shall be liable
for Tenant's prorated share of the insurance premiums. Before the Commencement
Date, Tenant shall deliver to Landlord a copy of any policy of insurance which
Tenant is required to maintain under this Section 4.04. At least thirty (30)
days prior to the expiration of any such policy, Tenant shall deliver to
Landlord a renewal of such policy. As an alternative to providing a policy of
insurance, Tenant shall have the right to provide Landlord a certificate of
insurance, executed by an authorized officer of the insurance company, showing
that the insurance which Tenant is required to maintain under this Section 4.04
is in full force and effect and containing such other information which Landlord
reasonably requires.

       (d)    General Insurance Provisions.

              (i)    Any insurance which Tenant is required to maintain under
this Lease shall include a provision which requires the insurance carrier to
give Landlord not less than thirty (30) days' written notice prior to any
cancellation or modification of such coverage.

              (ii)   If Tenant fails to deliver a policy, certificate or renewal
to Landlord required under this Lease within the prescribed time period or if
any such policy is canceled or modified during the Lease Term without Landlord's
consent, and if Tenant does not cure such failure within ten (10) days after
written notice thereof from Landlord, Landlord may obtain such insurance, in
which case Tenant shall reimburse Landlord for the cost of such insurance within
fifteen (15) days after receipt of a statement that indicates the cost of such
insurance.

                                                    Tenant JJ  Landlord JH    10

<PAGE>

              (iii)  Tenant shall maintain all insurance required under this
Lease with companies holding a "General Policy Rating" of A-8 or better, as set
forth in the most current issue of "Best Key Rating Guide". Landlord and Tenant
acknowledge the insurance markets are rapidly changing and that insurance in the
form and amounts described in this Section 4.04 may not be available in the
future. Tenant acknowledges that the insurance described in this Section 4.04 is
for the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease, Tenant
shall nevertheless maintain insurance coverage which is customary and
commercially reasonable in the insurance industry for Tenant's type of business,
as that coverage may change from time to time. Landlord makes no representation
as to the adequacy of such insurance to protect Landlord's or Tenant's
interests. Therefore, Tenant shall obtain any such additional property or
liability insurance which Tenant deems necessary to protect Landlord and Tenant.

              (iv)   Unless prohibited under any applicable insurance policies
maintained, Landlord and Tenant each hereby waive any and all rights of recovery
against the other, or against the officers, employees, agents or representatives
of the other, for loss of or damage to its property or the property of others
under its control, if such loss or damage is covered by any insurance policy in
force (whether or not described in this Lease) at the time of such loss or
damage. Upon obtaining the required policies of insurance, Landlord and Tenant
shall give notice to the insurance carriers of this mutual waiver of
subrogation.

       Section 4.05.  Common Areas.  Use, Maintenance and Costs.

       (a)    Common Areas. As used in this Lease, "Common Areas" shall mean all
parking areas, driveways, sidewalks, loading areas, access roads, alleys,
corridors, landscaping and planted areas, and grounds surrounding the Building,
as shown on the site plan referenced in Section 6.02(a) .

       (b)    Use of Common Areas. Tenant shall have the exclusive right to use
the Common Areas for the purposes intended, subject to such reasonable rules and
regulations as Landlord may establish from time to time and to Landlord's rights
to enter upon the Property in accordance with the terms and provisions of this
Lease and for the performance of Landlord's duties under this Lease. Tenant
shall abide by such rules and regulations and shall use its best effort to cause
others who use the Common Areas with Tenant's express or implied permission to
abide by Landlord's rules and regulations.

       (c)    Maintenance of Common Areas. Landlord shall maintain the Common
Areas in good order, condition and repair, in Landlord's reasonable discretion,
as a first-class industrial/commercial real property development. Tenant shall
pay all costs incurred by Landlord for the operation and maintenance of the
Common Areas in accordance with the provisions of Section 4.08. Common Area
costs include, but are not limited to, costs and expenses for the following:
gardening and landscaping; utilities, water and sewage charges; maintenance of
signs (other than tenants' signs); maintenance of the exterior of the Building
(including painting); premiums for liability, property damage, fire and other
types of casualty

                                                    Tenant JJ  Landlord JH    11

<PAGE>

insurance on the Common Areas and all Common Area improvements; all property
taxes and assessments levied on or attributable to the Common Areas and all
Common Area improvements; all personal Property taxes levied on or attributable
to personal property used in connection with the Common Areas; straight-line
depreciation on personal property owned by Landlord which is consumed in the
operation or maintenance of the Common Areas; rental or lease payments paid by
Landlord for rented or leased personal property used in the operation or
maintenance of the Common Areas; fees for required licenses and permits;
repairing, resurfacing, repaving, maintaining, painting, lighting, cleaning,
refuse removal, security and similar items and any other maintenance, repair or
replacement items normally associated with the foregoing.; and reserves for roof
replacement and exterior painting and other appropriate reserves. Landlord may
cause any or all of such services to be provided by third parties and the cost
of such services shall be included in Common Area Costs. Common Area costs shall
not include (i) depreciation of real property which forms part of the Common
Area, or (ii) those costs set forth on Exhibit "C" attached hereto.

       Section 4.06. Late Charges. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay to Landlord a late charge equal
to five percent (5%) of the overdue amount. The parties agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of such late payment. Notwithstanding the foregoing, Landlord
will waive the late charge two times during each calendar year, on a
non-cumulative basis.

       Section 4.07. Interest on Past Due Obligations. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this Lease
is higher than the rate permitted by law, the interest rate is hereby decreased
to the maximum legal interest rate permitted by law. Notwithstanding the
foregoing, Landlord will waive the interest charge two times during each
calendar year, on a non-cumulative basis.

       Section 4.08. Impounds for Insurance Premiums, Real Property Taxes and
Common Area Costs. Notwithstanding anything in this Lease to the contrary,
Tenant agrees to pay as Additional Rent (1) all real property taxes as defined
in Section 4.02, (2) any utilities for the Common Areas not separately metered
to Tenant, (3) the cost of insurance policies under Section 4.04, and (4)
Landlord's costs incurred pursuant to Section 4.05(c) (such costs and expenses
being referred to herein as "common area expenses"). During each month of the
Term of this Lease, on the same day that Base Rent is due hereunder, Tenant will
escrow with Landlord an amount equal to one-twelfth (1/12th) of the annual cost
of such items, as reasonably estimated by Landlord. Tenant authorizes Landlord
to use the funds deposited with Landlord under this Section 4.08 to pay such
costs. The initial monthly escrows set forth below are based

                                                    Tenant JJ  Landlord JH    12

<PAGE>

upon the estimated amounts for the first year of the Lease Term, and will be
increased or decreased annually to reflect the projected actual costs of all
such items. If Tenant's total escrow payments are less than the actual cost of
all such items, Tenant will pay the difference to Landlord within thirty (30)
days after demand. If the total escrow payments of Tenant are more than the
actual amount of all such items, Landlord will retain such excess and credit it
against Tenant's next annual escrow payments, or at Tenant's option refund such
excess to Tenant. The amount of the initial estimated monthly escrow payments
are as follows:

<TABLE>
       <S>                                                                        <C>

       (a)   Real Estate Taxes as set forth in Section 4.02 ....................  $ 23,000.00
       (b)   Insurance as set forth in Section 4.04 ............................  $  1,000.00
       (c)   Common area expenses as set forth in Section 4.05(c) ..............  $  5,333.33
                                                                                  -----------
             (Includes management fee under Section 4.09)

             Total initial estimated monthly escrow ............................  $ 29,333.33
</TABLE>

       Section 4.09. Management Fees. Tenant shall reimburse Landlord monthly
for management fees incurred by Landlord in connection with the Property in the
amount of two percent (2%) of the monthly rent for each month of the Lease Term.

       Section 4.10. Audit. Within nine (9) months of the end of any calendar
year, Tenant shall be entitled to inspect the invoices and statements relating
to Landlord's cost of operating and maintaining common areas or common
facilities, at Landlord's office or at the office of Landlord's managing agent,
upon prior reasonable notice and during Landlord's normal business hours. Tenant
may also request that Landlord furnish copies of invoices and statements related
to Landlord's costs of operating and maintaining common areas or common
facilities. Any information provided to Tenant by virtue of this Section 4.10
and the results of any audit performed by Tenant shall be kept by Tenant in
confidence and not revealed to any third party (other than to its attorneys and
accountants) except as may be required by law or by order of a court of
competent jurisdiction. If Tenant's audit reflects any discrepancy in the
amounts reported by Landlord, Landlord and Tenant shall promptly make any
necessary adjustments. If Tenant's audit reflects that Landlord has misstated
the actual amounts by more than ten percent (10%), Landlord shall reimburse
Tenant for the reasonable cost of the audit, up to $1,500.00.

ARTICLE FIVE:        USE OF PROPERTY.

       Section 5.01. Permitted Uses. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.

       Section 5.02. Manner of Use. Tenant shall not cause or permit the
Property to be used in any way which constitutes a violation of any law,
ordinance, or governmental regulation or order, or which constitutes a nuisance
or waste. Landlord shall obtain and pay for all permits, including a Certificate
of Occupancy, required for Tenant's occupancy of the Property and shall promptly
take all actions necessary to comply with all applicable statutes, ordinances,
rules, regulations, orders and requirements regulating the use by Tenant of the
Property as of the Commencement Date, including the Occupational Safety and
Health Act and the Americans With Disabilities Act and Texas Accessibility
statutes.

                                                    Tenant JJ  Landlord JH    13

<PAGE>

       Section 5.03. Hazardous Materials. As used in this Lease, the term
"Hazardous Material" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state or
local laws or regulations, including, without limitation petroleum-based
products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia compounds and other chemical products, asbestos, PCBs and
similar compounds, and including any different products and materials which are
subsequently found to have adverse effects on the environment or the health and
safety of persons. Tenant shall not cause or permit any Hazardous Material to be
generated, produced, brought upon, used, stored, treated or disposed of in or
about the Property by Tenant, its agents, employees, contractors, sublessees
without the prior written consent of Landlord. Landlord shall be entitled to
take into account such other factors or facts as Landlord may reasonably
determine to be relevant in determining whether to grant or withhold consent to
Tenant's proposed activity with respect to Hazardous Material. In no event,
however, shall Landlord be required to consent to the installation or use of any
storage tanks on the Property.

       Section 5.04. Signs and Auctions. Subject to applicable governmental
requirements and restrictions and written approval of Landlord, not to be
unreasonably withheld, delayed or conditioned, Tenant will have the right, at
Tenant's sole cost and expense, subject to the allowance specified in Section
1.15, to place signage on the Building facia. Tenant may install signs as shown
on Exhibit "D" attached hereto.

       Section 5.05. Indemnity. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's negligence or
willful misconduct. As used in this Section, the term "Tenant" shall include
Tenant's employees, agents, contractors and invitees, if applicable.

       Section 5.06. Landlord's Access. Landlord or its agents may enter the
Property during regular business hours with an escort provided by Tenant, to
show the Property to potential buyers, investors or tenants or other parties
(provided, that Landlord may not directly or indirectly bring any of Tenant's
business competitors into the Property); to do any other act or to inspect and
conduct tests in order to monitor Tenant's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for

                                                    Tenant JJ  Landlord JH    14

<PAGE>

any other purpose Landlord deems necessary. Landlord shall give Tenant prior
notice of such entry, except in the case of an emergency. During the last twelve
months of the Lease Term, as the Lease Term may be extended, Landlord may place
customary "For Sale" or "For Lease" signs on the Property.

       Section 5.07. Quiet Possession. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Property for the
full Lease Term, subject to the provisions of this Lease.

