Document:

<PAGE>

                                                                    EXHIBIT 10.2

                              FIRST AMENDMENT TO
           STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE -- NET
                     (3450 S. LaBrea Avenue, Los Angeles)
                     ------------------------------------

     THIS FIRST AMENDMENT TO STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE
-- NET ("Amendment") is made as of this 29th day of February, 2000 by and
between EXPOSITION PROPERTY ASSOCIATES, LLC, a Delaware limited liability
company ("Lessor") and HOMEGROCER.COM, INC., a Delaware corporation ("Lessee"),
with reference to the following:

                                    Recitals
                                    --------

     A. Lessor and Lessee have entered into that certain Standard
Industrial/Commercial Single-Tenant Lease -- Net, dated as of July 23, 1999 (the
"Lease") for that certain leased premises described therein containing
approximately 330,000 leaseable square feet in that certain
commercial/industrial building owned by Lessor, commonly known as 3450 S. La
Brea Avenue, in the City and County of Los Angeles, State of California, and
defined as the Project in the Lease.

     B. Lessee desires to lease all remaining leaseable space of the Project
under the Lease, among other amendments, and Lessor and Lessee desire and
intend, by this Amendment, to amend the Lease to provide such additional
leaseable space to Lessee under the Lease, among other amendments, subject to,
and in accordance with, the terms and conditions set forth below.

     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises and agreements of the parties set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby amend the Lease as follows:

     1. Incorporation of Recitals; Definitions: Recital Paragraphs A and B above
        --------------------------------------
are hereby incorporated below as substantive provisions of this Amendment. Any
capitalized term not defined in this Amendment shall have the meaning ascribed
to such term in the Lease.

     2. Additional Premises: Lease Paragraph 1.2, Lease Addendum Paragraph 50,
        -------------------
and all related provisions of the Lease are hereby amended to include in the
definition of the term "Premises," in addition to that portion of the Project
shown and described in the site plan attached to the Lease at Exhibit "A" (the
"Original Premises"), all remaining leaseable space of both floors of the
Project (the "Additional Premises"), as shown on the revised site plan attached
to this Amendment at Exhibit "A" and incorporated herein by this reference. The
Original Premises and Additional Premises shall be referred to collectively as
the Premises, and all references in the Lease, including this Amendment, to the
Premises shall mean and refer to the Original Premises under the Lease and the
Additional Premises under this Amendment,
<PAGE>

collectively. The site plan attached at Exhibit "A" to this Amendment shall
supersede and replace in its entirely the site plan attached at Exhibit "A" to
the Lease. All references in Lease Addendum Paragraph 50 and all other
provisions of the Lease to the 330,000 leaseable square footage of the Premises
are hereby amended to refer to 384,037 leaseable square feet. All rights,
duties, and obligations of the parties, respectively, under the Lease relating
to the Premises shall apply equally, from and after the date of this Amendment,
to the Additional Premises as part of the Premises.

     3. Base Rent: Lease Addendum Paragraph 54 is hereby deleted in its entirety
        ---------
and the following new Lease Addendum Paragraph 54 is substituted in lieu
thereof:

          54. Base Rent and Adjustment. [continued from Paragraph 1.5] Lessee
          shall pay the following base rent (the "Base Rent") for the Premises
          during the periods provided below:

          (1)  From the Rent Commencement Date through the thirty-sixth (36)
               month, inclusive, of the Lease Term --, $2,195,355.36 per year,
               payable in monthly installments of $182,946.28;

          (2)  During the thirty-seventh (37th) month through the seventy-second
               (72nd) month, inclusive, of the Lease Term -- $2,379,693.12 per
               year, payable in monthly installments of $198,307.76;

          (3)  During the seventy-third (73rd) month through the one hundred
               twentieth (120th) month, inclusive, of the Lease Term --
               $2,564,030.88 per year, payable in monthly installments of
               $213,669.24;

          (4)  During the one hundred twenty-first (121th) month through the one
               hundred fifty-sixth (156th) month, inclusive, of the Lease Term -
               - $2,794,453.08 per year, payable in monthly installments of
               $232,871.09;

          (5)  During the one hundred fifty-seventh (157th) month through the
               Expiration Date, inclusive, of the Lease Term -- $3,024,875.28
               per year, payable in monthly installments of $252,072.94; and

          (6)  If Lessee shall exercise one or more of the Options, the Fair
               Market Rental, as provided in Addendum Paragraph 51 above.

Lease Section 1.6 shall be amended to delete the reference to $158,400 as the
first monthly installment of Base Rent paid to Lessor upon execution of the
Lease and to substitute therefor a reference to $182,946.28. Concurrently with
the mutual execution and delivery to Lessee of a fully executed original of this
Amendment, Lessee shall pay to Lessor the difference between the monthly
installment amounts specified in the preceding sentence.

                                       2
<PAGE>

     4.    No Change in Letter of Credit: Notwithstanding any provision of this
           -----------------------------
Amendment, the stated amount of the Letter of Credit shall remain One Million
Four Hundred Fifty Thousand Dollars ($1,450,000), as provided in Lease Addendum
Paragraph 55 and shall neither be increased nor decreased by this Amendment.

     5.    Term: Lease Addendum Paragraphs 52(a) and (b) and Exhibit "B" are
           ----
hereby deleted in their entirety (but not Lease Addendum Paragraphs 52[c] and
[d] which will remain in full force and effect and shall be renumbered as
Paragraphs 52[g] and [h]), and the following new Lease Addendum Paragraphs 52(a)
through (f) are substituted in lieu thereof:

          52. Term; Commencement; Expiration; and Extension of Term. [continued
     from Paragraph 1.3] The Commencement Date shall mean and refer to the date
     of this Lease.

     (a) Rent Commencement Date: The Rent Commencement Date shall mean and refer
         ----------------------
     to the earlier to occur of:

          (i) the date on which Lessee first opens for business to the general
          public in the Premises; or

          (ii) sixty (60) days after the Delivery Date (as defined below);

     subject to termination for Lessor's failure to substantially complete as
     provided in Lease Addendum Section 52(f) below. The Expiration Date shall
     mean and refer to the final business day of the one hundred eightieth
     (180th) complete calendar month after the Rent Commencement Date, subject
     to earlier termination in accordance with the provisions of this Lease and
     subject further to Lessee's options to extend such Original Term as
     provided below.

     (b) Landlord's Work: Lessor shall use commercially reasonable efforts to
         ---------------
     diligently prosecute and substantially complete in a timely manner, at
     Lessor's sole cost and expense, the improvements of the Project described
     in Exhibit "B-1" attached hereto (collectively, "Landlord Work"). In
     addition, Lessor agrees to pay to Lessee the amounts specified in the
     attached Exhibit "B-2" in lieu of Lessor's construction or installation of
     the identified improvements, (the "In-Lieu Payments"), within thirty (30)
     days after written request of Lessee therefor made from and after Lessor's
     completion of Landlord Work, together with reasonably detailed back-up
     documentation satisfactory to Lessor of such amounts actually incurred by
     Lessee. The improvements identified on the attached Exhibit "B-2" in
     connection with the In-Lieu Payments shall be completed by Lessee, at
     Lessee's sole cost and expense including any amounts in excess of the In-
     Lieu Payments, as part of the Tenant Improvements Work (as defined below).
     The In-Lieu Payments to be paid by Lessor shall be in addition to the
     Allowance (as defined and described in the Tenant Improvements Work Letter
     attached hereto at Exhibit "C" and incorporated by this reference). Lessor
     shall have no

                                       3
<PAGE>

     obligation whatsoever with respect to the Tenant Improvements Work,
     including without limitation, any improvements with respect to which the
     In-Lieu Payments are made as provided in Exhibit "B-2." Lessor shall
     complete the Landlord Work in good and workmanlike manner, in lien-free
     condition, and free of defects in materials and workmanship. All references
     in the Lease to Base Building Work to be completed by Lessor shall be
     amended to refer to Landlord Work, and Landlord Work shall be strictly
     limited to the improvements described in the attached Exhibit "B-1."

     (c) Tenant Improvements Work: Except for Landlord's obligation for the
         ------------------------
     Landlord Work and the In-Lieu Payments, all improvements to the Project of
     any kind or nature whatsoever desired by Lessee or required by governmental
     authorities specifically in connection with Lessee's permitted use of the
     Premises, including without limitation all improvements listed on Exhibit
     "C" attached to this Amendment and incorporated by this reference, shall be
     the sole responsibility of Lessee to be completed, or caused to be
     completed, at Lessee's solo cost and expense, subject to Lessor's payment
     of the Allowance, and shall be collectively referred to herein as the
     "Tenant Improvements Work." Lessee shall use its commercially reasonable
     efforts to diligently prosecute and substantially complete the Tenant
     Improvements Work in a timely manner. In the event any Tenant Improvements
     Work (whether to the Original Premises or the Additional Premises or either
     or both) shall not be substantially completed by the Rent Commencement
     Date, such lack of substantial completion shall have no effect whatsoever
     upon the occurrence of the Rent Commencement Date. Lessee shall cause the
     Tenant Improvements Work to be constructed in good and workmanlike manner,
     in lien-free condition, and free of defects in materials and workmanship.

     (d)  Delivery Date: Upon Lessor's substantial completion of the Landlord's
          -------------
     Work to the Original Premises, either Lessor or Lessor's architect shall
     provide written certification of same to Lessee, and the date of delivery
     to Lessee of such written certification shall be referred to herein as the
     "Delivery Date." If Lessor's substantial completion of the Landlord Work to
     the Original Premises shall be delayed in any material respect by any
     action or inaction attributable to Lessee, then the Delivery Date shall be
     deemed to be such earlier date as Lessor's architect shall reasonably
     determine Lessor's substantial completion of the Landlord Work to the
     Original Premises would have occurred, but for such delay of Lessee. Lessor
     and Lessee acknowledge and agree that Lessee's requests for material
     changes in the Landlord Work (formerly known as the Base Building Work) and
     the Tenant Improvements Work; suspension or delay in Lessor's prosecution
     of the Landlord Work; suspension or delay in Lessor's ordering of necessary
     equipment for the Landlord Work and the Tenant Improvements Work; and
     expansion into the Additional Premises, have caused delay in Lessor's
     completion of the improvements to the Project to be completed by Lessor.
     due to no fault or neglect of Lessor, and such delay would have resulted in
     delay in the Rent Commencement Date under the Lease, as originally
     provided. Accordingly, Lessor and Lessee acknowledge and agree that it is a
     material part of the consideration to Lessor under this Amendment, without
     which Lessor would not entered into this Amendment,

                                       4
<PAGE>

     that the Delivery Date shall occur in strict accordance with the provisions
     of this Paragraph 52, notwithstanding that any Landlord Work to the
     Additional Premises or any Tenant Improvements Work shall not then be
     completed. Moreover, Lessor and Lessee further acknowledge and agree that
     it is a further material part of the consideration to Lessor under this
     Amendment, without which Lessor would not entered into this Amendment and
     would have instead satisfied its obligations and exercised its rights and
     remedies as originally provided in the Lease to the detriment of Lessee,
     that the Rent Commencement Date shall also occur in strict accordance with
     the provisions of this Paragraph 52, notwithstanding that, among other
     things, the Tenant Improvements Work may not then be complete, the Premises
     may not then be occupied by Lessee, or the Premises may not then be open
     for business to the general public.

     (e)  Mutual Cooperation and Coordination: Each party agrees to cooperate
          -----------------------------------
     with the other with respect to the exchange of status and scheduling
     information regarding the progress of the Landlord Work and Tenant
     Improvements Work. Lessor agrees to provide prior notice to Lessee of the
     date estimated by Lessor for the Delivery Date, which notice will be
     provided, if feasible, thirty (30) days prior to the Delivery Date
     estimated therein. Lessee agrees to provide prior notice to Lessor of the
     date estimated by Lessee for the completion of the Tenant Improvements
     Work, which notice will be provided, if feasible, thirty (30) days prior to
     the completion date estimated therein.

     (f)  Failure to Substantially Complete Landlord Work: In the event the
          -----------------------------------------------
     Landlord Work to the Original Premises has not been substantially completed
     by Lessor and the Delivery Date has not occurred as required hereunder, due
     to fault or neglect of Lessor, by May 1, 2001, subject to Force Majeure,
     Lessee shall be entitled to a penalty to be applied against Lessee's first
     Base Rent coming due under this Lease equal to One Thousand Dollars
     ($1,000) for each 24-hour period after May 1, 2001 by which the substantial
     completion of the Landlord Work to the Original Premises is so delayed due
     to fault or neglect of Lessor. If such substantial completion does not
     occur by November 1, 2001 in any event and without extension for Force
     Majeure, then either Lessor or Lessee, each acting alone, shall be entitled
     to terminate this Lease upon thirty (30) days prior written notice to the
     other, provided that, if Lessee shall deliver such termination notice as
     required hereunder and Lessor shall substantially complete the Landlord
     Work to the Original Premises and the Delivery Date shall occur within such
     30-day period, Lessee's notice shall be null and void, and this Lease shall
     continue in full force and effect.

     6.  Exteriorization Work: Lease Paragraph 7.4(c) is hereby amended to add
         --------------------
the following additional text at the end of the existing provision:

          Notwithstanding the foregoing, Lessor and Lessee acknowledge and agree
          that among Lessee's requests for material changes in the Landlord Work
          and the Tenant Improvements Work referred to in Paragraph 5 above of
          this Amendment, Lessee may propose removal of a portion of the
          building

                                       5
<PAGE>

          improvements of the Project to construct an exterior loading area or
          other exterior improvements for Lessee's use (collectively, the
          "Exteriorization Work"). Lessor and Lessee further acknowledge and
          agree that it is a material part of the consideration to Lessor for
          this Amendment, without which Lessor would not have entered into this
          Amendment, that Lessee pay to Lessor, concurrently with Lessee's
          surrender of the Premises and in all events not later than the
          Expiration Date or earlier termination date, the reasonable cost and
          expense, as determined by Lessor, of restoration of the portion of the
          building improvements removed by Lessee in connection with the
          Exteriorization Work, including removal of all loading dock and
          exterior improvements constructed by Lessee and construction of all
          base, core, shell, and other reasonable building improvements in the
          Restoration Area to restore to leaseable condition that portion of the
          building improvements of the Project removed by Lessee in connection
          with the Exteriorization Work. If Lessee shall fail to satisfy fully
          its payment obligation set forth above by the Expiration Date,
          provided Lessee shall have not less than thirty (30) days prior
          written notice of the amount due to Lessor hereunder, Lessor shall be
          entitled, at Lessor's election, to use all or any remaining portion of
          Lessee's security deposit, including without limitation the Letter of
          Credit, to satisfy such payment obligation of Lessee.

     7.  Tenant Improvements Work; Tenant Improvements Work Letter: Nothing in
         ---------------------------------------------------------
this Amendment shall relieve Lessee of any obligation under the Lease, including
without limitation, the Lease Exhibit "C" Tenant Improvements Work Letter,
regarding the Tenant Improvements Work. Furthermore, nothing in this Amendment
shall limit or restrict any right of Lessor granted under the Lease with respect
to the Tenant Improvements Work, including without limitation Lessor's right to
approve all Plans therefor. All material changes in any Plans previously
approved by Lessor in connection with the Tenant Improvements Work shall be
approved by Lessor pursuant to the Lease Exhibit "C" Tenant Improvements Work
Letter. All modifications to the Tenant Improvements Work and/or Landlord Work
requested by Lessee not previously approved by Lessor shall be subject to
Lessor's approval and other rights provided in the Lease Exhibit "C" Tenant
Improvements Work Letter and other relevant provisions of the Lease. Once
approved by Lessor, all modifications or additional work requested by Lessee
shall become part of the Tenant Improvements Work for which Lessee shall be
liable, including without limitation all cost and expense thereof. Approval by
Lessor of any Tenant Improvements Work shall in no event increase the amounts of
the Allowance or the In-Lieu Payments, as provided herein.

     8.  No Change in Tenant Reimbursement Allowance: The maximum amount of the
         -------------------------------------------
Allowance shall remain $1,300,000, as provided in Exhibit "C" Paragraph 4 and
shall neither be increased nor decreased by this Amendment. Notwithstanding the
foregoing, however, the In-Lieu Payments to be paid by Lessor shall be in
addition to the Allowance.

     9.  Effective Date: This Amendment and all provisions hereof shall be
         --------------
effective upon mutual execution by Lessor and Lessee which shall be the date
specified in the preamble

                                       6
<PAGE>

paragraph above.

     10.  General Provisions: The Lease and all terms and provisions thereof are
          ------------------
and shall remain in full force and effect, except as amended in this Amendment
and are hereby ratified and confirmed. The persons executing this Amendment on
behalf of each party hereby covenant and warrant that they have been duly
authorized and empowered by their respective principals to execute this
Amendment and that this Amendment is, and henceforth shall be, the binding
obligation of the party on whose behalf such person acted. This Amendment may be
executed in any number of counterparts, each of which shall be deemed an
original, and all of which, when taken together, shall constitute one and the
same Amendment.

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and date first set forth above.

"Lessor"                                 "Lessee"
EXPOSITION PROPERTY                      HOMEGROCER. COM, INC.,
ASSOCIATES, LLC,                         a Delaware corporation
a Delaware limited liability company

By:  M&B Capital, LLC,
     a Delaware limited liability         By /s/ Terry Drayton
     company,                                -------------------------------
     Its Managing Member                  Name: Terry Drayton
                                                ----------------------------
                                          Title: President
                                                 ---------------------------

By:__________________________________
   Bryan Ezralow, Trustee                  By /s/ C.J Karaffa
   of the Bryan Ezralow 1994                  ------------------------------
   Trust, Its Member                          Name: C.J Karaffa
                                                    ------------------------
                                              Title: Sr VP Ops
                                                     -----------------------

                                       7
<PAGE>

                                  EXHIBIT "A"

                         Revised Site Plan of Premises
                         -----------------------------

                               (See attachment)

<PAGE>

                                  EXHIBIT "A"

                                  [Site Plan]

                CITY OF LOS ANGELES DEPT. OF PARKS & RECREATION

<PAGE>

                                 EXHIBIT "B-1"

                             List of Landlord Work
                             ---------------------
                           to be Completed by Lessor
                           -------------------------

     1. Landlord shall undertake structural repairs to walls and roof deck to
the satisfaction of the City of Los Angeles Department of Building and Safety,
except for that certain new semi-truck and trailer loading area shown on the
attached Exhibit "B-1-A."

     2. Landlord shall remove all temporary chain link fencing securing the
building and the site as of the date of this Amendment.

     3. Landlord shall restore the existing HVAC system serving the lower deck
of the building to working order, including chiller, cooling tower and air
handling units to fully operating condition on temporary electrical service
lines. Permanent electrical service lines to be part of Tenant's Work.

     4. Landlord shall demolish and remove all drywall partitions and toilet
facilities in the building pursuant to Urban Concepts Division 91 permitted
plan, dated December 1, 1999.

     5. Landlord shall remove and replace the second level roof deck and roof
membrane, including portions demolished subsequent to the earthquake. The
replacement roof decking will have a load rating not to exceed 20 psf live load.

     6. Landlord shall warrant that the second level of the building will be
suitable for (non-semi-tractor-trailer) parking delivery trucks. The second
level, however, is a flat surface without drainage. Scuppers are located around
the perimeter of the second level floor for emergency drainage purposes only.

     7. Tenant will have the right to park up to one hundred twenty (120)
employee passenger vehicles on the upper level of the building along with up to
ninety (90) of Tenant's delivery trucks (but excluding semi-tractor-trailers).

     8. Landlord shall provide protected areas on the ground outside the
building as locations for satellite receivers and antennas. Tenant shall have
the option to locate such receivers and antennas within the building. Any
structural reinforcement required to mount receivers and/or antennas on the roof
of the building will be the responsibility of Tenant and such construction shall
be subject to Landlord's approval under the Lease. Landlord discloses that
Tenant's election to locate its satellite receivers and antennas on the ground
outside the building may result in a loss of parking spaces for which Landlord
will not be responsible.

<PAGE>

                                EXHIBIT "B-1-A"

                               Plot of New Semi-
                               -----------------
                        Truck and Trailer Loading Area
                        ------------------------------

                               (See attachment.)

<PAGE>

                                EXHIBIT "B-1-A"

                               Plot of New Semi-
                               -----------------
                        Truck and Trailer Loading Area
                        ------------------------------

<PAGE>

                                 EXHIBIT "B-2"

                List of In-Lieu Payments to be Made by Landlord
                -----------------------------------------------

                         (See attachment; also below.)

     In addition to the total of $1,148,927 in In-Lieu Payments shown on the
attached Exhibit B-2, Landlord's In-Lieu Payments to Tenant shall include an
additional Four Percent (4%) of such amount for a general contractor's fee which
equals $45,957.08, for a total of all In-Lieu Payments of $1,194,884.08.

<PAGE>

                           [LETTERHEAD OF BENCHMARK]

     East Building Gross Square Footage =     336,382 GSF
     West Building Gross Square Footage =      50,230 GSF
                                              -----------
     Total Building Gross Square Footage =    386.612 GSF
     Building Cost Per Square Foot =                  /SF

