Document:

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                                                                   Exhibit 10.12

EMPLOYMENT AGREEMENT entered on the 27th day of September, 1999.

AMONG:                     HF HOLDINGS, INC., a Delaware corporation.

                           ("COMPANY")

                           ICON HEALTH & FITNESS, INC., a Delaware
                           corporation.

                           ("SUBSIDIARY")

                           GARY E. STEVENSON, acting in his personal capacity,
                           of the City of PROVIDENCE, State of UTAH.

                           ("EMPLOYEE")

THE PARTIES AGREE AS FOLLOWS:

1. PREAMBLE

      1.1.  The COMPANY and the SUBSIDIARY have made an exchange offer for all
            outstanding 13% Senior Subordinated Notes due 2002 of the
            SUBSIDIARY, 15% Senior Secured Discount Notes due 2004 of IHF
            Holdings, Inc. and 14% Senior Discount Notes due 2006 of ICON
            Fitness Corporation, pursuant to an Exchange Offer and Consent
            Solicitation, dated July 30, 1999, as supplemented (the "Exchange
            Offer").

      1.2.  It is recorded that the COMPANY, in connection with the
            Restructuring (as defined in the Equity Letter Agreement (the
            "Equity Letter"), dated July 8, 1999, attached, as amended, to the
            Exchange Offer as Annex H) desires to conclude an agreement for the
            employment of the EMPLOYEE as President and Chief Operating Officer
            of the COMPANY, according to the terms and conditions to be set
            forth in this Agreement.

      1.3.  This Agreement is to record the terms and conditions which govern
            the mutual relations of the parties hereto with respect to its
            subject matter.

      1.4.  In this Agreement, "BUSINESS" means the manufacture, sale and
            distribution of SPORTING GOODS as carried on by the COMPANY, the
            SUBSIDIARY, and their respective various divisions and subsidiaries,
            from time to time. "SPORTING GOODS" means fitness equipment and
            accessories, which presently involve treadmills, home gyms, aerobic
            exercises, trampolines, weights and benches and exercise
            accessories, but the content of such product lines may vary from
            time to time.

      1.5.  In this Agreement, AFFILIATES means any entity in which the COMPANY
            or the SUBSIDIARY holds more than a 20% voting interest direct or
            indirect.
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2. EMPLOYMENT AND ONE-TIME BONUS

      2.1.  This Agreement shall come into effect on the date hereof ("EFFECTIVE
            DATE").

      2.2.  The COMPANY hereby employs the EMPLOYEE and the EMPLOYEE agrees to
            serve the COMPANY in the positions of President and Chief Operating
            Officer for a term of three (3) years from the EFFECTIVE DATE,
            subject to earlier termination as hereinafter provided (the "TERM").

      2.3.  Although this agreement is concluded between the COMPANY and the
            EMPLOYEE, it is agreed that the duties and obligations of the
            EMPLOYEE hereunder extend to the SUBSIDIARY and to all of the
            COMPANY's other subsidiaries, present and future, although the
            EMPLOYEE will not necessarily be an employee of such entities. The
            EMPLOYEE agrees to serve, if requested by the COMPANY, as an officer
            or director of the SUBSIDIARY and any other subsidiaries, in each
            case without additional consideration.

      2.4.  Upon the execution and delivery hereof, the COMPANY shall pay the
            EMPLOYEE a one-time bonus of FIVE HUNDRED THOUSAND DOLLARS
            ($500,000).

3. BASE SALARY, EXPENSES AND BENEFITS

      3.1.  In consideration for the faithful performance of services by the
            EMPLOYEE to be rendered to the COMPANY as herein provided, the
            COMPANY shall pay to the EMPLOYEE during the TERM an annual base
            salary of FOUR HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($475,000)
            payable in semi-monthly installments or in accordance with the
            general policy of the COMPANY which may change from time to time but
            in no event less frequently than monthly.

      3.2.  The annual base salary mentioned in Section 3.1 above shall be
            reviewed by the Board of Directors of the COMPANY and may be
            adjusted upwards in the Board's discretion, annually for each year
            of the TERM, taking into account, among other things:

            a)    the performance by the EMPLOYEE of his duties and functions
                  pursuant to this Agreement,

            b)    the general economic situation,

            c)    the development and performance of the BUSINESS, and

            d)    other matters deemed relevant by the Board of Directors such
                  as an increase in shareholder equity and the rate on return on
                  investment.

      3.3.  The COMPANY shall reimburse the EMPLOYEE for all reasonable expenses
            which are incurred by the EMPLOYEE in the performance of his duties
            hereunder

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            and (i) subject to the COMPANY's annual budget or (ii) as authorized
            by the Board of Directors of the COMPANY or (iii) in accordance with
            the policies and procedures established from time to time by the
            Board of Directors of the COMPANY or a committee delegated for such
            purpose.

      3.4.  During the Term, the COMPANY shall provide the EMPLOYEE with the use
            of a new automobile of his choice, acting reasonably (and
            consistently with his past practice) every 3 years for the purposes
            of his employment commensurate with the position of the EMPLOYEE and
            having regard to COMPANY policy in force from time to time.

            The COMPANY shall assume all costs and expenses of said automobile
            and its operation, including, without limitation, insurance,
            maintenance, gas and use of such automobile. Upon the expiry of the
            TERM, the EMPLOYEE shall deliver such automobile to the COMPANY.

      3.5.  During the Term, the EMPLOYEE shall be entitled to participate in
            the COMPANY's life, welfare, and health insurance plans for senior
            executives on the same terms as those of other senior executives.

      3.6.  During the Term, the EMPLOYEE shall be entitled to participate in
            fringe benefit programs which are not less favorable than those
            extended by the COMPANY to its senior executives, including without
            limitation an as yet to be defined deferred compensation plan to be
            established by the Board of Directors, but excluding for this
            purpose any such plan or program adopted exclusively for the benefit
            of junior management.

4. ANNUAL BONUS

      4.1.  The EMPLOYEE shall receive with respect to (i) each fiscal year
            ending during the Term, and (ii) that portion of any fiscal year
            ending after Term during which he is employed hereunder, a bonus
            equal to one and one-tenth percent (1.10%) of the consolidated
            EBITDA (as that term is defined in the Credit Agreement of even date
            herewith among the SUBSIDIARY, General Electric Capital Corporation
            and the other lenders thereunder, without regard to any amendments
            thereto) of the SUBSIDIARY and its subsidiaries (but not including
            the COMPANY), provided that such bonus shall not be payable with
            respect to any such fiscal year unless such EBITDA for such fiscal
            year exceeds five and one-half percent (5.5%) of the consolidated
            net sales of the SUBSIDIARY and its subsidiaries (but not including
            the COMPANY) determined in accordance with generally accepted
            accounting principles and provided, further, that for purposes of
            this Agreement, EBITDA shall be calculated without regard to any
            bonuses payable hereunder.

      4.2.  The sole basis for the bonus calculation shall be the auditied
            financial statements of the SUBSIDIARY and its subsidiairies for the
            fiscal year in question.

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      4.3.  Any bonus to which EMPLOYEE is entitled under the provisions of this
            Agreement for any fiscal year shall be paid to him (regardless of
            whether the TERM has terminated) in accordance with the COMPANY'S
            previous practice, with a first installment equal to forty percent
            (40%) of a good faith estimate of the bonus for such year, to be
            paid during the month of December of such year and a final
            installment to be paid as promptly as reasonably practicable after
            the end of, but not later than the 75th day after the end of each
            such fiscal year.

