Document:

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                             CO-PROMOTION AGREEMENT

         THIS CO-PROMOTION AGREEMENT (the "Agreement") is made as of December
21, 1999 by and between iParty Corp., a Delaware corporation ("iParty"), with an
address at 41 East 11th Street, 11th Floor, New York, New York 10003 and
Margaritaville Holdings, LLC, a Delaware limited liability company ("MV"), with
an address at Suite QR, 256 Worth Ave., Palm Beach, Florida 33480.

         WHEREAS, iParty is the owner and operator of the Internet web site
located at http://www.iparty.com, and all subsidiary pages thereof (the "iParty
Site"); and

         WHEREAS, MV is one of the operators of the Internet web site located at
http://www.margaritaville.com, and all subsidiary pages thereof (the
"Margaritaville Site"), the registrant of the domain name for which is Global
Audience Providers, which is an agent of The Margaritaville Store, Inc., a
company under common control with MV; and

         WHEREAS, both parties wish to cooperate with each other in the
promotion of each other's products and web sites on the terms and conditions set
forth below.

         NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:

1.       Term.  This  Agreement  shall have a term (the "Term") of three years
commencing on December 21, 1999 and ending on December 20, 2002, unless
terminated prior to such date in accordance with Section 8 hereof.

2.       Consideration.

         2.1 Royalty. Within forty-five (45) days after each calendar quarter,
iParty shall pay to MV a royalty (the "Royalty Payment") equal to six (6)
percent of the gross dollar amount actually received by iParty from customers
with respect to products sold on the iParty Site which bear the "MARGARITAVILLE"
trademark (one (1) percent of which shall be paid by MV to Jimmy Buffett
("Buffett") pursuant to a License Agreement between MV and Buffett dated as of
December 22, 1999). For the purposes of this Section 2.1 "gross dollar amount
actually received by iParty" shall not include funds relating to any shipping
charges, sales or other taxes or duties which iParty may collect, unless such
amounts exceed iParty's actual out-of-pocket costs for such items. The amount of
a Royalty Payment may be adjusted, dollar for dollar, to account for any
refunds, chargebacks, returns or similar occurrences.

         2.2 Warrant. Upon execution of this Agreement, iParty shall issue to MV
a five-year warrant (the "Warrant"), substantially in the form attached hereto
as Exhibit A.

3.       Establishment of "Margaritaville Channel." On or before April 1, 2000,
iParty shall establish a distinct area on the iParty Site known as
"Margaritaville" or the "Margaritaville

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Channel" which shall be used to aggregate and offer for sale such number of
products as iParty shall determine in its sole but reasonable discretion, which,
as of the date hereof, is attached hereto as Exhibit B. The products shall
remain reasonably consistent with themes associated with Buffett, his music and
live performances ("Buffett Themes") and shall not duplicate, compete with or be
similar to any products that are being offered by MV as of the date hereof
("iParty Products"). During the Term, MV shall not add any products to or sell
any products, directly or indirectly through, the Margaritaville Site that
duplicate, compete with or are similar to the iParty Products.

4.       Margaritaville Exclusive License.

         4.1 MV hereby grants iParty, to the full extent of MV's rights therein
and thereto, an exclusive, worldwide, fully paid license, during the Term, to
use the trademark "MARGARITAVILLE", in the party supply industry. MV hereby
grants iParty, to the full extent of MV's rights therein and thereto, exclusive,
worldwide marketing and distribution rights to the materials provided by MV and
created by Buffett pursuant to Article 6, below.

         4.2 Subject to the next sentence, MV represents and warrants that (i)
it possesses, itself or through agreement with Buffett, the right and ability to
grant the rights granted in Section 4.1, above in the United States and has no
knowledge of any worldwide limitation or restriction which would conflict with
the full enjoyment by iParty of its rights under this Agreement, (ii) the
granting of these right does not conflict with or violate any other agreement,
written or oral, that MV or Buffett have entered into and, (iii) it covenants
that it will not grant any rights under any future agreement that will conflict
with the full enjoyment by iParty of its rights under this Agreement. iParty
acknowledges that MV has granted certain rights to Seagram Americas, an
unincorporated division of Joseph E. Seagram & Son, Inc. ("Seagram") and
Universal City Development Partners ("Universal") which may be inconsistent with
the exclusive rights granted in the first sentence of Section 4.1, above. MV
covenants that, during the Term, it will not grant, or permit to be granted, any
additional rights to Seagram, Universal or any other party which are
inconsistent with the exclusive rights granted in the first sentence of Section
4.1, above. Except as provided in the next sentence, MV further represents,
warrants and covenants that no entity which controls, is controlled by or under
common control with MV, The Margaritaville Store, Inc. or Buffett has entered or
will enter into any agreement which is inconsistent with the rights granted to
iParty herein.