ARTICLE SIX:         CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND
                     ALTERATIONS

       Section 6.01. Existing. Subject to Landlord's obligations with respect to
construction of the Building and the Leasehold Improvements (hereinafter
defined) pursuant to Section 6.02, Tenant accepts the Property in its condition
as of the execution of the Lease, subject to all recorded matters, laws,
ordinances, and governmental regulations and orders. Except as expressly
provided herein, Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation as to the condition of the Property or the
suitability of the Property for Tenant's intended use. Tenant represents and
warrants that Tenant has made its own inspection of and inquiry regarding the
condition of the Property and is not relying on any representations of Landlord
or any Broker with respect thereto. If Landlord or Landlord's Broker has
provided a Property Information Sheet or other Disclosure Statement regarding
the Property, a copy is attached as an exhibit to the Lease.

       Section 6.02. Construction of Improvements.

       (a)    Landlord agrees at Landlord's sole cost and expense, to construct
the approximately 400,000 square foot Building and associated improvements
(collectively, the "Building Improvements") on the Land in accordance with the
site plan and building specifications attached hereto as Exhibit "E"
(collectively the "Building Plans"). Landlord covenants that on the Commencement
Date the Building Improvements will comply with (i) City of Mesquite Fire and
Building Codes, (ii) State of Texas Accessibility Standards, (iii) Americans
with Disability Act legislation, and (iv) be of quality similar to other Class A
office/warehouse buildings in the Mesquite, Texas, area.

       (b)    Promptly after mutual approval of the Leasehold Improvement Plans,
Landlord will apply for a building permit for the Building Improvements, enter
into a construction agreement with its general contractor and commence
construction of the Building Improvements upon issuance of the building permit.

       (c)    Tenant will cause the Architect to prepare and submit to Landlord
within sixty (60) days after the date hereof, a set of plans and specifications
and/or construction drawings (collectively, the "Leasehold Improvement Plans")
for Landlord's use in constructing the Leasehold Improvements. Landlord shall
have ten (10) days after receipt to approve the Leasehold Improvement Plans or
to give reasonable comments to Tenant. If Landlord makes such comments, Tenant
shall have five (5) days to revise the Leasehold Improvement Plans and

                                                    Tenant JJ  Landlord JH    15

<PAGE>

resubmit them to Landlord. Landlord shall have five (5) days after receipt of
the resubmitted Leasehold Improvement Plans to approve the Leasehold Improvement
Plans. After Landlord and Tenant have approved the Leasehold Improvement Plans,
any subsequent changes to the Leasehold Improvement Plans requested by Tenant
shall be at Tenant's sole cost and expense and subject to Landlord's written
approval, such approval not to be unreasonably withheld, delayed or conditioned.
The parties will cooperate with all due diligence to cause the Leasehold
Improvement Plans to be completed and mutually approved on or before August 15,
2000. Such plans must comply with (i) City of Mesquite Fire and Building Codes,
(ii) State of Texas Accessibility Standards, (iii) Americans with Disability Act
legislation, and (iv) be of quality similar to other Class A office/warehouse
buildings in the Mesquite, Texas, area.

       (d)    Promptly after mutual approval of the Leasehold Improvement Plans,
Landlord will apply for a building permit for the Leasehold Improvements, enter
into a construction agreement with a subcontractor (the "Interior Contractor")
in accordance with Section 1.15, and commence construction of the Leasehold
Improvements upon issuance of the building permit therefor.

       (e)    The Leasehold Improvements and the Building Improvements are
herein jointly referred to as the "Improvements". Landlord will use reasonable
diligence to substantially complete the Improvements by November 15, 2000
(exclusive of landscaping, which may be completed thereafter as weather allows).
Any increased costs resulting from any "fast-tracking" will be paid by Landlord.
Notwithstanding anything in this Lease to the contrary, the Commencement Date
will be the date upon which Landlord has notified Tenant in writing that the
Improvements have been substantially completed by Landlord in accordance with
the provisions of this Lease and a temporary certificate of occupancy has been
issued. As used herein, the term "substantial completion" of the Improvements
will mean that, in the reasonable opinion of Landlord's architect, such
improvements have been completed in accordance with the Building Plans and the
Leasehold Improvement Plans, subject only to completion of minor punch list
items, and a temporary certificate of occupancy is issued for the Property by
the appropriate governmental authority. Landlord agrees to deliver a final
certificate of occupancy to Tenant promptly after substantial completion of the
Improvements. As soon as the Improvements have been substantially completed,
Landlord will notify Tenant in writing. Within ten (10) days thereafter, Tenant
will submit to Landlord in writing a punch list of items needing completion or
correction. Landlord will use its best efforts to complete such items within
thirty (30) days after the receipt of such notice. If Tenant, its employees,
agents or contractors cause construction to be delayed, the Commencement Date
will be the date that, in the opinion of Landlord's architect, substantial
completion would have occurred if such delays ("Tenant Delays") had not taken
place. Tenant Delays include, but are not limited to, delays resulting from any
of the following:

              (i)    Failure of Tenant or its architects, engineers, space
planners or others employed by Tenant to timely comply with the schedule for
preparation of the Leasehold Improvement Plans;

                                                    Tenant JJ  Landlord JH    16

<PAGE>

              (ii)   If Tenant makes changes either before or during
construction of the Improvements if the changes result in the Improvements being
substantially completed later than they would have been substantially completed
absent such changes; and

              (iii)  Landlord's inability to obtain a building permit,
certificate of occupancy or other required governmental approval, inspection,
license or certificate or any necessary approval of any architectural control
committee or other association required under covenants, conditions or
restrictions applicable to the Building, and such Inability is due to Tenant's
failure to cooperate in the approval process (including Tenant's failure to
agree in a timely manner to make changes to the Building Plans and/or the
Leasehold Improvement Plans, if and as required by such authorities).

       (f)    Subject to Section 6.02(g) below, if the Improvements have not
been substantially completed by December 15, 2000, Landlord will not be in
default. However, for the period of any delay between December 15, 2000, and the
date upon which the improvements are substantially completed (the "Delay
Period"), Landlord will provide Tenant with two (2) days of Base Rent abatement
for each day of the Delay Period.

       (g)    Landlord's agreement to provide Base Rent abatement pursuant to
Section 6.02(f) is subject to the following conditions:

              (i)    This Lease is fully executed by Tenant and delivered to
                     Landlord by May 31, 2000 (it being understood and agreed
                     that the aforesaid December 15, 2000 date will be extended
                     by the amount of any delay between May 31, 2000 and the
                     date of such execution and delivery by Tenant);

              (ii)   Tenant approves the Leasehold Improvement Plans in form
                     ready for submittal to the City of Mesquite by August 15,
                     2000 (it being understood and agreed that the aforesaid
                     December 15, 2000 date will be extended by the amount of
                     any delay between August 15, 2000 and the date of such
                     approval by Tenant); and

              (iii)  Landlord will manage the construction of the Leasehold
                     Improvement, which will include entering into an AIA
                     contract with the Interior Contractor for construction of
                     the Leasehold Improvements.

       (h)    Notwithstanding anything in this Lease to the contrary, all dates
and time periods for Landlord's performance under this Section 6.02 will be
subject to extension for the period of any Tenant Delays and delays of the type
specified in Section 13.12.

       (i)    All Improvements will be owned by Landlord and will remain on the
Land at the expiration or early termination of this Lease.

       Section 6.03. Exemption of Landlord from Liability. Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares.

                                                    Tenant JJ  Landlord JH    17

<PAGE>

merchandise or other property of Tenant. Tenant's employees, invitees, customers
or any other person in or about the Property, whether such damage or injury is
caused by or results from: (a) fire, steam, electricity, water, gas or rain; (b)
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures or any other cause;
(c) conditions arising in or about the Property or upon other portions of the
Project, or from other sources or places; or (d) any act or omission of any
other tenant of the Project. Landlord shall not be liable for any such damage or
injury even though the cause of or the means of repairing such damage or injury
are not accessible to Tenant. The provisions of this Section 6.02 shall not,
however, exempt Landlord from liability for Landlord's gross negligence or
willful misconduct.

       Section 6.04. Landlord's Obligations. Except as provided in Article Seven
(Damage or Destruction) and Article Eight (Condemnation), Landlord shall be
responsible for the structural soundness of the Building including replacement
of the roof as well as repair to the foundation and exterior walls. However,
Landlord shall not be obligated to maintain or repair windows, doors, plate
glass or the interior surfaces of exterior walls. Tenant will immediately give
Landlord written notice of defect or need for repairs required per the terms of
this Lease, after which Landlord will repair same or cure such defect within
thirty (30) days after receiving written notice from Tenant unless such cure
cannot reasonably be accomplished within such thirty (30) days, in which case
Landlord will have such additional time as is reasonably necessary to accomplish
such cure provided Landlord promptly commences and diligently prosecutes such
cure to completion. Landlord's liability with respect to any defects, repairs,
replacements and maintenance for which Landlord is responsible hereunder will be
limited to the cost of such repairs or maintenance or the curing of such
defects. Tenant waives the benefit of any statute in effect now or in the future
which might give Tenant the right to make repairs at Landlord's expense or to
terminate this Lease due to Landlord's failure to keep the Property in good
order, condition and repair.

       Section 6.05. Tenant's Obligations.

       (a) Except as provided in Section 6.04, Article Seven (Damage
Destruction) and Article Eight (Condemnation), and except for Landlord's express
obligations under the Lease and for normal wear and tear, Tenant shall keep all
portions of the Property (including, nonstructural, interior, systems and
equipment) in good order, condition and repair (including interior repainting
and refinishing, as needed). If any portion of the Property or any system or
equipment in the Property which Tenant is obligated to repair cannot be fully
repaired or restored, Tenant shall promptly replace such portion of the Property
or system or equipment or equipment in the Property. Tenant shall maintain a
preventive maintenance contract providing for the regular inspection and
maintenance of the heating and air conditioning system by a licensed heating and
air conditioning contractor. If any part of the Property is damaged by any act
or omission of Tenant, Tenant shall pay Landlord the cost (net of any insurance
recovery by Landlord) of repairing or replacing such damaged property, whether
or not Landlord would otherwise be obligated to pay the cost of maintaining or
repairing such property. It is the intention of Landlord and Tenant that at all
times Tenant shall maintain the portions of the Property which Tenant is
obligated to maintain in an attractive, first class and fully operative

                                                    Tenant JJ  Landlord JH    18

<PAGE>

condition, normal wear and tear, obligations which are the express
responsibility of Landlord, fire, casualty and condemnation excepted.

       From time to time upon written request of Tenant, Landlord will furnish
Tenant a written list of maintenance and repair contractors approved by Landlord
for the performance of HVAC, plumbing, electrical, and mechanical (including
overhead doors) work in the Property. If Tenant has difficulty in obtaining
response/service from any such contractors, Tenant may so advise Landlord, and
Landlord will promptly assist Tenant in attempting to cause such contractors to
diligently respond and perform by direct telephone contact and other reasonable
means typically employed by Landlord to obtain appropriate service from its
contractors. Further, within 30 days following the Commencement Date, Landlord
will advise Tenant of the cost and specifications of any available extended or
"full-service" HVAC warranties for Tenant's consideration.

       (b)    Tenant shall fulfill all of Tenant's obligations under this
Section 6.05, at Tenant's sole expense. If Tenant fails to maintain, repair or
replace the Property as required by this Section 6.05, Landlord may, upon ten
(10) days' prior notice to Tenant (except that no notice shall be required in
the case of an emergency), enter the Property and perform such maintenance or
repair (including replacement, as needed) on behalf of the Tenant. In such case,
Tenant shall reimburse Landlord for all costs incurred in performing such
maintenance or repair immediately upon demand.