5. DUTIES

      5.1.  The EMPLOYEE shall perform those functions which are normally the
            functions of the President and Chief Operating Officer of the
            COMPANY and such other offices as he may hold pursuant to Section
            2.3, and shall further perform those functions which shall be
            reasonably determined from time to time by the Board of Directors of
            the COMPANY, such functions not to be inconsistent with those herein
            set forth. The EMPLOYEE shall report to, and be subject to the
            authority of, the Board of Directors of the COMPANY.

      5.2.  The COMPANY shall give the EMPLOYEE a notice of six (6) months prior
            to any relocation of the EMPLOYEE.

      5.3.  It is the specific responsibility of the EMPLOYEE, between regular
            meetings of the Board, to apprise Board Members of significant
            business matters.

      5.4.  The EMPLOYEE shall, during the TERM, devote his entire working time,
            attention and energies to the business of the COMPANY, the
            SUBSIDIARY, and their respective AFFILIATES.

      5.5.  The EMPLOYEE shall not, during the TERM, except under Section 5.6,
            be engaged in any other business activity, whether or not such
            business activity is pursued for gain, profit or other pecuniary
            advantage. Notwithstanding the prohibition contained in the present
            clause, the EMPLOYEE shall be entitled to continue to sit on the
            boards of directors of the companies listed on Schedule I hereto,
            and on the boards of directors of other companies if such activity
            is approved in writing by the Board of Directors of the COMPANY. In
            the case of non-profit corporations or charities, such approval
            shall not be unreasonably withheld, but in all other cases, the
            Board shall have sole discretion to grant, delay or withhold
            approval, with or without conditions.

      5.6.  The EMPLOYEE shall not invest his personal assets in any business
            other than NON-COMPETING BUSINESSES, and even in the case of such
            investments:

            a)    No services are required or furnished on the part of the
                  EMPLOYEE in the operations of the companies in which such
                  investments are made and in which his participation is solely
                  that of an investor provided that this subsection is not
                  infringed by the EMPLOYEE's providing counseling (and not
                  acting in a "line" capacity) on a non-remunerative basis to
                  all

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                  such companies for a maximum of 5 hours per week and 200 hours
                  per year; and

            b)    If the EMPLOYEE purchases securities in any corporation whose
                  securities are regularly traded in a recognized securities
                  market, such purchases shall not result in his collectively
                  owning beneficially at any time five percent (5%) or more of
                  the equity securities of any corporation engaged in a business
                  other than a NON-COMPETING BUSINESS.

            The foregoing restrictions shall not apply to any investment of
            whatever extent the EMPLOYEE may take in the shares of the COMPANY
            or of any successor company.

            For the purposes of this subsection, NON-COMPETING BUSINESSES are
            all businesses other than those which compete with:

            a)    the BUSINESS; or

            b)    any other business carried on in the future by the COMPANY,
                  the SUBSIDIARY or any AFFILIATES, provided that the EMPLOYEE
                  has access to confidential information concerning such
                  business.

            Moreover, the EMPLOYEE shall not knowingly assist any RELATIVE to
            make any investment which the EMPLOYEE is not permitted to make by
            this section.

      5.7.  The EMPLOYEE is a member of the Board of Directors and acknowledges
            that he has a significant interest in this Agreement and undertakes
            the following:

            5.7.1.    To seek independent legal counsel at the COMPANY's expense
                      to negotiate and review this Agreement on the EMPLOYEE's
                      behalf;

            5.7.2.    To disclose his interest in this Agreement to the other
                      members of the Board of Directors; and

            5.7.3.    To retire from and abstain from the discussion and vote at
                      any meeting of the Board of Directors at which this
                      Agreement or any default by EMPLOYEE or matter arising
                      therefrom is the subject of a discussion or a vote.

      5.8.  The EMPLOYEE also undertakes the following:

            5.8.1.    To use every best effort (including the establishment of
                      written procedures known to operation personnel) to
                      promptly bring to the attention of the Board of Directors
                      of the COMPANY any matter requiring the COMPANY's decision
                      or action where his own interests or those of a RELATIVE
                      are involved and to abstain from taking such decision or
                      action until the Board of Directors decides.

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            5.8.2.    If requested, to be absent from and abstain from the
                      discussion and vote at any meeting of the aforementioned
                      Board of Directors where the subject matter being
                      discussed and voted upon is any matter covered by section
                      5.8.l.

            5.8.3.    For the purposes of this Agreement RELATIVE means the
                      EMPLOYEE's spouse, parent, sibling, child or sibling's
                      children, the spouses of the foregoing and any other
                      person who could be claimed as a dependent on the
                      EMPLOYEE's or RELATIVE's federal income tax return, any
                      corporation or partnership in which a RELATIVE or the
                      EMPLOYEE holds a five percent (5%) interest or of which a
                      RELATIVE or the EMPLOYEE is an officer or director, and
                      any trust of which any of the foregoing is a beneficiary.

6.    EQUITY GRANT

      6.1.  Contemporaneously herewith, the COMPANY will issue to the EMPLOYEE
            291,700 shares of Common Stock of the COMPANY, at no cost to
            EMPLOYEE, which the COMPANY represents and warrants is equal to
            2.91617% of the COMPANY's Common Stock outstanding on a fully
            diluted basis upon closing of the Restructuring.

7.    CONFIDENTIALITY, ETC.

      7.1.  The EMPLOYEE recognizes and acknowledges that the confidential
            information, trade secrets and proprietary processes of the COMPANY,
            its AFFILIATES and subsidiaries as they may exist from time to time
            are valuable, special and unique assets of the BUSINESS of the
            COMPANY, its AFFILIATES and subsidiaries, access to and knowledge of
            which are essential to the performance of the EMPLOYEE's duties
            hereunder. The EMPLOYEE will not, during the TERM of his employment
            or at any time within five (5) years following its termination, for
            any reason whatsoever, in whole or in part, disclose such
            confidential information, secrets or processes to any person, firm,
            corporation, association or other entity for any reason or purpose
            whatsoever, nor shall the EMPLOYEE make use of such property for his
            own purposes or for the benefit of any person, firm, corporation or
            other entity (except the COMPANY, its AFFILIATES and subsidiaries)
            under any circumstances whatsoever, except as may be required in the
            fulfillment of his function with the COMPANY within the terms of
            this Agreement or except as provided by law; provided these
            restrictions shall not apply to such information, secrets and
            processes which are then in the public domain (provided that the
            EMPLOYEE was not responsible, directly or indirectly, for permitting
            such secrets or process to enter the public domain without the
            COMPANY's consent).

      7.2.  The EMPLOYEE furthermore agrees that upon termination of the TERM he
            will remit to the COMPANY all writings and materials, in his
            possession or under his control, which either belong to the COMPANY
            and AFFILIATES or which may

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            contain confidential information concerning the COMPANY and
            AFFILIATES. The EMPLOYEE may, however, retain his personal
            diary/agenda after removing or destroying all confidential COMPANY
            or AFFILIATES material therein.

      7.3.  Any and all inventions, discoveries, developments, methods,
            processes, compositions, works, concepts and ideas (whether or not
            patentable or copyrightable) conceived, made, developed, created or
            reduced to practice by the EMPLOYEE (whether at the request or
            suggestion of the COMPANY or otherwise, whether alone or in
            conjunction with others, and whether during regular hours of work or
            otherwise) during the period of his employment by the COMPANY or any
            of its subsidiaries which may relate to the business, ventures or
            other activities of or products manufactured or sold by the COMPANY
            or any of its subsidiaries (collectively, "Proprietary Rights"),
            shall be promptly and fully disclosed by the EMPLOYEE to an
            appropriate executive officer of the COMPANY and shall be the
            COMPANY's exclusive property as against the EMPLOYEE and his heirs
            and personal representatives, and the EMPLOYEE hereby assigns to the
            COMPANY his entire right, title and interest therein and shall
            promptly deliver to an appropriate executive officer of the COMPANY
            all papers, drawings models, data and other material relating to any
            of the foregoing Proprietary Rights, conceived, made, developed,
            created or reduced to practice by him as aforesaid. All
            copyrightable Proprietary Rights shall be considered "works made for
            hire."