         4.3 In any use by iParty of the MARGARITAVILLE trademark or of the
name, image or voice of Buffett, or, if permitted by Buffett, in his sole
discretion, any other trademarks or rights that he may own or otherwise control
(collectively, the "Materials") pursuant to this Agreement, iParty shall not
alter the color, proportional size or similar attributes (as applicable) of the
Materials as provided or approved by MV without the prior written consent of MV.
The right of iParty to place advertising, promotional or any other information
or materials visible with, near or surrounding the Materials is limited to those
which will not impair or adversely affect the name, reputation or goodwill of MV
or Buffett, and those which will not tarnish, dilute or be confusingly similar
to the Materials. iParty shall provide MV with samples of any iParty

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Products to which iParty wishes to affix any of the Materials, which shall be of
high quality. MV shall have two (2) business days after receipt of such sample
to object to such use of the Materials, following which, if any such objection
has not been received by iParty from MV, such use shall be deemed to have been
approved by MV. Provided that any use of the Materials is substantially similar
to any use previously approved by MV, iParty may apply such use to future iParty
Products without the necessity of obtaining MV's prior consent.

5.       Web Site Links.

         5.1 On or before April 1, 2000, iParty and MV shall place HTML (or
successor protocol) links to each others web sites on the entry/home page for
each party's own web site, each at the uniform resource locator (URL) set forth
in the recitals to this Agreement, or any successor URL.

         5.2 The textual and graphic content of the links required pursuant to
Sections 5.1 and 5.2 above will be in the forms mutually agreed to by the
parties, will be provided to the linking party as a computer-readable file in a
compatible file format and within a commercially reasonable time following such
mutual agreement. The inability of the parties to so agree as required in this
Section 5.3, without the occurrence of a fact or event that, existing on its
own, would be considered a breach of this Agreement, shall not be considered a
breach of this Agreement.

         5.3 In any identification of the other party (the "Linked Party") or of
their products or offerings included anywhere within the web site of each party
(the "Linking Party") pursuant to this Agreement, the Linking Party shall not
alter or otherwise impair the branding or other identification of the Linked
Party, nor alter or remove any copyright, trademark or other protective notices
of the Linked Party. Neither party shall, acting as Linking Party, alter the
color, size or similar attributes of the materials provided by the Linked Party
without the prior written consent of the Linked Party. Each party further agrees
that it shall not, acting as Linking Party, mask, frame, overlay, impair or
otherwise materially alter, affect or impair the images, information,
perception, service quality or security obtained from the Linked Party once the
link or equivalent pathway to the Linked Party is selected or initiated. The
right of each party, acting as Linking Party, to place advertising, promotional
or any other information or materials visible with, near or surrounding
materials provided by the Linked Party is limited to those which will not impair
or adversely affect the name, reputation or goodwill of the Linked Party or
Buffett, and those which will not tarnish, dilute or be confusingly similar to
the materials provided by the Linked Party or (in the case of iParty) by
Buffett. The parties agree that they shall not, acting as Linking Party, impose
any cost, charge, fee, restriction or requirement in order to permit access to
any aforementioned link or any other link contained in or to the Linked Party's
web site.

6.       Product Creations by Buffett.

         6.1 On or before May 1, 2000, MV shall provide to iParty, for sale
through the Margaritaville Channel, a videotape that will contain at least three
songs performed by Buffett

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and appropriate for children, the sale and distribution of which will be
exclusive to iParty. The aforementioned videotape shall be sold by iParty
without any alteration whatsoever and as a package with other party-related
merchandise. Such videotape shall not be sold by iParty as a "stand alone"
product. Pre-approved production costs in the creation of songs will be paid by
iParty. Buffett shall retain all intellectual property rights in the videotape,
the songs contained therein, and the materials related to the videotape and the
songs. During the Term, the parties may agree on additional products, subject to
mutually agreeable terms and conditions.

         6.2 On or before April 1, 2000, MV shall provide to iParty the initial
installment of written work related to Buffett, such as current information
about Buffett or his activities, or Buffett's advice, observations or wisdom,
the length of which shall be approximately one paragraph, that iParty shall have
the exclusive right to use as content on its web site. Such material will be
replaced with new material on a monthly basis. The material described in this
Section 6.2 may be used by iParty as stand-alone content on its web site, or may
be aggregated with other quotations from prior works written or performed by
Buffett and displayed as content on iParty's web site, subject to the prior
approval of MV, which such approval shall not be unreasonably withheld or
delayed. In the event that any proposed use by iParty of any written work
pursuant to the previous sentence requires the consent of any third party (e.g.,
a publisher), MV shall provide iParty with reasonable assistance regarding the
obtaining of such permission. No use of any material pursuant to this Section
6.2 shall constitute any transfer of any intellectual property rights by or on
behalf of iParty, MV or Buffett.

         6.3 The parties agree to proceed in good faith so that on or before
June 1, 2000, Buffett and/or MV and/or iParty shall create an electronic
greeting that iParty shall use, in its commercially reasonable discretion, in
connection with a greeting or invitation sold or otherwise used by iParty
through or in connection with the iParty Site. Such electronic greeting shall
contain icons or materials which represent Margaritaville and/or Buffett Themes
but shall not include Buffett's image and/or voice without Buffett's written
consent which may be withheld for any reason. The content and appearance of such
electronic greeting shall be subject to MV's approval, which such approval shall
not be unreasonably withheld or delayed.

7.       Marketing and Co-Promotions.

         7.1      During the Term, MV shall arrange for Buffett, at his
                  convenience, to meet with Sal Perisano, the CEO of iParty (or
                  such other iParty representative as shall be determined by
                  iParty), and marketing personnel from iParty to define overall
                  marketing and co-promotion activities between MV and iParty.
                  Such meetings shall be held no less frequently than twice each
                  year during the Term.