BUDGETARY ESTIMATE - HOMEGROCER ALLOWANCES

<TABLE>
<CAPTION>
ACCT                                        ITEM                         QTY    UNIT  UNIT PRICE  ITEM TOTALS    ACCT SUB
                                                                                                                   TOTAL
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>     <C>   <C>         <C>          <C>
1002      CLEAN-UP
----------------------------------------------------------------------------------------------------------------------------
             General Clean-up                                                1   LS    10,000.00       10,000
----------------------------------------------------------------------------------------------------------------------------
                                                                                                                      10,000
----------------------------------------------------------------------------------------------------------------------------
2100      DEMOLITION
----------------------------------------------------------------------------------------------------------------------------
             Demolition of concrete stair along La Brea Ave.                 1   LS     6,000.00        6,000
----------------------------------------------------------------------------------------------------------------------------
             Remove striping @ 2nd floor                                     1   LS     9,000.00        9,000
----------------------------------------------------------------------------------------------------------------------------
                                                                                                                      15,000
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
2500      ASHALTIC PAVING AND SITE CONCRETE
----------------------------------------------------------------------------------------------------------------------------
             Misc. curb repair damaged by General Contractor               100   LF        13.00        1,300
----------------------------------------------------------------------------------------------------------------------------
             Misc. curb replacement damaged by General Contractor          100   LF        13.00        1,300
----------------------------------------------------------------------------------------------------------------------------
             Asphaltic paving repairs @ north entrance (dam'd by SE)       800   SF         3.75        3,000
----------------------------------------------------------------------------------------------------------------------------
             Slurry coat existing site paving                           68,009   SF         0.07        4,761
----------------------------------------------------------------------------------------------------------------------------
                                                                                                                      10,361
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
2580      STRIPING
----------------------------------------------------------------------------------------------------------------------------
             Paint curbs for fire lanes (158 LF)                           158   LF         0.50           79
----------------------------------------------------------------------------------------------------------------------------
             ADA Handicap stalls @ north & south of site (7 total)           7   EA        30.00          210
----------------------------------------------------------------------------------------------------------------------------
             Single line stalls @ north & south of site (162 total)        162   EA         5.00          810
----------------------------------------------------------------------------------------------------------------------------
                                                                                                                       1,099
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
2830      FENCES AND GATES
----------------------------------------------------------------------------------------------------------------------------
             New wrought iron fence (Picket type w/posts)                  473   LF        22.00       10,406
----------------------------------------------------------------------------------------------------------------------------
                                                                                                                      10,406
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
2900      LANDSCAPING & IRRIGATION
----------------------------------------------------------------------------------------------------------------------------
             24" box, 10' - 12' high, deep root eucalyptis trees            20   EA       250.00        5,000
----------------------------------------------------------------------------------------------------------------------------
             New site irrigation and plantings @ west and north
              elevation                                                  3,800   SF         4.00       15,200
----------------------------------------------------------------------------------------------------------------------------
                                                                                                                      20,200
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
3210      REINFORCING STEEL
----------------------------------------------------------------------------------------------------------------------------
             Site Rebar                                                      1   LS     3,500.00        3,500
----------------------------------------------------------------------------------------------------------------------------
             Rebar @ north entrance stair repair (damaged by SE) (147 LF)  122  LB.         0.50           61
----------------------------------------------------------------------------------------------------------------------------
                                                                                                                       3,561
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
3300      CAST-IN-PLACE CONCRETE
----------------------------------------------------------------------------------------------------------------------------
             2 stairs along La Brea Ave.                                     1   LS    15,000.00       15,000
----------------------------------------------------------------------------------------------------------------------------
             Chip & level raised concrete slab areas
              along 19-line in east building                               960   SF         1.50        1,440
----------------------------------------------------------------------------------------------------------------------------
             Leveling slab (slurry) at dips in concrete along
              20-line in west building                                     960   SF         1.50        1,440
----------------------------------------------------------------------------------------------------------------------------
             T-10 landing replacement                                        1   LS       500.00          500
----------------------------------------------------------------------------------------------------------------------------
             Reset handrail @ metal stair removed by GC @ T-line: 8-10       1   LS       500.00          500
----------------------------------------------------------------------------------------------------------------------------
             Concrete @ north entrance stair repair (damaged by SE)
              (147 LF)                                                       2   CY       500.00        1,000
----------------------------------------------------------------------------------------------------------------------------
             Reset metal stair removed by GC @ T-line:8-10                   1   LS     3,000.00        3,000
----------------------------------------------------------------------------------------------------------------------------
                                                                                                                      22,880
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
3355      HYDRO BLASTING
----------------------------------------------------------------------------------------------------------------------------
             Powerwashing north ramp                                         1   LS     1,000.00        1,000
----------------------------------------------------------------------------------------------------------------------------
                                                                                                                       1,000
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
4200      CONCRETE MASONRY UNITS
----------------------------------------------------------------------------------------------------------------------------
             CMU @ T-10 landing replacement (8" block, cells filled)        25   SF        11.00          275
----------------------------------------------------------------------------------------------------------------------------
                                                                                                                         275
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
5120      STRUCTURAL STEEL
----------------------------------------------------------------------------------------------------------------------------
             Additional steel at modernized elevator                         1    LS    6,500.00        6,500
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<S>                                                           <C>      <C>      <C>        <C>       <C>
                                                                                                       6,500
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
5500      MISCELLANEOUS METALS
------------------------------------------------------------------------------------------------------------
             Reset bollards at HVAC ducts, enclosures, etc.        90    EA        135.00    12,150
------------------------------------------------------------------------------------------------------------
                                                                                                      12,150
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
5510      METAL STAIRS
------------------------------------------------------------------------------------------------------------
             New stair #5 from 2nd floor to roof per 6/A4.1        30   RISER      360.00    10,800
------------------------------------------------------------------------------------------------------------
                                                                                                      10,800
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
5520      HANDRAILS & RAILINGS
------------------------------------------------------------------------------------------------------------
             Resent handrail @ T-10 landing replacement             1    LS        500.00       500
------------------------------------------------------------------------------------------------------------
             New wall mounted handrail @ int. stair 24-line: F-G   36    LF         25.00       900
------------------------------------------------------------------------------------------------------------
             Add S.S. cable to existing Stair #5 multi-line
             handrails                                             35    LF         70.00     2,450
------------------------------------------------------------------------------------------------------------
             New multi-line handrail @ stair #1                   144    LF         31.50     4,536
------------------------------------------------------------------------------------------------------------
             New multi-line handrail @ stair #2                   144    LF         31.50     4,536
------------------------------------------------------------------------------------------------------------
             New multi-line handrail @ stair #4                   144    LF         31.50     4,536
------------------------------------------------------------------------------------------------------------
             New multi-line handrail @ stair #5                   144    LF         31.50     4,536
------------------------------------------------------------------------------------------------------------
             New multi-line handrail @ stair #6                   144    LF         31.50     4,536
------------------------------------------------------------------------------------------------------------
                                                                                                      26,530
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
6100      ROUGH CARPENTRY
------------------------------------------------------------------------------------------------------------
             Miscellaneous (Backing for handrails in GWB)           1    LS      2,000.00     2,000
------------------------------------------------------------------------------------------------------------
                                                                                                       2,000
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
7200      INSULATION (per 1/A4.8 and floor plans)
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ int. stair 24-line:F-G (2X6
             @ 20'h) @ 1st floor                                1,360    SF          0.40       544
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ stair #1 enclosure (2X6 @ 20'h)
             @ 1st floor                                          695    SF          0.40       278
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ stair #2 enclosure (2X6 @ 20'h)
             @ 1st floor                                          707    SF          0.40       283
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ stair #4 enclosure (2X6 @ 20'h)
             @ 1st floor                                          575    SF          0.40       230
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ stair #5 enclosure (2X6 @ 20'h)
             @ 1st floor                                          610    SF          0.40       244
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ stair #6 enclosure (2X6 @ 20'h)
             @ 1st floor                                          707    SF          0.40       283
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ main switch room (2X6 @ 20'h)
             @ 1st floor                                          760    SF          0.40       304
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ electrical telephone room (2X6
             @ 20'h) @ 1st floor                                  320    SF          0.40       128
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ HVAC louver intakes
             (2X6 @ 20'h) @ 1st floor                           1,500    SF          0.40       600
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ stair #5 enclosure
             (2X6 @ 20'h) @ 2nd floor                             610    SF          0.40       244
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ int. stair 24-line:F-G
             (2X6 @ 10'h) @ 2nd floor                             680    SF          0.36       245
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ stair #1 enclosure
             (2X6 @ 10'h) @ 2nd floor                             348    SF          0.36       125
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ stair #2 enclosure
             (2X6 @ 10'h) @ 2nd floor                             353    SF          0.36       127
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ stair #4 enclosure
             (2X6 @ 10'h) @ 2nd floor                             288    SF          0.36       104
------------------------------------------------------------------------------------------------------------
             R-13 Batt 6" wall @ stair #6 enclosure
             (2X6 @ 10'h) @ 2nd floor                             353    SF          0.36       127
------------------------------------------------------------------------------------------------------------
             R-13 Batt ceiling @ int. stair 24-line: F-G
             (2X6 @ 10'h) @ 2nd floor                             240    SF          0.36        86
------------------------------------------------------------------------------------------------------------
             R-13 Batt ceiling @ stair #1 enclosure
             (2X6 @ 10'h) @ 2nd floor                             255    SF          0.36        92
------------------------------------------------------------------------------------------------------------
             R-13 Batt ceiling @ stair #2 enclosure
             (2X6 @ 10'h) @ 2nd floor                             262    SF          0.36        94
------------------------------------------------------------------------------------------------------------
             R-13 Batt ceiling @ stair #4 enclosure
             (2X6 @ 10'h) @ 2nd floor                             188    SF          0.36        68
------------------------------------------------------------------------------------------------------------
             R-13 Batt ceiling @ stair #6 enclosure
             (2X6 @ 10'h) @ 2nd floor                             262    SF          0.36        94
------------------------------------------------------------------------------------------------------------
                                                                                                       4,300
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
8100      HOLLOW METAL DOORS AND FRAMES
------------------------------------------------------------------------------------------------------------
             New HM door/frames @ interior stairwell enclosures     6    EA        300.00     1,800
------------------------------------------------------------------------------------------------------------
             New 18 HM doors/ frames @ 1st floor excl. A-line      18    EA        300.00     5,400
------------------------------------------------------------------------------------------------------------
                                                                                                       7,200
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
8330      COILING DOORS
------------------------------------------------------------------------------------------------------------
             Replace exterior coiling doors over storefront
             entrances @ T-line                                     5    EA      2,000.00    10,000
------------------------------------------------------------------------------------------------------------
             New coiling doors to fit existing 8' x 7'
             openings (FC22 Ga.)                                    9    EA      2,000.00    18,000
------------------------------------------------------------------------------------------------------------
                                                                                                      28,000
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
8410      ALUMINUM STOREFRONTS
------------------------------------------------------------------------------------------------------------
             Refurb/replace custom double storefront doors &
             hardware @ T-line                                      5    EA      1,132.00     5,660
------------------------------------------------------------------------------------------------------------
             Replace glazing, mullions, inserts @ elevator tower    1    LS     10,000.00    10,000
------------------------------------------------------------------------------------------------------------
                                                                                                      15,660
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
8710      HARDWARE
------------------------------------------------------------------------------------------------------------
             New hardware for interior doors @ stairwell
             enclosures                                             6    PKG       200.00     1,200
------------------------------------------------------------------------------------------------------------
             New hardware for exterior HM doors @ 1st floor excl.
             A-line                                                18    PKG       300.00     5,400
------------------------------------------------------------------------------------------------------------
                                                                                                       6,600
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
9200      METAL STUDS @ DRYWALL (per 1/A4.8 and floor plans)
            Studs/Gyp @ int. stair 24-line: F-G (1 hr; 1+1 5/8"
            type-X, mud / tape) @ 1st floor                     1,360    SF          5.75     7,820
------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<S>                                                                <C>     <C>       <C>        <C>     <C>
        Studs/Gyp @ stair #1 enclosure (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 1st floor                             695    SF          5.75     3,996
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ stair #2 enclosure (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 1st floor                             695    SF          5.75     3,996
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ stair #4 enclosure (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 1st floor                             575    SF          5.75     3,306
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ stair #5 enclosure (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 1st floor                             610    SF          5.75     3,508
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ stair #6 enclosure (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 1st floor                             707    SF          5.75     4,065
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ int. stair 24-line:F-G (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 2nd floor                             760    SF          5.75     4,370
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ stair #1 enclosure (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 2nd floor                             320    SF          5.75     1,840
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ stair #2 enclosure (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 2nd floor                           1,500    SF          5.75     8,625
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ stair #4 enclosure (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 2nd floor                             610    SF          5.75     3,508
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ stair #5 enclosure (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 2nd floor                             680    SF          4.75     3,230
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ stair #6 enclosure (1 hr; 1+1 5/8"
        type-X, mud / tape) @ 2nd floor                             348    SF          4.75     1,653
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ main switch room (1 hr; 1+1 5/8" type-X,
        mud / tape)                                                 348    SF          4.75     1,653
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ electrical telephone room (1 hr; 1+1 5/8"
        type-X, mud / tape)                                         288    SF          4.75     1,368
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ HVAC louver intakes (1 hr; 1+1 5/8"
        type-X, mud / tape)                                         353    SF          4.75     1,677
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp @ main switch room (1 hr; 1+1 5/8" type-X,
        mud / tape)
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp-ceiling @ int. stair 24-line:F-G (1 hr; 1+1
        5/8" type-X, mud / tape) @ 2nd floor                        240    SF          4.75     1,140
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp-ceiling @ stair #1 enclosure (1 hr; 1+1
        5/8" type-X, mud / tape) @ 2nd floor                        257    SF          4.75     1,221
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp-ceiling @ stair #2 enclosure (1 hr; 1+1
        5/8" type-X, mud / tape) @ 2nd floor                        262    SF          4.75     1,245
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp-ceiling @ stair #4 enclosure (1 hr; 1+1
        5/8" type-X, mud / tape) @ 2nd floor                        188    SF          4.75       893
--------------------------------------------------------------------------------------------------------------
        Studs/Gyp-ceiling @ stair #6 enclosure (1 hr; 1+1
        5/8" type-X, mud / tape) @ 2nd floor                        262    SF          4.75     1,245
--------------------------------------------------------------------------------------------------------------
                                                                                                        60,358
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
9860 GRAFITTI RESISTANT COATING
--------------------------------------------------------------------------------------------------------------
        All around building to 10'h per City of LA code          17,760    SF          0.65    11,544
--------------------------------------------------------------------------------------------------------------
                                                                                                        11,544
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
9900 PAINTING
--------------------------------------------------------------------------------------------------------------
        Building exterior: 1 coat epoxy primer, 2 coats
        acrylic masonry paint, up to 2 colors                         1    LS     86,000.00    86,000
--------------------------------------------------------------------------------------------------------------
        Mask, clean, repaint HM doors/frames @ interior
        stairwell enclosures                                          6    EA        100.00       600
--------------------------------------------------------------------------------------------------------------
        Mask, clean, repaint custom storefront @ T-line               5    EA        200.00     1,000
--------------------------------------------------------------------------------------------------------------
        Repaint coiling doors to remain (8' x 7')                     6    EA        300.00     1,800
--------------------------------------------------------------------------------------------------------------
        Painting railings at north ramp/stair railings                1    LS      1,500.00     1,500
--------------------------------------------------------------------------------------------------------------
        Repaint NW exit stairs handrails                              1    LS        700.00       700
--------------------------------------------------------------------------------------------------------------
        Repaint NE exit stairs handrails                              1    LS        700.00       700
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ int. stair 24-line:F-G (2x @ 20'h) @
        2nd floor                                                 2,720    SF          0.50     1,360
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ stair #1 enclosure (2x6 @ 20'h) @ 1st
        floor                                                     1,390    SF          0.50       695
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ stair #2 enclosure (2x6 @ 20'h) @ 1st
        floor                                                     1,390    SF          0.50       695
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ stair #4 enclosure (2x6 @ 20'h) @ 1st
        floor                                                     3,550    SF          0.50     1,775
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ stair #5 enclosure (2x6 @ 20'h) @ 1st
        floor                                                     1,220    SF          0.50       610
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ stair #6 enclosure (2x6 @ 20'h) @ 1st
        floor                                                     1,414    SF          0.50       707
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ main switch room (1 hr; 1+1 5/8"
        type-X, mud / tape)                                       1,520    SF          0.50       760
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ electrical telephone room (2x6 @ 20'h)      640    SF          0.50       320
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ HVAC louver intakes (2x6 @ 20'h)          1,500    SF          0.50       750
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ stair #5 enclosure (2x6 @ 20'h) @ 2nd
        floor                                                     1,220    SF          0.50       610
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ int. stair 24-line:F-G (2x6 @ 10'h) @
        2nd floor                                                 1,360    SF          0.50       680
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ stair #1 enclosure (2x6 @ 10'h) @ 2nd
        floor                                                       696    SF          0.50       348
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ stair #2 enclosure (2x6 @ 10'h) @ 2nd
        floor                                                       696    SF          0.50       348
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ stair #4 enclosure (2x6 @ 10'h) @ 2nd
        floor                                                       576    SF          0.50       288
--------------------------------------------------------------------------------------------------------------
        Paint drywall @ stair #6 enclosure (2x6 @ 10'h) @ 2nd
        floor                                                       706    SF          0.50       353
--------------------------------------------------------------------------------------------------------------
        Paint drywall-ceiling @ int. stair 24-line:F-G (2x6)
        @ 2nd floor                                                 240    SF          0.50       120
--------------------------------------------------------------------------------------------------------------
        Paint drywall-ceiling @ stair #1 enclosure (2x6) @
        2nd floor                                                   257    SF          0.50       129
--------------------------------------------------------------------------------------------------------------
        Paint drywall-ceiling @ stair #2 enclosure (2x6) @
        2nd floor                                                   262    SF          0.50       131
--------------------------------------------------------------------------------------------------------------
        Paint drywall-ceiling @ stair #4 enclosure (2x6) @
        2nd floor                                                   188    SF          0.50        94
--------------------------------------------------------------------------------------------------------------
        Paint drywall-ceiling @ stair #6 enclosure (2x6) @
        2nd floor                                                   262    SF          0.50       131
--------------------------------------------------------------------------------------------------------------
                                                                                                       103,204
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
10500 FIRE EXTINGUISHERS AND CABINET
--------------------------------------------------------------------------------------------------------------
        Fire extinguishers - 5 lb.                                   20    EA         70.00     1,400
--------------------------------------------------------------------------------------------------------------
        Flush mounted fire extinguisher cabinets                     20    EA         45.00       900
--------------------------------------------------------------------------------------------------------------
                                                                                                         2,300
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
14200 ELEVATOR
--------------------------------------------------------------------------------------------------------------
        2 stop, 19'-6" travel, elevator w/ standard finishes          1    EA     48,700.00    48,700
--------------------------------------------------------------------------------------------------------------
                                                                                                        48,700
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
15510 FIRE SPRINKLER
--------------------------------------------------------------------------------------------------------------
        Shell & Core:
--------------------------------------------------------------------------------------------------------------
        New automatic fire sprinkler system @ 2nd floor
        complete, and 1st floor stairwells                            1    LS       176,000   176,000
--------------------------------------------------------------------------------------------------------------
        New separate floor control valves @ each fire riser               INCL
--------------------------------------------------------------------------------------------------------------
        Hydro-test existing piping                                        INCL
        Repairs to existing 1st floor automatic fire
        sprinkler system                                              1    LS     60,000.00    60,000
--------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<S>                                                             <C>      <C>      <C>         <C>        <C>
                                                                                                         236,000
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
15600 HVAC
------------------------------------------------------------------------------------------------------------------
        Shell & Core:
------------------------------------------------------------------------------------------------------------------
        Garage ventilation system (figured @ 325 pass.
        vehicle capacity)                                             1    LS     175,000.00    175,000
------------------------------------------------------------------------------------------------------------------
                                                                                                           175,000
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
16000 ELECTRICAL
------------------------------------------------------------------------------------------------------------------
        Shell & Core
------------------------------------------------------------------------------------------------------------------
        Retrofit Existing Switch Gear (Main switch board)             1    LS     297,300.00    297,300
------------------------------------------------------------------------------------------------------------------
        Recondition Existing Lighting @ 1st Floor (50 fc)                 INCL
------------------------------------------------------------------------------------------------------------------
        Recondition Existing Lighting @ 2nd Floor (5-10 fc)               INCL
------------------------------------------------------------------------------------------------------------------
        Recondition Site Lighting (1 fc)                                  INCL
------------------------------------------------------------------------------------------------------------------
        House panels: One High Voltage for future build-out               INCL
------------------------------------------------------------------------------------------------------------------
        House panels: One Low voltage for house lighting and
        site lighting                                                     INCL
------------------------------------------------------------------------------------------------------------------
        Reconnect feeders to elevator controllers (existing
        elevator)                                                         INCL
------------------------------------------------------------------------------------------------------------------
        Interface with HVAC systems                                       INCL
------------------------------------------------------------------------------------------------------------------
        Fire system monitoring                                            INCL
------------------------------------------------------------------------------------------------------------------
        New D-mark telephone into west building                           INCL
------------------------------------------------------------------------------------------------------------------
        Exit lighting with emergency battery back-up lighting             INCL
------------------------------------------------------------------------------------------------------------------
                                                                                                           297,300
------------------------------------------------------------------------------------------------------------------
      TOTAL DIRECT COSTS                                                                      1,148,927  1,148,927
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

                                  EXHIBIT "C"

                     List of Improvements Included Within
                     ------------------------------------
                         the Tenant Improvements Work
                         ----------------------------
                           to be Completed by Lessee
                           -------------------------

  1. All work shown and described in Exhibit "B-2" (subject to Landlord's
payment of the In-Lieu Payments).

  2. All work indicated in Exhibit "B-1" as a part of Tenant's Work.

  3. Any and all work desired by Tenant or required by the applicable
governmental authorities and not included within Landlord's Work as shown on
Exhibit "B-1."<PAGE>

                                                                    EXHIBIT 10.3

                                 DEED OF LEASE
                                 -------------

     THIS DEED OF LEASE, (this "Lease"), is made this 25th day of February,
2000, by and between TransDulles Center, Inc., a Virginia corporation, or
assigns ("Landlord") and HomeGrocer.com, Inc., a Delaware corporation,
("Tenant").

                                  WITNESSETH:

     WHEREAS, Landlord and Tenant desire to create a leasehold estate in favor
of Tenant in the Premises (as hereinafter defined) consisting of approximately
126,231 rentable square feet of space in a building being planned for
development and construction within an office and warehouse park located in
Loudoun County, Virginia known as TransDulles Centre; and

     WHEREAS, Landlord has, prior to the date hereof, submitted for approval the
"Amended Site Plan," as defined below, and, in addition, has submitted
application for a building permit for the "Building Shell," as defined below;
and

     WHEREAS, subject to: (i) execution and delivery of this Lease on or before
February 25, 2000; (ii) posting of the Security Deposit (as defined, below) and
first month's rent on or before February 25, 2000; (iii) Tenant Delay (as
defined below); (iv) Force Majeure Delay (as defined below); and (v) all of the
terms and conditions of this Lease, the parties anticipate that the Commencement
Date (as defined below) of this Lease shall be on or about October 1, 2000

     NOW, THEREFORE, in consideration of the Premises, and of the covenants and
agreements herein contained, the parties hereto agree as follows:

     1.   PREMISES.

     Effective as of the Commencement Date, Landlord shall lease unto Tenant and
Tenant shall lease from Landlord approximately One Hundred Twenty Six Thousand
Two Hundred. Thirty One (126,231) rentable square feet (the "Premises"),
consisting of the entire floor area of a building to be known as TransDulles
Centre Building 14 (the "Building") the proposed footprint of which is shown on
Exhibit A-I, together with the right to use all entranceways, parking areas and
sidewalks serving the Building, which Building is located on a parcel of land
known as Lot 49A, TransDulles Centre (the "Property") as shown and described by
metes and bounds in Exhibit A-2, within the office and warehouse park known as
TransDulles Centre as shown on Exhibit A-3 (TransDulles Centre"), and that
machinery and equipment installed in and upon the Premises by Landlord, together
with all additions and accessions thereto, substitutions therefor and
replacements thereof permitted by this Lease (collectively, the "Equipment").
The exact square footage of the Premises shall be determined by the architect
responsible for the design of the Building Shell (the "Designing Architect")
promptly following the Commencement Date, in accordance with the standard of
measurement described in Exhibit A-4. Landlord shall promptly provide Tenant
with notice of the square footage as so determined, accompanied by a summary of
the calculations prepared by the Designing Architect ("Landlord's Area
Determination Notice"). Within thirty (30) calendar days of the Landlord's Area
Determination Notice, Tenant may issue to Landlord notice of Tenants
determination of the square footage of the Premises ("Tenant's Area
Determination Notice") as determined by an architect selected by Tenant
("Tenants Architect") in accordance with the standard of measurement described
in Exhibit A-4, accompanied by a summary of the calculations prepared by
Tenant's Architect. Should Tenant fail to timely issue Tenant's Area
Determination Notice to Landlord, the area of the Premises as set forth in
Landlord's Area Determination shall conclusively be deemed to be the rentable
area of the Premises for all purposes. If Tenant timely issues to Landlord
Tenant's Area Determination Notice, the Designing Architect and Tenant's
Architect shall promptly confer and shall use their best efforts to agree upon
the area of the Premises. If The Designing Architect and Tenant's Architect
cannot reach agreement within
<PAGE>

thirty (30) days after the date of Tenants Area Determination Notice, then
within ten (10) days thereafter, they shall designate a third reputable,
licensed architect familiar with the design and construction of flex warehouse
space, (the "Independent Architect"). Upon the failure of the Designing
Architect and Tenants Architect to agree upon the designation of the Independent
Architect, then the Independent Architect shall be appointed by a Judge of the
Circuit Court of Loudoun County, Virginia upon ten (10) days notice, or by any
other court in Virginia having jurisdiction. Concurrently with such appointment,
the Designing Architect and Tenant's Architect shall each submit a letter to the
Independent Architect, with a copy to Landlord and Tenant, setting forth such
architects statement of the area of the Premises (respectively, "Designing
Architect's Letter" and "Tenant's Architect's Letter").In the event the areas
set forth in the Designing Architect's Letter and the Tenant's Architect's
Letter shall differ by less than Five Hundred (500) rentable square feet, then
the area of the Premises shall not be determined by the Independent Architect,
and the area of the Premises shall be the average of the areas set forth in the
Designing Architect's Letter and Tenant's Architect's Letter. In the event the
area of the Premises set forth in the Designing Architect's Letter and the
Tenant's Architect's Letter shall differ by more than Four Hundred Ninety Nine
(499) rentable square feet, the Independent Architect shall conduct such
investigations and take such measurements as he may deem appropriate and shall,
within sixty (60) days after the date of his designation, choose either the area
set forth in the Designing Architect's Letter, and the Tenant's Architect's
Letter, and such choice shall be binding upon Landlord and Tenant. Landlord and
Tenant shall each pay the fees and expenses of its respective architect. The
fees and expenses of the Independent Architect shall be shared equally by
Landlord and Tenant.

     The parties acknowledge that the Property is currently subject to a site
plan (the "Existing Site Plan") which has been approved by the appropriate
Loudoun County governmental agencies, and. which contemplates the construction
of two (2) buildings having footprints of Forty Thousand Three Hundred and
Twenty (40,320) and Eighty Five Thousand Six Hundred Eighty (85,680) rentable
square feet respectively. Landlord shall undertake to amend the Existing Site
Plan, and to obtain the requisite governmental approvals therefor, to provide
for the development of the Building to consist of approximately Ten Thousand
Eighty (10,080) rentable square feet of first floor office space, and
approximately One Hundred Sixteen One Hundred Fifty One (116,151) rentable
square feet of warehouse space having a clear height of twenty four feet (24')
(the Existing Site Plan, with the contemplated amendments, as the same may be
modified in the course of obtaining the necessary governmental approvals, is
referred to as the "Amended Site Plan"). Tenant shall make advance payments (the
"Advance Payments") to Landlord to defray the costs of the preparation and
solicitation of approvals of the Amended Site Plan as provided in that certain
letter agreement attached hereto as Exhibit A-5. In the event that Landlord is
unable to obtain all necessary governmental approvals for the Amended Site Plan
on or before June 1, 2000 and Landlord has been unable to obtain such necessary
governmental approvals within thirty (30) days of written notice from Tenant
issued no earlier than June 2, 2000, Tenant may, at its option, by second
written notice to Landlord, declare this Lease to be null and void and of no
further effect, in which case the Security Deposit, the Advance Payments, and
any prepaid rent, shall be returned to Tenant, following deduction of (i) all
actual, reasonable, out-of pocket costs incurred by Landlord in connection with
the preparation and solicitation of approvals for the Amended Site Plan, and any
building permits, including but not limited to all fees and expenses paid to any
architects, engineers, attorneys, and/or permit expediters, (ii) actual,
reasonable, out-of-pocket legal fees and expenses incurred by Landlord in
connection with the negotiation and preparation of this Lease not in excess of
One Hundred Thousand Dollars ($100,000.00), and (iii) a fee to Landlord equal to
four percent (4.0%) of the sum of items (i) and (ii) above. Notwithstanding the
above, the time within which Landlord shall have to obtain all necessary
governmental approvals for the Amended Site Plan before Tenant shall have any
right to terminate this Lease as provided herein shall be extended by any time
period attributable to "Tenant Delay" or "Force Majeure Delay," both as defined
below.

                                       2
<PAGE>

     Following receipt of all necessary governmental approvals for the Amended
Site Plan, Landlord shall be responsible for obtaining the necessary permits
for, and constructing, at its expense, the "Building Shell" as described in
Exhibit B hereto.

     2.   COMMENCEMENT DATE AND LEASE TERM.

          (a) The initial term of this Lease shall be for a period of thirteen
(13) years and one (1) month (hereafter referred to as "Initial Term"), (subject
to early termination as provided in Paragraph 4 below) commencing on the
Commencement Date, which shall be the date upon which the following are
satisfied:

               (i)  substantial completion of the Building Shell, as determined
by the Designing Architect, and

               (ii) delivery of possession of the Premises to Tenant.

Landlord projects that the Commencement Date shall be approximately seven (7)
months after the issuance of the building permit for construction of the
Building Shell by Loudoun County (the "Projected Commencement Date"), although
the Projected Commencement Date is subject to delays in design, permitting and
construction of the Building Shell for causes both within and beyond the control
of Landlord. If the Commencement Date is not the first day of a month, then the
Term shall be the period set forth above plus the partial month in which the
Commencement Date occurs. Except as expressly provided in Paragraph 2(c) below,
in no event shall Landlord be liable to Tenant for any failure to complete
construction of the Building Shell and deliver the Premises to Tenant by the
Projected Commencement Date for any reason whatsoever. Landlord shall use
reasonable efforts to keep Tenant informed of the progress of construction, and
any change in the Projected Commencement Date. The twelve (12) month period
commencing thirty (30) days after the Commencement Date and each successive
twelve (12) month period thereafter during the initial Term and any Renewal Term
shall be hereinafter referred to as a "Lease Year;" the first day of the first
Lease Year shall be hereinafter referred to as the Rent Commencement Date."
Notwithstanding the foregoing, if substantial completion of the Building Shell
is delayed as a direct or indirect result of "Tenant Delay" (as defined below)
the Rent. Commencement Date shall be deemed to occur thirty (30) days after the
date that Landlord determines in its reasonable judgment that the Building Shell
would have been substantially complete but for such Tenant Delay.
Notwithstanding any other provision of this Lease, no Base Rent or Additional
Rent shall   be payable in respect of any period prior to the Rent Commencement
Date. The Initial Term and, any Renewal Term(s) resulting from Tenant's exercise
of the options provided in Paragraph 6 hereof, are collectively referred to
herein as the "Term."

          (b)  Landlord agrees that approximately forty five (45) days prior to
the Commencement Date, or on such earlier date as Landlord reasonably determines
that Tenant may enter upon the Premises for the purposes described below without
interfering with Landlord's construction of the Building Shell (the "Early
Access Period"), (which date shall be determined by Landlord in its reasonable
discretion) it shall permit Tenant to have access to the Premises for the sole
purpose of commencing construction of the Tenant Work, and installation of
Tenant's trade fixtures, furniture, equipment, and related wiring, in accordance
with Construction Drawings and Specifications previously approved by Landlord as
provided in the Work Agreement attached hereto as Exhibit D, and permits
previously issued by Loudoun County. Tenant agrees however, that the provisions
of Paragraph 5(c) pertaining to Hazardous Materials, and the provisions of
Paragraph 20 pertaining to insurance and indemnification, shall apply during the
Early Access Period, and that Tenant shall indemnify and hold Landlord of and
from any and claims for damage to persons or property arising from Tenants
activities on the Premises during the Early Access Period. Tenant further agrees
that it will conduct its activities in the

                                       3
<PAGE>

Premises during the Early Access Period so as not to interfere with the
construction of the Building Shell, and that all of Tenants activities on the
Premises during such period shall be subject to coordination by Landlord.

          (c)  Notwithstanding any other provision of this Lease, Tenant shall
have the following rights:

               (i)   In the event that Landlord is unable to obtain the building
     permits necessary for the construction of the Building Shell within sixty
     (60) days of receipt of approval of the Amended Site Plan, and Landlord has
     been unable to obtain such building permits within thirty (30) days after
     written notice from Tenant issued no earlier than the sixty first (61st)
     day after receipt of approval of the Amended Site Plan (the thirtieth day
     following Tenant's notice is referred to herein as the "Outside Building
     Permit Issuance Date"), Tenant may, at its option, by second written notice
     to Landlord, declare this Lease to be null and void and of no further
     effect, in which case the Security Deposit, the Advance Payments, and any
     prepaid rent, shall be returned to Tenant, following deduction of (i) all
     actual, reasonable, out-of pocket costs incurred by Landlord in connection
     with the preparation and solicitation of approvals for the Amended Site
     Plan, and any building permits, including but not limited to all fees and
     expenses paid to any architects, engineers, attorneys, and/or permit
     expediters, (ii) actual, reasonable, out-of-pocket legal fees and expenses
     incurred by Landlord in connection with the negotiation and preparation of
     this Lease not in excess of One Hundred Thousand Dollars ($100,000.00), and
     (iii) a fee to Landlord equal to four percent (4.0%) of the sum of items
     (i) and (ii) above. Notwithstanding the above, the Outside Building Permit
     Issuance Date shall be extended by any delay in the issuance of building
     permits which results From "Tenant Delay" or "Force Majeure Delay" (both as
     defined below), and shall be further extended by the time necessary for
     Landlord to obtain such building Permits provided that Landlord has
     diligently taken commercially reasonable efforts to obtain such permits
     following receipt of approval of the Amended Site Plan.