            The EMPLOYEE shall, upon the COMPANY's request and without any
            payment therefor, execute any documents reasonably necessary or
            advisable in the opinion of the COMPANY's counsel to assign, and
            confirm the COMPANY's title in, his entire right, title and interest
            in the foregoing Proprietary Rights and to direct issuance of
            patents or copyrights to the COMPANY with respect to such
            Proprietary Rights as are the COMPANY's exclusive property as
            against the EMPLOYEE and his heirs and personal representatives
            under this Section 7.3 or to vest in the COMPANY title to such
            Proprietary Rights as against the EMPLOYEE and his heirs and
            personal representatives, the expense of securing any such patent or
            copyright, however, to be borne by the COMPANY. In addition, the
            Company shall reimburse the EMPLOYEE for any reasonable expenses
            incurred in having such documents reviewed by EMPLOYEE's counsel.

8. VACATION

      8.1.  The EMPLOYEE shall have the right to an annual paid vacation of no
            less duration than four (4) weeks.

9.    TERMINATION OF EMPLOYMENT

      9.1.  Notwithstanding any other provision contained herein, the COMPANY
            may on or after the EFFECTIVE DATE send to the EMPLOYEE notice of
            one of the following events and should the EMPLOYEE fail to cure the
            matter giving rise to the notice within thirty (30) days after
            receipt of such notice, the TERM shall

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            terminate without any delay stipulated therein or any indemnity
            payable in lieu thereof:

            a)    EMPLOYEE's willful misconduct or gross negligence;

            b)    The commission of a criminal act by the EMPLOYEE against the
                  COMPANY involving material harm (whether nor not charges are
                  filed);

            c)    The commission by the EMPLOYEE of a criminal act of moral
                  turpitude bringing the COMPANY into disrepute (whether or not
                  charges are filed);

            d)    Willful insubordination to any directive of the Board of
                  Directors provided reasonable prior notice of such directive
                  is given; or

            e)    Actions contrary to Sections 5.4, 5.5, 5.6, 5.8, 7 or 10
                  causing COMPANY or AFFILIATES material harm.

      9.2.  Notwithstanding any other provision contained herein, the TERM shall
            terminate automatically, without notice or indemnity in lieu
            thereof, upon the occurrence of one of the following events:

            a)    The bankruptcy or voluntary state insolvency filing of the
                  EMPLOYEE; or

            b)    The death of the EMPLOYEE.

      9.3.  The EMPLOYEE may terminate the TERM by sending his resignation in
            writing to Board of Directors not less than six (6) months prior to
            the effective date of such resignation or, if such resignation is
            submitted in good faith so that the EMPLOYEE can perform full time
            church service, not less than three (3) months prior to the
            effective date of such resignation, failing which notice the
            EMPLOYEE may be subject to any and all damages incurred as a result
            of such failure. In the event the EMPLOYEE has given such a notice
            to the COMPANY, the COMPANY may, at its option, earlier terminate
            EMPLOYEE's employment.

      9.4.  Except under the circumstances described in Section 9.6, the COMPANY
            may terminate the TERM by sending a notice in writing to the
            EMPLOYEE.

      9.5.  The EMPLOYEE may immediately terminate the TERM by sending a notice
            of termination to the Board of Directors with immediate effect
            following any material diminution of the EMPLOYEE's responsibilities
            or in the event that the EMPLOYEE is asked by the Board of Directors
            to perform any act which a reasonable person would consider illegal
            or unethical and the COMPANY has not withdrawn its request to the
            EMPLOYEE to perform such act within five (5) days of receiving a
            written notice from the EMPLOYEE to withdraw such a request.

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      9.6.  The COMPANY may immediately terminate the TERM by sending a notice
            in writing to the EMPLOYEE with immediate effect:

            9.6.1.    after a period of six (6) consecutive months (or
                      aggregating six (6) months in any twelve (12) month
                      period) of absence by the EMPLOYEE from his employment as
                      a result of sickness or disability, or

            9.6.2.    after sixty (60) days of absence by the EMPLOYEE from his
                      employment as a result of sickness or disability and a
                      certification by three (3) physicians that the EMPLOYEE is
                      likely to be disabled for a period of at least six (6)
                      months from the initial date of sickness or disability.
                      One (1) such physician shall be chosen by the EMPLOYEE,
                      one (1) shall be chosen by the COMPANY and the third shall
                      be chosen by the other two (2) selected physicians. The
                      EMPLOYEE agrees that in the event of his sickness, he
                      shall submit himself for examination by such physicians if
                      reasonably requested to do so by the COMPANY. For the
                      purposes of this section, "disabled" or "disability" shall
                      mean a temporary or permanent substantial inability
                      because of a physical or mental illness to continue to
                      discharge the EMPLOYEE's duties hereunder.

            Notwithstanding any other provision hereof, the EMPLOYEE's
            compensation during any period of the EMPLOYEE'S disability shall be
            reduced to the extent of any payments to the EMPLOYEE for such
            period under any disability plan or program maintained for the
            EMPLOYEE by the COMPANY for his benefit.

      9.7.  In the event of the termination of the TERM by virtue of section 9.6
            in addition to the payments described therein, the COMPANY shall pay
            to the EMPLOYEE a severance pay equal to one (1) month base salary
            in effect at termination for each calendar year, or part thereof, of
            the EMPLOYEE's employment with the COMPANY, the SUBSIDIARY, IHF
            Capital, Inc. or IHF Holdings, Inc. (or any predecessor companies of
            the COMPANY, the SUBSIDIARY, IHF Capital, Inc., or IHF Holdings,
            Inc.) after January 1, 1988.

      9.8.  In the event of the termination of the TERM by virtue of Section
            9.3, 9.4 or 9.5, the COMPANY shall pay to the EMPLOYEE a severance
            pay equal to the EMPLOYEE's base salary then in effect and the bonus
            referred to in Section 4 hereof, pro-rated for the period of the
            payment, for two (2) years following the termination of the TERM,
            provided, however, that if, due to the EMPLOYEE's resignation, there
            is a termination of the TERM, without any action by the COMPANY,
            during the one (1) year period following the EFFECTIVE DATE, the
            EMPLOYEE shall forego FIVE HUNDRED THOUSAND DOLLARS ($500,000) of
            any severance pay to which he would otherwise be entitled under this
            Section 9.8, unless the resignation resulting in such termination is
            submitted (i) in good faith by EMPLOYEE pursuant to Section 9.3 so
            that the EMPLOYEE can perform full time church service, or (ii)
            pursuant to Section 9.5. The bonuses shall be paid to the EMPLOYEE
            within ninety (90) days from the end of the COMPANY's applicable
            fiscal year, and the base salary shall be paid to the

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            EMPLOYEE on the same payment schedule as was applicable to the
            EMPLOYEE during his employment.