         7.2      MV shall arrange for Buffett to attend and participate in a
                  public relations event in New York to, among other things,
                  announce the launch of the iParty and MV relationship.
                  Buffett's appearance pursuant to the preceding sentence shall
                  be for no less than one half (1/2) hour. Thereafter, MV shall
                  arrange for Buffett to

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                  attend at least one (1) other public relations event on an
                  annual basis. The timing, concept and theme of such events
                  shall be subject to MV's reasonable approval, iParty shall
                  provide Buffett with no less than two (2) months advance
                  notice of each such event and no such event shall be scheduled
                  on any date that Buffett is scheduled to perform a concert.

         7.3      During the Term, MV and iParty shall each have the right to
                  utilize the other party's mailing list (which, in the case of
                  MV, shall mean the mailing list used by and for the "Coconut
                  Telegraph" and owned by The Margaritaville Store, Inc.) to
                  send information, one (1) time each year, to any or all of the
                  addresses contained on such mailing lists. In addition, MV and
                  iParty shall each have the right, three (3) times each year,
                  to use the e-mail lists of the other party (which, in the case
                  of MV, shall mean the e-mail list used by and for the "Coconut
                  Telegraph" and owned by The Margaritaville Store, Inc.) to
                  send information to each address on such e-mail lists.
                  Additionally, MV shall cause the "Coconut Telegraph" to
                  mention iParty in each issue published during the Term,. In
                  the event that iParty, during the Term, releases or provides a
                  direct mail piece to be sent to customers of iParty via U.S.
                  mail, iParty will cause such piece to mention the availability
                  of the iParty Products, subject to the terms and conditions of
                  this Agreement.

         7.4      iParty shall be allowed to create advertising that will
                  promote the Margaritaville Channel in print, broadcast, cable,
                  radio and online media, and any other medium now known or
                  hereafter known, subject to the approval of MV, which approval
                  shall not be unreasonably withheld or delayed. All such
                  advertising and promotion by iParty shall include other
                  trademarks or products not related to MV or Buffett, as
                  determined by iParty in its sole but commercially reasonable
                  discretion. Notwithstanding the foregoing, however, approval
                  for the use of Buffett's image and name may be withheld for
                  any reason.

         7.5      iParty and MV shall cooperate in developing and executing
                  additional plans to cross-promote their respective production.

8.       Termination.

         8.1 This Agreement may be terminated by either iParty, on the one hand,
or MV on the other, in the event of any material default in, or material breach
of, any of the terms or conditions of (a) this Agreement by MV, or (b) the
obligations of Buffett hereunder or (c) iParty (in the case of MV), which
default is not remedied within thirty (30) days after the defaulting party has
been provided with written notice of such default.

         8.2 If Buffett or MV commit any act or become involved in any situation
or occurrence which brings him/it into public disrepute, scandal or ridicule, or
shocks or offends the community, or derogates from the public image or reflects
unfavorably upon iParty or any of its products or services, iParty shall have
the right to terminate this Agreement at any time

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following the time that iParty becomes aware of such act or involvement,
provided that iParty shall have given MV and Buffett fourteen (14) days written
notice of such default and such default has not been cured, if curable, during
such fourteen (14) day period. If iParty commits any act or becomes involved in
any situation or occurrence which brings it into public disrepute, scandal or
ridicule, or shocks or offends the community, or derogates from the public image
or reflects unfavorably upon Buffett or MV or any of their products or services,
MV shall have the right to terminate this Agreement at any time following the
time that MV becomes aware of such act or involvement, provided that MV shall
have given iParty fourteen (14) days written notice of such default and such
default has not been cured, if curable, during such fourteen (14) day period.
Upon termination pursuant to this Article 8, all rights, duties and obligations
of the parties shall cease and each party shall return to the other party all
property and Confidential Information of the such party or, alternatively, as
appropriate, certify its destruction or deletion. For the avoidance of doubt,
warrant shares which have vested prior to the effective date of are the property
of MV.

         8.3 Termination or expiration of this Agreement shall not cancel or
terminate any rights and/or obligations which arose prior to the effective date
of termination and which must continue to give effect to their meaning at the
time such right and/or obligation arose.

9.        Limitations of Liability/Warranty Disclaimer.

         9.1 EXCEPT FOR OBLIGATIONS ARISING OUT OF ARTICLE 10 OR A BREACH BY
EITHER PARTY OF SECTION 11, THE MAXIMUM LIABILITY OF EITHER PARTY TO THE OTHER
FOR DAMAGES FOR ANY AND ALL CAUSES WHATSOEVER, AND EACH PARTY'S MAXIMUM REMEDY,
REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT OR OTHERWISE, SHALL
BE LIMITED TO $50,000.

         9.2 EXCEPT FOR OBLIGATIONS ARISING OUT OF SECTION 10 OR A BREACH BY
EITHER PARTY OF SECTION 11, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY
LOST DATA, LOST PROFITS, BUSINESS INTERRUPTION, OR FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES ARISING OUT OF OR RELATING
TO THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.

         9.3 EXCEPT FOR THE EXPRESS WARRANTIES STATED IN THIS AGREEMENT, NEITHER
PARTY MAKES ANY WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.