               (ii)  In the event that the Commencement Date has not occurred
     within twelve (12) months from the date of issuance of the last of the
     building permits necessary for the Construction of the Building Shell (the
     "Penalty Date"), Tenant shall be afforded a credit against Base Rent
     payable hereunder at the rate of One Thousand Dollars ($1,000.00) per day
     for each day from the Penalty Date to the Commencement Date.
     Notwithstanding the above, the Penalty Date shall be shall be extended by
     any period of delay in construction of the Building Shell attributable to
     "Tenant Delay" or "Force Majeure Delay" (both as defined below).

               (iii) In the event that the Commencement Date has not occurred by
     the Penalty Date as determined pursuant to Paragraph 2(c)(ii) above, Tenant
     may thereafter issue a notice to Landlord declaring its intent to terminate
     this Lease as of a date which is no less than sixty (60) days from the date
     of such notice (the "Outside Commencement Date"). If the Commencement Date
     has not occurred by such Outside Commencement Date, Tenant may, at its
     option, by second written notice to Landlord, declare this Lease to be null
     and void and of no further effect, in which case the Security Deposit, the
     Advance Payments, and any prepaid rent, shall be returned to Tenant,
     following deduction of (i) all actual, reasonable, out-of pocket costs
     incurred by Landlord in connection with the preparation and solicitation of
     approvals for the Amended Site Plan, and any building permits, including
     but not limited to all fees and expenses paid to any architects, engineers,
     attorneys, and/or permit expediters, (ii) actual, reasonable, out-of-pocket
     legal fees and expenses incurred by Landlord in connection with the
     negotiation and preparation of this Lease not in excess of One Hundred
     Thousand Dollars ($100,000.00), and (iii) a fee to Landlord equal to four
     percent (4.0%) of the sum of items (i) and (ii) above. Notwithstanding the
     above, the Outside Commencement Date shall be shall

                                       4
<PAGE>

     be extended by any period of delay in construction of the Building Shell
     attributable to "Tenant Delay" or "Force Majeure Delay" (both as defined
     below).

          (d)  As used in the Lease, the term "Tenant Delay" shall mean any
delay in construction of the Building Shell resulting directly or indirectly
from any of the following reasons: Tenant's failure to comply with any of its
duties and obligations hereunder, including the Work Agreement attached hereto
as Exhibit D; Tenant's request for modifications to plans or working drawings
subsequent to the date such plans or working drawings are approved by Tenant;
Tenant's failure to pay when due any amount required hereunder; Tenant's request
for materials, finishes or installations reasonably determined by Landlord not
to be building standard materials, finishes or installations; Tenant's
activities on the Premises during the Early Access Period; the performance or
timing of any work by any person or firm employed or retained by Tenant; Tenants
request for modifications to the Building Shell made at any time. Landlord shall
use commercially reasonable efforts to provide verbal notice to Tenant of the
occurrence of any event of Tenant Delay as soon as reasonably practicable after
Landlord becomes aware of the occurrence of an event of Tenant Delay, or if any
activity contemplated by Tenant of which Landlord becomes aware is likely to
cause a Tenant Delay; at the time of such notice, Landlord will use commercially
reasonable efforts to provide a good faith estimate of the duration of such
Tenant Delay. As used in this Lease, the term "Force Majeure Delay" shall mean
any delay in construction of the Building Shell resulting directly or directly
from any of the following reasons: earthquake; explosion; flood; hurricane; fire
or other casualty, the elements; acts of God or public enemy; actions or
restrictions of governmental authorities (permitting or inspection);
governmental regulation of the sale of materials or supplies or the
transportation thereof; war; invasion; insurrection; rebellion; riots; strikes
or lockouts; inability to obtain necessary materials, goods, equipment,
services, utilities or labor at commercially reasonable rates and upon
commercially reasonable terms; or any other cause whether similar or dissimilar
to the foregoing which is beyond the reasonable control of Landlord. Landlord
shall use commercially reasonable efforts to minimize the impact of any Force
Majeure Delay.

     3.   RENT.

     As rent for the Premises (all of which is hereinafter referred to
collectively as "Rent"), Tenant shall pay to Landlord all of the following:

          (a)  Base Rent. Tenant shall pay, without offset, demand or
counterclaim, as base rent (hereafter referred to as the "Base Rent") for each
Lease Year the sums identified on the attached Exhibit C, Rent Schedule. In the
event that the total rentable area of the Building changes in the process of
obtaining approval of the Amended Site Plan, or is otherwise determined to be
different from the square footage set forth in Paragraph 1 hereof in accordance
with the procedure set forth therein, Landlord shall prepare an Amended and
Restated Rent Schedule based upon the actual rentable square footage of the
Building as determined in accordance with Paragraph 1 hereof. Tenant hereby
agrees to execute such Amended and Restated Rent Schedule, or to provide
Landlord with written notice of its objections thereto, within seven (7)
calendar days of its presentation by Landlord, time being of the essence. Should
Tenant fail to do so, the Amended and Restated Rent Schedule shall conclusively
be deemed approved by Tenant. Should Tenant timely object to the Amended and
Restated Rent Schedule by written notice to Landlord served in accordance with
the provisions hereof, Landlord will evaluate Tenant's objections and determine,
in the exercise of its discretion, whether any change in the Amended and
Restated Rent Schedule is warranted; Landlord's determination in this regard,
shall be binding upon Tenant, provided such determination is made in good faith.
The monthly installments shall be payable in advance on the first day of each
and every month during the Term at the office of TransDulles Center, Inc., c/o
The Mark Winkler Company, 4900 Seminary Road, Suite 900, Alexandria, Virginia
22311, or by wire transfer routed to: Fleet Bank, Boston, Massachusetts, ABA #
011900571, Account Name: TransDulles Center, Inc., Account Number: 9427834304,
or at such other place as Landlord may hereafter

                                       5
<PAGE>

designate in writing, except that the first such installment, in the amount of
Ninety Thousand Nine Hundred Ninety One Dollars and Fifty Cents ($90,991.51),
shall be due contemporaneously with the execution of this Lease. Rent checks are
to be made payable to TransDulles Center, Inc., or such other person, firm or
corporation as Landlord may hereafter designate in writing.

          (b)  Intentionally Omitted.

          (c)  Intentionally Omitted.

          (d)  Intentionally Omitted.

          (e)  Tax on Lease. Tenants pro rata share of any federal, state or
local tax (including gross receipts tax) assessment, levy or other charge (other
than any income tax, gift tax, inheritance tax or real property tax)
(hereinafter collectively referred to as "Tax") if now or hereafter directly or
indirectly upon (a) Landlord with respect to this Lease or the value thereof,
(b) Tenant's use or occupancy of the Premises, or (c) the Base Rent or any other
sum payable under this Lease, payment of such Tax shall be paid by Tenant as
Additional Rent. Landlord shall annually notify Tenant of the amount which
Landlord estimates will be the Tax for each tax year, and Tenant shall pay such
amount in equal monthly installments in advance on or before the first day of
each of the twelve (12) months after the date of such notice. Landlord shall
annually submit to Tenant a statement showing Tenant's pro rata share of the
actual Tax for the current tax year, the amount thereof theretofore paid by
Tenant, and the amount of the resulting balance due thereon or overpayment
thereof. Such balance due shall be paid by Tenant, without interest, within
thirty (30) days after the date of such statement. In the event of an
overpayment by Tenant, Landlord shall afford Tenant a credit against Rent due
hereunder for the month or months following the date of such statement. Official
tax bills rendered by the taxing authority shall be presumptive evidence of the
actual amount of Tax. Tenant shall have the right to audit Landlord's records
pertaining to such Tax in accordance with paragraph 11 below.

          (f)  Tenant does hereby take and hold the Premises at the Rent
hereinabove specifically reserved and payable as aforesaid, and upon and subject
to the terms and conditions herein contained.

          (g)  Late Payment. If Tenant fails to pay any installment of Rent on
or before the third (3rd) calendar day of the calendar month when such
installment becomes due and payable, Tenant shall pay to Landlord a late charge
of five per cent (5%) of the amount of such installment, and, in addition, any
unpaid installment shall bear interest at that rate per annum which is two per
cent (2%) greater than the "prime rate" then in effect at Morgan Guaranty Trust
Company of New York, New York, (the "Default Rate") from the date such
installment became due and payable to the date of payment by Tenant, provided,
however, that nothing herein contained shall be construed or implemented in such
a manner as to allow Landlord to charge or receive interest in excess of the
maximum legal rate than allowed by law. Such late charge and interest shall
constitute Additional Rent hereunder and shall be due and payable with the next
monthly installment of Rent. Nothing in this paragraph shall be deemed to be in
derogation of Landlord's rights under Paragraph 17 .

          (h)  Additional Rent. With respect to this Lease, Additional Rent
shall mean any and all monetary obligations for which Tenant is responsible
under the terms, covenants and conditions of this Lease, including but not
limited to, Base Rent escalations, taxes, late fees, interest payments, holdover
Rent, Operating Costs, and cost of change orders.

          (i)  Tenants Proportionate Share. Landlord and Tenant agree that
Tenant's "pro rata share" for purposes of Paragraphs 3(e) and 11 shall be One
Hundred percent (100.00%), the approximate and agreed upon ratio that the area
of the Premises bears to the total rentable area of the Building.

                                       6
<PAGE>

     4.   EARLY TERMINATION.

     Notwithstanding the provisions of paragraph 2(a) above, provided that (i)
this Lease is in full force and effect, and (ii) there shall be no uncured Event
of Default by Tenant existing as of the date of issuance by Tenant of the Notice
of Termination as provided in this Paragraph 4, Tenant shall have the one time
option to terminate this Lease effective as of the last day of the tenth (10th)
Lease Year (the "Early Termination Date") only. To exercise such option, Tenant
shall provide Landlord with written notice (the "Notice of Termination") of its
exercise of such option at least one (1) year prior to the Early Termination
Date, time being of the essence, which Notice of Termination must be accompanied
by payment to Landlord of a termination fee equal to four (4) months Rent (as
"Rent" is defined in Paragraph 3 hereof, which includes, but is not limited to,
four (4) months' Base Rent payable in respect of the 11th Lease Year, and four
(4) months' Tenant's of Estimated Operating Costs as established pursuant to
Paragraph 11(c) hereof as of the date of the Notice of Termination). If between
the date of issuance of the Notice of Termination and the Termination Date,
Tenant shall have committed or suffered an Event of Default in Tenant's
obligations under this Lease, or should Tenant fail to vacate the Premises by
the Termination Date, time being of the essence, Landlord may, at its sole
option, (i) nullify the election to terminate in which event the Lease shall
remain in full force and effect, subject to its terms, or (ii) without further
notice declare an Event of Default under this Lease, and in addition to
recovering the Termination Fee, Landlord may exercise all other rights and
remedies for an Event of Default as hereinafter provided, or (iii) deem Tenant
to be holding over in accordance with the provisions of paragraph 18
hereinbelow. The option granted hereunder is personal to Tenant, and may not be
exercised by any transferee or assignee of Tenant other than a Related Entity as
defined in Paragraph 12 hereof; the option is exercisable only as to the
entirety of the Premises, and not as to a portion thereof.

     5.   USE OF PREMISES.

          (a)  Subject to the provisions hereof, Tenant shall have access to the
Premises twenty four (24) hours per day, seven (7) days per week, fifty-two (52)
weeks per year. To the extent permitted by applicable law, including applicable
zoning ordinances, and laws pertaining to the sale of alcoholic beverages,
Tenant may occupy and use the Premises for general office, storage, warehousing
and distribution purposes, product processing and other incidental uses, and for
no other purpose without the consent of Landlord (which consent shall not be
unreasonably withheld, conditioned or delayed), subject, however, to the terms
and provisions of any covenants, easements, conditions or restrictions which
affect the use of the Premises. Provided, however, that notwithstanding any
other provision of this Lease, and subject to Tenant obtaining all necessary
licenses therefor, Tenant shall be permitted to utilize the Premises for the on-
site retail sale of alcoholic beverages, but only if and to the extent that such
on-site distribution is necessary in order to permit Tenant to obtain the
necessary governmental approvals to distribute alcoholic beverages off site;
Tenant shall not be permitted to advertise or otherwise promote such on-site
sale, nor utilize any larger portion of the Premises or the Property than is
reasonably necessary in order to obtain such governmental approvals. Tenant
shall not Permit any unlawful occupation, business or trade to be conducted on
any of the Premises or any use to be made thereof contrary to applicable laws or
regulations. Tenant shall not use or occupy or permit any of the Premises to be
used or occupied, nor do or permit anything to be done in or on any of the
Premises, in a manner which would (i) violate any certificate of occupancy
affecting any of the Premises, (ii) make void or voidable any insurance then in
force with respect to any of the Premises, (iii) make it difficult or impossible
to obtain fire or other insurance which is required hereunder, or cause the cost
of maintaining such insurance to increase, (iv) cause structural damage to the
Building, or (v) constitute a public or private nuisance or waste.

          (b)  As part of its obligation to comply with laws and other
requirements under Paragraph 5(a) of this Lease, Tenant shall not (either with
or without negligence), in violation of any law, generate, use, store, or cause
or permit the escape, disposal or release of any Hazardous Materials in or about
the Building or

                                       7
<PAGE>

the Property or the Premises. Hazardous Materials shall mean (a) "hazardous
wastes", as defined by the Resource Conservation and Recovery Act of 1976, as
amended from time to time, (b) "hazardous substances", as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, (c) "toxic substances", as defined by the Toxic
Substances Control Act, as amended from time to time, (d) "hazardous materials",
as defined by the Hazardous Materials Transportation Act, as amended from time
to time, (e) any applicable state or local laws and the regulations adopted
under these acts, as amended from time to time, (f) oil or other petroleum
products whether refined or unrefined, (g) any highly combustible substance and
(h) any substance whose presence in Landlord's reasonable judgment could be
detrimental to the Building or the Property or the Premises or hazardous to
health or the environment. Notwithstanding the above, Tenant may, store and
handle, in strict compliance with all applicable laws and regulations: (i)
reasonable quantities of customary janitorial supplies that may contain
Hazardous Materials, (ii) packaged goods intended for resale to customers, such
as, but not limited to, hairspray, household cleaners, automotive products,
antifreeze, dog food, plant fertilizer and other items customarily sold to
customers in a grocery, food or drug store, and (iii) standard office products
that may contain Hazardous Materials (such as photocopy toner, "White Out" and
the like). If any lender or governmental agency shall ever require testing to
ascertain whether or not here has been any release of Hazardous Materials, then
the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon
demand as Additional Rent if such requirement applies to the Premises if the
requirement for such testing results from Tenant's activities at the Building or
on the Property. In addition, Tenant shall execute affidavits, representations
and the like from time to time at Landlord's request concerning Tenant's best
knowledge and belief regarding the presence of Hazardous Materials in the
Premises. In all events, Tenant shall indemnify and hold Landlord harmless of
and from any and all costs and expenses of any nature arising from the release
of Hazardous Materials in the Premises occurring while Tenant is in possession,
or elsewhere on the Property and any adjacent real estate owned by Landlord, if
caused by Tenant or persons acting under Tenant. The within covenants shall
survive the expiration or earlier termination of the Lease. Landlord warrants
that to the best of its knowledge, information and belief, the Premises,
Building and Property shall, as of the commencement of the Early Access Period,
be free and clear of Hazardous Materials, except for those materials used in
accordance with applicable law in connection with the construction of the
Building Shell.

          (c)  If Tenant fails to comply with any applicable law or regulation
or if Landlord reasonably believes the violation of any law or regulation is
threatened, excluding the exceptions set forth in Paragraph 5(b), Landlord shall
have the right (but not the obligation) following thirty (30) days notice to
Tenant unless Tenant commences to act during or prior to such period, and
diligently pursues the cure of such failure to comply (unless such failure or
threatened failure causes imminent threat to life or property in which case no
notice is required), to act in place of Tenant and to take such action as it may
deem necessary or desirable to ensure compliance or to mitigate, abate or
correct the violation or threatened violation. All costs of any kind whatsoever
incurred by Landlord in connection therewith, including consultants' and
reasonable attorneys' fees, shall be payable on demand, shall bear interest at
the default rate until paid, and shall constitute Additional Rent.

          (d)  Tenant shall indemnify, defend and hold Landlord harmless from
and against any and all claims, losses, damages, liabilities, cost and expenses,
including attorneys' fees, arising from Tenant's failure to comply with all
applicable laws and regulations. The foregoing provisions shall survive the
expiration or earlier termination of this Lease.

          (e)  Landlord represents that as of the date of this Lease, the
Building is zoned PD-IP (Planned Development-Industrial Park) in Loudoun County,
with a special exception for office and warehouse uses, and is subject to the
1972 Zoning Ordinance for such County.

                                       8
<PAGE>

     6.   OPTION TO EXTEND TERM.

          (a)  Renewal Terms. Provided that (i) this Lease is in full force and
effect, (ii) no material adverse change in Tenant's financial condition has
occurred since the date of execution of this Lease, and (iii) there shall be no
uncured Event of Default by Tenant existing as of the date of issuance the
Renewal Notice contemplated by Paragraph 6(b) below, Tenant shall have the
option to renew this Lease for two (2) consecutive five (5) year terms (each, a
"Renewal Term"), in "AS IS" condition, with the Base Rent for such renewal
periods being equal to the then current fair market rent ("FMR") for comparable
space in the Sterling, Virginia market area. first used in this Lease, FMR.
shall mean the annual amount payable as Base Rent that a non-equity, non-
renewal, non-expansion tenant would pay a landlord of a similar building in the
Sterling, Virginia submarket in "AS IS" condition, giving appropriate
consideration to annual rental rates per rentable Square foot on a "triple net"
basis, the length of the lease term, the size and location of the premises being
leased, the cost to Tenant of relocating its operations to another site, tenant
concessions prevalent in the marker. if any (including but not limited to such
items as free rent and build out allowances), and brokerage commissions, and
shall be determined in accordance with the provisions of Paragraph 6(c) below.
The option to renew provided herein may be exercised by Tenant solely as to the
entirety of the Premises.

          (b)  Notice Required. Tenant shall give Landlord written notice of its
intent to exercise its option to extend the Lease Term (the "Renewal Notice") at
least twelve (12) months, but no more than eighteen (18) months, prior to the
end of the then current term, time being of the essence. Should Tenant fail to
notify Landlord of its intent to exercise such Renewal option within the
aforementioned notice period, time being of the essence, then Tenant's renewal
option shall expire without action by either party and Landlord shall not need
to advise Tenant in writing of Tenant's neglect in reference to the notice
period.

          (c)  Determination of FMR for Renewal Terms. Within fifteen (15)
calendar days of Landlord's receipt of the Renewal Notice as to each Renewal
Term, Landlord shall issue written notice to Tenant of Landlord's determination
of FMR for such Renewal Term ("Landlord's Rent Notice"); if Tenant shall fail to
give written notice to Landlord within fifteen (15) calendar days of Landlord's
Rent Notice of its objection to the FMR as set forth in such notice, and if
Tenant's failure shall continue for five (5) days after notice from Landlord to
Tenant that Landlord did not receive from Tenant, within fifteen (15) days of
Landlord's Rent Notice, an objection to the FMR as set forth in Landlord's Rent
Notice, then the Base Rent for the applicable Renewal Term shall be the FMR as
set forth in Landlord's Rent Notice. If within fifteen (15) calendar days of
Landlord's Rent Notice, Tenant shall give written notice to Landlord of its
objection to the FMR ("Tenant's Objection Notice") as set forth in Landlord's
Rent Notice such notice, and its proposed FMR then Base Rent for such Renewal
Term shall be determined as follows:

               (i)  Landlord and Tenant shall use reasonable efforts to
negotiate and agree upon an FMR. within thirty (30) days of Tenants Objection
Notice. If Landlord and Tenant fail to agree upon an FMR within such period,
Landlord and Tenant shall each select a reputable, qualified, licensed real
estate broker having an office in Northern Virginia, and familiar with the
rentals then being charged for Buildings comparable to the Building in the
Sterling, Virginia area (respectively, "Landlord's Broker" and "Tenant's
Broker") who shall confer promptly after their selection by Landlord and Tenant
and shall use their best efforts to agree upon the FMR.

               (ii) If Landlord's Broker and Tenant's Broker cannot reach
agreement within seventy five (75) days after the date of Tenant's Objection
Notice, then within ten (10) days thereafter, they shall designate a third
reputable, licensed real estate broker having an office in Northern Virginia,
and familiar with the rentals then being charged for buildings comparable to the
Building in the Sterling, Virginia area (the "Independent Broker"). Upon the
failure of Landlord's Broker and Tenant's Broker to agree upon the

                                       9
<PAGE>

designation of the Independent Broker, then the Independent Broker shall be
appointed by a Judge of the Circuit Court of Loudoun County, Virginia upon ten
(10) days notice, or by any other court in Virginia having jurisdiction.
Concurrently with such appointment, Landlord's Broker and Tenant's Broker shall
each submit a letter to the Independent Broker, with a copy to Landlord and
Tenant, setting forth such broker's estimate of the FMR, taking into
consideration the duration of the first Renewal Term or the second Renewal Term,
as the case may be, and all other terms and conditions of this Lease which are
applicable to the Extension Term (respectively, Landlord's Broker's Letter" and
"Tenant's Brokers Letter"). In the event the FMR set forth in Landlord's
Broker's Letter and Tenant's Broker's Letter shall differ by less than Sixty
Cents ($0.60) per rentable square foot for each year during the Renewal Term,
then the FMR shall not be determined by the Independent Broker, and the FMR
shall be the average of the FMR set forth in Landlord's Broker's Letter and
Tenant's Broker's Letter. In the event the FMR set forth in Landlord's Broker's
Letter and Tenant's Broker's Letter shall differ by more than Fifty Nine Cents
($0.59) per rentable square foot per annum for any year during the Renewal Term,
the Independent Broker shall conduct such investigations as he may deem
appropriate and shall, within sixty (60) days after the date of his designation,
choose either the rental set forth in Landlord's Broker's Letter or Tenant's
Broker's Letter to be the FMR for the Renewal Term, and such choice shall be
binding upon Landlord and Tenant. Landlord and Tenant shall each pay the fees
and expenses of its respective broker. The fees and expenses of the Independent
Broker shall be shared equally by Landlord and Tenant.

     7.   CONSTRUCTION OF PREMISES.

          Landlord warrants that, at Landlord's sole cost and expense, the
Building Shell shall be constructed in a good and workmanlike manner in
conformance with the description of the Building Shell set forth in Exhibit B
hereto, and all applicable federal, state and local codes and regulations in
effect at the time of issuance of permits for the initial construction of the
Building Shell.

     8.   TENANT WORK.

          The respective rights and obligations of the parties with respect to
the design and construction of the Tenant Work are set forth in the Work Letter
attached hereto as Exhibit D hereto.

     9.   COMPLIANCE WITH LAWS.

     During the Term, Landlord shall be responsible for complying with and
promptly making all structural changes, alterations or additions necessitated by
all laws regulating the Property and exterior areas of the Building (excluding
the areas within the Premises), including the Americans with Disabilities Act
(ADA), and any amendments thereto. The cost of the modifications, alterations,
and/or additions contemplated by this Paragraph shall be included in Operating
Costs for which Tenant is responsible pursuant to the provisions of Paragraph 11
hereof.

     10.  SECURITY DEPOSIT.

          (a)  Contemporaneously with the execution of this Lease by Tenant the
sum of Two Million Two Hundred Thousand Dollars ($2,200,000.00) shall be
delivered to Landlord as a Security Deposit (the "Security Deposit") pursuant to
this Lease and shall be security for the payment and performance by Tenant of
all Tenants obligations, covenants, conditions and agreements under this Lease.
Such sum shall be either in cash, or in a letter of credit ("Letter of Credit"),
or in some combination thereof, as determined by Tenant. Upon the expiration of
the Term hereof, Landlord shall, if there does not then exist an uncured default
by Tenant in the performance of its covenants under this Lease, return such
Security Deposit to Tenant, less such portion thereof as Landlord shall have
appropriated to make good any default by Tenant with respect to Tenant's

                                       10
<PAGE>

obligations within ninety (90) days of such expiration. If Tenant suffers or
commits any Event of Default during the Term of this Lease, or Tenant defaults
in the performance of any covenant contained herein, and such default results,
in Landlord's reasonable judgment, in an imminent danger to persons or property,
or if Tenant fails to take possession on the Commencement Date stated in
Paragraph 2, Landlord shall have the right, but not the obligation, to apply all
or any portion of the Security Deposit to remedy such default, in which event
Tenant shall promptly deposit with Landlord the amount necessary to restore the
Security Deposit to its original amount. The Security Deposit shall not be
deemed liquidated damages, and Landlord's application of said Security Deposit
to reduce its damages shall not preclude recovery from Tenant of any additional
damages incurred by Landlord. If the Landlord sells or transfers its interest in
the Building, Landlord shall transfer the Security Deposit, and the Landlord
shall be released From all liability to Tenant for the return of such Security
Deposit.

          (b)  Landlord agrees to accept a Letter of Credit as and for the
Security Deposit, provided that such Letter of Credit shall be (i)
unconditional; (ii) irrevocable; (iii) issued by a financial institution
approved by Landlord in Landlord's reasonable discretion, which financial
institution must be a member bank of the Federal Reserve, and which has branch
offices in both the Washington, D.C. metropolitan area, and in New York, New
York, for the presentation of the Letter of Credit; (iv) in a form permitting
partial and multiple drawings; (v) for either multiple terms of at least one (1)
year each in duration, which are automatically renewed unless notice is given to
Landlord at least sixty (60) days prior to the expiration thereof, extending
until the date which is ninety (90) days after the expiration of the Lease Term,
as such Lease Term may be extended pursuant to the provisions of the Lease, or
at Tenant's option for a single term extending until the date which is ninety
(90) days after the expiration of the Lease Term, as such Lease Term may be
extended pursuant to the provisions of the Lease; and (vi) be in a form and
substance acceptable to the Landlord, in its reasonable discretion,
substantially in conformity with the provisions of Exhibit E hereto. If a
partial drawing occurs under the Letter of Credit, the Tenant shall, upon demand
but not more than five (5) days after such partial drawing, cause the financial
institution to reissue the Letter of Credit in the amount then currently
required under the terms of this Lease. Notwithstanding the foregoing, the
Landlord shall be entitled to draw down the entire amount of the Letter of
Credit, without any notice, at any time on or after the earlier of (i) the
occurrence of an Event of Default by Tenant under this Lease; or (ii) at any
time after the thirtieth (30th) day preceding the expiration date of the Letter
of Credit in the event that the issuer of the Letter of Credit gives notice to
Landlord that it will nor renew the Letter of Credit as contemplated hereby.