10. RESTRICTIVE COVENANT

      10.1. EMPLOYEE shall not, during the TERM of his employment hereunder and
            for a period of four (4) years from its termination, either directly
            or indirectly, individually or in partnership, carry on or be
            engaged in, or concerned with or interested in, in any capacity
            whatsoever (including that of principal, agent, shareholder (subject
            to section 5.6(b)), consultant, employee, lender or surety), any
            person, firm, association, syndicate or company engaged in or
            concerned with or interested in the conception, development,
            fabrication, transformation, marketing, distribution, advertising,
            franchising or sale in Canada, the United States or the European
            Economic Community, or any of them, of any products or services
            similar or identical to any of those manufactured, distributed, or
            sold by the COMPANY or any of its subsidiaries in the course of his
            employment with the COMPANY, its AFFILIATES and subsidiaries.

      10.2. (a)   EMPLOYEE shall not, during the TERM of his employment
                  hereunder and for a period of twelve (12) months from its
                  termination, directly or indirectly, hire any Designated
                  Employee.

            (b)   EMPLOYEE shall not, during the TERM of his employment
                  hereunder and for a period of eighteen (18) months from its
                  termination, directly or indirectly, solicit, interfere with
                  or endeavor to entice away, any Designated Employee.

            (c)   For purposes of this Section 10.2., the term "Designated
                  Employee" shall mean any person if that person is or was a
                  Senior Employee of the COMPANY or any of its AFFILIATES or
                  subsidiaries during the period beginning six (6) months prior
                  to the termination of the TERM and ending (i) in the case of
                  clause (a), twelve (12) months thereafter and (ii) in the case
                  of clause (b), eighteen (18) months thereafter, but shall
                  exclude Scott R. Watterson or any RELATIVE. For purposes of
                  this Section 10.2 "Senior Employee" shall mean each of the two
                  hundred (200) most highly compensated employees of the COMPANY
                  or any of its subsidiaries or AFFILIATES.

      10.3. Notwithstanding the foregoing, if termination of employment occurs
            under Section 9.3, 9.4 or 9.5, the period stipulated by Section 10.1
            is reduced to two (2) years; provided, however, that such period
            shall be extended by written notice to the EMPLOYEE within thirty
            (30) days of such termination up to two (2) years (i.e., up to a
            total of four (4) years from the termination of EMPLOYEE's
            employment) to the extent that the COMPANY, at its option, pays to
            the EMPLOYEE a severance pay equal to the EMPLOYEE's base salary
            then in effect and the bonus referred to in Section 4 hereof,
            pro-rated for the period of the payment, for a period of up to an
            additional two (2) years beyond that required to

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            be paid by the COMPANY to the EMPLOYEE under Section 9.8. If paid at
            the COMPANY's option, such bonuses are to be paid within ninety (90)
            days from the end of the COMPANY's applicable fiscal year, and the
            base salary shall be paid to the EMPLOYEE on the same payment
            schedule as was applicable to the EMPLOYEE during his employment.

11. REASONABLENESS AND REMEDIES

      11.1. The EMPLOYEE agrees that all the conditions and restrictions
            established in this Agreement are reasonable taking into account the
            circumstances surrounding this Agreement.

      11.2. The EMPLOYEE recognizes that in the view of the serious and
            irreparable harm which a violation hereof would have on the COMPANY,
            and without prejudice to the COMPANY's other remedies, injunctive
            relief would constitute an available and appropriate remedy and, to
            the extent permitted by law, the COMPANY shall not be required to
            furnish any security or bond in respect thereof.

12. [INTENTIONALLY DELETED]

13. GENERAL LIMIT ON EMPLOYEE'S LIABILITY

      13.1. As a general and overall limitation of the EMPLOYEE's liability to
            the COMPANY and AFFILIATES, the COMPANY agrees that the EMPLOYEE
            shall not be liable, for any reason except as set forth below, to
            the COMPANY or any of its AFFILIATES for an amount in excess of the
            amount provided in the next sentence hereof. Accordingly, as and for
            their sole remedy against the EMPLOYEE, the COMPANY agrees that for
            any claim or cause of action that the COMPANY or any of its
            AFFILIATES may have against the EMPLOYEE, whether past or future,
            their sole remedy shall be the forfeiture of the EMPLOYEE's salary,
            bonus and other compensation (but not the equity grant under Section
            6.1 hereof, which shall not be subject to forfeiture) received by
            the EMPLOYEE during the COMPANY's fiscal year in which the
            EMPLOYEE's termination occurred plus subsequently accruing
            compensation. In this regard, the COMPANY agrees, to the extent
            permitted by applicable law, to indemnify the EMPLOYEE from and
            against any liability the EMPLOYEE may have in excess of that
            provided in the immediately preceding sentence (i) hereunder or (ii)
            for any other claim the COMPANY or any of its AFFILIATES may have
            against the EMPLOYEE. However, nothing in this Section 13 shall
            limit the EMPLOYEE's liability to the COMPANY or any of its
            AFFILIATES or provide the EMPLOYEE any indemnity (i) for any act by
            the EMPLOYEE involving theft, fraud or embezzlement against the
            COMPANY or any of its AFFILIATES, (ii) in respect of any equitable
            remedy against the EMPLOYEE, (iii) in respect of any agreement
            listed on Schedule I of the Old Employment Agreement (as defined in
            that separate Termination Agreement among IHF Capital, Inc., IHF
            Holdings, Inc., SUBSIDIARY and EMPLOYEE, dated an even date hereof
            (the "Termination Agreement")) or any agreement heretofore or
            hereafter entered into

                                       11
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            by the EMPLOYEE after the date of the Old Employment Agreement, (iv)
            in respect of any claim or cause of action asserted by the COMPANY
            or any of its AFFILIATES as a counterclaim (to the extent of any
            liability the COMPANY or any of its AFFILIATES may have by reason of
            the EMPLOYEE claim in question) or as a set off, or (v) under
            Section 7, 9.3 or 10 of this Agreement or under the Non-Competition
            Agreement (as defined in the First Amended and Restated Master
            Transaction Agreement dated as of October 12, 1994 among ICON Health
            & Fitness, Inc. and the other parties thereto (the "Master
            Transaction Agreement")); provided, however, that the aggregate of
            the liability of the EMPLOYEE to the COMPANY or any of its
            AFFILIATES under Section 7, 9.3 or 10 of this Agreement or to the
            COMPANY, any of its AFFILIATES, IHF Capital, Inc. or any of its
            AFFILIATES (as defined in the Old Employment Agreement) under the
            Non-Competition Agreement and of the liability of the EMPLOYEE to
            IHF Capital, Inc. or any of its AFFILIATES (as so defined) in
            respect of claims subject to the $18,000,000 limits set forth in the
            third to last sentence of Section 10.3.1.1 of the Master
            Transaction, shall not exceed $1,240,000.

14. AMENDMENTS

      14.1. This Agreement may be amended only by written instrument duly
            executed by all the parties hereby and approved by the Board of
            Directors of the COMPANY.

15. NO ASSIGNMENT

      15.1. No party hereto shall assign, in whole or in part, this agreement or
            any of its or his respective rights and obligations hereunder
            without the express prior written consent of the other parties
            hereto; for this purpose the merger or reorganization of the COMPANY
            or the SUBSIDIARY or any AFFILIATE shall not be considered an
            assignment.

16.   NO WAIVER

      16.1  No waiver by any party of any breach of the obligations of any other
            party hereunder shall be a waiver of any subsequent breach or of any
            other obligation, nor shall any forbearance to seek a remedy for any
            breach be a waiver of any rights and remedies with respect to any
            subsequent breach.