10.      Indemnification. Each party (the "Indemnifying Party") shall indemnify,
defend and hold harmless the other party (the "Indemnified Party") from any and
all claims, costs, expenses, damages or other liability, including reasonable
attorney's fees, which is the result of infringement or misappropriation claims
arising out of or related to the use of the materials

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provided to the Indemnified Party by the Indemnifying Party. The Indemnified
Party shall notify the Indemnifying Party, in writing, in the event of any such
claim, and grant to the Indemnifying Party the right, at the Indemnifying
Party's expense, to control the defense thereof, including the right to settle
any such claim or suit on such terms as the Indemnifying Party shall deem
desirable.

11.      Confidentiality. The term "Confidential Information" means information
or data, including without limitation, names and expertise of employees and
consultants, know-how, processes, ideas, inventions, (whether patentable or
not), trade secrets and other technical, business and customer information,
financial and product development plans, forecasts and strategies, furnished by
one party to the other hereunder. Each party shall (i) hold all Confidential
Information of the other party in confidence and take all reasonable precautions
to protect such Confidential Information (including, without limitation, all
precautions such party employs with respect to its own confidential materials of
a similar nature), (ii) not divulge any such Confidential Information of such
other party or any information derived therefrom to any third person except to
its employees or independent contractors that have a need to know such
information to further the permitted use thereof, that are informed of the
non-disclosure obligations contained herein, (iii) not make any use whatsoever,
at any time, of any Confidential Information of the other party except to the
extent necessary to exercise any right or license granted under, or perform any
obligations under this Agreement, and (iv) not copy (except as reasonably
necessary to exercise the rights or obligations under this Agreement) or reverse
engineer or reverse compile any Confidential Information of the other party
which is computer code. For purpose of this Section 11, MV and Buffett shall be
considered one and the same party. Without granting any right or license, the
foregoing obligations shall not apply to the extent that the receiving party can
demonstrate that the Confidential Information of the such other party (A) is in
the public domain and is available at the time of disclosure or which thereafter
enters the public domain and is available through no improper action or inaction
by the receiving party, or (B) was in its possession or known by the receiving
party prior to receipt from the disclosing party, or (C) was rightfully
disclosed to the receiving party by a third party without restriction, or (D) is
independently developed by the receiving party without reference to such
Confidential Information of the disclosing party, or (E) is required to be
disclosed pursuant to any statutory or regulatory authority or court order,
provided the disclosing party is given prompt notice of such requirement and the
scope of such disclosure is limited to the maximum extent consistent with
compliance with such authority or order. Information shall not be deemed known
to the receiving party or publicly known for purposes of the above exceptions
(x) merely because it is embraced by more general information in the prior
possession of such person or others, or (y) merely because it is expressed in
public material in general terms not specifically the same as the Confidential
Information.

12.      Year 2000 Compliance. MV represents to iParty that the Margaritaville
Site is Year 2000 Compliant. iParty represents and warrants to MV that the
iParty Site is Year 2000 Compliant. For purposes of this Section 12, the term
"Year 2000 Compliant" means that such web site is designed to be used before,
during and after the year 2000. Specifically, such web site will (i) represent
all calendar years with four digits as opposed to two (e.g., 2001 instead of

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01); (ii) correctly identify and process all dates, including those in
calculations which reference one or more centuries; (iii) operate without any
errors, aborts or invalid results related to any date; and (iv) correctly
identify and process leap years.

13.      Notice. Any notice required or permitted by this Agreement shall be in
writing and shall be sent by courier or telefax confirmed in writing, addressed
to the signatory of this Agreement at the address listed in the preamble to this
Agreement, or at such other address for which either of the parties gives notice
hereunder. All notices shall be deemed to have been given upon receipt. As of
the date hereof, the facsimile number of the parties are as follows:

iParty:  (212) 331-1207                                       MV: (561) 835-9584

14.      Entire Agreement; Amendment. This Agreement and the Warrant to be
issued in connection herewith contain the entire understanding of the parties
with respect to the subject matter herein and supersedes all prior agreements
and understandings between them with respect to the subject matte hereof. No
amendment of this Agreement will be effective unless embodied in a written
instrument executed by all parties.

15.      Assignment. This Agreement will not be assignable by either party
without the other's written consent, which will not be unreasonably withheld or
delayed, except that either party shall have the right to assign this Agreement
to any parent, subsidiary or affiliate or to an entity which acquires all or
substantially all of the assets or equity of such party through an acquisition,
merger, consolidation or otherwise..

16.      Waiver of Breach. The failure of any party hereto at any time to
enforce any of the provisions of this Agreement will not be deemed or construed
to be a waiver of any such provisions, or in any way to affect the validity of
this Agreement or any provisions hereof or the right of any party hereto to
thereafter enforce each and every provision of this Agreement. No waiver of any
breach of any of the provisions of this Agreement will be effective unless set
forth in a written instrument executed by the party against which enforcement of
such waiver is sought; and no waiver of any such breach will be construed or
deemed to be a waiver of any other or subsequent breach.

17.      Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
conflict of laws rules of such state.

18.      Submission to Jurisdiction. The parties agree to submit to the
exclusive jurisdiction of the federal and state courts located in Wilmington,
Delaware with regard to any disputes arising under this Agreement.