          (c)  The Security Deposit shall be reduced to the amounts set forth in
the schedule below, provided there shall have been no material adverse change in
Tenant's financial condition, as determined by Landlord in the exercise of its
reasonable discretion, between the date of execution of this Lease and the date
of the scheduled reduction. Notwithstanding any other provision of this Lease,
the Security Deposit shall not be reduced unless and until Tenant shall have
delivered to Landlord: (x) a financial statement in the same form, and
containing the same type of information, as the financial statement provided to
Landlord prior to the execution of this Lease, which financial statement shall
reflect Tenant's financial condition as of a date no earlier than six (6) months
prior to the scheduled reduction in the Security Deposit; and (y) a warranty, in
writing, that the financial statement is accurate as of its date, and that there
has been no material adverse change in Tenant's financial condition between the
date of the financial statement and the date of the scheduled reduction in the
Security Deposit. Subject to the foregoing, the Security Deposit shall be
reduced as follows:

 .    At the beginning of the fifth (5th) Lease Year, the Security Deposit shall
     be reduced to One Million Five Hundred Thousand Dollars ($1,500,000.00)
 .    At the beginning of the sixth (6th) Lease Year, the Security Deposit shall
     be reduced to Nine Hundred Thousand Dollars ($900,000.00)

                                       11
<PAGE>

 .    At the beginning of the seventh (7th) Lease Year, the Security Deposit
     shall be reduced to Seven Hundred Thousand Dollars ($700,000.00)
 .    At the beginning of the eighth (8th) Lease Year, the Security Deposit shall
     be reduced to Five Hundred Thousand Dollars ($500,000.00)
 .    At the beginning of the ninth (9th) Lease Year, the Security Deposit shall
     be reduced to Three Hundred Thousand Dollars ($300,000.00)
 .    At the beginning of the tenth (10th) Lease Year, the Security Deposit shall
     be reduced to Two Hundred Thousand Dollars ($200,000.00)
 .    At the beginning of each Renewal Period, the Security Deposit shall be
     reduced to three (3) times the monthly Base Rent in effect at the beginning
     of such Renewal Period

Notwithstanding the above, in the event that Tenant commits or suffers either a
monetary Event of Default or a material non-monetary Event of Default at any
time prior to a scheduled reduction in the Security Deposit, then the next
scheduled reduction in the Security Deposit shall be delayed for a period of one
year from the date of such Event of Default, and each succeeding reduction shall
be correspondingly delayed.

     11.  OPERATING COSTS.

     This is a "Triple Net Lease." Effective as of the first day of the first
Lease Year, Tenant shall pay as Additional Rent its pro rata share of Operating
Costs of the Building and Property ("Operating Costs"). The projected
preliminary estimated calendar year 2000 Operating Costs are $1.75 per rentable
square foot of the Premises. This amount shall be adjusted on an annual basis in
accordance with the procedures outlined below. The parties recognize that this
estimate is for the projected Operating Costs of the Building in "shell"
condition, prior to the completion of the Tenant Work, and that actual Operating
Costs are likely to be higher after completion of such Tenant Work.

          (a)  Definition. As used herein, the term Operating Costs includes
(except as specifically excluded below) the actual costs incurred in owning,
operating and maintaining the Building and Property during each year of the
Lease Term. Such costs shall include, by way of example rather than of
limitation, (i) real property, county, and other similar taxes or assessments,
including but not limited to any special assessments (which specifically
includes, without limitation, the so caller "Route 28 Special Assessment"),
levied against any or all of the Building and Property; (ii) intentionally
omitted (iii) costs of providing landscaping service, snow removal service, and
of maintaining grounds, and adjacent parking and other costs of maintaining the
Property; (iv) all other reasonable costs of maintaining, repairing or replacing
any or all of the Building, and any of the Building systems including the roof
unless the cost of maintaining the roof is borne directly by Tenant, except (a)
costs for repairs, maintenance and replacements required due to defective
materials, installations or workmanship at the time of initial construction of
the Building Shell and Property and expenses incurred in connection with the
enforcement of any warranty rights in connection therewith, or (b) costs to
repair the foundation, interior load bearing partitions, exterior walls and
window systems, except to the extent any such structural repair is required due
to Tenant's negligence or willful misconduct (v) charges or fees for any
necessary governmental permits; (vi) management fees equal to Three and One Half
percent (3.5%) of Base Rent and Operating Expenses payable hereunder, plus any
related overhead and expenses; (vii) premiums for hazard, liability, workmen's
compensation or similar, insurance upon any or all of the Building and Property
as maintained by Landlord under Paragraph 20; (viii) costs arising under service
contracts with independent contractors for servicing, maintenance and repair of
building equipment and systems; and (ix) the cost of any other items which,
under accounting principles consistently applied from year to year with respect
to the Building and Property, constitute operating or maintenance costs
attributable to any or all of the Building and Property. Landlord and its agents
reserve the right to enter onto the Premises at reasonable times upon reasonable
notice from Landlord or its agent and accompanied by a representative of Tenant,
excepting

                                       12
<PAGE>

emergency, for the specific purpose of managing and maintaining the Premises.
Landlord agrees that it shall make no profit from its collection of Operating
Costs.

          (b) Notwithstanding anything to the contrary herein, Operating Costs
shall not include (i) any costs (including payments of principal and interest
under any mortgage and any ground rental payments) associated with the initial
construction of the Building, (ii) costs of development of the Property or the
Premises, (iii) intentionally omitted (iv) intentionally omitted (v)
intentionally omitted (vi) salaries and other compensation paid to officers or
executives of Landlord or any partner, principal or owner of the entity
comprising Landlord, (vii) fees or charges paid to any party affiliated with
Landlord on account of the provision by such entity of goods or services
constituting Operating Costs to the extent such fees or charges exceed the fees
or charges that would have been incurred to an independent entity in an arm's
length transaction, (viii) any expenses reimbursable by any insurance company or
condemning authority, or actually reimbursed by any other source, (ix)
intentionally omitted (xi) Landlord's income taxes, (xii) repairs or other work
occasioned by fire or other casualty of an insurable nature, but only to the
extent of any recovery actually received by Landlord, and (xiii) costs arising
from Landlord's civic activities or charitable or political contributions, all
of which costs are the responsibility of the Landlord except where agreed to
otherwise by the parties in writing, (xiv) costs or fees relating to the defense
of Landlord's title or interest in the Property, or any part thereof, (xv) any
costs or expenses relating to Landlord's obligations under this Lease or any
work letter to construct the Building Shell, or in connection with the Tenant
Work (xvi) wages, salaries, or other compensation or benefits for off-site
employees applicable to time spent working other than on the Property or
Building, (xvii) costs of acquisition of sculpture, paintings, or other objects
of art, and (xviii) without limiting Tenant's obligations for environmental
matters set forth in Paragraph 5(b), costs incurred by Landlord in connection
with cleanup of Hazardous Materials affecting the Building or Property resulting
from any cause other than Tenant's activities at the Building or on the
Property; Operating Costs shall, however, include the premiums (up to the amount
of Twenty Thousand Dollars ($20,000.00) in the first Lease Year, which limit
shall be increased by ten percent (10%) in each subsequent Lease Year) incurred
by Landlord in obtaining insurance for environmental matters, and shall also
include payment of any deductible if, and only if, the occurrence or condition
giving rise to the payment of such deductible results from Tenant's activities
at the Building or on the Property.

          (c) In order to provide for current payments, a statement of
Landlord's estimate of Operating Costs as initially set forth in Paragraph 11
(a) above, shall be submitted by Landlord to Tenant prior to the beginning of
each calendar year or part thereof during the Term. Tenant shall pay monthly, as
Additional Rent, one-twelfth (1/12th) of Tenants pro rata share of Landlord's
estimate of Operating Costs. Further, from time to time during any calendar
year, Landlord may submit to Tenant a revised statement of Landlord's estimate
of Tenants pro rata share of any Operating Costs and within thirty (30) days
after delivery of such statement, Tenant shall pay to Landlord, as Additional
Rent, with each monthly installment of Basic Rent, an amount equal to one-
twelfth (1/12th) of the revised amount so estimated. Landlord will, within one
hundred twenty (120) days of the end of each fiscal year, submit to Tenant a
statement of the actual expenses, incurred for Operating Costs for such
preceding fiscal year. Such statement shall also indicate the amount of Tenants
excess payment or underpayment based on the Landlord's estimate.

          If Additional Rent paid by Tenant during the preceding calendar year
shall be in excess of, or less than its share of the actual expenses incurred by
Landlord for Operating Costs for that year, Landlord and Tenant agree to make
the appropriate adjustment following the submission of Landlord's statement by
Tenant paying any Additional Rent due with the installment of rent due for the
month following submission of Landlord's statement, or Tenant deducting its
excess payment from the installment of rent for such month and any subsequent
months until Tenant has received full credit for such excess payment.

                                       13
<PAGE>

          During the final year of the Lease Term if Tenant overpays its portion
of Operating Costs, said overpayment amount shall be returned by Landlord within
thirty (30) days of termination provided no event of default has occurred or is
occurring.

          Within sixty (60) days after the receipt of Landlord's statement
showing actual figures for the year, Tenant shall have the right to request
copies of a statement of Operating Costs prepared by the Landlord which shall be
supplied to the Tenant within a reasonable time after Tenants written request,
but no such request shall extend the time for payment as set forth in the
preceding Paragraph. Unless Tenant asserts specific error(s) within thirty (30)
days after Landlord has complied with Tenant's request, the statement submitted
by Landlord shall be deemed to be correct. Provided Tenant timely asserts such
specific errors, and is current in its obligations to Landlord for the payment
of all sums due to Landlord as Rent under this Lease, and is not otherwise in
default in its obligations under this Lease, Tenant shall have the right,
exercisable no more than once per Lease Year, to cause Landlord's books and
records showing Tares and Operating Expenses for the prior Lease Year to be
examined and copied by a certified Public Accountant engaged by Tenant upon no
less than thirty (30) days prior written notice and during normal business hours
at any time within ninety (90) days following Tenant's receipt of Landlord's
statement for the prior Lease Year. No such Certified Public Accountant may be
engaged on a contingent fee basis. Such examination shall, at Landlord's option,
occur at the offices of the Landlord's management agent, and shall not take more
than thirty (30) days to complete. Any information obtained by Tenant from such
examination will be treated as confidential unless and until such information
has been publicly disclosed by Landlord; provided, however, that nothing herein
contained shall limit or impair the right or obligation of Tenant to disclose
such information when required to do so by law or to appropriate regulatory
authorities having jurisdiction over its affairs, or to use the same in
connection with the enforcement of the terms and conditions of the Lease. As a
condition of such examination, Landlord may require any party reviewing or
having access to Landlord's records to execute and deliver to Landlord a
confidentiality agreement substantially in the form attached hereto as Exhibit
F-1. In the event that Operating Expenses or Taxes for any Lease Year have been
overstated by ten percent (10%) or more, Landlord shall promptly reimburse or
credit Tenant for the reasonable costs of such audit, in addition to refunding
all overpayments previously made by Tenant. The provisions of this paragraph
shall survive the expiration or earlier termination of the Term of this Lease.

          (d) In any year which Landlord does not protest the real property tax
assessment levied against the Property and Building, Tenant may choose to
protest the assessment in Landlord's name, provided however, that Landlord's
prior written consent, which shall not be unreasonably withheld, conditioned or
delayed, is first obtained with respect to any substantive position as to the
value of the Building and Property which Tenant desires to assert. If Tenant
chooses to protest the assessment, Landlord shall reasonably cooperate with
Tenant's efforts provided Tenant pays all costs and expenses, including
attorneys fees, necessary to conduct such protest. Notwithstanding any other
provision of this Paragraph 11(d), Tenant shall not file any papers in
Landlord's name in connection with such protest without first obtaining
Landlord's prior written consent, which shall not be unreasonably withheld,
conditioned or delayed, as to each such filing. All costs and expenses incurred
by Landlord in connection with such protest, including attorneys fees, shall be
considered an Operating Cost regardless of whether the protest is brought by
Tenant or Landlord, and regardless of the result of such protest. In the event
that a reduction in real property tares results from such protest, Tenant shall
be entitled to the benefit of such reassessment to the extent that it is
applicable to a time Period prior to the termination of this Lease, either as a
credit against the next payments of Rent and Additional Rent due under this
Lease or as a refund if this Lease has expired. Tenant shall have the right to
audit Landlord's records pertaining to such tax in accordance with the
provisions of Paragraph 11(b) above.

                                       14
<PAGE>

11.1  COSTS OF OPERATING THE PREMISES.

     In addition to the Base Rent and Additional Rent provided elsewhere herein,
Tenant shall be responsible for making direct payment of all costs incurred by
Tenant in operating the Premises to the parties actually providing service to
the Premises and the Property, including without limitation, all utility costs
(including but not limited to water, sewer, gas, fuel, and electricity), and
costs of trash removal and janitorial services. In addition, notwithstanding any
provision of this lease to the contrary, maintenance and repair of special
tenant areas, facilities, finishes and equipment (including, but not limited to,
any special fire protection equipment, telecommunications and computer
equipment, kitchen/galley/coffee equipment, air-conditioning equipment, freezer
and refrigeration equipment, and any racking or conveyor system, and all other
furniture, furnishings and equipment of Tenant installed by Tenant, and any
Alteration (as hereinafter defined) made by Tenant, shall be the sole
responsibility of Tenant. Moreover, Landlord shall have the right to require
Tenant, at Tenants sole expense, to enter into reasonable and customary
maintenance contracts with duly qualified contractors reasonably satisfactory to
Landlord in all respects providing for good, workmanlike, first-class and prompt
routine maintenance and repair of such areas, facilities, finishes, equipment
and Alterations as may be designated by Landlord in its sole and absolute
discretion. Tenant shall at all times maintain the Premises in a neat and clean
manner, and shall place all trash in its dumpster.

     12.  ASSIGNMENT AND SUBLETTING.

          (a) Tenant shall not mortgage, pledge or encumber this Lease (herein
sometimes collectively referred to as "Transfers") without Landlord's prior
written consent, which consent shall not be unreasonably withheld or delayed.

          (b) Tenant shall have the right to assign this Lease or sublet all or
any portion of the Premises throughout the Term, subject to Landlord's prior
written consent and approval, which shall not be unreasonably withheld,
conditioned, or delayed, provided, that Tenant remains fully liable for the
performance of all terms and conditions of this Lease including but not limited
to the payment of Base Rent and Additional Rent and that the assignee or
subtenant agrees to be bound by all terms, conditions, and provisions of this
Lease. If Tenant wants to assign, sublet or otherwise transfer all or part of
the Premises 0r this Lease, then Tenant shall give Landlord written notice
("Tenant's Request Notice") of the identity of the proposed assignee or
subtenant and its business, all terms of the proposed assignment or subletting,
the commencement date of the proposed assignment or subletting (the "Proposed
Sublease Commencement Date"), the area proposed to be assigned or sublet (the
"Proposed Sublet Space") and such other information as Landlord may reasonably
request, together with a processing fee of One Thousand Dollars ($1,000.00)
payable to Landlord, which shall be earned by Landlord regardless of whether
Landlord's written consent and approval is given. Tenant shall also transmit
therewith the most recent financial statement or other evidence of financial
responsibility of such assignee or subtenant and a certification executed by
Tenant and such proposed assignee or subtenant stating whether any premium or
other consideration is being paid for the proposed assignment or sublease. Any
sublease, assignment or other transfer shall be effective on forms supplied or
approved by Landlord. Tenant assigns to Landlord any sum due to Tenant from any
assignee, subtenant or occupancy of Tenant as security for Tenant's performance
of its obligations pursuant to this Lease, provided, however, that Tenant shall
have the license to collect such rents prior to the occurrence of an monetary
Event of Default by Tenant. Following a monetary Event of Default by Tenant,
Tenant authorizes each such assignee, subtenant or occupant to pay such sum
directly to Landlord if such assignee, subtenant or occupant receives written
notice from Landlord specifying that such rent shall be paid directly to
Landlord. Landlord's collection of such rent shall not be construed as an
acceptance of such assignee, subtenant or occupant as a tenant nor a waiver of
any default hereunder by Tenant. Notwithstanding anything in this Paragraph 12
to the contrary, provided no Event of Default exists under this Lease, Tenant
may, without Landlord's consent, but after providing written notice to

                                       15
<PAGE>

Landlord, assign this Lease or sublet all or any portion of the Premises to any
Related  Entity (as hereinafter defined) provided that (i) in the event of an
assignment, such Related  Entity assumes in full all of Tenants obligations
under this Lease; (ii) Landlord is provided with a counterpart of the fully
executed agreement of assignment or sublease, which shall be in a form
reasonably satisfactory to Landlord; (iii) to the extent Tenant remains in
existence Tenant remains liable under the terms of this Lease; (iv) such Related
Entity is not a governmental entity or agency; (v) such Related Entity's use
requirement does not differ from the Permitted Use described in Paragraph 5
hereof; and (vi) such Related  Entity does not require additional services other
than those agreed to be provided by Landlord under the terms of this Lease.
"Related  Entity" shall be defined as (i) any parent company, subsidiary, or
affiliate of Tenant, which controls, is controlled by, or is under common
control with Tenant, and/or (ii) any entity into which Tenant shall be merged or
consolidated, or which purchases substantially all of the assets of Tenant
located at the Premises and assumes the liabilities of Tenant under this Lease
and continues in the same business as that of Tenant, whose net worth is not
less than One Hundred Million Dollars ($100,000,000.00). In addition, the
restrictions on Transfers, subletting and assignment set forth in this Lease do
not apply to the sale or transfer of Tenant's capital stock in connection with:
(i) the public offering of such stock; (ii) any transfer or sale of stock
amongst those parties which hold stock in Tenant as of the date of this Lease;
(iii) issuance of stock to employees of Tenant in accordance with Tenant's
Employee Stock Ownership Program, (iv) any sale of stock via private placement
provided existing shareholders maintain at least fifty (50%) of the voting
stock of Tenant, or (v) the reincorporation of Tenant in another state, which
reincorporation does not result in a transfer of voting control of Tenant.

          (c)  Intentionally Omitted.

          (d)  If Tenant proposes to assign this Lease other than in an
assignment not requiring Landlord's consent, Landlord may, at its option, upon
written notice to Tenant given within fifteen (15) calendar days after its
receipt of Tenant's Request Notice, together with all other necessary
information, elect to recapture the Premises and terminate this Lease. Landlord
may thereafter, without limitation, lease the Premises to the proposed assignee
without liability to Tenant. Upon any such termination, Landlord and Tenant
shall have no further obligations or liabilities to each other under this Lease
with respect to the Premises, except with respect to obligations or liabilities
which accrue or have accrued hereunder as of the date of such termination (in
the same manner as if the date of such termination were the date originally
fixed for the expiration of the Term hereof).

          (e) If any sublease, assignment or other Transfer (whether by
operation of law or otherwise) provides that the subtenant, assignee or other
transferee (or any affiliate thereof) is to pay any amount in excess of the rent
and other charges due under this Lease, then, whether such excess be in the form
of an increased rental, lump sum payment, or any other form (and if the
applicable space does not constitute the entire Premises, the amount and
existence of such excess shall be determined on a prorata basis), Tenant shall
pay to Landlord fifty per cent (50%) of such excess within ten (10) days,
provided, however, that in the event of a sublease, such excess shall be reduced
by the amount of market-rate brokerage commissions, reasonable attorneys fees,
and reasonable costs of improvements to the Premises actually paid by Tenant,
amortized on a straight line basis over the term of the Sublease. Landlord shall
have the right to inspect and audit Tenant's books and records relating to any
sublease, assignment or other transfer. In such event, Landlord shall be bound
by the confidentiality provisions set forth in Exhibit F-2 hereof.

     13.  CASUALTY DAMAGE.

     If the adjacent parking area, Premises or the Building are totally damaged
or destroyed thereby rendering the Premises totally untenantable, then Landlord
shall repair and restore the adjacent parking area, Premises (except as
hereinafter provided) and the Building together with the Tenant's Work and
Alterations

                                       16
<PAGE>

made by Tenant to substantially the same condition which they were in prior to
such damage or destruction; provided, however, that if in Landlord's reasonable
judgment such repair and restoration cannot be reasonably completed within two
hundred seventy (270) days after the occurrence of such damage or destruction
(taking into account the time needed for removal of debris, preparation of plans
and issuance of all required governmental permits), then either Landlord or
Tenant shall have the right, to terminate this Lease by giving written notice of
termination to the other within forty-five (45) days after the occurrence of
such damage or destruction. In addition, Tenant shall have the right to
terminate this Lease upon written notice to Landlord if Landlord fails to
complete the repair and restoration of the adjacent parking area, Premises,
and/or the Building with sixty (60) days of notice from Tenant to Landlord
issued no earlier than two hundred seventy (270) days after the occurrence of
such damage or destruction.

     If the parking area, Premises or the Building are partially damaged or
destroyed thereby rendering the Premises partially untenantable or not suitable
for Tenant's conduct of business, then Landlord shall repair and restore the
parking area, Premises (except as hereinafter provided) and the Building to
substantially the same condition which they were in prior to such damage or
destruction; provided, however, that if in Landlord's reasonable judgment such
repair and restoration cannot be reasonably completed within one hundred eighty
(180) days after the occurrence of such damage or destruction (taking into
account the time needed for, removal of debris, preparation of plans and
issuance of all required governmental permits), then Tenant shall have the
right, at its sole option, to terminate this Lease by giving written notice of
termination within thirty (30) days after the occurrence of such damage or
destruction.

     If the parking area, Premises or any part thereof are damaged or destroyed
by fire or any other cause, Tenant, as soon as it reasonably becomes aware of
such damage shall give prompt notice thereof to Landlord. If this Lease is
terminated pursuant to this Paragraph, then Rent and all other amounts payable
by Tenant hereunder shall be apportioned (based upon the portion of the
Premises, if any, which is usable after such damage or destruction) and paid to
the date of termination. If this Lease is not terminated as a result of such
damage or destruction, then until such diligent repair and restoration of the
Premises are substantially complete, Tenant shall be required to pay the Base
Rent and additional rent only for the Portion of the Premises that is usable
while such repair and restoration are being made, provided, however, that if
such damage or destruction was caused by the act or omission of Tenant or any
Invitee, then Tenant shall not be entitled to any such rent reduction. If this
Lease is not terminated as a result of such damage or destruction, then Landlord
shall bear the expenses of such diligent repair and restoration of the Premises
and the Building; provided, however, that if such damage or destruction was
caused by the act or omission of Tenant or any Invitee, then Tenant shall pay
the amount by which such expenses exceed the insurance proceeds, if any,
actually received by Landlord on account of such damage or destruction; and
provided further, however, that in no event shall Landlord be required to repair
or restore any work and materials not deemed by Landlord to be building standard
work and materials, any Alteration previously made by Tenant or any of Tenants
trade fixtures, furnishings, equipment or personal property, unless damaged or
loss are due to Landlord's negligence or intentional acts or omissions.
Notwithstanding anything herein to the contrary, Landlord shall have the right
to terminate this Lease if zoning or other applicable laws or regulations do not
permit such repair and restoration.

     14.  MAINTENANCE AND REPAIRS:

          (a) Subject to Tenants responsibilities set forth in Paragraph 14 (d),
Landlord shall keep the Building and all machinery, equipment and fixtures
attached to, or used in connection with the operation of the Building and
Property, including all electrical, heating, mechanical, sanitary, sprinkler,
utility, Power, plumbing, cleaning, refrigeration, ventilating, air conditioning
and elevator systems and equipment (excluding, however, lines, improvements,
systems and machinery for water, gas, steam and electricity owned and maintained
by any public utility company or governmental agency or body and excluding also
any of Tenants

                                       17
<PAGE>

property) in good order and repair. Landlord shall develop, in consultation with
Tenant, a program for maintenance of the Building and Property, including a
budget therefor. Landlord shall meet with Tenant at commercially reasonable
times, and upon commercially reasonable notice (but is not required to meet more
often than twice annually), to secure Tenant's input into such program and
budget. Landlord reserves the right of access to the Premises for the purposes
of such operation, cleaning, maintenance, safety, security and repairs, and
agrees that it shall use reasonable efforts (except in the case of emergency) to
provide reasonable advance written notice to Tenant of its intent to enter the
Premises for such purposes. The cost for maintaining the Building and Premises
in good order and repair as contemplated by this paragraph 14 (a) shall be an
Operating Cost for purposes of paragraph 11 hereof. There shall be no abatement
in rents due and payable hereunder and no liability on the part of Landlord by
reason of any inconvenience, annoyance or disruption arising from Landlord's
making reasonable repairs, additions or improvements to the Building or Premises
in accordance with its obligations hereunder. Tenant will not do or permit
anything to be done in the Premises or the Building of which they form a part or
bring or keep anything therein which shall in any way increase the rate of fire
or other insurance for said Building, or on the property kept therein, or
obstruct, or interfere with the rights of other tenants, or in any way injure or
annoy them, or those having business with them, or conflict with them or
conflict with the fire laws or regulations, or with any insurance policy upon
said Building or any part thereof, or with any statutes, rules or regulations
enacted or established by the appropriate governmental authority. If any
increase in the rate of fire insurance or other insurance is stated by any
insurance company or by any insurance rate bureau due to any activity or
equipment of Tenant, such statement shall be conclusive evidence that the
increase in such rate is caused by such activity or equipment, and Tenant shall
be liable for such increase and shall reimburse Landlord therefor upon demand,
and any such sum shall be considered Additional Rent payable hereunder.

          In the event Landlord elects to make substantial improvements or
additions to the Building, Property or Premises, such improvements or additions
shall not adversely affect Tenant's use of or access to the Premises unless
Landlord has obtained the prior written consent of Tenant, which consent shall
not be unreasonably withheld, to make such improvements or additions which
affect Tenant's Premises in an adverse manner. Landlord shall be free to make
improvements or additions to the Building, Property or Premises which do not
have an adverse effect on Tenant's use of or access to the Premises.

          (b) Except as hereinafter expressly set forth Tenant will not make any
alterations, installments, changes, replacements, additions or improvements,
collectively "Alterations", in or to the Premises or any part thereof, without
the prior written consent of Landlord, not to be unreasonably withheld or
delayed. Any request to make alterations shall be in writing, and shall be
accompanied by a space plan in detail sufficient to permit Landlord to evaluate
its impact on the Building. Within seven (7) calendar days of its receipt of the
Space Plan, Landlord shall have given its written consent to such plan, or shall
have provided Tenant with a list of recommended changes. If a list of changes is
provided, Tenant will address the changes and resubmit the plan to Landlord for
approval. If Landlord fails to provide Tenant with its consent or recommended
changes with seven (7) calendar days of its receipt of the request and Space
Plan, such request and Space Plan shall be deemed to be approved. In the event
Landlord elects to have the Alterations remain upon the Premises following the
expiration of the Term, said written consent shall include Landlord's election.
It is expressly understood that all Alterations shall be performed in a good and
workmanlike manner and shall conform to all rules and regulations established
from time to time by any applicable underwriter's association and conform to all
requirements of local, state and federal governments. All Alterations shall be
made at Tenants sole expense, by contractors, or subcontractors reasonably
approved by Landlord, and only after (i) Tenant has obtained all necessary
permits from governmental authorities and (ii) Tenant has submitted complete
plans and specifications to Landlord with respect to the Alterations and
Landlord has approved them. If any mechanic's lien is filed against the Premises
or the Building for work or materials furnished to Tenant, the lien shall be
discharged or bonded off by Tenant solely at Tenant's expense, within thirty
(30) days after Tenant receives

                                       18
<PAGE>

notice thereof. Tenant shall indemnify and hold harmless Landlord from any and
all expenses (including attorney's fees), liens and claims or damage to persons,
property, or the Building which may arise from the making of any Alterations.
Tenant will deliver to Landlord a complete set of "as built" plans showing the
approved Alterations. Notwithstanding anything to the contrary in this Paragraph
14, Tenant shall have the right to make interior decorative non-structural
alterations to the Premises having an aggregate cost of less than $25,000 in any
one (1) year period without the consent of Landlord.