17.   SEVERABILITY

      17.1. The invalidity of one of the provisions of this Agreement shall not
            invalidate or otherwise affect any of the other provisions of this
            Agreement, which shall remain in full force and effect, and each
            such invalid provision shall be construed by limiting it so as to be
            valid for the maximum extent permitted by law.

18.   CURRENCY, ETC.

                                       12
<PAGE>

      18.1. All references in this Agreement to dollar of $ mean lawful currency
            of the United States of America.

      18.2. The COMPANY shall have the right to withhold, from or in respect of
            any payment, benefit or other item of compensation due to the
            EMPLOYEE hereunder, any federal, state or local taxes of any kind
            required by law to be withheld with respect thereto. In the event
            that at the time any withholding is required hereunder, the amount
            of cash payments from which the applicable withholding taxes may be
            deducted is less than the withholding taxes due, the EMPLOYEE shall
            pay to the COMPANY, in immediately available funds, an amount equal
            to such shortfall.

19. GOVERNING LAW; ARBITRATION

      19.1. This Agreement shall be governed by and construed in accordance with
            the domestic substantive laws of the State of Utah, without giving
            effect to any choice or conflict of law provision or rule that would
            cause the application of the domestic substantive laws of any other
            jurisdiction; provided, however, that any dispute relating to the
            provisions of Section 19.2 shall be governed by the United States
            Arbitration Act as then in force.

      19.2. Except solely as set forth in Section 19.4, each dispute,
            difference, controversy or claim arising in connection with or
            related or incidental to, or question occurring under, this
            Agreement or the subject matter hereof shall be finally settled
            under the Commercial Arbitration Rules of the American Arbitration
            Association (the "AAA") by an arbitral tribunal composed of three
            (3) arbitrators, at least one (1) of whom shall be an attorney
            experienced in corporate transactions, appointed by agreement of the
            parties in accordance with said Rules. In the event the parties fail
            to agree upon a panel of arbitrators from the first list of
            potential arbitrators proposed by the AAA, the AAA will submit a
            second list in accordance with said Rules. In the event the parties
            shall have failed to agree upon a full panel of arbitrators from
            said second list, any remaining arbitrators to be selected shall be
            appointed by the AAA in accordance with said Rules. If, at the time
            of the arbitration, the parties agree in writing to submit the
            dispute to a single arbitrator, said single arbitrator shall be
            appointed by agreement of the parties in accordance with the
            foregoing procedure, or, failing such agreement, by the AAA in
            accordance with said Rules. The foregoing arbitration proceedings
            may be commenced by any party by notice to all other parties.

      19.3. The place of arbitration shall be Salt Lake City, Utah.

      19.4. The parties hereto exclude any right of appeal to any court on the
            merits of the dispute. The provisions of this Section 19 may be
            enforced in any court having jurisdiction over the award of any of
            the parties or any of their respective assets and judgment on the
            award (including without limitation equitable remedies) granted in
            any arbitration hereunder may be entered in any such court. Nothing
            contained in this Section 19 shall prevent any party from seeking
            interim

                                       13
<PAGE>

            measures of protection in the form of pre-award attachment of assets
            or preliminary or temporary equitable relief.

      19.5. To the extent not prohibited by applicable law which cannot be
            waived, each of the parties hereto hereby waives, and covenants that
            he or it will not assert (whether as plaintiff, defendant, or
            otherwise), any right to trial by jury in any forum in respect of
            any issue, claim, demand, cause of action, action, suit or
            proceeding arising out of or based upon this Agreement or the
            subject matter hereof, in each case whether now existing or
            hereafter arising and whether in contract or tort or otherwise. Any
            of the parties hereto may file an original counterpart or a copy of
            this Section 19.5 with any court as written evidence of the consent
            of each of the parties hereto to the waiver of his or its right to
            trial by jury.

      19.6. Each of the parties hereto acknowledges that he or it has been
            informed by each other party that the provisions of Section 19
            constitute a material inducement upon which such party is relying
            and will rely in entering into this Agreement and the transactions
            contemplated hereby.

20. BINDING ON HEIRS

      20.1. This Agreement binds and inures to the benefit of the parties, their
            heirs, executors, administrators, successors and permitted assigns
            (subject to Section 9.2(b)).

21. ENTIRE AGREEMENT

      21.1  This Agreement embodies the entire Agreement between the parties
            hereto concerning the subject matters mentioned herein and
            supersedes all previous discussions, correspondence, understandings
            or agreements, whether written or oral, with respect to such
            matters, except as provided in the Termination Agreement. This
            agreement shall constitute an agreement between employer and
            employee of the type referred to in Section 1, Chapter 28, Title 34
            of the Utah Code, Annotated.

22. ATTORNEY'S FEES

      22.1. In the event that any party hereto shall be found in default or in
            breach of this Agreement pursuant to arbitral or judicial
            proceedings, such party shall be liable to pay all reasonable
            attorney's fees, court costs and other related collection costs and
            expenses incurred by the non-defaulting or non-breaching party in
            pursuing its rights hereunder.

                                       14
<PAGE>

23. NOTICES

      23.1. All notices and other communications necessary or contemplated under
            this Agreement shall be in writing and shall be delivered in the
            manner specified herein or, in the absence of such specification,
            shall be deemed to have been duly given three (3) business days
            after mailing by certified mail, when delivered by hand, or when
            delivered by facsimile upon confirmation of receipt, or one (1) day
            after sending by overnight delivery service, to the respective
            addresses of the parties set forth below:

            a)    for notices and communications to the COMPANY or the
                  SUBSIDIARY:

                  HF HOLDINGS, INC.
                  ICON HEALTH & FITNESS, INC.
                  1500 South 1000 East
                  Logan, Utah 84321
                  Fax: 435-750-5238
                  Attn: Board of Directors

            b)    For notices and communications to the EMPLOYEE:

                  Gary E. Stevenson
                  370 Abbey Lane
                  Providence, Utah 84332

            c)    With a copy in each case to:

                  Hutchins, Wheeler & Dittmar
                  101 Federal Street
                  Boston, MA  02110
                  Fax: 617-951-1295
                  Attn: Charles W. Robins, Esq.

                  and

                  Ropes & Gray
                  One International Place
                  Boston, MA 02110
                  Fax: 617-951-7050
                  Attn: R. Newcomb Stillwell, Esq.

24. JOINT AND SEVERAL LIABILITY

      24.1. The COMPANY and the SUBSIDIARY shall be jointly and severally liable
            in respect of all payment obligations of the COMPANY hereunder.

                                       15
<PAGE>

      IN WITNESS WHEREOF the parties have hereto signed this 27th day of
September, 1999.

                                        HF HOLDINGS, INC.

                                        By: /s/ S. Fred Beck
-----------------------------------        -------------------------------------
Witness                                    Title: Vice President

                                        ICON HEALTH & FITNESS, INC.

                                        By: /s/ S. Fred Beck
-----------------------------------        -------------------------------------
Witness                                    Title: Vice President

                                        /s/ Gary E. Stevenson
-----------------------------------     ----------------------------------------
Witness                                   GARY E. STEVENSON

                                       16
<PAGE>

                                   SCHEDULE I
                                       To
                              EMPLOYMENT AGREEMENT
                                      Among
                                HF HOLDINGS, INC.
                           ICON HEALTH & FITNESS, INC.
                                       And
                                GARY E. STEVENSON

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

                                   Board Seats

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

                       Boy Scots of America, Local Council
                           Utah State Business College

                                       17<PAGE>

                                                                   Exhibit 10.13

                               NON-RECOURSE NOTE

U.S. $1,209,340                                       September 27, 1999
                                                      New York, New York

      FOR VALUE RECEIVED, the undersigned, Scott R. Watterson (the "Borrower"),
hereby promises to pay to HF Holdings, Inc., a Delaware corporation (the
"Company"), at the office of the Company located at 1500 South 1000 West, Logan,
UT 84321, or such other place as the holder hereof may designate, in immediately
available funds, the principal amount of ONE MILLION TWO HUNDRED AND NINE
THOUSAND THREE HUNDRED FORTY DOLLARS ($1,209,340) on September 26, 2009 (the
"Maturity Date"), together with interest on the principal balance hereof from
the date of issuance hereof through and including the Maturity Date, at the
times and at the rates provided herein. The repayment of the loan evidenced by
this Non-Recourse Note (the "Note") shall be subject to the terms and conditions
set forth hereinbelow.