19.      Severability. All of the provisions of this Agreement are intended to
be distinct and severable. If any provision of this Agreement is or is declared
to be invalid or unenforceable in any jurisdiction, it will be ineffective in
such jurisdiction only to the extent of such invalidity or

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unenforceability. Such invalidity or unenforceability will not affect either the
balance of such provision, to the extent it is not invalid or unenforceable, or
the remaining provisions hereof, or render invalid or unenforceable such
provision in any other jurisdiction.

20.      Independent Contractors. The relationship of the parties hereunder
shall be that of independent contractors. Nothing herein shall be construed to
constitute a partnership or other relationship between or joint venture of the
parties, nor shall either party be deemed the agent of the other or have the
right to bind the other in any way without the prior written consent of the
other.

21.      Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, and all of which
together will constitute one and the same Agreement. This Agreement may be
executed and delivered by electronic facsimile transmission with the same force
and effect as if it were executed and delivered by the parties simultaneously in
the presence of one another.

22.      Certain Dispute Resolution. With respect to any dispute which may arise
regarding Section 6.3 and/or Section 7.5 above, the parties agree that such
dispute shall not constitute a breach unless a party fails to comply with an
arbitration award entered against it. The parties further agree that, should any
dispute arise regarding Section 6.3 and/or Section 7.5, the following procedure
shall be used, unless they agree in writing to the contrary:

         (a) The President of iParty and the President of MV shall, within
seventy-two (72) hours of either party notifying the other in writing of a
particular dispute described above, discuss by telephone the resolution of that
dispute for a minimum of one (1) hour, or until the dispute is resolved;

         (b) If the telephone conference described in subsection (a) above does
not resolve the dispute, the parties shall request the American Arbitration
Association to appoint a mediator to mediate the dispute, such mediation to take
place in Wilmington, Delaware. The mediation shall occur with seventy-two (72)
hours after the mediator is appointed, unless the mediator is not available
within that time frame, in which case, the mediator shall set a date for the
mediation on the earliest possible day, based on the schedule of the mediator,
who shall take into account the schedule of the President of iParty and the
President of MV; and

         (c) If the mediation described in subsection (b) above fails to resolve
the dispute, the parties shall request the American Arbitration Association to
appoint one (1) arbitrator to resolve the dispute, such mediation to take place
in Wilmington, Delaware. The arbitration shall be governed by the then-existing
rules of the American Arbitration Association.

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

iPARTY CORP.                                      MARGARITAVILLE HOLDINGS, LLC

By: /s/ Sal Perissano                             By: John Cohlan
    -----------------                                ---------------------------
      Name:  Sal Perisano                            Name: John Cohlan
      Title: Chief Executive Officer                 Title: CEO

I, Jimmy Buffett, agree to do those things required of me (or indicated as being
delivered or created by me) pursuant to Article 6 and Article 7 of this
Agreement.

/s/ Jimmy Buffett
----------------------------
Jimmy Buffett, an individual

                                       10LEASE AGREEMENT

     THIS LEASE  AGREEMENT,  made and  entered  into this 15th day of  November,
1999, by and between H2C2 & ASSOCIATES LLC, hereinafter called LESSOR, and R-TEC
CORPORATION, an Idaho corporation, hereinafter called LESSEE.

                                   WITNESSETH:

     FOR AND IN  CONSIDERATION  OF the  rentals  hereinafter  provided,  and the
covenants and agreements  herein set forth,  LESSOR hereby leases and demises to
LESSEE,  for the term stated below, the portion  described in Exhibit A-1 of the
premises  situated in the County of Ada,  State of Idaho more fully set forth in
Exhibit  A-2.  Both  Exhibits  are attached  hereto and  incorporated  herein by
reference.

     This Agreement is subject to the following terms and  conditions,  to which
the parties mutually agree:

     1. Lease  Term.  The  initial  term of this Lease  shall be five (5) years,
commencing  the 1st day of  December,  1999.  At the option of the Lessee,  this
Lease may be extended for an additional five (5) year period, subject to Cost of
Living Index increases.

     2. Rental. LESSEE shall pay to LESSOR the following rentals:

          A. Minimum  Rental.  LESSEE shall pay to LESSOR upon execution of this
     Lease  the sums set  forth  in  Exhibit  C which  is  attached  hereto  and
     incorporated herein by reference.

          B.  Utilities.  LESSOR shall provide  LESSEE a statement each month of
     LESSEE'S prorata share of utilities used for the leased premises and LESSEE
     shall pay LESSOR for the utilities  within ten (10) days of receipt of said
     statement.

          C.  Telephone.  LESSEE  shall  provide  and pay for its own  telephone
     service.

          D. Past Due Charges.  In the event that any rental or utilities herein
     payable  to  LESSOR  is not  paid  within  ten  (10)  days  after  the date
     recognized  as the due date,  the LESSOR shall have the right and option to
     invoke a one and  one-half  percent (1 1/2) per month  service  charge (18%
     annual rate) on all unpaid balances.

     3. Use of  Premises.  LESSEE  shall  not use the  leased  premises  for any
purpose other than the business of LESSEE as contemplated by this lease, without
the prior written

LEASE AGREEMENT - PG. 1
<PAGE>

consent of LESSOR, which consent shall not be unreasonably  withheld.  Nor shall
LESSEE use the  premises in any  unlawful  manner,  or in any manner which would
cause  increases  in fire  insurance  rates  upon the  premises,  or  result  in
increases in maintenance  expenses over those normally experienced in connection
with the business purpose above stated.