       (c)    Landlord agrees that if a defect in materials or workmanship in
the initial construction of the Building or the Leasehold improvements
("Defect") is discovered by Tenant on or prior to the first anniversary of the
date of substantial completion of the Leasehold Improvements ("First
Anniversary"), Tenant shall give Landlord written notice thereof ("Defect
Notice") on or prior to the First Anniversary (time being of the essence with
respect thereto). If Landlord receives a Defect Notice prior to the First
Anniversary, Landlord shall, at its sole expense, cause such Defect to be
repaired or remedied. Notwithstanding the foregoing, nothing contained in this
Section 6.05(c) shall (i) require Landlord to repair or remedy any Defect to the
extent such repair or remediation is necessitated due to the negligence, or
intentional acts or omissions of, or misuse of the item requiring such repair or
remediation by, Tenant or its employees, agents, contractors or invitees; (ii)
require Landlord to repair or remedy any Defect if the coverage afforded by any
warranty or maintenance/service contract relating to the item in question has
been impaired or invalidated by Tenant or its employees, agents, contractors or
invitees; (iii) require Landlord to repair or remedy any Defect with respect to
which a Defect Notice is not received by Landlord on or prior to the First
Anniversary; (iv) give Tenant any defense to the payment when due of, or the
right to offset any amounts against, Base Rent, Additional Rent or other amounts
due from Tenant to Landlord hereunder; or (v) be enforceable against any
mortgagee of Landlord who succeeds to the interest of Landlord in the Property
as a result of foreclosure of any mortgage or deed of trust affecting the
Property (or as a result of a conveyance in lieu of foreclosure). Landlord may
satisfy its obligations under this Section 6.05(c) by electing to proceed under
any manufacturers' and construction warranties provided to Landlord in
connection with the construction of the Leasehold Improvements and/or under the
maintenance/service contracts required to be carried by Tenant under Section
6.05(a) hereof and Tenant hereby agrees to cooperate with Landlord in securing
the performance by any

                                                    Tenant JJ  Landlord JH    19

<PAGE>

manufacturer, contractor or contractor of the work required to be performed by
it under any such maintenance/service contractor of the work required to be
performed by it under any such maintenance/service contract.

       Section 6.06. Alterations, Additions, and Improvements.

       (a)    Tenant shall not make any alterations additions, additions or
improvements to the Property (other than the Leasehold Improvements to be
constructed in accordance with the terms and conditions set forth in Section
6.02(c)) without the prior written consent of Landlord (which consent shall not
       be unreasonably withheld, delayed or conditioned as to interior,
non-structural alterations); provided, however, Tenant may, without Landlord's
consent, make alterations which are nonstructural in character and the cost of
which does not exceed $100,000 during any calendar year of the Term of the Lease
("Permitted Non-Structural Alterations"). Tenant, at its own cost and expense,
may erect such shelves, bins, machinery and trade fixtures as it desires.
Notwithstanding the foregoing, the installation of such shelves, bins,
machinery, trade fixtures and all alterations, additions and improvements,
including without limitation Permitted Non-Structural Alterations, shall be
subject to the conditions that: (i) such items do not alter the basic character
of the Property; (ii) such items do not overload or damage the Property; (iii)
such items may be removed without injury to the Property; and (iv) the
construction, erection or installation thereof complies with all applicable
governmental laws, ordinances, regulations and with Landlord's specifications
and requirements. All alterations, additions, improvements and partitions
erected by Tenant shall be and remain the property of Tenant during the Term of
this Lease. All shelves, bins, machinery and trade fixtures installed by Tenant
(other than the Leasehold Improvements to be constructed in accordance with the
terms and conditions set forth on Exhibit "C") shall be removed on or before the
earlier to occur of the date of termination of this Lease or vacating of the
Property by Tenant, at which time Tenant shall restore the Property to the
condition as existed upon completion of the initial Leasehold Improvements,
reasonable wear and tear excepted. All alterations, installations, removals and
restoration shall be performed in a good and workmanlike manner so as not to
damage or alter the primary structure or structural qualities of the Building
and other improvements situated on the Property. Notwithstanding anything to the
contrary contained herein, but subject to the provisions of Section 6.06(b), it
is agreed that the use of and access to the roof of the Building is expressly
reserved to Landlord and is expressly denied to Tenant (except in order to
permit Tenant to discharge its obligations to repair, maintain and service the
HVAC unit situated on the roof of the Building or to comply with Tenant's other
obligations under this Lease). Subject to Section 6.06(b), Tenant shall not
penetrate the roof of the Building in any manner, nor install or construct any
alterations, additions or improvements thereon, nor otherwise use or occupy the
roof at any time during the Term hereof (except such use and occupation of the
roof as is necessary in order to permit Tenant to comply with the provisions of
this Lease).

       (b)    Tenant shall have the right to install satellite and/or microwave
antenna on the roof of the Building and elsewhere in the Building for the
reception and transmission of electromagnetic signals. Tenant shall be
responsible at Tenant's sole cost and expense for the cost of installation and
maintenance of such equipment. Landlord shall have the right to approve the
location, method of installation, size and shielding requirements, such approval
not to be

                                                    Tenant JJ  Landlord JH    20

<PAGE>

unreasonably withheld, delayed or conditioned; provided that any roof
penetrations shall be performed by Landlord's roofing contractor, at Tenant's
expense, in such manner as not to adversely affect the roof guarantee. Such
installation and use shall be subject to all required government approvals and
shall not interfere with Building systems.

       (c)    Tenant shall pay when due all claims for labor and material
furnished to the Property. Tenant shall give Landlord at least twenty (20) days'
prior written notice of the commencement of any work on the Property, regardless
of whether Landlord's consent to such work is required. Landlord may elect to
record and post notices of non-responsibility on the Property.

       Section 6.07. Condition upon Termination. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or Destruction). In addition, Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent), prior to the expiration of the Lease and to
restore the Property to its prior condition, all at Tenant's expense; provided
that Landlord must advise Tenant in writing at the time Landlord approves any
such alterations if Landlord's approval is conditioned upon Tenant's removal of
such alterations upon the expiration or earlier termination of this Lease;
otherwise, Tenant will not be required to remove such alterations. With respect
to alterations that do not require Landlord's approval, unless Tenant obtains
Landlord's waiver of the removal and restoration requirement prior to commencing
construction, Landlord will have the right to require Tenant to remove the
alterations and restore as aforesaid. All alterations, additions and
improvements which Landlord has not required Tenant to remove shall become
Landlord's property and shall be surrendered to Landlord upon the expiration or
earlier termination of the Lease, except that Tenant may remove any of Tenant's
machinery or equipment which can be removed without material damage to the
Property. Tenant shall repair, at Tenant's expense, any damage to the Property
caused by the removal of any such machinery or equipment. In no event, however,
shall Tenant remove any of the following materials or equipment (which shall be
deemed Landlord's property) without Landlord's prior written consent; any power
wiring or power panels; lighting or lighting fixtures; wall coverings; drapes,
blinds or other window coverings; carpets or other floor coverings; heaters, air
conditioners or any other heating or air conditioning equipment; fencing or
security gates; or other similar building operating equipment and decorations.

ARTICLE SEVEN:       DAMAGE OR DESTRUCTION

       Section 7.01. Partial Damage to Property.

       (a)    Tenant shall notify Landlord in writing immediately upon the
occurrence of any damage to the Property. If in the opinion of Landlord's
architect or engineer the damage can be repaired or restored within six (6)
months and if the proceeds received by Landlord from the insurance policies
described in Paragraph 4.04(b) are sufficient to pay for the necessary repairs,

                                                    Tenant JJ  Landlord JH    21

<PAGE>

this Lease shall remain in effect and Landlord shall repair the damage as soon
as reasonably possible. Landlord may elect (but is not required) to repair any
damage to Tenant's fixtures, equipment, or improvements.

       (b)    If the insurance proceeds received by Landlord are not sufficient
to pay the entire cost of repair, or if the cause of the damage is not covered
by the insurance policies which Landlord maintains under Paragraph 4.04(b), or
if in the opinion of Landlord's architect or engineer the damage cannot be
repaired or restored within six (6) months, Landlord may elect either to (i)
repair the damage as soon as reasonably possible, in which case this Lease shall
remain in full force and effect, or (ii) terminate this Lease as of the date the
damage occurred. Landlord shall notify Tenant within thirty (30) days after
receipt of notice of the occurrence of the damage whether Landlord elects to
repair the damage or terminate the Lease. If Landlord elects to repair the
damage, Tenant shall pay Landlord the "deductible amount" (if any), but not to
exceed $20,000,00, under Landlord's insurance policies. If Landlord elects to
terminate the Lease, Tenant may elect to continue this Lease in full force and
effect, in which case Tenant shall repair any damage to the Property and any
building in which the Property is located. Tenant shall pay the cost of such
repairs, except that upon satisfactory completion of such repairs, Landlord
shall deliver to Tenant any insurance proceeds received by Landlord for the
damage repaired by Tenant. Tenant shall give Landlord written notice of such
election within ten (10) days after receiving Landlord's termination notice.
Notwithstanding anything herein to the contrary, if Landlord elects to repair
the damage in accordance with the provisions hereof, and if the damage is not
repaired or restored within six (6) months after the date of the casualty, then
Tenant may terminate this Lease by giving Landlord written notice thereof at any
time prior to completion of Landlord's repair and restoration obligations
hereunder.

       (c)    If the damage to the Property occurs during the last six (6)
months of the Lease Term and such damage will require more then thirty (30) days
to repair, either Landlord or Tenant may elect to terminate this Lease as of the
date the damage occurred, regardless of the sufficiency of any insurance
proceeds. The party electing to terminate this Lease shall give written
notification to the other party of such election within thirty (30) days after
Tenant's notice to Landlord of the occurrence of the damage.

       Section 7.02. Substantial or Total Destruction. If the Property is
substantially or totally destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage as described in Section 7.01), and
regardless of whether Landlord receives any insurance proceeds, this Lease shall
terminate as of the date the destruction occurred. Notwithstanding the preceding
sentence, if the Property can be rebuilt within six (6) months after the date of
destruction, Landlord may elect to rebuild the Property at Landlord's own
expense, in which case this Lease shall remain in full force and effect.
Landlord shall notify Tenant of such election within thirty (30) days after
Tenant's notice of the occurrence of total or substantial destruction. If
Landlord so elects, Landlord shall rebuild the Property at Landlord's sole
expense, except that if the destruction was caused by an act or omission of
Tenant, Tenant shall pay Landlord the difference between the actual cost of
rebuilding and any insurance proceeds received by Landlord.

                                                    Tenant JJ  Landlord JH    22

<PAGE>

       Section 7.03. Temporary Reduction of Rent. If the Property is destroyed
or damaged and Landlord or Tenant repairs or restores the Property pursuant to
the provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes. Except for such possible reduction in Base Rent,
insurance premiums and real property taxes, Tenant shall not be entitled to any
compensation, reduction, or reimbursement from Landlord as a result of any
damage, destruction, repair, or restoration of or to the Property,

       Section 7.04. Waiver. Tenant waives the protection of any statute, code
or judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.