      1. Interest. Interest shall accrue on the unpaid principal balance of this
Note at a rate identical to the rate of interest payable from time to time by
ICON Health and Fitness, Inc. ("ICON") under the Revolving Loan portion of the
Credit Agreement, dated on even date herewith, among ICON, General Electric
Capital Corporation and other lenders, calculated on the basis of a 360-day year
consisting of twelve 30-day months. Such interest shall be payable quarterly in
cash on the first day of each December, March, June and September. All interest
hereunder shall cease to accrue upon the earlier of (i) the last day of the
calendar month immediately preceding the date as of which the cumulative
consolidated net taxable income of the Company and its subsidiaries (computed by
disregarding deductions of the Company and its subsidiaries arising from events
and transactions occurring after the closing of the ICON Restructuring (as that
term is referred to in the Exchange Offer and Consent Solicitation Statement,
dated July 30, 1999, of the Company and ICON, as supplemented), including
without limitation any extraordinary transactions, including any acquisitions,
effected after the ICON Restructuring) arising on or after the date of the ICON
Restructuring exceeds zero dollars ($0), and (ii) May 31, 2000, provided that
the consolidated EBITDA (as that term is defined in the Credit Agreement of even
date herewith among ICON, General Electric Capital Corporation and the other
lenders thereunder, without regard to any amendments thereto) of ICON and its
subsidiaries, for ICON's fiscal year then ended, exceeds $64 million.

      The Borrower and every endorser and guarantor hereof hereby waives
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note, and consents to any extension or postponement of the time of payment
or any other indulgence, to any substitution, exchange or release of collateral
and to the additional release of any other party or person primarily or
secondarily liable. No delay or omission on the part of the holder hereof in
exercising any right hereunder shall operate as a waiver of any such right or of
any other rights hereunder,

<PAGE>

nor shall any delay, omission or waiver on any one occasion be construed as a
bar to or waiver of the same or any other rights on any future occasion.

      The Borrower and every endorser and guarantor hereof agree to pay on
demand all costs and expenses (including reasonable attorneys' fees and
disbursements) which may be incurred or paid by the holder in the collection of
this Note or the enforcement of the holder's rights and remedies hereunder.

      2. Optional Prepayment. This Note may be prepaid at the option of the
Borrower in whole or in part at any time and from time to time without premium
or penalty. Any such prepayment on account of principal hereunder shall be
recorded by the Company and endorsed on the schedule which is attached to and is
part of this Note. The entries on the records of the Company (including any
appearing on this Note) shall be prima facie evidence of all principal amounts
outstanding hereunder.

      3. Mandatory Prepayment. The Borrower shall prepay 100% of the unpaid
principal of this Note, together with any accrued and unpaid interest thereon as
provided in Section 1 of this Note, upon the occurrence of a Liquidity Event, as
such term is defined in the Company Stockholders Agreement, also dated as of an
even date herewith.

      4. Event of Default. An "Event of Default" shall exist if any of the
following conditions or events shall occur and be continuing:

            (a) the Borrower fails to pay any principal or interest under this
Note when the same becomes due and payable; or

            (b) the Borrower fails to perform or comply with any material term
or condition contained in this Note (other than nonpayment as described in
clause (a) above), and such default continues for more than twenty (20) days
after the Borrower has received written notice thereof from the Company; or

            (c) the Borrower makes an assignment for the benefit of creditors,
or admits in writing its inability to pay its debts as they mature or become
due, or petitions or applies for the appointment of a trustee or other
custodian, liquidator or receiver of the Borrower of any substantial part of its
assets, or commences any case or other proceeding relating to the Borrower or
any bankruptcy, reorganization, insolvency or similar law of any jurisdiction;
or any such involuntary case or proceeding shall be filed or commenced against
the Borrower by any third party, and the Borrower shall indicate its approval
thereof or consent thereto or such case or proceeding shall not have been
dismissed within sixty (60) days following the filing or commencement thereof;
or

            (d) a decree or order is entered appointing any trustee, custodian,
liquidator or receiver for the Borrower or its assets, or adjudicating the
Borrower a bankrupt or

                                    -2-

<PAGE>

insolvent, or approving a petition in any such case or proceeding, or a decree
or order of relief is entered in respect of the Borrower in an involuntary case
under federal or state bankruptcy laws as now or hereafter constituted.

      5. Remedies on Event of Default.

            (a) Automatic Acceleration. If an Event of Default described in
paragraph (c) or (d) of Section 4 of this Note has occurred, this Note shall
thereupon automatically become immediately due and payable.

            (b) Acceleration by Declaration. If an Event of Default described in
paragraph (a) or (b) of Section 4 of this Note has occurred and is continuing,
the Company may at any time declare this Note to be immediately due and payable.

            (c) Effect of Acceleration. Upon this Note becoming due and payable
under this Section 5, whether automatically or by declaration, this Note will
forthwith mature and the entire unpaid principal amount of this Note, plus all
accrued and unpaid interest thereon (to the full extent permitted by applicable
law), shall be immediately due and payable.

      6. Nonrecourse. All loans made under this Note, and all interest thereon
and all costs related thereto, shall be nonrecourse to the Borrower or to any
other person, and the holder hereof shall have recourse only to the assets of
the Borrower referred to in Section 7 hereof which are being pledged to secure
the Borrower's obligations hereunder.

      7. Pledge of Collateral. As collateral security for the prompt payment of
the indebtedness evidenced hereby and the performance of all obligations
hereunder and all amendments and replacements hereof, the Borrower hereby agrees
to pledge, assign, deliver and grant a security interest in the Collateral (as
defined below) at the time of the making of the initial loan hereunder. The
value of such collateral security shall be equal to at least $2,418,680 (the
"Minimum Collateral Value Amount"), and shall consist of (i) common stock of the
Company held by the Borrower, representing 375,000 of the Company's common stock
outstanding immediately after the ICON Restructuring (the "Stock Collateral"),
plus (ii) sufficient membership interests held by the Borrower in HF Investment
Holdings, LLC, a Delaware limited liability company (the "Membership Interest
Collateral"), such that the aggregate value of the Stock Collateral plus the
Membership Interest Collateral (collectively, the "Collateral") is not less than
the Minimum Collateral Value Amount. For purposes of this Note, the value of the
Collateral shall be equal to such value as established at the time of the ICON
Restructuring closing. The pledging of the Collateral shall be governed by a
Pledge and Security Agreement, substantially in the form attached hereto as
Appendix A, which shall be executed and delivered by the Borrower, together with
all necessary stock certificates, executed stock powers and executed UCC-1
financing statements, as a condition to the making of the initial loan
hereunder.

                                       -3-
<PAGE>

      This Non-Recourse Note shall take effect as a sealed instrument, shall be
governed by the laws of the State of Utah and shall be binding upon the Borrower
and its successors and assigns.