          It is also expressly understood that all Alterations upon the Premises
(whether with or without Landlord's consent), shall at the election of Landlord,
as provided in the written consent required hereinabove, remain upon the
Premises and be surrendered with the Premises at the expiration of this Lease
without disturbance, molestation or injury. Notwithstanding the foregoing,
provided (i) this Lease is in full force and effect, and (ii) there shall be no
uncured Event of Default existing as of the time of such removal, Tenant shall
have the right to remove, prior to the expiration or termination of this Lease,
all movable furniture, fixtures or equipment installed in the Premises solely at
Tenant's expense. Should Landlord elect that alterations, installments, changes,
replacements, additions to or improvements made by Tenant are not to remain on
the Premises, Tenant hereby agrees that within five (5) days following the
expiration of the Term of this Lease, Landlord shall have the right to cause
same to be removed at Tenant's sole cost and expense. Tenant hereby agrees to
reimburse Landlord for the reasonable cost of such removal together with the
cost of restoring the Premises to its original condition, reasonable wear and
tear excepted.

      (c) Tenant shall not install any other equipment of any kind or nature
whatsoever which will or may necessitate any changes, replacements or additions
to or require the use of the water system, air conditioning system or the
electrical system of the Premises without the prior written consent of the
Landlord, which consent shall not be unreasonably withheld or delayed. In the
event that Tenant wishes to install machinery or mechanical equipment which may
cause noise or vibration to be transmitted to the structure of the Building or
any space therein, such machinery shall be installed and maintained by Tenant,
at Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate such noise and vibration. Tenant may, at its expense, install and
remove additional equipment and machinery used or useful in Tenant's business,
which equipment and machinery shall remain the property of Tenant and shall not
become part of the real estate, provided that such installation shall not reduce
the value of the Premises or its usefulness. Any equipment of Tenant not removed
by Tenant within ten (10) days after the expiration or earlier termination of
this Lease shall be considered abandoned by Tenant and may be appropriated,
sold, destroyed or otherwise disposed of by Landlord without first giving notice
thereof and without obligation to account therefor. Notwithstanding any other
provision of this Lease, Tenant may not install any equipment which emits
electromagnetic, microwave, ultrasonic, laser, or other radiation which Landlord
determines causes a risk to persons or property, or interferes with
telecommunications transmissions or computer use.

      (d) Subject to Landlord's obligations to maintain and repair the
Premises in accordance with this Paragraph 14, Tenant agrees that it will take
good care of the Premises and the fixtures therein and will, at the expiration
or other termination of the Term hereof, surrender and deliver up the same in
like good order and conditions as the same now is or shall be at the
commencement of the Term hereof, ordinary wear and tear and damage by insured
casualty excepted. Without limiting the generality of the foregoing, Tenant
shall promptly make all repairs to the Premises or to any. part of the Building,
to the extent such repairs are not covered by insurance and if such repairs are
necessitated by any act or omission of Tenant, any subtenant, assignee or
concessionaire of Tenant, any of its respective agents or employees, or by the
failure of Tenant to Perform any of its obligations under this Lease. In
addition, Tenant shall be solely responsible, at its expense, for maintaining
the roof of the Premises in good condition, consistent with the manufacture's
standards for maintenance, utilizing contractors reasonably designated or
approved by Landlord. Landlord will use commercially reasonable efforts to
assign or otherwise make available to Tenant any warranties obtained by

                                       19
<PAGE>

Landlord in connection with the roof, and will use commercially reasonable
efforts to cooperate with Tenant in enforcing such warranties.

     15.  PARKING AND LOADING AREAS.

          (a) During the Term of this Lease, Tenant shall have, without charge,
the right to utilize the Building's parking facilities, consisting of two
hundred sixty five (265) parking spaces for passenger vehicles upon such non-
financial terms and conditions as may from time to time be reasonably
established by Landlord in writing. The location of such parking facilities is
shown on Exhibit G. Landlord shall not grant unto any other tenant of
TransDulles Centre the right to park vehicles in such parking facilities, and
Landlord shall use commercially reasonable efforts to prohibit any such other
tenant from parking vehicles in such parking facilities, but in no event shall
Landlord have any obligation to impose any physical barrier to use of the
parking area by parties other than Tenant, its employees, invitees, vendors,
suppliers and contractors, or to tow vehicles from the parking area. Parking is
specifically prohibited on the streets adjacent to the Building, including Glenn
Drive, Sally Ride Drive, and Davis Drive. Tenant shall be responsible for
monitoring and enforcing these restrictions with respect to the vehicles used by
its employees, vendors, suppliers and contractors, and by parties visiting the
Premises. It is understood and agreed that Landlord assumes no responsibility,
and shall not be held liable, for any damage or loss to any automobiles parked
in the parking facilities or to any personal property located therein, or for
any injury sustained by any person in or about the parking facilities, or for
and claim arising from the unauthorized use of the parking areas by any party
other than Tenant, its employees, invitees, vendors, suppliers and contractors,
regardless of the cause. The parking facilities and areas adjacent to the
loading docks serving the Premises may not be used for storage or repair of
vehicles.

          (b) During the Term of this Lease, Tenant shall have, without charge,
the right to utilize the paved areas adjacent to the loading docks serving the
Premises for shipping and receiving. Landlord shall not be liable to Tenant as a
result of any inability of Tenant to access such docks due to the parking of
vehicles in the vicinity of such loading docks, or otherwise. Truck parking
shall be restricted to such loading docks, and, subject to applicable
governmental restrictions, to the areas in the rear of the Building in the
vicinity of such loading docks identified in Exhibit G as the truck Parking
Area. Truck parking is specifically prohibited in the parking areas located in
front of and on the sides of the Building designated for automobiles, and on the
streets located adjacent to the Building, including Glenn Drive, Sally Ride
Drive, and Davis Drive. Tenant shall be responsible for enforcing these
restrictions with respect to trucks making pickups and deliveries at the
Premises, or otherwise serving the Premises.

     16.  SIGNAGE

          Tenant shall be entitled to install, at its sole expense, one (1)
building mounted exterior sign providing identification of Tenant, and/or one
monument sign, subject to Landlord's prior written approval, which shall not be
unreasonably withheld, conditioned or delayed, as to location, design, color,
lighting, and specifications, and to applicable Loudoun County regulations.
Landlord shall not install, erect or maintain any signs on the interior or
exterior of the Building or on the Property during the Term, except that unless
this Lease shall have previously extended or renewed, Landlord may erect a "For
Rent" sign during the last twelve (12) months of the Term; provided, however,
that such sign shall not obstruct any sign of Tenant or interfere unreasonably
with the conduct of Tenants business at the Premises.

     17.  TENANT'S EVENT OF DEFAULT.

          (a) Definition. As used in the provisions of this Lease, each of the
following events shall constitute, and is hereinafter referred to as, an "Event
of Default":

                                       20
<PAGE>

          (i)  If Tenant (1) fails to pay Base Rent, Additional Rent or any
other sum which Tenant is obligated to pay by any provision of this Lease, when
and as it is due and payable hereunder and without demand therefor, or (2) in
any material respect violates any of the terms, conditions or covenants set
forth in the provisions of this Lease; or

         (ii)  If Tenant (1) applies for or consents to the appointment of a
receiver, trustee or liquidator of Tenant or of all or a substantial part of its
assets, (2) files a voluntary petition in bankruptcy or admits in writing its
inability to pay its debts as they come due, (3) makes an assignment for the
benefit of its creditors, (4) files a petition or an answer seeking a
reorganization or an arrangement with creditors, or seeks to take advantage of
any insolvency, law, (5) performs any other act of bankruptcy, or (6) files an
answer admitting the material allegations of a reorganization insolvency
proceeding.

        (iii)  If an order of relief or other order, judgement or decree is
entered by any court of competent jurisdiction adjudicating Tenant as insolvent,
or otherwise entitled to the protection of or subject to any bankruptcy statute,
approving a petition seeking such a reorganization, or appointing a receiver,
trustee or liquidator of Tenant or otherwise commence with respect to Tenant or
any of its assets any proceeding under any bankruptcy, reorganization,
arrangement, insolvency, readjustment, receivership or similar law, and if such
order, judgement, decree or proceeding continues unstayed for more than sixty
(60) consecutive days after the expiration of any stay thereof.

     (b)  Notice of Default; Cure Period. Anything contained in the
provisions of this Paragraph to the contrary notwithstanding, no Event of
Default Tenant shall not be deemed to have occurred, and Landlord shall not
exercise any right or remedy which it holds under any provision of this Lease or
under applicable law unless and until;

          (i)  Landlord has given written notice ("Notice of Default")
thereof to Tenant, and

         (ii)  Tenant has failed, (1) if such Event of Default consists of
the failure to pay money, within five (5) calendar days after issuance of the
Notice of Default to pay all of such money, together with interest thereon and
any late payment charge which may be due hereunder of five per cent (5%) levied
on all monies due to Landlord in accordance with Paragraph 3(g) as of the date
of issuance of the Notice of Default, or (2) if such Event of Default consists
of something other than the failure to pay money, within thirty (30) calendar
days after issuance of the Notice of Default to commence actively, diligently
and in good faith to proceed to cure such Event of Default and to continue to do
so until it is fully cured; provided however, if Tenant commence, to cure such
default during such thirty (30) day period, and such default cannot be cured
within such period despite diligent effort, Tenant shall be afforded such
additional time as may reasonably required to affect a cure provided that Tenant
continues to diligently pursue such cure.

        (iii)  No such notice shall be required, and Tenant shall be
entitled to no such grace period, (1) if Tenant has substantially terminated or
is in the process of substantially terminating its continuous occupancy and use
of the Premises for the purpose set forth in the provisions of Paragraph 5, or
(2) if any Event of Default enumerated in the provisions of Paragraphs 17(a)(ii)
or 17(a)(iii) has occurred.

     (c) Landlord's Rights upon Event of Default. Upon the occurrence of an
Event of Default, Landlord, at its option, may terminate this Lease, and with
our without terminating this Lease, may pursue any and all other remedies
available to it under the laws of the Commonwealth of Virginia, including, by
way of example rather than of limitation, the rights to:

                                       21
<PAGE>

           (i)  re-enter and repossess the Premises, with lawful force, and any
and all improvements hereon and additions thereto;

          (ii)  at Landlord's option, immediately recover an amount equal to the
present: value (as of the date of Tenant's default) of the Base Rent and
Additional Rent which would have become due through the date on which the Lease
Term would have expired but for Tenants default, less such amounts as Tenant
proves could reasonably have been avoided by Landlord through the exercise of
commercially reasonable efforts to relet the Premises, which damages shall be
payable to Landlord in a lump sum on demand. For purposes of this Section,
present value shall be computed by discounting at a rate equal to one (1) whole
per cent point above the "prime rate" then in effect at Morgan Guaranty Trust
Company of New York, and collect such balance in any manner not inconsistent
with applicable law; and/or

         (iii)  relet any or all of the Premises for Tenant's account for any
or all of the remainder of the Lease Term, or pay to Landlord any deficiency in
the Rent and any other sum which Tenant is obligated to pay resulting, with
respect to such remainder, from such reletting, as well as the out-of-pocket
cost to Landlord of any reasonable fees relating to reletting of the Premises
including but not limited to construction costs, brokerage fees, reasonable
attorney's fees or of any repairs or other action (including those taken in
exercising Landlord's rights under any provision of this Lease) taken by
Landlord on account of such Event of Default.

     Landlord's rights and remedies set forth in this Lease are cumulative and
in addition to Landlord's other rights and remedies at law or in equity,
including those available as a result of any anticipatory breach of this Lease.
Landlord's exercise of any such right or remedy shall not prevent the concurrent
or subsequent exercise of any other right or remedy. Landlord's delay or failure
to exercise or enforce any of Landlord's rights or remedies or Tenant's
obligations shall not constitute a waiver of any such rights, remedies or
obligations. Landlord shall not be deemed to have waived any default unless such
waiver expressly set forth in an instrument signed by Landlord. Any such waiver
shall not be construed as a waiver of any covenant or condition except as to the
specific circumstances described in such waiver. Neither Tenant's payment of an
amount less than a sum due nor Tenant's endorsement or statement on any check or
letter accompanying such payment shall be deemed an accord and satisfaction.
Notwithstanding any request or designation by Tenant, Landlord may apply any
payment received from Tenant to any payment then due. Landlord may accept the
same without prejudice to Landlord's right to recover the balance of such sum or
to pursue other remedies, Re-entry and acceptance of keys shall not be
considered an acceptance of a surrender of this Lease.

          (d) Right of Landlord to Cure Tenants Default. If Tenant defaults in
the performance of any of its obligations under this Lease, then Landlord shall
have the right (but not the duty) to perform such obligation, and Tenant shall
reimburse Landlord for any costs and expenses thereby incurred, together with
interest: thereon at that rate per annum which is two per cent (2%) greater than
the "prime rate" then in effect at Morgan Guaranty Trust Company of New York,
from the date such costs and expenses are incurred by Landlord to the date of
payment thereof by Tenant; provided, however, that nothing herein contained
shall be construed or implemented in such a manner as to allow Landlord to
charge or receive interest in excess of the maximum legal rate then allowed by
law. Such payment and interest shall constitute Additional Rent hereunder, which
shall be due and payable with the next monthly installment of Rent; but the
making of such payment or the taking of such action by Landlord shall not
operate to cure such default or to stop Landlord from the pursuit of any remedy
to which Landlord would otherwise be entitled.

          (e)  Intentionally omitted.

                                       22
<PAGE>

          (f) No Waiver. If Landlord institutes legal proceedings against Tenant
as to any matter under this Lease and a compromise or settlement is made,
Landlord shall not be deemed to have waived any rights under this Lease except
as explicitly set forth in a written agreement signed by Landlord evidencing
such compromise or settlement. No waiver by Landlord of any breach of any
covenant, condition, or agreement in this Lease shall operate as a waiver of
such covenant or condition itself or of any subsequent breach thereof. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
installments of Rent herein stipulated shall be deemed to be other than a
payment on account, nor shall any endorsement or statement on any check or
letter accompanying a check for payment of Rent be deemed an accord and
satisfaction, and Landlord may accept such check prepayment without prejudice to
Landlord's right to recover the balance of such Rent or to pursue any other
remedy provided in the Lease. No re-entry by Landlord, and no acceptance by
Landlord of keys from Tenant, shall be considered an acceptance of a surrender
of the Lease.

     18.  HOLDING OVER.

     Tenant acknowledges that it is extremely important that Landlord have
substantial advance notice of the date on which Tenant will vacate the Premises,
became Landlord will (a) require a substantial period to locate a replacement
tenant, and (b) plan its entire leasing and renovation program for the Building
in reliance on its lease expiration dates. Tenant also acknowledges that if
Tenant fails to surrender the Premises at the expiration or earlier termination
of the Lease Term, then it will be conclusively presumed that the value to
Tenant of remaining in possession and the loss that will be suffered by Landlord
as a result thereof, far exceed the Base Rent and Additional Rent that would
have been payable had the Lease Term continued during such holdover period.
Therefore, if Tenant (or anyone claiming through Tenant) does not immediately
surrender the Premises or any portion thereof upon the expiration or earlier
termination of the Lease Term, then the rent shall be increased to One Hundred
Fifty percent (150%) of the Base Rent and Additional Rent that would have been
payable pursuant to the provisions of this Lease if the Lease Term had continued
such holdover period. Such rent shall be computed by Landlord on a monthly basis
and shall be payable on the first day of such holdover period and the first day
of each calendar month thereafter during such holdover period until the Premises
have been vacated. Notwithstanding any other provision of this Lease, Landlord's
acceptance of such rent shall not in any manner adversely affect Landlord's
other rights and remedies, including Landlord's right to evict Tenant and to
recover all damages. Any holdover shall be deemed to be a tenancy-at-sufferance
and not a tenancy-at-will or tenancy From month-to-month; provided, however,
that Landlord may, in addition to its other remedies, elect, in its sole
discretion, to treat such holdover as the creation of a month-to-month tenancy
with Tenant. In no event shall any holdover be deemed a permitted extension or
renewal of the Lease Term, and nothing contained herein shall be construed to
constitute Landlord's consent to any holdover or to give Tenant any right with
respect thereto. Except as otherwise specifically provided in this Article, all
terms of this Lease shall remain in full force and effect during the holdover
period.

     19.  LANDLORD'S RIGHT OF ENTRY.

     Landlord and its agents shall be entitled to enter the Premises at any
reasonable time, with reasonable prior notice (Landlord shall use commercially
reasonable efforts to provide no less than twenty four (24) hours notice, which
notice may be oral and provided to Tenant's on site facilities manager), except
in emergency,

          (a)  To inspect the Premises;

          (b)  To exhibit the Premises to any existing or prospective purchaser
or mortgagee thereof or, during the last nine (9) months of the Term, any
prospective tenant thereof, in which case Landlord shall use commercially
reasonable efforts to provide Tenant with no less than forty-eight (48) hours
notice (which

                                       23
<PAGE>

notice may be oral and provided to Tenant's on site facilities manager), and
shall use commercially reasonable efforts to inform Tenant of the identity and
affiliation of the parties to whom the Premises shall be exhibited;

          (c)  To make any reasonable and necessary alteration, improvement or
repair to the Premises; or

          (d)  For any other reasonable purpose relating to the operation or
maintenance of the Premises; provided, that Landlord shall (i) give Tenant
reasonable prior notice of its intention to enter the Premises, except in the
case of emergency, and (ii) use reasonable efforts to avoid thereby interfering
any more than is reasonably necessary with Tenants use and enjoyment thereof.

     20.  LIABILITY, TENANT'S INDEMNITY, INSURANCE.

          (a)  (i)  Landlord shall not be liable for, and Tenant shall indemnify
and hold Landlord harmless from and against, any injury, loss or damage of
whatever nature (including incidental and consequential damages) to any persons
or property, arising within the Premises. Commencing with the date on which the
Premises are made available to Tenant and continuing thereafter throughout the
Lease Term, Tenant shall maintain, at its sole expense, (i) general
comprehensive public liability insurance, including bodily injury, property
damage or other loss, insuring Tenant, Landlord, Landlord's Lender, Landlord's
Ground Lessor and Landlord's appointed agent with respect to the Premises and
their appurtenances, in a company or companies reasonably satisfactory to
Landlord, in an amount not less than Five Million Dollars ($5,000,000), (ii)
all-risk property and casualty insurance, including theft, written at
replacement cost value and with replacement cost endorsement, covering all of
Tenant's personal property in the Premises, and (iii) if, and to the extent
required by law, worker's compensation or similar insurance offering statutory
coverage and containing statutory limits. All such insurance shall: (1) be
issued by a company that is licensed to do business in the jurisdiction in which
the Building is located, that has been approved in advance by Landlord and that
has a rating equal to or exceeding A:XI from Best's Insurance Guide; (2) name
Landlord, its managing agent (or its successor) and the holder of any Mortgage
as additional insureds and/or loss payees as applicable (as their interests may
appear), except that the liability insurance shall not name Landlord's Mortgage
holder as an additional insured; (3) contain an endorsement that such insurance
shall remain in full force and effect notwithstanding that the insured may have
waived its right of action against any person or entity prior to the occurrence
of a loss (Tenant hereby waiving its right of action and recovery against and
releasing Landlord and its employees, affiliates, partners and agents from any
and all liabilities, claims and losses for which they may otherwise be liable to
the extent Tenant is covered by insurance carried or required to be carried
under this Lease); (4) provide that the insurer waives all right of recovery by
way of subrogation against Landlord, its partners, affiliates, agents and
employees, (5) be acceptable in form and content to Landlord; (6) be primary and
non-contributory; and (7) contain an endorsement prohibiting cancellation,
failure to renew, reduction in amount of insurance or change of coverage (A) as
to the interests of Landlord or the holder of the Mortgage by reason of any act
or omission of Tenant, and (B) without the insurer's giving Landlord thirty (30)
days' prior written notice of such action. No such policy shall contain any
deductible provision except as otherwise approved in writing by Landlord, which
approval shall not be unreasonably withheld. Landlord reserves the right from
time to time to require Tenant to obtain higher minimum amounts or different
types of insurance. Tenant shall deliver a certificate of all such insurance and
receipts evidencing payment of the premium for such insurance (and, upon
request, copies of all required insurance policies, including endorsements and
declarations) to Landlord concurrently with Tenant's execution of this Lease and
at least annually thereafter.

              (ii)  Tenant shall require any contractor retained by it to
perform any Alteration to carry and maintain at Tenant's or such contractor's
expense (and furnish the policy, policies or certificates thereof to Landlord,
Landlord's lender and Ground Lessor (provided Landlord has provided Tenant with
the

                                       24
<PAGE>

names and addresses of such lender and ground lessor, if any) during such times
as contractor is working in the Premises, (i) comprehensive general liability
insurance policy, including, but not limited to, contractor's liability
coverage, contractual liability coverage, complete operations coverage, broad
form property damage endorsement and contractor's protective liability coverage,
to afford protection with limits per person and for each occurrence, of not less
than One Million ($1,000,000), combined single limit, with respect to Personal
injury and death and property damage, such insurance to provide for no
deductible, to name Landlord, Landlord's lender and Ground Lessor as additional
insureds and (ii) worker's compensation insurance or similar insurance in form
and amounts as required by law.

                (iii) Landlord shall maintain insurance coverage for the
Building, the cost of such insurance shall be an Operating Cost for purposes of
paragraph 11 hereof, in such amounts and with such carriers and providing such
coverages as Landlord shall deem to be reasonable and necessary from time to
time for comparable buildings in the Sterling, Virginia area, including (a) fire
insurance, with standard extended coverage endorsement including demolition
costs, increased costs of construction, and contingent liability from changes in
building codes on the Premises, in an amount not less than the full replacement
value from time to time of the Premises; (b) flood insurance in an amount
Landlord may from time to time reasonably require, if the Premises are located
in an area designated as "flood prone" pursuant to the national Flood Insurance
Act of 1968 and the Flood Disaster Protection Act; (c) general comprehensive
public liability insurance, including bodily injury, property damage or other
loss; and (d) such other insurance as Landlord may require against such other
insurable hazards which at the time are customary and prudent under the
circumstances.

          (b)   All damages to the Premises or the Building of which they are a
part, caused by Tenant, or the agents, servants, employees and invitees of
Tenant, will be repaired by Landlord at the expense of Tenant, to the extent not
covered by insurance proceeds, with the right on the part of Landlord to elect
in its discretion to regard the same as Additional Rent, in which event such
cost or charge shall become Additional Rent payable with the installment of Base
Rent next becoming due or thereafter falling due under the terms of this Lease.
This provision shall be construed as an additional remedy granted to Landlord
and not in limitation of any other rights and remedies which Landlord has or may
have in said circumstances.

          (c) Without limiting the scope of the provisions of paragraph
18(a)(i), all Personal property of Tenant in the Premises or in the Building of
which the Premises is a part shall be at the sole risk of Tenant. Landlord shall
not be liable for any accident to or damage to the property of Tenant (nor for
any incidental or consequential damages) resulting from the use or operation of
the heating, cooling, electrical or plumbing apparatus or any other cause
whatsoever. Landlord shall not be liable in damages, nor shall this Lease be
affected, for conditions arising or resulting, and which may affect the Building
of which the Premises is a part, due to construction on contiguous premises
unless such construction renders the Premises untenantable or impractical for
use for Tenant's purposes.

          (d) Without limiting the scope of the provisions of paragraph
18(a)(i), Landlord assumes no liability or responsibility whatsoever to the
conduct and operations of the business to be conducted in the Premises. Landlord
shall not be liable for any accident to or injury to any person or Persons or
property in or about the Premises which are caused by the conduct and operation
of said business or by virtue of equipment or property of Tenant in said
Premises.

          (e) Without limiting the scope of the provisions of paragraph
18(a)(i), Landlord shall have no liability to Tenant, its employees, agents,
invitees, licensees, customers, clients, family members or guests for any
damage, compensation or claim (specifically including any incidental or
consequential damages) arising from the repair by Landlord of any portion of the
Premises or the Building, any interruption in the use of the Premises, accident
or damage resulting from the use or operation (by Landlord, Tenant or any other

                                       25
<PAGE>

person) of heating, cooling, electrical or plumbing equipment or apparatus, or
from untenantability of the Premises resulting from fire or other casualty
subject to Paragraph 13, or from any robbery, theft, mysterious disappearance
and/or any other casualty, or from any leakage in any part or portion of the
Premises or the Building, or from water, rain or snow that may leak into or flow
from any part of the Premises, or from drains, pipes or plumbing work in the
Building, or from any other cause whatsoever. The employees of Landlord are
prohibited from receiving any packages or other articles delivered to the
Premises for Tenant, and if any such employee receives any such package or
article, at the request of Tenant, such employee shall be the agent of Tenant
for such purposes and not of Landlord.

     21.  WAIVER OF SUBROGATION.

     If either party hereto is paid or indemnified by any proceeds under any
policy of insurance naming such party as an insured (or would have been paid or
indemnified by such proceeds if it had maintained all of the insurance coverages
it is required under this Lease to maintain), on account of any loss, damage or
liability, then such party hereby releases the other party hereto from any and
all liability for such loss, damage or liability, notwithstanding that such
loss, damage or liability, may arise out of the negligent act or omission of the
other party, its agents or employees.

     22.  EMINENT DOMAIN.

          (a)  If any or all of the Premises or parking spaces are taken by the
exercise of any power of eminent domain or are conveyed to or at the direction
of any governmental entity under a threat of any such taking (each of which is
hereinafter referred to as a "Condemnation"), Landlord, subject to subparagraph
(c) below shall be entitled to collect from the condemning authority thereunder
the entire amount of any award made in any such proceeding or as consideration
for such deed, without deduction therefrom for any leasehold or other estate
held by Tenant by virtue of this Lease.

          (b)  Tenant, subject to subparagraph (c) below, hereby (i) assigns to
Landlord all of Tenant's right, title and interest, if any, in and to any such
award, (ii) waives any right which it may otherwise have in connection with such
Condemnation, against Landlord, and (iii) agrees to execute any and all further
documents which may be required in order to facilitate the Landlord's collection
of any and all such awards.

          (c)  Notwithstanding the foregoing provisions of this Paragraph, if
there is a Condemnation, Tenant may, to the extent permitted by law, appear,
claim, prove and receive in the Condemnation proceeding (a) the unamortized
value over the Term of Tenant's property and its improvements and alterations to
the Premises and Building (but only to the extent that such value exceeds the
unamortized portion of the Tenant Work Allowance described in Exhibit D),
provided the same shall have been installed by or at Tenant's expense but
regardless of whether Tenant's property or the improvements and alterations
might be considered by law or otherwise as a part of the Premises or Building or
shall be or become Landlord's property under the provisions of this Lease, (b)
the value of Tenant's trade fixtures, equipment, and personal property that are
damaged, destroyed or taken hereunder, (c) the cost of relocation, (d) special
awards or allowances paid to tenants when their rental space is taken by eminent
domain, and (e) value of the leasehold of which it is deprived for the remainder
of the Term.

     23.  EFFECT OF CONDEMNATION.

          (a)  If (i) all of the Premises or parking areas are covered by a
Condemnation, or (ii) if any part of the Premises is covered by a Condemnation
and the remainder thereof is insufficient for the reasonable operation therein
of Tenants business, or (iii) any of the Building is covered by a Condemnation
and, in

                                       26
<PAGE>

Landlord's reasonable opinion, reasonably concurred in by Tenant, it would be
impractical to restore the remainder thereof, then, in any such event, the Term
shall terminate on the date upon which possession of so much of the Premises as
is covered by such Condemnation is taken by the condemning authority thereunder,
and all Rent (including, by way of example rather than of limitation, any
Operating Costs payable pursuant to the provisions of Paragraph 11), taxes, and
other charges payable hereunder shall be prorated and paid to such date.

          (b)  If there is a Condemnation and the Term does not terminate
pursuant to the foregoing provisions of this Paragraph, the operation and effect
of this Lease shall be unaffected by such Condemnation, except that the Base
Rent payable under the provisions of Paragraph 3 shall be reduced in proportion
to the square footage, if any, of the Premises covered by such Condemnation, and
Tenant shall be required to pay Base Rent and additional rent only for the
portion of the Premises that is usable while repair and restoration, if any, are
being made.