ARTICLE EIGHT:       CONDEMNATION

       If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If (i) more than ten percent (10%) of the floor area of the Building is taken,
or (ii) parking is reduced below code requirements and is not replaced by
Landlord with reasonably suitable replacement parking within sixty (60) days
thereafter, or (iii) access to public roads is taken and not replaced by
Landlord with reasonably suitable replacement access within sixty (60) days
thereafter, and if in the case of (i), (ii) or (iii), whichever is applicable,
the Permitted Uses of the Building by Tenant is materially and adversely
interfered with, then either Landlord or Tenant may terminate this Lease as of
the date the condemning authority takes title or possession, by delivering
written notice to the other within ten (10) days after receipt of written notice
of such taking (or in the absence of such notice, within ten (10) days after the
condemning authority takes title or possession). If neither Landlord nor Tenant
terminates this Lease, this Lease shall remain in effect as to the portion of
the Property not taken, except that the Base Rent and Additional Rent shall be
reduced in proportion to the reduction in the floor area of the Building. Any
Condemnation award or payment shall be distributed in the following order: (a)
first, to any ground lessor, mortgagee or beneficiary under a deed of trust
encumbering the Property, the amount of its interest in the Property; (b)
second, to Tenant, only the amount of any award specifically designated for loss
of or damage to Tenant's trade fixtures or removable personal property; and (c)
third, to Landlord, the remainder of such award, whether as compensation for
reduction in the value of the leasehold, the taking of the fee, or otherwise. If
this Lease is not terminated, Landlord shall repair any damage to the Property
caused by the Condemnation, except that Landlord shall not be obligated to
repair any damage for which Tenant has been reimbursed by the condemning
authority. If the severance damages received by Landlord are not sufficient to
pay for such repair, Landlord shall have the right to either terminate this
Lease or make such repair (provided the repair can be completed within six
months) at Landlord's expense.

                                                    Tenant JJ  Landlord JH    23

<PAGE>

ARTICLE NINE:        ASSIGNMENT AND SUBLETTING

       Section 9.01. Landlord's Consent Required. No portion of the Property or
of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by sale, assignment, mortgage, sublease, transfer, operation of
law, or act of Tenant, without Landlord's prior written consent, except as
provided in Section 9.02 below. Landlord has the right to grantor withhold its
consent as provided in Section 9.05 below. Any attempted transfer without
consent shall be void and shall constitute a non-curable breach of this Lease.
If Tenant is a partnership, any cumulative transfer of more than twenty percent
(20%) of the partnership interests shall require Landlord's consent.

       Section 9.02. Tenant Affiliate. Tenant may assign this Lease or sublease
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all of
Tenant's obligations under this Lease.

       Section 9.03. No Release of Tenant. No transfer permitted by this Article
Nine, whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord's acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant's transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant's transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant's liability under
this Lease.

       Section 9.04. Offer to Terminate. If Tenant desires to assign the Lease
or sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. If Landlord does
not so elect, the Lease shall continue in effect until otherwise terminated and
the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.

       Section 9.05. Landlord's Consent.

       (a)    Tenant's request for consent to any transfer described in Section
9.01 shall set forth in writing the details of the proposed transfer, including
the name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g., the term of and the rent and
security deposit payable under any proposed assignment or sublease), and any
other information Landlord deems relevant. Landlord shall have the right to
withhold consent, if reasonable, or to grant consent, based on the following
factors: (i) the business of the proposed assignee or subtenant and the proposed
use of the Property: (ii) the net worth and financial reputation of the proposed
assignee or subtenant: (iii) Tenant's compliance with all of its obligations
under the Lease: and (iv) such other factors as Landlord may reasonably deem

                                                    Tenant JJ  Landlord JH    24

<PAGE>

relevant. If Landlord objects to a proposed assignment solely because of the net
worth and/or financial reputation of the proposed assignee, Tenant may
nonetheless sublease (but not assign), all or a portion of the Property to the
proposed transferee, but only on the other terms of the proposed transfer.

       (b)    If Tenant assigns or subleases, the following shall apply:

              (i)    Tenant shall pay to Landlord as Additional Rent under the
Lease the Landlord's Share (stated in Section 1.12) of the Profit (defined
below) on such transaction as and when received by Tenant, unless Landlord gives
written notice to Tenant and the assignee or subtenant that Landlord's Share
shall be paid by the assignee or subtenant to Landlord directly. The "Profit"
means (A) all amounts paid to Tenant for such assignment or sublease, including
"key" money, monthly rent in excess of the monthly rent payable under the Lease,
and all fees and other consideration paid for the assignment or sublease,
including fees under any collateral agreements, less (B) costs and expenses
directly incurred by Tenant in connection with the execution and performance of
such assignment or sublease for real estate broker's commissions and costs of
renovation or construction of tenant improvements required under such assignment
of sublease. Tenant is entitled to recover such cost and expenses before Tenant
is obligated to pay the Landlord's Share to Landlord. The Profit in the case of
a sublease of less than all the Property is the rent allocable to the subleased
space as a percentage on a square footage basis.

              (ii)   Tenant shall provide Landlord a written statement
certifying all amounts to be paid from any assignment or sublease of the
Property within thirty (30) days after the transaction documentation is signed,
and Landlord may inspect Tenant's books and records to verify the accuracy of
such statement. On written request, Tenant shall promptly furnish to Landlord
copies of all the transaction documentation, all of which shall be certified by
Tenant to be complete, true and correct. Landlord's receipt of Landlord's Share
shall not be consent to any further assignment or subletting. The breach of
Tenant's obligation under this Paragraph 9.05(b) shall be a material default of
the Lease.

       Section 9.06. No Merger. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.

       Section 9.07. Security Interest. Tenant may grant a security interest
and/or lien in Tenant's trade fixtures, equipment, furnishings and personal
property installed by Tenant in the Property.

                                                    Tenant JJ  Landlord JH    25

<PAGE>

ARTICLE TEN:         DEFAULTS; REMEDIES

       Section 10.01. Covenants and Conditions. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenants right to continue in possession of the Property is conditioned upon such
performance. Time is of the essence in the performance of all covenants and
conditions.

       Section 10.02. Defaults. Tenant shall be in material default under this
Lease:

       (a)    If Tenant abandons the Property for greater than 6 months without
giving Landlord at least fifteen (15) days advance written notice;

       (b)    If Tenant fails to pay rent or any other charge within ten (10)
days after written notice from Landlord that same is due;

       (c)    If Tenant fails to perform any of Tenants non-monetary obligations
under this Lease for a period of thirty (30) days after written notice from
Landlord; provided that if more than thirty (30) days are required to complete
such performance, Tenant shall not be in default if Tenant commences such
performance within the thirty (30)-day period and thereafter diligently pursues
its completion. However, Landlord shall not be required to give such notice if
Tenant's failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Paragraph is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.

       (d)    (i) If Tenant makes a general assignment or general arrangement
for the benefit of creditors; (ii) if a petition for adjudication of bankruptcy
or for reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.

       (e)    If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any portion of
Tenant's obligations under the Lease. Unless otherwise expressly provided, no
guaranty of the Lease is revocable.

       Section 10.03. Remedies. On the occurrence of any material default by
Tenant, Landlord may, at anytime thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:

                                                    Tenant JJ  Landlord JH    26

<PAGE>

       (a)    Terminate Tenant's right to possession of the Property by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Property to Landlord. In such event,
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including (i) the worth at the time of
the award of the unpaid Base Rent, Additional Rent and other charges which
Landlord had earned at the time of the termination: (ii) the worth at the time
of the award of the amount by which the unpaid Base Rent, Additional Rent and
other charges which Landlord would have earned after termination until the time
of the award exceeds the amount of such rental loss that Tenant proves Landlord
could have reasonably avoided; (iii) the worth at the time of the award of the
amount by which the unpaid Base Rent, and other charges which Tenant would have
paid for the balance of the Lease Term after the time of award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; and (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under the Lease or which in the ordinary course of things would be likely to
result therefrom, including, but not limited to, any costs or expenses Landlord
incurs in maintaining or preserving the Property after such default, the cost of
recovering possession of the Property, expenses of reletting, including
necessary renovation or alteration of the Property, Landlord's reasonable
attorneys' fee incurred in connection therewith, and any real estate commission
paid or payable. As used in subparts (i) and (ii) above, the "worth at the time
of the award" is computed by discounting to present value unpaid amounts at the
rate of fifteen percent (15%) per annum, or such lesser amount as may then be
the maximum lawful rate. As used in subpart (iii) above, the "worth at the time
of the award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one percent
(1%). If Tenant has abandoned the Property, Landlord shall have the option of
(i) retaking possession of the Property and recovering from Tenant the amount
specified in this Paragraph 10.03(a), or (ii) proceeding under Paragraph
10.03(b);

       (b)    Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant has abandoned the Property. In
such event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;

       (c)    Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state in which the Property is
located.

       Section 10.04. Repayment of "Free" Rent. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent".
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and

                                                    Tenant JJ  Landlord JH    27

<PAGE>

this Lease shall be enforced as if there were no such rent abatement or other
rent concession. In such case, Abated Rent shall be calculated based on the full
initial rent payable under this Lease.

       Section 10.05. Automatic Termination. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.

       Section 10.06. Cumulative Remedies. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.

ARTICLE ELEVEN.      PROTECTION OF LENDERS.

       Section 11.01. Subordination. Landlord shall have the right to
subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. Tenant shall cooperate with Landlord and any lender
which is acquiring a security interest in the Property or the Lease. Tenant
shall execute such further documents and assurances as such lender may require,
provided that Tenant's obligations under this Lease shall not be increased in
any way (the performance of minor ministerial acts shall not be deemed to
increase Tenant's obligations), and Tenant shall not be deprived of its rights
under this Lease. Tenant's right to quiet possession of the Property during the
Lease Term shall not be disturbed if Tenant pays the rent and performs all of
Tenant's obligations under this Lease and is not otherwise in default. If any
ground lessor, beneficiary or mortgagee elects to have this Lease prior to the
lien of its ground lease, deed of trust or mortgage and gives written notice
thereof to Tenant, this Lease shall be deemed prior to such ground lease, deed
of trust or mortgage whether this Lease is dated prior or subsequent to the date
of said ground lease, deed of trust or mortgage or the date of recording
thereof.

       Section 11.02. Attornment. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.

                                                    Tenant JJ  Landlord JH    28

<PAGE>

       Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.

       Section 11.04. Estoppel Certificates.

       (a)    Upon Landlord's written request, Tenant shall execute, acknowledge
and deliver to Landlord a written statement certifying: (i) that none of the
terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not been
cancelled or terminated; (iii) the last date of payment of the Base Rent and
other charges and the time period covered by such payment; (iv) that Landlord is
not in default under this Lease (or, if Landlord is claimed to be in default,
stating why); and (v) such other representations or information with respect to
Tenant or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrance of the Property may require. Tenant shall deliver such
statement to Landlord within ten (10) business days after Landlord's request.
Landlord may give any such statement by Tenant to any prospective purchaser or
encumbrance of the Property. Such purchaser or encumbrancer may rely
conclusively upon such statement as true and correct.

       (b)    If Tenant does not deliver such statement to Landlord within such
ten (10) business day period, Landlord, and any prospective purchaser or
encumbrancer, may conclusively presume and rely upon the following facts: (i)
that the terms and provisions of this Lease have not been changed except as
otherwise represented by Landlord; (ii) that this Lease has not been canceled or
terminated except as otherwise represented by Landlord; (iii) that not more than
one month's Base Rent or other charges have been paid in advance; and (iv) that
Landlord is not in default under the Lease. In such event, Tenant shall be
estopped from denying the truth of such facts.

       Section 11.06. Tenant's Financial Condition. Within ten (10) days after
written request from Landlord, but not more often than once per calendar year,
Tenant shall deliver to Landlord such then existing financial statements as
Landlord reasonably requires to verify the net worth of Tenant or any assignee,
subtenant, or guarantor of Tenant. In addition, Tenant shall deliver to any
lender designated by Landlord any financial statements reasonably required by
such lender to facilitate the financing or refinancing of the Property. Tenant
represents and warrants to Landlord that each such financial statement is a true
and accurate statement as of the date of such statement. All financial
statements shall be confidential and shall be used only for the purposes set
forth in this Lease. Landlord shall execute, and cause any lender, prospective
purchaser or other person or entity to which Landlord discloses any such
financial statement in accordance with the provisions hereof to execute, a
non-disclosure statement in form reasonably acceptable to Tenant, Landlord and
any such parties if requested by Landlord.