     4.  Remodeling  and  Additions  by Lessee:  LESSEE may at its expense  make
reasonable  alterations,  additions,  and  improvements  to the  interior of the
leased  premises from time to time,  but plans  therefore  shall be submitted to
LESSOR for  approval  prior to  commencement  of such work.  Floor  covering and
installation  thereof within the leased area is at LESSEE'S expense.  Other than
removable trade fixtures, all such alteration, additions, and improvements shall
at the  expiration or termination of this Lease become a part of the real estate
and remain upon the premises. All such alterations,  additions, and improvements
shall be in accordance  with all applicable  fire,  safety,  and building codes,
laws,  and  regulations.  LESSEE shall  promptly pay for all labor and materials
utilized  in any such  work,  and  shall not  permit  any liens to attach to the
premises.

     5. Repairs and  Maintenance.  LESSEE shall pay and be  responsible  for all
repairs and maintenance.

     6.  Emergency  Access;  Necessary  Repairs.  LESSOR shall have the right to
enter upon the leased  premises at all  reasonable  times for making  repairs or
maintenance  should the LESSEE fail to timely perform the same.  LESSOR shall be
entitled to be  reimbursed  for the same within  thirty (30) days of providing a
statement for the same to LESSEE.  LESSEE shall provide LESSOR a current key for
said access.

     7.  Indemnification  and  Insurance.  LESSEE  agrees to indemnify  and save
LESSOR harmless from and against all claims arising from any act,  omission,  or
negligence of LESSEE,  or its  contractors,  licensees,  agents,  servants,  and
employees,  or arising from any accident injury,  or damage whatsoever caused to
any person or any property  within the leased  premises,  and against all costs,
expenses,  and  liabilities  incurred in or in connection with any such claim or
proceeding brought thereon.  LESSEE shall, at its own expense,  maintain in full
force at all  times  during  the  term of this  Lease a policy  or  policies  of
comprehensive  liability  insurance against personal injuries or property damage
within the scope of the foregoing indemnification  agreement, and such insurance
shall name LESSOR as one of the insured parties, as its interest may appear. The
limits of  liability  under such  insurance  shall not be less than one  million
dollars

LEASE AGREEMENT - PG. 2
<PAGE>

for any one  occurrence.  Copies of such  insurance  policies,  or  certificates
evidencing  such  insurance  coverage,  shall be  furnished  to LESSOR  and kept
current at all times. If no verification is furnished LESSOR,  LESSOR may obtain
same at LESSEE's  expense.  Such policies shall contain an  endorsement  stating
that such  insurance  coverage  shall not be canceled  except upon ten (10) days
written notice to LESSOR. It shall be the responsibility of LESSEE to carry such
policies of insurance  covering losses to its own personal  property,  fixtures,
and leasehold improvements,  as it may deem fit and proper, and LESSOR shall not
be liable for any losses thereto resulting from any insurable cause.

     8. Default by Lessee. The following  eventualities shall be acts of default
by LESSEE,  upon  occurrence  of which LESSOR shall have the right and option to
declare this Lease  immediately  terminated,  without the  necessity for further
notice to LESSEE:

          A.  Failure of LESSEE to pay.  Failure of LESSE to pay any  rentals or
     utilities  hereunder  within ten (10) days after the same  becomes  due and
     payable.

          B. Breach of any other covenant.  Breach of any other covenant of this
     Lease which shall not have been cured or corrected by LESSEE  within thirty
     (30) days following  written  notice of intent to declare  default given to
     LESSEE by LESSOR.

          C. Commencement of proceedings. Commencement of proceedings to declare
     LESSEE  a  bankrupt,  or  for  relief  under  any of  the  Chapters  of the
     Bankruptcy by reason of any  insolvency of LESSEE,  whether any of the same
     be voluntary or involuntary;  the appointment of any receiver or trustee of
     the  assets of  LESSEE  situated  in or upon the  leased  premises;  or the
     seizure  of all or any  substantial  portion  of the assets of LESSEE in or
     upon the leased  premises  under any levy of attachment or execution  which
     shall not have been released within five (5) days after the date thereof.

          D.  Abandonment  of the premises by LESSEE.  Upon  termination of this
     Lease by declaration  of LESSOR upon  occurrence of any of the causes above
     set forth, LESSOR shall have the immediate right of re-entry and may remove
     all  persons  and  property  from the  leased  premises,  and may cause any
     property so removed to be stored in a public  warehouse or elsewhere at the
     cost and risk of, and for the account of,  LESSEE,  all without  service of
     notice  or resort to legal  process  and  without  being  deemed  guilty or
     trespass, or becoming liable for any loss or damage which may be occasioned
     thereby. Said property may be held by LESSOR until subject indebtedness has
     been resolved, or if not resolved, LESSOR shall have the right and

LEASE AGREEMENT - PG. 3
<PAGE>

option to dispose of said  property to settle said  indebtedness.  The  remedies
hereby granted to LESSOR shall not be exclusive, but shall be in addition to all
of the other  rights and remedies  provided by law to LESSOR,  which said rights
and remedies may be prosecuted by LESSOR contemporaneously or otherwise with the
exercise of the said right of  termination  and re-entry as herein  provided for
(except  in such event  LESSEE'S  liability  for such  rental  payment  shall be
reduced in the amount of any rentals received by LESSOR from others by reason of
re-renting  said  premises  during the balance of the term of this  Lease,  less
LESSOR'S  reasonable  costs and  expenses  of  re-renting  the  same,  including
preparation of the premises for such new tenant or tenants).