                                       BORROWER

                                       /s/ Scott R. Watterson
                                       -----------------------
                                      Scott R. Watterson

                                      -4-
<PAGE>

                         SCHEDULE TO NON-RECOURSE NOTE
                             OF SCOTT R. WATTERSON
                             TO HF HOLDINGS, INC.
                           DATED SEPTEMBER 27, 1999

                                              Remaining
                       Principal               Unpaid
Date of                 Amount                Principal          Notation
 Entry                   Paid                 Balance           Made by
-------                ---------             ----------          --------

                                      -5-
<PAGE>

                                 Appendix A to
                               Non-Recourse Note

                         PLEDGE AND SECURITY AGREEMENT

      This Pledge and Security Agreement (the "Agreement"), dated as of
September 27, 1999 is made by Scott R. Watterson, an individual (the "Grantor"),
and HF Holdings, Inc., a Delaware corporation (the "Company").

      WHEREAS, the Grantor is the legal and beneficial owner of certain capital
stock of the Company;

      WHEREAS, the Grantor is also the legal and beneficial owner of certain
membership interests in HF Investment Holdings, LLC, a Delaware limited
liability company ("Holdings LLC");

      WHEREAS, it is a condition precedent to the making by the Company of a
loan to the Grantor under that certain $1,209,340 Non-Recourse Note, dated
September 27, 1999 (the "Note"), made by the Grantor to the Company, that the
Grantor execute and deliver a pledge and security agreement in substantially the
form hereof; and

      WHEREAS, the Grantor wishes to grant pledges and security interests in the
"Collateral" more particularly described hereinbelow in favor of the Company,
all as herein provided.

      NOW, THEREFORE, in consideration of the premises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

      SECTION 1. Definition of Terms. All capitalized terms not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
Note.

      SECTION 2. Grant of Security Interest. The Grantor hereby pledges and
assigns to the Company and grants to the Company a first priority security
interest in the following (the "Collateral"):

            (i) the membership interest held by such Grantor in Holdings LLC
      (the "LLC Interests"), as set forth in Schedule A attached hereto and
      incorporated herein, all rights and powers accruing to such LLC Interests,
      whether by contract, statute or operation of law or otherwise, all
      certificates (if any) representing such LLC Interests and, subject to the
      provisions of Section 7 hereof, all dividends, cash, instruments and other
      property (including, without limitation, all distributions of capital or
      alternative securities pursuant to any recapitalization, restructuring or
      dissolution of the Company) from time to time received, receivable or
      otherwise distributed in respect of or in exchange for any or all of such
      LLC Interests; and

                                    -6-
<PAGE>

            (ii) the shares of capital stock held by such Grantor in the Company
      (collectively, the "Grantor Stock"), also as set forth in Schedule A
      attached hereto and incorporated herein, all rights and powers accruing to
      such Grantor Stock, whether by contract, statute or operation of law or
      otherwise, all securities issued in exchange or substitution for such
      Grantor Stock, all certificates (if any) representing such Grantor Stock
      and, subject to the provisions of Section 7 hereof, all dividends, cash,
      instruments and other property (including without limitation all
      distributions of capital or alternative securities pursuant to any
      recapitalization, restructuring or dissolution of the Company) from time
      to time received, receivable or otherwise distributed in respect of or in
      exchange for any or all of such Grantor Stock.

      SECTION 3. Security for Obligations. This Agreement and the security
interest granted hereby are made in order to secure the payment and performance
in full of all payment obligations of the Grantor for principal, interest and
expenses arising under the Note (the "Obligations").

      SECTION 4. Delivery of Collateral. The Grantor has herewith delivered all
certificates or instruments representing or evidencing the Collateral to the
Company, accompanied by duly executed instruments of transfer or assignment in
blank, all in form and substance reasonably satisfactory to the Company. All
additional securities or interests which may hereafter be acquired by the
Grantor and become part of the Collateral shall, if certificated, also be
delivered to the Company in suitable form for transfer and shall be accompanied
by similar executed instruments of transfer or assignments in blank.

      SECTION 5. Representations and Warranties. The Grantor represents and
warrants as follows with respect to the Collateral pledged by such Grantor
pursuant to Section 2 hereof:

            (a) The Grantor has good and marketable title to, and is the legal
and beneficial owner of the Collateral attributable to it as shown on Schedule A
attached hereto, free and clear of any lien, security interest, option or other
charge or encumbrance, except for (i) the restrictions imposed by the Holdings
LLC Limited Liability Company Agreement (the "LLC Agreement"), dated as of the
ICON Restructuring closing, (ii) the Company Stockholders Agreement (the
"Stockholders Agreement"), also dated as of the ICON Restructuring closing, and
(iii) the security interests created by this Agreement.

            (b) The pledge and assignment of the Collateral to the Company
pursuant to this Agreement creates a valid security interest in the Collateral,
securing the payment of the Obligations. Upon the filing of appropriate
financing statements describing the LLC Interests, such security interest will
be a perfected first priority security interest as to the LLC Interests. Upon
the delivery of the share certificates representing the Grantor Stock,
accompanied by stock powers or other appropriate instruments of assignment
thereof duly executed in blank by the Grantor, such security interest will be
a perfected first priority security interest as to the Grantor Stock.

                                      -7-
<PAGE>

            (c) No authorization, consent, approval, or other action by, and no
notice to or filing with any person, including, without limitation, any
governmental authority or regulatory body, is required for (i) the execution and
delivery of, and performance of its obligations under, this Agreement by the
Grantor (except such authorizations, consents, approvals, actions, notices or
filings which have already been obtained).

            (d) The Grantor has full power, authority and legal right to
execute, deliver and perform its obligations under this Agreement and to pledge
and grant a security interest in the Collateral pursuant to this Agreement, and
the execution, delivery and performance hereof and the pledge and assignment of
a security interest in the Collateral hereunder do not contravene any law, rule
or regulation applicable to Grantor, or constitute a violation or breach of any
judgment, decree, contract, agreement or instrument to which the Grantor is a
party or by which it or any of its properties is bound.

            (e) This Agreement is the legal, valid and binding obligation of the
Grantor enforceable against the Grantor in accordance with its terms, subject to
bankruptcy, insolvency and similar laws of general application affecting the
rights and remedies of creditors, equitable principles, and, with respect to the
availability of remedy of specific enforcement, subject to the discretion of the
court before which proceedings therefor may be brought.

            (f) The principal residence of the Grantor is set forth on the
signature page hereto. Grantor will not change the address of its principal
place of residence, unless Grantor has given written notice of any such
alteration or change to the Company no less than ten (10) business days prior
thereto.

      SECTION 6. Further Assurances. The Grantor agrees that at any time and
from time to time it will promptly execute and deliver all further instruments
and documents, and take all further action, that may be reasonably necessary, or
that the Company may reasonably request, in order to defend the right, title and
security interest of the Company against the claims and demands of others, to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Company to exercise and enforce its rights and remedies
hereunder with respect to any Collateral.

      SECTION 7. Voting Rights; Dividends; Etc.

            (a) So long as no Event of Default under the Note shall have
occurred and be continuing:

                (i) The Grantor shall be entitled to exercise any and all voting
      and other consensual rights (including without limitation all powers of
      consent, approval, designation and removal) pertaining to the Collateral
      or any part thereof for any purpose not inconsistent with the terms of
      this Agreement or the Note.

               (ii) The Company shall execute and deliver (or cause to be
      executed and delivered) to the Grantor all such proxies and other
      instruments as the Grantor may

                                      -8-
<PAGE>

      reasonably request for the purpose of enabling it to exercise the
      voting and other rights which the Grantor is entitled to exercise
      pursuant to paragraph (i) above.