ARTICLE TWELVE: LEGAL COSTS

                                                    Tenant JJ  Landlord JH    29

<PAGE>

       Section 12.01. Legal Proceedings. If Tenant or Landlord shall be in
breach or default under this Lease, such party (the "Defaulting Party") shall
reimburse the other party (the "Nondefaulting Party") upon demand for any costs
or expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease Is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys'fees and costs.
The losing party in such action shall pay such attorneys' fees and costs. Tenant
shall also indemnify Landlord against and hold Landlord harmless from all costs,
expenses, demands and liability Landlord may incur if Landlord becomes or is
made a party to any claim or action (a) instituted by Tenant against any third
party, or by any third party against Tenant, or by or against any person holding
any interest under or using the Property by license of or agreement with Tenant;
(b) for foreclosure of any lien for labor or material furnished to or for Tenant
or such other person; (c) otherwise arising out of or resulting from any act or
transaction of Tenant or such other person; or (d) necessary to protect
Landlord's Interest under this Lease in a bankruptcy proceeding, or other
proceeding under Title 11 of the United States Code, as amended. Tenant shall
defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse landlord for any legal fees or costs Landlord incurs in any such
claim or action.

       Section 12.02. Landlord's Consent. Tenant shall pay Landlord's reasonable
attorneys'fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting), or In connection with
any other act which Tenant proposes to do and which requires Landlord's consent.

ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS

       Section 13.01. Non-Discrimination. Tenant promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.

       Section 13.02. Landlord's Liability; Certain Duties.

       (a)    As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or the leasehold estate under a
ground lease of the Property at the time in question. Each Landlord is obligated
to perform the obligations of Landlord under this Lease only during the time
such Landlord owns such interest or title. Any Landlord who transfers its title
or interest is relieved of all liability with respect to the obligations of
Landlord under this Lease to be performed on or after the date of transfer.
However, each Landlord shall deliver to its transferee all funds that Tenant
previously paid if such funds have not yet been applied under the terms of this
Lease.

                                                    Tenant JJ  Landlord JH    30

<PAGE>

       (b)    Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any ground
lessor, mortgagee or beneficiary under any deed of trust encumbering the
Property whose name and address have been furnished to Tenant in writing.
Landlord shall not be in default under this Lease unless Landlord (or such
ground lessor, mortgagee or beneficiary) fails to cure such non-performance
within thirty (30) days after receipt of Tenant's notice, However, if such
nonperformance reasonably requires more than thirty (30) days to cure, Landlord
shall not be in default if such cure is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.

       (c)    Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations under
this Lease is limited to Landlord's interest in the Property, and neither the
Landlord nor its partners, shareholders, officers or other principals shall have
any personal liability under this Lease.

       Section 13.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.

       Section 13.04. Interpretation. The captions of the Articles or Sections
of this Lease are to assist the parties in reading this Lease and are not a part
of the terms or provisions of this Lease. Whenever required by the context of
this Lease, the singular shall include the plural and the plural shall include
the singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents. employees. contractors,
invitees, successors or others using the Property with Tenant's expressed or
implied permission.

       Section 13.05. Incorporation of Prior Agreements; Modifications. This
Lease is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.

       Section 13.06. Notices. All notices required or permitted under this
Lease shall be in writing and shall be personally delivered or sent by certified
mail, return receipt requested, postage prepaid. Notices to Tenant shall be
delivered to the address specified in Section 1.03 above. Notices to Landlord
shall be delivered to the address specified in Section 1.02 above. All notices
shall be effective upon delivery. Either party may change its notice address
upon written notice to the other party,

       Section 13.07. Waivers. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant. negotiate such check without being bound to the conditions of such
statement.

                                                    Tenant JJ  Landlord JH    31

<PAGE>

       Section 13.08. No Recordation. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form" memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.

       Section 13.09. Binding Effect; Choice of Law. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.

       Section 13.10. Corporate Authority; Partnership Authority. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within ten (10) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person or entity signing this Lease for Tenant represents and warrants that he
or it is a general partner of the partnership, that he or it has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall give written notice to
Landlord of any general partners withdrawal or addition. Within ten (10) days
after this Lease is signed, Tenant shall deliver to Landlord a copy of Tenant's
recorded statement of partnership or certificate of limited partnership.

       Section 13.11. Joint and Several Liability. All parties signing this
Lease as Tenant shall be jointly and severally liable for all obligations of
Tenant.

       Section 13.12. Force Majeure. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, government regulation or restriction and weather
conditions.

       Section 13.13. Execution of Lease. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.

       Section 13.14. Survival. All representations and warranties of Landlord
and Tenant shall survive the termination of this Lease.

       Section 13.15. Landlord's Lien. Landlord agrees from time to time upon
reasonable advance written request of Tenant, to subordinate any and all
contractual or statutory landlord's liens in Tenant's property in favor of
lender(s) furnishing financing for Tenant's business by execution of Landlord's
Waiver and Consent in the form attached hereto as Exhibit "F" or other document
reasonably acceptable to Landlord and such lender(s).

                                                    Tenant JJ  Landlord JH    32

<PAGE>

       Section 13.16. Tenant shall have right to choose utilities suppliers for
the Project.

ARTICLE FOURTEEN: BROKERS

       Section 14.01. Broker's Fee. When this Lease is signed by and delivered
to both Landlord and Tenant, Landlord shall pay a real estate commission to
Tenant's Broker named in Section 1.08 above, as provided in the written
agreement between Landlord and Tenant's Broker. Nothing contained in this Lease
shall impose any obligation on Landlord to pay a commission or fee to any party
other than Tenant's Broker.

       Section 14.02. Agency Disclosure; No Other Brokers. Landlord and Tenant
each warrant that they have dealt with no other real estate broker(s) in
connection with this transaction except: Leon Brothers, who represents Tenant.

       Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialed all exhibits
which are attached to or incorporated by reference in this Lease.

                                       "LANDLORD"

Signed on June 9, 2000                 PANATTONI/HILLWOOD
at 5310 Harvest Hill Road, #180,       DEVELOPMENT COMPANY, LLC,
Dallas, Texas                          a Texas limited liability company

                                       By: /s/ Dewitt J. Hicks III
                                          ------------------------------------
                                       Name: Dewitt J. Hicks III
                                            ----------------------------------
                                       Title: Principal
                                             ---------------------------------

                                       "TENANT"

Signed on June 6, 2000                 ICON HEALTH AND FITNESS, INC.,
at 4010 Distribution Drive             a Delaware corporation
Garland, TX

                                       By: /s/ Jace Jergensen
                                          ------------------------------------
                                       Name: Jace Jergensen
                                            ----------------------------------
                                       Title: Vice President/General Manager
                                             ---------------------------------

                                                    Tenant JJ  Landlord JH    33

<PAGE>

                                    Exhibit A

                             [Property Description]

PROPOSED BLOCK 2, LOT 4

BEING a tract of land situated in the Daniel Turner Survey, Abstract No. 1462,
in the City of Mesquite, Dallas County, Texas, and being a part of that tract of
land described in deed to Petrus Investment, L.P., as recorded in Volume 98251,
Page 9371, Deed Records, Dallas County, Texas, (DRDCT), and being more
particularly described as follows:

BEGINNING at a set 1/2-inch iron rod with a yellow plastic cap stamped "HALFF
ASSOC. INC." (hereafter referred to as "with cap"), at the intersection of the
westerly right-of-way line of Town East Boulevard (100 foot right-of-way) and
the northerly right-of-way line of a Dallas Power and Light Company
right-of-way, as recorded in Volume 5624, Page 250, DRDCT, (125 foot
right-of-way);

THENCE South 44 degrees 13minutes 32secondsWest, departing said westerly line
and along said northerly line, a distance of 930.01 feet to a set 1/2-inch iron
rod with cap for a corner;

THENCE North 45 degrees 31 minutes 28 seconds West, departing said northerly
line, a distance of 889.59 feet to a set 1/2-inch iron rod with cap for corner,

THENCE North 44 degrees 16 minutes 17 seconds East, a distance of 930.01 feet to
a set 1/2-inch iron rod with cap on the said westerly line of Town East
Boulevard;

THENCE South 45 degrees 31 minutes 28 seconds East, along said westerly line of
said Town East Boulevard, a distance of 888.85 feet to the POINT OF BEGINNING
AND CONTAINING 826,976 square feet or 18.98 acres of land, more or less.

                                                    Tenant JJ  Landlord JH    34

<PAGE>

                                   EXHIBIT "B"

                               Building Expansion

a.     Exercise of Expansion Option. Provided that (i) no Event of Default then
       exists and (ii) there has been no material adverse change in Tenant's
       financial condition, comparing the time the Lease is executed and the
       time that Tenant exercises the expansion option, and Tenant is not in
       default under its covenants with its then current lenders, if any (which
       defaults have not been waived in writing by such lenders), Tenant shall
       have the one-time right to elect to expand the Premises by up to 200,000
       square feet (but not less than 100,000 square feet). The term of the
       expansion option will be two (2) years commencing on the Commencement
       Date ("Initial Expansion Option Term"); provided that Tenant shall have
       the right to extend the Initial Expansion Option Term for an additional
       two (2) years by giving Landlord written notice thereof at least sixty
       (60) days prior to expiration of the Initial Expansion Option Term, time
       being of the essence. If Tenant exercises its right to extend the Initial
       Expansion Option Term, annual Base Rent shall automatically be increased
       by $0.10 per square foot for the entire two (2) years of the extended
       expansion option. This expansion right may be exercised by Tenant by
       delivering to Landlord written notice thereof (the "Expansion Notice") at
       any time during the Initial Expansion Option Tenn, as same may be
       extended as aforesaid, specifying the size of the expansion area (the
       "Expansion Space"). The Expansion Space will be constructed on the
       approximately 10.04 acre tract adjacent to the Project and in the
       configuration shown on Exhibit G attached to the Lease (the "Expansion
       Land").

b.     Expansion Space Lease. After Tenant has delivered the Expansion Notice as
       provided above, Tenant and Landlord shall execute a new lease for the
       Expansion Space (the "Expansion Space Lease") on substantially the same
       terms and conditions as this Lease, but with a 10-year term (beginning on
       substantial completion of the Expansion Space improvements) and an annual
       base rent rate (1) for the first five years of the Expansion Space Lease
       term, equal to (A) the Total Expansion Costs (defined below), multiplied
       by (B) the sum of (i) a mortgage constant rate equal to the 20-Yeat
       Mortgage Money Rate (defined below) at the time in question, plus (ii)
       250 basis points (plus a $0.10 structural reserve); and (2) for the final
       five years of the Expansion Space Lease term, equal to 115% of the base
       rent for the first five years of the Expansion Space Lease term. For
       example, if Tenant elects to do a 200,000 square foot expansion and the
       20-Year Mortgage Money Rate is 9% and the Total Expansion Cost for the
       Expansion Space is $2,000,000, then the annual Base Rent for the
       Expansion Space during the first five years of the Expansion Space lease
       term would be $250,000 [calculated as follows: $2,000,000 x (.09 +.025) =
       $230,000; plus $20,000 structural reserve]; and $287,500 for the final
       five years of the Expansion Space Lease term. At the time of execution of
       the Expansion Space Lease, Landlord and Tenant shall execute an amendment
       to this Lease extending the initial Term for a period such that it is
       coterminous with the lease term of the