     9. Eminent Domain. If any portion of the leased premises shall,  during the
term hereof, be taken by any public authority under the power of eminent domain,
either party hereto may at its option  declare this lease  terminated  as of the
date of such  taking,  whereupon  all rights  and  liabilities  of both  parties
hereunder  shall cease (except for  liabilities  already  accrued at the time of
termination,  including,  but not limited to,  prorated  liability of LESSEE for
annual  percentage  rentals).  All  compensation  received by reason of any such
taking,  except any  compensation  to which  LESSEE may be  entitled  by loss of
business, or depreciation of and cost of removal of stock in trade and removable
trade  fixtures,  shall be the property of LESSOR and LESSEE shall have no right
or interest therein.

     10.  Termination.  Upon  termination  of this  Lease as  provided,  or upon
expiration of its term or any renewal  term,  LESSEE shall quietly and peaceably
quit and surrender possess-ion of the premises to LESSOR in as good condition as
when received, reasonable wear and tear excepted, together with all alterations,
additions,  and  improvements  to the premises  required to remain  therewith as
provided in this Lease, and such possession shall be so surrendered  without the
necessity for any notice or demand therefore on the part of LESSOR.

     11.  Damage  or  Destruction  by Fire,  Etc.  In case the  premises  or the
building in which the same are situated shall be damaged or destroyed by fire or
other  casualty  insurable  under standard  extended risk coverage  (hereinafter
called "insurable loss"), or other cause (hereinafter  called "other loss"), the
respective rights and duties of the parties hereto shall be as follows:

          (a) If the leased premises shall be damaged or destroyed, or more than
     fifty  percent  (50%) of the  building  within  which the same are situated
     shall be damaged or destroyed,

LEASE AGREEMENT - PG. 4
<PAGE>

by a cause above  defined as "other loss",  LESSOR may at its option,  repair or
restore the  premises  within a reasonable  time after such loss,  or by written
notice to LESSEE given within  thirty (30) days after  occurrence  of such loss,
LESSOR may declare this lease terminated.

          (b). If the leased premises shall be damaged by insurable loss so that
     the same may be  repaired  or restored  to  tenantable  condition  within a
     period of sixty (60) days, with reasonable  diligence in prosecution of the
     work,  LESSOR  shall  repair and  restore the said  premises to  tenantable
     condition within a reasonable time following occurrence of such loss.

          (c) If the leased  premises are damaged or destroyed by insurable loss
     other than as described in  Subparagraph B of this Article,  LESSOR may, at
     its  discretion  (notice of which shall be given to LESSEE  within  fifteen
     (15) days after  occurrence of such loss),  repair and restore the premises
     to tenantable condition as rapidly as practicable after the loss, or LESSOR
     may declare this Lease terminated effective as of the date of such loss.

          (d) In any case  wherein the premises  are  rendered  untenantable  by
     reason  of  any  insurable  loss  or  other  loss  as  above   defined,   a
     proportionate  part of the minimum rental  provided for hereunder  shall be
     abated during the time such premises shall remain untenable.

          (e) In any case wherein  LESSOR  elects to, or is obligated to, repair
     and restore the  premises  following  any  insurable  loss or other loss as
     above defined,  its obligation to repair or rebuild shall be limited to the
     basic building, and interior work provided originally hereunder at LESSOR'S
     expense, and shall not extend to any of LESSEE'S leasehold  improvements or
     LESSEE'S fixtures, inventory, or other property situated within or upon the
     leased premises, it being understood that it is the obligation of LESSEE to
     insure against all losses to the same, as provided elsewhere in this Lease.

     12. Other Matters.

          A. Subletting or Assignment.  The premises herein described may not be
     sublet nor may this Lease be assigned by LESSEE  without the prior  written
     consent  of  LESSOR;   provided,   however,   such  consent  shall  not  be
     unreasonably withheld.

          B. Taxes.  LESSEE shall pay all real estate taxes which may during the
     term of this Lease be  assessed  against  the leased  premises,  and LESSEE
     shall pay all personal  property  taxes which may during the term hereof be
     assessed  against  LESSEE'S  improvements  and property  within or upon the
     leased premises.

          C.  Notices.  All notices  hereunder  shall be in writing and shall be
     deemed

LEASE AGREEMENT - PG. 5
<PAGE>

given when  personally  delivered  to the  employee  in charge of the  receiving
party's business  premises during normal working hours, or when deposited in the
United  States  Mail by  certified  mail,  addressed  to the  receiving  party's
business premises at:

          LESSOR                                LESSEE
          H2C2 & ASSOCIATES LLC                 R-TEC CORPORATION
          6190 S. Tarrega Lane                  1471 E. Commercial Ave.
          Meridian, Idaho 83642                 Meridian, Idaho 83642

          D.  Enforcement.  The forbearance or failure of any party hereunder to
     strictly  enforce any covenant of this Lease,  or to give notice of default
     or of  termination  of this  Lease  by  reason  of any  act,  omission,  or
     occurrence,  shall not be deemed a waiver of any of the  provisions of this
     Lease as regards any other or further such breach,  default, act, omission,
     or  occurrence,  nor shall  consent or approval of LESSOR  given in any one
     instance be construed to waive the  necessity  for such consent or approval
     as  regards  any  other or  further  similar  act by  LESSEE,  unless  such
     intention be expressly stated in writing by LESSOR.