          (c)  Except as expressly provided in Paragraph 23 (b) above, If there
is a Condemnation, Landlord shall have no liability to Tenant on account of any
(i) interruption of Tenant's business upon the Premises, (ii) diminution in
Tenant's ability to use the Premises, or (iii) other injury or damage sustained
by Tenant as a result of such Condemnation.

          (d)  Except as provided in Paragraph 22(c), Landlord shall be entitled
to conduct any such condemnation proceeding and any settlement thereof free of
interference from Tenant, and Tenant hereby waives any right which it might
otherwise have to participate therein.

     24.  MECHANICS AND MATERIALMEN'S LIENS.

     Excluding labor or materials provided in connection with the construction
of the Building by Landlord, Tenant shall bond, remove or have removed any
mechanic's, materialmen's or other lien filed or claimed against any or all of
the Premises, by reason of labor or materials provided for or at the request of
Tenant of any of its contractors or subcontractors within thirty (30) days of
notice of filing said lien.

     25.  QUIET ENJOYMENT.

     Landlord hereby covenants that Tenant, on paying the Rent and performing
the covenants set forth herein, shall without interference from Landlord
peaceably and quietly hold and enjoy, throughout the Term, (i) the Premises, and
(ii) such rights as Tenant may hold hereunder with respect to the Premises.

     26.  SURRENDER.

          (a)  Upon the expiration or earlier termination of the Term, Tenant
shall surrender the Premises to Landlord in good order, cleanliness and repair,
ordinary wear and tear and damages from insured casualty excepted.

          (b)  Subject to Paragraph 14(c) hereof, any and all improvements,
repairs, alterations and all other property attached to, used in connection with
or otherwise installed upon the Premises (i) shall, immediately upon the
completion of the installation thereof, be and become Landlord's property
without payment therefor by Landlord, and (ii) shall be surrendered to Landlord
upon the expiration or earlier termination of the Term, except that any
machinery, equipment or fixtures installed by Tenant and used in the conduct of
Tenant's trade or business (rather than to service the Premises) shall remain
Tenant's property and shall be removed by Tenant within five (5) days after the
expiration or earlier termination of the Term, and

                                       27
<PAGE>

Tenant shall promptly and thereafter fully restore any of the Premises or the
Building damaged by such installation or removal thereof.

     27.  SUBORDINATION.

     This Lease is subject and. subordinate to all ground or underlying leases
and to all mortgages and/or deeds of trust which may now or hereafter affect
such leases or the real property, of which the Premises form part,(the
"Mortgage") and to all renewals, modifications, consolidations, re-castings,
replacements and extensions thereof. In confirmation of the foregoing
subordination, Tenant shall at Landlord's request promptly execute any requisite
or appropriate document. So long as Tenant receives the Mortgage holder's
agreement not to disturb Tenant and to perform all of Landlord's obligations
hereunder upon Foreclosure, Tenant waives the provisions of any statute or rule
of law now or hereafter in effect which may give or purport to give Tenant any
right to terminate or otherwise adversely affect this Lease or Tenant's
obligations in the event any such Foreclosure proceeding is prosecuted or
completed or in the event the Land, the Building or Landlord's interest therein
is sold at a foreclosure sale or by deed in lieu of foreclosure. If this Lease
is not extinguished upon such sale or by the purchaser following such sale,
then, at the request of such purchaser, Tenant shall attorn to such purchaser
and shall recognize such purchaser as the landlord under this Lease, if such
purchaser shall recognize this Lease, and perform all of Landlord's obligations
hereunder from and after the date of purchaser's acquisition of the Property.
Upon such attornment such purchaser shall not be (a) bound by any payment of the
Base Rent or additional rent more than one (1) month in advance, (b) bound by
any amendment of this Lease made without the consent of the holder of the
Mortgage existing as of the date of such amendment, (c) liable for damages for
any breach, act or omission of any prior landlord, or (d) subject to any offset
or defenses which Tenant might have against any prior landlord. Within fifteen
(15) days after receipt, Tenant shall execute, acknowledge and deliver any
requisite or appropriate document submitted to Tenant confirming such
attornment, in form and substance reasonably acceptable to Tenant, in
consideration of Tenant's receipt of the attorned party's agreement to recognize
this Lease and perform all of Landlord's obligations hereunder from and after
the date of purchaser's acquisition of the Property.

     28.  ESTOPPEL CERTIFICATE.

     Landlord and Tenant agree from time to time, upon not less than fifteen
(15) days' prior written notice by the other party, to execute, acknowledge and
deliver to such party or to any existing or prospective owner or mortgagee of
the Building or land upon which such Building has been built, or any interest in
either, a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or if there have been modifications, stating the
modifications and that the Lease is in full force and effect as modified), (ii)
stating the dates to which the Rent and any other charges hereunder have been
paid by Tenant, (iii) stating whether or not, to the knowledge of such party,
the other party is in default in the performance of any covenant, agreement or
condition contained in this Lease, and if so, specifying each such default of
which such party may have knowledge, (iv) stating that Tenant shall give notice
to any mortgagee prior to seeking to terminate the Lease by reason of any act or
omission of Landlord until such mortgagee has reasonable time, at its option, to
remedy such act or omission, and (v) stating the address to which notices to
Tenant, or Landlord, as the case may be, should be sent. Any such statement may
be relied upon by any existing or prospective owner or mortgagee of the Building
or aforesaid land or any interest in either or any assignee of any such person.

     29.  NOTICE.

     Any notice, demand, consent, approval request or other communication or
document to be provided hereunder to a party hereto, shall be in writing and
shall be deemed to have been provided (i) three (3) days after being sent by
certified or registered mail, return receipt requested, in the United States
mail, or (ii) the

                                       28
<PAGE>

next business day after delivery to a reputable commercial courier for next day
delivery. Any and all notices or other communications to Landlord and Tenant
shall be given as follows:

     Landlord:      TransDulles Center, Inc.
                    c/o The Mark Winkler Company
                    4900 Seminary Road, Suite 900
                    Alexandria, Virginia 22311
                    Attn: Michael D. Lynch, President

     Copy to:       TransDulles Center, Inc.
                    c/o J.P. Morgan Investment Management, Inc.
                    522 Fifth Avenue at 44th Street
                    New York, New York 10036

     Tenant:        HomeGrocer.com, Inc.
                    10230 N.E. Points Drive, Suite 300
                    Kirkland, WA 98033
                    Attn: Vice President of Operations

     Copy to:       HomeGrocer.com, Inc.
                    10230 N.E. Points Drive, Suite 300
                    Kirkland, WA 98033
                    Attn: Legal Department

Either party may hereafter designate a new address for notice purposes, by
giving notice as provided hereunder.

     30.  GENERAL.

          (a)  Complete Understanding. This Lease, including without limitation,
all Exhibits attached hereto, represents the complete understanding between the
parties hereto as to the subject matter hereof, and supersedes all prior
negotiations, representations, warranties, statements or agreements, either
written or oral, between the parties hereto as to the same.

          (b)  Amendment. This Lease may be amended by and only by an instrument
executed and delivered by each party hereto.

          (c)  Applicable Law. This Lease shall be given effect and construed by
application of the laws of the Commonwealth of Virginia.

          (d)  Time of Essence. Time shall be of the essence of this Lease.

          (e)  Headings. The headings of the Paragraphs and subparagraphs hereof
are provided herein for and only for convenience or reference, and shall not be
considered in construing their contents.

          (f)  Exhibits. Each writing or plat referred to herein as being
attached hereto as an exhibit or otherwise designated herein as an exhibit
hereto is hereby made a part hereof.

          (g)  Severability. No determination by any court, governmental body or
otherwise that any provision of this Lease or any amendment hereof is invalid or
unenforceable in any instance shall affect the

                                       29
<PAGE>

validity of enforceability of (a) any other provision thereof, or (b) such
provision in any circumstance not controlled by such determination. Each such
provision shall be valid and enforceable to the fullest extent allowed by, and
shall be construed wherever possible as being consistent with, applicable law.

          (h)  Definition of "Landlord". As used herein, the term "Landlord"
means the entity hereinabove named as such, and its successors and assigns.

          (i)  Definition of "Tenant". As used herein, the term "Tenant" means
the entity hereinabove named as such, and its successors and assigns, each of
whom shall have the same obligations, liabilities, rights and privileges as it
would have possessed had it originally executed this Lease, except that no such
right or privilege granted to Tenant hereunder shall inure to the benefit of any
assignee of Tenant, immediate or remote, unless the assignment to such assignee
is made in accordance with the provisions of Paragraph 12. Whenever two or more
persons constitute Tenant, all such persons shall be jointly and severally
liable for the performance of Tenant's obligations hereunder.

          (j)  Successors.    It is agreed that all/rights, remedies and
liabilities herein given to or imposed upon either of the parties hereto, shall
extend to their respective heirs, executors, administrators, successors and
assigns.

          (k)  Landlord's Authority. Landlord warrants that it is the owner of
the Building and Premises and has the full right and authority to make this
Lease. Tenant hereby accepts this Lease.

          (l)  Force Majeure. In the event that Landlord or Tenant shall be
delayed, or hindered, or prevented from the performance of any act required
hereunder (except for the payment of monies), by reason of government
restrictions, scarcity of labor or materials, or for other reasons beyond its
reasonable control, the performance of such act shall be excused for the period
of delay and the period for the performance of any such act shall be extended
for a period equivalent to the period of such delay.

          (m)  Recordation. The parties agree to execute a short form of this
Lease, which may, at Landlord's or Tenant's option, be recorded among the land
records of the jurisdiction where the Premises are located. The expense thereof
shall be borne by the party requesting recordation.

          (n)  Tenant's Corporate Authority. Tenant hereby warrants and
represents that each individual executing this Lease on behalf of Tenant is duly
authorized to execute and deliver this Lease and that Tenant is a duly organized
corporation under the laws of the State of its incorporation, is qualified to do
business in the Commonwealth of Virginia, and has the Power and authority to
enter into this Lease, and that all corporate action requisite to authorize
Tenant to enter into this Lease has been duly taken.

          (o)  Commission. Landlord and Tenant warrant that they have not had
any dealings with any realtor, broker or agent in connection with the
negotiation of this Lease, except for The Mark Winkler Company and Cushman &
Wakefield ("Brokers") whose commissions shall be paid for by Landlord pursuant
to the terms of a separate agreement between Landlord and the Brokers. Should
any claim for a commission be established by any other broker or agent, the
parties hereby expressly agree to hold one another harmless with respect thereto
to the extent that one or the other is shown to have been responsible for the
creation of such claim.

          (p) No Representations By Landlord. Tenant acknowledges that neither
Landlord or any broker, agent or employee of Landlord has made any
representations or promises with respect to the Premises

                                       30
<PAGE>

or the Building except as herein expressly set forth, and no rights, privileges,
assessments or licenses are acquired by Tenant except as herein expressly
provided

          (q)  Authority of Landlord. Landlord hereby represents and warrants
that it is a corporation duly organized and in good standing under the laws of
the Commonwealth of Virginia, that each individual or entity executing this
Lease on behalf of Landlord is authorized to do so, and that all action
necessary to authorize Landlord to enter into this Lease has been duly taken.

          (r)  Third-Party Consents. Landlord hereby represents and warrants
that (i) the execution and delivery of this Lease by Landlord, and the
performance of Landlord's obligations hereunder, do not conflict with or result
in any breach under the terms of any agreement to which Landlord is a party or
by which Landlord or the Premises is bound and (ii) all consents of any third
parties, including without limitation any ground lessor or mortgagee of the
Premises, required in connection with the execution and delivery of this Lease
have been obtained by Landlord, and Landlord shall furnish evidence of such
consents to Tenant upon Tenant's written request therefor.

          (s)  Litigation. The prevailing party shall recover all reasonable
attorney's fees and costs incurred by or on behalf of such prevailing party if
(a) either party institutes litigation for a breach of the terms and conditions
of this Lease, (b) either party institutes litigation for possession of the
Premises, (c) either party is made party to litigation instituted by a third
party relating to Premises. Such attorney's fees and costs may be levied against
the party whose conduct necessitated the use of an attorney whether or not
litigation is prosecuted to judgment.

          (t)  Assignment by Landlord. Landlord may freely assign its interest
hereunder. The term "Landlord" as used herein shall be deemed to be related only
to a person or entity during the time of his or its ownership of Landlords
interest in this Lease.

          (u)  WAIVER OF JURY TRIAL. LANDLORD AND TENANT WAIVE TRIAL BY JURY IN
ANY ACTION, CLAIM OR COUNTERCLAIM BROUGHT IN CONNECTION WITH LANDLORD-TENANT
RELATIONSHIP, TENANTS USE OR OCCUPANCY OF THE PREMISES OR ANY CLAIM OF INJURY OR
DAMAGE RELATING TO THIS LEASE. Landlord and Tenant and all Guarantors waive any
objection to the venue of any action filed in any court situated in the
jurisdiction in which the Building is located and waive any right under the
doctrine of forum non conveniens or otherwise to transfer any such action filed
in any such court to any other court.

     31.  ROOFTOP INSTALLATIONS.

     For no additional consideration, Landlord hereby grants to Tenant an
irrevocable license to install and maintain, during the Term, at locations on
the roof of the Building (the "Roof") to be determined by Landlord and Tenant in
their reasonable discretion, (i) up to three (3) satellite or microwave dishes
(the "Antennae"), (ii) refrigeration equipment, and (iii) heating, ventilating
and air conditioning equipment, (individually and collectively the "Rooftop
Installations"), subject to the terms and conditions of this Lease and the
following specific conditions:

          (a)  Tenant shall bear all costs and expenses associated with the
installation of the Rooftop Installations (including but not limited to any and
all costs of design and permitting, and any and all costs associated with
structural changes to the Roof necessary to bear the increased loads associated
with the Rooftop Installations), and Tenant shall be responsible for, and shall
bear all costs and expenses associated with, the

                                       31
<PAGE>

operation and maintenance thereof. Tenant understands and acknowledges that
Landlord shall not be responsible for the operation and maintenance of any such
Rooftop Installations.

          (b)  The plans and specifications for the Rooftop Installations,
including the manner of their attachment to the Roof, the structural analysis of
the ability of the Roof to bear the loads associated with them, their location,
and the nature and location of any roof penetrations and conduit, shall be
subject to the prior written approval of Landlord, which shall not be
unreasonably withheld, conditioned or delayed. Tenant shall install the Rooftop
Installations in a good and safe manner in accordance with the terms and
conditions of this Lease, by a contractor reasonably approved by Landlord.
Tenant shall provide reasonable notice to Landlord of the time and date upon
which it desires to install such Rooftop Installations. A representative of
Landlord and Landlord's roofing contractor shall, at Landlord's election, be
present at the installation of the Rooftop Installations in order to approve the
methods of installation and performance thereof; the reasonable and actual out-
of-pocket cost of the attendance of such representative and contractor shall be
borne by Tenant.

          (c)  Tenant shall have the responsibility to secure all necessary
approvals relating to the installation and operation of the Rooftop
Installations from state, federal and other governmental authorities. Further,
Tenant shall construct, operate and maintain such facilities in accordance with
all applicable laws, ordinances, rules and regulations and in compliance with
the reasonable requirements of the insurers of the Building.

          (d)  Tenant shall be responsible for the cost of repairs required to
the Building arising out of the construction, installation, operation,
maintenance, repair, replacement or removal of the Rooftop Installations and
related equipment and, in reasonable consultation with Landlord, shall take
commercially reasonable steps to minimize wear and tear on the roof, including
the use of walking pads. In furtherance thereof, Tenant agrees to indemnify,
defend and hold Landlord harmless from an against any and all such costs or
expenses (including reasonable attorneys fees) incurred by Landlord as a result
of the acts, omissions or  negligence of Tenant and its agents and contractors
in the construction, installation, operation, maintenance, repair, replacement
or removal of the Rooftop Installations and related equipment, including all
cable, wires and transformers related thereto.

          (e)  Tenant warrants that its Antennae will not cause measurable
interference with the radio signals of any transmitting or receiving equipment
installed at TransDulles Centre as of the date of installation by Tenant of its
Antennae; Tenant shall, at its sole expense, within twenty four (24) hours of
notice from Landlord, take whatever steps are necessary to eliminate such
interference. Similarly, from and after the date of execution of this Lease,
Landlord shall not use, nor shall Landlord permit its lessees, licensees,
employees, invitees or agents to use, any portion of TransDulles Centre,
including the roof of the Building, in any way which results in measurable
interference with the operations of Antennae or other Rooftop Installations.
Landlord, after prior written notice, shall have the right to require Tenant to
relocate or temporarily move any of the Antennae in order to reasonably
accommodate, at Landlord's sole cost, Landlord, any other tenant of TransDulles
Centre, or any other user of the roof.

          (f)  Tenant represents and warrants that the Antennae do and will not
emit levels of electromagnetic, microwave, or other radiation in excess of any
health-related standards now or hereafter established by any law or regulation.
In furtherance hereof Tenant agrees to indemnify, defend and hold Landlord
harmless from an against any and all such claims, losses, damages, costs or
expenses (including reasonable attorneys fees) incurred by Landlord as a result
of a claim by anyone that the Antennae, and the emissions therefrom, are in any
way harmful to human health.

                                       32
<PAGE>

          (g)  Landlord shall have no responsibility to insure or maintain the
Rooftop Installations, and Tenant, at its sole cost and expense, shall be
responsible for maintaining such insurance coverage with regard thereto as may
be reasonably required by Landlord. Both Tenant and Landlord should be reflected
as named insurers. Tenant shall be solely responsible for any damage or
destruction to the Rooftop Installations, regardless of the cause.

          (h)  Tenant acknowledges that as part of the installation of the
Rooftop Installations, Landlord may require Tenant to install screening
reasonably acceptable to Landlord in order to conceal the Rooftop Installations.

          (i)  Tenant shall pay all taxes of any kind or nature whatsoever
levied upon the Rooftop Installations and all licensing fees, franchise fees and
other taxes, expenses and other costs of any nature whatsoever relating to the
construction, ownership, maintenance and operation of the Rooftop Installations.

          (j)  Upon the expiration of the Term, or earlier termination of this
Lease, Tenant shall be responsible for removing the Rooftop Installations and
any associated equipment from their location on the roof, restoring the roof to
the condition in which it existed prior to the installation of the Rooftop
Installations (including complete repair of any roof penetrations and removal of
conduit), ordinary wear and tear (determined without consideration oft he
presence of the Rooftop Installations) and insured casualty damage excepted, and
repairing any damage caused by the presence and removal of the Rooftop
Installations and associated equipment.

     32.  LANDLORD'S OBLIGATIONS.

          (a)  If Landlord fails within fifteen (15) days after notice from
Tenant (i) to discharge any of its obligations imposed by a mortgage that is
superior to this Lease, or (ii) to pay any real estate taxes or assessments
imposed upon the Property, then Tenant may (but is not required to) discharge
such obligations, or pay such taxes, as the case may be, and may recover the
same from Landlord, together with interest thereon at the legal rate from the
date of payment to the date of recovery from Landlord.

          (b)  If Landlord fails to commence and diligently pursue any necessary
repairs to the Property or Premises within thirty (30) days after notice from
Tenant of the need for such repairs, and if the necessary repairs are of a
nature that the costs thereof are properly borne by Tenant under the provisions
of this triple net Lease, Tenant may (but is not required to) make such repairs
at its sole expense, and may not recover from Landlord the costs of such
repairs, it being understood by the parties that the obligation for payment of
the cost of such repairs is Tenant's responsibility under the provisions of this
Lease.

          (c)  If Landlord fails to commence and diligently pursue any necessary
repairs to the Property or Premises within thirty (30) days of notice from
Tenant of the need for such repairs, and if the necessary repairs are to the
structure of the Building, the costs of which are properly borne by Landlord
under this Lease, and if Landlord fails to commence and diligently pursue such
repairs within ten (10) days of a second notice from Tenant of the need for such
repairs, Tenant may (but is not required to) make such repairs, and may recover
the reasonable direct costs incurred by Tenant in connection with such repairs,
together with interest thereon at the legal rate from the date of payment to the
date of recovery from Landlord.

          (d)  Notwithstanding any other provision of this Lease or of
applicable law, Tenant may not deduct from Rent payable hereunder any amount
claimed due from Landlord hereunder. Tenant's sole remedy shall be to institute
an action in a court of competent jurisdiction to obtain a judgement against
Landlord. If Tenant or any Invitee is awarded a money judgement against
Landlord, then recourse for satisfaction of such

                                       33
<PAGE>

judgement shall be limited to execution against Landlord's estate and interest
in the Building and the Land, which interest shall be deemed to include the rent
payments due under this Lease.  No other asset of Landlord, any partner,
director or officer of Landlord (collectively, "Officer") or any other person or
entity shall be available to satisfy or subject to such judgment, nor shall any
Officer or other person or entity have personal liability for satisfaction of
any claim or judgment against Landlord or any Officer.

IN WITNESS WHEREOF, each party hereto has executed and ensealed this Lease, or
has caused it to be executed and ensealed on its behalf by its duly authorized
representatives, the day and year first above written.

ATTEST:                       LANDLORD:             TRANSDULLES CENTER, INC.

[ILLEGIBLE]                   By:    /s/ Douglas Lawrence           (Seal)
------------------------             ------------------------------

                              Name:  Douglas Lawrence
                                     ------------------------------
                              Title:     V.P.
                                     ------------------------------

ATTEST:    TENANT:               HOMEGROCER.COM, INC.

/s/ Ursula M. Lazo            By: /s/ C.J. Karaffa                 (Seal)
------------------------          ---------------------------------

                              Name:  C.J. Karaffa
                                     ------------------------------

                              Title: Sr. V.P. Operations
                                     ------------------------------

                                       34
<PAGE>

                                  EXHIBIT A-1
                               BUILDING FOOTPRINT

                               Plan appears here
<PAGE>

                                 [LETTERHEAD]

[LOGO]

                                  EXHIBIT A-2
                           LOT 49A-TRANSDULLES CENTRE

                       [Bowers & Associates Letterhead]

                          METES & BOUNDS DESCRIPTION
                                    LOT 49A
                                 SECTION FIVE
                         USS INDUSTRIAL PARK-STERLING
                                 PROPERTY OF:
                           TRANSDULLES CENTER, INC.
                           DULLES ELECTION DISTRICT
                           LOUDOUN COUNTY, VIRGINIA

BEING all of Lot 49A, Section Five, USS Industrial Park-Sterling as the same is
shown on that certain Boundary Line Adjustment (BLA) Plat entitled "Boundary
Line Adjustment & Consolidation/Vacation, Lots 49 & 50 - Section Five, USS
Industrial Park-Sterling and Lots 51A & 52A- Section Five, Industrial Park-
Sterling" as recorded in deed book (DB) 1670 at page (PG) 706 and being part of
the land conveyed by Deed of Confirmation Following Merger recorded in DB 1556,
PG 1717 (original deed of conveyance having been in the name of TransDulles Land
Company and recorded in DB 971, PG 1408) and all of the land conveyed by Special
Warranty Deed recorded in DB 1544, PG 2374, all among the land records of
Loudoun County, Virginia.

BEGINNING at a point in the southerly right of way (R/W) line of Glenn Drive, a
60' R/W (DB 903, PG 483), said point being S 14(degrees)15'15" W, 0.20' from an
iron pipe found (IPF) as shown on said BLA, said point also being in the line of
or a comer to Lot 48A, Willow Pond Condominium Office Park (DB 1036, PG 310) and
the northwesterly corner of the herein described Lot 49A:

Thence departing said Willow Pond Condominium Office Park and running with said
southerly R/W line of Glenn Drive and with Lot 49A;

S 75(degrees)46'22" E, 419.66' to an iron pipe set (IPS),

540.67' along the arc of a curve to the left with a radius of 848.51' and a
chord bearing N 85(degrees)58'23" E, 531.57' to a PK nail set, said PK nail
being a corner to Lot 56A, Section Five, USS Industrial Park-Sterling CDB 1024,
PG 1247),

Thence departing the southerly R/W line of Glenn Drive and running with said Lot
56A;

S 22(degrees)19'12" E, 208.37' to an IPS, said iron pipe being adjacent, or in
the line of, or a comer to Tax Map 94, Parcel 53 (property of Tung Hong Shoung,
et al as recorded in DB 1136, PG 1620),
<PAGE>

Thence departing Lot 56A and running with or adjacent to said Tax Map 94, Parcel
53 and generally along or adjacent to a stone wall;

S 33(degrees)33', 19" W, 903.67' to an IPS adjacent to Lot 6A, Commonwealth
Center (DB 828, PG 653), having departed along the way (running with or adjacent
to) Tax Map 94, Parcel 53 and the stone wall, and running thereafter adjacent to
said Lot 6A,

Thence continuing to run adjacent to Lot 6A (for part of the way) and Lot 5,
Commonwealth Center (thereafter);

N 55(degrees)28'28" W, 799.39' to an IPF, said iron pipe being a corner to the
aforementioned Willow Pond Condominium Office Park,

Thence no longer running adjacent to said Lot 5 and running with Willow Pond
Condominium Office Park;

N 14(degrees)15'15" E, 576.31' to the POINT OF BEGINNING, containing 700,847
square feet or 16.0892 acres of land more or less.
<PAGE>

                                  EXHIBIT A-3
                               TRANSDULLES CENTRE

                                 [SITE PLAN]
<PAGE>

EXHIBIT A-4
STANDARD OF MEASUREMENT

                [LETTERHEAD OF ARCHITECTURE, INC. APPEARS HERE]

February 4, 2000

Mr. Peter S. Scholz
Vice President - Asset Management
The Mark Winkler Company
4900 Seminary Road
Alexandria, VA 22311

Re: Square Footage Calculations for TransDulles Centre - Building 14

Dear Peter,

As discussed, Architecture, Inc. calculated the square footage for this building
by measuring from the centerline of the structural portion of the exterior wall
inward. The (structural) exterior walls of the building are tilt-up concrete
panels with a thickness of eight inches (8"). The calculated square footage
includes the building sprinkler and electric rooms as well as all recessed
entries.

The method of square footage measurement described above is a modified
industrial gross calculation. The modified industrial gross square footage
calculation for this building is 126,231 s.f.

Note: Normally the square footage for this type of industrial building is
calculated as industrial gross which is measured from the exterior face of the
exterior walls. The (standard) industrial gross square footage for this building
is 126,840 s.f.

Please feel free to contact me with any questions or concerns about the
information listed above. Let me know if any additional information is required.

Sincerely,

/s/ Christopher J. Corneau

Christopher J. Corneau, AIA
Principal
<PAGE>

                                  EXHIBIT A-5
                       LETTER AGREEMENT AS TO DESIGN FEES

[LETTERHEAD OF ERNST & YOUNG APPEARS HERE]

     December 10, 1999

     Mr. Peter S. Scholz
     The Mark Winkler Company
     4900 Seminary Road
     Alexandria. VA 22311

     Re: Indemnification for Design Fees

     Dear Mr. Scholz

     As discussed on December 9, 1999, HomeGrocer.com is very interested in
     pursuing the conversion of the proposed site development at TransDulles
     from its present two building plan to a single building of 126,000 square
     feet, HomeGrocer.com fully understands the landlord's concern at converting
     its proposed development before a binding lease has been signed by the
     parties, Accordingly, in order to assure the landlord of HomeGrocer.com's
     good faith, and as an inducement for the landlord to proceed with the
     conversion of the site and construction documents to a single building,
     HomeGrocer.com offers the following program of rent prepayment:

     1. Upon HomeGrocer.com's receipt of signed originals of this letter and of
        the original letter of intent, HomeGrocer shall pay the landlord the sum
        of $15,000,00.
     2. Upon receiving the proposed lease from the landlord, HomeGrocer.com
        shall pay the landlord the sum of $15,000,00
     3. Upon completion of the first round of negotiations of the terms of the
        lease. HomeGrocer.com shall pay the landlord the sum of $15,000.00. For
        the purposes of this letter, the first round of negotiations of the
        lease is deemed complete when HomeGrocer.com has delivered its comments
        in response to Landlord's proposed lease and Landlord and HomeGrocer.com
                                                 ---
        have discussed each of HomeGrocer.com's comments regarding the proposed
        lease and Landlord has communicated its response to HomeGrocer.com's
              ---
        comments after obtaining all necessary input from appropriate decision
        makers, and professional advisors.
     4. When the landlord delivers to HomeGrocer.com, the final lease
        agreement, reflecting all changes agreed to by both parties, and signed
        by the record owner of the property, HomeGrocer.com shall pay the
        landlord the sum of $15,000,00.