                                                    Tenant JJ  Landlord JH    35

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       Expansion Space Lease, in which case, (A) the commencement date of the
       first five-year extension under Section 2,04 of the Lease shall begin
       upon the expiration of the initial Term of the Lease (as extended in
       accordance with this sentence) and (B) the Base Rent payable for the
       Premises during each Lease Year (defined below) of the extended portion
       of the initial Term shall be equal to the product of the previous Lease
       Year's Base Rent and 1.03, as determined at the beginning of each such
       Lease Year. The term "20-year Mortgage Money Rate" shall mean the
       mortgage constant (i.e., the amount of annual debt service, expressed as
       a percentage of the loan amount, that is necessary to pay interest and
       the entire principal over the amortization period) at the time such
       determination is being made associated with mortgage loans made available
       by the the following institutional lenders for permanent loans for
       properties similar to the Premises, with an amortization schedule of 20
       years: Metropolitan Life Insurance Company; Prudential Life Insurance
       Company; and The Principal Financial Group. If, however, any of such
       institutional lenders are not providing permanent financing for
       properties similar to the Premises, then Landlord may substitute another
       institutional lender in its/their place. Tenant may select the day on
       which the mortgage constant shall be determined within 30 days after
       Landlord notifies Tenant that the selection should be made (the
       "Selection Period") . Within five days after the end of the Selection
       Period, Tenant shall notify Landlord of Tenant's selected day. If Tenant
       does not notify Landlord as provided in the preceding sentence, then the
       mortgage constant shall be determined as of the day on which landlord
       receives the Expansion Notice. "Lease Year" means each 12-month period
       during the term of the Expansion Space Lease.

c.     Expansion Space Improvements. Within 30 days after the Expansion Space
       Lease is executed, Landlord will prepare and submit to Tenant for its
       review preliminary plans and outline specifications (the "Expansion
       Outline Specifications") for the construction of the shell of the
       Expansion Space (the "Expansion Shell") and the interior improvements of
       the Expansion Space (the "Expansion Interior") (which must be acceptable
       to Landlord and Tenant and provide for improvements that can be
       constructed for a Total Expansion Cost of not more than $32 per square
       foot). Tenant shall notify Landlord whether it approves of the submitted
       Expansion Outline Specifications within 14 days after Landlord's
       submission thereof. If Tenant disapproves of the Expansion Outline
       Specifications, then Tenant shall give Landlord notice thereof specifying
       in detail the reasons for such disapproval, in which case Landlord shall
       amend the submitted Expansion Outline Specifications and redeliver to
       Tenant for its approval within 10 days after receiving Tenant's notice
       disapproving the submitted Expansions Outline Specifications. This
       process shall be repeated until the Expansion Outline Specifications have
       been finally approved. Within 15 days after Landlord and Tenant have
       approved the Expansion Outline Specifications, Landlord shall submit to
       Tenant a written preliminary estimate of the Total Expansion Costs (which
       shall be based in part upon the lowest qualified estimates among those
       obtained by Landlord from at least four contractors for the cost of
       constructing the Expansion Space in accordance with the Expansion Outline
       Specifications). Tenant shall either approve or disapprove of such
       preliminary estimate

                                                    Tenant JJ  Landlord JH    36

<PAGE>

       within ten days after Tenant's receipt thereof. If Tenant disapproves the
       estimate, then Tenant shall notify Landlord of the reasons for such
       disapproval, in which case Landlord shall attempt to address Tenant's
       reasons for disapproval and resubmit the preliminary estimate to Tenant
       within 10 days after landlord's receipt of Tenant's disapproval. This
       process shall be repeated until Tenant has approved the preliminary
       estimate. Upon receipt of Tenant's approval of the preliminary estimate,
       Landlord shall proceed to prepare detailed plans and specifications for
       the Expansion Space (the "Expansion Plans and Specifications") including,
       without limitation, working drawings, construction drawings, electrical,
       plumbing and mechanical drawings necessary to construct the Expansion
       Shell and the Expansion Interior. After Landlord and Tenant have approved
       the Expansion Plans and Specifications, if Landlord believes that the
       actual cost to complete the Expansion Space will exceed the preliminary
       estimates by more than 10%, Landlord shall submit to Tenant Landlord's
       written estimate of the cost of constructing such improvements in
       accordance with the completed Expansion Plans and Specifications. Upon
       receipt of Tenant's approval of any such revised estimate, Landlord shall
       proceed to construct the improvements in accordance with the approved
       Expansion Plans and Specifications. "Total Expansion Costs" shall mean
       all soft and hard costs incurred in connection with the design and
       construction of the improvements for the Expansion Space, including,
       without limitation, all architecture, engineering, contractors, market
       leasing (not to exceed 2.25% of the anticipated base rent due for the
       Expansion Space for the fifth term of the lease thereof), brokerage and
       legal fees and expenses (however, Total Expansion costs shall not
       include-any-development fee or any brokerage commissions other than the
       market leasing fee described above), any interest expense, tax and
       insurance payments incurred during such construction process, any loan or
       mortgage fees, value of the Expansion Land (currently agreed to be $1.50
       per square foot, which shall increase at the rate of 5% per year), and
       any other costs, fees or expenses incurred with the construction of the
       Expansion Space. However, Total Expansion Costs relating to the design
       and construction of the Expansion Space shall not exceed 110% of the hard
       and soft costs for the design and construction of the Expansion Space
       improvements that were approved by Tenant, unless such costs were caused
       by changes in Law occurring after Tenant's approval of such costs or
       Force Majeure Events. If Tenant elects to expand hereunder for less than
       200,000 square feet, Landlord will have the right to construct up to the
       full 200,000 square feet, in which case the Total Expansion Costs
       attributable to the Expansion Shell and the Expansion Land will be
       prorated between the Expansion Space and the balance of the actual square
       footage of the constructed expansion building based upon their respective
       square footages.

d.     Rescission of Expansion Election. Landlord and Tenant shall negotiate in
       good faith to reach mutual agreement on all matters for which this
       Exhibit B requires the approval of Landlord and Tenant, including the
       Expansion Outline Specifications, the Total Expansion Costs and the
       Expansion Plans and Specifications. If the Total Expansion Costs and the
       Expansion Plans and Specifications have not been finally approved by
       Landlord and Tenant within 90 days after Tenant's delivery to Landlord of
       an Expansion Notice, then, notwithstanding any other provision herein,
       Tenant shall have the right to rescind such election upon written notice
       to Landlord delivered at any time before the

                                                    Tenant JJ  Landlord JH    37

<PAGE>

       earlier of the date Landlord and Tenant have finally approved the Total
       Expansion Costs and the Plans and Specifications or 120 days after the
       Expansion Notice was delivered to Landlord, in which case Tenant shall
       reimburse landlord for all reasonable costs incurred by Landlord prior to
       the date Tenant delivers such rescission notice (which costs shall
       include an administration charge of $5,000 to cover Landlord's overhead
       costs in connection therewith). Such reimbursement shall be due within 30
       days after Landlord delivers to Tenant an invoice therefor. If Tenant
       does not rescind its expansion option, Landlord will diligently commence
       the construction of the Expansion Space and will thereafter diligently
       and continuously pursue the completion of the Expansion Space.

e.     Right of First Offer. If Tenant does not exercise its expansion option
       during the Initial Expansion Option Term, as same may be extended as
       aforesaid, Landlord or its successors and assigns with respect to the
       Expansion Land shall have the right to construct a building (the "New
       Building") on the Expansion Land at such time and of such size, up to
       200,000 square feet, as Landlord or its successors or assigns may
       determine in its or their sole discretion. Provided that if (i) no Event
       of Default then exists, (ii) there has been no material adverse change in
       Tenant's financial condition, comparing the time the Lease is executed
       and the time that Tenant exercises the expansion option, (iii) Tenant is
       not in default under its covenants with its then current lenders, if any
       (which defaults have not been waived in writing by such lenders), and
       (iv) the New Building is not constructed for occupancy solely by the then
       owner of the Expansion Land, Landlord agrees prior to entering into the
       first lease for space in any such New Building to give Tenant written
       notice specifying the terms upon which Landlord will be offering to lease
       space in the New Building to third parties. Such notice may be given
       prior to commencement of construction of the New Building. Tenant will
       have a period of five (5) business days after receipt of such notice
       within within which to give Landlord written notice of Tenant's election
       to lease all or any part of the New Building which is not to be occupied
       by the then owner of the Expansion Land, upon the same terms and
       provisions specified in Landlord's notice, provided that if Tenant does
       not elect to take the entire portion of the New Building that is
       available for lease to third parties, any remaining space available for
       lease to third parties must be of a size and configuration acceptable to
       Landlord from a marketing standpoint in Landlord's discretion. If Tenant
       so elects to accept the offer, Tenant will have a period of ten (10)
       additional calendar days following receipt from Landlord of a form of
       Lease including the business points relating to such space, and otherwise
       substantially incorporating the other provisions of this Lease generally
       applicable separately from said business points. In the event of failure
       of Tenant to se exercise the right to lease the subject space hereunder
       or to so execute a new lease on such terms as aforesaid, Tenant will have
       no further rights to lease the space pursuant to this paragraph e. At the
       time that Tenant leases any space in the New Building, Landlord and
       Tenant shall execute an amendment to this Lease extending the initial
       Term for a period such that it is coterminous with the lease term of the
       space in the New Building, in which case, (A) the commencement date of
       the first five-year extension under Section 2.04 of the Lease shall begin
       upon the expiration of the initial Term of the Lease (as extended in
       accordance with this sentence) and (B) the Base Rent payable for the
       Premises during each Lease Year (defined below)

                                                    Tenant JJ  Landlord JH    38

<PAGE>

       of the extended portion of the initial Term shall be equal to the product
       of the previous Lease Year's Base Rent and 1.03, as determined at the
       beginning of each such Lease Year

f.     It is understood and agreed that Landlord is the current owner of the
       Expansion Land and that if Landlord transfers this Lease to a third
       party, Landlord agrees that as a condition to being released from
       Landlord's obligations under this Lease, that Landlord will grant to such
       third party the right to purchase the Expansion Land at a net price to
       Landlord equal to the land value specified in paragraph c. above (as
       increased as therein provided) if Tenant exercises its expansion option
       under paragraph a above. Such option may be exercised by giving Landlord
       (or the then owner of the Expansion Land) written notice thereof (the
       "Exercise Notice") within thirty (30) days after the first to occur of
       (i) mutual agreement under paragraph d above, or (ii) expiration of the
       120-day period specified in paragraph d., without Tenant having exercised
       its recession right, and with closing to occur within fifteen (15) days
       after receipt of the Exercise Notice. If Tenant does not exercise its
       expansion option under paragraph a, the right of first offer set forth in
       paragraph e. above will be applicable to the Expansion Land and binding
       upon Landlord and Landlord's successors and assigns with respect to the
       Expansion Land. Landlord agrees to cause any transferee of the Expansion
       Land to assume the obligations of Landlord under such right of first
       offer in writing for the benefit of Tenant.