              (iii) The Grantor shall be entitled to receive, retain and
      distribute all regularly scheduled periodic cash dividends on the Grantor
      Stock (including without limitation any portion thereof received by
      Holdings LLC and distributed thereunder) and all regularly scheduled
      periodic cash distributions on the LLC Interests, and, with respect to all
      other cash dividends or other cash distributions upon the Collateral at
      any time (including without limitation any portion thereof received by
      Holdings LLC and distributed thereunder), Grantor shall be entitled to
      receive, retain and distribute only such amount thereof as is necessary to
      pay any federal, state or local taxes of any kind required by law to be
      paid by the Grantor thereon and the remainder thereof, together with all
      other dividends or other distributions, shall remain as part of the
      Collateral pursuant to Section 2 hereof.

            (b) Upon the occurrence and during the continuance of an Event of
Default, all rights of the Grantor to exercise the voting and other consensual
rights (including without limitation all powers of consent, approval,
designation and removal) and to receive dividends or distributions which such
Grantor would otherwise be entitled to exercise or receive pursuant to paragraph
(a) above shall cease upon written notice from the Company, and all such rights
shall thereupon become vested in the Company who shall thereupon have the sole
right to exercise such voting and other consensual rights and to receive
dividends or distributions.

      SECTION 8. Transfers and Other Liens. The Grantor agrees that it will not
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, or (ii) create or
suffer to exist any lien, security interest, or other charge or encumbrance upon
or with respect to any of the Collateral to secure indebtedness of any Person,
except as provided in the LLC Agreement and Stockholders Agreement and except
for the security interests created under this Agreement.

      SECTION 9. Company Appointed Attorney-in-Fact. The Grantor hereby appoints
the Company as its attorney-in-fact, with full authority in the place and stead
of the Grantor and in the name of the Grantor or otherwise, from time to time in
the Company's discretion, to take any action and to execute any instrument which
the Company may deem reasonably necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to receive, endorse
and collect all instruments made payable to the Grantor representing any
dividend, interest payment or other distribution in respect of the Collateral or
any part thereof and to give full discharge for the same; provided, however,
that the Company shall not have the right to exercise its power under this
Section 9 until the occurrence and continuance of an Event of Default.

      SECTION 10. Company May Perform. If a Grantor fails to perform any
agreement contained herein within the time provided, the Company may itself
perform, or cause performance of, such agreement, and the reasonable expenses
of the Company incurred in connection therewith shall be payable by the Grantor
under Section 13.

                                      -9-
<PAGE>

      SECTION 11. Reasonable Care. The Company shall exercise reasonable care in
the custody and preservation of the Collateral in its possession or control, it
being understood that the Company shall not have any responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Company has or is deemed to have knowledge of such matters, or (ii) taking
any necessary steps to preserve rights against any parties with respect to any
Collateral. It is agreed that, subject to the foregoing, the Company shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral if the Company exercises the same care that it exercises with respect
to its own property.

      SECTION 12. Remedies upon Event of Default. If any Event of Default shall
have occurred and be continuing:

            (a) The Company may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party under the Uniform
Commercial Code as adopted and in effect in Utah (the "Code"), and, to the
extent permitted by law, the Company may also, without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker's board or at any of the
Company's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as are commercially reasonable. The Grantor agrees that,
to the extent notice of sale shall be required by law, at least ten (10) days'
notice to the Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Company shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. At any such sale, the Company may, to the
extent permitted by the Code or other applicable law, itself purchase all or any
of the Collateral. The Company may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.

            (b) All cash proceeds received by the Company in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Company, be held by the Company as collateral for,
and/or then or at any time thereafter applied (after payment of any amounts
payable to the Company pursuant to Section 13) in whole or in part by the
Company against, all or any part of the Obligations in such order as the Company
shall elect, to the extent permitted by law. Any surplus of such cash or cash
proceeds held by the Company and remaining after payment in full of all the
Obligations shall be paid over to the Grantor or to such other persons as may be
lawfully entitled to receive such surplus.

      SECTION 13. Expenses. The Grantor will upon demand pay to the Company the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of the Company's counsel and of any experts and agents, which the
Company may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Company hereunder, or (iv) the failure by the Grantor
to perform or observe any of the provisions hereof.

                                      -10-
<PAGE>

      SECTION 14. Security Interest Absolute. All rights of the Company and
security interests hereunder, and all obligations of the Grantor hereunder,
shall be absolute and unconditional irrespective of:

            (i) any lack of validity or enforceability of the Note or any other
agreement or instrument relating thereto;

            (ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the obligations under the Note, or any other
amendment or waiver of or any consent to any departure from the Note;

            (iii) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations; or

            (iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Grantor or a third party guarantor.

      SECTION 15. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by the Grantor herefrom, shall be
effective unless the same shall be in writing and signed by the Company, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.

      SECTION 16. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including communication by
telecopier) and shall be mailed, telecopied or delivered, at the respective
addresses set forth on the signature page hereto, or in any case at such other
address as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this section. All such notices
and other communications shall be effective (i) three (3) days after being
deposited in the mails, (ii) when delivered by telecopier (upon electronic
confirmation of receipt thereof) or by hand, or (iii) one (1) business day after
sending by overnight delivery service, addressed as aforesaid.

      SECTION 17. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until indefeasible cash payment in full of the all obligations,
(ii) be binding upon the Grantor and its successors and assigns, and (iii) inure
to the benefit of the Company and its respective successors, transferees and
assigns. Upon the cash payment in full of the Obligations, the Grantor shall be
entitled to the return, upon its request, of such of the Collateral pledged by
the Grantor as shall not have been sold or otherwise applied pursuant to the
terms hereof.

      SECTION 18. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Utah, without
giving effect to the conflicts of laws principles thereof. EACH PARTY HERETO FOR
ITSELF AND ITS PROPERTIES, HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF

                                      -11-
<PAGE>

ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF UTAH FOR
THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF, OR WITH
RESPECT TO THIS AGREEMENT, AND EXPRESSLY WAIVES ANY OBJECTIONS IT MAY HAVE AS TO
VENUE IN SUCH COURTS. THE GRANTOR ALSO HEREBY INTENTIONALLY AND KNOWINGLY
WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN
ACTION MAY BE COMMENCED ARISING OUT OF THIS AGREEMENT. Unless otherwise
defined herein or in the Loan Agreement, terms defined in Articles 8 and 9 of
the Code are used herein as therein defined.

                                 * * * * * * *

                                      -12-
<PAGE>

                        PLEDGE AND SECURITY AGREEMENT

                                Signature Page

     IN WITNESS WHEREOF, the Grantor and the Company have each executed and
delivered this Agreement as an instrument under seal as of the date first above
written.

Address:                          GRANTOR:

560 South 1000 East
Logan, UT 84321                   /s/ Scott R. Watterson
                                  ------------------------------
                                  Name: Scott R. Watterson

Address:                          HF HOLDINGS, INC.

1500 South 1000 West
Logan, UT 84321

                                  By: /s/ S. Fred Beck
                                     ---------------------------
                                     Name/Title:  S. Fred Beck
                                          CFO, Vice President & Treasurer

                                     S-1

<PAGE>

                                  SCHEDULE A
                                      TO
                         PLEDGE AND SECURITY AGREEMENT

Description of membership interest in Holdings LLC pledged hereunder:

2,324.3 Units

Description of capital stock of the Company pledged hereunder:

375,000 shares of Common Stock

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