     HomeGrocer.com acknowledges that the lease would necessarily be contingent
     upon the proposed conversion being approved by all governmental agencies
     with jurisdiction and all requisite consents and permits issued.
     Accordingly, if despite the landlord's best efforts to obtain all above-
     mentioned approvals, consents and permits, any one or more such approvals,
     consents or permits cannot be obtained for the conversion and building of
     the project as a single building development, Landlord is entitled to apply
     lease prepaid rent towards those third party professional costs incurred by
     landlord in respect of the conversion of the project. Landlord shall
     provide HomeGrocer.com with copies of all such invoices as evidence of
     payment of such third party coats. All funds not applied towards such third
     party costs shall be returned to HomeGrocer.com by March 1, 2000.

     Of course, both parties shall work diligently to obtain all the above-
     mentioned approvals, consents and permits, and if our efforts are
     successful, and all such approvals, consents and
<PAGE>

     permits are obtained, and the proposed building constructed, then the
     entire $60,000 shall be credited towards the first month's rent payable
     under the lease.

     As I mentioned, HomeGrocer.com is proposing this arrangement to give the
     landlord comfort in changing its proposed development and so as to
     accelerate the construction and lease negotiation process for the benefit
     of both parties. Accordingly, the negotiation schedule is necessarily as
     follows:

     .   Landlord and HomeGrocer.com must enter into a letter of
         intent by 5:00 p.m., EST, on Tuesday December 14, 1999;
     .   Landlord shall provide HomeGrocer.com the proposed lease by Thursday
         December 16, 1999;
     .   HomeGrocer.com shall provide Landlord with HomeGrocer.com's comments
         on the proposed lease by Tuesday December 21, 1999.
     .   First negotiation of the lease must be completed by 5:00 p.m. EST on
         December 30, 1999;
     .   HomeGrocer.com and Landlord must sign the final lease agreement by
         5:00 p.m. on January 15. 2000.

     By entering into this agreement Landlord and HomeGrocer.com agree to act,
     in good faith and shall use their best possible efforts to perform and
     consummate the transactions contemplated and described in this letter, and
     to complete this matter by the timelines prescribed above. Further, in
     order to bring this matter to a mutually beneficial conclusion in a timely
     fashion, but in any event to complete negotiations no later than January
     30, 2000, the parties agree to negotiate exclusively with each other in
     respect of a lease arrangement for commercial warehouse space in the
     TransDulles sub-market of the Maryland and Virginia Washington DC real
     estate market.

     If these terms are acceptable to the landlord, please have an authorized
     signatory sign where indicated below, and return one original and an
     original letter of Intent to Ernst & Young LLP. HomeGrocer.com will then
     immediately-return to you the first prepayment of rent in the amount of
     $15,000.00.

     If you have any questions, please do not hesitate to call me. I can be
     reached at (425) 922 0365. HomeGrocer.com looks forward to a long, mutually
     beneficial relationship with you.

     Sincerely,

     /s/ John Martin for Daryl Stromswold
     Daryl L. Stromswood
     Director of Real Estate

     Agreed and Accepted:
     The Mark Winkler Company as Agent For
     TransDulles Centre Inc.

     By: /s/ Peter Scholz
         ----------------------------

     Name: Peter Scholz
           --------------------------

     Title: Senior Vice President
            -------------------------

     Date:  Dec 13, 1999
            -------------------------

     CC: John Martin, Ernst & Young LLP
         John W. Anderson, Cushman & Wakefield

<PAGE>

                                  EXHIBIT B
                                  ---------
                         DESCRIPTION OF BUILDING SHELL
                         -----------------------------
                               TransDulles Centre
                               Sterling, Virginia
                                  Building 14

Building Structure: The Building Shell shall be a tilt-up concrete structure
                    with interior steel columns supporting steel roof joists and
                    girders.

Exterior Finish:    The exterior surface of the tilt-up concrete panels shall be
                    painted with "Tex-Cote", a textured exterior coating
                    manufactured by Textured Coatings of America (TCA) in a
                    color scheme to be determined by Landlord, and reasonably
                    acceptable to Tenant.

Concrete Slab:      The building floor slab consists of an average thickness of
                    6" reinforced concrete above a 4" stone gravel base.

Structural Grid:    The typical column grid is 40' x 42'.

Loading Docks &
Overhead Doors:     The Building Shell is provided with twenty (20) loading
                    docks at thirty eight inches (38") above finished grade, and
                    eight loading docks at forty, eight inches (48") above
                    finished grade., The typical loading dock door is a 9' wide
                    x 10' tall insulated, sectional, steel door with two small
                    windows. These roll-up doors are opened manually with a
                    chain hoist.

Sprinkler System:   The Building Shell is provided with a wet-pipe sprinkler
                    system conforming with the requirements of NFPA 231C, Class
                    IV commodities, with storage allowed to 20'0" above finished
                    floor.

Storefront
Entrances:          Multiple storefront entrances occur along the front of the
                    Building. Storefront doors are provided with 1/4" tempered
                    tinted glass and adjacent storefront entrance windows are
                    provided with 1" insulated tinted glass, tempered where
                    required by code.

Clear Height:       The Building Shell is provided with a 24' interior clear
                    height at the roof joists. Note: The bottom of the roof
                    girders is approximately two feet lower than the bottom of
                    the roof joists bearing on that girder.

Roofing System:     A ballasted single-ply EPDM roof system will be installed on
                    the Building Shell. Roof drains and overflow drains will be
                    provided as required to comply with applicable codes. The
                    roofing system will be warranted for a period of ten years.

Unit Heaters:       Twenty five (25) joist-hung, gas-fired unit heaters are
                    provided to serve the Building Shell.

Interior Lighting:  Seventy Four (74) 400 watt, metal halide light fixtures are
                    provided to serve the Building Shell.

Windows:            Sixteen (16) 16' wide x 6' tall windows are provided at the
                    main level. All windows are 1" insulated and tinted glass
                    installed in an aluminum framing system. Standard 1"
                    aluminum horizontal blinds will be installed on all windows.
<PAGE>

Electrical Service: Subject to determination by Virginia Power as to the size of
                    the transformer to be installed to serve the Buildings the
                    Building Shell shall be provided with 4000 amp, 3 phase, 480
                    volt electric service to the Building's main electric
                    service panel.

Wall Insulation:    The perimeter walls are insulated with 6 1/4" FRK (Foil
                    Reinforced Kraft-faced/flame spread 25) glass fiber
                    insulation batts from 8'6" above finished floor to the
                    underside of roof deck. This insulation has an insulation
                    value of R-19.

Dumpster Pad:       Two (2) concrete pads for placement on each of a single
                    standard size trash dumpster shall be provided in the
                    exterior of the Building to service the Building.

Water:              The Building will be serviced by an eight inch (8") water
                    main which feeds an eight inch (8") fire line into the
                    Buildings Sprinkler Room. The Building's Domestic Water
                    Service will be provided by a two inch (2") water line to a
                    two inch (2") meter located in an outside crock. The
                    domestic water line size changes to three inches (3") from
                    the water meter into the Building.

Gas:                The Building will be serviced by a three quarter inch
                    (3/4") gas line to be installed by Washington Gas.

Sewer:              The Building will be serviced by a six inch (6") sanitary,
                    lateral.

Landlord shall consider in good faith any requests by Tenant for modifications
to the Building Shell made at any time during the course of the construction of
the Building Shell, but Landlord shall have no obligation to make any such
modification to the Building Shell. Tenant acknowledges that the time period
during which Landlord is evaluating and considering any such request may
constitute Tenant Delay. Landlord will use commercially reasonable efforts to
promptly provide Tenant with a commercially reasonable estimate of(i) the cost,
if any, of the requested modification, and (ii) the delay, if any, which will
likely result from the requested modification ("Landlord's Estimate of Cost and
Delay"). If the parties agree to proceed with any requested modification, then,
without regard to Landlord's Estimate of Cost and Delay: (i) Tenant shall be
solely responsible for the actual increase, if any, in the cost of construction
of the Building Shell resulting from the requested modification; and (ii) any
actual delay in the construction of the Building Shell resulting directly or
indirectly from the requested modification shall be considered a Tenant Delay.

                                       2
<PAGE>

                                   EXHIBIT C
                                   ---------
                                 RENT SCHEDULE
                            TransDulles Center, Inc.
                              HomeGrocer.com, Inc.
                            Sterling, Virginia 20164
<TABLE>
<CAPTION>

<S>                                                <C>
     Total Square Footage                             126,231
     Lease Term-Months                                    157
     Initial Annual Per Square Foot Rental Rate    $     8.65
     Initial Monthly Rental Rate                   $90,991.51
     Annual Rent Escalations                              3.0%
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Lease Year                Base Rent PRSF*                Annual Base Rent*                 Monthly Base Rent*
---------------------------------------------------------------------------------------------------------------------
<S>                      <C>                            <C>                               <C>
    1                           $8.65                     $1,091,898.12                        $90,991.51
---------------------------------------------------------------------------------------------------------------------
    2                           $8.91                     $1,124,718.24                        $93,726.52
---------------------------------------------------------------------------------------------------------------------
    3                           $9.18                     $1,158,800.64                        $96,566.72
---------------------------------------------------------------------------------------------------------------------
    4                           $9.45                     $1,192,882.92                        $99,406.91
---------------------------------------------------------------------------------------------------------------------
    5                           $9.74                     $1,229,490.00                       $102,457.50
---------------------------------------------------------------------------------------------------------------------
    6                           $10.03                    $1,266,096.96                       $105,508.08
---------------------------------------------------------------------------------------------------------------------
    7                           $10.33                    $1,303,966.20                       $108,663.85
---------------------------------------------------------------------------------------------------------------------
    8                           $10.64                    $1,343,097.84                       $111,924.82
---------------------------------------------------------------------------------------------------------------------
    9                           $10.96                    $1,383,491.76                       $115,290.98
---------------------------------------------------------------------------------------------------------------------
   10                           $11.29                    $1,425,147.96                       $118,762.33
---------------------------------------------------------------------------------------------------------------------
   11                           $11.62                    $1,466,804.28                       $122,233.69
---------------------------------------------------------------------------------------------------------------------
   12                           $11.97                    $1,510,985.04                       $125,915.42
---------------------------------------------------------------------------------------------------------------------
   13                           $12.33                    $1,556,428.23                       $129,702.35
---------------------------------------------------------------------------------------------------------------------
</TABLE>

*  Subject to Revision Following Approval of Amended Site Plan; Excludes
   Additional Rent as defined in Paragraph 3(h).
<PAGE>

                                   EXHIBIT D
                                   ---------
                                 WORK AGREEMENT
                                 --------------

     This Work Agreement (the "Agreement") is attached to and made a part of
that certain Deed of Lease ("Lease") of even date herewith, by and between
TRANSDULLES CENTER., INC. ("Landlord") and HomeGrocer.com, Inc. ("Tenant"). The
terms used in this Agreement that are defined in the Lease shall have the same
meanings as provided in the Lease.

1.  General
    -------

     1.1  Purpose. This Agreement sets forth the terms and conditions governing
          -------
     the design and construction of tenant improvements to be installed in the
     Premises (the "Tenant Work"). The parties contemplate that in addition to
     the construction of office space in a portion of the Premises, the Tenant
     Work shall include, but not be limited to: installation of HVAC service for
     the Premises; installation of substantial refrigeration equipment for the
     storage of perishable food products; installation of plumbing, electrical
     and mechanical systems necessary for Tenant's operations; racking systems
     for storage; and conveyor systems for moving products throughout the
     Premises.

     1.2  Construction Representatives. Landlord hereby appoints and Tenant
          ----------------------------
     hereby approves the following person as Landlord's representative
     ("Landlord's Representative") to act for Landlord in all matters regarding
     the Tenant Work and Tenant hereby appoints and Landlord hereby approves the
     following person as Tenant's representative ("Tenants Representative") to
     act for Tenant in all matters regarding the Tenant Work:

     Landlord's Representative:       Tenant's Representative:
     ---------------------------------------------------------

     Peter S. Scholz                   HomeGrocer.com, Inc.
     Senior Vice President             Senior Vice President
     The Mark Winkler Company          10230 N.E. Points Drive, Suite 300
     4900 Seminary Road, Suite 900     Kirkland, WA 98033
     Alexandria, Virginia 22311-1811
     (703) 578-7749

     With copies to:

     Neil Hunter                       HomeGrocer.com, Inc.
     Project Manager                   Attn: Director of Project Management-
     The Mark Winkler Company                Rich Buchco
     4900 Seminary Road, Suite 900     10230 N.E. Points Drive, Suite 300
     Alexandria, Virginia 22311-1811   Kirkland, WA 98033
     (703) 578-7770                    (425) 201-7875

                                        HomeGrocer.com, Inc.
                                        10230 N.E. Points Drive, Suite 300
                                        Kirkland, WA 98033
                                        Attn: Legal Department-Murray McLeod

                                        HomeGrocer.com, Inc.
                                        10230 N.E. Points Drive, Suite 300
                                        Kirkland, WA 98033
                                        Attn: Director of Real Estate-Daryl
                                              Stromswold
                                        Phone: (425) 201-7520
<PAGE>

                                        Fax: (425) 201-7875

          All inquiries, requests, instructions, authorizations or other
     communications with respect to the Tenant shall be made to Landlord's
     Representative or Tenant's Representative, as the case may be.
     Authorizations may each party's Representative shall be binding and each
     party shall be responsible for all costs authorized Representative. Either
     party may change its Representative at any time by written notice to the
     other party. Landlord shall not be obligated to respond to or act upon any
     plan, drawing, change order approval or other matter relating the Tenant
     Work until it has been executed by Tenant's Representative.

2.   Tenant Work Allowance.
     ---------------------

     2.1  Allowance for Tenant Work. Tenant shall receive, to be applied against
          -------------------------
     the costs associated with the design permitting and construction of the
     Tenant Work an amount of Eleven Dollars ($11.00) per rentable square foot
     of the Premises (the "Tenant Work Allowance"). Landlord shall pay such
     Tenant Work Allowance directly to Tenant or, at Tenant's option, to
     Tenant's architect or engineer or Tenant's general contractor, as the case
     may be, in accordance with the terms and conditions set forth in section
     2.2, below. All costs of the Tenant Work in excess of the Tenant Work
     Allowance shall be payable by Tenant. The costs of the Tenant Work shall
     include all costs to be expended in connection with the construction of the
     Tenant Work, including but not limited to the (i) architectural and
     engineering fees in connection with the preparation of the Construction
     Drawings and Specifications (as defined below); (ii) governmental agency
     plan check, permit and other fees (including any code compliance changes
     required by any governmental or authority having jurisdiction thereof);
     (iii) sales and use taxes, if any; (iv) insurance fees associated with the
     construction of the Tenant Work; (v) testing and inspecting costs; (vi) the
     actual costs and charges for material and labor, contractor's profit and
     contractor's general overhead incurred in constructing the Tenant Work;
     (vii) a fee to Landlord for the review of the Tenant Plans, processing of
     Tenant Work Allowance draws, general Landlord representation during the
     construction process, and coordination of the construction of the Tenant
     Work of Fifteen Thousand Dollars ($15,000.00), and (viii) other project
     related expenses (including but not limited to telecommunications cabling,
     moving expenses, furniture and furnishings, and professional fees other
     than architectural and engineering fees), provided however, that no more
     than Two Dollars and Fifty, Cents ($2.50) per rentable square foot may be
     used for items other than those encompassed in Section 2.1(i) through
     2.1(vii) above. Any portion of the Tenant Work Allowance not utilized by
     Tenant for items (i) through (viii) above within the first Lease Year, may
     be applied by Tenant to the installment(s) of Base Rent due commencing with
     the first and subsequent months of the second Lease Year.

     2.2  Disbursement of Tenant Work Allowance for Tenant Work. Except as
          -----------------------------------------------------
     otherwise set forth herein, Landlord, disburse portions of the Tenant Work
     Allowance by check once each month during the period of Tenant's
     construction of the Tenant Work, commencing no sooner than thirty (30)
     calendar days after Tenant shall have (i) commenced construction of the
     Tenant Work hereunder, (ii) provided Landlord written notice of such
     commencement of construction, and (iii) satisfied all other conditions set
     forth herein. The regular monthly Tenant Work Allowance disbursement date
     (the "Disbursement Date") shall be approximately thirty (30) days after
     Tenant's delivery to Landlord of a reasonably acceptable request for
     payment, in the form, and with supporting documentation, as set forth
     below, provided that Tenant submits such request, in proper form, with all
     required supporting documentation, no later than the first (1st) day of
     each calendar month.

          No more often than once each month, Tenant shall deliver to Landlord a
     request for payment in form and content reasonably acceptable to Landlord
     which shall include, without limitation, (i) a certification by Tenant and
     Tenant's architect of the percentage of completion of the Tenant Work; (ii)
     a detailed itemization of new costs incurred by Tenant and not previously
     reimbursed by Landlord; (iii) interim lien waivers for all preceding
     payments from the  general contractor and all subcontractors and suppliers,
     and (iv) a current lien waiver from the general contractor conditioned upon
     the clearance of funds from the payment of that portion of the Tenant Work
     Allowance contemplated

                                       2
<PAGE>

     by the request for payment. In the event Tenant fails to timely deliver the
     required information) Landlord shall have no obligation to disburse the
     Tenant Work Allowance to Tenant until the next following Disbursement Date,
     provided that the reasonably required information shall have been received.

          On the Disbursement Date, Landlord shall disburse to Tenant (or to
     Tenant's architect or Tenants general contractor, as directed by Tenant) a
     sum equal to the lesser of (i) "Landlord's Share" (as hereinafter defined)
     less a ten percent (10%) retention; or (ii) the balance of any remaining
     available portion of the Tenant Work Allowance less a ten percent (10%)
     retention. "Landlord's Share" shall mean a sum equal to the product
     obtained by multiplying the percentage of Tenant Work completed from the
     date of the last certification by Tenants architect, as such additional
     percentage may be verified by Landlord, by the Tenant Work Allowance, less
     the sum credited to Landlord in accordance with Section 2.1 (vii) above.
     Landlord shall have the right to withhold from any such disbursement such
     amount as Landlord reasonably deems necessary to account for items of
     Tenant Work which are not in accordance with the Tenant Plans (as
     hereinafter defined), and/or the reasonable standards of quality required
     by this Agreement. Disbursement by Landlord of a portion of the Tenant Work
     Allowance shall not be deemed to constitute a waiver of any rights or
     remedies available to Landlord as a result of Tenant's failure to complete
     the Tenant Work in accordance with the standards required by this
     Agreement, nor shall it constitute a representation or warranty by Landlord
     that such work complies with the Tenant Plans (as hereinafter defined) or
     any governmental law, code or regulation and no third party may rely on
     such disbursement as evidence that the Tenant Work complies with same.

     The sums retained by Landlord from each request for payment (less any
     amounts deducted therefrom in accordance with the provisions of this
     Agreement) shall be paid to Tenant within fifteen (15) calendar days after
     the last to occur of: (i) final completion and acceptance of the Tenant
     Work by Landlord's Representative after completion of all punch-list items;
     (ii) approval of the Tenant Work by all governmental agencies having
     authority therefore and issuance of a certificate of occupancy; or (iii),
     Tenants delivery to Landlord of final mechanic's lien releases from
     Tenant's subcontractors, laborers, materialmen and suppliers with respect
     to the Tenant Work in the form of Schedule I attached hereto and made a
     part hereof.

     In the event that any mechanic's lien is filed against the Building or
     Premises during the course of the Tenant Work, then, unless the same has
     previously been released or bonded off, Landlord shall have the right to
     withhold from the Tenant Work Allowance a sum equal to two hundred percent
     (200%) of the disputed amount. Landlord shall have the right to make
     payment of the disputed sum directly to the claimant to cause the release
     of any mechanic's lien that has been filed against the Building or Premises
     where said lien has not been removed by the recordation of either a release
     of mechanic's lien or a statutory lien release bond issued by a corporate
     surety reasonably acceptable to Landlord within thirty (30) days following
     the date Tenant receives notice of filing of the mechanic's lien.

3.   Design and Schedule.
     -------------------

     3.1  Tenant Plans for Tenant Work.
          ----------------------------

          (a) Space Plan: The "Space Plan" as used herein shall mean a plan
          containing, among other things, a partition layout, door location,
          location of all freezer and refrigerator units, and some furniture
          located in key spaces within the Premises.

          (b) Construction Drawings and Specifications: The "Construction
          Drawings and Specifications" as used herein shall mean the
          construction working drawings, the mechanical, electrical, plumbing)
          and other technical specifications, and the finishing details,
          including wall finishes and colors and technical and mechanical
          equipment installation, if any, all of which details the installation
          of the Tenant Work in the Premises. The Construction Drawings and
          Specifications shall:

                                       3
<PAGE>

             (i)    be reasonably compatible with the Base Building Shell, and
                    with the design, construction and equipment of the
                    Building;

             (ii)   comply with all applicable laws, codes and ordinances
                    (including without limitation the Americans With
                    Disabilities Act, the Clean Air Act, the Occupational Safety
                    and Health Act, BOCA and NFPA, to the extent that they are
                    applicable) and the rules and regulations of all
                    governmental authorities having jurisdiction;

             (iii)  comply with all applicable insurance regulations and the
                    requirements of the Board of Underwriters for a fire
                    resistant building of this type and use; and

              (iv)  include locations of all Tenant Work including complete
                    dimensions.

          (c) Except as specified by Landlord pursuant to Section 8 hereof, and
                                                          ---------
          Paragraph 14(b) of the Lease, all Tenant Work, whether covered by the
          Tenant Work Allowance or nor, which is permanently affixed to the
          Premises or alters the operational systems or structure of the
          Building (excluding Tenant's personal property and trade fixtures)
          shall in Landlord's sole and absolute discretion become the property
          of Landlord upon expiration or earlier termination of the Lease and
          shall remain on the Premises at all times during the term of the
          Lease.

     3.2  Approvals by Landlord. Within thirty (30) calendar days of execution
          ---------------------
     of the Lease by Tenant and Landlord, Tenant shall provide Landlord with
     three (3) copies of the Space Plan. Within seven (7) calendar days of its
     receipt of the Space Plan, Landlord Shall have given its written approval
     of such plan, or shall have provided Tenant with a list of reasonably
     recommended changes. If a list of changes is provided, Tenant will address
     the changes and resubmit the plan to Landlord for approval, and Landlord
     shall review such resubmission in the manner and within the time frames
     applicable to the initial submission of the Space Plan. Should Landlord
     fail to provide such notice to Tenant within seven (7) calendar days of
     Landlord's receipt of notice from Tenant that such notice of approval of
     the Space Plan or reasonably recommended changes has not been timely
     received, such Space Plan shall conclusively be deemed to have been
     approved. Upon approval of the Space Plan by Landlord, Tenant shall cause
     its architects and engineers to prepare the Construction Drawings and
     Specifications for the Tenant Work, and shall provide Landlord with three
     (3) complete sets thereof. Landlord shall provide to Tenant within seven
     (7) calendar days of its receipt of three (3) sets of full and final
     Construction Drawings and Specifications, notice of any refusal to approve
     any aspect of such plans, which notice shall state those elements of the
     Construction Drawings as to which Landlord does not approve. Should
     Landlord fail to provide such notice to Tenant within seven (7) calendar
     days of Landlord's receipt of notice from Tenant that such notice of
     approval or refusal to provide approval has not been timely received, such
     Construction Drawings and Specifications shall conclusively be deemed to
     have been approved. The Construction Drawings and Specifications as
     approved by Landlord are referred to herein as the "Tenant Plans." Any
     changes, additions or modifications that Tenant desires to make to the
     Tenant Plans shall also be subject to Landlord's prior written approval, in
     accordance with the time periods and standards set forth herein. Landlord's
     approval of the Space Plan and the Construction Drawings and Specifications
     shall not be unreasonably withheld, except that Landlord shall have
     complete discretion with regard to granting or withholding approval of
     Construction Drawings and Specifications to the extent they impact the
     Buildings structure, or would be visible from the exterior of the Building.
     Landlord's review of the Rooftop Installations contemplated by Paragraph 31
     of the Lease shall be governed by such Paragraph 31.

4.  Construction of Tenant Work. Following Landlord's final approval of the
    ---------------------------
Construction Drawings and Specifications and Tenant obtaining the required
permits, Tenant shall commence and diligently proceed with the construction of
the Tenant Work. Landlord and Tenant acknowledge that Tenant shall hire its own
general contractor or contractors to complete the Tenant Work, subject to
Landlord's reasonable approval as provided in subparagraph 4(b) below. The
Tenant Work shall be conducted with such diligence, in a good and workmanlike
manner, lien free, utilizing new materials, and in accordance with the Tenant

                                       4
<PAGE>

Plans, and all applicable laws, codes, ordinances and rules and regulations of
all governmental authorities having jurisdiction and in accordance with the
Specifications for General Contractors attached hereto and made a part hereof as
Schedule II. The Tenant Work shall include any modifications required to the
Building Shell, if any, associated with Tenant's intended and Permitted Use;
Landlord shall use commercially reasonable efforts to cooperate with Tenant in
connection with the design and construction of any modifications to the Building
Shell, so as to attempt to reduce, to the extent commercially reasonable under
the circumstances, the cost of such modifications, and the time necessary for
their design and construction. Tenant shall cause any lien placed on the
Premises or Building as a result of the Tenant Work to be removed as provided in
Paragraph 14(b) of the Lease.

Tenant hereby agrees to indemnify and cause the general contractor and all
subcontractors which it engages to perform the Tenant Work to indemnify Landlord
and its agents, and hold Landlord and its agents harmless from any and all
claims for personal or bodily injury and property damage that may arise in whole
or in part from the performance of the Tenant Work, whether resulting from the
negligence or willful misconduct of its general contractors, subcontractors or
otherwise. Tenant and its contractors and subcontractors shall execute such
additional documents as Landlord deems reasonably appropriate to evidence said
indemnity.

Notwithstanding the foregoing, Tenant shall not commence the Tenant Work until
the following have been provided to Landlord:

          (a) Insurance. Prior to construction, Tenant shall provide Landlord
              ---------
     with an original certificate of All-Risk Builder's Risk Insurance (the
     "Builder's Risk Insurance Policy"), subject to Landlord's reasonable
     approval, in the minimum amount of the replacement cost of the Tenant Work
     issued by a company or companies reasonably acceptable to Landlord and
     authorized to do business in Virginia, covering the Premises, with premiums
     prepaid, and which names the Landlord as an additional insured. Said policy
     shall insure the Tenant Work, the Premises, the Building, and all materials
     and supplies for the Tenant Work stored on the Premises (or at any other
     sites) against loss or damage by fire and the risks and hazards insured
     against by the standard form of extended coverage, and against vandalism
     and malicious mischief, and such other risks and hazards as Landlord may
     reasonably request. Said insurance coverage shall be for 100% of
     replacement cost, including architectural fees. The Builder's Risk
     Insurance Policy shall contain a provision that the insurance company
     waives the right of recovery or subrogation against Landlord, Landlord's
     management company, and their agents, servants, invitees, employees, co-
     Tenants, co-venturers, affiliate companies, and insurers.