                                                    Tenant JJ  Landlord JH    39

<PAGE>

                                   EXHIBIT "C"

                        EXCLUSIONS FROM COMMON AREA COSTS

Notwithstanding any provision contained herein to the contrary "common area
expenses" for purposes hereof shall not include, and in no event shall Tenant be
required to pay or reimburse Landlord for: the any costs incurred by Landlord
prior to the date upon which Landlord delivers possession of the Property to
Tenant in the condition required by this Lease; any costs incurred by Landlord
in connection with the acquisition of the Property or the initial construction
of the Improvements, or the correction of any defects therein; depreciation
(except as provided in Section 4.05(c)); interest and/or principal payments on
debts of Landlord; repairs or other work occasioned by fire, windstorm or other
casualty, or the exercise of the right of eminent domain; lease commissions;
overhead and profit increment paid to subsidiaries or other affiliates of
Landlord for services to the extent that the costs of such services exceed the
competitive cost for such services rendered by persons or entities of similar
skill, competence and experience; cost of electricity and other utilities for
tenanted areas and areas intended for tenancy or capable of being tenanted in
the Property or the Project; salaries of employees whose rank is above the grade
of building manager (to the extent an employee's time is devoted to activities
at other locations or buildings, only an equitable proration of such salary,
based upon the actual time spent at the Property, shall be included within
common area expenses) all items(including repairs) and services paid for by
insurance proceeds; costs incurred in connection with the sale, financing,
refinancing, mortgaging or sale of the Property, including brokerage
commissions; attorney's and accountant's fees, closing costs; title insurance
premiums, transfer taxes and interest charges; costs, fines, interest,
penalties, legal fees or costs of litigation incurred due to the late payment of
taxes, utility bills and other costs incurred by Landlord's failure to make such
payments when due; costs associated with correcting any violation of law, or
making renovations or alterations to the Property required in order to cause
same to be in compliance with any applicable law; ground rent; rental or lease
charges on any equipment or property the acquisition of which would normally be
capitalized under generally accepted accounting principals; political or
charitable contributions; expenses for repairs, replacements or improvements
arising from the initial construction of the improvements to the extent such
expenses result from deficiencies in design or workmanship (except conditions
resulting from ordinary wear and tear); costs arising out of the gross
negligence of Landlord or its agents or of any tenant, vendor, contractor, or
providers of materials or services selected, hired or engaged by Landlord or its
agents; entertainment or travel expenses of Landlord, its employees, agents,
partners and affiliates; or reserves of any kind, Including without limitation,
replacement reserves and reserves for bad debts or lost rent or any similar
charge not involving the payment of money to third parties. No expenses will be
included in common area expenses that are otherwise payable by Tenant or other
specific tenants of the Project separate from common area expenses, so that
there will be no duplication of the same charges by billing the same charge to
Tenant or other specific tenants separate from common area expenses and also
including the same charges in common area expenses. Expenses

                                                    Tenant JJ  Landlord JH    40

<PAGE>

that are designated as capital expenditures by generally accepted accounting
procedures ("GAAP") shall be included in common area expenses, provided that if
any such expenditure is more than Five Thousand Dollars ($5,000.00), such amount
will be amortized over the useful life, as determined by GAAP, of such capital
expenditure, and such amortization will be included in common area expenses for
each year of such useful life failing within the Term of this Lease (to the
extent that the useful life of a capital expenditure exceeds the expiration of
the Term, Tenant will have no obligation to pay Landlord such amount following
such expiration)

                                                    Tenant JJ  Landlord JH    41

<PAGE>

                                   EXHIBIT "D"

                                Proposed Signage

                                [GRAPHIC OMITTED]

                                                    Tenant JJ  Landlord JH    42

<PAGE>

                                   EXHIBIT "E"

                             BUILDING SPECIFICATIONS

                            ICON HEALTH H AND FITNESS

GENERAL DESCRIPTION

Land Area:               Approximately 18.98 acres

Building Type:           Concrete tilt-up.

Building Size:           400,000 square feet

Building Dimensions:     500 X 800

Office Area:             Landlord's proposal includes a $35 per square foot
                         allowance for design and construction of 15,500 square
                         feet of office area.

Showroom Area:           Landlord's proposal includes a $30 per square foot
                         allowance for design and construction of 3,000 square
                         feet of showroom area. Showroom to include 2 floor
                         drains and a hose bib for use in spa displays.

Sewing Room:             60,000 square feet. Landlord will provide metal halide
                         fighting providing an average of 50 foot candies as
                         measured horizontally 3' above the floor, with a
                         minimum of 25 foot candles as measured vertically.

                         Landlord will provide 150 Tons of HVAC distributed
                         along with R-19 insulation at the roof deck. Also, this
                         area will be demised separately with 1-hr sheetrock
                         demising wall to deck which will be insulated, taped,
                         and painted white on the inside of the sewing room.
                         Also, landlord will provide a 12' by 12' automated,
                         overhead door leading into the sewing room from the
                         warehouse and a 40' by 80' chain fink storage area
                         within the sewing area. The height of the fence will be
                         10' and it will have a chain link roof which shall
                         fully enclose the area.

Clear Height:            Operating clear height of 30', excluding: fight
                         fixtures and heaters.

Bay Sizes:               Sixteen (16) bays at 50' each for the 800' length and
                         two staging bays (2) bays at approximately 52' each and
                         eight (9) bays at 44' each for the 500' depth.

                                                    Tenant JJ  Landlord JH    43

<PAGE>

Roof:                    4 ply built-up

Skylights:               None

Landscaping:             A $100,000 allowance will be provided for all
                         installation and design of plant materials and
                         irrigation.

Parking:                 One space for every 1,000 square feet will be provided.

Outdoor Storage Area:    Two areas of approximately 40,000 s.f. each, with 8'
                         tall chain link fencing with vinyl privacy slats. Each
                         area to be served by two gates each. Each area to have
                         a gravel surface.

SITE WORK

On-site Storm
Drain System:            Engineered to assure rapid collection and disposal into
                         the municipal storm sewer.

Domestic Water
And Sewer:               Extend Sanitary Sewer and Domestic Water Connections
                         for office into the first bay at the north end of the
                         building.

Paving:                  Car Operations: Concrete, per soils engineer
                         recommendations, but no less than 5".

                         Truck Operations: Concrete, per soils engineer
                         recommendations, but no less than 6".

Curbs and Striping:      Fully striped parking lot per code.

CONCRETE

Walls:                   Reinforced concrete, 4,000 psi.

         Interior:       Smooth troweled finish with pick points covered.
         Exterior:       Smooth surface finish with accent paint stripes.

Floor Slab:              6" and 7 1/2" reinforced concrete, 4,000 psi when
                         cured, saw cut at perpendicular angles no greater than
                         16'-8" on center. Slab will be laser screened, with a
                         minimum floor flatness to meet or exceed a flatness of
                         Ff35 and a minimum floor levelness to meet or exceed a
                         levelness of F125. Construction joints will have 24"
                         smooth dowels, 24" on center.

Truck Docks:             Concrete will extend 130' from the building and be
                         3,000 psi, reinforced, 6" thick. All concrete paving
                         shall have expansion

                                                    Tenant JJ  Landlord JH    44

<PAGE>

                         joints as drawn by architect, or engineer, and will
                         have saw cut control joints at maximum spacing of 15'
                         on center each way. All joints will be sealed with hot
                         rubberized asphalt joint sealer. All exterior paving
                         will be poured directly on prepared subgrade with bank
                         sand leveling cushion.

SMOKE EVACUATION

Smoke Evacuation:        Smoke evacuation system per code.

DOORS & HARDWARE

Exterior:

     Roll Up Doors:      Twenty (20) 9' x 10', sectional metal doors, 48" high,
                         vertically lifted, manually operated.

     Drive In Door:      Two (2) 12' x 14' sectional metal, chain hoist
                         vertically lifted drive-in doors will be provided.

     Man Doors:          3' x 6'8" metal doors with poured in place metal
                         frames, commercial grade hardware, including lever
                         handles inside, automatic closures and exterior lock
                         guard. The number of man doors will be per code.

     Dock Equipment:     Landlord will provide the following dock equipment: Ten
                         (10) Dock levelers by Rite Hite, or approved equal -
                         25,000 lbs. Capacity and ten (10) dock lights which can
                         be shared between two doors.

FINISHES

Paint:                   All metal surfaces with the exception of the roof and
                         interior steel will receive one factory coat of
                         oil-based primer and two coats of oil-based finish
                         paint. Exterior concrete walls and trim will receive
                         one coat of seal primer and one finished coat. All wall
                         striping shall receive two finish coats.

Demising Wall:           None other than the walls constructed to separate the
                         sewing room area from the office area and warehouse
                         area.

Floor:                   Floor slab to be sealed with two coats of Sonneborne
                         Lapidolith

FIRE SPRINKLERS

                                                    Tenant JJ  Landlord JH    45

<PAGE>

Warehouse Area:          An ESFR system, including pump room if required, will
                         be installed per code. The sprinkler control room will
                         be fully enclosed with CMU block.

Office:                  Fire protection for the office will be per code.

HVAC

Warehouse:               Cambridge space heaters will be provided, complete with
                         unit mounted thermostats to protect the EFSR sprinkler
                         system by maintaining a minimum temperature of 45
                         degrees. In addition, exhaust fans will be provided per
                         code. Quantity of fans and air changes per applicable
                         mechanical and fire code, but in no event shall the air
                         changes be less than 3 per hour.

Office:                  The entire office space will be air conditioned per
                         code requirements.

Welding Area:            Landlord will provide 15 tons of HVAC for the welding
                         area.

ELECTRICAL

Service:                 4,500 amp, 480 volt, 3 phase service, main panel
                         housing, conduit, and pad only. Utility company to set
                         transformer and complete hookup.

Electrical Distribution: A $100,000 allowance will be provided for distribution
                         of power to equipment.

Warehouse Lighting:      Warehouse Lighting shall be sufficient to average 25
                         foot candles in the warehouse 30" AFF based on an
                         unoccupied facility. Fixtures to be 400 watt metal
                         halide high bay fixtures.

Outside                  Lighting: Outside lighting shall consist of 400 watt
                         metal halide wall packs on all sides of the building at
                         a density of one per 150 linear feet. Landlord shall
                         add 2 pole lights at the entrance to the building.

Telephone:               Main telephone terminal installed in the electrical
                         room. Extend 1 ea 4" conduit with pull string from the
                         property line into the electrical room. Mount one sheet
                         4'x8' plywood on electrical room wall above conduit
                         stub-up.

Emergency Power:         Provided by Tenant

Wiring:                  All wiring and bus duct to be copper

Exterior Transformer:    Provided by TU Electric

                                                    Tenant JJ  Landlord JH    46

<PAGE>

Power Source:            TU Electric

ADA COMPLIANCE           This facility will comply with all ADA regulations upon
                         the time of completion.

TESTING                  Landlord will engage a third party independent testing
                         laboratory to provide construction materials testing.

MISCELLANEOUS            Roof drainage shall be provided by means of exterior
                         downspouts.

                         A $10,000 allowance will be provided for the
                         installation of compressed air lines.

                         An allowance of $10,000 will be provided for two (2)
                         2-ton overhead cranes.

EXCLUSIONS               Joint sealant at the floor slab.

                                                    Tenant JJ  Landlord JH    47

<PAGE>

                                   EXHIBIT "F"

                          LANDLORD'S WAIVER AND CONSENT

       THIS LANDLORD'S WAIVER AND CONSENT ("Waiver and Consent") is made and
entered into as of this _____ day of ________________ by and between
_____________________, a ____________________ ("Landlord"), and GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, as agent ("Agent") for the lenders
(collectively, "Lenders") from time to time party to the Credit Agreement
described below.

       A.     Landlord is the owner of the real property commonly known as
________________________ (the "Premises").

       B.     Landlord has entered into that certain Lease Agreement (together
with all amendments and modifications thereto and waivers thereof, the "Lease")
with ICON Health & Fitness, Inc., a Delaware corporation ("Company"), with
respect to the Premises.

       C.     Agent and Lenders have entered into a Credit Agreement with
Company, and to secure the obligations arising under such Credit Agreement,
Company has granted to Agent, for its own benefit and the ratable benefit of
Lenders, a security interest in and lien upon certain assets of Company,
including all of Company's goods, inventory, machinery, equipment, and furniture
and trade fixtures (such as equipment bolted to floors), installed by Company,
together with all additions, substitutions, replacements and improvements to,
and proceeds of, the foregoing, but excluding building fixtures (such as
plumbing, lighting and HVAC systems) (collectively, the "Collateral").

       NOW, THEREFORE, in consideration of any financial accommodations extended
by Lenders to Company at any time, and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:

       1.     Landlord acknowledges that (a) the Lease is in full force and
effect and (b) Landlord is not aware of any existing default under the Lease.