          E.  Relationship  of  Parties.   Nothing  herein  contained  shall  be
     construed to create the  relationship  of  partners,  joint  venturers,  or
     parties to a joint enterprise in any manner between LESSOR and LESSEE.

          F.  Sale of  Property.  LESSOR  shall  have the right to sell the real
     property  upon which the leased  premises are  situated,  or to mortgage or
     otherwise hypothecate the same, all subject to this Lease, and LESSEE shall
     recognize the purchaser of said real property as the LESSOR  hereunder from
     and after time of any such  sale,  and in the event of  foreclosure  of any
     mortgage  or  exercise  of any  power  of sale by any  party  to whom  such
     property has been  hypothecated,  LESSEE shall recognize the purchaser from
     such foreclosure or sale as the LESSOR  hereunder,  all with the same force
     and effect as if such party or parties had  originally  executed this Lease
     as the LESSOR.

          G. Quiet Enjoyment.  Upon performing all of its duties and obligations
     hereunder in accordance with the terms and conditions of this Lease, LESSEE
     shall be entitled to quietly and peaceably have, hold, occupy, possess, and
     enjoy the leased  premises  during the term hereof,  without  hinderance or
     ejection by persons lawfully claiming under LESSOR.

          H.  Governing  Law.  This Lease shall be governed by, and construed in
     accordance with, the laws of the State of Idaho.

LEASE AGREEMENT - PG. 6
<PAGE>

          I. Successors and Assigns. This Lease shall endure and be binding upon
     the successors and assigns of the parties hereto, subject to the provisions
     of Subparagraph A of this Article.

          J.  Amendments.  Provisions of this Agreement may be amended only upon
     the written consent of all parties hereto.

     IN WITNESS  WHEREOF,  the parties hereto have caused this  instrument to be
executed effective as of the day and year first above written.

LESSOR

By  /s/ GARY A. CLAYTON
   ------------------------------------
   Its
       --------------------------------

LESSEE

By  /s/ DOUGLAS G. HASTINGS
   ------------------------------------
   Its
       --------------------------------

LEASE AGREEMENT - PG. 7

<PAGE>

STATE OF IDAHO            )
                          )  ss.
County of Ada             )

     On this 15 day of  November,  1999,  before me, a Notary  Public in and for
said State,  personally appeared Douglas Hastings,  known to me to be the person
whose name is subscribed to the foregoing  instrument and acknowledged before me
that s/he executed the same individually and in his/her corporate capacity.

     IN WITNESS  WHEREOF,  I have  hereunto  set my hand and affixed my official
seal the day and year in this certificate first above written.

                                   /s/ VERNETTA HASTINGS
                                  ------------------------------------------
                                  Notary Public for Idaho
                                  Residing at 2910 E. Victory, Meridian, ID.
                                  My Commission Expires:
                                       September 2003

STATE OF IDAHO            )
                          )  ss.
County of Ada             )

     On this 15 day of  November,  1999,  before me, a Notary  Public in and for
said State, personally appeared Gary Clayton, known to me to be the person whose
name is subscribed to the foregoing  instrument and acknowledged  before me that
s/he executed the same  individually  and in his/her  capacity as manager of the
Limited Liability Company.

     IN WITNESS  WHEREOF,  I have  hereunto  set my hand and affixed my official
seal the day and year in this certificate first above written.

                                   /s/ VERNETTA HASTINGS
                                  ------------------------------------------
                                  Notary Public for Idaho
                                  Residing at 2910 E. Victory, Meridian, ID.
                                  My Commission Expires:
                                       September 2003

LEASE AGREEMENT - PG. 8
<PAGE>

                                   EXHIBIT A-1
                                 LEASE AGREEMENT

                                   FLOOR PLAN

                                    [GRAPHIC]

<PAGE>

                                   EXHIBIT A-2
                                 LEASE AGREEMENT

          Lot 3 in Block 3 of RAILSIDE PARK  SUBDIVISION,  according to
          the OFFICIAL Plat thereof, filed in Book 73 of Plats at Pages
          7561-7562, records of Ada County, Idaho.

<PAGE>

                                    EXHIBIT C
                                 LEASE AGREEMENT

LESSEE  shall pay to LESSOR upon  execution  of this Lease the sum of  $2,950.00
which shall be deemed the  payment of minimum  rental for the first month of the
term hereof.  Thereafter,  LESSEE shall pay to LESSOR each month, in advance, on
or before  the 1st day of the  month,  during  the  balance  of the term of this
Lease,  the sum of $2,950.00 as and for minimum  rental for the premises  hereby
leased to LESSEE. The minimum rental payment, at the option of LESSOR,  shall be
subject to Cost of Living Index increases on an annual basis.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00011-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00011-of-00352.parquet"}]]