          (b) Approved List of Contractors. A list of the general contractors
              ----------------------------
     and all subcontractors that are to supply labor and material for the Tenant
     Work, subject to the reasonable approval by Landlord within seven (7)
     calendar days of submission of such list, considering the quality,
     reputation, experience in type of construction and experience in the
     Northern Virginia and Maryland area, personnel, and financial strength of
     such general contractor and subcontractors. All general contractors and
     major subcontractors shall be bondable. Notwithstanding any other provision
     of the Lease or of this Agreement, Tenant shall be required to engage a
     roof contractor reasonably designated or approved by Landlord with respect
     to any work to be performed on the roof of the Building, including but not
     limited to any roof penetrations reasonably approved by Landlord, in order
     that Landlord may protect the integrity of the roof, and may maintain in
     full force any and all warranties which may have been issued to Landlord in
     connection with the installation of the roof.

          (c) Governmental Permits. Building permits and other appropriate
              --------------------
     permits and licenses from the appropriate agency or office of any
     governmental or regulatory body having jurisdiction over the Premises and
     which are required for the construction of the Tenant Work.

          (d) Additional Insurance. Additional insurance in the form of and
              --------------------
     meeting the requirements of Schedule III attached hereto.
                                 ------------

                                       5
<PAGE>

          (e) Accepted Bid. Tenant shall provide Landlord with a copy of the
              ------------
     general contractor bid selected (the "Accepted Bid"), including the name of
     the general contractor and all subcontractors, materialmen and suppliers.

5.  Change Orders. Tenant shall not make any change or addition to or
    -------------
subtraction from the Tenant Work ("Change Order")   after Tenants and Landlord's
approval of the final and complete Tenant Plans without the prior written
approval of Landlord. Landlord shall respond to Tenants request for consent as
soon as possible, but in no event later than seven (7) calendar days after such
request is received by Landlord. Landlord's consent to any changes, additions or
modifications that Tenant desires to make to the Tenant Plans shall not be
unreasonably withheld, conditioned or delayed, except that Landlord shall have
complete discretion with regard to granting or withholding approval for Change
Orders affecting the Building's structure or with respect to changes which would
be visible from the exterior of the Building.

6.  Cooperation With Other Tenants. Tenant shall at no time unreasonably disrupt
    ------------------------------
or allow unreasonable disruption to any existing tenant's parking vehicles and
pedestrian access, nor allow disruptions of mechanical, electrical, telephone
and plumbing services, or interference with the normal business operations of
any other tenant of TransDulles Centre, except as provided below. Tenant
contemplates that the Tenant Work may, of necessity, involve interruption of
normal mechanical, electrical, telephone and plumbing services, and Tenant shall
cooperate with Landlord and other tenants of TransDulles Centre to avoid
disruption of the normal business operation of any other tenant of TransDulles
Centre. Any such interruption or disruption shall be restricted to after Normal
Business Hours and shall be subject to Landlord's prior consent and approval
regarding scheduling of such work, which consent and approval shall not be
unreasonably withheld, conditioned or delayed.

7.  Inspection by Landlord. Landlord shall have the right to inspect the Tenant
    ----------------------
Work at all reasonable times upon prior notice to Tenant for the purpose of
insuring conformity of the Tenant Work with the Tenant Plans, and applicable
codes. Landlord's failure to inspect the Tenant Work shall in no event
constitute a waiver of any of Landlord's rights hereunder nor shall Landlord's
inspection of the Tenant Work constitute the Landlord's approval of same.

8.  Removal of Specialized Tenant Improvements. Portions of the Tenant Work, if
    ------------------------------------------
any, as reasonably determined by Landlord to be specialized improvements (such
as, by way of example, and nor limitation: raised flooring, refrigeration units,
racking systems, conveyor systems, Rooftop Installations, or Liebert units),
shall, at the election of Landlord, and subject to the provisions of Paragraph
14(b) of the Lease, either be removed by Tenant at its expense before the
expiration of the term or shall remain upon the Premises and be surrendered
therewith at the expiration date or earlier termination of this Lease as the
property of Landlord without disturbance, molestation or injury. If Landlord
requires the removal of all or part of said specialized tenant improvements,
Tenant, at its expense, shall repair any damage to the Premises or the Building
caused by such removal and restore the Premises to its condition prior to the
installation of such specialized tenant improvements. If Tenant fails to remove
said specialized tenant improvements upon Landlord's request, then Landlord may
(but shall not be obligated to) remove the same and the cost of such removal,
repair and restoration, together with any and all damages which Landlord may
suffer and sustain by reason of the failure of Tenant to remove the same, shall
be charged to Tenant and paid upon demand.

9.  Completion of Tenant Work. Tenant shall notify Landlord in writing when the
    -------------------------
Tenant Work has been substantially completed. Landlord shall thereupon have the
opportunity to inspect the Premises in order to determine if the Premises have
been substantially completed in accordance with the Construction Drawings and
Specifications. If the Tenant Work has not been substantially completed in
accordance with the Tenant Plans, Landlord shall, immediately following
inspection, provide Tenant with written notification in reasonable detail of the
items deemed not to be in accordance with the Tenant Plans, and/or the standards
of quality required by this Agreement. Tenant shall forthwith proceed to correct
the incorrect or incomplete items. Notwithstanding anything to the contrary, the
Tenant Work shall not be considered suitable for review by Landlord until all
designated or required governmental inspections, permits and certifications
necessary for the Tenant Work, including, but not limited to a certificate of
occupancy, have been made, given and/or posted.

10.  Drawings and Warranties. Upon completion of the Tenant Work, Tenant shall
     -----------------------
provide to Landlord a complete "as built" set of the Construction Drawings and
Specifications. Tenant shall cause all warranties and guarantees issued in

                                       6
<PAGE>

connection with the Tenant Work to be assigned to Landlord upon the expiration
of the Term of the Lease, or the prior termination thereof.

                                       7
<PAGE>

                                  SCHEDULE I
               CONTRACTOR'S AFFIDAVIT AND FINAL RELEASE OF LIEN
               ------------------------------------------------

     1.  Contractor, pursuant to a contract, hereinafter referred to as
"Contract", with_________Inc., a Tenant of TransDulles Center, Inc., hereinafter
referred to as "Owner", has heretofore furnished, or caused to be furnished,
labor, material and services for the construction of certain improvements
located in the building known as ______________, Sterling, Virginia.

     2.  Contractor represents that all work to be performed under the Contract
has been fully completed and that all persons and firms who furnished material,
labor and/or services incident to the final completion of said work have been
paid in full.

     3.  The undersigned affiant for and in consideration of final payment to
him in the amount of _______________________________ ($________), and all
previous payments paid by Tenant to Contractor, does hereby for and on behalf of
the Contractor fully waive, release, remise and relinquish the Contractor's
right to claim, demand or impose a lien or liens for work done or materials
and/or services furnished or any other class whatsoever, on any of the premises
owned by Owner on which improvements have been completed in connection with the
Contract. This final release of lien is contingent upon clearance of all funds
paid to Contractor for construction of the improvements.

     4.  The affiant herein does hereby represent that he has authority to
execute a final release of lien for and on behalf of the Contractor as set forth
above.

     5.  This Contractor's Affidavit and Final Release of Lien is made by
affiant with full knowledge of the applicable laws of the Commonwealth of
Virginia. In addition to such rights as may be afforded to Owner under such
applicable laws, the undersigned affiant expressly agrees to indemnify and save
Owner and Tenant harmless from any and all actual costs and expenses, including
reasonable attorney's fees, arising out of claims by laborers, subcontractors or
materialmen who might claim that they have not been paid for services or
material furnished by or through the Contractor in connection with the work
performed under the Contract.

     I hereby acknowledge that the statements contained herein are true and
correct.

Dated this______day of_______________, 2000.

                         CONTRACTOR:

                         By:_____________________________

STATE OF    (S)
COUNTY OF   (S)

     Sworn to and subscribed before me this_______day of_____________, 2000.

                                    __________________________
                                    Notary Public
<PAGE>

                                  SCHEDULE II
                                  -----------
                    SPECIFICATIONS FOR GENERAL CONTRACTORS
                    --------------------------------------

1.   Landlord must authorize commencement of construction.

2.   Tenant-approved building permit plans must be submitted for approval and/or
     comment by Landlord, which shall not be unreasonably withheld, conditioned
     or delayed.

3.   Contractor shall submit to Landlord a detailed working schedule prior to
     beginning construction.

4.   Prior to commencement of construction, Contractor must provide the Landlord
     with:

     a.   building permit (if and to the extent legally required),
     b.   occupational license for County, and State
     c.   an original Certificate of Insurance for Contractor,
     d.   original Certificates of Insurance issued by the insurance carriers
          for all sub-contractors.

5.   Upon completion of the job, the Contractor will provide Landlord with:

     a.   as-built electrical plans/mechanical and plumbing
     b.   release of liens for all sub-contractors,
     c.   a final release of lien from the Contractor,
     d.   the original building permit plans with the original inspector's
          signatures (if and to the extent legally required).

6.   Landlord will not be responsible for:

     a.   Security of materials or work in place.
     b.   Air conditioning work not being properly performed to allow for proper
          cooling of the Premises unless all air conditioning work is done in
          coordination with the building engineering staff.
     c.   Warranty repairs.
     d.   Window breakage during construction.
     e.   Work stoppages due to work interfering with other tenants.
     f.   Delays due to change orders and architect-contractor problems.

7.   The Contractor will confine the construction debris and dust to the
construction areas away from completed tenant space or common areas. All areas
of the building, especially access areas and common areas, are to be maintained
in a clean and orderly fashion on a daily basis. The Contractor is to turn the
improved premises over to Tenant in a clean condition, ready for occupancy by
Tenant. Containment or construction dust is required through use of plastic
barriers, if possible.

8.   The Contractor will remove all trash and debris, including excess materials
from the construction site and the building and no unreasonable accumulation
will be allowed.

9.   The Contractor will coordinate the delivery of materials and removal of
debris with Landlord. Temporary floor coverings will be used to protect all
permanent flooring.

10.  The Contractor will supply building standard locks, keyed to the building
master key system.

11.  The Contractor will exercise all due diligence in maintaining a safe
working environment and to abide by all OSHA regulations.
<PAGE>

12.  Upon completion, the Contractor will remove all foreign materials from
windows, floors, glass, hardware and restroom fixtures.

13.  The Contractor will not unduly disturb the peaceful enjoyment of any
tenants of TransDulles Center. All plumbing installations requiring access to
other areas of TransDulles Center, and which may result in interruption of
service to other tenants of TransDulles Center must will be coordinated with the
Landlord. Special care is required when electrical work is to be performed so as
to not to interfere with any other Tenant of TransDulles Center. Safety data
sheets on all products used in construction will be provided to Landlord.

14.  All sub-contractors will park personal vehicles in Tenant's parking spaces
or on the outskirts of parking areas after loading or unloading equipment.
Parking is specifically prohibited on the streets adjacent to the Building,
including Glenn Drive, Sally Ride Drive, and Davis Drive.

15.  No flammable materials shall be stored in the building. In the event it is
necessary to store flammable materials overnight, Contractor must have specific
permission from Landlord.

16.  Damage or injury occurring while working must immediately be reported to
the Landlord.

17.  The Landlord reserves the right to have any employee who is not performing
his or her duties in a workmanlike manner immediately removed from the premises.

18.  Employees of Contractor must be appropriately attired to include shirt and
shoes at all times. Vulgar language is unacceptable at TransDulles Center, and
anyone using foul language will be asked to leave. No employees of Contractor
will make any complimentary or challenging remarks to any tenant or employee of
tenants of TransDulles Center. Any potential argumentative issues will be
brought up to the Landlord.

19.  Employees of Contractor shall use only restrooms specifically designated by
Landlord and will leave the restroom in a clean condition.

20.  Contractor shall turn off lights except emergency lighting at the end of
each day.

21.  No smoking is permitted throughout the Building.

                                       2
<PAGE>

                                 SCHEDULE III
             INSURANCE REQUIREMENTS FOR TENANTS GENERAL CONTRACTOR
             -----------------------------------------------------

Tenant must provide Landlord with written evidence of the following minimum
insurance requirements. In no way do the following minimum requirements limit
the liability or obligation to provide insurance assumed elsewhere in the Work
Agreement or the Lease, as amended; in the event of any conflict between the
provisions of this Schedule and the Lease, the provisions of the Lease shall
govern.

A.   Workers' Compensation and Employer's Liability.
     ----------------------------------------------

     1.  Statutory requirements in the Commonwealth of Virginia, to include all
     areas involved in operations covered under the Work Agreement for the
     Premises.

     2.  Coverage "B" - Employer's Liability, limit - $1,000,000.

B.   Commercial General Liability.
     ----------------------------

     1.  Commercial General Liability: Form providing coverage not less than
     that of the occurrence form ISO Standard Commercial General Liability.
     Insurance, including but not limited to bodily injury, personal injury,
     independent contractors' products, completed operations (construction risks
     only), Broad Form Property Damage (including Completed Operations for a
     period of not less than three (3) years - construction risk only). For
     those contractors selling/manufacturing products, Commercial General
     Liability coverage should be specifically endorsed to include products
     liability.

     2.  Contractual Liability, Blanket basis insuring the liability assumed
     under this Agreement.

     3.  Limits of Liability: Bodily Injury and Property Damage - $1,000,000
     each occurrence, $1,000,000 aggregate; and Personal Injury - $1,000,000
     each occurrence.

C.   Commercial Auto Policy
     ----------------------

     1.  Commercial Auto Policy form, including all Owned, Non-Owned and Hired
     Vehicles.

     2.  Limits of Liability: Bodily Injury - $1,000,000 each person, $1,000,000
     each occurrence; and Property Damage - $1,000,000 each occurrence.

D.   Umbrella Liability.
     ------------------

Such insurance shall provide coverage with limits of not less than $3,000,000
per occurrence/S3,000,000 aggregate, in excess of the underlying coverages
listed in Paragraphs A, B, and C above.

ADDITIONAL REQUIREMENTS
-----------------------

1.   Landlord and Landlord's management company (The Mark Winkler Company) shall
     be included as an Additional Insured on all coverages listed above.

2.   Tenant shall require the same primary minimum insurance requirements, as
     listed above, from its general contractor and any other contractors with
     which Tenant contracts directly, and they shall also comply with the
     additional requirements listed herein.
<PAGE>

3.   All insurance coverages required as herein set forth shall be primary and
     at the sole cost and expense of Tenant, and its general contractor and any
     other contractors with which Tenant contracts directly, and all deductibles
     shall be assumed by, for the account of, and at the sole risk of Tenant,
     and its general contractor and any other contractors with which Tenant
     contracts directly. Insurance coverages will be in a form and carrier
     reasonably acceptable to Landlord with a minimum rating of A:VII or higher.

4.   A Certificate of Insurance evidencing all of the above must be presented to
     Landlord prior to commencement of the Tenant Work.

5.   The cancellation provision of such Certificate of Insurance shall provide
     as follows:

     "To be effective as to certificate holder, the issuing companies must
     provide to the below named certificate holder sixty (60) days' written
     notice prior to any cancellation or material modification of the above-
     described policies before the expiration dates thereof."

                                    2
<PAGE>

                                   EXHIBIT E
                                   ---------
                          (Form of Letter of Credit)
                         IRREVOCABLE LETTER OF CREDIT

Date of Issue: _______________               Letter of Credit No.:_____________
Expiration Date:______________               Original Amount: USD $____________

Beneficiary:                                 Applicant:
TransDulles Center, Inc.
c/o The Mark Winkler Company                 _________________________
4900 Seminary Road, Suite 900                _________________________
Alexandria, Virginia 22311-1811              _________________________
Attn: Mr. Peter S. Scholz

Ladies and Gentlemen:

We hereby establish this Irrevocable Letter of Credit No.______________, in your
favor as Beneficiary for an aggregate amount of up to_____________USD
(USD $_______), available to you by drafts drawn at sight, accompanied by your
dated and signed statement certifying that Landlord is entitled to draw against
the Letter of Credit posted as the Security Deposit pursuant to the terms of
that certain Deed of Lease between Beneficiary and Applicant dated_____________,
2000(the "Lease").

We hereby engage with you that all drafts drawn under and in compliance with the
terms of this Irrevocable Letter of Credit will be honored if presented at [bank
address], no later than [last day of month approximately 90 days after
expiration of first lease year] (the "Expiration Date"). This Letter of Credit
shall be automatically renewed for additional one (1) year periods ("Renewal
Periods") beginning on the first day of [the month after the Expiration Date],
and on the first day of [the month after the expiration date] each year
thereafter through [date 90 days after expiration of lease term and any option
periods], unless we send to you by nationally recognized overnight courier
service at the address shown above (or any other address you provide to us by
notice sent to us by nationally recognized overnight courier service which
references this Letter of Credit by Number) a notice of our intention not to
renew this Letter of Credit at least sixty (60) days prior to the beginning of
any of the Renewal Periods. At all times, we retain absolute discretion
concerning the decision to renew or not renew this Letter of Credit.

Documents may be presented at either ____________________________, New York,
New York, or at _________________________________, Washington, D.C.

Partial and Multiple Drawings are permitted. The amount available under this
Irrevocable Letter of Credit shall be the Original Amount set forth above, less
the sum of any drawings honored by us hereunder. This Letter of Credit letter is
binding upon and shall inure to the benefit of the parties and their respective
successors and permitted assigns. This Letter of Credit is transferable to any
successor in title to Beneficiary's interests as Landlord under the Lease, and
any such successor shall be deemed the Beneficiary hereunder, and shall be
entitled to draw against this Letter of Credit in accordance with the terms
hereof. This Irrevocable Letter of Credit is subject to the Uniform Customs and
Practice for Documentary Credits, 1993 Revision, ICC Publication 500.

                                              Very truly yours,
                                              BANK

                                              By:_________________________
                                              Name:_______________________
                                              Title:______________________
<PAGE>

                                  EXHIBIT F-1
                                  -----------

                           CONFIDENTIALITY AGREEMENT
                       (OPERATING EXPENSE AND TAX AUDIT)

THIS CONFIDENTIALITY AGREEMENT (the "Agreement") is made and entered into this
____ day of _______, 2000 by and between TransDulles Center, Inc., a Virginia
corporation ('Landlord'), HomeGrocer.com, Inc., a Delaware corporation
("Tenant") and_____________________________ ("Contractor").

Preamble

Pursuant to the provisions of that certain Deed of Lease between Landlord and
Tenant, dated             ,2000 (the "Lease"), Tenant was provided with certain
limited rights to audit the annual Operating Costs (as defined in the Lease). In
this regard, Tenant has engaged the services of Contractor to perform an audit
of the Operating Costs for the _____ Calendar Year (the "Audit"). In connection
with the Audit, Tenant and Contractor will be given access to various documents,
files and other information relating to the Operating Costs for their review and
inspection (the "Confidential Information"). The Confidential Information may
include economic, commercial, marketing and financial information that is
confidential and/or proprietary in nature. Therefore, Landlord has determined to
require Tenant and Contractor to execute and deliver this Agreement as a
condition of their review and inspection of the Confidential Information.

In consideration of being granted the opportunity to review and inspect the
Confidential Information, Tenant and Contractor agree as follows:

Agreement

Section 1.  Purpose. Tenant and Contractor agree that their review and
inspection of the Confidential Information shall be solely to conduct an audit,
on Tenant's behalf and not as an agent, representative or broker of any
undisclosed party, to verify the accuracy of Operating Costs for the________
Calendar Year which Tenant paid under the Lease.

Section 2.  Non-Disclosure and Use of Confidential Information.

     (a)    Tenant and Contractor agree that, except as set forth below, all
     Confidential Information shall be used by Tenant and Contractor solely for
     the purposes stated in Section 1 hereof. Tenant and Contractor further
     agree not to disclose any of the Confidential Information without the prior
     written consent of Landlord to any third party other than to their
     respective (i) employees, officers, directors, and (ii) agents and
     representatives, including attorneys, accountants and financial advisors
     (collectively, the "Representatives"), in each case who (i) have a need to
     know the Confidential Information for the limited purpose stated in Section
     1 hereof, and (ii) have entered into an agreement with Tenant and
     Contractor substantially in the form of this Agreement.

     (b)    The term "Confidential Information" shall not include information
     which: (a) is already known to Tenant or Contractor from non-Landlord
     sources not known by Tenant or Contractor to be subject to any
     confidentiality obligations to Landlord; (b) is or becomes generally
     available to the public other than as a result of a disclosure by Tenant or
     Contractor or any of their Representatives; or (c) is required to be
     disclosed by law or by regulatory or judicial process (including without
     limitation any action instituted by Tenant to enforce the terms of the
     Lease.)

     (c)    In the event Tenant or Contractor or any of their Representatives
     fails in any respect to comply with its obligations under this Agreement,
     Tenant and Contractor shall be liable to Landlord for breach of this
     Agreement. In addition, in the event of any such failure, Landlord may, in
     its sole discretion, refuse to allow Tenant the opportunity to perform an
     audit with respect to any other Calendar Years.
<PAGE>

     (d)    The rights, powers and remedies provided for in the preceding
     subsection (c) shall be in addition to and do not preclude the exercise of
     any other right, power or remedy available to Landlord under law or in
     equity. No forbearance, failure or delay in exercise of any such right,
     power or remedy shall operate as a waiver thereof or preclude its further
     exercise.

Section 3.  Review of Confidential Information. The Confidential Information
will be made available for review by appointment only, at a location determined
by Landlord in the Washington, D.C. metropolitan area, to Representatives of
Tenant and/or Contractor whose duties include the review and inspection of such
information.

Section 4.  Duplication. Intentionally Deleted

Section 5.  Limited Access. Tenant and Contractor shall inform each of their
Representatives that receives any of the Confidential Information of the
requirements of this Agreement and shall require each such Representative to
comply with such requirements.

Section 6.  Tenant Contact. Tenant and Contractor agree not to communicate with
any other tenants in the Project known as TransDulles Center in connection with
the Audit without the prior written consent of Landlord.

Section 7.  Entire Agreement. This Agreement represents the entire agreement
between Tenant, Contractor and Landlord relating to the treatment of
Confidential Information heretofore or hereafter reviewed or inspected by Tenant
or Contractor in connection with the Audit. This Agreement supersedes all other
agreements relating to such matters which have previously been executed by
Tenant and/or Contractor in favor of Landlord.

Section 8.  Reliance by Landlord's Management Company. Landlord's property
management company, The Mark Winkler Company, and its employees shall be
authorized to accept a copy of this Agreement (as executed by Tenant and
Contractor) as a basis for allowing Tenant or Contractor to review and inspect
the Confidential Information in connection with the Audit.

     IN WITNESS WHEREOF, a duly authorized representative for both Tenant and
Contractor have executed this Agreement as of the date set forth below.

TENANT:                                  LANDLORD:

HOMEGROCER.COM, INC.                     TRANSDULLES CENTER, INC.,
a Delaware corporation                   a Virginia corporation

By:______________________                By:_______________________________
Name:____________________                Name:_____________________________
Title:___________________                Title:____________________________

Date of Execution:______________         Date of Execution:________________

CONTRACTOR:

By:
Name:
Title:

Date of Execution:

                                       2
<PAGE>

                                  EXHIBIT F-2
                                  -----------
                           CONFIDENTIALITY AGREEMENT
                        (SUBLEASE AND ASSIGNMENT AUDIT)

THIS CONFIDENTIALITY AGREEMENT (the "Agreement") is made and entered into this
____day of___________, 2000 by and between TransDulles Center, Inc., a Virginia
corporation ("Landlord"), HomeGrocer.com, Inc., a Delaware corporation
("Tenant") and _____________________ ("Contractor").

Preamble

Pursuant to the provisions of that certain Deed of Lease between Landlord and
Tenant, dated                     , 2000 (the "Lease"), Landlord was provided
with certain rights to audit the records of Tenant pertaining to the Assignment
and Subletting of the Premises. In this regard, Landlord will be given access to
various documents, files and other information relating to the Assignment and
Subletting of the Premises for its review and inspection (the "Confidential
Information"). The Confidential Information may include economic, commercial,
marketing and financial information that is confidential and/or proprietary in
nature. Therefore, Tenant has determined to require Landlord to execute and
deliver this Agreement as a condition of its review and inspection of the
Confidential Information.

In consideration of being granted the opportunity to review and inspect the
Confidential Information, Landlord agrees as follows:

Agreement

Section 1.     Purpose. Landlord agrees that its review and inspection of the
Confidential Information shall be solely to determine the nature and scope of
the consideration paid to Tenant for the Assignment or Subletting of the
Premises.

Section 2.     Non-Disclosure and Use of Confidential Information.

        (a)    Landlord agrees that, except as set forth below, all Confidential
        Information shall be used by Landlord solely for the purposes stated in
        Section 1 hereof. Landlord further agree not to disclose any of the
        Confidential Information without the prior written consent of Tenant to
        any third party other than to their respective (i) employees, officers,
        directors, and (ii) agents and representatives, including attorneys,
        accountants and financial advisors (collectively, the
        "Representatives"), in each case who (i) have a need to know the
        Confidential Information for the limited purpose stated in Section 1
        hereof, and (ii) have entered into an agreement with Landlord
        substantially in the form of this Agreement.

        (b)    The term "Confidential Information" shall not include information
        which: (a) is already known to Landlord from non-Tenant sources not
        known by Landlord to be subject to any confidentiality obligations to
        Tenant (b) is or becomes generally available to the public other than as
        a result of a disclosure by Landlord or any of its Representatives; or
        (c) is required to be disclosed by law or by regulatory or judicial
        process (including without limitation any action instituted by Landlord
        to enforce the terms of the Lease.)

        (c)    In the event Landlord fails in any respect to comply with its
        obligations under this Agreement, Landlord shall be liable to Tenant for
        breach of this Agreement. In addition, in the event of such failure,
        Tenant may, in its sole discretion, refuse to allow Landlord the
        opportunity to perform an audit at a future time.

        (d)    The rights, powers and remedies provided for in the preceding
        subsection (c) shall be in addition to and do not preclude the exercise
        of any other right, power or remedy available to Tenant under law or in
        equity. No forbearance,
<PAGE>

        failure or delay in exercising any such right, power or remedy shall
        operate as a waiver thereof or preclude its further exercise.

Section 3.     Review of Confidential Information. The Confidential Information
will be made available for review by appointment only, at a location determined
by Tenant in the Washington, D.C. metropolitan area.

Section 4.     Duplication. Intentionally Deleted.

Section 5.     Limited Access. Landlord shall inform each of its
Representatives that receives any of the Confidential Information of the
requirements of this Agreement and shall require each such Representative to
comply with such requirements.

Section 6.     Entire Agreement. This Agreement represents the entire agreement
between Tenant and Landlord relating to the treatment of Confidential
Information heretofore or hereafter reviewed or inspected by Landlord in
connection with the Audit. This Agreement supersedes all other agreements
relating to such matters which have previously been executed by Landlord in
favor of Tenant.

Section 7.     Reliance by Tenant. Tenant and its employees shall be authorized
to accept a copy of this Agreement as executed by Landlord as a basis for
allowing Landlord to review and inspect the Confidential Information in
connection with the Audit.

     IN WITNESS WHEREOF, a duly authorized representative for both Landlord and
Tenant have executed this Agreement as of the date set forth below.

TENANT:                                       LANDLORD:

HOMEGROCER.COM, INC.                     TRANSDULLES CENTER, INC.,
a Delaware corporation                   a Virginia corporation

By:_______________________               By:_______________________________
Name:_____________________               Name:_____________________________
Title:____________________               Title:____________________________

Date of Execution:_____________          Date of Execution:________________

                                       2
<PAGE>

                                   EXHIBIT G
                                    PARKING

                                  [SITE PLAN]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00009-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00009-of-00352.parquet"}]]