       2.     Landlord will use its best efforts to provide Agent with written
notice of any default by Company under the Lease (a "Default Notice"). Agent
shall have 15 days following receipt of such Default Notice to cure such
default, but neither Agent not any Lender shall be under any obligation to cure
any default by Company under the Lease. No action by Agent or any Lender
pursuant to this Waiver and Consent shall be deemed to be an assumption by Agent
or Lenders of any obligation under the Lease, and, except as provided in
paragraphs 6, 7 and 8 below, Agent shall not have any obligation to Landlord.

       3.     Landlord acknowledges the validity of Agent's lien on the
Collateral and, until such time as the obligations of Company to Lenders are
indefeasibly paid in full, Landlord agrees to subordinate any interest in the
Collateral Landlord may have and agrees not to distrain

                                                      Tenant JJ  Landlord JH

<PAGE>

or levy upon any Collateral or to assert any landlord lien, right of distraint
or other claim against the Collateral for any reason.

       4.     Landlord agrees that the Collateral consisting of trade fixtures
installed by Company, such as equipment bolted to the floor shall not be deemed
a fixture or part of the real estate but shall at all times be considered
personal property.

       5.     Prior to a termination of the Lease, Agent or its representatives
or invitees may enter upon the Premises at any time without any interference by
Landlord to inspect or remove any or all of the Collateral, including, without
limitation, by [public auction or] private sale pursuant to the provisions of
paragraph 7 below.

       6.     Upon written request made by Agent prior to expiration of the term
of the Lease or within fourteen (14) days after Agent's receipt of notice of
termination of the Lease (failing which, Agent's rights of permitted occupancy
during the Disposition Period shall be waiver), Landlord will permit Agent and
its representatives and invitees to occupy and remain on the Premises; provided
that (a) such period of occupation (the "Disposition Period") shall not exceed
up to 90 days following receipt by Agent of a notice of Lease termination from
Landlord or, if the Lease has expired by its own terms (absent a default
thereunder), up to 30 days following Agent's receipt of written notice of such
expiration, (b) for the actual period of occupancy by Agent, Agent will pay to
Landlord the basic rent due under the Lease pro-rated on a per diem basis
determined on a 30-day month, and shall provide and retain liability and
property insurance coverage, electricity and heat to the extent required by the
Lease, and (c) such amounts paid by Agent to Landlord shall exclude any rent
adjustments, indemnity payments or similar amounts for which the Company remains
liable under the Lease for default, holdover status or other similar charges. If
any injunction or stay is issued that prohibits Agent from removing the
Collateral, the commencement of the Disposition Period will be deferred until
such injunction or stay is lifted or removed. Agent's written request must state
the exact duration of Agent's desired Disposition Period, and Agent shall be
obligated to pay basic rent for such entire period, which rental amount shall
accompany Agent's written request.

       7.     During any Disposition Period, (a) Agent and its representatives
and invitees may inspect, repossess, remove and otherwise deal with the
Collateral, and Agent may advertise and conduct private sales of the Collateral
at the Premises, in each case without interference by Landlord or liability of
Agent or any Lender to Landlord, and (b) Agent shall make the Premises available
for inspection by Landlord and prospective tenants and shall cooperate in
Landlord's reasonable efforts to re-lease the Premises. If Agent conducts a
private sale of the Collateral at the Premises, Agent shall use reasonable
efforts to notify Landlord first and to hold such motion or sale in a manner
which would not unduly disrupt Landlord's or any other tenant's use of the
Premises.

       8.     Agent shall promptly repair, at Agent's expense, or reimburse
Landlord for any physical damage to the Premises actually caused by the conduct
of such [auction or] sale and any removal of Collateral by or through Agent
(ordinary wear and tear excluded). Neither Agent nor any Lender shall not be
liable for any diminution in value of the Premises caused by the

                                                      Tenant JJ  Landlord JH

<PAGE>

absence of Collateral removed, and neither Agent nor any Lender shall have any
duty or obligation to remove or dispose of any Collateral or any other property
left on the Premises by Company. Agent shall indemnify and hold harmless from
and against any claims, loss, cost, expense or damage asserted by Tenant or any
third party arising out of any act of omission of Agent in connection with the
exercise by Agent of its rights under this Waiver and Consent, including,
without limitation, reasonable attorneys' fees.

              9.     All notices hereunder shall be in writing, sent by
certified mail, return receipt requested or by telecopy, to the respective
parties and the addresses set forth on the signature page or at such other
address as the receiving party shall designate in writing.

              10.    This Waiver and Consent may be executed in any number of
several counterparts, shall be governed and controlled by, and interpreted
under, the laws of the State of Illinois, and shall inure to the benefit of
Agent and its successors and assigns and shall be binding upon Landlord and its
successors and assigns (including any transferees of the Premises) and upon
Agent, its successors and assigns.

              IN WITNESS WHEREOF, this Landlord's Waiver and Consent is entered
into as of the date first set forth above.

                                        "LANDLORD"

______________________________________  PANATTONI/HILLWOOD
______________________________________
______________________________________
______________________________________
Attention: ___________________________  By: _________________________________
Telephone: ___________________________  Title: ______________________________
Facsimile: ___________________________

                                        "AGENT"

GENERAL ELECTRIC CAPITAL                GENERAL ELECTRIC CAPITAL
CORPORATION                             CORPORATION
10 South LaSalle Street, Suite 2700
Chicago, Illinois 60603
Attention: ___________________________  By: _________________________________
Telephone: ___________________________  Title: ______________________________
Facsimile: ___________________________  Its: Duly Authorized Signatory

                                                      Tenant JJ  Landlord JH

<PAGE>

                                   EXHIBIT "G"

                                 EXPANSION LAND

PROPOSED BLOCK 2, LOT 3

BEING a tract of land situated in the Daniel Turner Survey, Abstract No. 1462,
in the City of Mesquite, Dallas County, Texas, and being a part of that tract of
land described in deed to Petrus Investment, L.P., as recorded in Volume 98251,
Page 9371, Deed Records, Dallas County, Texas, (DRDCT), and being more
particularly described as follows:

COMMENCING at a set 1/2-inch iron rod with a yellow plastic cap stamped "HALFF
ASSOC. INC." (hereafter referred to as "with cap"), at the intersection of the
westerly right-of-way line of Town East Boulevard (100 foot right-of-way) and
the northerly right-of-way line of a Dallas Power and Light Company
right-of-way, as recorded in Volume 5624, Page 250, DRDCT, (125 foot
right-of-way);

THENCE South 44 degrees 13 minutes 32 seconds West, departing said westerly line
and along said northerly line, a distance of 930.01 feet to the POINT OF
BEGINNING;

THENCE South 44 degrees 13 minutes 32 seconds West continuing along said
northerly line, a distance of 489.81 feet to a point at the intersection of said
northerly line with the easterly right-of-way line of Chase Road (50 foot
right-of-way);

THENCE North 45 degrees 45 minutes 33 seconds West, departing said northerly
line and along said easterly line, a distance of 889.98 feet to a point for
corner on the north line of said Petrus Investment tract;

THENCE North 44 degrees 16 minutes 17 seconds East, departing said easterly line
and along the north line of said Petrus Investment tract, a distance of 493.45
feet to a point for corner;

THENCE South 45 degrees 31 minutes 28 seconds East, departing said north line, a
distance of 889.59 feet to the POINT OF BEGINNING AND CONTAINING 437,446 SQUARE
FEET OR 10.04 ACRES OF LAND, MORE OR LESS.

                                                      Tenant JJ  Landlord JH

<PAGE>

                    [STRASBURGER & PRICE, L.L.P. LETTERHEAD]

                                  June 1, 2000

VIA FAX
Charles Tuttle
5968 West Northwest Hwy.
Suite 1532
Dallas, TX  75225

       RE:    Lease by and between ICON Health & Fitness, Inc., as Tenant and
              Panattoni/Hillwood Development Company, L.L.C., as Landlord

Dear Charles:

       Under section 5.03 of the Lease, the Landlord has the right to approve.
any hazardous materials used on the property. The following is a list of
materials currently used by ICON in its manufacturing activities which may
require Landlord's approval.

<TABLE>
<S>                                          <C>
3M Scotch grip plastic adhesive              Deloaxed Hyddraparafine Distillate Oil
Enamel paint                                 Acetylene Bottles
Autofroth Isocyanate                         Argon/CO2 bottles
Autofroth Resin                              Oxygen Bottles
Chemical Starter Kits For Spas               Propane Tanks for Forklifts
Chlorine                                     Light Machine Oil
Silk Screen Inks                             Miscellaneous Spray Paints
Toluene                                      Hydraulic Fluid
Carbon Dioxide Storage Tanks - 12,000 LB.    Fiberglassing (future potential material)
capacity
Argon Storage Tank - 118,000 Lb. capacity    Paint for powdercoat process
#5 Spray Adhesive                            Plastics for processes like injection, blow,
                                             vacuum, thermal, roto, etc. molding
</TABLE>

As part of this there are a couple of storage tanks that will need to be
installed on the property and these are listed. The Landlord also has a right to
approve these storage tanks. As part of the Lease, we need Landlord's approval
of these materials and the two storage tanks pursuant to the terms of section
5.03. If you would have the Landlord sign below and send a copy of this back to
me and to Colin Rushalko, I would appreciate it.

                                                      Tenant JJ  Landlord JH

<PAGE>

                                             Very truly yours,

                                             /s/ ILLEGIBLE

APPROVED:

Partattoni/Hillwood Development Company, L.L.C.,
a Texas limited liability company

By:______________________________
Its:_____________________________

cc:    Colin S. Rushalko
       Director of ICON Health & Fitness, Weider Division

                                                      Tenant JJ  Landlord JH

<PAGE>

                       AMENDMENT NO. 1 TO LEASE AGREEMENT
                         (Build-to-Suit Facility) - 2000

       This Amendment No. 1 to Lease Agreement by and between Panattoni/Hillwood
Development Company, LLC, as Landlord, and ICON Health and Fitness, Inc., as
Tenant is entered into as of June 9, 2000.

       For and in consideration of Ten Dollars and other good and valuable
consideration, Landlord and Tenant hereby amend and modify the Lease Agreement
(Build-to-Suit Facility) - 2000 (the "Lease") by and between Landlord and Tenant
which Lease is dated as of June __, 2000. Landlord and Tenant add Article
Fifteen to the Lease, which Article Fifteen states as follows:

"ARTICLE FIFTEEN LEASE RESTRICTIONS

       During the Term of this Lease, Landlord agrees not to lease any space or
grant other rights in the Expansion Land to the following entities: Cap Barbell,
Keys Fitness, Bollinger, Hedstrom, Jump Sport, Life Fitness, Sport Works,
Precor, Impex, and Schwinn, and such entities corporate successors."

Except as modified above, the Lease is in full force and effect without change
or amendment.

                                             "LANDLORD"

                                             PANATTONI/HILLWOOD
                                             DEVELOPMENT COMPANY, LLC,
                                             a Texas limited liability company

                                             By:    /s/ Dewitt J. Hicks III
                                                 -------------------------------
                                             Name: DEWITT J. HICKS III
                                                   -----------------------------
                                             Its:    Principal
                                                  ------------------------------
                                             Date:   6/28/00
                                                   -----------------------------

                                             "TENANT"

                                              ICON HEALTH AND FITNESS, INC.,
                                              a Delaware corporation

                                              By:    /s/ Jace Jergensen
                                                  ------------------------------
                                              Name:     Jace Jergensen
                                                    ----------------------------
                                              Its:      VP/GM
                                                   -----------------------------
                                              Date:     6/26/00
                                                    ----------------------------

                                                      Tenant JJ  Landlord JH

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